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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 29, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CELL PATHWAYS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 23-2969600
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
702 ELECTRONIC DRIVE
HORSHAM, PENNSYLVANIA 19044
(215) 706-3800
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
RICHARD H. TROY, ESQ.
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
CELL PATHWAYS, INC.
702 ELECTRONIC DRIVE
HORSHAM, PENNSYLVANIA 19044
(215) 706-3800
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
COPIES TO:
DAVID R. KING, ESQ.
MORGAN, LEWIS & BOCKIUS LP
1701 MARKET STREET
PHILADELPHIA, PA 19103
(215) 963-5000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this registration statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. /X/
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / ----------
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ----------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF SHARES AMOUNT TO BE OFFERING AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED(1) PRICE OFFERING REGISTRATION
PER SHARE PRICE(2) FEE(3)
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<S> <C> <C> <C> <C>
Common Stock, 3,149,375
par value $.01 per share shares $9.25 $29,131,718 $8,098.62
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</TABLE>
(1) In addition to the shares of Common Stock set forth in the table, the
amount to be registered includes an indeterminate number of shares of
Common Stock as may be adjusted as a result of stock splits, stock
dividends and similar transactions in accordance with Rule 416 under the
Securities Act.
(2) Estimated solely for the purpose of calculating the registration fee;
computed in accordance with Rule 457(c) on the basis of the average of the
high and low sales prices for a share of Common Stock on December 21, 1999
as reported on The Nasdaq National Market.
(3) Calculated pursuant to Section 6(b) as follows: proposed maximum aggregate
offering price multiplied by .000278.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and we are not soliciting offers to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION DATED DECEMBER ___, 1999
PROSPECTUS
3,149,375 Shares
CELL PATHWAYS, INC.
Common Stock
-------------------------
The shares of common stock offered by this prospectus are being offered by
the selling stockholders named in the section entitled "Selling Stockholders" on
page 25. We will not receive any of the proceeds from the sale of the shares by
the selling stockholders.
Our common stock is quoted on the Nasdaq National Market of The Nasdaq
Stock Market under the symbol "CLPA." On December 28, 1999, the last reported
closing price of the common stock was $9-3/16 per share.
-------------------------
YOU SHOULD READ THIS PROSPECTUS CAREFULLY BEFORE YOU INVEST. SEE "RISK
FACTORS" BEGINNING ON PAGE 4 FOR A DISCUSSION OF SOME ISSUES TO CONSIDER BEFORE
PURCHASING OUR COMMON STOCK.
-------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-------------------------
PROSPECTUS DATED DECEMBER __, 1999.
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TABLE OF CONTENTS
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Page
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FORWARD-LOOKING STATEMENTS............................................. 3
CELL PATHWAYS, INC..................................................... 4
RISK FACTORS........................................................... 4
USE OF PROCEEDS........................................................ 25
SELLING STOCKHOLDERS................................................... 25
PLAN OF DISTRIBUTION................................................... 28
LEGAL OPINION.......................................................... 29
EXPERTS................................................................ 29
HOW TO OBTAIN MORE INFORMATION......................................... 30
</TABLE>
No dealer, salesman, or other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus and, if given or made, such information or representations must not
be relied upon as having been authorized by us or the selling stockholders. This
prospectus does not constitute an offer of any securities other than those to
which it relates or an offer to sell or a solicitation of an offer to buy to any
person in any jurisdiction in which such offer or solicitation would be unlawful
or to any person to whom it is unlawful. Neither the delivery of this prospectus
nor any offer or sale made hereunder shall, under any circumstances, create any
implication that there has been no change in our affairs or that information
contained herein is correct as of any time subsequent to the date hereof. The
information contained in this prospectus is current as of the date on the cover.
OFFICES AND PLACE OF INCORPORATION
Cell Pathways, Inc. was incorporated in 1998 under the laws of Delaware as
a subsidiary of, and as of November 3, 1998 successor to, a predecessor
corporation of the same name. Our principal executive offices are located at 702
Electronic Drive, Horsham, Pennsylvania 19044 and our telephone number is (215)
706-3800. References in this prospectus to "we," "us," "our," the "Company," and
"Cell Pathways" refer to Cell Pathways, Inc. and its subsidiaries.
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FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Such statements are those
that express plan, anticipation, intent, contingency or future development
and/or otherwise are not statements of historical fact. These statements are
subject to risks and uncertainties, known and unknown, which could cause actual
results and developments to differ materially from those expressed or implied in
such statements. Such risks and uncertainties relate to, among other factors,
the absence of approved products; history of operating losses; early stage of
development; the costs, delays and uncertainties inherent in basic
pharmaceutical research, drug development, clinical trials and the regulatory
approval process, with respect to both our current product candidates and our
future product candidates, if any; dependence on development of Aptosyn(TM)
(exisulind); the limitations on, or absence of, the predictive value of data
obtained in laboratory tests, animal models and human clinical trials when
planning additional steps in product development; the uncertainty of obtaining
regulatory approval, including uncertainty of approval of the New Drug
Application ("NDA") submitted for Aptosyn(TM) (exisulind) for adenomatous
polyposis coli ("APC"), a rare disease that puts those afflicted at high risk of
developing colon cancer, whether in connection with the adequacy of the data
generated in the clinical trials of Aptosyn(TM) (exisulind) or otherwise; the
timing and scope of any approval which might be received for any compound for
any indication in the future; acceptance by providers of healthcare
reimbursement; the validity, scope and enforceability of patents; the actions of
competitors; dependence upon third parties; product liability; and the need for
further financing.
Any or all of our forward-looking statements in this prospectus may turn
out to be wrong. They can be affected by inaccurate assumptions we might make or
by known or unknown risks and uncertainties. Many factors mentioned in our
discussion in this prospectus will be important in determining future results.
Consequently, no forward-looking statement can be guaranteed. Actual future
results may vary materially.
We undertake no obligation to publicly update any forward-looking
statements, whether as a result of new information, future events or otherwise.
You are advised, however, to consult any further disclosures we make in our
reports on Forms 10-Q, 8-K and 10-K to the Securities and Exchange Commission.
Also note that we provide a cautionary discussion of certain risks and
uncertainties relevant to our business under "Risk Factors" beginning on page 4
of this prospectus. These are factors that we think could cause our actual
results to differ materially from expected results. Other factors besides those
listed above or under "Risk Factors" here could also adversely affect us. This
discussion is provided as permitted by the Private Securities Litigation Reform
Act of 1995.
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CELL PATHWAYS, INC.
Cell Pathways, Inc. was incorporated in Delaware in July 1998 as a
subsidiary of, and as of November 3, 1998, successor to, a Delaware corporation
of the same name. As the context requires, "we," "us," "our," the "Company," and
"Cell Pathways" are used herein to signify the successor and/or the predecessor
corporations.
We are a development-stage pharmaceutical company focused on the research,
development and commercialization of unique and novel medications to prevent and
treat cancer. Our technology is based upon our discovery of a novel mechanism
which we believe, based on our research, can be targeted to induce selective
apoptosis, or programmed cell death, in precancerous and cancerous cells without
affecting normal cells. We have created a new class of selective apoptotic
anti-neoplastic drugs ("SAANDS") and have synthesized approximately 500 new
chemical compounds in this new class. From the inception of our business in
1990, operating activities have related primarily to conducting research and
development, raising capital and recruiting personnel. Our initial
investigational new drug application ("IND") was filed with the Food and Drug
Administration ("FDA") in December 1993 for human clinical trials of Aptosyn(TM)
(exisulind). We filed an IND for our second product candidate, CP-461, in
December 1998. In August 1999, we submitted to the FDA an NDA for Aptosyn(TM)
(exisulind) in APC, an FDA designated drug indication. If approved by the FDA
for marketing, Aptosyn(TM) (exisulind) would provide a non-surgical treatment
option to individuals with APC. We are continuing to conduct clinical trials of
Aptosyn(TM) (exisulind) and CP-461 for the prevention and treatment of various
precancer and cancer indications.
In October 1999, we issued 1.555 million shares of common stock, for net
proceeds of approximately $13.5 million, to the selling stockholders whose
shares are being registered herein. This increased our common stock outstanding
to approximately 26.1 million shares.
RISK FACTORS
The following risk factors relate to our business and qualify the
statements made in this prospectus about our business. These factors, among
others, could cause actual results to differ materially from those contained in
forward-looking statements made in this prospectus and/or presented elsewhere by
management from time to time. The subheadings below identify the risks discussed
but cannot do so completely. Each subsection may relate to more than one aspect
of our business. Accordingly, you should carefully consider each risk factor in
evaluating our business, any investment in us and the descriptions of us
contained in this prospectus. You should also review our SEC filings on Forms
10-Q, 10-K and 8-K, particularly the sections entitled "Business Description,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Risk Factors" and "Other Events."
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HISTORY OF OPERATING LOSSES; ACCUMULATED DEFICIT; EXPECTED FUTURE LOSSES.
Our business has experienced significant operating losses since inception
in 1990. We have not received any revenue from the sale of products and none of
our product candidates has been approved for marketing. As of September 30,
1999, we had an accumulated deficit of approximately $59.4 million. We expect to
incur additional operating losses over the next several years and expect
cumulative losses to increase substantially as our research and development
efforts and preclinical and clinical testing expand. If FDA approval of
Aptosyn(TM) (exisulind) is granted, we may also incur significant manufacturing
and marketing costs. Our ability to achieve profitability is dependent on our
ability, alone or with others, to complete the development of our proposed
products successfully, obtain the required regulatory approvals, manufacture and
market our proposed products successfully or have others manufacture and market
such products and gain market acceptance for such products. We may not achieve
profitability.
STOCK VOLATILITY; CLASS ACTION LITIGATION.
We are a development-stage company. The market price of development-stage
companies is typically volatile. When there is a sharp drop in the stock price,
stockholder class actions may be filed against the particular company. Our stock
price has been volatile. The stock price dropped substantially after we made an
announcement on February 1, 1999 that we anticipated a delay in
commercialization following preliminary evaluation of unblinded data from our
Phase III clinical trial of Aptosyn(TM) (exisulind) for APC. The announcement
stated that preliminary evaluation suggested that the study had not achieved
statistical significance. As of March 26, 1999, five stockholder class actions
had been filed against us and certain of our officers and directors. These
actions were consolidated into one action by court order on April 28, 1999, and
on June 28, 1999, a consolidated amended complaint was filed on behalf of a
class of all purchasers of our common stock between October 7, 1998 and February
2, 1999. This action is continuing in the United States District Court for the
Eastern District of Pennsylvania. We believe the allegations are without merit
and intend to vigorously defend the litigation.
EARLY STAGE OF DEVELOPMENT; ABSENCE OF DEVELOPED PRODUCTS; UNCERTAINTY OF
CLINICAL TRIALS.
We are at an early stage of development and must be evaluated in light of
the uncertainties and complications present in a development-stage company. We
have no products approved for sale in any country. We have only one product
candidate which has been in clinical trials for an appreciable length of time,
Aptosyn(TM) (exisulind). We have completed only limited human clinical trials
designed to demonstrate the safety and efficacy of Aptosyn(TM) (exisulind) and
have not commenced such trials for any other compounds with the exception of
Phase I studies of a new compound, CP-461. We have not generated any revenue
from product sales to date, and none of our product candidates has been approved
for marketing. Accordingly, our income has been limited to interest income from
investments, and our primary source of capital has been the sale of equity
securities.
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Before obtaining regulatory approval for the commercial sale of any of our
product candidates, we must demonstrate through preclinical and clinical trials
that the product is safe and effective for use in each target indication. The
results from preclinical and early clinical trials may not be predictive of
results that will be obtained in later stage clinical trials. The clinical
trials of our product candidates may not demonstrate sufficient safety and
efficacy to obtain the requisite regulatory approvals and result in marketable
products. Clinical trials are often conducted with patients who are critically
ill. During the course of treatment these patients may die or suffer other
adverse medical events for reasons that may not be related to the pharmaceutical
agent being tested, but which can nevertheless affect clinical trial results. A
number of companies in the pharmaceutical and biotechnology industries have
suffered significant setbacks in advanced clinical trials, even after achieving
promising results in earlier trials.
The completion of clinical trials of our product candidates could be
interrupted by many factors. Delays and terminations may occur. One relevant
factor is the rate of enrollment of patients, which generally varies throughout
the course of a clinical trial and which depends on the size of the patient
population, the number of clinical trial sites, the proximity of the patients to
clinical trial sites, the eligibility criteria for the clinical trial and the
existence of competitive clinical trials. We cannot control the rate at which
patients present themselves for enrollment. The rate of patient enrollment may
not be consistent with our expectations or be sufficient to enable clinical
trials of our product candidates to be completed in a timely manner. We have
limited experience managing clinical trials and any delays or terminations of
such trials could have a material adverse effect on our business, financial
condition and results of operations.
Trials to date have involved only a limited number of patients. While we
have submitted an NDA to the FDA for Aptosyn(TM) (exisulind) for the APC
indication, and are awaiting the FDA's review of the submission, we may not be
able to submit an NDA to the FDA or the foreign equivalent with respect to
Aptosyn(TM) (exisulind) for any other indication. In addition, results obtained
in clinical trials for the treatment of APC may not be predictive of results of
clinical trials for other indications. If our product candidates are not shown
to be safe and effective in clinical trials for one or more indications, there
would be a material adverse effect on our business, financial condition and
results of operations.
We face intense competition. In the fields of cancer therapy and the
prevention of precancerous and cancerous lesions, other products are being
developed that may compete directly with the products that we are seeking to
develop and market. We are aware of clinical trials in which a number of
pharmaceutical and nutritional agents are being examined for their potential
usefulness in the treatment of precancerous lesions and cancer. The studies are
being conducted by pharmaceutical and biotechnology companies, major academic
institutions and government agencies. Such existing or new agents may ultimately
be found to be useful, and therefore competitive with, any of our future
products. In December 1999, the FDA approved the arthritis drug Celebrex for the
indication of APC. You should also read the section entitled "Intense
Competition; Rapid Technological Change" below in this "Risk Factors" section.
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We may not be able to submit an IND or foreign equivalents with respect to
any new chemical entities or follow-on compounds (other than that filed in
December 1998 with respect to CP-461). We may not be permitted to undertake
human clinical testing of such additional compounds. If human clinical testing
is permitted, such compounds may not prove to be safe and effective. Our
compounds may prove to have undesirable and unintended side effects or other
characteristics that may prevent or limit their commercial use. Products, if
any, resulting from our research and development programs may not be
commercially available for a number of years even if they are successfully
developed and proven to be safe and effective. Thus, our product development
efforts may not be successfully completed. Regulatory approvals may not be
obtained or may not be as broad as sought. Our products may not be capable of
being produced in commercial quantities at a reasonable cost. Products, if
introduced, may not achieve market acceptance. Our failure to complete clinical
trials, obtain regulatory approval or successfully market our products, if
approved, would have a material adverse effect on our business, financial
condition and results of operations.
DEPENDENCE ON APTOSYN(TM) (EXISULIND).
Until the spring of 1999, when we commenced Phase I clinical trials of
CP-461, we had only one compound, Aptosyn(TM) (exisulind), in clinical trials.
We do not expect to have an additional compound (other than CP-461) in clinical
trials until we are able to file an additional IND.
In August 1999, we submitted an NDA to the FDA for Aptosyn(TM) (exisulind)
to obtain marketing approval of Aptosyn(TM) (exisulind) for the treatment of
APC. If approved by the FDA for marketing, Aptosyn(TM) (exisulind) would provide
a non-surgical treatment option to individuals with APC.
The NDA submission is based upon significant outcomes achieved in two
pivotal clinical trials in which Aptosyn(TM) (exisulind) impeded the progression
of the disease in APC patients. In the patient group targeted by our Phase III
trial, Aptosyn(TM) (exisulind) demonstrated a clinically and statistically
significant reduction in new polyp formation when compared to placebo. (In
statistical analysis of the overall patient group, including patients who did
not meet the inclusion criteria, the reduction in the formation of new polyps
does not achieve statistical significance.) In a Phase I/II trial funded by the
National Cancer Institute, Aptosyn(TM) (exisulind) demonstrated a clinically and
statistically significant dose response at six months; and, over periods ranging
from six months to thirty months, this study and its extensions continued to
demonstrate clinically and statistically significant differences in the mean
change in number of polyps between dose groups. Regressing polyps showed
substantial increases in the rate of apoptosis, while the rate of apoptosis in
nearby normal tissue was unchanged, confirming a selective induction of
apoptosis in neoplastic tissue without affecting normal cells. We submitted
additional data requested by the FDA in October 1999 in connection with the NDA
submission.
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Aptosyn(TM) (exisulind) has not been approved for marketing by the FDA for
any indication, and trials to date have involved only a limited number of
patients. There can be no assurance that marketing approval for Aptosyn(TM)
(exisulind) will be obtained. We caution that neither the filing of an NDA nor
the submission of additional data provides assurance that Aptosyn(TM)
(exisulind) will be found to be of sufficient safety and efficacy to warrant
marketing approval for APC. Marketing approval, if ultimately granted, would
come only after thorough, detailed review by the FDA of all data, including the
data submitted in October 1999. The FDA may determine not to approve the NDA, or
the FDA might require post-marketing studies. If post-marketing studies were
required as a condition of approval of Aptosyn(TM) (exisulind) and such studies
thereafter showed that Aptosyn(TM) (exisulind) is not safe or effective or
failed to demonstrate any clinical benefit, it is likely that Aptosyn(TM)
(exisulind) would be required to be withdrawn from the market for such
indication.
Even if approved for marketing, Aptosyn(TM) (exisulind) may not gain
market acceptance. In addition, competition to Aptosyn(TM) (exisulind) may
develop from other new or existing products. The failure of Aptosyn(TM)
(exisulind) to be approved for marketing or to gain market acceptance would have
a material adverse effect on our business, financial condition and results of
operations.
The number of APC patients in the U.S. is limited and estimates vary. In
order to increase the potential applications for which Aptosyn(TM) (exisulind)
may be used, we must successfully complete lengthy clinical trials and
thereafter receive marketing clearance from the FDA for each additional
indication. We may not successfully complete these clinical trials and receive
appropriate regulatory clearance on a timely basis, if at all. The inability to
achieve marketing clearance of Aptosyn(TM) (exisulind) for at least one
indication in addition to APC would be expected to materially limit the
commercial potential of Aptosyn(TM) (exisulind) and thereby have a materially
limiting and adverse effect upon our business, financial condition and results
of operations. The Orphan Drug and Fast Track designations granted by the FDA
for Aptosyn(TM) (exisulind) may not provide any meaningful competitive advantage
to us.
TECHNOLOGICAL UNCERTAINTY; REGULATORY UNCERTAINTY.
As of December 1999, to our knowledge, the FDA has not approved any drug
for the prevention of precancerous lesions or cancer other than a limited
approval of tamoxifen for prevention of breast cancer and, in December 1999,
approval of the arthritis drug Celebrex for treatment of APC. We may not be able
to develop successfully a chemoprevention drug; and if we can, we may not be
able to develop such a drug within our proposed timelines. Even if such a drug
is approved, such a drug may not be commercially viable and may not achieve
market acceptance. Our area of focus, oncology in general and chemoprevention in
particular, is not thoroughly understood. The products we are seeking to develop
may not prove to be safe and effective in preventing or treating precancerous
lesions or cancer.
We believe that Aptosyn(TM) (exisulind) and our other compounds
selectively induce apoptosis through a novel mechanism. Additional research by
us or others may cause us to
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revise or abandon this approach, adversely affecting our ability to develop
products on a timely basis, if at all. The use of our technology may not lead to
the development and approval of commercial pharmaceutical products that are safe
and efficacious. Our competitors may develop safer and more effective products,
may obtain patent protection or intellectual property rights that limit our
ability to commercialize products, and may commercialize products earlier than
we do.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING.
We will have continuing needs for additional capital. Development of our
initial product candidate, Aptosyn(TM) (exisulind), and additional compounds
will require substantial additional funds to conduct research, development and
clinical trials necessary to bring such products to market and to establish
manufacturing, marketing and distribution capabilities.
The extent of our future capital requirements will depend on many factors,
including, among others: whether the FDA will approve the NDA submitted to the
FDA for Aptosyn(TM) (exisulind) for the APC indication and, if approval is
granted, the timing of the approval; reevaluation of our other programs,
depending upon what action is taken by the FDA with respect to the NDA for APC;
scientific progress in research and development programs; progress with
preclinical and clinical trials; progress in obtaining regulatory approvals; the
costs involved in preparing, filing, prosecuting, maintaining and enforcing
patent claims; competing technological efforts and market developments; changes
in our existing research relationships; changes in the programs of clinical
development of one or more compounds; our ability to establish sales and
marketing capabilities; the extent of competition; and our ability to establish
collaborative arrangements to the extent necessary.
The need for additional capital may arise from additional factors. There
is always a risk of delay or failure at any stage of developing a product
candidate. Additional compounds may be introduced into clinical testing. The
time required and costs involved in successfully accomplishing our objectives
cannot be predicted. Actual drug research and development costs could
substantially exceed budgeted amounts. Revenue and expense forecasts, if made by
us, may not prove to be accurate. Any of the foregoing, singly or in
combination, could have a material adverse effect on our business, financial
condition or results of operations and could increase our need for additional
capital.
To the extent necessary, we will need to seek additional funding through
public or private equity or debt financings, collaborative relationships,
capital lease transactions or other available financing transactions. However,
additional financing may not be available on acceptable terms, if at all; and
such financings could be dilutive to stockholders.
In the event that additional funds are obtained through arrangements with
collaborative partners, such arrangements may require us to relinquish rights to
certain of our technologies, product candidates or products that we would
otherwise seek to develop or commercialize ourselves. If adequate funds are not
available, we may be required to delay, reduce the scope of or eliminate one or
more of our research or development programs. Our failure to obtain
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adequate financing when needed and on acceptable terms would have a material
adverse effect on our business, financial condition and results of operations.
UNCERTAINTY OF PROTECTION OF PATENTS, TRADEMARKS AND PROPRIETARY RIGHTS.
Patents are important to us and to our competitors. Our success will
depend, in part, on our ability to obtain patents, establish and maintain
trademarks, operate without infringing the proprietary rights of others and
maintain trade secrets, both in the U.S. and other countries. We could fail in
any one or more of these endeavors. Patent matters in the pharmaceutical
industry can be highly uncertain and involve complex legal and factual
questions. Accordingly, the validity, breadth, and enforceability of our patents
and the existence of potentially blocking patent rights of others cannot be
predicted, either in the U.S. or in other countries.
As of December 1999, we held title or exclusive licenses to four issued
U.S. patents and five other pending U.S. patent applications relating to the
therapeutic uses of Aptosyn(TM) (exisulind) in the treatment of neoplasia,
precancerous lesions and/or other indications. A composition of matter patent is
not available to us (or anyone else) because the sulfone derivative of sulindac,
now named Aptosyn(TM) (exisulind), was described in the scientific and patent
literature over twenty years ago. Thus, our current patent rights relating to
Aptosyn(TM) (exisulind) are limited to a series of patents and patent
applications pertaining to various specific uses of Aptosyn(TM) (exisulind). We
also have been issued or hold exclusive licenses to fourteen foreign patents
(including patents in various European countries, Australia, Canada, Korea and
Japan) relating to the use of Aptosyn(TM) (exisulind) in pharmaceutical
compositions for the treatment of neoplasia and/or precancerous lesions. In
Europe, our patent rights relating to Aptosyn(TM) (exisulind) are directed to
the use of Aptosyn(TM) (exisulind) in the manufacture of pharmaceutical
compositions for the treatment of precancerous lesions. We also hold title or
exclusive licenses to five pending U.S. and five pending international patent
applications relating to uses of Aptosyn(TM) (exisulind) in combination with
certain existing conventional chemotherapeutics.
We also hold title or exclusive licenses to one issued U.S patent, one
pending U.S. application and one pending international patent application
relating to CP-461, its composition of matter and various of its therapeutic
uses.
In addition, we hold title or exclusive licenses to 12 U.S. patents, 8
U.S. patent applications which have been allowed, 46 other pending U.S. patent
applications, and 7 pending foreign applications on other compounds, or
therapeutic methods involving such compounds, for the treatment of colonic
polyps, precancerous lesions, and/or neoplasia. We also have filed nine U.S. and
33 foreign patent applications, and own one issued U.S patent, on methods for
screening compounds for their usefulness in selectively inducing apoptosis. We
also have filed two U.S. applications and an international application relating
to diagnostic methodologies.
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We have also filed four U.S. patent applications relating to certain
business methods and packaged pharmaceuticals with descriptive material
describing and relating to our mechanism of action.
We intend to file additional applications, as appropriate, for patents on
new compounds, products, or processes discovered or developed through
application of our technology.
Research is an on-going process. Whether a new development or discovery
can be successfully patented is a very complicated issue and depends on the
facts as they develop over time. Thus, beyond the patents granted to date, we
cannot provide assurance that our continuing research activities will discover
or develop patentable products or processes, or that patents will be issued for
any of the currently pending patent applications, or that claims granted on
issued patents will be sufficient in their validity, breadth and enforceability
to protect our technology or competitive commercial advantage. Potential
competitors or other researchers in the field may have filed patent
applications, been issued patents, published articles or otherwise created prior
art that could restrict or block our efforts to obtain additional patents.
Similarly, we cannot predict whether our issued patents or pending patent
applications, if issued, will be challenged, invalidated, circumvented or
breached by others, or whether judicial protection and enforcement will be
available to us to counteract such actions by others, or whether the rights
granted thereunder will provide proprietary protection or competitive advantages
to us. Our patent rights also depend in part on its compliance with technology
and patent licenses upon which its patent rights are based and upon the validity
of assignments of patent rights from consultants and other inventors that are
not or were not employed by us. Also, if controlling law is amended or
interpreted or applied differently than it is currently, such changes in law may
impact on our ability to enforce one or more of our patents or to obtain
allowances of one or more of our pending applications.
Competitors may manufacture and sell our potential products in those
countries where we have not filed for patent protection or where patent
protection may be unavailable, not obtainable or ultimately not enforceable. The
ability of competitors to do this is usually governed by the patent laws of the
countries in which the product is sold. If clinical uses of Aptosyn(TM)
(exisulind) are discovered beyond those set forth in our patent claims, we may
not be able to enforce its patent rights against companies marketing Aptosyn(TM)
(exisulind) for such other clinical uses.
Our success also will depend, in part, upon our not infringing patents
issued to others. Pharmaceutical companies, biotechnology companies,
universities, research institutions, and others may have filed patent
applications or have received, or may obtain, issued patents in the U.S. or
elsewhere relating to aspects of our technology. It is uncertain whether the
issuance of any third-party patents will require us to alter our products or
processes, obtain licenses, or cease certain activities. Some third-party
applications or patents may conflict with our issued patents or pending
applications. Such conflict could result in a significant reduction of the
coverage of our issued or licensed patents. In addition, if patents are issued
to other companies which contain blocking, dominating or conflicting claims and
such claims are ultimately determined to be valid, we may be required to obtain
licenses to these patents or to develop or obtain alternative
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technology. If any licenses were required, we might not be able to obtain such
licenses on commercially favorable terms, if at all; and if these licenses were
not obtained, we might be prevented from pursuing the development of certain of
its potential products. Our failure to obtain a license to any technology that
it may require to commercialize its products may have a material adverse impact
upon our business, financial condition and results of operations.
Litigation may be necessary to enforce any patents issued or licensed to
us. Litigation may be necessary to determine the scope and validity of the
proprietary rights of others. Litigation could result in substantial costs to
us.
Under the abbreviated new drug application ("ANDA") provisions of U.S.
law, after four years from the date marketing approval is granted to us by the
FDA for a patented drug, a generic drug company may submit an ANDA to the FDA to
obtain approval to market in the U.S. a generic version of the drug patented by
us. If approval is given to the generic drug company, we would be required to
promptly initiate patent litigation to prevent the marketing of such a generic
version prior to the normal expiration of the patent. We cannot provide
assurance that our issued or licensed patents would be held valid by a court of
competent jurisdiction. In addition, if our competitors file patent applications
in the U.S. that claim technology also claimed by us, we may have to participate
in interference proceedings to determine priority of invention. These
proceedings, if initiated by the U.S. Patent and Trademark Office, could result
in substantial cost to us, even if the eventual outcome is favorable to us. An
adverse outcome with respect to a third-party claim or in an interference
proceeding could subject us to significant liabilities, require disputed rights
to be licensed from third parties, or require us to cease using such technology,
any of which could have a material adverse effect on our business, financial
condition and results of operations.
In most cases, pharmaceutical companies rely on patents to provide market
exclusivity for the periods covered by the patents. In the U.S., the Drug Price
Competition and Patent Term Restoration Act of 1984 (the "Hatch-Waxman Act")
permits an extension of patents in certain cases to compensate for patent time
expended during clinical development and FDA review of a drug. In addition, the
Hatch-Waxman Act establishes a period of market exclusivity, independent of any
patents, during which the FDA may not accept or approve abbreviated applications
for generic versions of the drug from other sponsors, although the FDA may
accept and approve subsequent long-form applications for the drug. The
applicable period of market exclusivity for a drug containing an active
ingredient not previously approved is five years. There is no assurance that all
or any of our products, if approved, will receive market exclusivity under the
Hatch-Waxman Act. Failure to receive such exclusivity could have an adverse
effect on our business, financial condition and results of operations at that
time.
We also rely on trade secrets to protect technology, especially where
patent protection is not believed to be appropriate or obtainable or where
patents have not been issued. We attempt to protect our proprietary technology
and processes, in part, by confidentiality agreements and assignment of
invention agreements with our employees and confidentiality agreements with our
consultants and certain contractors. We cannot provide assurance that these
agreements will not
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be breached, that we would have adequate remedies for any breach, or that our
trade secrets will not otherwise become known or be independently discovered by
competitors. Such trade secrets or our other intellectual property, should they
become known to its competitors, could result in a material adverse effect on
our business, financial condition and results of operations. To the extent that
we or our consultants or research collaborators use intellectual property owned
by others in their work for us, disputes may also arise as to the rights to
related or resulting know-how and inventions.
We also have filed trademark applications in the U.S. and abroad on the
"APTOSYN" trademark. Two U.S. trademarks based on intent to use have been
approved, but are currently in the "opposition period," during which third
parties may come forward and challenge the use of such mark. There is no
guarantee that third-party opposers will not come forward, or that others might
not challenge our use of that mark, or our uses of the other trademarks that we
propose to use with our product(s).
INTENSE COMPETITION; RAPID TECHNOLOGICAL CHANGE.
The industry in which we compete is very competitive. It is characterized
by extensive research and development efforts and rapid technological progress.
New developments occur and are expected to continue to occur at a rapid pace.
Discoveries and commercial developments by our competitors may render some or
all of our potential products obsolete or non-competitive, which would have a
material adverse effect on our business, financial condition and results of
operations. Many of our potential competitors have far greater resources than we
do. They may be large, well-financed companies or small, well-focused companies.
Our competitive position also depends on our ability to attract and retain
qualified scientific and other personnel, develop effective proprietary
products, implement development and marketing plans, obtain patent protection
and secure adequate capital resources.
We face competition in our specific areas of focus. In the fields of
cancer therapy and the prevention of precancerous and cancerous lesions, other
products and procedures are in use or in development that may compete directly
with the products that we are seeking to develop and market for cancer treatment
or cancer prevention. Surgery, radiation, chemotherapeutic agents and compounds
that interfere with hormone activities have been in use for years in the
treatment of cancer. Tamoxifen has been granted limited approval for use in the
prevention of breast cancer. The arthritis drug Celebrex, a cyclooxegenase
inhibitor produced by the large pharmaceutical firm G.D. Searle & Co., was
approved by the FDA in December 1999 for the reduction and regression of
adenomatous polyps in APC patients. Celebrex is the first drug approved for any
treatment of polyps in APC patients.
We are aware of clinical trials in which a number of pharmaceutical and
nutritional agents are being examined for their potential usefulness in the
treatment of precancerous lesions and cancer. These include studies of
additional chemotherapeutic agents, monocloncal antibodies, hormone blockers,
thalidomide and other anti-angeogenesis agents in the treatment of cancer;
studies of NSAID-like compounds, cyclooxygenase inhibitors,
difluoromethylornithine
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("DFMO") and natural nutrients in the treatment of APC and sporadic colonic
polyps; studies of retinoids and DFMO in the treatment of cervical dysplasia;
and studies of tamoxifen for the prevention of breast cancer. Additional
compounds being tested in various epithelial lesions include compounds related
to aspirin, various vitamins and nutritional supplements, oltipraz, N-acetyl
cysteine and compounds that interfere with hormone activities. The studies are
being conducted by pharmaceutical and biotechnology companies, major academic
institutions and government agencies. There are other agents, including certain
prescription drugs, that have been observed to have an effect in the general
area of cyclic-GMP phosphodiesterase. Although we are not aware that any third
party has demonstrated the preclinical utility of these compounds in the
treatment of precancerous or cancerous lesions, such existing or new agents may
ultimately be found to be useful, and therefore competitive with any of our
future products.
