View:
As filed, via EDGAR, with the Securities and Exchange Commission on February 8,
1999.
File No.:________
ICA No.: _________
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the registrant |_|
Filed by a party other than the registrant |X|
Check the appropriate box:
|X| Preliminary proxy statement |_| Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
|_| Definitive proxy statement
|_| Definitive additional materials
|_| Soliciting material pursuant to
Rule 14a-11(c) or Rule 14a-12
ATLANTIC PHARMACEUTICALS, INC.
(Name of Registrant as Specified in Its Charter)
STEVE H. KANZER, A. JOSEPH RUDICK AND FREDERIC P. ZOTOS
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
PRELIMINARY COPY --
SUBJECT TO COMPLETION
CONSENT STATEMENT
OF
STEVE H. KANZER, A. JOSEPH RUDICK AND FREDERIC P. ZOTOS
FOR
ATLANTIC PHARMACEUTICALS, INC.
This Consent Solicitation Statement (this "Consent Statement") is
furnished to you by Steve H. Kanzer, C.P.A., Esq., A. Joseph Rudick, M.D., and
Frederic P. Zotos, Esq. (collectively, the "Solicitors") in connection with
their solicitation of written consents from the holders of common stock, par
value $0.001 per share (the "Common Stock"), and Series A Convertible Preferred
Stock, par value $0.001 per share (the "Preferred Stock"; together with the
Common Stock, the "Stock"), of Atlantic Pharmaceuticals, Inc., a Delaware
corporation ("Atlantic"), to take the following actions without a meeting of
Atlantic's stockholders, as permitted by the Delaware General Corporation Law
(the "DGCL"):
1. Remove (i) all current members of Atlantic's Board of Directors (the
"Board of Directors") other than Steve H. Kanzer and Yuichi Iwaki, and
(ii) any other person or persons (other than the persons elected
pursuant to this consent) elected or appointed to the Board of
Directors prior to the effective time of this stockholder action in
addition to or in lieu of any of such current members (including any
persons elected or appointed in lieu of Steve H. Kanzer ) to fill any
newly-created directorship or vacancy on the Board of Directors or
otherwise (the "Director Removal Proposal").
2. Elect A. Joseph Rudick and Frederic P. Zotos (collectively, the
"Nominees") as directors of Atlantic to serve until their respective
successors are duly elected and qualified (the "Director Election
Proposal").
3. Repeal any By-Laws adopted by the Board of Directors subsequent to
January 11, 1999, and prior to the effectiveness of the Solicitor
Proposals (as defined below), other than the amendment to the By-Laws
contemplated by this Consent Statement (the "By-Laws Proposal";
collectively with the Director Removal Proposal, and the Director
Election Proposal, the "Solicitor Proposals").
The effectiveness of the Solicitor Proposals is conditioned upon the
adoption of each of the Solicitor Proposals , except that if the By-Laws
Proposal is not adopted, the Solicitors reserve the right to waive this
condition.
The Solicitors ask that stockholders of Atlantic consent to each of the
Solicitor Proposals by marking the enclosed white consent card appropriately,
signing and dating it, and returning it promptly in accordance with the
instructions set forth below.
The members of the current Board of Directors other than Mr. Kanzer,
namely Drs. Fildes, Iwaki, and Cleary (collectively, the "Opposing Directors"),
have caused Atlantic to file with the Securities and Exchange Commission (the
"Commission"), and will be distributing to stockholders of Atlantic, a
Solicitation in Opposition and Consent Solicitation Statement (the "Solicitation
in Opposition") recommending that stockholders consent to Atlantic's proposals
that (1) Mr. Kanzer be removed from the Board of Directors, and (2) Atlantic's
Certificate of Designations be amended to remove the requirement that 66.67% of
the Preferred Stock approve Atlantic transactions with affiliates (collectively,
the "Opposing Director Proposals"). Atlantic has
distributed or will be distributing the Solicitation in Opposition to Atlantic
stockholders. The Solicitors recommend that you withhold your consent to both
the Opposing Director Proposals.
The Solicitors note that Dr. Iwaki has voted to oppose the Solicitor
Proposals and to solicit stockholder approval for the Opposing Director
Proposals.
This Consent Statement and the enclosed consent card are first being
furnished to Atlantic's stockholders on or about February __ , 1999.
SUMMARY OF CONSENT PROCEDURE
The Solicitor Proposals will become effective on the date when the
written consents of holders of a majority of the shares of Stock outstanding on
the record date as determined in accordance with Delaware law (the "Record
Date") are delivered to Atlantic, so long as each of those consents is delivered
to Atlantic within 60 days of the earliest dated consent delivered to Atlantic.
Section 213(b) of the DGCL provides that a corporation's board of directors may
fix a record date for a consent solicitation, but that the date selected may not
be more than ten days after the date upon which the resolution fixing the record
date is adopted by the board. Section 213(b) also provides that if the board
does not fix a record date, the record date will be the first date on which a
signed written consent is delivered to the corporation. Steve H. Kanzer
delivered a signed written consent to Atlantic on January 25, 1999. Accordingly,
the Solicitors believe that the Record Date will be January 25, 1999, the date
Mr. Kanzer's written consent was received by Atlantic. The solicitation period
will terminate after 60 days from the Record Date; in other words, it will run
through March 26, 1999.
To the Solicitors' knowledge, there were at the close of business on the
Record Date approximately 4,990,310 shares of Common Stock and 482,870 shares of
Preferred Stock outstanding and entitled to vote. Each holder of Common Stock is
entitled to one vote for each share of Common Stock held by it as of the Record
Date. Each holder of Preferred Stock is entitled to one vote for each share of
Common Stock into which a share of Preferred Stock was convertible as of the
Record Date. As of the record date, the Solicitors believe each share of
Preferred Stock is convertible into 3.27 shares of Common Stock. Consequently,
the Preferred Stock was as of the Record Date entitled to an aggregate of
1,578,985 votes. The total voting power represented by the Common Stock and the
Preferred Stock as of the Record Date is 6,569,295, with 3,284,649 votes
constituting the majority required for adoption of the Solicitor Proposals.
As of the Record Date, Mr. Kanzer owned 121 shares of Common Stock, and
options exercisable within 60 days for 4,000 shares of Common Stock,
representing in the aggregate less than 1% of the voting power of the
outstanding Stock as of the Record Date. As of the Record Date, Dr. Rudick and
Mr.
Zotos held no shares of Stock.
The Solicitors recommend that you consent to each of the Solicitor
Proposals by marking the enclosed white consent card appropriately, signing and
dating it, and returning it promptly in the postage-paid envelope provided.
Failure to sign and return your consent will have the same effect as voting
against the Solicitor Proposals.
If your shares are held in the name of a brokerage firm, bank nominee
or other institution, you should contact the person responsible for your account
and give instructions for the consent card representing your shares to be
marked, dated, signed and mailed. Only that institution can execute a consent
card with respect to your shares held in the name of that institution and only
upon receipt of specific instructions from you. The Solicitors urge you to
confirm in writing your instructions to the person
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responsible for your account and to provide a copy of those instructions to Dr.
Rudick at the address set forth below so that the Solicitors are aware of all
instructions given and can attempt to ensure that those instructions are
followed.
The Solicitors currently intend to cease the solicitation of consents
once they have determined that valid and unrevoked consents representing a
majority of the voting power represented by issued and outstanding shares of
Stock as of the Record Date have been obtained and to deliver those consents to
Atlantic in the manner required by Section 228 of the DGCL as soon as
practicable thereafter. When the Solicitor Proposals for which consents are
given become effective, a stockholder will be unable to revoke his or her
consent.
If the Solicitor Proposals become effective, Atlantic will as required
by the DGCL promptly notify by mail the stockholders who have not consented to
the Solicitor Proposals.
