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
[_] 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 ss.240.14a-11(c) or ss.240.14a-12
BENTLEY PHARMACEUTICALS, INC.
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[X] No fee required
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and 0-11
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the offsetting fee was paid previously. Identify the previous
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BENTLEY PHARMACEUTICALS, INC.
ONE URBAN CENTRE
SUITE 548
4830 WEST KENNEDY BLVD.
TAMPA, FLORIDA 33609
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
June 6, 1997
Tampa, Florida
May 2, 1997
To the Stockholders of
Bentley Pharmaceuticals, Inc.
NOTICE IS HEREBY GIVEN that the Annual Meeting (the "Meeting") of
Stockholders of BENTLEY PHARMACEUTICALS, INC., a Florida corporation (the
"Company"), will be held on Friday, June 6, 1997 at 9:00 a.m., local time at The
Princeton Club, 15 West 43rd Street, New York, New York 10036 for the purpose of
considering and acting upon the following matters:
(1) The election of two Class I Directors to serve until the 2000
Annual Meeting of Stockholders or until the election and
qualification of their respective successors;
(2) A proposal to adopt amendments to the Company's 1991 Stock
Option Plan (the "1991 Plan") to increase the number of shares
of Common Stock for which options may be granted under the 1991
Plan from 240,000 to 500,000 and to eliminate the Non-Employee
Director formula option grants and certain provisions relating
thereto currently set forth in the 1991 Plan; and
(3) The transaction of such other business as may properly be
brought before the meeting or any adjournment or postponement
thereof.
The Board of Directors has fixed the close of business on May 5, 1997 as
the record date for the determination of stockholders entitled to notice of, and
to vote at, the Meeting.
You are cordially invited to attend the Meeting. Whether or not it is
your intention to attend the Meeting, you are urged to complete, sign and date
the enclosed form of proxy, and return it promptly in the enclosed reply
envelope. No postage is required if mailed in the United States. Returning your
proxy does not deprive you of your right to attend the Meeting and to vote your
shares in person. This solicitation is being made on behalf of the Company's
Board of Directors.
By Order of the Board of Directors
MICHAEL D. PRICE
Secretary
BENTLEY PHARMACEUTICALS, INC.
One Urban Centre
Suite 548
4830 West Kennedy Blvd.
Tampa, Florida 33609
PROXY STATEMENT
For Annual Meeting of Stockholders
June 6, 1997
This Proxy Statement, to be mailed to stockholders on or about May 8,
1997, is furnished in connection with the solicitation by the Board of Directors
of Bentley Pharmaceuticals, Inc., a Florida corporation (the "Company"), of
proxies in the accompanying form ("Proxy" or "Proxies") for use at the Annual
Meeting of Stockholders of the Company to be held on June 6, 1997 at 9:00 a.m.,
local time at The Princeton Club, 15 West 43rd Street, New York, New York 10036
and at any adjournments or postponements thereof (the "Meeting").
All Proxies received will be voted in accordance with the
specifications made thereon or, in the absence of any specification, for the
election of all of the nominees named herein to serve as Directors and for the
proposal to amend the Company's 1991 Plan. Any Proxy given pursuant to this
solicitation may be revoked by the person giving it any time prior to the
exercise of the powers conferred thereby by notice in writing to Michael D.
Price, Secretary of the Company, One Urban Centre, Suite 548, 4830 West Kennedy
Blvd., Tampa, Florida 33609, by execution and delivery of a subsequent Proxy or
by attendance and voting in person at the Meeting, except as to any matter or
matters upon which, prior to such revocation, a vote shall have been cast
pursuant to the authority conferred by such Proxy.
Only holders of record of the Company's issued and outstanding Common
Stock, $.02 par value (the "Common Stock"), as of the close of business on May
5, 1997 (the "Record Date") will be entitled to notice of, and to vote at, the
Meeting. As of the Record Date, there were issued and outstanding 3,348,195
shares of the Company's Common Stock, each of which is entitled to one vote upon
each matter at the Meeting. The holders of a majority of the shares entitled to
vote at the Meeting will constitute a quorum for the transaction of business.
Proxies submitted which contain abstentions or broker non-votes will be deemed
present at the Meeting in determining the presence of a quorum. A plurality of
the votes cast at the Meeting at which a quorum is present will be required for
the election of Directors and the affirmative vote of the holders of a majority
of the votes cast at the Meeting at which a quorum is present will be required
to approve the amendments to the Company's 1991 Plan. Shares of Common Stock
that are voted to abstain and shares which are subject to broker non-votes with
respect to any matter will not be considered cast with respect to that matter.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of April 25, 1997 as to
(i) each person (including any "group" as that term is used in Section 13(d)(3)
of the Securities Exchange Act of 1934, as amended) who is known to the Company
to be the beneficial owner of more than five percent of the Company's Common
Stock, its only class of voting securities, and (ii) the shares of the Company's
Common Stock beneficially owned by all Executive Officers and Directors of the
Company as a group.
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER: OWNERSHIP (1) OF CLASS
- ------------------------------------- ------------- --------
Richard C. Perry 2,650,000(2) 45.70%
2635 Century Parkway, N.E
Suite 1000
Atlanta, GA 30345
Light Associates 550,594(3) 14.89%
1031 Rosewood Way
Alameda, California 94501
All current Executive Officers and 695,114(4) 17.22%
Directors as a group (6 persons)
- -----------------------
(1) Except as otherwise indicated, all shares are beneficially owned, and sole
investment and voting power is held, by the persons named.
(2) Includes 2,000,000 shares which Mr. Perry has the right to acquire
pursuant to presently exercisable stock purchase warrants and 450,000
shares which Mr. Perry has the right to receive upon the conversion of 12%
Convertible Senior Subordinated Debentures.
(3) As reported in the Light Associates Schedule 13-D (Amendment No. 7) dated
November 18, 1996. Includes 350,000 shares which Mr. Light has the right
to acquire pursuant to presently exercisable stock purchase warrants.
(4) Includes 669,599 shares of Common Stock which certain of the current
Executive Officers and Directors have a right to acquire pursuant to
presently exercisable stock options and 14,000 shares of Common Stock
which certain of the current Executive Officers and Directors have a right
to acquire pursuant to presently exercisable stock purchase warrants (the
"Warrants") and 5,600 shares of Common Stock which certain of the current
Executive Officers and Directors have a right to acquire upon the
conversion of 12% Convertible Senior Subordinated Debentures (the
"Debentures"), which Warrants and Debentures were purchased in the 1996
public offering.
2
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding beneficial
ownership of the Company's Common Stock as of April 25, 1997 as to (i) each
Director and nominee for Director of the Company, (ii) each Executive Officer of
the Company named in the Summary Compensation Table set forth below, and (iii)
all current Executive Officers and Directors as a group.
AMOUNT AND NATURE OF PERCENT
NAME BENEFICIAL OWNERSHIP(1) OF CLASS
- ---- ----------------------- --------
James R. Murphy 259,287(2) 7.19%
Chairman of the Board, President,
Chief Executive Officer and Director
Robert M. Stote, M.D 253,466(3) 7.04%
Senior Vice President, Chief
Science Officer and Director
Michael D. Price 167,636(4) 4.77%
Vice President, Chief
Financial Officer, Secretary,
Treasurer and Director
Randolph W. Arnegger 3,413(5) *
Director
Charles L. Bolling 7,800(6) *
Director
Doris E. Wardell 3,512(7) *
Director
Ehud D. Laska 45,000(8) 1.34%
Nominee for Director
All current Executive Officers
and Directors as a group (6 persons) 695,114(9) 17.22%
- -----------------
* Less than one percent
(1) Except as otherwise indicated, all shares are beneficially owned, and sole
investment and voting power is held, by the persons named.