We expect near-term competition from fully integrated and more established
pharmaceutical and biotechnology companies. Most of these companies have
substantially greater financial, research and development, manufacturing and
marketing experience and resources than ours and represent substantial long-term
competition for us. Such companies may succeed in discovering and developing
pharmaceutical products more rapidly than we do, or pharmaceutical products that
are safer, more effective or less costly than any that may be developed by us.
Such companies may be more successful than we are in production and marketing.
Smaller companies may also prove to be significant competitors, particularly
through collaborative arrangements with large pharmaceutical and established
biotechnology companies. Academic institutions, governmental agencies and other
public and private research organizations also conduct clinical trials, seek
patent protection and establish collaborative arrangements for the development
of oncology products.
We will face competition based on a number of factors: product efficacy
and safety; the timing and scope of regulatory approvals; availability of
supply; marketing and sales capability; reimbursement coverage; price; and
patent position. Our competitors may develop safer and more effective products.
Our competitors may obtain patent protection or intellectual property rights
that limit our ability to commercialize products. Our competitors may develop or
commercialize products earlier than we do. Our issued patents or pending patent
applications, if issued, may be challenged, invalidated or circumvented and the
rights granted thereunder may not provide proprietary protection or competitive
advantage to us.
DEPENDENCE ON THIRD-PARTY RELATIONSHIPS.
We depend on third parties. Third-party contractors perform basic
laboratory research studies, animal toxicology studies, animal efficacy studies,
human clinical trials, bulk drug manufacture, drug assay and characterization,
product formulation and finishing, strategic consulting, commercialization
planning, planned product distribution and other important functions. Loss,
failure or delay in respect of any individual material segment or any material
cumulative amount of such contracting activity could delay our development
efforts and could have a material adverse effect on our business, financial
condition and results of operations.
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Our strategy for commercialization of our proposed products for certain
indications and markets includes collaborating with corporate partners and
others, and, to the extent that such corporate partnerships may be entered into,
our success will be dependent upon the subsequent success of these outside
parties in performing their responsibilities. We currently do not have any
collaborations with other pharmaceutical companies for the commercialization of
products. We may not be able to negotiate any collaborative arrangements in the
future on acceptable terms, if at all; and, if negotiated, such collaborative
arrangements may not be maintained or may not prove to be successful. To the
extent that such arrangements are negotiated, the amount and timing of resources
to be devoted to these activities are not within our complete control. Partners
may not perform their obligations as expected. We may not derive any revenue
from such arrangements. Future collaborators may pursue their existing or
alternative technologies or product candidates in preference to those being
developed in collaboration with us. In addition, there can be no assurance that
our future collaborators will pay license fees to us, that they will develop and
market any products under the agreements or that they will commit to fund
product development costs.
To the extent that we choose not to enter into collaborative
relationships, or are unable to establish such arrangements, we would be
required to continue to undertake research, development and marketing of our
proposed products at our own expense. In addition, we may encounter significant
delays in introducing our proposed products into certain markets or find that
the development, manufacture or sale of our proposed products in such markets is
adversely affected by the absence of such collaborative agreements.
The third parties with whom we work, or with whom we may work in the
future, are subject to much of the regulation described in the following
section. Failure of any third party to comply with applicable regulations could
adversely affect the Company to the extent that Company matters are affected by
such non-compliance. Compliance reviews by governmental authorities are common;
findings of non-compliance and requirements for remediation are also common.
Accordingly, the Company is at the additional risk of non-compliance by such
third parties.
EXTENSIVE GOVERNMENT REGULATION; NO ASSURANCE OF NECESSARY FDA AND OTHER
REGULATORY APPROVALS; PRODUCT DEVELOPMENT; SAFETY AND EFFICACY.
Our activities are subject to extensive governmental regulation. In
particular, the research, design, testing, manufacturing, labeling, marketing,
distribution and advertising of pharmaceutical products such as our proposed
products are subject to extensive regulation by governmental regulatory
authorities in the U.S. and other countries. The drug development and approval
process is generally lengthy, expensive and subject to unanticipated delays.
The FDA and comparable agencies in foreign countries impose substantial
requirements on the introduction of new pharmaceutical products through lengthy
and detailed preclinical and clinical testing procedures, sampling activities
and other costly and time-consuming compliance procedures. A new drug may not be
marketed in the U.S. until it has undergone rigorous testing
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and has been approved by the FDA. The drug may then be marketed only for the
specific indications, uses, formulation, dosage forms and strengths approved by
the FDA. Similar requirements are imposed by foreign regulators upon the
marketing of a new drug in their respective countries.
Satisfaction of such regulatory requirements, which includes demonstrating
to the satisfaction of the FDA that the relevant product is both safe and
effective, typically takes several years or more depending upon the type,
complexity and novelty of the product. It also requires the expenditure of
substantial resources. Preclinical studies must be conducted in conformance with
the FDA's Good Laboratory Practice ("GLP") regulations. Our compounds require
extensive clinical trials and FDA review as new drugs. Clinical trials are
vigorously regulated and must meet requirements for FDA review and oversight and
requirements under Good Clinical Practice ("GCP") guidelines. We may encounter
problems in clinical trials which would cause us or the FDA to delay or suspend
clinical trials. Any such delay or suspension could have a material adverse
effect on our business, financial condition and results of operations.
The steps required before a drug may be marketed in the U.S. include: (i)
preclinical laboratory and animal tests; (ii) submission to the FDA of an
application for an IND exemption, which must become effective before human
clinical trials may commence; (iii) human clinical trials to establish the
safety and efficacy of the drug; (iv) submission of a detailed NDA to the FDA;
and (v) FDA approval of the NDA. In addition to obtaining FDA approval for each
product, each domestic establishment where the drug is to be manufactured must
be registered with the FDA. Domestic manufacturing establishments must comply
with cGMP regulations and are subject to periodic inspections by the FDA.
Foreign manufacturing establishments manufacturing drugs intended for sale in
the U.S. also must comply with cGMP regulations and are subject to periodic
inspection by the FDA or by local authorities under agreement with the FDA.
Governmental inspections apply to virtually every phase of drug
development, testing and commercialization. These inspections apply to us to the
extent of our direct activities. They also apply to those third parties with
whom we contract and upon whom we depend. Inspections are common; findings of
non-compliance and requirements of remediation, including time-consuming
replication of studies, tests or other work, are also common. Depending upon the
matter at issue, a finding of non-compliance with respect to activities
undertaken directly by us or with respect to activities undertaken by third
parties upon whom we depend could lead to a substantial delay in clinical
programs, in drug approval, in commercialization or in some other important
program and have a material adverse effect on the Company.
Preclinical tests include laboratory evaluation of product chemistry and
animal studies to assess the metabolic and pharmacologic activity and potential
safety and efficacy of the product. Preclinical tests must be conducted by
laboratories that comply with FDA regulations regarding GLP. The results of
preclinical tests are submitted to the FDA as part of an IND, which must become
effective before the sponsor may conduct clinical trials in human subjects.
Unless the FDA objects to an IND, the IND becomes effective 30 days following
its receipt by the FDA.
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There is no certainty that submission of an IND will result in FDA authorization
of the commencement of clinical trials. A separate IND application may be
required by the FDA, in its sole discretion, as to each indication. The FDA has
determined that all cancer prevention and therapeutic indications for which
Aptosyn(TM) (exisulind) is or will be tested are to be submitted under its
current IND application filed in December 1993.
Clinical trials involve the administration of the investigational drug to
patients. Every clinical trial must be conducted under the review and oversight
of an institutional review board ("IRB") at each institution participating in
the trial. The IRB evaluates, among other things, ethical factors, the safety of
human subjects and the possible liability of the institution. Clinical trials
typically are conducted in three phases, which generally are conducted
sequentially, but which may overlap. Clinical trials test for efficacy and
safety, side effects, dosage, tolerance, metabolism and clinical pharmacology.
Phase I tests involve the initial introduction of the drug to a small group of
subjects to test for safety, dosage tolerance, pharmacology and metabolism.
Phase II trials involve a larger but still limited patient population to
determine the efficacy of the drug for specific indications, to determine
optimal dosage and to identify possible side effects and safety risks. If a drug
appears to be efficacious in Phase II evaluations, larger-scale Phase III trials
are undertaken to evaluate the safety and effectiveness of the drug, usually,
though not necessarily, in comparison with a placebo or an existing treatment.
There are many uncertainties in the overall clinical trial process. Phase
I, Phase II and/or Phase III testing may not be completed successfully within
any specified time period, if at all. Designation of a trial by Phase may be
changed by the Company or by the FDA. The FDA may increase, decrease or
re-characterize the number and Phases of trials required for approval. The FDA
may suspend clinical trials at any time if it decides that patients are being
exposed to a significant health risk.
The results of the preclinical studies and clinical trials are submitted
to the FDA as part of an NDA seeking approval of the marketing of the drug. The
NDA also includes information pertaining to the chemistry, formulation and
manufacture of the drug and each component of the final product, as well as
details relating to the sponsoring company. In prior years, the NDA review
process has taken from one to two years on average to complete, although reviews
of treatments for cancer and other life-threatening diseases may be accelerated.
The process may take substantially longer if the FDA has questions or concerns
about a product. In general, the FDA requires at least two adequate and
well-controlled clinical studies demonstrating efficacy in order to approve an
NDA. The FDA may, however, request additional information, such as long-term
toxicity studies or other studies relating to product safety, and may increase,
decrease or re-characterize the number and phases of trials required for
approval. Notwithstanding the submission of requested data, the FDA ultimately
may decide that the application does not satisfy its regulatory criteria for
approval. Finally, the FDA may require additional clinical tests following NDA
approval.
We may not succeed in developing drugs that prove to be safe and effective
in treating or preventing cancer. The development of such drugs will require the
commitment of substantial
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resources to conduct the preclinical development and clinical trials necessary
to bring such compounds to market. Drug research and development by its nature
is uncertain. There is a risk of delay or failure at any stage, and the time
required and cost involved in successfully accomplishing our objectives cannot
be predicted. Actual drug research and development costs could exceed budgeted
amounts, which could have a material adverse effect on our business, financial
condition and results of operations.
No new drug may be marketed in the U.S. until it has been approved by the
FDA. We may encounter delays or rejections in the approval process. The FDA may
make policy changes during the period of product development or the period of
FDA regulatory review of an NDA. A delay in obtaining, or failure to obtain,
approval would have a material adverse effect on our business, financial
condition and results of operations. Even if regulatory approval were obtained,
such approval would be limited to the indicated uses for which the product may
be promoted or marketed.
A marketed product, its manufacturer and the facilities in which it is
manufactured are subject to continual review and periodic inspections. If
marketing approval is granted, we would be required to comply with FDA
requirements for manufacturing, labeling, advertising, record keeping and
reporting of adverse experiences and other information. In addition, we would be
required to comply with federal and state anti-kickback and other health care
fraud and abuse laws that pertain to the marketing of pharmaceuticals. Failure
to comply with regulatory requirements and other factors could subject us to
regulatory or judicial enforcement actions, including, but not limited to,
product recalls or seizures, injunctions, withdrawal of the product from the
market, civil penalties, criminal prosecution, refusals to approve new products
and withdrawal of existing approvals, as well as enhanced product liability
exposure, any of which could have a material adverse effect on our business,
financial condition and results of operations.
Sales of our products outside the U.S. will be subject to foreign
regulatory requirements governing clinical trials, marketing approval,
manufacturing and pricing. Non-compliance with these requirements could result
in enforcement actions and penalties or could delay introduction of our products
in certain countries.
Our current clinical trial strategy for the development of drugs for the
prevention of precancerous lesions assumes that, for precancer trials, the FDA
will accept reduction in the formation of precancerous lesions as an endpoint.
To date, the FDA has not approved any compounds that are solely chemoprevention
compounds, and there can be no assurance that the FDA will approve such
compounds in the future. The FDA has given a limited approval of the cancer drug
Tamoxifen for the prevention of breast cancer. In December 1999, the FDA
approved the arthritis drug Celebrex for the reduction and regression of polyps
in APC patients. Should the FDA require us to demonstrate the efficacy of
Aptosyn(TM) (exisulind) in the actual prevention (or reduction in the incidence
of) certain cancers or in overall mortality rates resulting from certain
cancers, our clinical trial strategy for precancer would be materially and
adversely affected. Significant additional time and funding would be required to
demonstrate such efficacy.
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For these and other reasons, we may not be able to successfully develop a safe
and efficacious chemoprevention product. If we do succeed in obtaining approval
for a cancer chemopreventive product, the product may not be commercially viable
or accepted in the market place.
In 1988 and again in 1992, the FDA issued regulations intended to expedite
the development, evaluation and marketing of new therapeutic products to treat
life-threatening and severely debilitating illnesses for which no satisfactory
alternative therapies exist. One program under these regulations provides for
early consultation between the sponsor and the FDA in the design of both
preclinical studies and clinical trials. Another program provides for
accelerated approval based on a surrogate endpoint. This does not mean that any
future products we may develop will be eligible for evaluation by the FDA under
these regulations. Nor does this mean that Aptosyn(TM) (exisulind) or any future
products we may develop, if eligible for these programs, will be approved for
marketing sooner than would be traditionally expected. Regulatory approval
granted under these regulations may be restricted by the FDA as necessary to
ensure the safe use of the drug. In addition, post-marketing clinical studies
may be required. If Aptosyn(TM) (exisulind) or any of our future products do not
perform satisfactorily in such post-marketing clinical studies, they would
likely be required to be withdrawn from the market.
We have obtained Orphan Drug status for Aptosyn(TM) (exisulind) for the
treatment of APC. Orphan Drug status may provide an applicant exclusive
marketing rights in the U.S. for a specific compound for a designated indication
for seven years following marketing approval, in order to obtain such benefits.
However, the applicant must be the sponsor of the first NDA approved for that
drug and indication. Moreover, amendment of the Orphan Drug Act by the U.S.
Congress and reinterpretation by the FDA are frequently discussed. Therefore,
the precise scope of protection that may be afforded by Orphan Drug status in
the future is uncertain. The current level of exclusivity may not remain in
effect.
We have been granted Fast Track designation by the FDA for Aptosyn(TM)
(exisulind) for the reduction in development of new polyps in patients with APC.
The Fast Track Program is a new mechanism, introduced in the FDA Modernization
Act of 1997, for facilitating the development and expediting the approval of
drugs that demonstrate the potential to address unmet medical needs for serious
and life-threatening conditions. This mechanism builds upon existing FDA
programs for accelerated approval of such drugs. However, there can be no
assurance that the Fast Track designation will lead to earlier or faster
consideration by the FDA of Aptosyn(TM) (exisulind) for APC than would otherwise
be the case.
Among the requirements for product approval is the requirement that
prospective manufacturers conform to the FDA's cGMP standards, which also must
be observed at all times following approval. Accordingly, manufacturers must
continue to expend time, money and effort in production, record keeping and
quality control to ensure compliance with cGMP standards. Failure to comply
subjects the manufacturer to possible FDA action, such as the suspension of
manufacturing or seizure of the product. The FDA may also request a voluntary
recall of a product.
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Health care reform legislation, if enacted, could result in significant
change in the financing and regulation of the health care business. Also,
legislation affecting coverage and reimbursement under Medicare, Medicaid and
other government medical assistance programs has been enacted and modified from
time to time. The future course of legislation is unpredictable. Changes
adversely affecting drug pricing, drug reimbursement and prescription benefits,
among other changes, could have a materially adverse effect on our business,
financial condition and results of operations at that time.
Data obtained from preclinical and clinical testing are subject to varying
interpretations that could delay, limit or prevent FDA approval. There may be
delays or rejections based upon changes in FDA policy for drug approval during
the period of development and FDA regulatory review of each submitted NDA.
Satisfaction of regulatory requirements (which includes demonstrating to the
satisfaction of the FDA that the relevant product is both safe and effective)
typically takes several years or more depending upon the type, complexity and
novelty of the product. This also requires the expenditure of substantial
resources. We may encounter problems in clinical trials which would cause us or
the FDA to delay or suspend clinical trials. We may encounter delays in the FDA
approval process. Any such delay or suspension could have a material adverse
effect on our business, financial condition, results of operations or market
price of the common stock of the Company. For example, on February 1, 1999, we
made an announcement stating that we anticipated a delay in NDA filing and
subsequent commercialization in light of preliminary evaluation of data from the
Phase III trial of Aptosyn(TM) (exisulind) for APC. The market price of the
Company's common stock dropped substantially. Although we subsequently filed the
NDA in August of 1999, the market price of the Company's common stock, as of
December 1999, remained substantially below the pre-announcement level.
As discussed above, we submitted an NDA for Aptosyn(TM) (exisulind) for
the indication of APC in August 1999. We cannot predict when, if ever, we will
submit another NDA for another indication of Aptosyn(TM) (exisulind) or for one
of its compounds currently under development. We may not successfully complete
clinical trials for Aptosyn(TM) (exisulind) for any indication other than for
APC or for other compounds currently under development within any specified time
period, if at all. Further, such testing may not show Aptosyn(TM) (exisulind) or
any other product to be safe or effective. We may encounter problems in clinical
trials that will cause us to delay or suspend clinical trials.
Even after such time has been expended and expenses incurred by us in
product development, we may fail to obtain regulatory approval for any
therapeutic product. In the event that such regulatory approval is obtained, we,
our products, our contract manufacturers and our commercial collaborators will
be subject to continual regulatory review in both the U.S. and other countries,
and later discovery of previously unknown problems with regard to such a
product, distributor or manufacturer may result in restrictions on such product
or manufacturer, including withdrawal of the product from the market and
disqualification or decertification of the distributor or manufacturer.
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POTENTIAL LIMITATIONS ON THIRD-PARTY REIMBURSEMENT; HEALTH CARE REFORM.
In both U.S. and foreign markets, sales of our proposed products will
depend in part on the availability of reimbursement from third-party payors such
as government health administration authorities, private health insurers and
other organizations. The levels of revenues and profitability of pharmaceutical
companies may be affected by the continuing efforts of governmental and
third-party payors to contain or reduce the costs of health care. We cannot
predict the effect that private sector or governmental health care reforms may
have on our business, and there can be no assurance that any such reforms will
not have a material adverse effect on our business, financial condition and
results of operations. In addition, in both the U.S. and elsewhere, sales of
prescription drugs are dependent in part on the availability of reimbursement to
the consumer from third-party payors, such as government and private insurance
plans. Third-party payors are increasingly challenging the price and
cost-effectiveness of medical products and services. Significant uncertainty
exists as to the reimbursement status of newly approved health care products.
There can be no assurance that our proposed products will be considered
cost-effective or that adequate third-party reimbursement will be available to
enable us to maintain price levels sufficient to realize an appropriate return
on our investment in product development. Legislation and regulations affecting
the pricing of pharmaceuticals may change before any of our proposed products
are approved for marketing. Adoption of such legislation could further limit
reimbursement for medical products and services. As a result, we may elect not
to market future products in certain markets.
LACK OF MANUFACTURING EXPERIENCE; RELIANCE ON CONTRACT MANUFACTURERS AND
SUPPLIERS.
We do not have facilities to manufacture and produce our compounds for
preclinical, clinical or commercial purposes. Our product candidates have never
been manufactured for commercial purposes and there can be no assurance that
such products can be manufactured at a cost or in quantities necessary to make
them commercially viable, although our lead compound, Aptosyn(TM) (exisulind),
has been manufactured by our contractors at commercial scale. If we are unable
to manufacture or contract for a sufficient supply of our compounds on
acceptable terms, or if we should encounter delays or difficulties in our
relationships with manufacturers, our preclinical and human clinical testing
schedule would be delayed, resulting in delay of the submission of products for
regulatory approval or delay of the market introduction and subsequent sales of
such products, which would have a material adverse effect on our business,
financial condition and results of operations. Furthermore, we or contract
manufacturers must supply all necessary documentation in support of our NDA on a
timely basis and must adhere to GLP and current Good Manufacturing Practice
regulations enforced by the FDA through its facilities inspection program.
Inspections are common; findings of noncompliance and consequent delays are also
common; if delays were to be material, the adverse consequences to the Company
could be material. For example, if facilities of a third-party manufacturer or
finisher of drug could not pass a pre-approval plant inspection, the FDA
approval of the products would not be granted and delay would ensue until the
FDA were satisfied.
21
<PAGE> 23
We may not be able to maintain sufficiently advantageous relationships
with current or future suppliers of raw or intermediate materials and finished
product. If our current manufacturing sources and suppliers are unable or
unwilling to make Aptosyn(TM) (exisulind) and formulation and finishing
materials and services available to us in required quantities, there can be no
assurance that we will be able to identify and contract with alternative
contract manufacturers. We would incur significant costs and delays to qualify
alternative manufacturing sources and suppliers, which could have a material
adverse effect on our business, financial condition and results of operations.
The availability and price of Aptosyn(TM) (exisulind) or other materials may be
subject to curtailment or change due to limitations that may be imposed under
governmental regulations, suppliers' allocations or facilities priorities,
interruptions in production by suppliers and market and other events and
conditions, which could have a material adverse effect on our business,
financial condition and results of operations.
ABSENCE OF SALES AND MARKETING EXPERIENCE; DEPENDENCE ON THIRD PARTIES.
We have no product approved; and, as a company, we have had no experience
in sales, marketing or distribution. Depending upon the marketing strategy
ultimately adopted with respect to each relevant market, we intend either to
market our products, if developed and approved, on our own or through
relationships with pharmaceutical companies that have established distribution
systems and direct sales forces. To market any of our products directly, we must
develop a marketing and sales force with technical expertise and with supporting
distribution capabilities. While we are currently making preparations to handle
the marketing and selling in the United States (with distribution through
contracted third parties), there can be no assurance that we will be able to
establish effective sales, marketing and distribution capabilities or
relationships with third parties, or that we will be successful in gaining
market acceptance for our products. To the extent that we enter into
co-promotion or other licensing arrangements, any revenues received by us will
depend upon the efforts of third parties, and there can be no assurance that
such efforts will be successful.
NEED TO ATTRACT AND RETAIN KEY EMPLOYEES AND CONSULTANTS.
Because of the specialized scientific nature of our business, our success
is highly dependent upon our ability to attract and retain qualified scientific
and technical personnel. We are highly dependent on the principal members of our
scientific and management staff and the loss of any of their services might
significantly delay or prevent the achievement of research, development or
business objectives. We do not maintain key-man life insurance with respect to
any of our employees, nor do we intend to secure such insurance. We also rely on
consultants and advisors, including the members of our Scientific Advisory
Board, to assist us in formulating our research and development strategy.
Retaining and attracting qualified personnel, consultants and advisors is
critical to our success. In order to pursue our product development and
marketing and sales plans, we will be required to hire additional qualified
scientific personnel to perform research and development, as well as personnel
with expertise in clinical testing, government regulation, manufacturing and
marketing and sales. We face competition for qualified individuals from numerous
pharmaceutical and biotechnology companies, universities and other
22
<PAGE> 24
research institutions. We may not be able to attract and retain such individuals
on acceptable terms, if at all, and the failure to do so could have a material
adverse effect on our business, financial condition and results of operations.
RISKS ASSOCIATED WITH ACQUISITION STRATEGY.
We may seek to acquire and further develop technologies, products and/or
companies focused in the prevention, diagnosis and treatment of cancer,
consistent with the objective of building an integrated pharmaceutical company
focused in oncology. We may not identify appropriate acquisition candidates,
and, if we do, we may not be successful in completing any such transactions on
favorable terms, if at all. In addition, to the extent that we undertake or
complete any such acquisitions, such activities may place a strain on our
financial and management resources, which could have a material adverse effect
on our business, financial condition and results of operations. Also, the
technologies, products and/or companies acquired may be subject to many of the
risk factors associated with development of our present technologies and product
candidates to an equal or greater degree.
POTENTIAL PRODUCT LIABILITY; POSSIBLE INSUFFICIENCY OF INSURANCE.
Our business will expose us to potential product liability risks. These
would include risks that are inherent in the testing, manufacturing and
marketing of human therapeutic products. Clinical research involves the testing
of new drugs on human volunteers pursuant to a research plan, and such testing
involves a risk of liability for personal injury or death to patients due to,
among other reasons, possible unforeseen adverse side effects or improper
administration of the new drug. Many of these patients are already seriously ill
and are at risk of further illness or death. We currently have clinical trial
liability insurance in the amount of $10 million, but there can be no assurance
that we will be able to maintain such insurance. We could be materially and
adversely affected if we were required to pay damages or incur defense costs:
(i) in connection with a claim outside the scope of indemnity or insurance
coverage; (ii) if the indemnity, although applicable, is not performed in
accordance with the terms of the relevant contract; or (iii) if our liability
exceeds the amount of applicable insurance. Similar risks would exist upon the
commercialization or marketing of any products by us or our partners.
HANDLING AND DISPOSAL OF HAZARDOUS MATERIALS.
Our research and development involves the controlled use of hazardous
materials, chemicals and various radioactive compounds. Although we believe that
our safety procedures for handling and disposing of such materials comply with
the standards prescribed by state and federal regulations, the risk of
accidental contamination or injury from these materials cannot be completely
eliminated. In the event of such an accident, we could be held liable for any
damages that result, and any such liability could exceed our resources. We may
incur substantial costs to comply with environmental regulations if we develop
manufacturing capacity.
23
<PAGE> 25
ABSENCE OF PRIOR TRADING MARKET; POTENTIAL VOLATILITY OF STOCK PRICE; NO
DIVIDENDS.
Prior to November 4, 1998, there was no direct public market for our
common stock. There can be no assurance as to the degree to which an active
market in our common stock will be maintained. The market price of our common
stock, like that of the common stock of many other early-stage pharmaceutical
and biotechnology companies, is likely to be highly volatile. Factors such as
the fluctuation in our operating results, comments by research analysts,
announcements of technological innovations or new commercial products by us (or
our subsidiaries) or our competitors, progress with clinical trials,
governmental regulations, changes in reimbursement policies, developments in our
patent or other proprietary rights or of our competitors, including litigation,
developments in our relationships with collaborative partners, if any, public
concern as to the safety and efficacy of drugs developed by us and our
competitors, general market conditions and market conditions affecting the
pharmaceutical and biotechnology sectors particularly may have a significant
effect on the market price of our common stock. We have never paid any cash
dividends and do not anticipate paying cash dividends in the foreseeable future.
OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS; ANTI-TAKEOVER PROVISIONS.
Our directors and executive officers, taken in the aggregate with entities
represented by them, beneficially own or significantly influence approximately
20% of the outstanding shares of our common stock (as of November 30, 1999).
Accordingly, these stockholders, if they act in concert with others, might be
able to control many matters requiring approval by our stockholders, including
the election of directors. Our certificate of incorporation does not provide for
cumulative voting with respect to the election of directors. Consequently, the
directors and executive officers will be able to exercise substantial influence
over the election of the members of our board. Such concentration of ownership
could have an adverse effect on the price of our common stock or have the effect
of delaying or preventing a change in our control. In addition, certain
provisions of Delaware law and our certificate of incorporation, including the
provision in the certificate of incorporation for a classified board of
directors, could have the effect of making it more difficult for a third party
to acquire, or of discouraging a third party from attempting to acquire, control
of us. In December 1998, our board of directors adopted a stockholder rights
plan to enable the directors to act in the best interests of the stockholders in
the event of an actual or threatened accumulation of stock by a third party
without the consent of the board of directors. Such provisions could limit the
price that certain investors might be willing to pay in the future for shares of
our common stock. The provisions of Delaware law, of our certificate of
incorporation and bylaws and of the stockholder rights plan may also have the
effect of discouraging or preventing certain types of transactions involving an
actual or threatened change of control of us (including unsolicited takeover
attempts) even though such a transaction may offer our stockholders the
opportunity to sell their stock at a price above the prevailing market price.
Certain of these provisions allow us to issue preferred stock without any vote
or further action by the stockholders, require stockholders to provide advance
notice prior to bringing proposals before a meeting and prevent or eliminate
cumulative voting in the election of
24
<PAGE> 26
directors. These provisions may make it more difficult for stockholders to take
certain corporate actions and could have the effect of delaying or preventing a
change in control of us.
RISKS ASSOCIATED WITH THE YEAR 2000
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. In other words,
date-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in system failures or miscalculations
causing disruptions of operations, including, among others, a temporary
inability to process transactions and information, send invoices, or engage in
similar normal business activities. Non-information technology systems that
utilize embedded technology, such as microcontrollers, HVAC, and security may
also face Year 2000 issues.
During 1999, we have been conducting an analysis to determine the extent
to which our major suppliers', third-party researchers' and clinical trial
sites' systems (insofar as they relate to our business) are subject to the Year
2000 issue. We are currently unable to predict the extent to which we would be
vulnerable to our third parties' failure to remediate any Year 2000 issues on a
timely basis. The failure of a major third party subject to the Year 2000 issue
to convert its systems on a timely basis or a conversion that is incompatible
with our systems could have a material adverse effect on us.
USE OF PROCEEDS
The proceeds from the sale of the common stock offered pursuant to this
prospectus are solely for the account of the selling stockholders. We will not
receive any proceeds from the sale of these shares of common stock by the
selling stockholders. However, because some of the shares that may be offered
pursuant to this prospectus by the selling stockholders may be acquired pursuant
to the exercise of warrants by the selling stockholders, we would receive
proceeds from the selling stockholders upon the exercise by a selling
stockholder of any portion of the warrant issued to it. See "Selling
Stockholders" on page 25. We will use the proceeds, if any, from the exercise of
the warrants to support the ongoing development of Aptosyn(TM) (exisulind) and
to support our other research and development programs.
SELLING STOCKHOLDERS
Pursuant to purchase agreements, dated as of October 8, 1999, we issued
(i) 1,555,000 shares of our common stock at a purchase price of $9.00 per share,
and (ii) warrants to purchase 1,555,000 shares of our common stock, to the
selling stockholders in private placement transactions. The warrants are
exercisable at any time in whole or in part until December 31, 2000, and the
warrants entitle the holder to purchase our common stock at a purchase price
equal to $14.00 per share, as appropriately adjusted pursuant to the terms of
the warrants. In addition, we have agreed to issue to Janney Montgomery Scott
LLC (formerly Janney Montgomery Scott Inc. prior to a reorganization that
occurred in August 1999) ("Janney") warrants to purchase up to an additional
39,375 shares of our common stock, in connection with these private placement
transactions, as compensation for the placement of the warrants to purchase
1,555,000 shares of
25
<PAGE> 27
our common stock. Janney will receive warrants to purchase that number of shares
of our common stock, also at an exercise price of $14 per share, which is equal
to 3.5% of the number of shares of common stock issued upon exercise of warrants
by purchasers in the private placement who had not previously been stockholders
of the Company. Janney is entitled to exercise these warrants upon the later of
December 31, 2000 or 30 days after the exercise of the warrants by the
purchasers in the private placement. The exercise price and the number of
warrant shares of both the warrantholders and Janney are subject to adjustment
upon the following events:
- The subdivision, split or combination of shares of our common stock;
and
- The issuance of dividends in the form of common stock.
The shares issued upon exercise of the warrants are sometimes referred to as the
warrant shares. After the exercise of the warrants, the selling stockholders may
also offer or sell the warrant shares from time to time in the manner
contemplated under the "Plan of Distribution." Under the terms of the purchase
agreements for the shares of common stock and the warrants, we are obligated to
use our best efforts to maintain an effective registration statement for the
period from the effectiveness of the registration statement of which this
prospectus forms a part and the earlier of (i) such date when either all of the
shares and the warrant shares have been sold pursuant to the registration
statement, or by reason of Rule 144(k) of the Securities and Exchange Commission
under the Securities Act of 1933 (the "Securities Act") or any other rule of
similar effect, the shares and warrant shares are no longer required to be
registered for the resale thereof by the holders in ordinary market transactions
without imposition of any volume restrictions, or (ii) the second anniversary of
the expiration of the warrants.