Please return your completed consent card (or institution
instructions), and direct any questions, to Dr. Rudick at the following
coordinates:
A. Joseph Rudick, M.D.
150 Broadway
Suite 1100
New York, NY 10038
Telephone: (212) 227-4714
Any stockholder that has returned to Atlantic a consent card consenting
to the Atlantic Proposals may revoke its consent by means of a dated writing
mailed to Atlantic at the address stated in the mailing instructions in the
Solicitation in Opposition. If you have already consented to the Atlantic
Proposals, the Solicitors urge you to revoke your consent to the proposal that
Mr. Kanzer be removed from the Board of Directors, and ask that you send to Dr.
Rudick at the above address a copy of your revocation so that the Solicitors can
ensure that the revocation is effective. Any revocation will only be effective,
however, if Atlantic receives it prior to receiving written consents in favor of
that proposal from stockholders holding a majority of the voting power of the
Stock.
If you have not completed or mailed the consent card supplied in
connection with the Solicitation in Opposition, your failure to do so will
effectively serve as a "no" vote on the Opposing Director Proposals. However, in
order to vote in favor of the Solicitor Proposals, you must indicate your
consent on the enclosed white consent card and return it to Dr. Rudick.
WHY YOU SHOULD CONSENT TO THE SOLICITOR PROPOSALS
The Solicitors believe that the situation facing Atlantic stockholders
is perilous. It can be summarized as follows:
o At its current rate of expenditure, Atlantic will most likely need to
secure additional financing during 1999.
o Virtually all of Atlantic's products are in an early stage of
development, and are highly unlikely to generate any revenues before
Atlantic is required to seek additional financing.
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o The Opposing Directors have caused Atlantic to incur inappropriately
high general and administrative expenses, and have attempted to engage
in inappropriate self-dealing transactions.
o The Opposing Directors have shown little or no interest in seeking a
licensing arrangements, acquisitions, or a business combination so as
to reduce general and administrative expenses and perhaps gain access
to technologies with near-term profit potential.
o The result is that Atlantic will need the additional financing sooner
than it should have. By reason of Atlantic's current condition, it is
likely that absent a profound change in management strategy, this
financing, if available, will result in significant dilution of the
current stockholders' ownership interest in Atlantic.
o Atlantic stockholders who wish to avoid excessive dilution are urged to
consent to the Solicitor Proposals, as the Solicitors will immediately
reverse the policies that have brought Atlantic to its current
precarious position.
These points are discussed in greater detail below.
Atlantic Will Soon Need Additional Financing
In August 1997, Atlantic obtained $12.5 million in equity financing.
Without further financing, however, resources for Atlantic's operating and
capital expenditures could be exhausted anytime after March 2000, according to
Atlantic's most recent filing on Form 10-QSB from April 2000.
An even more immediate concern, however, is the risk that as early as
July 1999, Atlantic's net tangible assets could fall below $2 million, the
minimum required for the Common Stock's continued inclusion in the NASDAQ
SmallCap Market.
If the Common Stock is delisted from the NASDAQ SmallCap Market for
failure to meet NASDAQ's net tangible asset requirement and is forced to trade
on the OTC Bulletin Board, Atlantic would be subject to the "penny stock"
provisions of Rule 15g-9 under the Exchange Act, which impose additional sales
practice requirements on broker-dealers that sell such securities. These
requirements would likely have an adverse effect on the market liquidity of the
Common Stock, and therefore on Atlantic's ability to raise funds in the future,
the ability of broker-dealers to interest buyers in the Common Stock, and the
ability of purchasers to sell the Common Stock in the secondary market. Also,
the price of the Common Stock would no longer be listed daily in the Wall Street
Journal or New York Times.
Given these adverse consequences, the Solicitors are of the opinion
that Atlantic must avoid exclusion from the NASDAQ SmallCap Market. Absent a
significant reduction in the Atlantic's rate of spending, the only way to ensure
this would be to obtain additional financing safely in advance of exclusion.
Atlantic's need for further capital raises two questions. First, why
will Atlantic need further financing so soon? Second, what would be the effect
on current stockholders of any additional financing? Answering these questions
requires that one consider certain features of Atlantic's operations.
Atlantic's Products Will Not Generate Revenues in the Near-Term
There is no basis for assuming that Atlantic's programs, as currently
managed, would allow Atlantic to generate the cash necessary to ensure that
Atlantic remains eligible for continued inclusion on the
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NASDAQ SmallCap Market. With the exception of the Catarex device, Atlantic's
products are in an early stage of development, and no significant drug
development milestones are likely to occur before Atlantic is required to seek
additional financing. Consequently, there is very little prospect of Atlantic
obtaining revenue from corporate partners. This has been borne out by Atlantic's
failure to enter into a strategic alliance with any multinational pharmaceutical
company (other than Bausch & Lomb Surgical) despite several years of effort
towards that goal. Even if a potential corporate partner were to appear
tomorrow, it is unlikely that Atlantic would be able to finalize any arrangement
with that potential partner in time to meet Atlantic's cash requirements, given
the lengthy due diligence and negotiation process that such transactions
typically involve.
Atlantic's General and Administrative Expenses Are Excessive
According to Atlantic's most recent filing on Form 10-QSB, Atlantic has
since its inception incurred general and administrative expenses of $11,497,806,
whereas it has spent only $6,131,920 on research and development of Atlantic's
proprietary products and technologies. Similarly, in the three months ended
September 30, 1998, Atlantic incurred $842,605 of general and administrative
expenses and $476,744 of research and development expenses.
In the opinion of the Solicitors, these ratios are entirely
inappropriate for a development-stage medical technology company that should be
seeking to build value through research and development. While in the
Solicitation of Opposition the Opposing Directors trumpet their cost-cutting
measures, the Opposing Directors have no interest in controlling general and
administrative expenses, and are seeking to take steps that would result in
their increase.
The Opposing Directors appear to be particularly unwilling to control
compensation. For example, Atlantic maintains a full and highly-compensated
management team of its own, even though its principal program is handled by its
majority-owned subsidiary, Optex Opthalmics, Inc. ("Optex"), which itself has a
full and independent management team. It was Optex that was responsible for
acquiring, developing, and licensing to Bausch & Lomb Surgical the Catarex
device.
A far more insidious reflection of the Opposing Directors' freewheeling
approach to general and administrative expenses is, however, the arrangements
that the Board of Directors sought to put in place for Dr. John K.A.
Prendergast, a director of Atlantic until December 1998.
On December 17, 1998, the Board of Directors proposed that Atlantic
enter into an employment agreement with Dr. Prendergast pursuant to which
Atlantic would hire Dr. Prendergast as chief executive officer and pay him a
$25,000 signing bonus and an annual salary of $275,000. In addition, Atlantic
would grant Dr. Prendergast an option to purchase 5% of Atlantic's outstanding
shares at an exercise price equal to the market price, and would protect his
interest against dilution until there were 10 million shares of Common Stock
outstanding. (On the Record Date, there were approximately 4,990,310 shares of
Common Stock outstanding.) If Atlantic were to terminate Dr. Prendergast's
employment without cause, Dr. Prendergast would be entitled to $275,000 in
severance pay.
Perhaps just as disturbing is that Atlantic also proposed to grant Dr.
Prendergast the right to cause Atlantic to relocate from its present premises in
North Carolina, presumably to New Jersey, where Dr. Prendergast resides, with
all the expense that relocation entails; despite the exceedingly generous terms
of the employment agreement, Atlantic was evidently unwilling to impose upon Dr.
Prendergast to relocate to North Carolina. This move would have represented the
fourth relocation of Atlantic since its founding in 1993. Originally Atlantic
was located in New York City, then it moved to Half Moon Bay, California,
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before relocating to North Carolina. With each move, Atlantic incurred expenses
relocating employees and establishing new offices.
A further problem is the Opposing Directors' proposal to grant Dr.
Prendergast options for up to 500,000 shares of Common Stock. The Common Stock
began 1998 at $6.50 per share, and traded as high as $9.00 per share, but has
since slid to approximately $1.50 per share, a decline of approximately 84%. The
Solicitors believe that someone who was a member of the Board of Directors and a
consultant to Atlantic during the period when this decline in the price of the
Common Stock took place should not be rewarded with options for up to half a
million shares of Common Stock a low exercise price.