(2) Includes 1,000 shares of Common Stock owned by Mr. Murphy's son as to
which Mr. Murphy disclaims beneficial ownership. Also, includes 253,000
shares of Common Stock which Mr. Murphy has the right to acquire pursuant
to presently exercisable stock options and 3,000 shares of Common Stock
which Mr. Murphy has the right to acquire pursuant to presently
exercisable stock purchase warrants (the "Warrants") and 1,200 shares of
Common Stock which Mr. Murphy has a right to acquire upon the conversion
of 12% Convertible
(Footnote explanations continue on following page)
3
Senior Subordinated Debentures (the "Debentures"), which Warrants and
Debentures were purchased in the 1996 public offering.
(3) Includes 239,166 shares of Common Stock which Dr. Stote has the right to
acquire pursuant to presently exercisable stock options and 10,000 shares
of Common Stock which Dr. Stote has the right to acquire pursuant to
presently exercisable stock purchase warrants (the "Warrants") and 4,000
shares of Common Stock which Dr. Stote has a right to acquire upon the
conversion of 12% Convertible Senior Subordinated Debentures (the
"Debentures"), which Warrants and Debentures were purchased in the 1996
public offering.
(4) Includes 101 shares of Common Stock owned by Mr. Price's son as to which
Mr. Price disclaims beneficial ownership. Also includes 165,833 shares of
Common Stock which Mr. Price has the right to acquire pursuant to
presently exercisable stock options and 1,000 shares of Common Stock which
Mr. Price has the right to acquire pursuant to presently exercisable stock
purchase warrants (the "Warrants") and 400 shares of Common Stock which
Mr. Price has a right to acquire upon the conversion of 12% Convertible
Senior Subordinated Debentures (the "Debentures"), which Warrants and
Debentures were purchased in the 1996 public offering.
(5) Includes 2,600 shares of Common Stock which Mr. Arnegger has the right to
acquire pursuant to presently exercisable stock options.
(6) Includes 6,000 shares of Common Stock which Mr. Bolling has the right to
acquire pursuant to presently exercisable stock options.
(7) Includes 3,000 shares of Common Stock which Mrs. Wardell has the right to
acquire pursuant to presently exercisable stock options.
(8) Represents shares of Common Stock owned by Coleman and Company Securities,
Inc. of which Mr. Laska serves as Chairman.
(9) Includes 669,599 shares of Common Stock which certain of the current
Executive Officers and Directors have a right to acquire pursuant to
presently exercisable stock options and 14,000 shares of Common Stock
which certain of the current Executive Officers and Directors have a right
to acquire pursuant to presently exercisable stock purchase warrants (the
"Warrants") and 5,600 shares of Common Stock which certain of the current
Executive Officers and Directors have a right to acquire upon the
conversion of 12% Convertible Senior Subordinated Debentures (the
"Debentures"), which Warrants and Debentures were purchased in the 1996
public offering.
4
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Articles of Incorporation and By-Laws provide for a
classified Board of Directors. The Board is divided into three classes
designated Class I, Class II and Class III. The nominees below are being
presented for election as Class I Directors to hold office until the 2000 Annual
Meeting of Stockholders. The term of each Class II Director is to expire at the
1998 Annual Meeting of Stockholders and the term of each Class III Director is
to expire at the 1999 Annual Meeting of Stockholders. Unless instructed to the
contrary, the persons named in the enclosed Proxy intend to cast all votes
pursuant to Proxies received in favor of the person listed under the heading
"Nominees" below as Directors. The nominees have indicated to the Company their
availability for election. In the event that the nominees should not continue to
be available for election, the holders of the Proxies may exercise their
discretion to vote for a substitute. Officers hold office until the meeting of
the Board of Directors following each Annual Meeting of Stockholders and until
their successors have been chosen and qualified.
The following information is furnished with respect to the nominees
and each other continuing member of the Company's Board of Directors.
CLASS
OF YEAR
POSITIONS WITH DIRECTOR FIRST
THE COMPANY (UPON BECAME
NAME AGE PRESENTLY HELD ELECTION) DIRECTOR
- ---- --- -------------- --------- --------
Nominees:
Ehud D. Laska 47 Nominee for Director I _
Michael D. Price 39 Vice President, Chief I 1995 (as
Financial Officer, a Class II
Secretary, Treasurer Director)
and Director
DIRECTORS WHOSE TERMS OF OFFICE
CONTINUE AFTER THE MEETING:
Randolph W. Arnegger 52 Director II 1994
Charles L. Bolling 73 Director II 1991
James R. Murphy 47 Chairman of the Board, III 1993
President, Chief Executive
Officer and Director
Robert M. Stote, M.D. 57 Senior Vice President, III 1993
Chief Science Officer and
Director
5
BACKGROUND OF NOMINEES
EHUD D. LASKA is the Chairman of Coleman and Company Securities,
Inc., a New York Stock Exchange member investment bank. Mr. Laska is also a
founding partner of InterBank/Birchall Acquisition Partners, LLC. Through these
firms, Mr. Laska specializes in building up companies through same industry
consolidation and acquisitions. From August 1994 to February 1996, Mr. Laska
served as a managing director at the investment banking firm of Continuum
Capital, Inc. While serving as a Managing Director with Tallwood Associates,
Inc., a boutique investment banking firm, from May 1992 to August 1994, Mr.
Laska founded the Private Equity Finance Group, which merged with Continuum
Capital, Inc, in August 1994. Prior to May 1992, Mr. Laska was an investment
banker with Laidlaw Equities.
MICHAEL D. PRICE became Chief Financial Officer, Vice
President/Treasurer and Secretary of the Company in October 1993, April 1993 and
November 1992, respectively. He has served the Company in other capacities since
March 1992. Prior to joining the Company, Mr. Price was employed as a financial
and management consultant with Carr Financial Group in Tampa, Florida from March
1990 to March 1992. Prior thereto, he was employed as Vice President of Finance
with Premiere Group, Inc., a real estate developer in Tampa, Florida from June
1988 to February 1990. Prior thereto, Mr. Price was employed by Price Waterhouse
in Tampa, Florida from January 1982 to June 1988 where his last position with
that firm was as an Audit Manager. Mr. Price received a B.S. in Business
Administration with a concentration in Accounting from Auburn University and an
M.B.A. from Florida State University. Mr. Price is a Certified Public Accountant
in the State of Florida.
BACKGROUND OF CONTINUING DIRECTORS
RANDOLPH W. ARNEGGER is the President of Vantage Point Marketing, a
developer and producer of continuing medical education programs, medically
oriented direct mail programs, and medical convention programs, a position he
has held since 1986. Prior thereto, Mr. Arnegger served as Vice President of
Account Services for Curtin & Pease/Peneco, a national direct mail firm, and
Vice President for Pro Clinica, a medical advertising agency in New York.
CHARLES L. BOLLING served from 1968 to 1973 as Vice President of
Product Management and Promotion (U.S.), from 1973 to 1977 as Vice President of
Commercial Development and from 1977 to 1986 as Director of Business Development
(International) at Smith Kline & French Laboratories. Mr. Bolling has been
retired since 1986.