The following table sets forth certain information known to us regarding
the beneficial ownership of the common stock of each selling stockholder as of
November 30, 1999 and as adjusted to give effect to the sale of the shares
offered hereby. The following table states the maximum number of shares each
selling stockholder may offer under this prospectus assuming that each selling
stockholder chooses to (a) sell all shares purchased in the private placement in
October 1999 and (b) exercise all its warrants and sell the warrant shares it
acquired upon exercise of the warrants. The shares are being registered to
permit public secondary trading of the shares, and the selling stockholders may
offer the shares for resale from time to time. See "Plan of Distribution" on
page 28. We cannot assure you that the selling stockholders will sell any or all
of the shares.
26
<PAGE> 28
<TABLE>
<CAPTION>
Ownership Before Offering Ownership After Offering(3)
---------------------------- ----------------------------
Common Shares
that May
Percent of Be Sold Percent of
Common Common Shares Pursuant to Common Common
Name of Selling Stockholder Shares(1) Held(2) the Offering Shares Shares Held
- --------------------------- --------- ------- ------------ ------ -----------
<S> <C> <C> <C> <C> <C>
MAS Funds - Small Cap Value Portfolio(4) 1,005,600 3.78% 955,600 50,000 *
Van Kampen - American Value Fund 958,100 3.60 954,000 4,100 *
MSDW SICAV Small Cap Value 72,900 * 72,600 300 *
MSDW SICAV Global Small Cap US 7,900 * 7,600 300 *
Coutts & Co. 11,700 * 10,200 1,500 *
SoundShore Holdings Ltd. 150,000 * 150,000 -- --
SoundShore Opportunity Holding Fund Ltd. 100,000 * 100,000 -- --
Vulcan Ventures Inc. 979,770 3.72 460,000 519,770 1.97
Jackson Boulevard Ventures, L.P. 1,017,907(5) 3.87 400,000 617,907 2.35
Janney Montgomery Scott Inc.(6)(7) 39,375 * 39,375 -- --
</TABLE>
* Less than 1.00%.
(1) This number includes the unexercised warrants of the respective selling
stockholder.
(2) Both the numerator and the denominator of the fraction used to arrive at
this percentage include the number of warrant shares held by the selling
stockholder whose percent of common shares held is being calculated.
(3) These figures assume that all Common Shares and Warrant Shares received by
the selling stockholders in the October 1999 private placement have been sold.
(4) Morgan Stanley Dean Witter & Co. and/or its affiliates, including, among
others, Morgan Stanley Dean Witter Investment Management Inc., Miller, Anderson
& Sherrerd, LLP and Morgan Stanley Dean Witter Investment Management, Ltd.
(collectively, "MSDW"), may be deemed to control, or own an interest in, the
following selling stockholders: MAS Funds - Small Cap Value Portfolio, Van
Kampen - American Value Fund, MSDW SICAV Small Cap Value and MSDW SICAV Global
Small Cap US. In addition to the shares disclosed in this table for each of
these selling stockholders, MSDW, directly or indirectly, had, as of November
30, 1999, voting and/or dispositive power over an additional 411,142 shares held
in discretionary trading accounts at MSDW for the benefit of individuals,
institutions and other entities.
(5) This amount includes, as of November 30, 1999, 270,184 shares beneficially
owned by Jackson Boulevard Partners, 154,601 shares beneficially owned by
Jackson Boulevard Equities, L.P., 209,527 shares and warrants to purchase
200,000 shares beneficially owned by Jackson Boulevard Ventures, L.P., 88,918
shares beneficially owned by Jackson Boulevard Investments, L.P., 10,998 shares
beneficially owned by Paul J. Duggan, 71,181 shares beneficially owned by
Jackson Offshore Fund, Ltd. , and 12,498 shares beneficially owned by Deborah
Gemini. Jackson Boulevard Capital Management, Ltd. f/k/a Jackson Boulevard Fund,
Ltd. is the General Partner of Jackson Boulevard Equities, L.P., Jackson
Boulevard Ventures, L.P., Jackson Boulevard Investments, L.P., and the
investment manager of Jackson Offshore Fund, Ltd. The President and sole
stockholder of Jackson Boulevard Capital Management, Ltd. is Paul J. Duggan, who
is the General Partner of Jackson Boulevard Partners and the spouse of Deborah
Gemini. Mr. Duggan may be deemed to share voting and investment power with these
entities and individuals; however, Mr. Duggan disclaims beneficial ownership of
such shares except to the extent of his pecuniary interest therein.
(6) These shares were originally registered in the name of Janney Montgomery
Scott Inc. In August 1999, Janney Montgomery Scott Inc. became Janney
Montgomery Scott LLC pursuant to a corporate reorganization in which it
converted to a limited liability company.
(7) Janney makes a market in the stock of Cell Pathways. The ownership interest
of Janney set forth in this table does not include any shares of Common Stock
that Janney may hold in its role as a market maker on behalf of Cell Pathways.
27
<PAGE> 29
PLAN OF DISTRIBUTION
The shares being offered by the selling stockholders, or their respective
pledgees, donees, transferees or other successors in interest, will be sold in
one or more transactions (which may involve block transactions) on the Nasdaq
National Market, or on such other market on which the common stock may from time
to time be trading, in privately negotiated transactions, through the writing of
options on the shares, short sales or any combination thereof. The sale price to
the public may be the market price prevailing at the time of sale, a price
related to such prevailing market price or such other price as the selling
stockholders determine from time to time. The shares may also be sold pursuant
to Rule 144 of the Securities Act. The selling stockholders shall have the sole
and absolute discretion not to accept any purchase offer or make any sale of
shares if they deem the purchase price to be unsatisfactory at any particular
time.
The selling stockholders, or their respective pledgees, donees,
transferees or other successors in interest, may also sell the shares directly
to market makers acting as principals and/or broker-dealers acting as agents for
themselves or their customers. Brokers acting as agents for the selling
stockholders will receive usual and customary commissions for brokerage
transactions, and market makers and block purchasers purchasing the shares will
do so for their own account and at their own risk. It is possible that the
selling stockholders will attempt to sell shares of common stock in block
transactions to market makers or other purchasers at a price per share which may
be below the then market price. There can be no assurance that all or any of the
shares offered hereby will be issued to, or sold by, the selling stockholders.
The selling stockholders and any brokers, dealers or agents, upon effecting the
sale of any of the shares offered hereby, may be deemed "underwriters" as that
term is defined under the Securities Act or the Securities Exchange Act of 1934
(the "Exchange Act"), or the rules and regulations thereunder.
The selling stockholders, alternatively, may sell all or any part of the
shares offered hereby through an underwriter. The selling stockholders have not
entered into any agreement with a prospective underwriter and there is no
assurance that any such agreement will be entered into. If the selling
stockholders enter into such an agreement or agreements, the relevant details
will be set forth in a supplement or revisions to this prospectus.
Upon our being notified by the selling stockholders that any material
arrangement has been entered into with a broker or dealer for the sale of shares
through a block trade, special offering, exchange distribution or secondary
distribution or a purchase by a broker or dealer, a supplemented prospectus will
be filed, if required, pursuant to Rule 424(c) under the Securities Act,
disclosing:
- - the name of each such broker-dealer,
- - the number of shares involved,
28
<PAGE> 30
- - the price at which such shares were sold,
- - the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable,
- - that such broker-dealer(s) did not conduct any investigation to verify the
information set out or incorporated by reference in this prospectus, as
supplemented, and
- - other facts material to the transaction.
The selling stockholders and any other persons participating in the sale
or distribution of the shares will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, which provisions may
limit the timing of purchases and sales of any of the shares by the selling
stockholders or any other such person. The foregoing may affect the
marketability of the shares.
We have agreed to indemnify the selling stockholders, or their transferees
or assignees, against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments the selling stockholders or their
respective pledgees, donees, transferees or other successors in interest, may be
required to make in respect thereof.
We are bearing all costs relating to the registration of the shares (other
than fees and expenses, if any, of counsel or other advisers to the selling
stockholders). Any commissions, discounts or other fees payable to
broker-dealers in connection with any sale of the shares will be borne by the
selling stockholders.
LEGAL OPINION
The validity of the shares of common stock offered hereby will be passed
upon for us by Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania.
EXPERTS
The financial statements incorporated by reference in this prospectus have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are incorporated by
reference herein in reliance upon the authority of said firm as experts in
giving said report.
29
<PAGE> 31
HOW TO OBTAIN MORE INFORMATION
This prospectus is part of a registration statement on Form S-3 that we
filed with the SEC. Some information in the registration statement has been
omitted from this prospectus in accordance with the SEC rules. We file annual,
quarterly, and special reports, proxy statements, and other information with the
SEC. You can read and copy the registration statement as well as reports, proxy
statements, and other information we have filed with the SEC at the public
reference room maintained by the SEC at 450 Fifth Street, NW, Washington, D.C.
20549. You can call the SEC at 1-800-SEC-0330 for further information about the
public reference room. We are also required to file with the SEC electronic
versions of these documents, which may be accessed through the SEC's World Wide
Web site at http://www.sec.gov. or the Company's web site at
http://www.cellpathways.com. Our common stock is quoted on The Nasdaq National
Market. Reports, proxy and information statements, and other information
concerning our company may be inspected at The Nasdaq Stock Market at 1735 K
Street, NW, Washington, D.C. 20006.
The SEC allows us to "incorporate by reference" the information we have
previously filed with them, which means we can disclose important information by
referring you to those documents. All information that we have incorporated by
reference is available to you in accordance with the above paragraph.
Information that we file with the SEC subsequent to the date of this prospectus
will automatically update and supersede this information. We incorporate by
reference the documents listed below and any future filings made with the SEC
under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, until the selling
stockholders have sold all the shares.
The following documents filed with the SEC are incorporated by reference
in this prospectus:
- - Our Annual Report on Form 10-K for the year ended December 31, 1998.
- - Our Quarterly Report on Form 10-Q for the quarterly period ended March 31,
1999.
- - Our Quarterly Report on Form 10-Q for the quarterly period ended June 30,
1999.
- - Our Quarterly Report on Form 10-Q for the quarterly period ended September
30, 1999.
- - Our report on Form 8-K dated August 25, 1999.
- - Our definitive Proxy Statement dated April 30, 1999, filed in connection
with our 1999 Annual Meeting of Stockholders.
30
<PAGE> 32
- - The description of our common stock set forth in our registration
statement on Form 8-A, filed with the SEC on September 14, 1998, including
any amendment or reports filed for the purpose of updating such
description.
We will furnish without charge to you, on written or oral request, a copy
of any or all of the documents incorporated by reference, including exhibits to
these documents. You should direct any requests for documents to Investor
Relations, Cell Pathways, Inc., 702 Electronic Drive, Horsham, Pennsylvania
19044, (215) 706-3800.
31
<PAGE> 33
===============================================================================
3,149,375 SHARES
CELL PATHWAYS, INC.
COMMON STOCK
---------------
PROSPECTUS
---------------
____ __, 1999
===============================================================================
<PAGE> 34
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table shows the estimated expenses of the issuance and
distribution of the securities offered hereby.
<TABLE>
<S> <C>
SEC registration fee................ $ 8,098.62
Nasdaq listing fee.................. $17,500.00
Legal fees and expenses............. $30,000.00
Printing and engraving expenses..... $ 3,000.00
Accounting fees and expenses........ $ 6,000.00
Miscellaneous....................... $ 5,000.00
----------
Total $69,598.62*
==========
</TABLE>
* Excludes the fair market value of warrants to purchase up to 39,375 shares
of Common Stock that the Company may issue to Janney as compensation for
the placement of warrants in connection with the October 1999 private
placement of 1,555,000 Common Shares and warrants to purchase the same
number of shares of the Registrant's Common Stock.
II-1
<PAGE> 35
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law ("Section 145")
permits indemnification of directors, officers, agents and controlling persons
of a corporation under certain conditions and subject to certain limitations.
Section 145 empowers a corporation to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director, officer or
agent of the corporation or another enterprise if serving at the request of the
corporation. Depending on the character of the proceeding, a corporation may
indemnify against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred in connection with
such action, suit or proceeding if the person indemnified acted in good faith
and in a manner he reasonably believed to be in or not opposed to, the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. In the
case of an action by or in the right of the corporation, no indemnification may
be made with respect to any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the extent
that the Court of Chancery or the court in which such action or suit was brought
shall determine that despite the adjudication of liability such person is fairly
and reasonably entitled to indemnity for such expenses which the court shall
deem proper. Section 145 further provides that to the extent a director,
officer, employee or agent of a corporation has been successful in the defense
of any action, suit or proceeding referred to above or in the defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith. Section 43 of Article XI of the Company's Bylaws provides
to the fullest extent permitted by Section 145 of the Delaware General
Corporation Law for the indemnification of each person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he or she is or was a director or executive officer of
the corporation, or is or was serving at the request of the corporation, as a
director, executive officer or trustee of, or in a similar capacity with,
another corporation, partnership, joint venture, trust or other enterprise
(including any employee benefit plan), or by reason of any action alleged to
have been taken or omitted in such capacity, against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person or on such person's behalf in connection with
such action, suit or proceeding and any appeal therefrom.
II-2
<PAGE> 36
ITEM 16. LIST OF EXHIBITS
The exhibits filed as part of this registration statement are as follows:
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
4.1* Form of Warrant, dated October 8, 1999, issued to MAS Funds Small
Cap Value Portfolio, Van Kampen American Value Fund, MSDW SICAV US
Small Cap Equity Fund, MSDW SICAV Global Small Cap Equity Fund and
Coutts Fund Managers Limited, SoundShore Holdings, Ltd., SoundShore
Opportunity Holding Fund Ltd., Vulcan Ventures, Inc. and Jackson
Boulevard Ventures, L.P., pursuant to Purchase Agreements, dated as
of October 8, 1999.
5.1* Opinion of Morgan, Lewis & Bockius LLP regarding legality of
securities being registered.
10.1* Purchase Agreement, dated as of October 8, 1999, between Cell
Pathways, Inc. and MAS Funds Small Cap Value Portfolio, Van Kampen
American Value Fund, MSDW SICAV US Small Cap Equity Fund, MSDW SICAV
Global Small Cap Equity Fund and Coutts Fund Managers Limited.
10.2* Purchase Agreement, dated as of October 8, 1999, between Cell
Pathways, Inc. and SoundShore Holdings Ltd. and SoundShore
Opportunity Holding Fund Ltd.
10.3* Purchase Agreement, dated as of October 8, 1999, between Cell
Pathways, Inc. and Vulcan Ventures Inc.
10.4* Purchase Agreement, dated as of October 8, 1999, between Cell
Pathways, Inc. and Jackson Boulevard Ventures, L.P.
23.1* Consent of Morgan, Lewis & Bockius LLP (included in its opinion
filed as Exhibit 5.1 hereto).
23.2* Consent of Arthur Andersen LLP.
24.1* Powers of Attorney (included as part of signature page hereof).
</TABLE>
- --------------
* Filed herewith.
II-3
<PAGE> 37
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to its Certificate of Incorporation, its Bylaws, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against a public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraph (1)(i) and 1(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed
II-4
<PAGE> 38
by the Registrant pursuant to section 13 or section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrant hereby undertakes to supplement the prospectus,
after the expiration of the subscription period, to set forth the results of the
subscription offer, the transactions by the selling stockholders during the
subscription period, the amount of unsubscribed securities to be purchased by
the selling stockholders, and the terms of any subsequent reoffering thereof. If
any public offering by the selling stockholders is to be made on terms differing
from those set forth on the cover page of the prospectus, a post-effective
amendment will be filed to set forth the terms of such offering.
The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report, to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
II-5
<PAGE> 39
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Horsham, Commonwealth of Pennsylvania, on December
29, 1999.
CELL PATHWAYS, INC.
By: /s/ Robert J. Towarnicki
--------------------------------------
Robert J. Towarnicki
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by or on behalf of the following
persons in the capacities and on the dates indicated.
Each person, in so signing also makes, constitutes, and appoints Robert J.
Towarnicki and Richard H. Troy, and each of them acting alone, as his true and
lawful attorneys-in-fact, with full power of substitution, in his name, place,
and stead, to execute and cause to be filed with the Securities and Exchange
Commission any or all amendments to this report.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Robert J. Towarnicki President, Chief Executive Officer and December 13, 1999
- ----------------------------------- Director (Principal Executive Officer)
Robert J. Towarnicki
/s/ Brian J. Hayden Chief Financial Officer, December 15, 1999
- ----------------------------------- Vice President, Finance (Principal
Brian J. Hayden Financial and Accounting Officer)
/s/ William A. Boeger Chairman of the Board of Directors December 13, 1999
- -----------------------------------
William A. Boeger
/s/ John J. Gibbons Director December 13, 1999
- -----------------------------------
John J. Gibbons
/s/ Thomas M. Gibson Director December 13, 1999
- -----------------------------------
Thomas M. Gibson
/s/ Judith A. Hemberger Director December 13, 1999
- -----------------------------------
Judith A. Hemberger
/s/ Roger J. Quy Director December 10, 1999
- -----------------------------------
Roger J. Quy
</TABLE>
II-6
<PAGE> 40
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Bruce R. Ross Director December 13, 1999
- -----------------------------------
Bruce R. Ross
/s/ Peter G. Schiff Director December 13, 1999
- -----------------------------------
Peter G. Schiff
/s/ Randall M. Toig Director December 13, 1999
- -----------------------------------
Randall M. Toig
/s/ Richard H. Troy Senior Vice President, Corporate December 13, 1999
- ----------------------------------- Development, General Counsel,
Richard H. Troy Secretary and Director
/s/ Louis M. Weiner Director December 13, 1999
- -----------------------------------
Louis M. Weiner
</TABLE>
II-7
<PAGE> 41
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT
- ------ --------
<S> <C>
4.1* Form of Warrant, dated October 8, 1999, issued to MAS Funds Small
Cap Value Portfolio, Van Kampen American Value Fund, MSDW SICAV US
Small Cap Equity Fund, MSDW SICAV Global Small Cap Equity Fund and
Coutts Fund Managers Limited, SoundShore Holdings, Ltd., SoundShore
Opportunity Holding Fund Ltd., Vulcan Ventures, Inc. and Jackson
Boulevard Ventures, L.P., pursuant to Purchase Agreements, dated as
of October 8, 1999.
5.1* Opinion of Morgan, Lewis & Bockius LLP regarding legality of
securities being registered.
10.1* Purchase Agreement, dated October 8, 1999, between Cell Pathways,
Inc. and MAS Funds Small Cap Value Portfolio, Van Kampen American
Value Fund, MSDW SICAV US Small Cap Equity Fund, MSDW SICAV Global
Small Cap Equity Fund and Coutts Fund Managers Limited.
10.2* Purchase Agreement, dated October 8, 1999, between Cell Pathways,
Inc. and SoundShore Holdings Ltd. and SoundShore Opportunity Holding
Fund Ltd.
10.3* Purchase Agreement, dated October 8, 1999, between Cell Pathways,
Inc. and Vulcan Ventures Inc.
10.4* Purchase Agreement, dated October 8, 1999, between Cell Pathways,
Inc. and Jackson Boulevard Ventures, L.P.
23.1* Consent of Morgan, Lewis & Bockius LLP (included in its opinion
filed as Exhibit 5.1 hereto).
23.2* Consent of Arthur Andersen LLP.
24.1* Powers of Attorney (included as part of signature page hereof).
</TABLE>
* Filed herewith.
II-8
<PAGE> 1
Exhibit 4.1
THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR UNDER ANY APPLICABLE STATE SECURITIES LAWS
AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS CELL PATHWAYS, INC. RECEIVES AN
OPINION OF COUNSEL ACCEPTABLE TO IT THAT SUCH OFFER, SALE, PLEDGE OR
TRANSFER IS EXEMPT FROM ANY REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
CELL PATHWAYS, INC.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
No. __________ ______ Shares
IN CONSIDERATION OF the covenants contained in the Purchase Agreement,
dated October 8, 1999, between Cell Pathways, Inc., a Delaware corporation (the
"Company"), and ____________________ (the "Initial Holder") (the "Purchase
Agreement"), and for value received, the Company hereby certifies that the
Initial Holder or any registered assign of the Initial Holder (each of the
Initial Holder and any such registered assign being hereinafter referred to as
the "Holder") is entitled, subject to the provisions of this Warrant, to
purchase from the Company, at any time or from time to time on or after October
13, 1999 (the "Issue Date"), and before 5:00 p.m., Philadelphia time, on
December 31, 2000 (the "Exercise Period"), the number of fully paid and
nonassessable shares of common stock of the Company, par value $.01 per share,
set forth above. The term "Common Stock" shall mean the aforementioned common
stock of the Company together with any other equity securities that may be
issued by the Company in connection therewith or in substitution therefor, as
provided herein. During the Exercise Period, the Holder may purchase such number
of shares of Common Stock at a purchase price per share equal to $14.00 (the
"Original Exercise Price"), as appropriately adjusted pursuant to Section 7
hereof. As used herein, the term "Exercise Price" shall mean the Original
Exercise Price or, if the Original Exercise Price shall be adjusted pursuant to
Section 7 hereof, the purchase price per share of Common Stock as determined by
Section 7.
The number of shares of Common Stock to be received upon the exercise
of this Warrant and the price to be paid for a share of Common Stock are subject
to adjustment from time to time as hereinafter set forth. The shares of Common
Stock deliverable upon such exercise, as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares."
<PAGE> 2
1. Exercise of Warrant. This Warrant may be exercised in whole or in
part, at any time or from time to time, during the Exercise Period by
presentation and surrender hereof to the Company at its principal office at 702
Electronic Drive, Horsham, Pennsylvania 19044 (or at such other address as the
Company or its agent may hereafter designate in writing to the Holder), or at
the office of its warrant agent, with the Purchase Form contained herein duly
executed and accompanied by cash or a certified or official bank check drawn to
the order of "Cell Pathways, Inc." in the amount of the Exercise Price
multiplied by the number of Warrant Shares specified in such form. Prior to the
deliveries specified in the preceding sentence, the Holder may, if the Holder is
required (by any laws, statutes, rules or regulations applicable to the Holder)
to receive evidence of the Warrant Shares prior to payment therefor, provide the
Company with written notice of its intent to exercise this Warrant (the "Notice
of Intent"), which notice shall specify the number of Warrant Shares to be
purchased upon such exercise. Upon receipt of the Notice of Intent, the Company
shall direct the warrant agent or the transfer agent of its Common Stock to
prepare a share certificate for the Warrant Shares to be issued upon exercise of
the Warrant and shall provide a copy of such share certificate to the Holder. If
this Warrant should be exercised in part only, the Company shall, upon surrender
of this Warrant, execute and deliver a new Warrant evidencing the rights of the
Holder thereof to purchase the balance of the Warrant Shares purchasable
hereunder. Upon receipt by the Company during the Exercise Period of this
Warrant and the Purchase Form, in proper form for exercise, together with proper
payment of the Exercise Price, at such office, or by the warrant agent of the
Company at its office, the Holder shall be deemed to be the holder of record of
the number of Warrant Shares specified in such form; provided, however, that if
the date of such receipt by the Company or its agent is a date on which the
stock transfer books of the Company are closed, such person shall be deemed to
have become the record holder of such shares on, and such certificate shall be
dated, the next succeeding business day on which the stock transfer books of the
Company are open. The Company shall pay any and all documentary, stamp or
similar issue or transfer taxes payable in respect of the issue or delivery of
such Warrant Shares. Any new or substitute Warrant issued under this Section 1
shall be dated as of the date of this Warrant. Upon exercise of this Warrant,
the Company or its warrant agent shall promptly cause to be issued and shall
promptly deliver upon written order of the Holder of this Warrant, and in such
name or names as such Holder may designate, a certificate or certificates for
the Warrant Shares.
2. Warrant Register. This Warrant will be registered in a register (the
"Warrant Register") to be maintained by the Company or its agent at its
principal office in the name of the recordholder to whom it has been
distributed. The Company may deem and treat the registered holder of this
Warrant as the absolute owner thereof (notwithstanding any notation of ownership
or other writing hereon made by anyone), for the purpose of any exercise thereof
or any distribution to the holder thereof and for all other purposes, and the
Company shall not be affected by any notice to the contrary.
3. Reservation of Shares. The Company hereby agrees that at all times
there shall be reserved for issuance and delivery upon exercise of this Warrant
all shares of its Common Stock or other shares of capital stock of the Company
from time to time
2
<PAGE> 3
issuable upon exercise of this Warrant. All such shares shall be duly authorized
and, when issued upon such exercise, shall be validly issued, fully paid and
nonassessable, free and clear of all liens, security interests, charges and
other encumbrances or restrictions on sale and free and clear of all preemptive
rights.
4. Exchange, Transfer or Assignment.
(a) Neither this Warrant nor the Warrant Shares have been
registered under the Securities Act or any state securities law and may not be
offered, sold, pledged, assigned or otherwise transferred in the absence of such
registration or unless such offer, sale, pledge, assignment or transfer is
exempt from any registration and prospectus delivery requirements of the
Securities Act and any applicable state securities laws.
(b) If, at the time of the surrender of this Warrant in
connection with any exercise, transfer, or exchange of this Warrant, this
Warrant (or, in the case of any exercise, the issuance of the Warrant Shares
hereunder), shall not be registered under the Securities Act of 1933, as amended
(the "Securities Act"), and under applicable state securities or blue sky laws,
the Company may require, as a condition of allowing such exercise, transfer, or
exchange, (i) that the Holder of this Warrant furnish to the Company a written
opinion of counsel, which opinion and counsel are acceptable to the Company, to
the effect that such exercise, transfer, or exchange may be made without
registration under said Act and under applicable state securities or blue sky
laws, (ii) that the Holder or transferee execute and deliver to the Company an
investment letter in form and substance acceptable to the Company and (iii) that
the Holder or transferee be an "accredited investor" as defined in Rule 501(a)
promulgated under the Securities Act.
(c) The Initial Holder of this Warrant (and certain assignees
thereof, as and to the extent provided in the Purchase Agreement) is entitled to
the benefit of such registration rights in respect of resale of the Warrant
Shares as are set forth in the Purchase Agreement.
(d) Except as otherwise permitted by this Section 4, this
Warrant and any Warrant issued upon direct or indirect transfer of or in
substitution for this Warrant or any part thereof shall be stamped or otherwise
imprinted with a legend substantially in the form of the legend with respect to
transfer limitations and compliance with the Securities Act at the head of this
Warrant.
(e) Except as otherwise permitted by this Section 4, each
certificate for a Warrant Share issued upon exercise of this Warrant or any
Warrant issued upon direct or indirect transfer of or in substitution for this
Warrant or any part thereof shall be stamped or otherwise imprinted with a
legend in substantially the following form:
The Shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or
under any applicable state securities laws and may not be
offered, sold, pledged or transferred in the absence of such
registration unless the Company receives an opinion of
3
<PAGE> 4
counsel, in form, substance and scope reasonably acceptable to
the Company, that such offer, sale, pledge or transfer is
exempt from any registration and prospectus delivery
requirements of the Securities Act and such applicable state
securities laws.
and; subject to 4(f) below, each certificate issued upon direct or indirect
transfer of any such Warrant Share shall be stamped or otherwise imprinted with
a legend in substantially the following form:
The Shares represented by this certificate have not
been registered under the Securities Act of 1933, as amended,
or under any applicable state securities laws and may not be
offered, sold, pledged or transferred in the absence of such
registration unless the Company receives an opinion of
counsel, in form, substance and scope reasonably acceptable to
the Company, that such offer, sale, pledge or transfer is
exempt from any registration and prospectus delivery
requirements of the Securities Act and such applicable state
securities laws.
(f) The Company shall, at the request of any registered holder
of a Warrant Share, exchange the certificate representing such security for a
certificate representing the same security not bearing the restrictive legend
required by Section 4(e) if the Warrant Shares may be sold or transferred
pursuant to the provisions of Rule 144(k) and, in the opinion of counsel to the
Company, such restrictive legend is no longer necessary.
(g) Subject to the provisions of subsection (a), this Warrant
may be assigned, at the option of the Holder, upon surrender of this Warrant to
the Company or at the office of its warrant agent, with the Warrant Assignment
Form contained herein duly executed and accompanied by funds sufficient to pay
any transfer tax. The Company shall execute and deliver a new Warrant or
Warrants in the name of the assignee or assignees named in such instrument of
assignment and, if the Holder's entire interest in this Warrant is not being
transferred or assigned, in the name of the Holder, and this Warrant shall
promptly be cancelled.
(h) Apart from the payment of any transfer tax pursuant to (g)
above, any transfer or exchange of this Warrant shall be without charge to the
Holder. The term "Warrant", as used herein includes any Warrants into which this
Warrant may be divided or for which it may be exchanged or any new Warrant
issued pursuant to Section 1 hereof.
5. Lost, Mutilated or Missing Warrant. Upon receipt by the Company of
evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) of satisfactory
indemnification, and upon surrender and cancellation of this Warrant, if
mutilated, the Company shall execute and deliver a new Warrant of like tenor and
date.
4
<PAGE> 5
6. Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of stockholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in this Warrant.
7. Adjustments. The Exercise Price and the number of shares purchasable
hereunder are subject to adjustment from time to time as follows:
(a) Stock Dividend, Split or Subdivision of Shares. If the
number of shares of Common Stock outstanding at any time after the date hereof
is increased by a stock dividend payable to all holders of Common Stock in
shares of Common Stock or by a subdivision or split-up of shares of Common
Stock, then, following the record date fixed for the determination of holders of
Common Stock entitled to receive such stock dividend, subdivision or split-up,
the Exercise Price shall be appropriately decreased and the number of shares of
Common Stock issuable on exercise of each Warrant shall be increased in
proportion to such increase in outstanding shares.
(b) Combination of Shares. If, at any time after the date
hereof, the number of shares of Common Stock outstanding is decreased by a
combination or consolidation of the outstanding shares of Common Stock, by
reclassification, reverse stock split or otherwise, then, following the record
date for such combination, the Exercise Price shall be appropriately increased
and the number of shares of Common Stock issuable on exercise of each Warrant
shall be decreased in proportion to such decrease in outstanding shares.
(c) Calculations. All calculations under this Section 7 shall
be made to the nearest cent ($.01), or to the nearest one-tenth of a share, as
the case may be.
(d) Merger and Consolidation. If at any time there is a
capital reorganization or reclassification of shares of Common Stock or other
securities of the Company, or a merger or consolidation of the Company with or
into another corporation where the Company is not the surviving corporation, or
the sale of all or substantially all of the Company's properties and assets to
any other person, then as part of such reorganization, merger, consolidation or
sale, lawful provision shall be made so that the Holder shall thereafter be
entitled to receive upon exercise of its rights to purchase Common Stock, the
number of shares of Common Stock, cash, property or shares of the successor
corporation resulting from such merger or consolidation, to which a holder of
Common Stock, deliverable upon exercise of the rights to purchase Common Stock
hereunder, would have been entitled in such capital reorganization, merger or
consolidation or sale if the right to purchase such Common Stock hereunder had
been exercised immediately prior to such capital reorganization, merger,
consolidation or sale. In any such event, appropriate adjustment shall be made
in the application of the provisions of this Warrant with respect to the rights
and interests of the Holder after such capital reorganization, merger,
consolidation or sale so that the provisions of this Warrant (including Exercise
Price and the number of shares of Common Stock purchasable pursuant to the terms
and conditions of this Warrant) shall be applicable after that event
5
<PAGE> 6
as near as reasonably may be, in relation to any shares deliverable upon the
exercise of the Holder's rights to purchase Common Stock pursuant to this
Warrant.
(e) Certification as to Adjustments. Upon the occurrence of
each adjustment or readjustment pursuant to this Section 7, the Company, at its
own expense, shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and furnish to each Holder a certificate
setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The Company shall, upon the
written request, at any time, of any such Holder, furnish or cause to be
furnished to such Holder a like certificate setting forth: (a) such adjustments
and readjustments; (b) the Exercise Price at the time in effect; and (c) the
number of shares and the amount, if any of other property that at the time would
be received upon the exercise of the Warrant.
8. Fractional Shares. No fractional shares of Common Stock or scrip
shall be issued to any Holder in connection with the exercise of this Warrant.
Instead of any fractional shares of Common Stock that would otherwise be
issuable to such Holder, the Company shall make a cash refund therefor equal in
amount to the product of the applicable fraction multiplied by the Exercise
Price paid by the Holder for one Warrant Share upon such exercise.
9. Listing on Securities Exchanges. The Company will list on the Nasdaq
National Market or any other trading market, on which any Common Stock may at
any time be listed, all shares of Common Stock from time to time issuable upon
the exercise of this Warrant, subject to official notice of issuance upon the
exercise of this Warrant, and will maintain such listing so long as any other
shares of its Common Stock are so listed; and the Company shall so list on the
Nasdaq National Market or any other trading market, and shall maintain such
listing of, any other shares of capital stock of the Company issuable upon the
exercise of this Warrant if and so long as any shares of capital stock of the
same class are listed on the Nasdaq National Market or any other trading market,
by the Company. Any such listing will be at the Company's expense.