It is noteworthy that although Atlantic engaged, and paid, an
independent executive search firm to assist it in locating candidates for the
chief executive officer position, Dr. Prendergast has thus far been the only
candidate considered by the Board of Directors.
The Board of Directors approved the proposed arrangement with Dr.
Prendergast, with only Mr. Kanzer voting against. Shortly thereafter, on
December 23, 1998, Mr. Kanzer delivered a letter to the Board of Directors and
Atlantic's counsel stating that as Dr. Prendergast was a member of the Board of
Directors, and therefore an affiliate of Atlantic, the proposed employment
agreement had to be approved by the holders of the Preferred Stock; the
Certificate of Designations of the Preferred Stock provides that until fewer
than 50% of the shares of Preferred Stock are outstanding, transactions between
Atlantic and its affiliates must be approved by 66.67% of all outstanding shares
of Preferred Stock (this requirement, the "Preferred Stock Consent
Requirement").
On December 24, 1998, Dr. Prendergast resigned from the Board of
Directors. That his resignation was an effort to avoid being deemed an affiliate
for purposes of the Preferred Stock Consent Requirement was confirmed during a
meeting of the Board of Directors held on January 11, 1998, when the Opposing
Directors indicated to Mr. Kanzer that they still wished to approve the
employment agreement between Atlantic and Dr. Prendergast. In response, Mr.
Kanzer indicated to the Opposing Directors that he considered their conduct
highly inappropriate and against the interests of the stockholders at a time
when Atlantic should be seeking to reduce, rather than increase, general and
administrative expenses. Mr. Kanzer stated that he would seek to change
Atlantic's management by means of a consent solicitation.
The Solicitors' objections to the proposed arrangement with Dr.
Prendergast are straightforward. Given the current situation of Atlantic, the
proposed arrangement would be entirely unreasonable, no matter whom the proposed
CEO, in that it would simply serve to further increase the burden of general and
administrative expenses and provide management with a further incentive to avoid
a business combination or other measure that might reduce their substantial cash
salaries. The proposed arrangement also reeks of croneyism.
Stockholders should note that Dr. Prendergast and another director have
consulting agreements with Atlantic, and that Dr. Fildes is, to the knowledge of
the Solicitors, receiving a salary for acting as interim CEO. On March 13, 1998,
Board of Directors authorized new consulting agreements with Dr. Prendergast and
that other director, but those agreements are subject to the Preferred Stock
Consent Requirement, and the holders of Preferred Stock have not given their
consent.
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Perhaps the clearest sign of how entrenched the Opposing Directors are
is that in the Solicitation in Opposition, the Opposing Directors seek the
consent of a majority of the Preferred Stock to removal of the Preferred Stock
Consent Requirement. The Opposing Directors state that the Preferred Stock
Consent Requirement is burdensome, expensive, and time-consuming, but fail to
offer any specifics to back up this claim. This is not surprising: it would be
embarrassing for the Opposing Directors to have to detail, as presumably their
prime example of the unjust workings of the Preferred Stock Consent Requirement,
their failure to obtain prompt approval of the outrageous terms of Dr.
Prendergast's employment agreement.
The Solicitors make no recommendation regarding the Opposing Directors'
proposal to eliminate the Preferred Stock Consent Requirement. The Solicitors
note, however, that the Preferred Stock Consent Requirement will lapse once
fewer than 50% of the shares of Preferred Stock are outstanding, on a
fully-diluted basis. To the best of the Solicitors' knowledge, as of the Record
Date there were 558,801 shares of Preferred Stock and Preferred Stock warrants
outstanding, representing 66% of the issued shares of Preferred Stock, on a
fully-diluted basis; this suggests that the number of shares of Preferred Stock
outstanding may fall below the 50% mark before too long.
That said, the Solicitors feel that the Solicitation in Opposition
represents yet another example of the willingness of the Opposing Directors to
incur general and administrative expenses. While Mr. Kanzer is currently paying
out of his own pocket all costs relating to this consent solicitation, the
Opposing Directors are causing Atlantic to bear the costs of the Solicitation in
Opposition, even though, in the opinion of the Solicitors, the Solicitation in
Opposition would further the interests of the Opposing Directors rather than
those of Atlantic.
The Opposing Directors Have Made Little or No Effort to Seek Strategic Alliances
or a Business Combination
One way Atlantic could have reduced general and administrative expenses
and perhaps gained access to technologies with near-term potential would have
been through licensing arrangements, acquisitions, or a business combination.
While locating suitable candidates for such transactions is not a
straightforward process, with dozens of unsuitable prospects for every one that
is suitable, the efforts expended by Atlantic in this regard have been entirely
inadequate. To the knowledge of the Solicitors, management of Atlantic has not
seriously considered, let alone accomplished, any such transaction.
Mr. Kanzer's experience in this regard is illustrative. In September
1997, he advised management of Atlantic of the possibility of its engaging in a
strategic alliance or business combination with a privately-held company with
which he was not affiliated. That company had exclusive licenses from a major
multinational pharmaceutical company to four proprietary products that had
already been subjected to extensive preclinical testing and clinical trials on
humans. Management of Atlantic saw no need to speak to anyone at that company,
but simply sent its management a letter advising them that after internal
evaluation, Atlantic was not interested in discussing the company or its
products. This company subsequently completed a transaction with a multinational
pharmaceutical company that provided it with $13 million in development funding,
together with royalties and a carried interest in the rights to the products.
In November 1997, Mr. Kanzer introduced Atlantic to a second
privately-held company with which he was not affiliated. Although this time
Atlantic's management did engage in discussions with the other company, they did
not lead to anything. In the summer of 1998, Mr. Kanzer proposed to Atlantic
that it license certain clinical-stage proprietary products of a
Paramount-affiliated company of which he was Chairman. This proposal too was
rejected, and Paramount did not charge any fees; indeed, at the time there was
no fee-based advisory agreement between Atlantic and Paramount. To the knowledge
of the Solicitors,
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this latter company is the only Paramount-affiliated entity that has been
introduced to Atlantic by any person affiliated with Paramount.
From the Solicitors' perspective, the Board of Directors' approach to
licensing arrangements, acquisitions, or a business combination is consistent
with their unwillingness to consider outside candidates for chief executive
officer, and their eagerness to eliminate the Preferred Stock Consent
Requirement. The Opposing Directors wish to avoid at all costs having outsiders
intrude on what is a self-serving insider arrangement at the expense of the
current stockholders.
Without a Prompt Change in Management, Any Additional Financing Will be Highly
Dilutive
Atlantic's management has depleted Atlantic's resources, and will leave
Atlantic without adequate means of replenishing them. Unless remedial measures
are promptly taken, any additional financing will be significantly dilutive,
requiring that the current stockholders surrender a large portion of their
ownership interest in Atlantic.
In this regard, a further factor to consider is the low trading price of
the Common Stock, which has the effect of making it that much more likely that
any additional financing will be profoundly dilutive. (The prospect of dilutive
financing could well, in turn, create further selling pressures.)
The Solicitors Would Take Steps Aimed at Remedying the Current Situation
In managing Atlantic, the Solicitors would have two principal goals.
First, they would cause the Board of Directors to take steps to reduce
general and administrative expenses. Besides the obvious -- ensuring that
officer and director compensation is compatible with industry standards and
Atlantic's performance -- the Nominees would consider the possibility of
combining Atlantic's operations with those of its 80%-owned subsidiary, Optex.
Optex's management team was, together with Dr. Rudick, responsible for
acquiring, developing, and licensing to Bausch & Lomb Surgical Optex's Catarex
device; this remains Atlantic's one success. This management team consists of
three persons operating from a two-story facility in San Juan Capistrano,
California, housing administrative offices and laboratory facilities. It may be
appropriate to have this management team assume responsibility for Atlantic's
other products and technologies; among other potential benefits, this would
eliminate the need for some general and administrative personnel and related
office expenses.