JAMES R. MURPHY became President and Chief Operating Officer of the
Company on September 7, 1994, was named Chief Executive Officer effective
January 1, 1995 and became Chairman of the Board on June 9, 1995. Prior to
rejoining the Company, Mr. Murphy served as Vice President of Business
Development at MacroChem Corporation, a publicly owned pharmaceutical company,
from March 1993 through September 1994. From September 1992 until March 1993,
Mr. Murphy served as a Consultant to the pharmaceutical industry with his
primary efforts directed toward product licensing. Prior thereto, Mr. Murphy
served as Director - Worldwide Business Development and Strategic Planning of
the Company from December 1991 to September 1992. Mr. Murphy previously spent 14
years in basic pharmaceutical research and product development with SmithKline
Corporation and in business development with contract research laboratories. Mr.
Murphy received a B.A. in Biology from Millersville University.
ROBERT M. STOTE, M.D. became Senior Vice President and Chief Science
Officer of the Company in March 1992. Prior to joining the Company, Dr. Stote
was employed for 20 years by SmithKline Beecham Corporation serving as Senior
Vice President and Medical Director, Worldwide Medical Affairs from 1989 to
1992, and Vice President-Clinical Pharmacology-Worldwide from 1987 to 1989. From
1984 to 1987 Dr.
6
Stote was Vice President-Phase I Clinical Research, North America. Dr. Stote was
Chief of Nephrology at Presbyterian Medical Center of Philadelphia from 1972 to
1989 and was Clinical Professor of Medicine at the University of Pennsylvania.
Dr. Stote received a B.S. in Pharmacy from the Albany College of Pharmacy, an
M.D. from Albany Medical College and is Board Certified in Internal Medicine and
Nephrology. He was a Fellow in Nephrology and Internal Medicine at the Mayo
Clinic and is currently a Fellow of the American College of Physicians.
COMMITTEES OF THE BOARD OF DIRECTORS; BOARD OF DIRECTORS MEETINGS
The Board of Directors has an Audit Committee and a Compensation
Committee. The Audit Committee recommends to the Board of Directors the
appointment of independent auditors to audit the Company's consolidated
financial statements, reviews the Company's internal control procedures and
advises the Company on tax and other matters connected with the growth of the
Company. The Audit Committee also reviews with management the annual audit and
other work performed by the independent auditors. The Company's Compensation
Committee administers the Company's 1991 Stock Option Plan and reviews and
recommends to the Board of Directors the nature and amount of compensation to be
paid to the Company's executive officers. The Audit Committee consists of
Messrs. Arnegger and Bolling. The Compensation Committee consists of Mrs.
Wardell and Messrs. Arnegger and Bolling.
During the Company's last fiscal year ended December 31, 1996, the
Board of Directors held five meetings, the Audit Committee held two meetings and
the Compensation Committee held three meetings. Each Director attended at least
75% of the total number of meetings of the Board of Directors which were held
during the period he or she served as a Director in the fiscal year ended
December 31, 1996 and meetings of each Committee on which such Director served.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee during 1996 were Mrs.
Wardell and Messrs. Arnegger and Bolling, all of whom are non-employee
Directors. No member of the Compensation Committee has a relationship that would
constitute an interlocking relationship with Executive Officers or Directors of
another entity.
REMUNERATION OF NON-EMPLOYEE DIRECTORS
The Company pays non-employee Director fees equal to $12,000 per year
for attendance at meetings and reimburses expenses incurred in attending
meetings. Total non-employee Director fee payments during the year ended
December 31, 1996 were $54,000 (including $24,000 earned in 1995) and expenses
incurred by non-employee Directors in attending meetings which were reimbursed
by the Company totaled $2,743. In addition, options to purchase 1,000 shares of
Common Stock are automatically granted to each non-employee Director upon his or
her election or reelection to the Board for each year of the term for which he
or she is elected. The options vest as to 1,000 shares at the end of each year
of such term. During the year ended December 31, 1996, no non-employee Directors
were elected to the Board and, accordingly, the Company granted no such options
to the individuals who served as non-employee Directors during such fiscal year.
Non-employee Directors who serve on committees of the Company's Board
of Directors are awarded 200 shares of Common Stock annually. During the fiscal
year ended December 31, 1996, 600 shares of Common Stock were granted to
non-employee Directors.
7
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the total compensation paid to or
accrued by the Company for the account of the current Chief Executive Officer
and the executive officers at December 31, 1996 whose total cash compensation
for the year ended December 31, 1996 exceeded $100,000.
LONG-TERM COMPENSATION
--------------------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------- ----------------------------------- -------------------
SECURITIES
NAME AND PRINCIPAL OTHER RESTRICTED UNDERLYING LTIP ALL
- ------------------ ANNUAL STOCK OPTIONS/ PAYOUTS OTHER
POSITION YEAR SALARY($) BONUS($) COMP.($) AWARDS($) SARS(#) ($) COMP.(1)
- ---------- ------ --------- -------- -------- --------- ------ ----- --------
James R. Murphy (2) Y/E 12/31/96 $235,833 $ 20,000 -- -- 600,000 -- $ 4,750
Chairman of the Board, Y/E 12/31/95 $187,500 -- -- -- 50,000 -- $ 4,620
President, Chief Executive Y/E 12/31/94 $ 55,903 -- -- $ 685 -- -- $ 12,000
Officer and Director
Robert M. Stote (3) Y/E 12/31/96 $220,417 -- -- -- 500,000 -- $ 4,750
Senior Vice President, Y/E 12/31/95 $203,750 -- -- -- 37,500 -- $ 4,620
Chief Science Officer Y/E 12/31/94 $200,000 -- -- -- -- -- --
and Director
Michael D. Price (4) Y/E 12/31/96 $122,500 $ 10,000 -- -- 400,000 -- $ 4,750
Vice President, Chief Y/E 12/31/95 $114,808 -- -- -- 22,500 -- $ 4,620
Financial Officer, Treasurer, Y/E 12/31/94 $100,000 -- -- -- -- -- --
Secretary and Director
- -------------------------
(1) The value of perquisites provided to the named executive officers did not
exceed 10% of total compensation in any case.
(2) Mr. Murphy, Chairman, President and Chief Executive Officer, has been
employed by the Company since September 1994. Mr. Murphy's annual salary
is currently $245,000. During the year ended December 31, 1996, Mr. Murphy
was awarded ten-year stock options to purchase 600,000 shares of common
stock, of which one-third of such options vested when the closing price of
the Company's Common Stock on the American Stock Exchange equaled or
exceeded the exercise price of $2.89 for twenty consecutive trading days;
one-third will vest and become exercisable when the closing price equals
or exceeds the exercise price of $3.68 for twenty consecutive trading
days; and one-third will vest and become exercisable when the closing
price equals or exceeds the exercise price of $4.73 for twenty consecutive
trading days. During the year ended December 31, 1995, Mr. Murphy was
awarded stock options to purchase 50,000 shares of Common Stock at $3.75
per share, 50% of which vested on June 12, 1996 and the balance of which
vest on June 12, 1997. During the years ended December 31, 1996 and 1995,
the Company provided to Mr. Murphy matching funds totaling $4,750 and
$4,620, respectively, pursuant to the terms of a Company sponsored 401(k)
retirement plan (see "401(k) Retirement Plan"). During the year ended
December 31, 1994, Mr. Murphy was reimbursed $12,000 for costs related to
his relocation upon accepting employment with the Company. During the year
ended December 31, 1994, Mr. Murphy was awarded stock options to purchase
2,000 shares of Common Stock at $11.25 per share upon his election to the
Board of Directors on June 9, 1994. Of these options, 1,000 options vested
on June 9, 1995 and the remaining 1,000 options vested on June 9, 1996.