10. Successors. All the provisions of this Warrant by or for the
benefit of the Company or the Holder shall bind and inure to the benefit of
their respective successors, assigns, heirs and personal representatives.
11. Headings. The headings of sections of this Warrant have been
inserted for convenience of reference only, are not to be considered a part
hereof and shall in no way modify or restrict any of the terms or provisions
hereof.
12. Notices. Unless otherwise provided in this Warrant, all notices,
requests, consents and other communications hereunder shall be in writing, shall
be sent by a nationally recognized overnight express courier postage prepaid,
and shall be deemed given one day after being so sent, or if delivered by hand
shall be deemed given on the date of such delivery to such party or, if mailed,
shall be deemed given on the fifth day after the date of mailing, or if sent to
such party by certified or registered mail or air mail,
6
<PAGE> 7
postage prepaid, shall be deemed to be delivered upon receipt by the addressee,
addressed to it (in the case of a Holder) at its address in the Warrant Register
that will be maintained by the Company or its agent in accordance with Section 2
hereof or (in the case of the Company) at its address set forth above,
Attention: President and Chief Executive Officer, or to such other address as is
designated by written notice, similarly given to the other party hereto.
13. GOVERNING LAW. THIS WARRANT SHALL BE DEEMED TO BE A CONTRACT MADE
UNDER THE LAWS OF THE STATE OF DELAWARE AND FOR ALL PURPOSES SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF SAID STATE AS APPLIED TO CONTRACTS MADE AND TO BE
PERFORMED IN DELAWARE BETWEEN DELAWARE RESIDENTS.
Capitalized terms used in this Warrant but not defined herein shall
have the meanings set forth in the Purchase Agreement.
IN WITNESS WHEREOF, the Company has duly caused this Warrant to be
signed and attested by its duly authorized officers and to be dated as of
October 13, 1999.
CELL PATHWAYS, INC.
By:__________________________________________
Robert J. Towarnicki
President and Chief Executive Officer
7
<PAGE> 8
PURCHASE FORM
Dated: ___________ __, 1999
The undersigned hereby irrevocably elects to exercise this Warrant to
purchase _________ Shares of Common Stock and hereby makes payment of
$____________ in payment of the exercise price thereof.
Signature: __________________
WARRANT ASSIGNMENT FORM
FOR VALUE RECEIVED, ___________________________ hereby sells, assigns
and transfers to:
Name: ________________________________________ (the "Assignee")
[please type or print in block letters]
Address: ________________________________________________________________
its rights to purchase up to _____________ shares of Common Stock represented by
this Warrant and does hereby irrevocably constitute and appoint _______________,
Attorney, to transfer the same on the books of the Company, with full power of
substitution in the premises.
Dated: ____________ __, 1999
Signature: _______________
8
<PAGE> 1
EXHIBIT 5.1
December 29, 1999
Cell Pathways, Inc.
702 Electronic Drive
Horsham, PA 19044
Re: Cell Pathways, Inc.
Registration Statement on Form S-3
Ladies and Gentlemen:
As counsel to Cell Pathways, Inc., a Delaware corporation (the "Company"), we
have assisted in the preparation of the subject Registration Statement on Form
S-3, as amended (the "Registration Statement"), to be filed with the Securities
and Exchange Commission under the Securities Act of 1933, as amended (the
"Act"), relating to the shelf registration of 3,149,375 shares of the Company's
common stock (the "Shares") sold in a private offering to the selling
stockholders.
In rendering the opinion set forth below, we have reviewed (a) the Registration
Statement; (b) the Certificate of Incorporation, as amended, and the Bylaws, as
amended, of the Company, as in effect on the date hereof; (c) certain records of
the Company's corporate proceedings as reflected in its minute books; and (d)
such records, documents, statutes and decisions as we have deemed relevant. In
our examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals and the conformity
with the original of all documents submitted to us as copies thereof. The
opinion set forth below is limited to the General Corporation Law of the State
of Delaware, as amended.
Based upon the foregoing, we are of the opinion that the Shares are validly
issued, fully paid and nonassessable.
We hereby consent to the use of this opinion as Exhibit 5.1 to the Registration
Statement and to the reference to our firm under the heading "Legal Opinion" in
the Registration Statement. In giving such opinion, we do not thereby admit that
we are acting within the category of persons whose consent is required under
Section 7 of the Act or the rules or regulations of the Securities and Exchange
Commission thereunder.
Very truly yours.
/s/ Morgan, Lewis & Bockius LLP
<PAGE> 1
Exhibit 10.1
PURCHASE AGREEMENT
THIS AGREEMENT is made as of the 8th day of October, 1999,
between Cell Pathways, Inc. (the "Company"), a corporation organized under the
laws of the State of Delaware, with its principal offices at 702 Electronic
Drive, Horsham, Pennsylvania 19044 and each purchaser whose name is set forth on
the signature page hereof (each a "Purchaser" and collectively, the
"Purchasers").
IN CONSIDERATION of the mutual covenants contained in this
Agreement, the Company and each Purchaser, intending to be legally bound, agree
as follows:
SECTION 1. Authorization of Sale of the Units. Subject to the
terms and conditions of this Agreement, the Company has authorized the sale of
up to 1,000,000 units (the "Units"), each consisting of one share of common
stock ("Common Stock"), par value $.01 per share (each a "Share," and together
the "Shares"), of the Company and one warrant (each a "Warrant," and together
the "Warrants") to purchase one share of Common Stock (the "Warrant Shares").
The terms of the Warrants shall be as set forth in the form of Warrant attached
hereto as Exhibit A. The Shares, Warrant Shares and Warrants are referred to
herein as the "Securities."
SECTION 2. Agreement to Sell and Purchase the Units. At the
Closing (as defined in Section 3), the Company will sell to each Purchaser, and
such Purchaser will buy from the Company, upon the terms and conditions
hereinafter set forth, the number of Units shown, and at the purchase price
shown, opposite such Purchaser's name on Schedule A and Schedule B hereto. The
Shares and Warrants constituting the Units shall become immediately separable
and transferable upon the Closing. The Company may simultaneously enter into a
similar form of this purchase agreement with certain other investors (the "Other
Purchasers") and complete sales of the Units to them, although it is understood
that there is no minimum number of Units that are required to be sold by the
Company. (The Purchaser and the Other Purchasers, if any, are hereinafter
sometimes collectively referred to as the "Purchasers," and this Agreement and
the agreements executed by the Other Purchasers are hereinafter sometimes
collectively referred to as the "Agreements.")
SECTION 3. Delivery of the Units at the Closing. The
completion of the purchase and sale of the Units (the "Closing") shall occur on
October 13, 1999 or such other time as may be agreed upon by the Company and
each Purchaser (the "Closing Date"). At the Closing, the Company shall deliver
to each Purchaser one or more stock certificates for the Shares and one or more
Warrants registered in the name of each Purchaser, or in such name(s) as
designated by each Purchaser, based on the number of Units set forth in Section
2 above. The name(s) in which the stock certificates for the Shares and the
Warrants are to be registered are set forth in the Stock Certificate and Warrant
Questionnaire attached hereto as part of Appendix I. The Company's obligation to
complete the purchase and sale of the Units and deliver such stock
<PAGE> 2
certificate(s) and Warrants to each Purchaser at the Closing shall be subject to
the following conditions, any one or more of which may be waived by the Company
in its sole discretion: (i) receipt by the Company of immediately available
funds in the full amount of the purchase price for the Units being purchased
hereunder; (ii) completion of the purchases and sales under the Agreements with
any Other Purchasers; and (iii) the accuracy of the representations and
warranties made by the Purchasers and the fulfillment of those undertakings of
the Purchasers to be fulfilled prior to the Closing; provided, however, that in
the event that condition (ii) or, with respect to Other Purchasers, condition
(iii) is not met, each Purchaser shall have the right, but not the obligation,
to purchase the Units which such Other Purchaser (the "Defaulting Purchaser")
should have purchased on the same terms, and if Other Purchasers want to
exercise this right, on a pro rata basis (based on the number of Units purchased
hereunder and under the other purchase agreements) with any Other Purchasers
exercising the right, and if the Purchaser and/or Other Purchasers exercise this
right, the condition shall be deemed to have been met. Each Purchaser's
obligation to accept delivery of such stock certificate(s) and Warrants and to
pay for the Units evidenced thereby shall be subject to the accuracy in all
material respects of the representations and warranties made by the Company in
the Purchase Agreement and the fulfillment in all material respects of those
undertakings of the Company to be fulfilled prior to Closing.
SECTION 4. Representations, Warranties and Covenants of the
Company. The Company hereby represents and warrants to, and covenants with, each
Purchaser as follows:
4.1. Organization and Qualification. The Company is a
corporation duly organized and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to conduct its
business as currently conducted. The Company is qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in which the
Company conducts business, except where the failure to do so would not have a
material adverse effect on the business, condition (financial or otherwise) or
results of operations of the Company.
4.2. Authorized and Issued Capital Stock. (a) As of September
30, 1999, the authorized capital stock of the Company consists of (i) 70,000,000
shares of Common Stock, of which 24,550,894 shares were issued and outstanding,
and (ii) 5,000,000 shares of preferred stock, $.01 par value per share, of which
no shares are issued and outstanding. The shares of Common Stock have certain
rights pursuant to the terms of a Rights Agreement, dated as of December 3,
1998, between the Company and Registrar and Transfer Company, as rights agent.
All of the outstanding shares of Common Stock were validly issued and are fully
paid and non-assessable shares.
(b) The Company has registered its Common Stock pursuant to
Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended
(together with the rules and regulations promulgated thereunder, the "Exchange
Act"), and is in full compliance with all
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<PAGE> 3
reporting requirements of the Exchange Act, and such Common Stock is currently
listed or quoted on the Nasdaq National Market.
4.3. Due Execution, Delivery and Performance of the
Agreements. The execution, delivery and performance of the Agreements by the
Company (i) have been duly authorized by all requisite corporate action by the
Company, and (ii) will not violate any law or the Certificate of Incorporation
(the "Certificate of Incorporation") or the Bylaws (the "Bylaws") of the
Company, or any provision of any material indenture, mortgage, agreement,
contract or other material instrument to which the Company is a party or by
which the Company or any of its properties or assets is bound as of the date
hereof, or result in a breach of or constitute (upon notice or lapse of time or
both) a default under any such material indenture, mortgage, agreement, contract
or other material instrument or result in the creation or imposition of any
lien, security interest, mortgage, pledge, charge or other encumbrance, of any
material nature whatsoever, upon any properties or assets of the Company. The
Company has no material subsidiaries, except Cell Pathways Pharmaceuticals, Inc.
Upon their execution and delivery, and assuming the valid execution thereof by
the respective Purchasers, the Agreements will constitute valid and binding
obligations of the Company, enforceable in accordance with their respective
terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law) and except as the indemnification and
contribution agreements of the Company in Section 7.4 hereof may be legally
unenforceable.
4.4. Issuance, Sale and Delivery of the Shares and Warrant
Shares. When issued and paid for, the Shares to be sold hereunder by the Company
and the Warrant Shares to be acquired upon exercise of the Warrants will be
validly issued and outstanding, fully paid and non-assessable shares of Common
Stock. Neither the sale of the Shares and Warrants pursuant to this Agreement,
nor the Company's performance of its obligations under, this Agreement and the
Warrants shall (i) result in the creation or imposition of any liens, charges,
claims or other encumbrances upon the Shares, the Warrant Shares or any of the
assets of the Company, or (ii) entitle the holders of the outstanding Common
Stock to preemptive or other rights to subscribe to or acquire Common Stock or
other securities of the Company.
4.5. Exemption from Registration. Assuming the accuracy of
each Purchaser's representations and warranties set forth in Section 5 hereof,
the offer, issuance and sale of the Units pursuant to this Agreement are and
will be exempt from the registration and prospectus delivery requirements of the
Securities Act of 1933, as amended (together with the rules and regulations
promulgated thereunder, the "Securities Act").
4.6. Additional Information. The Company represents and
warrants that the information contained in the following documents, copies of
which have been furnished to each
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<PAGE> 4
Purchaser, was true and correct in all material respects and did not contain any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements contained therein in light of the circumstances under
which they were made not misleading, in each case as of their respective dates
(the "SEC Documents"):
(i) the Company's 1998 annual report to stockholders;
(ii) the Company's annual report on Form 10-K for the
fiscal year ended December 31, 1998 (without
exhibits);
(iii) the Company's quarterly reports on Form 10-Q for the
three-month periods ended March 31, 1999 and June 30,
1999;
(iv) the notice of annual meeting of stockholders and
proxy statement for the Company's 1999 annual meeting
of stockholders held June 22, 1999; and
(v) all other documents, if any, filed by the Company
with the Securities and Exchange Commission (the
"Commission") since June 30, 1999 pursuant to the
reporting requirements of the Exchange Act.
4.7. No Material Change. As of the date hereof, there has been
no material adverse change in the business, condition (financial or otherwise)
or results of operations of the Company since June 30, 1999, it being understood
that the Company has not achieved revenues and that the continued expenditure of
resources in the Company's continuing operations does not constitute a material
adverse change within the meaning of this paragraph. Without limitation of the
foregoing, each Purchaser also acknowledges being advised by the Company that
(i) the treatment portion of the Phase II/III trial of exisulind in the
prevention of prostate cancer recurrence (the primary endpoint of which relates
to PSA levels) has been completed and data analysis at the Company will begin
shortly, (ii) until such analysis is completed it is impossible for the Company
to understand fully the outcome of the trial, and (iii) the results of such
clinical trial, when released, along with other clinical results and scientific
developments, could materially impact the market price of the Company's shares.
4.8. Legal Opinion. Prior to and as a condition to the
Closing, Richard H. Troy, Esq., General Counsel to the Company, will deliver a
legal opinion to the Purchasers as to the valid issuance of the Shares and the
Warrant Shares, a draft of which has been provided to the Purchasers prior to
the date hereof.
4.9. Listing of Common Stock. The Company shall cause the
Shares and the Warrant Shares to be listed on the Nasdaq National Market and
maintain the listing of the Shares and the Warrant Shares on each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed.
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<PAGE> 5
SECTION 5. Representations, Warranties and Covenants of the
Purchasers.
(a) Each Purchaser acknowledges that the Shares and Warrants
have not been, and that the Warrant Shares will not be, registered under the
Securities Act or any state securities law and may not be offered, sold, pledged
or otherwise transferred (i) in the absence of such registration, (ii) unless
the Company receives an opinion of counsel reasonably acceptable to it that such
offer, sale, pledge or transfer is exempt from any registration and prospectus
delivery requirements of the Securities Act and any applicable state securities
laws or (iii) unless the Shares or Warrant Shares are sold pursuant to Rule 144
promulgated under the Securities Act of 1933, as amended (the "Securities Act")
("Rule 144") in accordance with the terms of such rule. Except as otherwise
permitted by Section 7.3, each certificate for the Shares issued at the Closing
and the Warrant Shares, or upon direct or indirect transfer of or in
substitution thereof, shall be stamped or otherwise imprinted with a legend in
substantially the following form:
The Shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or
under any applicable state securities laws and may not be
offered, sold, pledged or transferred in the absence of such
registration unless the Company receives an opinion of
counsel, in form, substance and scope reasonably acceptable to
the Company, that such offer, sale, pledge or transfer is
exempt from any registration and prospectus delivery
requirements of the Securities Act and such applicable state
securities laws.
Each Purchaser acknowledges and agrees that the Warrants will contain a similar
legend, as set forth on the top of the form of Warrant attached as Exhibit A
hereto.
(b) Each Purchaser represents and warrants, as of the date
hereof and as of the Closing Date, to, and covenants with, the Company that: (i)
the Purchaser, taking into account the personnel and resources it can
practically bring to bear on the purchase of the Units contemplated hereby, is
knowledgeable, sophisticated and experienced in making, and is qualified to
make, decisions with respect to investments in equity securities presenting an
investment decision like that involved in the purchase of the Units, including
investments in equity securities issued by development-state biotechnology
companies; (ii) the Purchaser or its counsel, accountants or other investment
advisers have requested, received, reviewed and considered all information
deemed relevant by them in making an informed decision to purchase the Units,
(iii) the Purchaser is acquiring the Units in the ordinary course of its
business and for its own account for investment only and with no present
intention of distributing any of the Securities, nor is there any arrangement or
understanding with any other persons regarding the distribution of the
Securities; provided however, that such representation and warranty will not
limit the Purchaser's right to sell Shares and the Warrant Shares pursuant to
the Registration Statement or pursuant to an exemption from the Securities Act;
(iv) the Purchaser will not, directly or indirectly, offer, sell (including sell
short), pledge, transfer or otherwise dispose of (or
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<PAGE> 6
solicit any offers to buy, purchase or otherwise acquire or take a pledge of)
any of the Shares and Warrant Shares except in compliance with the Securities
Act, and the rules and regulations promulgated thereunder; (v) the Purchaser has
completed or caused to be completed the Registration Statement Questionnaire and
the Stock Certificate and Warrant Questionnaire, both attached hereto as
Appendix I, for use in preparation of the Registration Statement and the answers
thereto are true, correct and complete in all material respects as of the date
hereof and will be true, correct and complete in all material respects as of the
effective date of the Registration Statement; (vi) the Purchaser has, in
connection with its decision to purchase the Units, relied solely upon the SEC
Documents and the representations and warranties contained herein, as well as
any investigation completed by the Purchaser or its counsel, accountants or
other investment advisers; and (vii) the Purchaser is an "accredited investor"
within the meaning of Rule 501 of Regulation D promulgated under the Securities
Act.
(c) Each Purchaser agrees not to make any sale of the Shares
or the Warrant Shares under the Registration Statement without effectively
causing the prospectus delivery requirement under the Securities Act to be
satisfied, and each Purchaser acknowledges and agrees that such Shares and the
Warrant Shares are not transferable on the books of the Company unless the
certificate submitted to the transfer agent evidencing the Shares or the Warrant
Shares is accompanied by a separate officer's certificate: (i) in the form of
Appendix II hereto, (ii) executed by an officer of, or other authorized person
designated by, the Purchaser, and (iii) to the effect that (A) such Shares or
Warrant Shares have been sold pursuant to and in accordance with the
Registration Statement and (B) the requirement of delivering a current
prospectus has been satisfied, unless exempt from registration and prospectus
delivery requirements. Each Purchaser acknowledges that there may occasionally
be times when the Company must suspend the use of the prospectus forming a part
of the Registration Statement until such time as an amendment to the
Registration Statement has been filed by the Company and declared effective by
the Commission, or until such time as the Company has filed an appropriate
report with the Commission pursuant to the Exchange Act. Each Purchaser agrees
that it will not sell any Securities during the period commencing at the time at
which the Company gives the Purchaser notice of the suspension of the use of
said prospectus and ending at the time the Company gives the Purchaser notice
that the Purchaser may thereafter effect sales pursuant to said prospectus. The
Company shall only be able to suspend the use of said prospectus for periods
aggregating no more than sixty business days in any twelve month period. Each
Purchaser further agrees to notify promptly the Company of the sale of all of
such Purchaser's Securities, and to notify promptly the Company in writing of
any material changes in the information set forth in the Registration Statement
relating to such Purchaser or its plan of distribution, or of any supplemental
information required to be included in the Registration Statement relating to
its plan of distribution.
(d) Each Purchaser further represents and warrants, as of the
date hereof and as of the Closing Date, to, and covenants with, the Company
that: (i) the Purchaser has full right, power, authority and capacity to enter
into this Agreement and to consummate the transactions
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<PAGE> 7
contemplated hereby and has taken all necessary action to authorize the
execution, delivery and performance of this Agreement, and (ii) upon the
execution and delivery of this Agreement, this Agreement shall constitute a
valid and binding obligation of the Purchaser enforceable in accordance with its
terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law) and except as the indemnification and
contribution agreements of the Purchaser in Section 7.4 hereof may be legally
unenforceable.
(e) In consideration for the Company agreeing to its
obligations set forth in Section 7 below in respect of Registrable Securities,
each Purchaser agrees, in connection with any firm commitment underwritten
offering of the Company's Common Stock that, upon the request of the managing
underwriters of such offering, not to sell, make any short sale of, loan, grant
any option for the purchase of, or otherwise dispose of any shares of Common
Stock beneficially owned by it without the prior written consent of such
managing underwriters during the period of time beginning ten days prior to the
date when such managing underwriters advise the Company that they expect to
initiate such public offering and ending at a date not to exceed ninety days
from the commencement of such public offering. Notwithstanding the foregoing,
(i) this obligation shall not apply to the Purchaser unless each of the
Company's directors and officers enter into a similar agreement, and the
Purchaser at such time beneficially owns in excess of 2% of the Company's then
outstanding shares of Common Stock.
SECTION 6. Survival of Representations, Warranties and
Agreements. Notwithstanding any investigation made by any party to this
Agreement, all covenants, agreements, representations and warranties made by the
Company and the Purchaser herein shall survive the execution of this Agreement,
the delivery to the Purchaser of the Units being purchased and the payment
therefor.
SECTION 7. Registration of Shares and Warrant Shares for
Resale
7.1. Registration Procedures and Expenses.
(a) The Company shall as soon as practicable after November 3,
1999, but in no event later than December 31, 1999, prepare and file with the
Commission a registration statement on Form S-3 (or if such form is unavailable
to the Company, on such other form deemed appropriate for the registration of
the Common Stock by the Commission) (the "Registration Statement") to register
the Shares and Warrant Shares ("Registrable Securities") for resale by the
Purchasers in non-underwritten, market transactions, and shall use its best
efforts to cause the Registration Statement to become effective as soon as
practicable thereafter. The Company shall, within three business days before
filing such Registration Statement, provide a draft to each Purchaser and its
counsel and its agent for review and comment;
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<PAGE> 8
(b) The Company shall promptly prepare and file with the
Commission such amendments and supplements to the Registration Statement and the
prospectus used in connection therewith as may be necessary to keep such the
Registration Statement effective until the first to occur of (i) such date when
either all of the Registrable Securities have been sold pursuant thereto or, by
reason of Rule 144(k) of the Commission under the Securities Act or any other
rule of similar effect, the Registrable Securities are no longer required to be
registered for the resale thereof by the Purchasers in ordinary market
transactions without imposition of any volume limitations, or (ii) the second
anniversary of the expiration of the Warrants (the "Registration Period");
(c) The Company shall promptly furnish to each Purchaser and
its agent such number of copies of prospectuses and preliminary prospectuses in
conformity with the requirements of the Securities Act as such Purchaser or its
agent may reasonably request, in order to facilitate the public sale or other
disposition of all or any of the Registrable Securities by such Purchaser;
(d) The Company shall promptly file documents required of the
Company for any required blue sky clearance for the Registrable Securities in
such states specified in writing by each Purchaser or its agent; provided,
however, that the Company shall not be required to (i) qualify to do business or
consent to service of process in any jurisdiction in which it is not now so
qualified or has not so consented, (ii) subject itself to general taxation in
any such jurisdiction, (iii) provide any undertakings that cause the Company
undue burden or expense or (iv) make any change in its charter or bylaws;
(e) The Company shall promptly inform each Purchaser and its
agent when any stop order has been issued with respect to the Registration
Statement and use its best efforts to promptly cause such stop order to be
withdrawn;
(f) The Company shall notify each Purchaser whose shares are
registered on a Registration Statement and its agent at any time when a
prospectus relating to any Registrable Securities covered by such Registration
Statement or a Company Registration Statement is required to be delivered under
the Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing and promptly file such
amendments and supplements as may be necessary so that, as thereafter delivered
to such Purchasers of such Registrable Securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing and use its best efforts
to cause each such amendment and supplement to become effective;
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<PAGE> 9
(g) The Company shall bear all expenses in connection with the
procedures in paragraph (a) through (f) in this Section 7.1 and the registration
of the Shares pursuant to the Registration Statement, other than fees and
expenses, if any, of counsel or other advisers to the Purchaser or the Other
Purchasers and any expenses relating to the sale of the Registrable Securities
by the Purchasers (including without limitation, broker's commissions, discounts
or fees of any nature and transfer taxes or charges of any nature); and
(h) The Company understands that each Purchaser disclaims
being an underwriter, but a Purchaser being deemed an underwriter shall not
relieve the Company of any obligations it has hereunder. A questionnaire related
to the Registration Statement to be completed by each Purchaser is attached as
Appendix I to this Agreement.
7.2. Transfer of Registrable Securities. Each Purchaser agrees
that it will not effect any disposition of Registrable Securities except as
contemplated in the Registration Statement or as otherwise in compliance with
applicable securities laws, and that it will promptly notify the Company of any
material changes in the information set forth in the Registration Statement
regarding the Purchaser or its plan of distribution. Without limitation, each
Purchaser understands that (i) it may not use Registrable Securities to cover a
short position in shares of the Company's Common Stock created prior to the
effective date of the Registration Statement, and (ii) it must deliver a
prospectus in connection with any short sale of the Registrable Securities
unless it is exempt from such requirement.
7.3. Indemnification. For the purpose of this Section 7.3:
(a) the term "Selling Stockholder" shall include the
Purchaser, its officers, directors, agent and/or trustees and any affiliate or
controlling person of such Purchaser or any permitted assign hereunder;
(b) the term "Registration Statement" shall include any final
prospectus, exhibit, supplement or amendment included in or relating to the
Registration Statement referred to in Section 7.1; and
(c) the term "untrue statement" shall include any untrue
statement or alleged untrue statement, or any omission or alleged omission to
state in the Registration Statement a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
The Company agrees to indemnify and hold harmless each Selling
Stockholder from and against any losses, claims, damages or liabilities to which
such Selling Stockholder may become subject (under the Securities Act or
otherwise) insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based
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<PAGE> 10
upon, any breach of the representations set forth in Section 4 hereof by the
Company, or any untrue statement of a material fact contained in the
Registration Statement, or arise out of any failure by the Company to fulfill
any agreement, covenant or undertaking contained in this Agreement or included
in the Registration Statement, and the Company will reimburse such Selling
Stockholder for any reasonable legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action, proceeding or
claim; provided, however, that the Company shall not be liable in any such case
to the extent that such loss, claim, damage or liability arises out of, or is
based upon, (i) an untrue statement made in the Registration Statement in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of such Selling Stockholder specifically for use in the
Registration Statement (which shall be deemed to include the information set
forth in the Registration Statement Questionnaire and in the plan of
distribution section of the prospectus), (ii) the failure of such Selling
Stockholder to comply with the covenants and agreements contained herein
respecting transfer or sale of Registrable Securities, or (iii) any statement or
omission in any Prospectus that is corrected in any subsequent Prospectus that
was delivered to the Purchaser sufficiently prior to the pertinent sale or sales
by the Purchaser. The Company shall also not be liable for amounts paid in
settlement of any loss, claim, damage or liability if such settlement if
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld.
Each Purchaser agrees, severally and not jointly, to indemnify
and hold harmless the Company (and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act, each officer of the
Company who signs the Registration Statement and each director of the Company)
from and against any losses, claims, damages or liabilities to which the Company
(or any such officer, director or controlling person) may become subject (under
the Securities Act or otherwise), insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are
based upon, any breach of the representations set forth in Section 5 hereof by
such Purchaser, or any failure by such Purchaser to comply with the covenants
and agreements contained herein regarding the transfer or sale of Registrable
Securities, or any untrue statement of a material fact contained in the
Registration Statement if such untrue statement was made in reliance upon and in
conformity with written information furnished by or on behalf of the Purchaser
specifically for use in the Registration Statement. Each Purchaser will
reimburse, severally and not jointly, the Company (or such officer, director or
controlling person), as the case may be, for any legal or other documented
expenses reasonably incurred in investigating, defending or preparing to defend
any such action, proceeding or claim. Each Purchaser agrees that the information
regarding the Purchaser or its officers, directors and affiliates and their
intended plan of distribution of the Shares set forth in the Registration
Statement questionnaire, the form of which is attached as Appendix 1, or
included from time to time in the Registration Statement (including without
limitation the plan of distribution section of the Registration Statement) shall
be deemed to be written information furnished to the Company by or on behalf of
the Purchaser specifically for use in the Registration
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Statement. The foregoing indemnification shall be limited in amount as to each
Purchaser to the Purchase Price paid by such Purchaser hereunder.
Promptly after receipt by any indemnified person of a notice
of a claim or the beginning of any action in respect of which indemnity is to be
sought against an indemnifying person pursuant to this Section 7.3, such
indemnified person shall notify the indemnifying person in writing of such claim
or of the commencement of such action; provided, however, that any failure by an
indemnified person to notify an indemnifying person shall not relieve the
indemnifying person from its obligations hereunder except to the extent that the
indemnifying person is materially prejudiced thereby. Subject to the provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and such indemnifying person shall have been notified
thereof, such indemnifying person shall be entitled to participate therein, and,
to the extent it shall wish, to assume and control the defense thereof, with
counsel reasonably satisfactory to such indemnified person. After notice from
the indemnifying person to such indemnified person of its election to assume the
defense thereof, such indemnifying person shall not be liable to such
indemnified person for any legal expenses subsequently incurred by such
indemnified person in connection with the defense thereof; provided, however,
that if there exists a conflict of interest that would make it inappropriate, in
the opinion of counsel to the indemnifying person, for the same counsel to
represent both the indemnified person and such indemnifying person or any
affiliate or associate thereof, the indemnified person shall be entitled to
retain its own counsel at the expense of such indemnifying person; provided
further, however, that no indemnifying person shall be responsible for the fees
and expenses of more than one separate counsel for all indemnified parties
hereunder and under the other Agreements.
If the indemnification provided for in this Section 7.3 from
the indemnifying person would be applicable by its terms but is otherwise
unavailable, as determined by a court of applicable jurisdiction, to an
indemnified person hereunder in respect of any losses, claims, damages,
liabilities or expenses referred to herein, then the indemnifying person, in
lieu of indemnifying such indemnified person, shall contribute to the amount
paid or payable by such indemnified person as a result of such losses, claims,
damages, liabilities or expenses in such proportion as is appropriate to reflect
the relative fault of the indemnifying person and indemnified persons in
connection with the actions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative fault of such indemnifying person and indemnified persons shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact, has been
made by, or relates to information supplied by, such indemnifying person or
indemnified persons, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include, subject to the
limitations set forth in this Section 7.3, any reasonable legal or other fees or
expenses reasonably incurred by such party in connection with any investigation
or proceeding.
11
<PAGE> 12
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 7.3 were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 7.3, no Purchaser
shall be required to contribute any amount in excess of the dollar amount of the
proceeds received by such Purchaser upon the sale of the Registrable Securities,
giving rise to such contribution obligation. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
7.4. Termination of Conditions and Obligations. The conditions
imposed by Section 5 or this Section 7 upon the transferability of Registrable
Securities shall cease and terminate as to any particular number of Registrable
Securities when such Registrable Securities shall have been effectively
registered under the Securities Act and sold or otherwise disposed of in
accordance with the intended method of disposition set forth in the Registration
Statement, or at such time as an opinion of counsel satisfactory to the Company
shall have been rendered to the effect that such conditions are not necessary in
order to comply with the Securities Act.
7.5. Continued Availability of Information. So long as the
Registration Statement is effective covering the resale of Registrable
Securities owned by the Purchaser, the Company will furnish to the Purchaser:
(a) as soon as practicable after available (but in the case of
the Company's Annual Report to Stockholders, within 120 days after the end of
each fiscal year of the Company), one copy of (i) its Annual Report to
Stockholders (which Annual Report shall contain financial statements audited in
accordance with generally accepted accounting principles by a firm of certified
public accountants), (ii) if not included in substance in the Annual Report to
Stockholders, its Annual Report on Form 10-K, (iii) any quarterly reports to
stockholders, and if not included in substance in its quarterly reports to
stockholders, its quarterly reports on Form 10-Q, and (iv) a full copy of the
Registration Statement (the foregoing, in each case, excluding exhibits);
(b) upon the reasonable request of a Purchaser or its agent,
all exhibits excluded by the parenthetical to subparagraph (a)(iv) of this
Section 7.5 and all other information that is made available to shareholders;
and
(c) upon the reasonable request of a Purchaser or its agent,
an adequate number of copies of the prospectuses to supply to any other party
requiring such prospectuses;
and the Company, upon the reasonable request of a Purchaser or its agent, will
meet with the Purchaser or a representative thereof at the Company's
headquarters to discuss all information
12
<PAGE> 13
relevant for disclosure in the Registration Statement and will otherwise
cooperate with any Purchaser conducting an investigation for the purpose of
reducing or eliminating such Purchaser's exposure to liability under the
Securities Act, including the reasonable production at the Company's
headquarters of non-confidential information (and, upon execution of a
confidentiality agreement satisfactory to the Company, confidential
information).