Second, they might seek appropriate candidates to enter into strategic
alliances with Atlantic. The Solicitors note that the Solicitation in Opposition
suggests that the Solicitors would act as a stalking horse for Paramount, their
intent being to arrange a business combination with a Paramount-affiliated
entity. The reality is otherwise. While on a member of the Board of Directors,
Mr. Kanzer has unquestionably acted with the best interests of Atlantic in mind,
and will continue to do so. The only compensation he has received for his
service on the Board of Directors is options to purchase 2,000 shares of Common
Stock at an exercise price of $7.00 per share, which were issued to Mr. Kanzer
pursuant to Atlantic's automatic stock option grant program for non-employee
members of the Board of Directors. Furthermore, he is, unlike the Opposing
Directors, currently paying out of his own pocket all costs relating to this
consent solicitation. Similarly, given Dr. Rudick's past and current involvement
with Atlantic and its two majority-owned subsidiaries, Optex and Channel
Therapeutics, Inc. ("Channel"), it is unreasonable to suggest that his loyalties
would be divided. The
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Solicitors have no present intention to cause Atlantic to enter into a strategic
alliance with any entity affiliated with Paramount, and when assessing the
suitability of any proposed strategic alliance, they would evaluate
Paramount-affiliated entities by the same criteria as they judge other entities.
In the Solicitation in Opposition, Atlantic questions the experience
and qualifications of the Solicitors. Biographical and other information
regarding the Solicitors is provided below, but the Solicitors wish in addition
to make the following observations.
While Dr. Rudick is the only one of the Solicitors with an advanced
degree in medicine or the sciences, his participation carries considerable
weight, given that he was in large measure responsible for Atlantic's one
success, Optex's Catarex surgical device. Mr. Kanzer has been involved in the
financing and development of over 50 pharmaceutical technologies. Mr. Zotos has
been involved in dozens of licensing transactions and has a strong background in
patent law, including technology assessment and valuation.
That the Solicitors hold little Stock is utterly irrelevant for
purposes of determining their ability to increase stockholder value, as both Dr.
Rudick and Mr. Kanzer have amply demonstrated their commitment to Atlantic.
THE NUMBER OF NOMINEES
Removal of all current directors other than Mr. Kanzer and Dr. Iwaki
and appointment of the Nominees would result in a four-person Board of
Directors. A four-member Board of Directors presents the possibility of
deadlock, but the Solicitors feel this is only a theoretical possibility, as
they agree on the direction Atlantic must take.
That the Solicitors are not nominating a full slate of six candidates
is due to time constraints. The Solicitors did not plan this consent
solicitation long in advance; instead, it was put together on very short notice,
the catalyst being the continued efforts of the current members of the Board of
Directors, other than Mr. Kanzer, to cause Atlantic to enter into the proposed
employment agreement with Dr. Prendergast. Also, even though Dr. Iwaki has voted
to oppose the Proposals and to solicit stockholder approval for the Atlantic
Proposals, the Solicitors are not disconcerted at the prospect of his remaining
on the Board of Directors.
Upon stockholder approval of the Solicitor Proposals, the Solicitors
would, after due deliberation, hope to fill the vacancies on the Board of
Directors with individuals who can offer expertise that would be valuable to
Atlantic. Stockholders would have the opportunity at the 1999 Annual Meeting to
vote for those persons nominated by the Board of Directors to serve on the Board
of Directors for the following year. (The Solicitation in Opposition states that
the deadline for stockholders to submit proposals for inclusion in Atlantic's
proxy statement for the 1999 Annual Meeting of Stockholders was December 12,
1998. Consequently, stockholders will not be able to nominate their own
candidates for election to the Board of Directors at the 1999 Annual Meeting.)
WHY YOU SHOULD NOT CONSENT TO THE OPPOSING DIRECTOR PROPOSAL
TO REMOVE MR. KANZER
In the opinion of the Solicitors, stockholder consent to the Atlantic
Proposal that Mr. Kanzer be removed from the Board of Directors would not simply
perpetuate mismanagement of Atlantic by the Opposing Directors, it would
aggravate that mismanagement. Consequently, the Solicitors recommend that
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you consent to each Solicitor Proposal, and withhold consent to the Atlantic
Proposal that Mr. Kanzer be removed from the Board of Directors.
THE SOLICITOR PROPOSALS
The Solicitors are seeking written consents from the holders of shares
of Stock to elect the Nominees and adopt the other Solicitor Proposals and to
take the following actions without a stockholders meeting, as permitted by the
DGCL. The effectiveness of each of the Solicitor Proposals is subject to, and
conditioned upon, the adoption of each of the other Solicitor Proposals by the
holders of record, as of the close of business on the Record Date, of a majority
of the voting power of the shares of Stock then outstanding. If, however, the
By-Laws Proposal is not so adopted, the Solicitors reserve the right to waive
this condition, but only with respect to the By-Laws Proposal.
Board Removal Proposal
This proposal would remove each of the current members of the Board of
Directors other than the Remaining Directors (as defined below) and the persons
elected pursuant to this consent. The text of the resolution is as follows:
RESOLVED, that (1) each current member of the Board of Directors of
Atlantic, other than Steve H. Kanzer and Yuichi Iwaki (those current
members, the "Remaining Directors"), and (2) any other person or
persons (other than the persons elected pursuant to this consent)
elected or appointed to the Board of Directors of Atlantic prior to the
effective time of this resolution, in addition to or in lieu of any of
such current members (including any persons elected or appointed in
lieu of the Remaining Directors) to fill any newly created directorship
or vacancy on the Board of Directors of Atlantic, or otherwise, is
hereby removed and the office of each such member of the Board of
Directors of Atlantic is hereby declared vacant.
Delaware law provides that directors of Atlantic may be removed, with
or without cause, by the holders of a majority of the shares of stock then
entitled to vote at an election of the directors. This Solicitor Proposal would
remove all of the current directors (other than the Remaining Directors) so that
the Nominees would, if elected, constitute, along with the Remaining Directors
all of the members of the Board of Directors. Each member of the Board of
Directors would then serve until a successor is elected and qualified or until
he resigns or is removed. Among the members of the Board of Directors who would
be removed upon approval of the Solicitor Proposals would be Martin D. Cleary,
who was appointed in December 1998.
Director Election Proposal
This proposal would elect A. Joseph Rudick and Frederic P. Zotos as
directors of Atlantic. The text of the resolution is as follows:
RESOLVED, that A. Joseph Rudick and Frederic P. Zotos are hereby
elected as directors of Atlantic, to serve until their respective
successors are duly elected and qualified.
The Solicitors seek to replace the current Board of Directors other
than the Remaining Directors with the Nominees. If elected, the Nominees would
be responsible for managing the business and affairs of Atlantic. The Nominees
understand that, as directors of Atlantic, each of them has an obligation under
Delaware law to the scrupulous observance of his duty of care and duty of
loyalty to Atlantic and its
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stockholders. The Solicitors propose that the Nominees named above, once
elected, serve until the next annual meeting of the stockholders and until their
successors have been duly elected and qualified. Each of the Nominees has
consented to serve as a director of Atlantic if elected. See "Certain
Information Regarding the Solicitors and the Nominees" for more information
about the Nominees.
By-Laws Proposal
This proposal would repeal each provision of any amendment to the
By-Laws adopted subsequent to January 11, 1999 (the day Mr. Kanzer indicated to
the Board of Directors that he would be conducting this consent solicitation),
and prior to the effectiveness of the Solicitor Proposals, other than the
amendment to the By-Laws contemplated by this Consent Statement. This proposal
is designed to prevent the existing Board of Directors from taking actions to
amend the By-Laws which might prevent the stockholders from accomplishing the
objectives described in this Consent Statement. The Solicitors are not currently
aware of any amendments to the by-Laws that would be repealed upon effectiveness
of the Solicitor Proposals. If the current Board of Directors adopts any
material amendments they would be repealed upon effectiveness of the Solicitor
Proposals. The Solicitors will provide stockholders with additional materials
regarding those amendments. The text of the resolution is set forth below.