Prior to becoming an Executive Officer, in his capacity as an outside
Director, Mr. Murphy was awarded 137 shares of Common Stock for services
rendered in 1994 as a member of a Committee of the Board of Directors.
(3) Dr. Stote, Senior Vice President and Chief Science Officer, has been
employed by the Company since March 1992. Dr. Stote's annual salary is
currently $225,000. During the year ended December 31, 1996, Dr. Stote
(Footnote explanations continue on following page)
8
was awarded ten-year stock options to purchase 500,000 shares of Common
Stock, of which one-third of such options vested when the closing price of
the Company's Common Stock on the American Stock Exchange equaled or
exceeded the exercise price of $2.89 for twenty consecutive trading days;
one-third will vest and become exercisable when the closing price equals
or exceeds the exercise price of $3.68 for twenty consecutive trading
days; and one-third will vest and become exercisable when the closing
price equals or exceeds the exercise price of $4.73 for twenty consecutive
trading days. During the year ended December 31, 1995, Dr. Stote was
awarded stock options to purchase 37,500 shares of Common Stock at $3.75
per share, 50% of which vested on June 12, 1996 and balance of which vest
on June 12, 1997. During the years ended December 31, 1996 and 1995, the
Company provided to Dr. Stote matching funds totaling $4,750 and $4,620,
respectively, pursuant to the terms of a Company sponsored 401(k)
retirement plan (see "401(k) Retirement Plan").
(4) Mr. Price, Vice President, Chief Financial Officer, Secretary, and
Treasurer has been employed by the Company since March 1992. Mr. Price's
annual salary is currently $125,000. During the year ended December 31,
1996, Mr. Price was awarded ten-year stock options to purchase 400,000
shares of Common Stock, of which one-third of such options vested when the
closing price of the Company's Common Stock on the American Stock Exchange
equaled or exceeded the exercise price of $2.89 for twenty consecutive
trading days; one-third will vest and become exercisable when the closing
price equals or exceeds the exercise price of $3.68 for twenty consecutive
trading days; and one-third will vest and become exercisable when the
closing price equals or exceeds the exercise price of $4.73 for twenty
consecutive trading days. During the year ended December 31, 1995, Mr.
Price was awarded stock options to purchase 22,500 shares of Common Stock
at $3.75 per share, 50% of which vested on June 12, 1996 and the balance
of which vest on June 12, 1997. During the years ended December 31, 1996
and 1995, the Company provided to Mr. Price matching funds totaling $4,750
and $4,620, respectively, pursuant to the terms of a Company sponsored
401(k) retirement plan (see "401(k) Retirement Plan").
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth the details of options granted to the
individuals listed in the Summary Compensation table during the year ended
December 31, 1996. No stock appreciation rights have been granted to date.
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION
----------------- ------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED(#) FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
- ---- ---------- ----------- --------- ---- ----- ------
James R. Murphy (1) 600,000 39.4% $2.89-$4.73 4/19/06 $396,400 $1,824,800
Robert M. Stote, M.D. (2) 500,000 32.9% $2.89-$4.73 4/19/06 $330,333 $1,520,666
Michael D. Price (3) 400,000 26.3% $2.89-$4.73 4/19/06 $264,267 $1,216,533
- -----------------------------------------
(1) During the year ended December 31, 1996, Mr. Murphy was awarded ten-year
stock options to purchase 600,000 shares of Common Stock, of which
one-third of such options vested when the closing price of the Company's
Common Stock on the American Stock Exchange equaled or exceeded the
exercise price of $2.89 for twenty consecutive trading days; one-third
will vest and become exercisable when the closing price equals
(Footnote explanations continue on following page)
9
or exceeds the exercise price of $3.68 for twenty consecutive trading
days; and one-third will vest and become exercisable when the closing
price equals or exceeds the exercise price of $4.73 for twenty consecutive
trading days.
(2) During the year ended December 31, 1996, Dr. Stote was awarded ten-year
stock options to purchase 500,000 shares of Common Stock, of which
one-third of such options vested when the closing price of the Company's
Common Stock on the American Stock Exchange equaled or exceeded the
exercise price of $2.89 for twenty consecutive trading days; one-third
will vest and become exercisable when the closing price equals or exceeds
the exercise price of $3.68 for twenty consecutive trading days; and
one-third will vest and become exercisable when the closing price equals
or exceeds the exercise price of $4.73 for twenty consecutive trading
days.
(3) During the year ended December 31, 1996, Mr. Price was awarded ten-year
stock options to purchase 400,000 shares of Common Stock, of which
one-third of such options vested when the closing price of the Company's
Common Stock on the American Stock Exchange equaled or exceeded the
exercise price of $2.89 for twenty consecutive trading days; one-third
will vest and become exercisable when the closing price equals or exceeds
the exercise price of $3.68 for twenty consecutive trading days; and
one-third will vest and become exercisable when the closing price equals
or exceeds the exercise price of $4.73 for twenty consecutive trading
days.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth certain information concerning the
number of shares of Common Stock acquired upon the exercise of stock options
during the year ended December 31, 1996 by, and the number and value at December
31, 1996 of shares of Common Stock subject to unexercised options held by, the
individuals listed in the Summary Compensation Table.
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
SHARES FY-END(# SHARES) FY-END($)
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE (1)
---- -------------- ----------- ------------- -----------------
James R. Murphy - - 228,000/425,000 -0- / -0-
Robert M. Stote, M.D - - 220,416/325,084 -0- / -0-
Michael D. Price - - 154,583/278,167 -0- / -0-
- -------------------------
(1) Represents the closing price of the Company's Common Stock on the American
Stock Exchange on December 31, 1996 minus the respective exercise prices.
EMPLOYMENT AGREEMENTS
Mr. James R. Murphy, Chairman of the Board, President and Chief
Executive Officer, entered into an employment agreement with the Company dated
as of June 12, 1995 providing for an initial term which expires on June 12,
1998. Under the terms of this agreement as amended on September 16, 1996, Mr.
Murphy's annual base salary is $245,000. The agreement with Mr. Murphy also
provides for bonuses at the recommendation and discretion of the Compensation
Committee of the Company's Board of Directors and a severance payment equal to
two years salary and immediate vesting of all outstanding stock options upon
termination following a change in control of the Company. Pursuant to the
agreement, if terminated without
10
cause, Mr. Murphy will be entitled to a severance payment equal to one year
salary and immediate vesting of all outstanding stock options.
Dr. Robert M. Stote, Senior Vice President and Chief Science Officer,
entered into an employment agreement with the Company dated as of June 12, 1995
providing for an initial term which expires on June 12, 1998. Under the terms of
this agreement as amended on September 16, 1996, Dr. Stote's annual base salary
is $225,000. The agreement with Dr. Stote also provides for bonuses at the
recommendation and discretion of the Compensation Committee of the Company's
Board of Directors and a severance payment equal to two years salary and
immediate vesting of all outstanding stock options upon termination following a
change in control of the Company. Pursuant to the agreement, if terminated
without cause, Dr. Stote will be entitled to a severance payment equal to one
year salary and immediate vesting of all outstanding stock options.