7.6. Reports under Exchange Act. With a view to making
available to the Purchasers the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the Commission that may at
any time permit a Purchaser to sell Registrable Securities to the public without
registration, and with a view to making it possible to register the Registrable
Securities pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep available public information, as understood
and defined in Rule 144, at all times;
(b) file with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act and the
Exchange act; and
(c) furnish to a Purchaser owning any Registrable Securities
or its agent upon reasonable request (i) a written statement by the Company that
is has complied with the reporting requirements of Rule 144, the Securities Act
and the Exchange act, or that it qualifies as a registrant whose Registrable
Securities may be resold pursuant to Form S-3 (at any time after it so
qualified, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably required in availing any Purchaser
of Registrable Securities of any rule or regulation of the Commission which
permits the selling of any such Registrable Securities without registration or
pursuant to such form.
SECTION 8. Broker's Fees. Each of the parties hereto hereby
represents that, on the basis of any actions and agreements by it, there are no
brokers or finders entitled to compensation in connection with the sale of the
Shares to the Purchaser, except for the Company's obligations to Janney
Montgomery Scott Inc. which has acted as adviser to the Company.
SECTION 9. Expenses. At the Closing, each party hereto shall
bear its own expenses.
13
<PAGE> 14
SECTION 10. Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be sent by a nationally
recognized overnight express courier postage prepaid, and shall be deemed given
one day after being so sent and shall be delivered as addressed as follows:
(a) if to the Company, to:
Cell Pathways, Inc.
702 Electronic Drive
Horsham, PA 19044
Attention: Robert J. Towarnicki
President and Chief Executive Officer
with copies so mailed to:
Richard H. Troy, Esq.
Senior Vice President, General Counsel and Secretary
Cell Pathways, Inc.
702 Electronic Drive
Horsham, PA 19044
and to
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, Pennsylvania 19103-2921
Attention: David R. King, Esq.
or to such other person at such other place as the
Company shall designate to the Purchaser in writing;
and
(b) if to the Purchaser, at the address set forth on
Schedule A or Schedule B hereto, or at such other address or addresses as may
have been furnished to the Company in writing,
SECTION 11. Entire Agreement; Changes. This Agreement sets
forth the entire agreement of the parties and may not be modified or amended
except pursuant to an instrument in writing signed by the Company and the
Purchaser.
SECTION 12. Headings. The headings of the various sections of
this Agreement have been inserted for convenience of reference only and shall
not be deemed to be part of this Agreement.
14
<PAGE> 15
SECTION 13. Severability. In case any provision contained in
this Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
SECTION 14. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT
GIVING EFFECT TO CONFLICTS OF LAWS.
SECTION 15. Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute but one instrument, and shall
become effective when one or more counterparts have been signed by each party
hereto and delivered to the other parties.
SECTION 16. Assignment. The Purchaser (or any permitted
assignee) may assign its rights under Section 7 of this Agreement to any
subsequent holder of any or all of the Units who has purchased at least 3,800
Shares or Warrants to purchase at least 3,800 Shares from such Purchaser (or
permitted assignee), provided that the Company shall have the right to require
any such holder of any or all of the Shares to execute a counterpart of this
Agreement and agree to be bound by the provisions of this Agreement as a
condition to such holder's claim to any rights hereunder.
15
<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized representatives as of the day
and year first above written.
CELL PATHWAYS, INC.
By: /s/ Robert J. Towarnicki
------------------------------------------
Robert J. Towarnicki
President and Chief Executive Officer
MAS Funds Small Cap Value Portfolio
By: Miller, Anderson & Sherrerd, LLP,
as duly authorized Investment Adviser
and Attorney-in-Fact
By: /s/ Gary G. Schlarbaum
------------------------------------------
Name: Gary G. Schlarbaum
Title: Managing Director
Van Kampen American Value Fund
By: Morgan Stanley Dean Witter Investment
Management Inc., as duly authorized
Investment Adviser and Attorney-in-Fact
By: /s/ Gary G. Schlarbaum
------------------------------------------
Name: Gary G. Schlarbaum
Title: Managing Director
MSDW SICAV US Small Cap Equity Fund
By: Morgan Stanley Dean Witter Investment
Management Inc., as duly authorized
Investment Adviser and Attorney-in-Fact
By: /s/ Gary G. Schlarbaum
------------------------------------------
Name: Gary G. Schlarbaum
Title: Managing Director
16
<PAGE> 17
MSDW SICAV Global Small Cap Equity Fund
By: Morgan Stanley Dean Witter Investment
Management Inc., as duly authorized
Investment Adviser and Attorney-in-Fact
By: /s/ Gary G. Schlarbaum
------------------------------------------
Name: Gary G. Schlarbaum
Title: Managing Director
Coutts Fund Managers Limited
By: Morgan Stanley Dean Witter Investment
Management Inc., as duly authorized
Investment Adviser and Attorney-in-Fact
By: /s/ Gary G. Schlarbaum
------------------------------------------
Name: Gary G. Schlarbaum
Title: Managing Director
17
<PAGE> 18
SCHEDULE A
MILLER ANDERSON & SHERRERD, LLP
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF UNITS PRICE AGGREGATE
OF PURCHASERS TO BE PURCHASED PER UNIT PURCHASE PRICE
- ------------- --------------- -------- --------------
<S> <C> <C> <C>
MAS Funds 477,800 Units, consisting of $9.00 $4,300,200.00
Small Cap Value Portfolio 477,800 Shares and Warrants to
Address: One Tower Bridge purchase 477,800 Warrant Shares
W. Conshohocken, PA 19428
Telephone: 610-940-5000
Fax: 610-940-5690
</TABLE>
<PAGE> 19
SCHEDULE B
MORGAN STANLEY DEAN WITTER
INVESTMENT MANAGEMENT INC.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF UNITS PRICE AGGREGATE
OF PURCHASERS TO BE PURCHASED PER UNIT PURCHASE PRICE
- ------------- --------------- -------- --------------
<S> <C> <C> <C>
Van Kampen 477,000 Units, consisting of $9.00 $4,293,000.00
American Value Fund 477,000 Shares and Warrants to
Address: One Tower Bridge purchase 477,000 Warrant
W. Conshohocken, PA 19428 Shares
Telephone: 610-940-5000
Fax: 610-940-5690
MSDW SICAV US 36,300 Units, consisting of $9.00 $326,700.00
Small Cap Equity Fund 36,300 Shares and Warrants
Address: One Tower Bridge to purchase 36,300 Warrant
W. Conshohocken, PA 19428 Shares
Telephone: 610-940-5000
Fax: 610-940-5690
MSDW SICAV 3,800 Units, consisting of $9.00 $34,200.00
Global Small Cap Equity Fund 3,800 Shares and Warrants
Address: One Tower Bridge to purchase 3,800 Warrant Shares
W. Conshohocken, PA 19428
Telephone: 610-940-5000
Fax: 610-940-5690
</TABLE>
<PAGE> 20
SCHEDULE B
MORGAN STANLEY DEAN WITTER
INVESTMENT MANAGEMENT INC.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF UNITS PRICE AGGREGATE
OF PURCHASERS TO BE PURCHASED PER UNIT PURCHASE PRICE
- ------------- --------------- -------- --------------
<S> <C> <C> <C>
Coutts Fund Managers Limited 5,100 Units, consisting of $9.00 $45,900.00
Address: 440 Strand 5,100 Shares and Warrants
London WC 2ROQS to purchase 5,100 Warrant Shares
Telephone: 610-940-5000
Fax: 610-940-5690
</TABLE>
<PAGE> 21
Appendix I
(one of two)
CELL PATHWAYS, INC.
STOCK CERTIFICATE AND WARRANT QUESTIONNAIRE
Please provide us with the following information:
<TABLE>
<CAPTION>
<S> <C> <C>
1. The exact name that your Shares and Warrants (both must be in the same
name) are to be registered. This is the name that will appear on your
stock certificate(s) and Warrants. You may use a nominee name if
appropriate: ______________________
2. The relationship between the Purchaser of the Units and the registered
holder listed in response to item 1 above: ______________________
3. The mailing address of the registered holder
listed in response to item 1 above: ______________________
______________________
4. The social security number or tax identification number of the
registered holder listed in
response to item 1 above: ______________________
</TABLE>
<PAGE> 22
Appendix I
(two of two)
CELL PATHWAYS, INC.
REGISTRATION STATEMENT QUESTIONNAIRE
In connection with the preparation of the Registration
Statement, please provide us with the following information:
1. Pursuant to the "Selling Stockholder" section of the
Registration Statement, please state your or your organization's name exactly as
it should appear in the Registration Statement:
2. Please provide the number of shares of Common Stock that
you or your organization will own beneficially or of record immediately after
Closing, including those Shares purchased by you or your organization pursuant
to this Purchase Agreement and those shares purchased by you or your
organization through other transactions (indicating whether you have sole or
shared voting or dispositive power over such securities as determined under
applicable rules of the Securities and Exchange Commission):
<TABLE>
<CAPTION>
VOTING POWER DISPOSITIVE POWER
Sole Shared Sole Shared
<S> <C> <C> <C> <C>
__________ __________ __________ __________ Common Stock beneficially owned prior to the
date hereof
__________ __________ __________ __________ Shares being purchased from the Company
__________ __________ __________ __________ Warrant Shares, issuable upon exercise of the Warrants
being purchased from the Company
__________ __________ __________ __________ Common Stock issuable upon exercise of other options or
warrants that you may own, to the extent such shares of
Common Stock are deemed to be beneficially owned
</TABLE>
TOTAL: ________________ shares of Common Stock beneficially owned
3. Have you or your organization had any position, office or
other material relationship within the past three years with the Company or its
affiliates other than as disclosed in the Company's proxy statement for its 1999
annual meeting of stockholders, or with Janney Montgomery Scott Inc.?
<PAGE> 23
_____ Yes _____ No
If yes, please indicate the nature of any such relationships
below:
-------------------------------------------------------------
-------------------------------------------------------------
-------------------------------------------------------------
4. Attached is a draft of the proposed "plan of distribution"
section of the Registration Statement. Please confirm that the draft is a
correct and complete statement of your intended plan of distribution.
_____ Yes _____ No
<PAGE> 24
PLAN OF DISTRIBUTION
The Shares being offered by the Selling Shareholder or its
respective pledgees, donees, transferees or other successors in interest, will
be sold in one or more transactions (which may involve block transactions) on
the Nasdaq National Market or on such other market on which the Common Stock may
from time to time be trading, in privately negotiated transactions, through the
writing of options on the Shares, short sales or any combination thereof. The
sale price to the public may be the market price prevailing at the time of sale,
a price related to such prevailing market price or such other price as the
Selling Shareholder determines from time to time. The Shares may also be sold
pursuant to Rule 144. The Selling Shareholder shall have the sole and absolute
discretion not to accept any purchase offer or make any sale of Shares if they
deem the purchase price to be unsatisfactory at any particular time.
The Selling Shareholder or its respective pledgees, donees,
transferee or other successors in interest, may also sell the Shares directly to
market makers acting as principals and/or broker-dealers acting as agents for
themselves or their customers. Brokers acting as agents for the Selling
Shareholder will receive usual and customary commissions for brokerage
transactions, and market makers and block purchasers purchasing the Shares will
do so for their own account and at their own risk. It is possible that the
Selling Shareholder will attempt to sell shares of Common Stock in block
transactions to market makers or other purchasers at a price per share which may
be below the then market price. There can be no assurance with all or any of the
Shares offered hereby will be issued to, or sold by , the Selling Shareholder.
The Selling Shareholder and any brokers, dealers or agents, upon effecting the
sale of any of the Shares offered hereby, may be deemed "underwriters" as that
term is defined under the Securities Act or the Exchange Act, or the rules and
regulations thereunder.
The Selling Shareholder, alternatively, may sell all or any
part of the Shares offered hereby through an underwriter. The Selling
Shareholder has not entered into any agreement with a prospective underwriter
and there is no assurance that any such agreement will be entered into. If the
Selling Shareholder enters into such an agreement or agreements, the relevant
details will be set forth in a supplement or revisions to this Prospectus.
Upon the Company being notified by the Selling Shareholder
that any material arrangement has been entered into with a broker or dealer for
the sale of Shares through a block trade, special offering, exchange
distribution or secondary distribution or a purchase by a broker or dealer, a
supplemented Prospectus will be filed, if required, pursuant to Rule 424(c)
under the Securities Act, disclosing (a) the name of each such broker-dealer,
(b) the number of Shares involved, (c) the price at which such Shares were sold,
(d) the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable, (e) that such broker-dealer(s) did not
conduct any investigation to verify the information set out or incorporated by
reference in this Prospectus, as supplemented, and (f) other facts material to
the transaction.
<PAGE> 25
The Selling Shareholder and any other persons participating in
the sale or distribution of the Shares will be subject to applicable provisions
of the Exchange Act and the rules and regulations thereunder, which provisions
may limit the timing of purchases and sales of any of the Shares by the Selling
Shareholder or any other such person. The foregoing may affect the marketability
of the Shares.
The Company has agreed to indemnify the Selling Shareholder,
or its transferees or assignees, against certain liabilities, including
liabilities under the Securities Act, or to contribute to payments the Selling
Shareholder or its respective pledgees, donees, transferees or other successors
in interest, may be required to make in respect thereof.
The Company is bearing all costs relating to the registration
of the Shares (other than fees and expenses, if any, of counsel or other
advisers to the Selling Shareholder). Any commissions, discounts or other fees
payable to broker-dealers in connection with any sale of the Shares will be
borne by the Selling Shareholder.
<PAGE> 26
APPENDIX II
Attention:
PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE
The undersigned, [AN OFFICER OF, or OTHER PERSON DULY AUTHORIZED BY]
___________________________________________________ [FILL IN OFFICIAL NAME OF
INDIVIDUAL OR INSTITUTION] hereby certifies that he/she [said institution] is
the Purchaser of the shares evidenced by the attached certificate, and as such,
sold such shares on __________________ [DATE] pursuant to and in accordance with
registration statement number ____________________ [FILL IN THE NUMBER OF OR
OTHERWISE IDENTIFY REGISTRATION STATEMENT] and the requirement of delivering a
current prospectus by the Company has been complied with in connection with such
sale.
<TABLE>
<CAPTION>
Print or Type:
<S> <C>
Name of Purchaser
(individual or
institution): ______________________
Name of individual
representing
Purchaser (if an
institution) ______________________
Title of individual
representing
Purchaser (if an
institution): ______________________
Signature by:
Individual purchaser
or individual repre-
senting purchaser: ______________________
</TABLE>
<PAGE> 1
Exibit 10.2
PURCHASE AGREEMENT
THIS AGREEMENT is made as of the 8th day of October, 1999, between
Cell Pathways, Inc. (the "Company"), a corporation organized under the laws of
the State of Delaware, with its principal offices at 702 Electronic Drive,
Horsham, Pennsylvania 19044 and each purchaser whose name is set forth on the
signature page hereof (each a "Purchaser" and collectively, the "Purchasers").
IN CONSIDERATION of the mutual covenants contained in this
Agreement, the Company and each Purchaser, intending to be legally bound, agree
as follows:
SECTION 1. Authorization of Sale of the Units. Subject to the terms
and conditions of this Agreement, the Company has authorized the sale of up to
125,000 units (the "Units"), each consisting of one share of common stock
("Common Stock"), par value $.01 per share (each a "Share," and together the
"Shares"), of the Company and one warrant (each a "Warrant," and together the
"Warrants") to purchase one share of Common Stock (the "Warrant Shares"). The
terms of the Warrants shall be as set forth in the form of Warrant attached
hereto as Exhibit A. The Shares, Warrant Shares and Warrants are referred to
herein as the "Securities."
SECTION 2. Agreement to Sell and Purchase the Units. At the Closing
(as defined in Section 3), the Company will sell to each Purchaser, and such
Purchaser will buy from the Company, upon the terms and conditions hereinafter
set forth, the number of Units shown, and at the purchase price shown, opposite
such Purchaser's name on Schedule A hereto. The Shares and Warrants constituting
the Units shall become immediately separable and transferrable upon the Closing.
The Company may simultaneously enter into a similar form of this purchase
agreement with certain other investors (the "Other Purchasers") and complete
sales of the Units to them, although it is understood that there is no minimum
number of Units that are required to be sold by the Company. (The Purchaser and
the Other Purchasers, if any, are hereinafter sometimes collectively referred to
as the "Purchasers," and this Agreement and the agreements executed by the Other
Purchasers are hereinafter sometimes collectively referred to as the
"Agreements.")
SECTION 3. Delivery of the Units at the Closing. The completion of
the purchase and sale of the Units (the "Closing") shall occur on October 13,
1999 or such other time as may be agreed upon by the Company and each Purchaser
(the "Closing Date"). At the Closing, the Company shall deliver to each
Purchaser one or more stock certificates for the Shares and one or more Warrants
registered in the name of each Purchaser, or in such name(s) as designated by
each Purchaser, based on the number of Units set forth in Section 2 above. The
name(s) in which the stock certificates for the Shares and the Warrants are to
be registered are set forth in the Stock Certificate and Warrant Questionnaire
attached hereto as part of Appendix I. The Company's obligation to complete the
purchase and sale of the Units and deliver such stock
<PAGE> 2
certificate(s) and Warrants to each Purchaser at the Closing shall be subject to
the following conditions, any one or more of which may be waived by the Company
in its sole discretion: (i) receipt by the Company of immediately available
funds in the full amount of the purchase price for the Units being purchased
hereunder; (ii) completion of the purchases and sales under the Agreements with
any Other Purchasers; and (iii) the accuracy of the representations and
warranties made by the Purchasers and the fulfillment of those undertakings of
the Purchasers to be fulfilled prior to the Closing; provided, however, that in
the event that condition (ii) or, with respect to Other Purchasers, condition
(iii) is not met, each Purchaser shall have the right, but not the obligation,
to purchase the Units which such Other Purchaser (the "Defaulting Purchaser")
should have purchased on the same terms, and if Other Purchasers want to
exercise this right, on a pro rata basis (based on the number of Units purchased
hereunder and under the other purchase agreements) with any Other Purchasers
exercising the right, and if the Purchaser and/or Other Purchasers exercise this
right, the condition shall be deemed to have been met. Each Purchaser's
obligation to accept delivery of such stock certificate(s) and Warrants and to
pay for the Units evidenced thereby shall be subject to the accuracy in all
material respects of the representations and warranties made by the Company in
the Purchase Agreement and the fulfillment in all material respects of those
undertakings of the Company to be fulfilled prior to Closing.
SECTION 4. Representations, Warranties and Covenants of the
Company. The Company hereby represents and warrants to, and covenants with,
each Purchaser as follows:
4.1. Organization and Qualification. The Company is a corporation
duly organized and in good standing under the laws of the State of Delaware and
has all requisite corporate power and authority to conduct its business as
currently conducted. The Company is qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the Company
conducts business, except where the failure to do so would not have a material
adverse effect on the business, condition (financial or otherwise) or results of
operations of the Company.
4.2. Authorized and Issued Capital Stock. (a) As of September 30,
1999, the authorized capital stock of the Company consists of (i) 70,000,000
shares of Common Stock, of which 24,550,894 shares were issued and outstanding,
and (ii) 5,000,000 shares of preferred stock, $.01 par value per share, of which
no shares are issued and outstanding. The shares of Common Stock have certain
rights pursuant to the terms of a Rights Agreement, dated as of December 3,
1998, between the Company and Registrar and Transfer Company, as rights agent.
All of the outstanding shares of Common Stock were validly issued and are fully
paid and non-assessable shares.
(b) The Company has registered its Common Stock pursuant to Section
12(b) or 12(g) of the Securities Exchange Act of 1934, as amended (together with
the rules and regulations promulgated thereunder, the "Exchange Act"), and is in
full compliance with all
2
<PAGE> 3
reporting requirements of the Exchange Act, and such Common Stock is currently
listed or quoted on the Nasdaq National Market.
4.3. Due Execution, Delivery and Performance of the Agreements. The
execution, delivery and performance of the Agreements by the Company (i) have
been duly authorized by all requisite corporate action by the Company, and (ii)
will not violate any law or the Certificate of Incorporation (the "Certificate
of Incorporation") or the Bylaws (the "Bylaws") of the Company, or any provision
of any material indenture, mortgage, agreement, contract or other material
instrument to which the Company is a party or by which the Company or any of its
properties or assets is bound as of the date hereof, or result in a breach of or
constitute (upon notice or lapse of time or both) a default under any such
material indenture, mortgage, agreement, contract or other material instrument
or result in the creation or imposition of any lien, security interest,
mortgage, pledge, charge or other encumbrance, of any material nature
whatsoever, upon any properties or assets of the Company. The Company has no
material subsidiaries, except Cell Pathways Pharmaceuticals, Inc. Upon their
execution and delivery, and assuming the valid execution thereof by the
respective Purchasers, the Agreements will constitute valid and binding
obligations of the Company, enforceable in accordance with their respective
terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law) and except as the indemnification and
contribution agreements of the Company in Section 7.4 hereof may be legally
unenforceable.
4.4. Issuance, Sale and Delivery of the Shares and Warrant Shares.
When issued and paid for, the Shares to be sold hereunder by the Company and the
Warrant Shares to be acquired upon exercise of the Warrants will be validly
issued and outstanding, fully paid and non-assessable shares of Common Stock.
Neither the sale of the Shares and Warrants pursuant to this Agreement, nor the
Company's performance of its obligations under, this Agreement and the Warrants
shall (i) result in the creation or imposition of any liens, charges, claims or
other encumbrances upon the Shares, the Warrant Shares or any of the assets of
the Company, or (ii) entitle the holders of the outstanding Common Stock to
preemptive or other rights to subscribe to or acquire Common Stock or other
securities of the Company.
4.5. Exemption from Registration. Assuming the accuracy of each
Purchaser's representations and warranties set forth in Section 5 hereof, the
offer, issuance and sale of the Units pursuant to this Agreement are and will be
exempt from the registration and prospectus delivery requirements of the
Securities Act of 1933, as amended (together with the rules and regulations
promulgated thereunder, the "Securities Act").
4.6. Additional Information. The Company represents and warrants
that the information contained in the following documents, copies of which have
been furnished to each
3
<PAGE> 4
Purchaser, was true and correct in all material respects and did not contain any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements contained therein in light of the circumstances under
which they were made not misleading, in each case as of their respective dates
(the "SEC Documents"):
(i) the Company's 1998 annual report to stockholders;
(ii) the Company's annual report on Form 10-K for the fiscal year
ended December 31, 1998 (without exhibits);
(iii) the Company's quarterly reports on Form 10-Q for the
three-month periods ended March 31, 1999 and June 30, 1999;
(iv) the notice of annual meeting of stockholders and proxy
statement for the Company's 1999 annual meeting of
stockholders held June 22, 1999; and
(v) all other documents, if any, filed by the Company with the
Securities and Exchange Commission (the "Commission") since
June 30, 1999 pursuant to the reporting requirements of the
Exchange Act.
4.7. No Material Change. As of the date hereof, there has been no
material adverse change in the business, condition (financial or otherwise) or
results of operations of the Company since June 30, 1999, it being understood
that the Company has not achieved revenues and that the continued expenditure of
resources in the Company's continuing operations does not constitute a material
adverse change within the meaning of this paragraph. Without limitation of the
foregoing, each Purchaser also acknowledges being advised by the Company that
(i) the treatment portion of the Phase II/III trial of exisulind in the
prevention of prostate cancer recurrence (the primary endpoint of which relates
to PSA levels) has been completed and data analysis at the Company will begin
shortly, (ii) until such analysis is completed it is impossible for the Company
to understand fully the outcome of the trial, and (iii) the results of such
clinical trial, when released, along with other clinical results and scientific
developments, could materially impact the market price of the Company's shares.
4.8. Legal Opinion. Prior to and as a condition to the Closing,
Richard H. Troy, Esq., General Counsel to the Company, will deliver a legal
opinion to the Purchasers as to the valid issuance of the Shares and the Warrant
Shares, a draft of which has been provided to the Purchasers prior to the date
hereof.
4.9. Listing of Common Stock. The Company shall cause the Shares and
the Warrant Shares to be listed on the Nasdaq National Market and maintain the
listing of the Shares and the Warrant Shares on each national securities
exchange or automated quotation system, if any, upon which shares of Common
Stock are then listed.
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SECTION 5. Representations, Warranties and Covenants of the
Purchasers.
(a) Each Purchaser acknowledges that the Shares and Warrants have
not been, and that the Warrant Shares will not be, registered under the
Securities Act or any state securities law and may not be offered, sold, pledged
or otherwise transferred (i) in the absence of such registration, (ii) unless
the Company receives an opinion of counsel reasonably acceptable to it that such
offer, sale, pledge or transfer is exempt from any registration and prospectus
delivery requirements of the Securities Act and any applicable state securities
laws or (iii) unless the Shares or Warrant Shares are sold pursuant to Rule 144
promulgated under the Securities Act of 1933, as amended (the "Securities Act")
("Rule 144") in accordance with the terms of such rule. Except as otherwise
permitted by Section 7.3, each certificate for the Shares issued at the Closing
and the Warrant Shares, or upon direct or indirect transfer of or in
substitution thereof, shall be stamped or otherwise imprinted with a legend in
substantially the following form:
The Shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or under any
applicable state securities laws and may not be offered, sold,
pledged or transferred in the absence of such registration unless
the Company receives an opinion of counsel, in form, substance and
scope reasonably acceptable to the Company, that such offer, sale,
pledge or transfer is exempt from any registration and prospectus
delivery requirements of the Securities Act and such applicable
state securities laws.
Each Purchaser acknowledges and agrees that the Warrants will contain a similar
legend, as set forth on the top of the form of Warrant attached as Exhibit A
hereto.
(b) Each Purchaser represents and warrants, as of the date hereof
and as of the Closing Date, to, and covenants with, the Company that: (i) the
Purchaser, taking into account the personnel and resources it can practically
bring to bear on the purchase of the Units contemplated hereby, is
knowledgeable, sophisticated and experienced in making, and is qualified to
make, decisions with respect to investments in equity securities presenting an
investment decision like that involved in the purchase of the Units, including
investments in equity securities issued by development-state biotechnology
companies; (ii) the Purchaser or its counsel, accountants or other investment
advisers have requested, received, reviewed and considered all information
deemed relevant by them in making an informed decision to purchase the Units,
(iii) the Purchaser is acquiring the Units in the ordinary course of its
business and for its own account for investment only and with no present
intention of distributing any of the Securities, nor is there any arrangement or
understanding with any other persons regarding the distribution of the
Securities; provided however, that such representation and warranty will not
limit the Purchaser's right to sell Shares and the Warrant Shares pursuant to
the Registration Statement or pursuant to an exemption from the Securities Act;
(iv) the Purchaser will not, directly or indirectly, offer, sell (including sell
short), pledge, transfer or otherwise dispose of (or
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<PAGE> 6
solicit any offers to buy, purchase or otherwise acquire or take a pledge of)
any of the Shares and Warrant Shares except in compliance with the Securities
Act, and the rules and regulations promulgated thereunder; (v) the Purchaser has
completed or caused to be completed the Registration Statement Questionnaire and
the Stock Certificate and Warrant Questionnaire, both attached hereto as
Appendix I, for use in preparation of the Registration Statement and the answers
thereto are true, correct and complete in all material respects as of the date
hereof and will be true, correct and complete in all material respects as of the
effective date of the Registration Statement; (vi) the Purchaser has, in
connection with its decision to purchase the Units, relied solely upon the SEC
Documents and the representations and warranties contained herein, as well as
any investigation completed by the Purchaser or its counsel, accountants or
other investment advisers; and (vii) the Purchaser is an "accredited investor"
within the meaning of Rule 501 of Regulation D promulgated under the Securities
Act.
(c) Each Purchaser agrees not to make any sale of the Shares or the
Warrant Shares under the Registration Statement without effectively causing the
prospectus delivery requirement under the Securities Act to be satisfied, and
each Purchaser acknowledges and agrees that such Shares and the Warrant Shares
are not transferable on the books of the Company unless the certificate
submitted to the transfer agent evidencing the Shares or the Warrant Shares is
accompanied by a separate officer's certificate: (i) in the form of Appendix II
hereto, (ii) executed by an officer of, or other authorized person designated
by, the Purchaser, and (iii) to the effect that (A) such Shares or Warrant
Shares have been sold pursuant to and in accordance with the Registration
Statement and (B) the requirement of delivering a current prospectus has been
satisfied, unless exempt from registration and prospectus delivery requirements.
Each Purchaser acknowledges that there may occasionally be times when the
Company must suspend the use of the prospectus forming a part of the
Registration Statement until such time as an amendment to the Registration
Statement has been filed by the Company and declared effective by the
Commission, or until such time as the Company has filed an appropriate report
with the Commission pursuant to the Exchange Act. Each Purchaser agrees that it
will not sell any Securities during the period commencing at the time at which
the Company gives the Purchaser notice of the suspension of the use of said
prospectus and ending at the time the Company gives the Purchaser notice that
the Purchaser may thereafter effect sales pursuant to said prospectus. The
Company shall only be able to suspend the use of said prospectus for periods
aggregating no more than sixty business days in any twelve month period. Each
Purchaser further agrees to notify promptly the Company of the sale of all of
such Purchaser's Securities, and to notify promptly the Company in writing of
any material changes in the information set forth in the Registration Statement
relating to such Purchaser or its plan of distribution, or of any supplemental
information required to be included in the Registration Statement relating to
its plan of distribution.
(d) Each Purchaser further represents and warrants, as of the date
hereof and as of the Closing Date, to, and covenants with, the Company that: (i)
the Purchaser has full right, power, authority and capacity to enter into this
Agreement and to consummate the transactions
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<PAGE> 7
contemplated hereby and has taken all necessary action to authorize the
execution, delivery and performance of this Agreement, and (ii) upon the
execution and delivery of this Agreement, this Agreement shall constitute a
valid and binding obligation of the Purchaser enforceable in accordance with its
terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law) and except as the indemnification and
contribution agreements of the Purchaser in Section 7.4 hereof may be legally
unenforceable.
(e) In consideration for the Company agreeing to its obligations set
forth in Section 7 below in respect of Registrable Securities, each Purchaser
agrees, in connection with any firm commitment underwritten offering of the
Company's Common Stock that, upon the request of the managing underwriters of
such offering, not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any shares of Common Stock beneficially
owned by it without the prior written consent of such managing underwriters
during the period of time beginning ten days prior to the date when such
managing underwriters advise the Company that they expect to initiate such
public offering and ending at a date not to exceed ninety days from the
commencement of such public offering. Notwithstanding the foregoing, (i) this
obligation shall not apply to the Purchaser unless each of the Company's
directors and officers enter into a similar agreement, and the Purchaser at such
time beneficially owns in excess of 2% of the Company's then outstanding shares
of Common Stock.
SECTION 6. Survival of Representations, Warranties and Agreements.
Notwithstanding any investigation made by any party to this Agreement, all
covenants, agreements, representations and warranties made by the Company and
the Purchaser herein shall survive the execution of this Agreement, the delivery
to the Purchaser of the Units being purchased and the payment therefor.