RESOLVED, that all By-Laws adopted subsequent to January 11, 1999, and
prior to the effectiveness of this resolution are null and void and of
no force and effect.
Section 109 of the DGCL provides that "the power to adopt, amend or
repeal bylaws shall be in the stockholders entitled to vote ...; provided,
however, any corporation may, in its certificate of incorporation, confer the
power to adopt, amend or repeal bylaws upon the directors .... The fact that
such power has been so conferred upon the directors ... shall not divest the
stockholders ... of the power, nor limit their power to adopt, amend or repeal
bylaws." The Solicitors believe that such an unequivocal statement makes it
clear that the stockholders of Atlantic have the power under Delaware law to
repeal By-Laws as provided by the By-Laws Proposal, whether or not the By-Laws
so amended or repealed are known to the stockholders. To the knowledge of the
Solicitors, the Delaware courts have not addressed the validity of a proposal in
the form of the By-Laws Proposal. Based upon a review of the By-Laws on file
with the Commission as of January 11, 1999, the Solicitors do not believe that
the invalidity of this proposal would have an adverse effect on the stockholders
or this consent solicitation. Upon effectiveness of this proposal, all By-Laws
adopted subsequent to January 11, 1999, whether they could be considered as
beneficial or detrimental to the stockholders, will be repealed. If prior to the
effectiveness of the Solicitor Proposals the Board of Directors adopts any
material amendments to the By-Laws that are relevant to the Solicitor Proposals,
the Solicitors will forward additional solicitation materials to Atlantic's
stockholders regarding those actions.
CERTAIN INFORMATION REGARDING THE SOLICITORS
Set forth below are the name, age, present principal occupation and
employment history of each of the Nominees for at least the past five years. The
information regarding each Nominee has been furnished to the Solicitors by that
Nominee. Each of the Nominees has consented to serve as a director of Atlantic,
and is at least 18 years of age.
A. Joseph Rudick, M.D., age 41 and a citizen of the United States, is a
founder of Atlantic and two of its majority-owned subsidiaries, Optex and
Channel . Dr. Rudick is a member of the board of directors
11
of Optex and Channel. Dr. Rudick served as a business consultant to Atlantic
from January 1997 until November 1998. From November 1994 until December 1998,
Dr. Rudick was a Vice President of Paramount Capital, Inc. ("Paramount"), an
investment banking firm specializing in medical technology and previously a
placement agent and financial advisor to Atlantic. Since 1988, Dr. Rudick has
been a Partner of Associate Ophthalmologists P.C., a private ophthalmology
practice located in New York. Since 1993, Dr. Rudick has served as a director of
Healthdesk Corporation, a public medical information company. Dr. Rudick earned
a B.A. in Chemistry from Williams College in 1979 and an M.D. from the
University of Pennsylvania in 1983.
Frederic P. Zotos, Esq., age 33 and a citizen of the United States, is
an independent patent attorney and technology licensing consultant. From
December 1996 until September 1998, Mr. Zotos was Assistant to the President and
Patent Counsel of Competitive Technologies, Inc., a public technology licensing
agency located in Fairfield, Connecticut. From July 1994 until November 1996,
Mr. Zotos was a General Associate of Pepe & Hazard, a private intellectual
property and corporate law firm located in Hartford, Connecticut. Mr. Zotos is
Co-Chair of the Fairfield-Westchester Chapter of the Licensing Executive Society
("LES") and a member of the Valuation and Taxation Committee of LES. Mr. Zotos
is a registered patent attorney with the United States Patent and Trademark
Office. He earned a B.S. in Mechanical Engineering from Northeastern University
in 1987 and a joint J.D. and M.B.A. degree from Northeastern University in 1993.
Set forth below are the name, age, present principal occupation and
employment history for at least the past five years of the one Solicitor who is
not a Nominee.
Steve H. Kanzer, C.P.A., Esq, age 35 and a citizen of the United
States, has served as a director of Atlantic since its inception in 1993. Since
December 1997, Mr. Kanzer has been President, Chief Executive Officer and member
of the board of directors of the Institute for Drug Research, Inc., a private
350-employee pharmaceutical research and development company with offices in
Budapest, Hungary, and New York. From 1992 until December 1998, Mr. Kanzer was a
founder and Senior Managing Director of Paramount and Senior Managing Director
and Head of Venture Capital of Paramount Capital Investments, LLC, a
biotechnology and biopharmaceutical venture capital and merchant banking firm
that is associated with Paramount. Mr. Kanzer is a founder and Chairman of the
Board of Discovery Laboratories, Inc. and a member of the board of directors of
Endorex Corp., two publicly-traded pharmaceutical research and development
companies. From 1993 until June 1998, Mr. Kanzer was a founder and a member of
the board of directors of Boston Life Sciences, Inc., a publicly-traded
pharmaceutical research and development company. Mr. Kanzer is also a founder
and member of the board of directors and has been a Chairman and Interim
President of several private pharmaceutical research and development companies.
Prior to joining Paramount, Mr. Kanzer was an attorney associated with Skadden,
Arps, Slate, Meagher & Flom LLP in New York from September 1988 to October 1991.
Mr. Kanzer received his J.D. from New York University School of Law in 1988 and
a B.B.A. in Accounting from Baruch College in 1985.
None of the Solicitors has, during the past 10 years, been convicted in
a criminal proceeding (excluding traffic violations and similar misdemeanors).
Certain Relationships
Dr. Rudick is a founder and serves as a member of the board of
directors of two of Atlantic's majority-owned subsidiaries, Optex and Channel .
In connection with the establishment of those companies, Dr. Rudick received
30,000 shares of Optex stock and 40,000 shares of Channel stock. In 1996,
Atlantic issued to Dr. Rudick 30,000 shares of Common Stock in exchange for the
40,000 shares of Channel stock held by Dr. Rudick; in 1998, Dr. Rudick sold
those shares of Common Stock on the open
12
market. From January 1996 until November 1998, Dr. Rudick was a business
consultant to Atlantic pursuant to a Consulting Agreement entered into between
Dr. Rudick and Atlantic, under the terms of which Dr. Rudick received $2,500 per
month. From 1995 until December 1998, Dr. Rudick was a Vice President of
Paramount.
Prior to a private financing consummated in September 1995, Atlantic's
operations had been financed primarily through loans provided during the period
from July 25, 1993, to June 30, 1995 by (i) Lindsay A. Rosenwald, M.D.,
President, Chairman, and sole stockholder of Paramount and a principal
stockholder and former director of Atlantic, and (ii) VentureTek, L.P.
("VentureTek"), a principal stockholder of Atlantic. The principal amount of
those loans together with the interest thereon through June 30, 1995, was
$1,085,027 from Dr. Rosenwald and $1,357,277 from VentureTek, L.P. (that
indebtedness, including accrued interest through June 30, 1995, the "Stockholder
Loans"). On December 31, 1995, Stockholder Loans were converted into an
aggregate of 785,234 shares of Common Stock.
In addition to the Stockholder Loans, VentureTek provided a loan to
Atlantic in July 1995 in an aggregate principal amount of $125,000, bearing
interest at the rate of 10% annually. This loan, together with $115,011 interest
accrued on that loan and on the Stockholder Loans (from July 1, 1995 until
conversion of the Stockholder loans into shares of Common Stock), was repaid on
January 15, 1996, from the proceeds of Atlantic's initial public offering.