Mr. Michael D. Price, Vice President, Chief Financial Officer,
Secretary and Treasurer, entered into an employment agreement with the Company
dated as of June 12, 1995 providing for an initial term which expires on June
12, 1998. Under the terms of this agreement as amended on April 1, 1996, Mr.
Price's annual base salary is $125,000. The agreement with Mr. Price also
provides for bonuses at the recommendation and discretion of the Compensation
Committee of the Company's Board of Directors and a severance payment equal to
two years salary and immediate vesting of all outstanding stock options upon
termination following a change in control of the Company. Pursuant to the
agreement, if terminated without cause, Mr. Price will be entitled to a
severance payment equal to one year salary and immediate vesting of all
outstanding stock options.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's executive officers and directors, and any persons who own
more than 10% of any class of the Company's equity securities, to file certain
reports relating to their ownership of such securities and changes in such
ownership with the Securities and Exchange Commission, the American Stock
Exchange and the Pacific Stock Exchange and to furnish the Company with copies
of such reports. To the Company's knowledge, during the year ended December 31,
1996, all Section 16(a) filing requirements have been satisfied.
1991 STOCK OPTION PLAN
The Company's 1991 Stock Option Plan (the "1991 Plan") was
unanimously adopted by the Board of Directors on September 30, 1991, approved by
the Stockholders at the December 1991 Annual Meeting of Stockholders and amended
to increase the number of shares available under the plan to an aggregate of
240,000 by the Stockholders at the February 1993 and June 1994 Annual Meetings
of Stockholders. The purpose of the 1991 Plan is to promote the interests of the
Company in attracting and retaining employees (including Officers) and
experienced and knowledgeable non-employee Directors for the Company and its
subsidiaries, by enabling them to acquire or increase a proprietary interest in
the Company, to benefit from appreciation in the value of the Company's Common
Stock and, thus, participate in the long-term growth of the Company.
PERFORMANCE OPTIONS
On April 19, 1996, the Board of Directors, with Messrs. Murphy,
Stote, M.D. and Price abstaining from the vote, granted 600,000, 500,000 and
400,000 non-qualified, performance vesting stock options (the "Performance
Options") to each of Mr. Murphy, Dr. Stote and Mr. Price, respectively, subject
to stockholder
11
approval. The Performance Options were approved by the stockholders at the 1996
Annual Stockholders Meeting on June 14, 1996.
The Performance Options are exercisable for a term of ten years, of
which one-third of such options vested and became exercisable when the closing
price of the Company's Common Stock on the American Stock Exchange equaled or
exceeded the exercise price of $2.89 for twenty consecutive trading days (110%
of the closing price on April 19, 1996); one-third when the closing price equals
or exceeds the the exercise price of $3.68 for twenty consecutive trading days
(140% of the closing price on April 19, 1996); and one-third when the closing
price equals or exceeds the exercise price of $4.73 for twenty consecutive
trading days (180% of the closing price on April 19, 1996).
The option exercise price may be paid in cash, by check or by any
other form of consideration permitted by law. Additionally, Mr. Murphy, Dr.
Stote and Mr. Price were granted certain registration rights with respect to the
shares of Common Stock issuable upon exercise of such options. No additional
options will be granted to Mr. Murphy, Dr. Stote or Mr. Price until April 19,
1999.
In the event that the number of outstanding shares of Common Stock is
increased or decreased or changed into a different number or kind of shares or
securities by reason of any merger, share exchange, consolidation,
reorganization, recapitalization, reclassification, stock split, combination of
shares, exchange of shares, stock dividend or other distribution payable in
capital stock, or other increase or decrease in such shares effected without
receipt of consideration by the Company, an adjustment will be made to the
remaining outstanding options so that the proportional interest of Mr. Murphy,
Dr. Stote and Mr. Price after such an event will be, to the extent practicable,
the same as before the event.
401(k) RETIREMENT PLAN
The Company sponsors a 401(k) retirement plan (the "401(k) Plan")
under which eligible employees may contribute, on a pre-tax basis, between 1% to
15% of their respective total annual income from the Company, subject to maximum
aggregate annual contribution imposed by the Internal Revenue Code of 1986 as
amended. All full-time employees who have worked for the Company for at least
six months are eligible to participate in the 401(k) Plan. All employee
contributions are allocated to the employee's individual account and are
invested in various investment options as directed by the employee. Cash
contributions are fully vested and nonforfeitable. The Company made matching
contributions to the 401(k) Plan for the 1996 fiscal year in the amount of
$25,500, and is continuing to match 50% of each eligible employee's contribution
in 1997.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors, which is
comprised of three non-employee Directors of the Company, determines, to the
extent not fixed pursuant to the terms of applicable employment agreements, the
compensation of the Chief Executive Officer, other employee members of the Board
of Directors, and all other employees whose annual compensation exceeds $50,000.
The compensation levels of such officers, Directors and employees are subject to
the approval of the Board of Directors.
The Compensation Committee, being responsible for overseeing and
approving executive compensation and grants of stock options, is in a position
to appropriately balance the current cash compensation considerations with the
longer-range incentive-oriented growth outlook associated with stock options.
12
The main objectives of the Company's compensation structure include
rewarding individuals for their respective contributions to the Company's
performance, providing executive officers with a stake in the long-term success
of the Company and providing compensation programs and policies that will
attract and retain qualified executive personnel. The Board of Directors and the
Compensation Committee place a great deal of importance on job security and
recognize that by offering executives protection against job loss, it can be
more successful in recruiting experienced executives from large, established
pharmaceutical companies to relocate with the Company in Florida. Historically,
the members of the Board of Directors and the Compensation Committee have chosen
to achieve these objectives through salary increases, bonuses and periodic stock
option grants. The Committee considered each of these factors in approving the
compensation for Mr. Murphy, who serves as Chief Executive Officer.
The Compensation Committee considers, among other things, the
performance of the Company, compensation levels in competing companies,
individual contributions to the Company and the length of service with the
Company. The Compensation Committee also considered independent surveys of
executive compensation of similarly situated companies.
Compensation through the periodic grant of stock options under the
Company's stock option plans is intended to coordinate executives' and
stockholders' long-term interests by creating a direct link between a portion of
executive compensation and increases in the price of Common Stock and the
long-term success of the Company. This method of compensation also permits the
Company to preserve its cash resources.
The Compensation Committee recognizes the significant improvement in
operating results and reduced losses in 1996. Although the extraordinary
individual contributions of each executive officer must be recognized when
appropriate, it can be expected that any future substantial increases in
executive compensation will be based upon the satisfaction of pre-established
individual objectives, corporate milestones and financial performance of the
Company.