SECTION 7. Registration of Shares and Warrant Shares for Resale
7.1. Registration Procedures and Expenses.
(a) The Company shall as soon as practicable after November 3, 1999,
but in no event later than December 31, 1999, prepare and file with the
Commission a registration statement on Form S-3 (or if such form is unavailable
to the Company, on such other form deemed appropriate for the registration of
the Common Stock by the Commission) (the "Registration Statement") to register
the Shares and Warrant Shares ("Registrable Securities") for resale by the
Purchasers in non-underwritten, market transactions, and shall use its best
efforts to cause the Registration Statement to become effective as soon as
practicable thereafter. The Company shall, within three business days before
filing such Registration Statement, provide a draft to each Purchaser and its
counsel and its agent for review and comment;
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<PAGE> 8
(b) The Company shall promptly prepare and file with the Commission
such amendments and supplements to the Registration Statement and the prospectus
used in connection therewith as may be necessary to keep such the Registration
Statement effective until the first to occur of (i) such date when either all of
the Registrable Securities have been sold pursuant thereto or, by reason of Rule
144(k) of the Commission under the Securities Act or any other rule of similar
effect, the Registrable Securities are no longer required to be registered for
the resale thereof by the Purchasers in ordinary market transactions without
imposition of any volume limitations, or (ii) the second anniversary of the
expiration of the Warrants (the "Registration Period");
(c) The Company shall promptly furnish to each Purchaser and its
agent such number of copies of prospectuses and preliminary prospectuses in
conformity with the requirements of the Securities Act as such Purchaser or its
agent may reasonably request, in order to facilitate the public sale or other
disposition of all or any of the Registrable Securities by such Purchaser;
(d) The Company shall promptly file documents required of the
Company for any required blue sky clearance for the Registrable Securities in
such states specified in writing by each Purchaser or its agent; provided,
however, that the Company shall not be required to (i) qualify to do business or
consent to service of process in any jurisdiction in which it is not now so
qualified or has not so consented, (ii) subject itself to general taxation in
any such jurisdiction, (iii) provide any undertakings that cause the Company
undue burden or expense or (iv) make any change in its charter or bylaws;
(e) The Company shall promptly inform each Purchaser and its agent
when any stop order has been issued with respect to the Registration Statement
and use its best efforts to promptly cause such stop order to be withdrawn;
(f) The Company shall notify each Purchaser whose shares are
registered on a Registration Statement and its agent at any time when a
prospectus relating to any Registrable Securities covered by such Registration
Statement or a Company Registration Statement is required to be delivered under
the Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing and promptly file such
amendments and supplements as may be necessary so that, as thereafter delivered
to such Purchasers of such Registrable Securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing and use its best efforts
to cause each such amendment and supplement to become effective;
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<PAGE> 9
(g) The Company shall bear all expenses in connection with the
procedures in paragraph (a) through (f) in this Section 7.1 and the registration
of the Shares pursuant to the Registration Statement, other than fees and
expenses, if any, of counsel or other advisers to the Purchaser or the Other
Purchasers and any expenses relating to the sale of the Registrable Securities
by the Purchasers (including without limitation, broker's commissions, discounts
or fees of any nature and transfer taxes or charges of any nature); and
(h) The Company understands that each Purchaser disclaims being an
underwriter, but a Purchaser being deemed an underwriter shall not relieve the
Company of any obligations it has hereunder. A questionnaire related to the
Registration Statement to be completed by each Purchaser is attached as Appendix
I to this Agreement.
7.2. Transfer of Registrable Securities. Each Purchaser agrees that
it will not effect any disposition of Registrable Securities except as
contemplated in the Registration Statement or as otherwise in compliance with
applicable securities laws, and that it will promptly notify the Company of any
material changes in the information set forth in the Registration Statement
regarding the Purchaser or its plan of distribution. Without limitation, each
Purchaser understands that (i) it may not use Registrable Securities to cover a
short position in shares of the Company's Common Stock created prior to the
effective date of the Registration Statement, and (ii) it must deliver a
prospectus in connection with any short sale of the Registrable Securities
unless it is exempt from such requirement.
7.3. Indemnification. For the purpose of this Section 7.3:
(a) the term "Selling Stockholder" shall include the Purchaser, its
officers, directors, agent and/or trustees and any affiliate or controlling
person of such Purchaser or any permitted assign hereunder;
(b) the term "Registration Statement" shall include any final
prospectus, exhibit, supplement or amendment included in or relating to the
Registration Statement referred to in Section 7.1; and
(c) the term "untrue statement" shall include any untrue statement
or alleged untrue statement, or any omission or alleged omission to state in the
Registration Statement a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
The Company agrees to indemnify and hold harmless each Selling
Stockholder from and against any losses, claims, damages or liabilities to which
such Selling Stockholder may become subject (under the Securities Act or
otherwise) insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based
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upon, any breach of the representations set forth in Section 4 hereof by the
Company, or any untrue statement of a material fact contained in the
Registration Statement, or arise out of any failure by the Company to fulfill
any agreement, covenant or undertaking contained in this Agreement or included
in the Registration Statement, and the Company will reimburse such Selling
Stockholder for any reasonable legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action, proceeding or
claim; provided, however, that the Company shall not be liable in any such case
to the extent that such loss, claim, damage or liability arises out of, or is
based upon, (i) an untrue statement made in the Registration Statement in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of such Selling Stockholder specifically for use in the
Registration Statement (which shall be deemed to include the information set
forth in the Registration Statement Questionnaire and in the plan of
distribution section of the prospectus), (ii) the failure of such Selling
Stockholder to comply with the covenants and agreements contained herein
respecting transfer or sale of Registrable Securities, or (iii) any statement or
omission in any Prospectus that is corrected in any subsequent Prospectus that
was delivered to the Purchaser sufficiently prior to the pertinent sale or sales
by the Purchaser. The Company shall also not be liable for amounts paid in
settlement of any loss, claim, damage or liability if such settlement if
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld.
Each Purchaser agrees, severally and not jointly, to indemnify and
hold harmless the Company (and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act, each officer of the
Company who signs the Registration Statement and each director of the Company)
from and against any losses, claims, damages or liabilities to which the Company
(or any such officer, director or controlling person) may become subject (under
the Securities Act or otherwise), insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are
based upon, any breach of the representations set forth in Section 5 hereof by
such Purchaser, or any failure by such Purchaser to comply with the covenants
and agreements contained herein regarding the transfer or sale of Registrable
Securities, or any untrue statement of a material fact contained in the
Registration Statement if such untrue statement was made in reliance upon and in
conformity with written information furnished by or on behalf of the Purchaser
specifically for use in the Registration Statement. Each Purchaser will
reimburse, severally and not jointly, the Company (or such officer, director or
controlling person), as the case may be, for any legal or other documented
expenses reasonably incurred in investigating, defending or preparing to defend
any such action, proceeding or claim. Each Purchaser agrees that the information
regarding the Purchaser or its officers, directors and affiliates and their
intended plan of distribution of the Shares set forth in the Registration
Statement questionnaire, the form of which is attached as Appendix 1, or
included from time to time in the Registration Statement (including without
limitation the plan of distribution section of the Registration Statement) shall
be deemed to be written information furnished to the Company by or on behalf of
the Purchaser specifically for use in the Registration
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Statement. The foregoing indemnification shall be limited in amount as to each
Purchaser to the Purchase Price paid by such Purchaser hereunder.
Promptly after receipt by any indemnified person of a notice of a
claim or the beginning of any action in respect of which indemnity is to be
sought against an indemnifying person pursuant to this Section 7.3, such
indemnified person shall notify the indemnifying person in writing of such claim
or of the commencement of such action; provided, however, that any failure by an
indemnified person to notify an indemnifying person shall not relieve the
indemnifying person from its obligations hereunder except to the extent that the
indemnifying person is materially prejudiced thereby. Subject to the provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and such indemnifying person shall have been notified
thereof, such indemnifying person shall be entitled to participate therein, and,
to the extent it shall wish, to assume and control the defense thereof, with
counsel reasonably satisfactory to such indemnified person. After notice from
the indemnifying person to such indemnified person of its election to assume the
defense thereof, such indemnifying person shall not be liable to such
indemnified person for any legal expenses subsequently incurred by such
indemnified person in connection with the defense thereof; provided, however,
that if there exists a conflict of interest that would make it inappropriate, in
the opinion of counsel to the indemnifying person, for the same counsel to
represent both the indemnified person and such indemnifying person or any
affiliate or associate thereof, the indemnified person shall be entitled to
retain its own counsel at the expense of such indemnifying person; provided
further, however, that no indemnifying person shall be responsible for the fees
and expenses of more than one separate counsel for all indemnified parties
hereunder and under the other Agreements.
If the indemnification provided for in this Section 7.3 from the
indemnifying person would be applicable by its terms but is otherwise
unavailable, as determined by a court of applicable jurisdiction, to an
indemnified person hereunder in respect of any losses, claims, damages,
liabilities or expenses referred to herein, then the indemnifying person, in
lieu of indemnifying such indemnified person, shall contribute to the amount
paid or payable by such indemnified person as a result of such losses, claims,
damages, liabilities or expenses in such proportion as is appropriate to reflect
the relative fault of the indemnifying person and indemnified persons in
connection with the actions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative fault of such indemnifying person and indemnified persons shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact, has been
made by, or relates to information supplied by, such indemnifying person or
indemnified persons, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include, subject to the
limitations set forth in this Section 7.3, any reasonable legal or other fees or
expenses reasonably incurred by such party in connection with any investigation
or proceeding.
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The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 7.3 were determined by pro rata allocation
or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 7.3, no Purchaser shall be
required to contribute any amount in excess of the dollar amount of the proceeds
received by such Purchaser upon the sale of the Registrable Securities, giving
rise to such contribution obligation. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
7.4. Termination of Conditions and Obligations. The conditions
imposed by Section 5 or this Section 7 upon the transferability of Registrable
Securities shall cease and terminate as to any particular number of Registrable
Securities when such Registrable Securities shall have been effectively
registered under the Securities Act and sold or otherwise disposed of in
accordance with the intended method of disposition set forth in the Registration
Statement, or at such time as an opinion of counsel satisfactory to the Company
shall have been rendered to the effect that such conditions are not necessary in
order to comply with the Securities Act.
7.5. Continued Availability of Information. So long as the
Registration Statement is effective covering the resale of Registrable
Securities owned by the Purchaser, the Company will furnish to the Purchaser:
(a) as soon as practicable after available (but in the case of the
Company's Annual Report to Stockholders, within 120 days after the end of each
fiscal year of the Company), one copy of (i) its Annual Report to Stockholders
(which Annual Report shall contain financial statements audited in accordance
with generally accepted accounting principles by a firm of certified public
accountants), (ii) if not included in substance in the Annual Report to
Stockholders, its Annual Report on Form 10-K, (iii) any quarterly reports to
stockholders, and if not included in substance in its quarterly reports to
stockholders, its quarterly reports on Form 10-Q, and (iv) a full copy of the
Registration Statement (the foregoing, in each case, excluding exhibits);
(b) upon the reasonable request of a Purchaser or its agent, all
exhibits excluded by the parenthetical to subparagraph (a)(iv) of this Section
7.5 and all other information that is made available to shareholders; and
(c) upon the reasonable request of a Purchaser or its agent, an
adequate number of copies of the prospectuses to supply to any other party
requiring such prospectuses;
and the Company, upon the reasonable request of a Purchaser or its agent, will
meet with the Purchaser or a representative thereof at the Company's
headquarters to discuss all information
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relevant for disclosure in the Registration Statement and will otherwise
cooperate with any Purchaser conducting an investigation for the purpose of
reducing or eliminating such Purchaser's exposure to liability under the
Securities Act, including the reasonable production at the Company's
headquarters of non-confidential information (and, upon execution of a
confidentiality agreement satisfactory to the Company, confidential
information).
7.6. Reports under Exchange Act. With a view to making available to
the Purchasers the benefits of Rule 144 promulgated under the Securities Act and
any other rule or regulation of the Commission that may at any time permit a
Purchaser to sell Registrable Securities to the public without registration, and
with a view to making it possible to register the Registrable Securities
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep available public information, as understood and
defined in Rule 144, at all times;
(b) file with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange act; and
(c) furnish to a Purchaser owning any Registrable Securities or its
agent upon reasonable request (i) a written statement by the Company that is has
complied with the reporting requirements of Rule 144, the Securities Act and the
Exchange act, or that it qualifies as a registrant whose Registrable Securities
may be resold pursuant to Form S-3 (at any time after it so qualified, (ii) a
copy of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii) such other information
as may be reasonably required in availing any Purchaser of Registrable
Securities of any rule or regulation of the Commission which permits the selling
of any such Registrable Securities without registration or pursuant to such
form.
SECTION 8. Broker's Fees. Each of the parties hereto hereby
represents that, on the basis of any actions and agreements by it, there are no
brokers or finders entitled to compensation in connection with the sale of the
Shares to the Purchaser, except for the Company's obligations to Janney
Montgomery Scott Inc. which has acted as adviser to the Company.
SECTION 9. Expenses. At the Closing, each party hereto shall
bear its own expenses.
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SECTION 10. Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be sent by a nationally
recognized overnight express courier postage prepaid, and shall be deemed given
one day after being so sent and shall be delivered as addressed as follows:
(a) if to the Company, to:
Cell Pathways, Inc.
702 Electronic Drive
Horsham, PA 19044
Attention: Robert J. Towarnicki
President and Chief Executive Officer
with copies so mailed to:
Richard H. Troy, Esq.
Senior Vice President, General Counsel and Secretary
Cell Pathways, Inc.
702 Electronic Drive
Horsham, PA 19044
and to
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, Pennsylvania 19103-2921
Attention: David R. King, Esq.
or to such other person at such other place as the Company
shall designate to the Purchaser in writing; and
(b) if to the Purchaser, at the address set forth on Schedule A
hereto, or at such other address or addresses as may have been furnished to the
Company in writing,
SECTION 11. Entire Agreement; Changes. This Agreement sets
forth the entire agreement of the parties and may not be modified or amended
except pursuant to an instrument in writing signed by the Company and the
Purchaser.
SECTION 12. Headings. The headings of the various sections of
this Agreement have been inserted for convenience of reference only and shall
not be deemed to be part of this Agreement.
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SECTION 13. Severability. In case any provision contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
SECTION 14. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT
GIVING EFFECT TO CONFLICTS OF LAWS.
SECTION 15. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but all of which,
when taken together, shall constitute but one instrument, and shall become
effective when one or more counterparts have been signed by each party hereto
and delivered to the other parties.
SECTION 16. Assignment. The Purchaser (or any permitted assignee)
may assign its rights under Section 7 of this Agreement to any subsequent holder
of any or all of the Units who has purchased at least 50,000 Shares or Warrants
to purchase at least 50,000 Shares from such Purchaser (or permitted assignee),
provided that the Company shall have the right to require any such holder of any
or all of the Shares to execute a counterpart of this Agreement and agree to be
bound by the provisions of this Agreement as a condition to such holder's claim
to any rights hereunder.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized representatives as of the day and year
first above written.
CELL PATHWAYS, INC.
By: /s/ Robert J. Towarnicki
----------------------------------------
Name: Robert J. Towarnicki
Title: President and Chief Executive Officer
SoundShore Holdings Ltd.
By: /s/ Anthony Giordano
----------------------------------------
Name: Anthony Giordano
Title: Director
SoundShore Opportunity Holding Fund Ltd.
By: /s/ Anthony Giordano
----------------------------------------
Name: Anthony Giordano
Title: Director
16
<PAGE> 17
SCHEDULE A
AGGREGATE
NAME AND ADDRESS OF NUMBER OF UNITS PRICE PURCHASE
PURCHASER TO BE PURCHASED PER UNIT PRICE
- -------------------------------------------------------------------------------
SoundShore Holdings Ltd.
Address: 29 Richmond Road 75,000 Units, consisting
Pembroke, Bermuda HM08 of 75,000 Shares and
Attention: Anthony Warrants to purchase $9.00 $675,000.00
Giordano, Director 75,000 Warrant Shares
Telephone: 203-324-8402
Fax: 203-324-8498
Email: [email protected]
SoundShore Opportunity
Holding Fund Ltd. 50,000 Units, consisting
Address: 29 Richmond Road of 50,000 Shares and
Pembroke, Bermuda HM08 Warrants to purchase $9.00 $450,000.00
Attention: Anthony 50,000 Warrant Shares
Giordano, Director
Telephone: 203-324-8402
Fax: 203-324-8498
Email:[email protected]
17
<PAGE> 18
Appendix I
(one of two)
CELL PATHWAYS, INC.
STOCK CERTIFICATE AND WARRANT QUESTIONNAIRE
Please provide us with the following information:
1. The exact name that your Shares and
Warrants (both must be in the same
name) are to be registered. This is
the name that will appear on your
stock certificate(s) and Warrants.
You may use a nominee name if
appropriate: ----------------------
2. The relationship between the Purchaser
of the Units and the registered
holder listed in response to
item 1 above: ----------------------
3. The mailing address of the registered
holder listed in response to item 1 above: ----------------------
4. The social security number or tax
identification number of the registered
holder listed in response to
item 1 above: ----------------------
<PAGE> 19
Appendix I
(two of two)
CELL PATHWAYS, INC.
REGISTRATION STATEMENT QUESTIONNAIRE
____________________________________
In connection with the preparation of the Registration Statement,
please provide us with the following information:
1. Pursuant to the "Selling Stockholder" section of the Registration
Statement, please state your or your organization's name exactly as it should
appear in the Registration Statement:
2. Please provide the number of shares of Common Stock that you or
your organization will own beneficially or of record immediately after Closing,
including those Shares purchased by you or your organization pursuant to this
Purchase Agreement and those shares purchased by you or your organization
through other transactions (indicating whether you have sole or shared voting or
dispositive power over such securities as determined under applicable rules of
the Securities and Exchange Commission):
VOTING POWER DISPOSITIVE POWER
Sole Shared Sole Shared
__________ __________ __________ __________ Common Stock beneficially owned
prior to the date hereof
__________ __________ __________ __________ Shares being purchased from the
Company
__________ __________ __________ __________ Warrant Shares, issuable upon
exercise of the Warrants being
purchased from the Company
__________ __________ __________ __________ Common Stock issuable upon
exercise of other options or
warrants that you may own, to
the extent such shares of
Common Stock are deemed to be
beneficially owned
TOTAL: __________ shares of Common Stock beneficially owned
3. Have you or your organization had any position, office or other
material relationship within the past three years with the Company or its
affiliates other than as disclosed in the Company's proxy statement for its 1999
annual meeting of stockholders, or with Janney Montgomery Scott Inc.?
<PAGE> 20
_____ Yes _____ No
If yes, please indicate the nature of any such relationships below:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
4. Attached is a draft of the proposed "plan of distribution"
section of the Registration Statement. Please confirm that the draft is a
correct and complete statement of your intended plan of distribution.
_____ Yes _____ No
<PAGE> 21
PLAN OF DISTRIBUTION
The Shares being offered by the Selling Shareholder or its
respective pledgees, donees, transferees or other successors in interest, will
be sold in one or more transactions (which may involve block transactions) on
the Nasdaq National Market or on such other market on which the Common Stock may
from time to time be trading, in privately negotiated transactions, through the
writing of options on the Shares, short sales or any combination thereof. The
sale price to the public may be the market price prevailing at the time of sale,
a price related to such prevailing market price or such other price as the
Selling Shareholder determines from time to time. The Shares may also be sold
pursuant to Rule 144. The Selling Shareholder shall have the sole and absolute
discretion not to accept any purchase offer or make any sale of Shares if they
deem the purchase price to be unsatisfactory at any particular time.
The Selling Shareholder or its respective pledgees, donees,
transferee or other successors in interest, may also sell the Shares directly to
market makers acting as principals and/or broker-dealers acting as agents for
themselves or their customers. Brokers acting as agents for the Selling
Shareholder will receive usual and customary commissions for brokerage
transactions, and market makers and block purchasers purchasing the Shares will
do so for their own account and at their own risk. It is possible that the
Selling Shareholder will attempt to sell shares of Common Stock in block
transactions to market makers or other purchasers at a price per share which may
be below the then market price. There can be no assurance with all or any of the
Shares offered hereby will be issued to, or sold by , the Selling Shareholder.
The Selling Shareholder and any brokers, dealers or agents, upon effecting the
sale of any of the Shares offered hereby, may be deemed "underwriters" as that
term is defined under the Securities Act or the Exchange Act, or the rules and
regulations thereunder.
The Selling Shareholder, alternatively, may sell all or any part of
the Shares offered hereby through an underwriter. The Selling Shareholder has
not entered into any agreement with a prospective underwriter and there is no
assurance that any such agreement will be entered into. If the Selling
Shareholder enters into such an agreement or agreements, the relevant details
will be set forth in a supplement or revisions to this Prospectus.
Upon the Company being notified by the Selling Shareholder that any
material arrangement has been entered into with a broker or dealer for the sale
of Shares through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a supplemented
Prospectus will be filed, if required, pursuant to Rule 424(c) under the
Securities Act, disclosing (a) the name of each such broker-dealer, (b) the
number of Shares involved, (c) the price at which such Shares were sold, (d) the
commissions paid or discounts or concessions allowed to such broker-dealer(s),
where applicable, (e) that such broker-dealer(s) did not conduct any
investigation to verify the information set out or incorporated by reference in
this Prospectus, as supplemented, and (f) other facts material to the
transaction.
<PAGE> 22
The Selling Shareholder and any other persons participating in the
sale or distribution of the Shares will be subject to applicable provisions of
the Exchange Act and the rules and regulations thereunder, which provisions may
limit the timing of purchases and sales of any of the Shares by the Selling
Shareholder or any other such person. The foregoing may affect the marketability
of the Shares.
The Company has agreed to indemnify the Selling Shareholder, or its
transferees or assignees, against certain liabilities, including liabilities
under the Securities Act, or to contribute to payments the Selling Shareholder
or its respective pledgees, donees, transferees or other successors in interest,
may be required to make in respect thereof.
The Company is bearing all costs relating to the registration of the
Shares (other than fees and expenses, if any, of counsel or other advisers to
the Selling Shareholder). Any commissions, discounts or other fees payable to
broker-dealers in connection with any sale of the Shares will be borne by the
Selling Shareholder.
<PAGE> 23
APPENDIX II
Attention:
PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE
__________________________________________
The undersigned, [AN OFFICER OF, OR OTHER PERSON DULY AUTHORIZED BY]
___________________________________________________ [FILL IN OFFICIAL NAME OF
INDIVIDUAL OR INSTITUTION] hereby certifies that he/she [said institution] is
the Purchaser of the shares evidenced by the attached certificate, and as such,
sold such shares on ___________________________ [DATE] pursuant to and in
accordance with registration statement number ____________________ [FILL IN THE
NUMBER OF OR OTHERWISE IDENTIFY REGISTRATION STATEMENT] and the requirement of
delivering a current prospectus by the Company has been complied with in
connection with such sale.
Print or Type:
Name of Purchaser
(individual or
institution): ______________________
Name of individual
representing
Purchaser (if an
institution) ______________________
Title of individual
representing
Purchaser (if an
institution): ______________________
Signature by:
Individual purchaser
or individual repre-
senting purchaser: ______________________
<PAGE> 1
Exhibit 10.3
PURCHASE AGREEMENT
THIS AGREEMENT is made as of the 8th day of October, 1999, between
Cell Pathways, Inc. (the "Company"), a corporation organized under the laws of
the State of Delaware, with its principal offices at 702 Electronic Drive,
Horsham, Pennsylvania 19044 and each purchaser whose name is set forth on the
signature page hereof (each a "Purchaser" and collectively, the "Purchasers").
IN CONSIDERATION of the mutual covenants contained in this
Agreement, the Company and each Purchaser, intending to be legally bound, agree
as follows:
SECTION 1. Authorization of Sale of the Units. Subject to the terms
and conditions of this Agreement, the Company has authorized the sale of up to
230,000 units (the "Units"), each consisting of one share of common stock
("Common Stock"), par value $.01 per share (each a "Share," and together the
"Shares"), of the Company and one warrant (each a "Warrant," and together the
"Warrants") to purchase one share of Common Stock (the "Warrant Shares"). The
terms of the Warrants shall be as set forth in the form of Warrant attached
hereto as Exhibit A. The Shares, Warrant Shares and Warrants are referred to
herein as the "Securities."
SECTION 2. Agreement to Sell and Purchase the Units. At the Closing
(as defined in Section 3), the Company will sell to each Purchaser, and such
Purchaser will buy from the Company, upon the terms and conditions hereinafter
set forth, the number of Units shown, and at the purchase price shown, opposite
such Purchaser's name on Schedule A hereto. The Shares and Warrants constituting
the Units shall become immediately separable and transferable upon the Closing.
The Company may simultaneously enter into a similar form of this purchase
agreement with certain other investors (the "Other Purchasers") and complete
sales of the Units to them, although it is understood that there is no minimum
number of Units that are required to be sold by the Company. (The Purchaser and
the Other Purchasers, if any, are hereinafter sometimes collectively referred to
as the "Purchasers," and this Agreement and the agreements executed by the Other
Purchasers are hereinafter sometimes collectively referred to as the
"Agreements.")
SECTION 3. Delivery of the Units at the Closing. The completion of
the purchase and sale of the Units (the "Closing") shall occur on October 13,
1999 or such other time as may be agreed upon by the Company and each Purchaser
(the "Closing Date"). At the Closing, the Company shall deliver to each
Purchaser one or more stock certificates for the Shares and one or more Warrants
registered in the name of each Purchaser, or in such name(s) as designated by
each Purchaser, based on the number of Units set forth in Section 2 above. The
name(s) in which the stock certificates for the Shares and the Warrants are to
be registered are set forth in the Stock Certificate and Warrant Questionnaire
attached hereto as part of Appendix I. The Company's obligation to complete the
purchase and sale of the Units and deliver such stock
<PAGE> 2
certificate(s) and Warrants to each Purchaser at the Closing shall be subject to
the following conditions, any one or more of which may be waived by the Company
in its sole discretion: (i) receipt by the Company of immediately available
funds in the full amount of the purchase price for the Units being purchased
hereunder; (ii) completion of the purchases and sales under the Agreements with
any Other Purchasers; and (iii) the accuracy of the representations and
warranties made by the Purchasers and the fulfillment of those undertakings of
the Purchasers to be fulfilled prior to the Closing; provided, however, that in
the event that condition (ii) or, with respect to Other Purchasers, condition
(iii) is not met, each Purchaser shall have the right, but not the obligation,
to purchase the Units which such Other Purchaser (the "Defaulting Purchaser")
should have purchased on the same terms, and if Other Purchasers want to
exercise this right, on a pro rata basis (based on the number of Units purchased
hereunder and under the other purchase agreements) with any Other Purchasers
exercising the right, and if the Purchaser and/or Other Purchasers exercise this
right, the condition shall be deemed to have been met. Each Purchaser's
obligation to accept delivery of such stock certificate(s) and Warrants and to
pay for the Units evidenced thereby shall be subject to the accuracy in all
material respects of the representations and warranties made by the Company in
the Purchase Agreement and the fulfillment in all material respects of those
undertakings of the Company to be fulfilled prior to Closing.
SECTION 4. Representations, Warranties and Covenants of the
Company. The Company hereby represents and warrants to, and covenants with,
each Purchaser as follows:
4.1. Organization and Qualification. The Company is a corporation
duly organized and in good standing under the laws of the State of Delaware and
has all requisite corporate power and authority to conduct its business as
currently conducted. The Company is qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the Company
conducts business, except where the failure to do so would not have a material
adverse effect on the business, condition (financial or otherwise) or results of
operations of the Company.
4.2. Authorized and Issued Capital Stock. (a) As of September 30,
1999, the authorized capital stock of the Company consists of (i) 70,000,000
shares of Common Stock, of which 24,550,894 shares were issued and outstanding,
and (ii) 5,000,000 shares of preferred stock, $.01 par value per share, of which
no shares are issued and outstanding. The shares of Common Stock have certain
rights pursuant to the terms of a Rights Agreement, dated as of December 3,
1998, between the Company and Registrar and Transfer Company, as rights agent.
All of the outstanding shares of Common Stock were validly issued and are fully
paid and non-assessable shares.
(b) The Company has registered its Common Stock pursuant to Section
12(b) or 12(g) of the Securities Exchange Act of 1934, as amended (together with
the rules and regulations promulgated thereunder, the "Exchange Act"), and is in
full compliance with all
2
<PAGE> 3
reporting requirements of the Exchange Act, and such Common Stock is currently
listed or quoted on the Nasdaq National Market.
4.3. Due Execution, Delivery and Performance of the Agreements. The
execution, delivery and performance of the Agreements by the Company (i) have
been duly authorized by all requisite corporate action by the Company, and (ii)
will not violate any law or the Certificate of Incorporation (the "Certificate
of Incorporation") or the Bylaws (the "Bylaws") of the Company, or any provision
of any material indenture, mortgage, agreement, contract or other material
instrument to which the Company is a party or by which the Company or any of its
properties or assets is bound as of the date hereof, or result in a breach of or
constitute (upon notice or lapse of time or both) a default under any such
material indenture, mortgage, agreement, contract or other material instrument
or result in the creation or imposition of any lien, security interest,
mortgage, pledge, charge or other encumbrance, of any material nature
whatsoever, upon any properties or assets of the Company. The Company has no
material subsidiaries, except Cell Pathways Pharmaceuticals, Inc. Upon their
execution and delivery, and assuming the valid execution thereof by the
respective Purchasers, the Agreements will constitute valid and binding
obligations of the Company, enforceable in accordance with their respective
terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law) and except as the indemnification and
contribution agreements of the Company in Section 7.4 hereof may be legally
unenforceable.
4.4. Issuance, Sale and Delivery of the Shares and Warrant Shares.
When issued and paid for, the Shares to be sold hereunder by the Company and the
Warrant Shares to be acquired upon exercise of the Warrants will be validly
issued and outstanding, fully paid and non-assessable shares of Common Stock.
Neither the sale of the Shares and Warrants pursuant to this Agreement, nor the
Company's performance of its obligations under, this Agreement and the Warrants
shall (i) result in the creation or imposition of any liens, charges, claims or
other encumbrances upon the Shares, the Warrant Shares or any of the assets of
the Company, or (ii) entitle the holders of the outstanding Common Stock to
preemptive or other rights to subscribe to or acquire Common Stock or other
securities of the Company.
4.5. Exemption from Registration. Assuming the accuracy of each
Purchaser's representations and warranties set forth in Section 5 hereof, the
offer, issuance and sale of the Units pursuant to this Agreement are and will be
exempt from the registration and prospectus delivery requirements of the
Securities Act of 1933, as amended (together with the rules and regulations
promulgated thereunder, the "Securities Act").
4.6. Additional Information. The Company represents and warrants
that the information contained in the following documents, copies of which have
been furnished to each
3
<PAGE> 4
Purchaser, was true and correct in all material respects and did not contain any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements contained therein in light of the circumstances under
which they were made not misleading, in each case as of their respective dates
(the "SEC Documents"):
(i) the Company's 1998 annual report to stockholders;
(ii) the Company's annual report on Form 10-K for the fiscal year
ended December 31, 1998 (without exhibits);
(iii) the Company's quarterly reports on Form 10-Q for the
three-month periods ended March 31, 1999 and June 30, 1999;
(iv) the notice of annual meeting of stockholders and proxy
statement for the Company's 1999 annual meeting of
stockholders held June 22, 1999; and
(v) all other documents, if any, filed by the Company with the
Securities and Exchange Commission (the "Commission") since
June 30, 1999 pursuant to the reporting requirements of the
Exchange Act.
4.7. No Material Change. As of the date hereof, there has been no
material adverse change in the business, condition (financial or otherwise) or
results of operations of the Company since June 30, 1999, it being understood
that the Company has not achieved revenues and that the continued expenditure of
resources in the Company's continuing operations does not constitute a material
adverse change within the meaning of this paragraph. Without limitation of the
foregoing, each Purchaser also acknowledges being advised by the Company that
(i) the treatment portion of the Phase II/III trial of exisulind in the
prevention of prostate cancer recurrence (the primary endpoint of which relates
to PSA levels) has been completed and data analysis at the Company will begin
shortly, (ii) until such analysis is completed it is impossible for the Company
to understand fully the outcome of the trial, and (iii) the results of such
clinical trial, when released, along with other clinical results and scientific
developments, could materially impact the market price of the Company's shares.
4.8. Legal Opinion. Prior to and as a condition to the Closing,
Richard H. Troy, Esq., General Counsel to the Company, will deliver a legal
opinion to the Purchasers as to the valid issuance of the Shares and the Warrant
Shares, a draft of which has been provided to the Purchasers prior to the date
hereof.
4.9. Listing of Common Stock. The Company shall cause the Shares and
the Warrant Shares to be listed on the Nasdaq National Market and maintain the
listing of the Shares and the Warrant Shares on each national securities
exchange or automated quotation system, if any, upon which shares of Common
Stock are then listed.
4
<PAGE> 5
SECTION 5. Representations, Warranties and Covenants of the
Purchasers.