Joseph Stevens & Co., Inc. ("Joseph Stevens"), a principal stockholder
of Atlantic, was the underwriter in Atlantic's initial public offering. In
connection with the initial public offering, Joseph Stevens and Atlantic entered
into an Underwriting Agreement. In connection with a bridge financing that
occurred shortly before the initial public offering, Joseph Stevens acted as
placement agent and received fees and expenses totaling $195,000. In addition,
Atlantic granted Joseph Stevens, for nominal consideration, a warrant (the
"Joseph Stevens Warrant") exercisable for 165,000 units (each, a "Unit"), the
security issued by Atlantic in its initial public offering, each Unit consisting
of one share of Common Stock and a redeemable warrant exercisable for one share
of Common Stock. The Joseph Stevens Warrant is exercisable until December 13,
2000 at an exercise price of $6.60 per Unit. In addition, Atlantic and Joseph
Stevens entered into a Financial Advisory and Consulting Agreement and related
Indemnity Agreement pursuant to which Atlantic paid Joseph Stevens a monthly
consulting fee of $2,000 (this obligation terminated on December 18, 1997) and
agreed to pay Joseph Stevens additional consideration in the event Joseph
Stevens assists Atlantic in connection with certain financing or strategic
transactions.
On April 15, 1996 Atlantic entered into a letter agreement with
Paramount, pursuant to which Paramount agreed to render financial advisory
services to Atlantic and Atlantic agreed to compensate Paramount for those
services by paying Paramount a retainer of $5,000 per month, issuing a warrant
to Paramount's designee to purchase 25,000 shares of Atlantic's Common Stock at
an exercise price of $10.00 per share, and paying Paramount additional
consideration in the event Paramount assisted Atlantic in connection with
certain financing or strategic transactions. Pursuant to the terms of the letter
agreement, (1) upon the renewal of the term of the letter agreement, Atlantic
issued a warrant to Paramount's designee exercisable for 25,000 shares of
Atlantic's Common Stock at an exercise price of $8.05, and (2) upon the
consummation of a financing transaction, Atlantic paid $76,438 to Paramount and
issued a warrant to Paramount's designee exercisable for 12,500 shares of Common
Stock at an exercise price of $6.73 per share. The term of the letter agreement
has expired. From February 1992 until December 1998, Steve H.
Kanzer was a Senior Managing Director of Paramount.
13
On June 24, 1996, Atlantic, Paramount and a second financial advisor
(Paramount and the second financial advisor are collectively referred to as the
"Financial Advisor") entered into a Financial Services Agreement pursuant to
which the Financial Advisor agreed to render financial advisory services.
Pursuant to the agreement, Atlantic paid the Financial Advisor a $30,000
retainer and agreed to pay additional consideration in the event the Financial
Advisor assisted Atlantic in connection with certain financing or strategic
transactions. The term of this Financial Services Agreement has expired,
although Atlantic may be obligated to pay fees to the Financial Advisor in the
event certain financing or strategic transactions are consummated pursuant to
the terms of the Financial Services Agreement.
Effective February 26, 1997, Atlantic and Paramount entered into a
letter of intent whereby Paramount agreed to act as placement agent for Atlantic
in connection with the private placement of Preferred Stock (the "Private
Placement"). Thereafter, Atlantic entered into an agreement with Paramount,
pursuant to which Atlantic agreed to pay Paramount, for its services,
compensation in the form of (i) cash commissions equal to 9% of the gross
proceeds from the sale of the Preferred Stock issued in the Private Placement
and (ii) a non-accountable expense allowance equal to 4% of the gross proceeds
from the sale of the Preferred Stock (that agreement, the "Placement
Agreement"). In addition, upon the final closing date of the sale of the
Preferred Stock, Atlantic sold to Paramount and its designees, for $0.001 per
warrant, warrants exercisable for an aggregate of 123,720 shares of Preferred
Stock, at an exercise price of $11.00 per share of Preferred Stock. These
warrants are exercisable for 10 years and contain certain antidilution
provisions. Under the Placement Agreement, Atlantic has agreed to indemnify
Paramount against certain liabilities, including liabilities under the
Securities Act.
In connection with the Private Placement, Atlantic has committed to
enter into an advisory agreement (the "Placement Advisory Agreement") with
Paramount pursuant to which Paramount will act as Atlantic's non-exclusive
financial advisor. This engagement provides that Paramount receive (i) a monthly
retainer of $4,000 commencing June 1, 1997 (with a minimum engagement of 24
months), (ii) out-of-pocket expenses incurred in connection with services
performed under the Placement Advisory Agreement, and (iii) standard success
fees in the event Paramount assists Atlantic in connection with certain
financing and strategic transactions. Paramount has agreed that, in the event it
is entitled to compensation under the letter agreement dated April 15, 1996 or
the Financial Services Agreement dated June 24, 1996, each described above, and
the Placement Advisory Agreement, it will seek payment under only one of the
agreements.
Except as set forth in this Consent Statement, to the best knowledge of
the Solicitors, none of the Solicitors or Nominees (i) owns beneficially,
directly or indirectly any securities of Atlantic , (ii) owns beneficially,
directly or indirectly any securities of any parent or subsidiary of Atlantic,
(iii) owns any securities of Atlantic of record but not beneficially, (iv) has
purchased or sold any securities of Atlantic within the past two years, (v) has
incurred indebtedness for the purpose of acquiring or holding securities of
Atlantic, (vi) is or has within the past year been a party to any contract,
arrangement or understanding with respect to any securities of Atlantic, (vii)
since the beginning of Atlantic's last fiscal year has been indebted to Atlantic
or any of its subsidiaries in excess of $60,000 or (viii) has any arrangement or
understanding with respect to future employment by Atlantic or with respect to
any future transactions to which Atlantic or any of its affiliates will or may
be a party. In addition, to the best knowledge of the Solicitors, except as set
forth in this Consent Statement , since the beginning of Atlantic's last fiscal
year, none of the Solicitors or Nominees has had or is to have a direct or
indirect material interest in any transaction or proposed transaction with
Atlantic in which the amount involved exceeds $60,000.
Except as set forth in this Consent Statement, to the best knowledge of
the Solicitors, none of the Nominees, since the beginning of Atlantic's last
fiscal year, has been affiliated with (i) any entity that made or received, or
during Atlantic's current fiscal year proposes to make or receive, payments to
or from
14
Atlantic or its subsidiaries for property or services in excess of 5% of either
Atlantic's or that entity's consolidated gross revenues for its last full fiscal
year, or (ii) any entity to which Atlantic or its subsidiaries was indebted at
the end of Atlantic's last full fiscal year in an aggregate amount exceeding 5%
of Atlantic's total consolidated assets at the end of such year. Except as set
forth in this Consent Statement, none of the Nominees is or during Atlantic's
last fiscal year has been affiliated with any law or investment banking firm
that has performed or proposes to perform services for Atlantic.
To the best knowledge of the Solicitors, except for Optex and Channel
in the case of Dr. Rudick, none of the corporations or organizations in which
each of the Nominees has conducted his principal occupation or employment was a
parent, subsidiary or other affiliate of Atlantic, and no Nominee holds any
position or office with Atlantic or has any family relationship with any
executive officer or director of Atlantic or has been involved in any
proceedings, legal or otherwise, of the type required to be disclosed by the
rules governing this solicitation.
CERTAIN EFFECTS OF THE SOLICITOR PROPOSALS
Set forth below is a description of certain provisions of an agreement
to which Atlantic is a party which may be implicated as a result of the adoption
of certain of the Solicitor Proposals. This description is qualified in its
entirety by reference to the agreement, which have been filed by Atlantic with
the Commission. Other documents or arrangements applicable to Atlantic not
available to or not reviewed by the Solicitors may be affected by the matters
contemplated by the Consent Statement.
Stock Options
Atlantic's 1995 Stock Option Plan provides that "[t]he Plan
Administrator shall have the discretion ... to (i) provide for the automatic
acceleration of one or more outstanding options ... upon the occurrence of a
Change in Control or (ii) condition any such option acceleration ... upon the
subsequent Involuntary Termination of the Optionee's service within a specified
period following the effective date of such Change in Control.
"Change in Control" is defined in the Appendix of the 1995 Stock Option
Plan to include the following:
a change in the composition of the Board over a period of thirty-six
(36) consecutive months or less such that a majority of the Board
members ceases, by reason of one or more contested elections for Board
membership, to be comprised of individuals who either (A) have been
Board members continuously since the beginning of such period or (B)
have been elected or nominated for election as Board members during
such period by at least a majority of the Board members described in
clause (A) who were still in office at the time the Board approved such
election or nomination.