COMPENSATION COMMITTEE
- ----------------------
Doris E. Wardell
Randolph W. Arnegger
Charles L. Bolling
COMMON STOCK PERFORMANCE
The graph presented below compares the cumulative total shareholder
return on the Company's Common Stock for the five years ended December 31, 1996
with the cumulative total shareholder return for such period reflected in the
Standard and Poor's (S&P) 500 Stock Index and in two different peer group
indexes. The Company has elected to change the peer group to which its stock's
performance is compared from the peer group reflected in last year's Proxy
Statement. Accordingly, the graph presented below includes comparisons with both
last year's peer group index of two competing pharmaceutical companies (Cytogen
Corp. and RIBI Immunochem Research Inc.) and the new peer group index of four
(of which only three have comparative data to date) competing pharmaceutical
companies (Andrx Corp., Biovail Corp. International, Noven Pharmaceuticals Inc.
and Theratech Inc. Utah). The Company has elected to change the peer group as it
believes the companies included in the new peer group are more reflective of the
Company's business and therefore provide a more meaningful comparison of stock
performance. The graph (and the information relating to it) was obtained by the
Company from S&P. The comparative returns shown in the graph assume (i) the
investment of $100 in the Company's Common Stock, the common stock of the
companies included in
13
the S&P 500 Stock Index and the common stock of the companies in the two peer
groups at the market close on December 31, 1991 and (ii) the reinvestment of all
dividends.
14
[GRAPH APPEARS HERE]
ANNUAL RETURN PERCENTAGE
Years Ending
Company Name / Index Dec92 Dec93 Dec94 Dec95 Dec96
- --------------------------------------------------------------------------------
BENTLEY PHARMACEUTICALS -68.15 -60.00 -80.00 -55.00 16.67
S&P 500 INDEX 7.62 10.08 1.32 37.58 22.96
OLD PEER GROUP 17.30 -56.39 -44.72 35.19 -8.37
NEW PEER GROUP 90.74 4.74 -23.16 157.26 6.82
INDEXED RETURNS
Base Years Ending
Period
Company Name / Index Dec91 #VALUE! #VALUE! #VALUE! #VALUE! #VALUE!
- --------------------------------------------------------------------------------------
BENTLEY PHARMACEUTICALS 100 31.85 12.74 2.55 1.15 1.34
S&P 500 INDEX 100 107.62 118.46 120.03 165.13 203.05
OLD PEER GROUP 100 117.30 51.16 28.28 38.23 35.03
NEW PEER GROUP 100 190.74 199.78 153.51 394.91 421.85
Old Peer Group Companies New Peer Group Companies
- --------------------------------------------------------------------------------
CYTOGEN CORP ANDRX CORP - NOT INCLUDED IN ANY YEAR
RIBI IMMUNOCHEM RESEARCH INC BIOVAIL CORP INTERNATIONAL - INCLUDED FROM 1995
FORWARD
NOVEN PHARMACEUTICALS INC - INCLUDED ALL YEARS
THERATECH INC UTAH - INCLUDED FROM 1993 FORWARD
15
PROPOSAL 2
PROPOSAL TO ADOPT AMENDMENTS TO THE COMPANY'S 1991 STOCK OPTION PLAN
The Company's 1991 Stock Option Plan (the "1991 Plan") was adopted by
the Board of Directors on September 30, 1991 and was approved by the
shareholders on December 16, 1991. The 1991 Plan was amended to increase the
number of shares available under the Plan to an aggregate of 1,200,000 and
2,400,000 shares by the Stockholders at the February 1993 and June 1994 Annual
Meetings of Stockholders, respectively. As a result of the reverse stock split
on July 25, 1995, the number of shares available under the Plan is 240,000. As
of April 25, 1997, no options had been exercised and options to purchase 214,100
shares held by 13 optionees were outstanding at a weighted average per share
exercise price of $24.84 and 25,900 shares are available for future grants under
the 1991 Plan.
PROPOSED AMENDMENTS
On April 18, 1997, the Board of Directors unanimously adopted and
recommended for submission to shareholders for their approval at the Meeting,
amendments to the 1991 Plan (the "Amendments") to:
(i) Increase the number of shares of Common Stock for which options
may be granted under the 1991 Plan from 240,000 to 500,000 shares. The Board of
Directors believes that, although the Company has not experienced difficulty in
attracting and retaining personnel, the 1991 Plan has been instrumental in
attracting and retaining employees, officers and consultants of outstanding
ability and that this objective will be furthered by providing additional shares
for future option grants; and
(ii) Delete the sections in the 1991 Plan that provide that (i) each
individual who becomes a Non-Employee Director shall on the date of the
director's initial election and each election to the Board of Directors be
granted an option to purchase 1,000 shares of Common Stock for each year of the
term to which the director is elected or reelected at a price equal to 100% of
the fair market value of the Common Stock on the date of election or reelection
determined in accordance with the provision of the 1991 Plan; (ii) such options
be for a term of 10 years, and (iii) such options vest in three equal
installments on each of the first three anniversaries of the date of grant.
These provisions had been required in order for such option grants to be exempt
from the six-month short swing profit provisions of Section 16(b) of the
Securities Exchange Act of 1934 (the "Act"). Recent amendments to Rule 16b-3
promulgated under the Act no longer require that the terms of such grants be
specified in the Plan ("formula grants") in order for the exemption to be
available. The Board of Directors believes that by deleting the provision for
formula grants, the Company will have greater flexibility in granting options to
Non-Employee Directors which will facilitate its attracting and retaining
qualified Non-Employee Directors.
The following is a description of the 1991 Plan:
Types of Grants and Awards
- --------------------------
The 1991 Plan permits the grant of options which may either be
"incentive stock options" ("ISOs"), within the meaning of Section 422 of the
Code, or "non-qualified stock options" ("NQSOs"), which do not meet the
requirements of Section 422 of the Code.
16
Prior to giving effect to the proposed amendments, options to
purchase 1,000 shares of Common Stock are to be automatically granted to each
Non-Employee Director upon his or her election or reelection to the Board for
each year of the term for which he or she is elected. The options vest as to
1,000 shares at the end of each year of such term. One of the proposed
amendments to the 1991 Plan is to delete the provisions described in this
paragraph.
Eligibility
- -----------
All employees (including officers), and directors of the Company and
its subsidiaries, are eligible to be granted options under the 1991 Plan. The
Company currently has approximately 110 employees.
Stock Subject to the 1991 Plan
- ------------------------------
The total number of shares of Common Stock for which options may be
granted under the 1991 Plan may not exceed 240,000, subject to possible
adjustment in the future. One of the proposed amendments to the 1991 Plan is to
increase the number of shares for which options may be granted under the 1991
Plan to 500,000. Any shares of Common Stock subject to any option which for any
reason expires, is canceled or is terminated unexercised or which ceases for any
reason to be exercised will again be available for grant under the 1991 Plan.
The number of shares of Common Stock underlying that portion of options which
are exercised will not again become available for grant under the Plan.
Administration
- --------------
The 1991 Plan is administered by a committee of the Board of
Directors of not less than two Directors, each of whom must be a "Non-Employee
Director" within the meaning of regulations promulgated by the Securities and
Exchange Commission. The Board of Directors has designated the Compensation
Committee of the Board consisting of Mrs. Wardell and Messrs. Arnegger and
Bolling to administer the 1991 Plan. The Compensation Committee has the
authority under the 1991 Plan to determine the terms of options granted under
the 1991 Plan, including, among other things, the individuals who shall receive
options, the times when they shall receive them, whether an incentive stock
option and/or non-qualified option shall be granted, the number of shares to be
subject to each option, and the date or dates each option shall become
exercisable.
Exercise Price
- --------------
The exercise price of an option granted under the 1991 Plan is
determined by the Compensation Committee, but may not be less than 100% of the
fair market value of the Common Stock on the date an option is granted (110% of
such fair market value in the case of ISOs granted to an optionee (a "Ten
Percent Shareholder") who owns or is deemed to own stock possessing more than
10% of the total combined voting power of all classes of stock of the Company.)