(a) Each Purchaser acknowledges that the Shares and Warrants have
not been, and that the Warrant Shares will not be, registered under the
Securities Act or any state securities law and may not be offered, sold, pledged
or otherwise transferred (i) in the absence of such registration, (ii) unless
the Company receives an opinion of counsel reasonably acceptable to it that such
offer, sale, pledge or transfer is exempt from any registration and prospectus
delivery requirements of the Securities Act and any applicable state securities
laws or (iii) unless the Shares or Warrant Shares are sold pursuant to Rule 144
promulgated under the Securities Act of 1933, as amended (the "Securities Act")
("Rule 144") in accordance with the terms of such rule. Except as otherwise
permitted by Section 7.3, each certificate for the Shares issued at the Closing
and the Warrant Shares, or upon direct or indirect transfer of or in
substitution thereof, shall be stamped or otherwise imprinted with a legend in
substantially the following form:
The Shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or under any
applicable state securities laws and may not be offered, sold,
pledged or transferred in the absence of such registration unless
the Company receives an opinion of counsel, in form, substance and
scope reasonably acceptable to the Company, that such offer, sale,
pledge or transfer is exempt from any registration and prospectus
delivery requirements of the Securities Act and such applicable
state securities laws.
Each Purchaser acknowledges and agrees that the Warrants will contain a similar
legend, as set forth on the top of the form of Warrant attached as Exhibit A
hereto.
(b) Each Purchaser represents and warrants, as of the date hereof
and as of the Closing Date, to, and covenants with, the Company that: (i) the
Purchaser, taking into account the personnel and resources it can practically
bring to bear on the purchase of the Units contemplated hereby, is
knowledgeable, sophisticated and experienced in making, and is qualified to
make, decisions with respect to investments in equity securities presenting an
investment decision like that involved in the purchase of the Units, including
investments in equity securities issued by development-state biotechnology
companies; (ii) the Purchaser or its counsel, accountants or other investment
advisers have requested, received, reviewed and considered all information
deemed relevant by them in making an informed decision to purchase the Units,
(iii) the Purchaser is acquiring the Units in the ordinary course of its
business and for its own account for investment only and with no present
intention of distributing any of the Securities, nor is there any arrangement or
understanding with any other persons regarding the distribution of the
Securities; provided however, that such representation and warranty will not
limit the Purchaser's right to sell Shares and the Warrant Shares pursuant to
the Registration Statement or pursuant to an exemption from the Securities Act;
(iv) the Purchaser will not, directly or indirectly, offer, sell (including sell
short), pledge, transfer or otherwise dispose of (or
5
<PAGE> 6
solicit any offers to buy, purchase or otherwise acquire or take a pledge of)
any of the Shares and Warrant Shares except in compliance with the Securities
Act, and the rules and regulations promulgated thereunder; (v) the Purchaser has
completed or caused to be completed the Registration Statement Questionnaire and
the Stock Certificate and Warrant Questionnaire, both attached hereto as
Appendix I, for use in preparation of the Registration Statement and the answers
thereto are true, correct and complete in all material respects as of the date
hereof and will be true, correct and complete in all material respects as of the
effective date of the Registration Statement; (vi) the Purchaser has, in
connection with its decision to purchase the Units, relied solely upon the SEC
Documents and the representations and warranties contained herein, as well as
any investigation completed by the Purchaser or its counsel, accountants or
other investment advisers; and (vii) the Purchaser is an "accredited investor"
within the meaning of Rule 501 of Regulation D promulgated under the Securities
Act.
(c) Each Purchaser agrees not to make any sale of the Shares or the
Warrant Shares under the Registration Statement without effectively causing the
prospectus delivery requirement under the Securities Act to be satisfied, and
each Purchaser acknowledges and agrees that such Shares and the Warrant Shares
are not transferable on the books of the Company unless the certificate
submitted to the transfer agent evidencing the Shares or the Warrant Shares is
accompanied by a separate officer's certificate: (i) in the form of Appendix II
hereto, (ii) executed by an officer of, or other authorized person designated
by, the Purchaser, and (iii) to the effect that (A) such Shares or Warrant
Shares have been sold pursuant to and in accordance with the Registration
Statement and (B) the requirement of delivering a current prospectus has been
satisfied, unless exempt from registration and prospectus delivery requirements.
Each Purchaser acknowledges that there may occasionally be times when the
Company must suspend the use of the prospectus forming a part of the
Registration Statement until such time as an amendment to the Registration
Statement has been filed by the Company and declared effective by the
Commission, or until such time as the Company has filed an appropriate report
with the Commission pursuant to the Exchange Act. Each Purchaser agrees that it
will not sell any Securities during the period commencing at the time at which
the Company gives the Purchaser notice of the suspension of the use of said
prospectus and ending at the time the Company gives the Purchaser notice that
the Purchaser may thereafter effect sales pursuant to said prospectus. The
Company shall only be able to suspend the use of said prospectus for periods
aggregating no more than sixty business days in any twelve month period. Each
Purchaser further agrees to notify promptly the Company of the sale of all of
such Purchaser's Securities, and to notify promptly the Company in writing of
any material changes in the information set forth in the Registration Statement
relating to such Purchaser or its plan of distribution, or of any supplemental
information required to be included in the Registration Statement relating to
its plan of distribution.
(d) Each Purchaser further represents and warrants, as of the date
hereof and as of the Closing Date, to, and covenants with, the Company that: (i)
the Purchaser has full right, power, authority and capacity to enter into this
Agreement and to consummate the transactions
6
<PAGE> 7
contemplated hereby and has taken all necessary action to authorize the
execution, delivery and performance of this Agreement, and (ii) upon the
execution and delivery of this Agreement, this Agreement shall constitute a
valid and binding obligation of the Purchaser enforceable in accordance with its
terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law) and except as the indemnification and
contribution agreements of the Purchaser in Section 7.4 hereof may be legally
unenforceable.
(e) In consideration for the Company agreeing to its obligations set
forth in Section 7 below in respect of Registrable Securities, each Purchaser
agrees, in connection with any firm commitment underwritten offering of the
Company's Common Stock that, upon the request of the managing underwriters of
such offering, not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any shares of Common Stock beneficially
owned by it without the prior written consent of such managing underwriters
during the period of time beginning ten days prior to the date when such
managing underwriters advise the Company that they expect to initiate such
public offering and ending at a date not to exceed ninety days from the
commencement of such public offering. Notwithstanding the foregoing, (i) this
obligation shall not apply to the Purchaser unless each of the Company's
directors and officers enter into a similar agreement, and the Purchaser at such
time beneficially owns in excess of 2% of the Company's then outstanding shares
of Common Stock.
SECTION 6. Survival of Representations, Warranties and Agreements.
Notwithstanding any investigation made by any party to this Agreement, all
covenants, agreements, representations and warranties made by the Company and
the Purchaser herein shall survive the execution of this Agreement, the delivery
to the Purchaser of the Units being purchased and the payment therefor.
SECTION 7. Registration of Shares and Warrant Shares for Resale
7.1. Registration Procedures and Expenses.
(a) The Company shall as soon as practicable after November 3, 1999,
but in no event later than December 31, 1999, prepare and file with the
Commission a registration statement on Form S-3 (or if such form is unavailable
to the Company, on such other form deemed appropriate for the registration of
the Common Stock by the Commission) (the "Registration Statement") to register
the Shares and Warrant Shares ("Registrable Securities") for resale by the
Purchasers in non-underwritten, market transactions, and shall use its best
efforts to cause the Registration Statement to become effective as soon as
practicable thereafter. The Company shall, within three business days before
filing such Registration Statement, provide a draft to each Purchaser and its
counsel and its agent for review and comment;
7
<PAGE> 8
(b) The Company shall promptly prepare and file with the Commission
such amendments and supplements to the Registration Statement and the prospectus
used in connection therewith as may be necessary to keep such the Registration
Statement effective until the first to occur of (i) such date when either all of
the Registrable Securities have been sold pursuant thereto or, by reason of Rule
144(k) of the Commission under the Securities Act or any other rule of similar
effect, the Registrable Securities are no longer required to be registered for
the resale thereof by the Purchasers in ordinary market transactions without
imposition of any volume limitations, or (ii) the second anniversary of the
expiration of the Warrants (the "Registration Period");
(c) The Company shall promptly furnish to each Purchaser and its
agent such number of copies of prospectuses and preliminary prospectuses in
conformity with the requirements of the Securities Act as such Purchaser or its
agent may reasonably request, in order to facilitate the public sale or other
disposition of all or any of the Registrable Securities by such Purchaser;
(d) The Company shall promptly file documents required of the
Company for any required blue sky clearance for the Registrable Securities in
such states specified in writing by each Purchaser or its agent; provided,
however, that the Company shall not be required to (i) qualify to do business or
consent to service of process in any jurisdiction in which it is not now so
qualified or has not so consented, (ii) subject itself to general taxation in
any such jurisdiction, (iii) provide any undertakings that cause the Company
undue burden or expense or (iv) make any change in its charter or bylaws;
(e) The Company shall promptly inform each Purchaser and its agent
when any stop order has been issued with respect to the Registration Statement
and use its best efforts to promptly cause such stop order to be withdrawn;
(f) The Company shall notify each Purchaser whose shares are
registered on a Registration Statement and its agent at any time when a
prospectus relating to any Registrable Securities covered by such Registration
Statement or a Company Registration Statement is required to be delivered under
the Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing and promptly file such
amendments and supplements as may be necessary so that, as thereafter delivered
to such Purchasers of such Registrable Securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing and use its best efforts
to cause each such amendment and supplement to become effective;
8
<PAGE> 9
(g) The Company shall bear all expenses in connection with the
procedures in paragraph (a) through (f) in this Section 7.1 and the registration
of the Shares pursuant to the Registration Statement, other than fees and
expenses, if any, of counsel or other advisers to the Purchaser or the Other
Purchasers and any expenses relating to the sale of the Registrable Securities
by the Purchasers (including without limitation, broker's commissions, discounts
or fees of any nature and transfer taxes or charges of any nature); and
(h) The Company understands that each Purchaser disclaims being an
underwriter, but a Purchaser being deemed an underwriter shall not relieve the
Company of any obligations it has hereunder. A questionnaire related to the
Registration Statement to be completed by each Purchaser is attached as Appendix
I to this Agreement.
7.2. Transfer of Registrable Securities. Each Purchaser agrees that
it will not effect any disposition of Registrable Securities except as
contemplated in the Registration Statement or as otherwise in compliance with
applicable securities laws, and that it will promptly notify the Company of any
material changes in the information set forth in the Registration Statement
regarding the Purchaser or its plan of distribution. Without limitation, each
Purchaser understands that (i) it may not use Registrable Securities to cover a
short position in shares of the Company's Common Stock created prior to the
effective date of the Registration Statement, and (ii) it must deliver a
prospectus in connection with any short sale of the Registrable Securities
unless it is exempt from such requirement.
7.3. Indemnification. For the purpose of this Section 7.3:
(a) the term "Selling Stockholder" shall include the Purchaser, its
officers, directors, agent and/or trustees and any affiliate or controlling
person of such Purchaser or any permitted assign hereunder;
(b) the term "Registration Statement" shall include any final
prospectus, exhibit, supplement or amendment included in or relating to the
Registration Statement referred to in Section 7.1; and
(c) the term "untrue statement" shall include any untrue statement
or alleged untrue statement, or any omission or alleged omission to state in the
Registration Statement a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
The Company agrees to indemnify and hold harmless each Selling
Stockholder from and against any losses, claims, damages or liabilities to which
such Selling Stockholder may become subject (under the Securities Act or
otherwise) insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based
9
<PAGE> 10
upon, any breach of the representations set forth in Section 4 hereof by the
Company, or any untrue statement of a material fact contained in the
Registration Statement, or arise out of any failure by the Company to fulfill
any agreement, covenant or undertaking contained in this Agreement or included
in the Registration Statement, and the Company will reimburse such Selling
Stockholder for any reasonable legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action, proceeding or
claim; provided, however, that the Company shall not be liable in any such case
to the extent that such loss, claim, damage or liability arises out of, or is
based upon, (i) an untrue statement made in the Registration Statement in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of such Selling Stockholder specifically for use in the
Registration Statement (which shall be deemed to include the information set
forth in the Registration Statement Questionnaire and in the plan of
distribution section of the prospectus), (ii) the failure of such Selling
Stockholder to comply with the covenants and agreements contained herein
respecting transfer or sale of Registrable Securities, or (iii) any statement or
omission in any Prospectus that is corrected in any subsequent Prospectus that
was delivered to the Purchaser sufficiently prior to the pertinent sale or sales
by the Purchaser. The Company shall also not be liable for amounts paid in
settlement of any loss, claim, damage or liability if such settlement if
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld.
Each Purchaser agrees, severally and not jointly, to indemnify and
hold harmless the Company (and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act, each officer of the
Company who signs the Registration Statement and each director of the Company)
from and against any losses, claims, damages or liabilities to which the Company
(or any such officer, director or controlling person) may become subject (under
the Securities Act or otherwise), insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are
based upon, any breach of the representations set forth in Section 5 hereof by
such Purchaser, or any failure by such Purchaser to comply with the covenants
and agreements contained herein regarding the transfer or sale of Registrable
Securities, or any untrue statement of a material fact contained in the
Registration Statement if such untrue statement was made in reliance upon and in
conformity with written information furnished by or on behalf of the Purchaser
specifically for use in the Registration Statement. Each Purchaser will
reimburse, severally and not jointly, the Company (or such officer, director or
controlling person), as the case may be, for any legal or other documented
expenses reasonably incurred in investigating, defending or preparing to defend
any such action, proceeding or claim. Each Purchaser agrees that the information
regarding the Purchaser or its officers, directors and affiliates and their
intended plan of distribution of the Shares set forth in the Registration
Statement questionnaire, the form of which is attached as Appendix 1, or
included from time to time in the Registration Statement (including without
limitation the plan of distribution section of the Registration Statement) shall
be deemed to be written information furnished to the Company by or on behalf of
the Purchaser specifically for use in the Registration
10
<PAGE> 11
Statement. The foregoing indemnification shall be limited in amount as to each
Purchaser to the Purchase Price paid by such Purchaser hereunder.
Promptly after receipt by any indemnified person of a notice of a
claim or the beginning of any action in respect of which indemnity is to be
sought against an indemnifying person pursuant to this Section 7.3, such
indemnified person shall notify the indemnifying person in writing of such claim
or of the commencement of such action; provided, however, that any failure by an
indemnified person to notify an indemnifying person shall not relieve the
indemnifying person from its obligations hereunder except to the extent that the
indemnifying person is materially prejudiced thereby. Subject to the provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and such indemnifying person shall have been notified
thereof, such indemnifying person shall be entitled to participate therein, and,
to the extent it shall wish, to assume and control the defense thereof, with
counsel reasonably satisfactory to such indemnified person. After notice from
the indemnifying person to such indemnified person of its election to assume the
defense thereof, such indemnifying person shall not be liable to such
indemnified person for any legal expenses subsequently incurred by such
indemnified person in connection with the defense thereof; provided, however,
that if there exists a conflict of interest that would make it inappropriate, in
the opinion of counsel to the indemnifying person, for the same counsel to
represent both the indemnified person and such indemnifying person or any
affiliate or associate thereof, the indemnified person shall be entitled to
retain its own counsel at the expense of such indemnifying person; provided
further, however, that no indemnifying person shall be responsible for the fees
and expenses of more than one separate counsel for all indemnified parties
hereunder and under the other Agreements.
If the indemnification provided for in this Section 7.3 from the
indemnifying person would be applicable by its terms but is otherwise
unavailable, as determined by a court of applicable jurisdiction, to an
indemnified person hereunder in respect of any losses, claims, damages,
liabilities or expenses referred to herein, then the indemnifying person, in
lieu of indemnifying such indemnified person, shall contribute to the amount
paid or payable by such indemnified person as a result of such losses, claims,
damages, liabilities or expenses in such proportion as is appropriate to reflect
the relative fault of the indemnifying person and indemnified persons in
connection with the actions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative fault of such indemnifying person and indemnified persons shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact, has been
made by, or relates to information supplied by, such indemnifying person or
indemnified persons, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include, subject to the
limitations set forth in this Section 7.3, any reasonable legal or other fees or
expenses reasonably incurred by such party in connection with any investigation
or proceeding.
11
<PAGE> 12
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 7.3 were determined by pro rata allocation
or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 7.3, no Purchaser shall be
required to contribute any amount in excess of the dollar amount of the proceeds
received by such Purchaser upon the sale of the Registrable Securities, giving
rise to such contribution obligation. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
7.4. Termination of Conditions and Obligations. The conditions
imposed by Section 5 or this Section 7 upon the transferability of Registrable
Securities shall cease and terminate as to any particular number of Registrable
Securities when such Registrable Securities shall have been effectively
registered under the Securities Act and sold or otherwise disposed of in
accordance with the intended method of disposition set forth in the Registration
Statement, or at such time as an opinion of counsel satisfactory to the Company
shall have been rendered to the effect that such conditions are not necessary in
order to comply with the Securities Act.
7.5. Continued Availability of Information. So long as the
Registration Statement is effective covering the resale of Registrable
Securities owned by the Purchaser, the Company will furnish to the Purchaser:
(a) as soon as practicable after available (but in the case of the
Company's Annual Report to Stockholders, within 120 days after the end of each
fiscal year of the Company), one copy of (i) its Annual Report to Stockholders
(which Annual Report shall contain financial statements audited in accordance
with generally accepted accounting principles by a firm of certified public
accountants), (ii) if not included in substance in the Annual Report to
Stockholders, its Annual Report on Form 10-K, (iii) any quarterly reports to
stockholders, and if not included in substance in its quarterly reports to
stockholders, its quarterly reports on Form 10-Q, and (iv) a full copy of the
Registration Statement (the foregoing, in each case, excluding exhibits);
(b) upon the reasonable request of a Purchaser or its agent, all
exhibits excluded by the parenthetical to subparagraph (a)(iv) of this Section
7.5 and all other information that is made available to shareholders; and
(c) upon the reasonable request of a Purchaser or its agent, an
adequate number of copies of the prospectuses to supply to any other party
requiring such prospectuses;
and the Company, upon the reasonable request of a Purchaser or its agent, will
meet with the Purchaser or a representative thereof at the Company's
headquarters to discuss all information
12
<PAGE> 13
relevant for disclosure in the Registration Statement and will otherwise
cooperate with any Purchaser conducting an investigation for the purpose of
reducing or eliminating such Purchaser's exposure to liability under the
Securities Act, including the reasonable production at the Company's
headquarters of non-confidential information (and, upon execution of a
confidentiality agreement satisfactory to the Company, confidential
information).
7.6. Reports under Exchange Act. With a view to making available to
the Purchasers the benefits of Rule 144 promulgated under the Securities Act and
any other rule or regulation of the Commission that may at any time permit a
Purchaser to sell Registrable Securities to the public without registration, and
with a view to making it possible to register the Registrable Securities
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep available public information, as understood and
defined in Rule 144, at all times;
(b) file with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange act; and
(c) furnish to a Purchaser owning any Registrable Securities or its
agent upon reasonable request (i) a written statement by the Company that is has
complied with the reporting requirements of Rule 144, the Securities Act and the
Exchange act, or that it qualifies as a registrant whose Registrable Securities
may be resold pursuant to Form S-3 (at any time after it so qualified, (ii) a
copy of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii) such other information
as may be reasonably required in availing any Purchaser of Registrable
Securities of any rule or regulation of the Commission which permits the selling
of any such Registrable Securities without registration or pursuant to such
form.
SECTION 8. Broker's Fees. Each of the parties hereto hereby
represents that, on the basis of any actions and agreements by it, there are no
brokers or finders entitled to compensation in connection with the sale of the
Shares to the Purchaser, except for the Company's obligations to Janney
Montgomery Scott Inc. which has acted as adviser to the Company.
SECTION 9. Expenses. At the Closing, each party hereto shall
bear its own expenses.
13
<PAGE> 14
SECTION 10. Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be sent by a nationally
recognized overnight express courier postage prepaid, and shall be deemed given
one day after being so sent and shall be delivered as addressed as follows:
(a) if to the Company, to:
Cell Pathways, Inc.
702 Electronic Drive
Horsham, PA 19044
Attention: Robert J. Towarnicki
President and Chief Executive Officer
with copies so mailed to:
Richard H. Troy, Esq.
Senior Vice President, General Counsel and Secretary
Cell Pathways, Inc.
702 Electronic Drive
Horsham, PA 19044
and to
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, Pennsylvania 19103-2921
Attention: David R. King, Esq.
or to such other person at such other place as the Company
shall designate to the Purchaser in writing; and
(b) if to the Purchaser, at the address set forth on Schedule A
hereto, or at such other address or addresses as may have been furnished to the
Company in writing,
SECTION 11. Entire Agreement; Changes. This Agreement sets
forth the entire agreement of the parties and may not be modified or amended
except pursuant to an instrument in writing signed by the Company and the
Purchaser.
SECTION 12. Headings. The headings of the various sections of
this Agreement have been inserted for convenience of reference only and shall
not be deemed to be part of this Agreement.
14
<PAGE> 15
SECTION 13. Severability. In case any provision contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
SECTION 14. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT
GIVING EFFECT TO CONFLICTS OF LAWS.
SECTION 15. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but all of which,
when taken together, shall constitute but one instrument, and shall become
effective when one or more counterparts have been signed by each party hereto
and delivered to the other parties.
SECTION 16. Assignment. The Purchaser (or any permitted assignee)
may assign its rights under Section 7 of this Agreement to any subsequent holder
of any or all of the Units who has purchased at least 50,000 Shares or Warrants
to purchase at least 50,000 Shares from such Purchaser (or permitted assignee),
provided that the Company shall have the right to require any such holder of any
or all of the Shares to execute a counterpart of this Agreement and agree to be
bound by the provisions of this Agreement as a condition to such holder's claim
to any rights hereunder.
15
<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized representatives as of the day and year
first above written.
CELL PATHWAYS, INC.
By: /s/ Robert J. Towarnicki
-------------------------
Name: Robert J. Towarnicki
Title: President and Chief Executive Officer
VULCAN VENTURES INC.
By: /s/ William D. Savoy
--------------------------
Name: William D. Savoy
Title: Vice President
16
<PAGE> 17
SCHEDULE A
<TABLE>
<CAPTION>
AGGREGATE
NAME AND ADDRESS OF NUMBER OF UNITS PRICE PURCHASE
PURCHASER TO BE PURCHASED PER UNIT PRICE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Vulcan Ventures Inc. 230,000 Units, $9.00 $2,070,000.00
110 - 110th Avenue N.E. consisting of 230,000
Suite 550 shares and Warrants to
Bellevue, WA 98004 purchase 230,000 Warrant
Telephone: 425-453-1940 Shares
Fax: 425-453-1985
</TABLE>
<PAGE> 18
Appendix I
(one of two)
CELL PATHWAYS, INC.
STOCK CERTIFICATE AND WARRANT QUESTIONNAIRE
Please provide us with the following information:
1. The exact name that your Shares and
Warrants (both must be in the same
name) are to be registered. This is
the name that will appear on your
stock certificate(s) and Warrants. You
may use a nominee name if appropriate: ______________________
2. The relationship between the Purchaser
of the Units and the registered holder
listed in response to item 1 above: ______________________
3. The mailing address of the registered
holder listed in response to item 1 above: ______________________
4. The social security number or tax
identification number of the registered
holder listed in response to item 1 above: ______________________
<PAGE> 19
Appendix I
(two of two)
CELL PATHWAYS, INC.
REGISTRATION STATEMENT QUESTIONNAIRE
------------------------------------
In connection with the preparation of the Registration Statement,
please provide us with the following information:
1. Pursuant to the "Selling Stockholder" section of the Registration
Statement, please state your or your organization's name exactly as it should
appear in the Registration Statement:
2. Please provide the number of shares of Common Stock that you or
your organization will own beneficially or of record immediately after Closing,
including those Shares purchased by you or your organization pursuant to this
Purchase Agreement and those shares purchased by you or your organization
through other transactions (indicating whether you have sole or shared voting or
dispositive power over such securities as determined under applicable rules of
the Securities and Exchange Commission):
VOTING POWER DISPOSITIVE POWER
Sole Shared Sole Shared
__________ __________ __________ __________ Common Stock beneficially owned
prior to the date hereof
__________ __________ __________ __________ Shares being purchased from the
Company
__________ __________ __________ __________ Warrant Shares, issuable upon
exercise of the Warrants being
purchased from the Company
__________ __________ __________ __________ Common Stock issuable upon
exercise of other options or
warrants that you may own, to
the extent such shares of
Common Stock are deemed to be
beneficially owned
TOTAL: ________________ shares of Common Stock beneficially owned
3. Have you or your organization had any position, office or other
material relationship within the past three years with the Company or its
affiliates other than as disclosed in the Company's proxy statement for its 1999
annual meeting of stockholders, or with Janney Montgomery Scott Inc.?
<PAGE> 20
_____ Yes _____ No
If yes, please indicate the nature of any such relationships below:
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
4. Attached is a draft of the proposed "plan of distribution"
section of the Registration Statement. Please confirm that the draft is a
correct and complete statement of your intended plan of distribution.
_____ Yes _____ No
<PAGE> 21
PLAN OF DISTRIBUTION
The Shares being offered by the Selling Shareholder or its
respective pledgees, donees, transferees or other successors in interest, will
be sold in one or more transactions (which may involve block transactions) on
the Nasdaq National Market or on such other market on which the Common Stock may
from time to time be trading, in privately negotiated transactions, through the
writing of options on the Shares, short sales or any combination thereof. The
sale price to the public may be the market price prevailing at the time of sale,
a price related to such prevailing market price or such other price as the
Selling Shareholder determines from time to time. The Shares may also be sold
pursuant to Rule 144. The Selling Shareholder shall have the sole and absolute
discretion not to accept any purchase offer or make any sale of Shares if they
deem the purchase price to be unsatisfactory at any particular time.
The Selling Shareholder or its respective pledgees, donees,
transferee or other successors in interest, may also sell the Shares directly to
market makers acting as principals and/or broker-dealers acting as agents for
themselves or their customers. Brokers acting as agents for the Selling
Shareholder will receive usual and customary commissions for brokerage
transactions, and market makers and block purchasers purchasing the Shares will
do so for their own account and at their own risk. It is possible that the
Selling Shareholder will attempt to sell shares of Common Stock in block
transactions to market makers or other purchasers at a price per share which may
be below the then market price. There can be no assurance with all or any of the
Shares offered hereby will be issued to, or sold by , the Selling Shareholder.
The Selling Shareholder and any brokers, dealers or agents, upon effecting the
sale of any of the Shares offered hereby, may be deemed "underwriters" as that
term is defined under the Securities Act or the Exchange Act, or the rules and
regulations thereunder.
The Selling Shareholder, alternatively, may sell all or any part of
the Shares offered hereby through an underwriter. The Selling Shareholder has
not entered into any agreement with a prospective underwriter and there is no
assurance that any such agreement will be entered into. If the Selling
Shareholder enters into such an agreement or agreements, the relevant details
will be set forth in a supplement or revisions to this Prospectus.
Upon the Company being notified by the Selling Shareholder that any
material arrangement has been entered into with a broker or dealer for the sale
of Shares through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a supplemented
Prospectus will be filed, if required, pursuant to Rule 424(c) under the
Securities Act, disclosing (a) the name of each such broker-dealer, (b) the
number of Shares involved, (c) the price at which such Shares were sold, (d) the
commissions paid or discounts or concessions allowed to such broker-dealer(s),
where applicable, (e) that such broker-dealer(s) did not conduct any
investigation to verify the information set out or incorporated by reference in
this Prospectus, as supplemented, and (f) other facts material to the
transaction.
<PAGE> 22
The Selling Shareholder and any other persons participating in the
sale or distribution of the Shares will be subject to applicable provisions of
the Exchange Act and the rules and regulations thereunder, which provisions may
limit the timing of purchases and sales of any of the Shares by the Selling
Shareholder or any other such person. The foregoing may affect the marketability
of the Shares.
The Company has agreed to indemnify the Selling Shareholder, or its
transferees or assignees, against certain liabilities, including liabilities
under the Securities Act, or to contribute to payments the Selling Shareholder
or its respective pledgees, donees, transferees or other successors in interest,
may be required to make in respect thereof.
The Company is bearing all costs relating to the registration of the
Shares (other than fees and expenses, if any, of counsel or other advisers to
the Selling Shareholder). Any commissions, discounts or other fees payable to
broker-dealers in connection with any sale of the Shares will be borne by the
Selling Shareholder.
<PAGE> 23
APPENDIX II
Attention:
PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE
The undersigned, [AN OFFICER OF, OR OTHER PERSON DULY AUTHORIZED BY]
___________________________________________________ [FILL IN OFFICIAL NAME OF
INDIVIDUAL OR INSTITUTION] hereby certifies that he/she [said institution] is
the Purchaser of the shares evidenced by the attached certificate, and as such,
sold such shares on __________________________________ [DATE] pursuant to and in
accordance with registration statement number ____________________ [FILL IN THE
NUMBER OF OR OTHERWISE IDENTIFY REGISTRATION STATEMENT] and the requirement of
delivering a current prospectus by the Company has been complied with in
connection with such sale.
Print or Type:
Name of Purchaser
(individual or
institution): ______________________
Name of individual
representing
Purchaser (if an
institution) ______________________
Title of individual
representing
Purchaser (if an
institution): ______________________
Signature by:
Individual purchaser
or individual repre-
senting purchaser: ______________________
<PAGE> 1
EXIHIBIT 10.4
PURCHASE AGREEMENT
THIS AGREEMENT is made as of the 8th day of October, 1999,
between Cell Pathways, Inc. (the "Company"), a corporation organized under the
laws of the State of Delaware, with its principal offices at 702 Electronic
Drive, Horsham, Pennsylvania 19044 and each purchaser whose name is set forth on
the signature page hereof (each a "Purchaser" and collectively, the
"Purchasers").
IN CONSIDERATION of the mutual covenants contained in this
Agreement, the Company and each Purchaser, intending to be legally bound, agree
as follows:
SECTION 1. Authorization of Sale of the Units. Subject to the
terms and conditions of this Agreement, the Company has authorized the sale of
up to 200,000 units (the "Units"), each consisting of one share of common stock
("Common Stock"), par value $.01 per share (each a "Share," and together the
"Shares"), of the Company and one warrant (each a "Warrant," and together the
"Warrants") to purchase one share of Common Stock (the "Warrant Shares"). The
terms of the Warrants shall be as set forth in the form of Warrant attached
hereto as Exhibit A. The Shares, Warrant Shares and Warrants are referred to
herein as the "Securities."
SECTION 2. Agreement to Sell and Purchase the Units. At the
Closing (as defined in Section 3), the Company will sell to each Purchaser, and
such Purchaser will buy from the Company, upon the terms and conditions
hereinafter set forth, the number of Units shown, and at the purchase price
shown, opposite such Purchaser's name on Schedule A hereto. The Shares and
Warrants constituting the Units shall become immediately separable and
transferable upon the Closing. The Company may simultaneously enter into a
similar form of this purchase agreement with certain other investors (the "Other
Purchasers") and complete sales of the Units to them, although it is understood
that there is no minimum number of Units that are required to be sold by the
Company. (The Purchaser and the Other Purchasers, if any, are hereinafter
sometimes collectively referred to as the "Purchasers," and this Agreement and
the agreements executed by the Other Purchasers are hereinafter sometimes
collectively referred to as the "Agreements.")
SECTION 3. Delivery of the Units at the Closing. The
completion of the purchase and sale of the Units (the "Closing") shall occur on
October 13, 1999 or such other time as may be agreed upon by the Company and
each Purchaser (the "Closing Date"). At the Closing, the Company shall deliver
to each Purchaser one or more stock certificates for the Shares and one or more
Warrants registered in the name of each Purchaser, or in such name(s) as
designated by each Purchaser, based on the number of Units set forth in Section
2 above. The name(s) in which the stock certificates for the Shares and the
Warrants are to be registered are set forth in the Stock Certificate and Warrant
Questionnaire attached hereto as part of Appendix I. The Company's obligation to
complete the purchase and sale of the Units and deliver such stock
<PAGE> 2
certificate(s) and Warrants to each Purchaser at the Closing shall be subject to
the following conditions, any one or more of which may be waived by the Company
in its sole discretion: (i) receipt by the Company of immediately available
funds in the full amount of the purchase price for the Units being purchased
hereunder; (ii) completion of the purchases and sales under the Agreements with
any Other Purchasers; and (iii) the accuracy of the representations and
warranties made by the Purchasers and the fulfillment of those undertakings of
the Purchasers to be fulfilled prior to the Closing; provided, however, that in
the event that condition (ii) or, with respect to Other Purchasers, condition
(iii) is not met, each Purchaser shall have the right, but not the obligation,
to purchase the Units which such Other Purchaser (the "Defaulting Purchaser")
should have purchased on the same terms, and if Other Purchasers want to
exercise this right, on a pro rata basis (based on the number of Units purchased
hereunder and under the other purchase agreements) with any Other Purchasers
exercising the right, and if the Purchaser and/or Other Purchasers exercise this
right, the condition shall be deemed to have been met. Each Purchaser's
obligation to accept delivery of such stock certificate(s) and Warrants and to
pay for the Units evidenced thereby shall be subject to the accuracy in all
material respects of the representations and warranties made by the Company in
the Purchase Agreement and the fulfillment in all material respects of those
undertakings of the Company to be fulfilled prior to Closing.