Upon approval of the Solicitor Proposals the Nominees will not
constitute a majority of the Board. The remaining members of the current Board
will have been members continuously during the past 36 consecutive months.
Accordingly, it would appear that approval of the Solicitor Proposals would not
cause a Change of Control.
15
THE CONSENT PROCEDURE
Section 228 of the DGCL states that, unless otherwise provided in a
corporation's certificate of incorporation, any action that may be taken at any
annual or special meeting of stockholders may be taken without a meeting,
without prior notice, and without a vote if consents in writing, setting forth
the action so taken, are signed by the holders of outstanding stock having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voted, and those consents are delivered to the corporation by
delivery to its registered office in Delaware, its principal place of business
or an officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. In the case of this
consent solicitation, written, unrevoked consents of the holders of a majority
of the outstanding shares of Stock as of the Record Date must be delivered to
Atlantic as described above to effect the actions as to which consents are being
solicited hereunder. Section 228 of the DGCL further provides that no written
consent shall be effective to take the corporate action referred to therein
unless, within 60 days of the earliest dated consent delivered in the manner
required by Section 228, written consents signed by a sufficient number of
holders to take such action are delivered to the corporation in the manner
required by Section 228.
The Solicitors currently intend to cease the solicitation of consents
once they have determined that valid and unrevoked consents representing a
majority of the voting power represented by issued and outstanding shares of
Stock as of the Record Date have been obtained and to deliver those consents to
Atlantic in the manner required by Section 228 of the DGCL as soon as
practicable thereafter. When the Solicitor Proposals for which consents are
given become effective, a stockholder will be unable to revoke his or her
consent.
If the Solicitor Proposals become effective, Atlantic will as required
by the DGCL promptly notify by mail the stockholders who have not consented to
the Solicitor Proposals.
Consents may only be executed by stockholders of record at the close of
business on the Record Date. To the best knowledge of the Solicitors, as of
January 25, 1999, there were outstanding 4,990,310 shares of Common Stock and
482,870 shares of Preferred Stock. Given that the Solicitors own in the
aggregate shares accounting for less than 1% of the voting power of the Stock,
consents of stockholders owning approximately 50% of the voting power of the
outstanding shares of Stock other than those owned by the Solicitors on the
Record Date are still required to adopt the Solicitor Proposals. Since the
Solicitors must receive consents from the holders of a majority of the voting
power represented by Atlantic's outstanding shares in order for the Solicitor
Proposals to be adopted, a broker non-vote or direction to withhold authority to
vote on the consent card will have the same effect as a "no" vote with respect
to the Solicitors' solicitation.
Consent Card Special Instructions
If you were a record holder as of the close of business on the Record
Date, you may elect to consent to, withhold consent or abstain with respect to
each Solicitor Proposal by marking the "CONSENT," "WITHHOLD CONSENT," or
"ABSTAIN" box, as applicable, underneath EACH Solicitor Proposal on the
accompanying white consent card and signing, dating and returning it promptly in
the enclosed postage-paid envelope. Each consent card will be voted in
accordance with the stockholder's instruction on that consent card. As to the
Solicitor Proposals set forth herein, stockholders may consent to an individual
Solicitor Proposal or may withhold their consent by marking the proper box in
the consent card. If the enclosed consent card is signed and returned and no
direction is given, it will be voted in favor of all of the Solicitor Proposals
and if the consent card is signed and returned and not dated, it will be dated
on or about the date it is received.
16
If any stockholder who has executed and returned the white consent card
has failed to check a box marked "CONSENT," "WITHHOLD CONSENT," or "ABSTAIN" for
any or all of the Solicitor Proposals, that stockholder's consent card will be
voted in favor of that Solicitor Proposal or those Solicitor Proposals.
The Solicitors recommend that you consent to each of the Solicitor
Proposals. Your consent is important. Please mark, sign and date the enclosed
white consent card and return it promptly in the enclosed postage-paid envelope
to the address set forth under "Summary of Consent Procedure." Failure to return
your consent card will have the same effect as withholding consent to the
Solicitor Proposals.
If your shares are held in the name of a brokerage firm, bank nominee
or other institution, you should contact the person responsible for your account
and give instructions for the consent card representing your shares to be
marked, dated, signed and mailed. Only that institution can execute a consent
card with respect to your shares held in the name of the institution and only
upon receipt of specific instructions from you. The Solicitors urge you to
confirm in writing your instructions to the person responsible for your account
and to provide a copy of those instructions to A. Joseph Rudick at the address
set forth under "Summary of Consent Procedure" so that the Solicitors are aware
of all instructions given and can attempt to ensure that such instructions are
followed.
Broker non-votes, abstentions, or failure to return a signed consent
will have the same effect as withholding consent to the Solicitor Proposals. The
Solicitors urge each stockholder to ensure that the record holder of his or her
shares marks, signs, dates and returns the enclosed white consent card as soon
as possible.
CERTAIN OTHER INFORMATION REGARDING ATLANTIC; STOCKHOLDER PROPOSALS
Stockholders are referred to Atlantic's Proxy Statement for the Annual
Meeting of Stockholders held on May 11, 1998, with respect to the compensation
and remuneration paid and payable and other information related to Atlantic's
officers and directors and to the beneficial ownership of Atlantic's securities.
The Solicitation in Opposition states that the deadline for stockholders to
submit proposals for inclusion in Atlantic's proxy statement for the 1999 Annual
Meeting of Stockholders was December 12, 1998.
APPRAISAL RIGHTS
Stockholders of Atlantic are not entitled to appraisal rights in
connection with the adoption of the Proposals.
REVOCATION; COSTS OF CONSENT SOLICITATION
A consent executed by a stockholder may be revoked at any time before
its exercise by submitting (i) a written, dated revocation of that consent or
(ii) a later dated consent covering the same shares. A revocation may be in any
written form validly signed by the record holder as long as it clearly states
that the consent previously given is no longer effective and must be executed
and delivered prior to the time that the action authorized by the executed
consent is taken. The revocation may be delivered to A. Joseph Rudick,
17
150 Broadway, Suite 1100, New York, NY 10038. Although a revocation or later
dated consent delivered only to Atlantic will be effective to revoke a
previously executed consent, the Solicitors request that if a revocation or
later dated consent is delivered to Atlantic, a photocopy of the revocation or
later dated consent also be delivered to the Dr. Rudick at the address set forth
above, so that the Solicitors are aware of that revocation.
The purpose of the Solicitor Proposals being made by the Solicitors in
this Consent Statement is to advance the interests of all of Atlantic's
stockholders. Therefore, the Solicitors believe that their expenses in
connection with the consent solicitation, which are being paid by Mr.Kanzer,
should be reimbursed by Atlantic. The cost of the solicitation of consents to
the Solicitor Proposals will be initially borne by the Solicitors. The
Solicitors intend to seek reimbursement of their expenses from Atlantic if the
Nominees are elected to the Board of Directors. This request will not be
submitted to a stockholder vote. Costs related to the solicitation of consents
to the Solicitor Proposals include expenditures for attorneys and postage and
are expected to aggregate approximately $45,000. To date, the Solicitors have
incurred costs of approximately $35,000. The actual costs and expenses could be
materially different than the estimate set for above, and, in particular, could
be substantially higher if for any reason litigation is instituted in connection
with the matters related to this Consent Statement.
Your consent is important. No matter how many or how few shares you
own, please consent to the Solicitor Proposals by marking, sign, dating, and
mailing the enclosed white consent card promptly.
Steve H. Kanzer
A. Joseph Rudick
Frederic P. Zotos
February __, 1999
18
ANNEX 1
SHARE OWNERSHIP OF
ATLANTIC PHARMACEUTICALS, INC.
AS REPORTED IN THE PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS OF
ATLANTIC PHARMACEUTICALS, INC.