The exercise price is payable at the time of exercise of the option in cash,
previously acquired shares of Common Stock (valued at their fair market value on
the date of exercise of the option) or a combination thereof, in the discretion
of the Compensation Committee. The Compensation Committee may, in its
discretion, permit payment of the exercise price of options by delivery of
properly executed exercise notices, together with a copy of irrevocable
instructions from the optionee to a broker to deliver promptly to the Company
the amount of sale or loan proceeds to pay such exercise. To facilitate the
foregoing, the Company may enter into agreements for coordinated procedures with
one or more brokerage firms.
17
Terms and Conditions
- --------------------
As to options granted to employees:
i. Options granted to employees may be granted for terms of up to
but not exceeding ten years as determined by the Compensation Committee,
provided that ISOs granted to a Ten Percent Shareholder may not be for a term of
more than five years.
ii. Shares covered by options may not be purchased within the
one-year period after the date of grant, except as described in subparagraphs
(iii), (iv) and (v) below. Thereafter, options will become exercisable on such
terms and at such times as the Compensation Committee shall determine. Options
may not be exercised in an amount of less than 100 shares (except the remaining
shares then covered by and purchasable under the option if less than 100
shares).
iii. If an employee optionee's employment is terminated for any
reason other than "retirement," "disability" or death, the option may be
exercised at any time within three months thereafter to the extent shares were
purchasable at the date of termination. However, in the event employment is
terminated by the Company within three years after a "change in control" of the
Company, the optionee at any time within three months after termination may
exercise all or any part of the remaining unexercised potion of the option
notwithstanding that the option had not yet become exercisable with respect to
all or any part of such shares at the date of termination. The term "change in
control of the Company" means the acquisition of the beneficial ownership,
directly or indirectly, of voting stock of the Company by any corporation,
person or entity resulting in such corporation, person or entity owning 50% or
more of such stock.
iv. If an employee's employment is terminated by "disability" or
"retirement," the remaining unexercised portion of the option may be exercised
at any time within a twelve month period after such termination notwithstanding
that the option had not yet become exercisable with respect to all or any part
of such shares at the date of termination.
v. In the event of the death of an optionee while employed, the
remaining unexercised potion of the option may be exercised notwithstanding that
it had not yet become exercisable with respect to all or any part of such shares
at the date of death. If death occurs during the three month period after
termination of employment, or the twelve month period after termination by
reason of retirement (three months in the case of termination by reason of
retirement for employee optionees holding ISOs) or disability, the option may be
exercised to the extent the optionee was entitled to do so at the date of death,
giving effect to the provisions described in subparagraph (iii) and (iv) above.
In each case, the option may be exercised by the optionee's legal representative
or beneficiary during the period prescribed in the option agreement not
exceeding twelve months after the date of death.
vi. An option may not be transferred other than by will or the
laws of descent and distribution and may be exercised during a holder's lifetime
only by the holder or by the holder's guardian or legal representative.
vii. The foregoing notwithstanding, in no case may options be
exercised later than the expiration date specified in the grant.
18
As to options granted to Non-Employee Directors:
i. Prior to giving effect to the proposed amendments, options
granted to Non-Employee Directors are for a term of ten years; provided that
shares may not be purchased within the one-year period after the date of grant,
except as described in subparagraphs (ii), (iii) and (iv) below. Options granted
to Non-Employee Directors elected for a full three year term become exercisable
on each of the first three anniversaries of the date of grant to the extent of
one-third of the number of shares originally subject to the option (adjusted for
changes described under "Adjustment in Event of Capital Changes" below), except,
in the case of termination of service on the Board or "Director Emeritus" (an
honorary title granted by majority vote of the members of the Board then
serving) status under the circumstances described in subparagraphs (ii), (iii)
and (iv) below. Shares not purchased in any one exercise period may be purchased
in any subsequent exercise period prior to the termination of the option.
Options may not be exercised in an amount less than 100 shares (except the
remaining shares then covered by and purchasable under the option if less than
100 shares). One of the proposed amendments to the 1991 Plan is to delete the
provisions described in this paragraph (i).
ii. If a Non-Employee Director optionee ceases to serve on the
Board for any reason, other than "disability" or death without being designated
as a "Director Emeritus," or a "Director Emeritus" ceases to retain such status
otherwise than by reason of "disability" or death, the option may be exercised
at any time within three months thereafter to the extent shares were purchasable
at the date of termination. However, in the event service on the Board or
"Director Emeritus" status is terminated by the Company within three years after
a "change in control" of the Company, the non-employee director optionee at any
time within three months after termination may exercise all or any part of the
remaining unexercised portion of the option notwithstanding that the option had
not yet become exercisable with respect to all or any part of such shares at the
date of termination. If a Non-Employee Director ceases to serve on the Board but
is designated as a "Director Emeritus," the option will continue to be
exercisable under the terms thereof while the Non-Employee Director retains such
status.
iii. If a Non-Employee Director optionee ceases to serve on the
Board by reason of "disability" or becomes "disabled" while retaining the status
of "Director Emeritus," the remaining unexercised portion of the option may be
exercised at any time within a twelve month period after such termination
notwithstanding that the option had not yet become exercisable with respect to
all or any part of such shares at the date of termination.
iv. In the event of the death of a Non-Employee Director optionee
either while serving on the Board or retaining the status of "Director
Emeritus," t he remaining unexercised portion of the option may be exercised
notwithstanding that it had not yet become exercisable with respect to all or
any part of such shares at the date of death. If death occurs during the three
month period after termination of service on the Board without "Director
Emeritus" status, or within the twelve month period after termination of service
on the Board or of "Director Emeritus" status by reason of "disability," the
option may be exercised to the extent the optionee was entitled to do so at the
date of death, giving effect to the provisions described in subparagraphs (ii)
and (iii) above. In each case, the option may be exercised by the optionee's
legal representative or beneficiary during the twelve month period after the
date of death.
v. An option may not be transferred other than by will or the
laws of descent and distribution and may be exercised during a holder's lifetime
only by the holder or by his guardian or legal representative.
vi. The foregoing notwithstanding, in no case may options be
exercised later than the expiration date specified in the grant.
19
Adjustment in the Event of Capital Changes
- ------------------------------------------
The Board of Directors shall make appropriate adjustments in the
number and kind of shares subject to the 1991 Plan, and in the number and kind
of shares subject to, and the exercise price of, outstanding options in the
event of any change in the Common Stock by reason of any stock dividend, stock
split, stock combination, recapitalization, merger or reorganization in which
the Company is the surviving corporation, or the like.
Plan Term and Amendments
- ------------------------
No options may be granted under the 1991 Plan after September 30,
2001. The Board may amend, suspend or terminate the 1991 Plan or any portion
thereof at any time and from time to time in such respects as it deems necessary
or advisable (including without limitation to conform with applicable law or the
regulations or rulings thereunder), but may not without the approval of the
Company's shareholders make any alteration or amendment thereof which would (i)
change the class of those eligible to receive options, (ii) increase the maximum
number of shares for which options may be granted (except for anti-dilution
adjustments) or (iii) materially increase the benefits to participants under the
1991 Plan.
During the fiscal year ended December 31, 1996, options to purchase
21,500 shares of Common Stock were granted to employees of the Company who are
not executive officers. Such options were granted at prices ranging from $2.37
to $2.44 per share, representing the fair market value of the Common Stock on
the dates of grant. These options expire on various dates through April 26,
2006.