HELD ON MAY 11, 1998
The following table sets forth certain information with respect to the
beneficial ownership of Common Stock as of March 16, 1998, by (1) all persons
who were reported to be beneficial owners of 5% or more of Common Stock, (2)
directors and certain executive officers of Atlantic and (c) all directors and
executive officers as a group, as reported in the 1998 Proxy Statement.
This information is qualified in its entirety by reference to the 1998
Proxy Statement. The Solicitors make no representations as to the accuracy of
this information. Moreover, because changes in beneficial ownership may have
occurred since the effective dates of the filings cited below, this information,
even if accurate as of the time of filing, may no longer be valid.
NUMBER OF PERCENT OF TOTAL SHARES
NAME AND ADDRESS SHARES OUTSTANDING(1)
Lindsay A. Rosenwald, M.D.(2) ..................... 445,462 13.30%
787 7th Avenue
New York, NY 10019
VentureTek, L.P.(3) ................................ 438,493 12.94%
39 Broadway
New York, NY 10006
Joseph Stevens & Co. Inc.(4) ....................... 330,000 9.74%
33 Maiden Lane, 8th floor
New York, NY 10038
Mellon Bank Corporation ............................ 280,000 8.27%
One Mellon Bank Center
Pittsburgh, PA 15258
Jon D. Lindjord(5).................................. 130,000 3.84%
Stephen R. Miller, M.D.(5).......................... 77,480 2.29%
John K.A. Prendergast, Ph.D.(6)..................... 71,656 2.12%
Margaret A. Schalk(5)............................... 64,570 1.91%
Yuichi Iwaki, M.D., Ph.D.(5)........................ 42,000 1.24%
Shimshon Mizrachi(5)................................ 30,000 *
Robert A. Fildes, Ph.D.(5).......................... 10,000 *
Paul D. Rubin, M.D.(5).............................. 10,000 *
Steve H. Kanzer, Esq.(7)............................ 4,121 *
All current executive officers and directors as a
group (9 persons)(5-7)............................ 439,827 12.98%
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* Less than 1.0%
(1) Percentage of beneficial ownership is calculated assuming 3,387,751
shares of Common Stock were outstanding on March 16, 1998. Beneficial
ownership is determined in accordance with the rules of the Commission
and includes voting and investment power with respect to shares of
Common Stock.
(2) Includes 570 shares owned by Dr. Rosenwald's wife and trusts in favor of
his minor children. Dr. Rosenwald disclaims beneficial ownership of such
shares. Does not include 86 shares collectively owned by Dr. Rosenwald's
mother and two brothers, of which Dr. Rosenwald disclaims beneficial
ownership. Includes 380 shares owned by two companies of which Dr.
Rosenwald is the sole stockholder. Includes 100,068 shares of Common
Stock into which shares of Series A Preferred may be converted upon
exercise of a warrant, exercisable within 60 days of March 16, 1998, for
47,202 shares of Series A Preferred.
(3) The general partner of VentureTek, L.P. is Mr. C. David Selengut. Mr.
Selengut may be considered a beneficial owner of the shares owned by
VentureTek, L.P. by virtue of his authority as general partner to vote
and/or dispose of such shares. VentureTek, L.P. is a limited
partnership, the limited partners of which include Dr. Rosenwald's wife,
children, sisters of Dr. Rosenwald's wife and their husbands and
children. Dr. Rosenwald disclaims beneficial ownership of such shares.
(4) Represents shares of Common Stock underlying a warrant, exercisable
within 60 days of March 16, 1998, for shares of Common Stock and
securities convertible into Common Stock.
(5) Represents options exercisable within 60 days of March 16, 1998.
(6) Includes 53 shares of Common Stock held in trust for the benefit of the
children of Dr. Prendergast. Dr. Prendergast disclaims beneficial
ownership of such shares. Includes 34,000 shares of Common Stock
underlying options exercisable within 60 days of March 16, 1998.
Includes 37,500 shares of Common Stock underlying a warrant exercisable
within 60 days of March 16, 1998.
(7) Includes 4,000 shares underlying options exercisable within 60 days of
March 16, 1998.
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PRELIMINARY COPY -- ANNEX 2
SUBJECT TO COMPLETION
ATLANTIC PHARMACEUTICALS, INC.
CONSENT OF STOCKHOLDER TO ACTION WITHOUT A MEETING
THIS CONSENT IS SOLICITED BY
STEVE H. KANZER, A. JOSEPH RUDICK,
AND FREDERIC P. ZOTOS (THE "SOLICITORS")
Unless otherwise indicated below, the undersigned, a stockholder on
January 25, 1999 (the "Record Date"), of Atlantic Pharmaceuticals, Inc.
("Atlantic"), hereby consents, pursuant to Section 228 of the General
Corporation Law of the State of Delaware, with respect to all shares of Common
Stock, par value $0.001 per share, of Atlantic (the "Common Stock") and Series A
Convertible Preferred Stock, par value $0.001 per share, of Atlantic (the
"Preferred Stock," and together with the Common Stock, the "Stock"), held by the
undersigned, to each of the following actions without a meeting, without prior
notice and without a vote.
THE SOLICITORS STRONGLY RECOMMEND THAT YOU CONSENT TO THE
FOLLOWING RESOLUTIONS.
1. RESOLVED, that (1) each current member of the Board of Directors of
Atlantic, other than Steve H. Kanzer and Yuichi Iwaki (those current members,
the "Remaining Directors"), and (2) any other person or persons (other than the
persons elected pursuant to this consent) elected or appointed to the Board of
Directors of Atlantic prior to the effective time of this resolution, in
addition to or in lieu of any of such current members (including any persons
elected or appointed in lieu of the Remaining Directors) to fill any newly
created directorship or vacancy on the Board of Directors of Atlantic, or
otherwise, is hereby removed and the office of each such member of the Board of
Directors is hereby declared vacant.
|_| CONSENT |_| WITHHOLD CONSENT |_| ABSTAIN
2. RESOLVED, that A. Joseph Rudick and Frederic P. Zotos are hereby
elected as directors of Atlantic, to serve until their respective successors are
duly elected and qualified.
|_| CONSENT |_| WITHHOLD CONSENT |_| ABSTAIN
(To withhold consent to the election of either Dr. Rudick or Mr. Zotos,
write his name in the following space: _______________________________.)
3. RESOLVED, that all By-Laws adopted subsequent to January 11, 1999,
and prior to the effectiveness of this resolution are null and void and of no
force and effect.
|_| CONSENT |_| WITHHOLD CONSENT |_| ABSTAIN
To consent, withhold consent or abstain from consenting to the
Proposals set forth above, check the appropriate boxes above. If no box is
marked above with respect to any Proposal, the undersigned will be deemed to
have consented to that Proposal.
For any of the Proposals to be effective, they must each be approved by
the Stockholders. The Solicitors the right, however, to waive this condition if
the only Proposal that is not approved is Proposal No. 3.
- --------------------------------------------------------------------------------
ONLY COMPLETE THIS BOX IF YOU WISH THIS CONSENT TO APPLY TO FEWER THAN ALL
SHARES YOU OWN OF RECORD. Please contact the Solicitors if you are unsure of the
number of shares you hold.
- -------------------------------- -----------------------------------
No. shares of Common Stock voted No. shares of Preferred Stock voted
- --------------------------------------------------------------------------------
Dated:______________________, 1999
-----------------------------------
(Signature)
-----------------------------------
(Title or authority, if applicable)
-----------------------------------
(Signature if held jointly)
Please sign your name exactly as it appears on this consent. If the
shares are registered in more than one name, the signature of each person in
whose name the shares are registered is required. A corporation should sign in
its full corporate name, with a duly authorized officer signing on behalf of the
corporation and stating his or her title. Trustees, guardians, executors, and
administrators should sign in their official capacity, giving their full title
as such. A partnership should sign in its partnership name, with an authorized
person signing on behalf of the partnership. This consent serves to vote all
shares to which the signatory is entitled.
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PLEASE DATE, SIGN AND MAIL THE CONSENT PROMPTLY, USING THE ENCLOSED
ENVELOPE.
3