Federal Income Tax Treatment
- ----------------------------
The following is a general summary of the federal income tax
consequences under current tax law of NQSOs and ISOs. It does not purport to
cover all of the special rules, including special rules relating to optionees
subject to Section 16(b) of the Exchange Act and the exercise of an option with
previously-acquired shares, or the state or local income or other tax
consequences inherent in the ownership and exercise of stock options and the
ownership and disposition of the underlying shares.
An optionee will not recognize taxable income for federal income tax
purposes upon the grant of a NQSO or an ISO.
Upon the exercise of a NQSO, the optionee will recognize ordinary
income in an amount equal to the excess, if any, of the fair market value of the
shares acquired on the date of exercise over the exercise price thereof, and the
Company will generally be entitled to a deduction for such amount at that time.
If the optionee later sells shares acquired pursuant to the exercise of a NQSO,
he or she will recognize long-term or short-term capital gain or loss, depending
on the period for which the shares were held. Long-term capital gain is
generally subject to more favorable tax treatment than ordinary income or
short-term capital gain. Proposed legislation would treat long-term capital gain
even more favorably.
Upon the exercise of an ISO, the optionee will not recognize taxable
income. If the optionee disposes of the shares acquired pursuant to the exercise
of an ISO more than two years after the date of grant and more than one year
after the transfer of the shares to him or her, the optionee will recognize
long-term capital gain or loss and the Company will not be entitled to a
deduction. However, if the optionee disposes of such shares within the required
holding period, all or a portion of the gain will be treated as ordinary income
and the Company will generally be entitled to deduct such amount.
20
In addition to the federal income tax consequences described above,
an optionee may be subject to the alternative minimum tax, which is payable to
the extent it exceeds the optionee's regular tax. For this purpose, upon the
exercise of an ISO, the excess of the fair market value of the shares over the
exercise price therefor is an adjustment which increases alternative minimum
taxable income. In addition, the optionee's basis in such shares is increased by
such excess for purposes of computing the gain or loss on the disposition of the
shares for alternative minimum tax purposes. If an optionee is required to pay
an alternative minimum tax, the amount of such tax which is attributable to
deferral preferences (including the ISO adjustment) is allowed as a credit
against the optionee's regular tax liability in subsequent years. To the extent
the credit is not used, it is carried forward.
The Company's Board of Directors recommends a vote FOR this proposal.
Vote Required
- -------------
The affirmative vote of the holders of a majority of the shares of
the Company's Common Stock present or represented and entitled to vote at the
Meeting will be required to approve the amendments to the 1991 Plan.
21
MISCELLANEOUS
Voting Requirements
- -------------------
Directors are elected by a plurality of the votes cast at the Meeting
at which a quorum is present (Proposal 1). The affirmative vote of the holders
of a majority of the votes cast at the Meeting at which a quorum is present will
be required to approve the amendments to the Company's 1991 Plan (Proposal 2).
Abstentions and broker non-votes with respect to any matter are not considered
cast with respect to that matter.
Independent Auditors
- --------------------
The Audit Committee of the Board of Directors of the Company selected
Deloitte & Touche LLP to serve as the Company's independent auditors for the
year ended December 31, 1996 and for the year ending December 31, 1997.
Representatives of Deloitte & Touche LLP, will not be present at the Meeting.
Stockholder Proposals
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From time to time stockholders may present proposals for consideration
at a meeting which may be proper subjects for inclusion in the proxy statement
and form of proxy related to that meeting. Stockholder proposals intended to be
included in the Company's proxy statement and form of proxy relating to the
Company's 1998 Annual Meeting of Stockholders must be received by the Company at
its principal offices, One Urban Centre, Suite 548, 4830 West Kennedy Blvd.,
Tampa, Florida 33609 by January 1, 1998. Any such proposals, as well as any
questions relating thereto, should be directed to the Secretary of the Company
at such address.
Additional Information
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The cost of solicitation of Proxies, including the cost of reimbursing
banks, brokers and other nominees for forwarding Proxy solicitation material to
the beneficial owners of shares held of record by them and seeking instructions
from such beneficial owners, will be borne by the Company. The Company has
engaged Morrow & Co., Inc. to solicit Proxies and has agreed to pay Morrow &
Co., Inc. a fee of $4,000 plus their accountable expenses in connection with the
solicitation. Proxies may also be solicited without extra compensation by
certain officers and regular employees of the Company. Proxies may be solicited
by mail and, if determined to be necessary, by telephone, telegraph or personal
interview.
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Other Matters
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Management does not intend to bring before the Meeting any matters
other than those specifically described above and knows of no matters other than
the foregoing to come before the Meeting. If any other matters or motions
properly come before the Meeting, it is the intention of the persons named in
the accompanying Proxy to vote such Proxy in accordance with their judgment on
such matters or motions, including any matters dealing with the conduct of the
Meeting.
By Order of the Board of Directors
MICHAEL D. PRICE
Secretary
Tampa, Florida
May 2, 1997
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BENTLEY PHARMACEUTICALS, INC.
ANNUAL MEETING OF STOCKHOLDERS - JUNE 6, 1997
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints, as proxies for the undersigned,
James R. Murphy, Dr. Robert M. Stote and Michael D. Price and each of them, with
full power of substitution, to vote all shares of Common Stock of the
undersigned in Bentley Pharmaceuticals, Inc. (the "Company") at the Annual
Meeting of Stockholders of the Company to be held at The Princeton Club, 15 West
43rd Street, New York, New York 10036 on June 6, 1997, at 9:00 a.m., local time
(the receipt of Notice of which meeting and the Proxy Statement accompanying the
same being hereby acknowledged by the undersigned), or at any adjournments
thereof, upon the matters described in the Notice of Annual Meeting and Proxy
Statement and upon such other business as may properly come before such meeting
or any adjournments thereof, hereby revoking any proxies heretofore given.
Each properly executed proxy will be voted in accordance with the
specifications made on the reverse side hereof. If no specifications are made,
the shares represented by this proxy will be voted "FOR" the listed nominees and
"FOR" approval of the amendments to the Company's 1991 Plan.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
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Election of Directors:
FOR ALL NOMINEES |_| WITHHOLD AUTHORITY |_|
to vote for all nominees
Nominees: Ehud D. Laska and Michael D. Price
(INSTRUCTION: To withhold authority for any individual nominee, strike a line
through the nominee's name on the list above.)
Approval of the amendments to the Company's 1991 Stock Option Plan (the "1991
Plan") increasing the number of shares of Common Stock for which options may be
granted under the 1991 Plan from 240,000 to 500,000 and eliminating the
Non-Employee Director formula grants and certain provisions relating thereto
currently set forth in the 1991 Plan.
FOR |_| AGAINST |_| ABSTAIN |_|
NOTE: Please date and sign your
name or names exactly as set forth
hereon. If signing as attorney,
executor, administrator, trustee or
guardian, please indicate the
capacity in which you are acting.
Proxies by corporations should be
signed by a duly authorized officer
and should bear the corporate seal.
Dated: _____________________, 1997
__________________________________
__________________________________
Signature of Stockholder(s)
__________________________________
Print Name(s)
Please Sign and Return the Proxy Promptly in the Enclosed Envelope.
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