SECTION 4. Representations, Warranties and Covenants of the
Company. The Company hereby represents and warrants to, and covenants with, each
Purchaser as follows:
4.1. Organization and Qualification. The Company is a
corporation duly organized and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to conduct its
business as currently conducted. The Company is qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in which the
Company conducts business, except where the failure to do so would not have a
material adverse effect on the business, condition (financial or otherwise) or
results of operations of the Company.
4.2. Authorized and Issued Capital Stock. (a) As of September
30, 1999, the authorized capital stock of the Company consists of (i) 70,000,000
shares of Common Stock, of which 24,550,894 shares were issued and outstanding,
and (ii) 5,000,000 shares of preferred stock, $.01 par value per share, of which
no shares are issued and outstanding. The shares of Common Stock have certain
rights pursuant to the terms of a Rights Agreement, dated as of December 3,
1998, between the Company and Registrar and Transfer Company, as rights agent.
All of the outstanding shares of Common Stock were validly issued and are fully
paid and non-assessable shares.
(b) The Company has registered its Common Stock pursuant to
Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended
(together with the rules and regulations promulgated thereunder, the "Exchange
Act"), and is in full compliance with all
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reporting requirements of the Exchange Act, and such Common Stock is currently
listed or quoted on the Nasdaq National Market.
4.3. Due Execution, Delivery and Performance of the
Agreements. The execution, delivery and performance of the Agreements by the
Company (i) have been duly authorized by all requisite corporate action by the
Company, and (ii) will not violate any law or the Certificate of Incorporation
(the "Certificate of Incorporation") or the Bylaws (the "Bylaws") of the
Company, or any provision of any material indenture, mortgage, agreement,
contract or other material instrument to which the Company is a party or by
which the Company or any of its properties or assets is bound as of the date
hereof, or result in a breach of or constitute (upon notice or lapse of time or
both) a default under any such material indenture, mortgage, agreement, contract
or other material instrument or result in the creation or imposition of any
lien, security interest, mortgage, pledge, charge or other encumbrance, of any
material nature whatsoever, upon any properties or assets of the Company. The
Company has no material subsidiaries, except Cell Pathways Pharmaceuticals, Inc.
Upon their execution and delivery, and assuming the valid execution thereof by
the respective Purchasers, the Agreements will constitute valid and binding
obligations of the Company, enforceable in accordance with their respective
terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law) and except as the indemnification and
contribution agreements of the Company in Section 7.4 hereof may be legally
unenforceable.
4.4. Issuance, Sale and Delivery of the Shares and Warrant
Shares. When issued and paid for, the Shares to be sold hereunder by the Company
and the Warrant Shares to be acquired upon exercise of the Warrants will be
validly issued and outstanding, fully paid and non-assessable shares of Common
Stock. Neither the sale of the Shares and Warrants pursuant to this Agreement,
nor the Company's performance of its obligations under, this Agreement and the
Warrants shall (i) result in the creation or imposition of any liens, charges,
claims or other encumbrances upon the Shares, the Warrant Shares or any of the
assets of the Company, or (ii) entitle the holders of the outstanding Common
Stock to preemptive or other rights to subscribe to or acquire Common Stock or
other securities of the Company.
4.5. Exemption from Registration. Assuming the accuracy of
each Purchaser's representations and warranties set forth in Section 5 hereof,
the offer, issuance and sale of the Units pursuant to this Agreement are and
will be exempt from the registration and prospectus delivery requirements of the
Securities Act of 1933, as amended (together with the rules and regulations
promulgated thereunder, the "Securities Act").
4.6. Additional Information. The Company represents and
warrants that the information contained in the following documents, copies of
which have been furnished to each
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Purchaser, was true and correct in all material respects and did not contain any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements contained therein in light of the circumstances under
which they were made not misleading, in each case as of their respective dates
(the "SEC Documents"):
(i) the Company's 1998 annual report to stockholders;
(ii) the Company's annual report on Form 10-K for the
fiscal year ended December 31, 1998 (without
exhibits);
(iii) the Company's quarterly reports on Form 10-Q for the
three-month periods ended March 31, 1999 and June 30,
1999;
(iv) the notice of annual meeting of stockholders and
proxy statement for the Company's 1999 annual meeting
of stockholders held June 22, 1999; and
(v) all other documents, if any, filed by the Company
with the Securities and Exchange Commission (the
"Commission") since June 30, 1999 pursuant to the
reporting requirements of the Exchange Act.
4.7. No Material Change. As of the date hereof, there has been
no material adverse change in the business, condition (financial or otherwise)
or results of operations of the Company since June 30, 1999, it being understood
that the Company has not achieved revenues and that the continued expenditure of
resources in the Company's continuing operations does not constitute a material
adverse change within the meaning of this paragraph. Without limitation of the
foregoing, each Purchaser also acknowledges being advised by the Company that
(i) the treatment portion of the Phase II/III trial of exisulind in the
prevention of prostate cancer recurrence (the primary endpoint of which relates
to PSA levels) has been completed and data analysis at the Company will begin
shortly, (ii) until such analysis is completed it is impossible for the Company
to understand fully the outcome of the trial, and (iii) the results of such
clinical trial, when released, along with other clinical results and scientific
developments, could materially impact the market price of the Company's shares.
4.8. Legal Opinion. Prior to and as a condition to the
Closing, Richard H. Troy, Esq., General Counsel to the Company, will deliver a
legal opinion to the Purchasers as to the valid issuance of the Shares and the
Warrant Shares, a draft of which has been provided to the Purchasers prior to
the date hereof.
4.9. Listing of Common Stock. The Company shall cause the
Shares and the Warrant Shares to be listed on the Nasdaq National Market and
maintain the listing of the Shares and the Warrant Shares on each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed.
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SECTION 5. Representations, Warranties and Covenants
of the Purchasers.
(a) Each Purchaser acknowledges that the Shares and Warrants
have not been, and that the Warrant Shares will not be, registered under the
Securities Act or any state securities law and may not be offered, sold, pledged
or otherwise transferred (i) in the absence of such registration, (ii) unless
the Company receives an opinion of counsel reasonably acceptable to it that such
offer, sale, pledge or transfer is exempt from any registration and prospectus
delivery requirements of the Securities Act and any applicable state securities
laws or (iii) unless the Shares or Warrant Shares are sold pursuant to Rule 144
promulgated under the Securities Act of 1933, as amended (the "Securities Act")
("Rule 144") in accordance with the terms of such rule. Except as otherwise
permitted by Section 7.3, each certificate for the Shares issued at the Closing
and the Warrant Shares, or upon direct or indirect transfer of or in
substitution thereof, shall be stamped or otherwise imprinted with a legend in
substantially the following form:
The Shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or
under any applicable state securities laws and may not be
offered, sold, pledged or transferred in the absence of such
registration unless the Company receives an opinion of
counsel, in form, substance and scope reasonably acceptable to
the Company, that such offer, sale, pledge or transfer is
exempt from any registration and prospectus delivery
requirements of the Securities Act and such applicable state
securities laws.
Each Purchaser acknowledges and agrees that the Warrants will contain a similar
legend, as set forth on the top of the form of Warrant attached as Exhibit A
hereto.
(b) Each Purchaser represents and warrants, as of the date
hereof and as of the Closing Date, to, and covenants with, the Company that: (i)
the Purchaser, taking into account the personnel and resources it can
practically bring to bear on the purchase of the Units contemplated hereby, is
knowledgeable, sophisticated and experienced in making, and is qualified to
make, decisions with respect to investments in equity securities presenting an
investment decision like that involved in the purchase of the Units, including
investments in equity securities issued by development-state biotechnology
companies; (ii) the Purchaser or its counsel, accountants or other investment
advisers have requested, received, reviewed and considered all information
deemed relevant by them in making an informed decision to purchase the Units,
(iii) the Purchaser is acquiring the Units in the ordinary course of its
business and for its own account for investment only and with no present
intention of distributing any of the Securities, nor is there any arrangement or
understanding with any other persons regarding the distribution of the
Securities; provided however, that such representation and warranty will not
limit the Purchaser's right to sell Shares and the Warrant Shares pursuant to
the Registration Statement or pursuant to an exemption from the Securities Act;
(iv) the Purchaser will not, directly or indirectly, offer, sell (including sell
short), pledge, transfer or otherwise dispose of (or
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<PAGE> 6
solicit any offers to buy, purchase or otherwise acquire or take a pledge of)
any of the Shares and Warrant Shares except in compliance with the Securities
Act, and the rules and regulations promulgated thereunder; (v) the Purchaser has
completed or caused to be completed the Registration Statement Questionnaire and
the Stock Certificate and Warrant Questionnaire, both attached hereto as
Appendix I, for use in preparation of the Registration Statement and the answers
thereto are true, correct and complete in all material respects as of the date
hereof and will be true, correct and complete in all material respects as of the
effective date of the Registration Statement; (vi) the Purchaser has, in
connection with its decision to purchase the Units, relied solely upon the SEC
Documents and the representations and warranties contained herein, as well as
any investigation completed by the Purchaser or its counsel, accountants or
other investment advisers; and (vii) the Purchaser is an "accredited investor"
within the meaning of Rule 501 of Regulation D promulgated under the Securities
Act.
(c) Each Purchaser agrees not to make any sale of the Shares
or the Warrant Shares under the Registration Statement without effectively
causing the prospectus delivery requirement under the Securities Act to be
satisfied, and each Purchaser acknowledges and agrees that such Shares and the
Warrant Shares are not transferable on the books of the Company unless the
certificate submitted to the transfer agent evidencing the Shares or the Warrant
Shares is accompanied by a separate officer's certificate: (i) in the form of
Appendix II hereto, (ii) executed by an officer of, or other authorized person
designated by, the Purchaser, and (iii) to the effect that (A) such Shares or
Warrant Shares have been sold pursuant to and in accordance with the
Registration Statement and (B) the requirement of delivering a current
prospectus has been satisfied, unless exempt from registration and prospectus
delivery requirements. Each Purchaser acknowledges that there may occasionally
be times when the Company must suspend the use of the prospectus forming a part
of the Registration Statement until such time as an amendment to the
Registration Statement has been filed by the Company and declared effective by
the Commission, or until such time as the Company has filed an appropriate
report with the Commission pursuant to the Exchange Act. Each Purchaser agrees
that it will not sell any Securities during the period commencing at the time at
which the Company gives the Purchaser notice of the suspension of the use of
said prospectus and ending at the time the Company gives the Purchaser notice
that the Purchaser may thereafter effect sales pursuant to said prospectus. The
Company shall only be able to suspend the use of said prospectus for periods
aggregating no more than sixty business days in any twelve month period. Each
Purchaser further agrees to notify promptly the Company of the sale of all of
such Purchaser's Securities, and to notify promptly the Company in writing of
any material changes in the information set forth in the Registration Statement
relating to such Purchaser or its plan of distribution, or of any supplemental
information required to be included in the Registration Statement relating to
its plan of distribution.
(d) Each Purchaser further represents and warrants, as of the
date hereof and as of the Closing Date, to, and covenants with, the Company
that: (i) the Purchaser has full right, power, authority and capacity to enter
into this Agreement and to consummate the transactions
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<PAGE> 7
contemplated hereby and has taken all necessary action to authorize the
execution, delivery and performance of this Agreement, and (ii) upon the
execution and delivery of this Agreement, this Agreement shall constitute a
valid and binding obligation of the Purchaser enforceable in accordance with its
terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law) and except as the indemnification and
contribution agreements of the Purchaser in Section 7.4 hereof may be legally
unenforceable.
(e) In consideration for the Company agreeing to its
obligations set forth in Section 7 below in respect of Registrable Securities,
each Purchaser agrees, in connection with any firm commitment underwritten
offering of the Company's Common Stock that, upon the request of the managing
underwriters of such offering, not to sell, make any short sale of, loan, grant
any option for the purchase of, or otherwise dispose of any shares of Common
Stock beneficially owned by it without the prior written consent of such
managing underwriters during the period of time beginning ten days prior to the
date when such managing underwriters advise the Company that they expect to
initiate such public offering and ending at a date not to exceed ninety days
from the commencement of such public offering. Notwithstanding the foregoing,
(i) this obligation shall not apply to the Purchaser unless each of the
Company's directors and officers enter into a similar agreement, and the
Purchaser at such time beneficially owns in excess of 2% of the Company's then
outstanding shares of Common Stock.
SECTION 6. Survival of Representations, Warranties and
Agreements. Notwithstanding any investigation made by any party to this
Agreement, all covenants, agreements, representations and warranties made by the
Company and the Purchaser herein shall survive the execution of this Agreement,
the delivery to the Purchaser of the Units being purchased and the payment
therefor.
SECTION 7. Registration of Shares and Warrant Shares for
Resale
7.1. Registration Procedures and Expenses.
(a) The Company shall as soon as practicable after November 3,
1999, but in no event later than December 31, 1999, prepare and file with the
Commission a registration statement on Form S-3 (or if such form is unavailable
to the Company, on such other form deemed appropriate for the registration of
the Common Stock by the Commission) (the "Registration Statement") to register
the Shares and Warrant Shares ("Registrable Securities") for resale by the
Purchasers in non-underwritten, market transactions, and shall use its best
efforts to cause the Registration Statement to become effective as soon as
practicable thereafter. The Company shall, within three business days before
filing such Registration Statement, provide a draft to each Purchaser and its
counsel and its agent for review and comment;
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<PAGE> 8
(b) The Company shall promptly prepare and file with the
Commission such amendments and supplements to the Registration Statement and the
prospectus used in connection therewith as may be necessary to keep such the
Registration Statement effective until the first to occur of (i) such date when
either all of the Registrable Securities have been sold pursuant thereto or, by
reason of Rule 144(k) of the Commission under the Securities Act or any other
rule of similar effect, the Registrable Securities are no longer required to be
registered for the resale thereof by the Purchasers in ordinary market
transactions without imposition of any volume limitations, or (ii) the second
anniversary of the expiration of the Warrants (the "Registration Period");
(c) The Company shall promptly furnish to each Purchaser and
its agent such number of copies of prospectuses and preliminary prospectuses in
conformity with the requirements of the Securities Act as such Purchaser or its
agent may reasonably request, in order to facilitate the public sale or other
disposition of all or any of the Registrable Securities by such Purchaser;
(d) The Company shall promptly file documents required of the
Company for any required blue sky clearance for the Registrable Securities in
such states specified in writing by each Purchaser or its agent; provided,
however, that the Company shall not be required to (i) qualify to do business or
consent to service of process in any jurisdiction in which it is not now so
qualified or has not so consented, (ii) subject itself to general taxation in
any such jurisdiction, (iii) provide any undertakings that cause the Company
undue burden or expense or (iv) make any change in its charter or bylaws;
(e) The Company shall promptly inform each Purchaser and its
agent when any stop order has been issued with respect to the Registration
Statement and use its best efforts to promptly cause such stop order to be
withdrawn;
(f) The Company shall notify each Purchaser whose shares are
registered on a Registration Statement and its agent at any time when a
prospectus relating to any Registrable Securities covered by such Registration
Statement or a Company Registration Statement is required to be delivered under
the Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing and promptly file such
amendments and supplements as may be necessary so that, as thereafter delivered
to such Purchasers of such Registrable Securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing and use its best efforts
to cause each such amendment and supplement to become effective;
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<PAGE> 9
(g) The Company shall bear all expenses in connection with the
procedures in paragraph (a) through (f) in this Section 7.1 and the registration
of the Shares pursuant to the Registration Statement, other than fees and
expenses, if any, of counsel or other advisers to the Purchaser or the Other
Purchasers and any expenses relating to the sale of the Registrable Securities
by the Purchasers (including without limitation, broker's commissions, discounts
or fees of any nature and transfer taxes or charges of any nature); and
(h) The Company understands that each Purchaser disclaims
being an underwriter, but a Purchaser being deemed an underwriter shall not
relieve the Company of any obligations it has hereunder. A questionnaire related
to the Registration Statement to be completed by each Purchaser is attached as
Appendix I to this Agreement.
7.2. Transfer of Registrable Securities. Each Purchaser agrees
that it will not effect any disposition of Registrable Securities except as
contemplated in the Registration Statement or as otherwise in compliance with
applicable securities laws, and that it will promptly notify the Company of any
material changes in the information set forth in the Registration Statement
regarding the Purchaser or its plan of distribution. Without limitation, each
Purchaser understands that (i) it may not use Registrable Securities to cover a
short position in shares of the Company's Common Stock created prior to the
effective date of the Registration Statement, and (ii) it must deliver a
prospectus in connection with any short sale of the Registrable Securities
unless it is exempt from such requirement.
7.3. Indemnification. For the purpose of this Section 7.3:
(a) the term "Selling Stockholder" shall include the
Purchaser, its officers, directors, agent and/or trustees and any affiliate or
controlling person of such Purchaser or any permitted assign hereunder;
(b) the term "Registration Statement" shall include any final
prospectus, exhibit, supplement or amendment included in or relating to the
Registration Statement referred to in Section 7.1; and
(c) the term "untrue statement" shall include any untrue
statement or alleged untrue statement, or any omission or alleged omission to
state in the Registration Statement a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
The Company agrees to indemnify and hold harmless each Selling
Stockholder from and against any losses, claims, damages or liabilities to which
such Selling Stockholder may become subject (under the Securities Act or
otherwise) insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based
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<PAGE> 10
upon, any breach of the representations set forth in Section 4 hereof by the
Company, or any untrue statement of a material fact contained in the
Registration Statement, or arise out of any failure by the Company to fulfill
any agreement, covenant or undertaking contained in this Agreement or included
in the Registration Statement, and the Company will reimburse such Selling
Stockholder for any reasonable legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action, proceeding or
claim; provided, however, that the Company shall not be liable in any such case
to the extent that such loss, claim, damage or liability arises out of, or is
based upon, (i) an untrue statement made in the Registration Statement in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of such Selling Stockholder specifically for use in the
Registration Statement (which shall be deemed to include the information set
forth in the Registration Statement Questionnaire and in the plan of
distribution section of the prospectus), (ii) the failure of such Selling
Stockholder to comply with the covenants and agreements contained herein
respecting transfer or sale of Registrable Securities, or (iii) any statement or
omission in any Prospectus that is corrected in any subsequent Prospectus that
was delivered to the Purchaser sufficiently prior to the pertinent sale or sales
by the Purchaser. The Company shall also not be liable for amounts paid in
settlement of any loss, claim, damage or liability if such settlement if
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld.
Each Purchaser agrees, severally and not jointly, to indemnify
and hold harmless the Company (and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act, each officer of the
Company who signs the Registration Statement and each director of the Company)
from and against any losses, claims, damages or liabilities to which the Company
(or any such officer, director or controlling person) may become subject (under
the Securities Act or otherwise), insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are
based upon, any breach of the representations set forth in Section 5 hereof by
such Purchaser, or any failure by such Purchaser to comply with the covenants
and agreements contained herein regarding the transfer or sale of Registrable
Securities, or any untrue statement of a material fact contained in the
Registration Statement if such untrue statement was made in reliance upon and in
conformity with written information furnished by or on behalf of the Purchaser
specifically for use in the Registration Statement. Each Purchaser will
reimburse, severally and not jointly, the Company (or such officer, director or
controlling person), as the case may be, for any legal or other documented
expenses reasonably incurred in investigating, defending or preparing to defend
any such action, proceeding or claim. Each Purchaser agrees that the information
regarding the Purchaser or its officers, directors and affiliates and their
intended plan of distribution of the Shares set forth in the Registration
Statement questionnaire, the form of which is attached as Appendix 1, or
included from time to time in the Registration Statement (including without
limitation the plan of distribution section of the Registration Statement) shall
be deemed to be written information furnished to the Company by or on behalf of
the Purchaser specifically for use in the Registration
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Statement. The foregoing indemnification shall be limited in amount as to each
Purchaser to the Purchase Price paid by such Purchaser hereunder.
Promptly after receipt by any indemnified person of a notice
of a claim or the beginning of any action in respect of which indemnity is to be
sought against an indemnifying person pursuant to this Section 7.3, such
indemnified person shall notify the indemnifying person in writing of such claim
or of the commencement of such action; provided, however, that any failure by an
indemnified person to notify an indemnifying person shall not relieve the
indemnifying person from its obligations hereunder except to the extent that the
indemnifying person is materially prejudiced thereby. Subject to the provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and such indemnifying person shall have been notified
thereof, such indemnifying person shall be entitled to participate therein, and,
to the extent it shall wish, to assume and control the defense thereof, with
counsel reasonably satisfactory to such indemnified person. After notice from
the indemnifying person to such indemnified person of its election to assume the
defense thereof, such indemnifying person shall not be liable to such
indemnified person for any legal expenses subsequently incurred by such
indemnified person in connection with the defense thereof; provided, however,
that if there exists a conflict of interest that would make it inappropriate, in
the opinion of counsel to the indemnifying person, for the same counsel to
represent both the indemnified person and such indemnifying person or any
affiliate or associate thereof, the indemnified person shall be entitled to
retain its own counsel at the expense of such indemnifying person; provided
further, however, that no indemnifying person shall be responsible for the fees
and expenses of more than one separate counsel for all indemnified parties
hereunder and under the other Agreements.
If the indemnification provided for in this Section 7.3 from
the indemnifying person would be applicable by its terms but is otherwise
unavailable, as determined by a court of applicable jurisdiction, to an
indemnified person hereunder in respect of any losses, claims, damages,
liabilities or expenses referred to herein, then the indemnifying person, in
lieu of indemnifying such indemnified person, shall contribute to the amount
paid or payable by such indemnified person as a result of such losses, claims,
damages, liabilities or expenses in such proportion as is appropriate to reflect
the relative fault of the indemnifying person and indemnified persons in
connection with the actions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative fault of such indemnifying person and indemnified persons shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact, has been
made by, or relates to information supplied by, such indemnifying person or
indemnified persons, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include, subject to the
limitations set forth in this Section 7.3, any reasonable legal or other fees or
expenses reasonably incurred by such party in connection with any investigation
or proceeding.
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The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 7.3 were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 7.3, no Purchaser
shall be required to contribute any amount in excess of the dollar amount of the
proceeds received by such Purchaser upon the sale of the Registrable Securities,
giving rise to such contribution obligation. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
7.4. Termination of Conditions and Obligations. The conditions
imposed by Section 5 or this Section 7 upon the transferability of Registrable
Securities shall cease and terminate as to any particular number of Registrable
Securities when such Registrable Securities shall have been effectively
registered under the Securities Act and sold or otherwise disposed of in
accordance with the intended method of disposition set forth in the Registration
Statement, or at such time as an opinion of counsel satisfactory to the Company
shall have been rendered to the effect that such conditions are not necessary in
order to comply with the Securities Act.
7.5. Continued Availability of Information. So long as the
Registration Statement is effective covering the resale of Registrable
Securities owned by the Purchaser, the Company will furnish to the Purchaser:
(a) as soon as practicable after available (but in the case of
the Company's Annual Report to Stockholders, within 120 days after the end of
each fiscal year of the Company), one copy of (i) its Annual Report to
Stockholders (which Annual Report shall contain financial statements audited in
accordance with generally accepted accounting principles by a firm of certified
public accountants), (ii) if not included in substance in the Annual Report to
Stockholders, its Annual Report on Form 10-K, (iii) any quarterly reports to
stockholders, and if not included in substance in its quarterly reports to
stockholders, its quarterly reports on Form 10-Q, and (iv) a full copy of the
Registration Statement (the foregoing, in each case, excluding exhibits);
(b) upon the reasonable request of a Purchaser or its agent,
all exhibits excluded by the parenthetical to subparagraph (a)(iv) of this
Section 7.5 and all other information that is made available to shareholders;
and
(c) upon the reasonable request of a Purchaser or its agent,
an adequate number of copies of the prospectuses to supply to any other party
requiring such prospectuses;
and the Company, upon the reasonable request of a Purchaser or its agent, will
meet with the Purchaser or a representative thereof at the Company's
headquarters to discuss all information
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relevant for disclosure in the Registration Statement and will otherwise
cooperate with any Purchaser conducting an investigation for the purpose of
reducing or eliminating such Purchaser's exposure to liability under the
Securities Act, including the reasonable production at the Company's
headquarters of non-confidential information (and, upon execution of a
confidentiality agreement satisfactory to the Company, confidential
information).
7.6. Reports under Exchange Act. With a view to making
available to the Purchasers the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the Commission that may at
any time permit a Purchaser to sell Registrable Securities to the public without
registration, and with a view to making it possible to register the Registrable
Securities pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep available public information, as understood
and defined in Rule 144, at all times;
(b) file with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act and the
Exchange act; and
(c) furnish to a Purchaser owning any Registrable Securities
or its agent upon reasonable request (i) a written statement by the Company that
is has complied with the reporting requirements of Rule 144, the Securities Act
and the Exchange act, or that it qualifies as a registrant whose Registrable
Securities may be resold pursuant to Form S-3 (at any time after it so
qualified, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably required in availing any Purchaser
of Registrable Securities of any rule or regulation of the Commission which
permits the selling of any such Registrable Securities without registration or
pursuant to such form.
SECTION 8. Broker's Fees. Each of the parties hereto hereby
represents that, on the basis of any actions and agreements by it, there are no
brokers or finders entitled to compensation in connection with the sale of the
Shares to the Purchaser, except for the Company's obligations to Janney
Montgomery Scott Inc. which has acted as adviser to the Company.
SECTION 9. Expenses. At the Closing, each party hereto shall
bear its own expenses.
13
<PAGE> 14
SECTION 10. Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be sent by a nationally
recognized overnight express courier postage prepaid, and shall be deemed given
one day after being so sent and shall be delivered as addressed as follows:
(a) if to the Company, to:
Cell Pathways, Inc.
702 Electronic Drive
Horsham, PA 19044
Attention: Robert J. Towarnicki
President and Chief Executive Officer
with copies so mailed to:
Richard H. Troy, Esq.
Senior Vice President, General Counsel and Secretary
Cell Pathways, Inc.
702 Electronic Drive
Horsham, PA 19044
and to
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, Pennsylvania 19103-2921
Attention: David R. King, Esq.
or to such other person at such other place as the
Company shall designate to the Purchaser in writing;
and
(b) if to the Purchaser, at the address set forth on Schedule
A hereto, or at such other address or addresses as may have been furnished to
the Company in writing,
SECTION 11. Entire Agreement; Changes. This Agreement sets
forth the entire agreement of the parties and may not be modified or amended
except pursuant to an instrument in writing signed by the Company and the
Purchaser.
SECTION 12. Headings. The headings of the various sections of
this Agreement have been inserted for convenience of reference only and shall
not be deemed to be part of this Agreement.
14
<PAGE> 15
SECTION 13. Severability. In case any provision contained in
this Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
SECTION 14. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT
GIVING EFFECT TO CONFLICTS OF LAWS.
SECTION 15. Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute but one instrument, and shall
become effective when one or more counterparts have been signed by each party
hereto and delivered to the other parties.
SECTION 16. Assignment. The Purchaser (or any permitted
assignee) may assign its rights under Section 7 of this Agreement to any
subsequent holder of any or all of the Units who has purchased at least 50,000
Shares or Warrants to purchase at least 50,000 Shares from such Purchaser (or
permitted assignee), provided that the Company shall have the right to require
any such holder of any or all of the Shares to execute a counterpart of this
Agreement and agree to be bound by the provisions of this Agreement as a
condition to such holder's claim to any rights hereunder.
15
<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized representatives as of the day
and year first above written.
CELL PATHWAYS, INC.
By: /s/ Robert J. Towarnicki
-------------------------------------
Name:Robert J. Towarnicki
Title:President and Chief Executive Officer
JACKSON BOULEVARD VENTURES, L.P.
By: Jackson Capital Management Ltd.,
its General Partner
By: /s/ Paul Duggan
-------------------------------------
Name: Paul Duggan
Title: President
16
<PAGE> 17
<TABLE>
<CAPTION>
SCHEDULE A
NUMBER OF UNITS PRICE AGGREGATE
NAME AND ADDRESS OF PURCHASER TO BE PURCHASED PER UNIT PURCHASE PRICE
<S> <C> <C> <C>
Jackson Boulevard Ventures, L.P. 200,000 Units, consisting of $9.00 $1,800,000.00
Address: 53 West Jackson Blvd. 200,000 Shares and Warrants to
Chicago, IL 60604 purchase 200,000 Warrant Shares
Telephone: 312-294-6440
Fax: 312-294-6449
Email: [email protected]
</TABLE>
<PAGE> 18
Appendix I
(one of two)
CELL PATHWAYS, INC.
STOCK CERTIFICATE AND WARRANT QUESTIONNAIRE
<TABLE>
<CAPTION>
Please provide us with the following information:
<S> <C>
1. The exact name that your Shares and Warrants (both must be in the same
name) are to be registered. This is the name that will appear on your
stock certificate(s) and Warrants. You may use a nominee name if
appropriate: ----------------------
2. The relationship between the Purchaser of the Units and the registered
holder listed in response to item 1 above: ----------------------
3. The mailing address of the registered holder listed in response to
item 1 above: ----------------------
----------------------
4. The social security number or tax identification number of the
registered holder listed in response to item 1 above: ----------------------
</TABLE>
<PAGE> 19
Appendix I
(two of two)
CELL PATHWAYS, INC.
REGISTRATION STATEMENT QUESTIONNAIRE
In connection with the preparation of the Registration
Statement, please provide us with the following information:
1. Pursuant to the "Selling Stockholder" section of the
Registration Statement, please state your or your organization's name exactly as
it should appear in the Registration Statement:
2. Please provide the number of shares of Common Stock that
you or your organization will own beneficially or of record immediately after
Closing, including those Shares purchased by you or your organization pursuant
to this Purchase Agreement and those shares purchased by you or your
organization through other transactions (indicating whether you have sole or
shared voting or dispositive power over such securities as determined under
applicable rules of the Securities and Exchange Commission):
<TABLE>
<CAPTION>
VOTING POWER DISPOSITIVE POWER
<S> <C> <C> <C> <C>
Sole Shared Sole Shared
__________ __________ __________ __________ Common Stock beneficially owned prior to the
date hereof
__________ __________ __________ __________ Shares being purchased from the Company
__________ __________ __________ __________ Warrant Shares, issuable upon exercise of the Warrants being
purchased from the Company
__________ __________ __________ __________ Common Stock issuable upon exercise of other options or warrants
that you may own, to the extent such shares of Common Stock are
deemed to be beneficially owned
TOTAL: ________________ shares of Common Stock beneficially owned
</TABLE>
3. Have you or your organization had any position, office or
other material relationship within the past three years with the Company or its
affiliates other than as disclosed in the Company's proxy statement for its 1999
annual meeting of stockholders, or with Janney Montgomery Scott Inc.?
<PAGE> 20
_____ Yes _____ No
If yes, please indicate the nature of any such relationships below:
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
4. Attached is a draft of the proposed "plan of distribution"
section of the Registration Statement. Please confirm that the draft is a
correct and complete statement of your intended plan of distribution.
_____ Yes _____ No
<PAGE> 21
PLAN OF DISTRIBUTION
The Shares being offered by the Selling Shareholder or its
respective pledgees, donees, transferees or other successors in interest, will
be sold in one or more transactions (which may involve block transactions) on
the Nasdaq National Market or on such other market on which the Common Stock may
from time to time be trading, in privately negotiated transactions, through the
writing of options on the Shares, short sales or any combination thereof. The
sale price to the public may be the market price prevailing at the time of sale,
a price related to such prevailing market price or such other price as the
Selling Shareholder determines from time to time. The Shares may also be sold
pursuant to Rule 144. The Selling Shareholder shall have the sole and absolute
discretion not to accept any purchase offer or make any sale of Shares if they
deem the purchase price to be unsatisfactory at any particular time.
The Selling Shareholder or its respective pledgees, donees,
transferee or other successors in interest, may also sell the Shares directly to
market makers acting as principals and/or broker-dealers acting as agents for
themselves or their customers. Brokers acting as agents for the Selling
Shareholder will receive usual and customary commissions for brokerage
transactions, and market makers and block purchasers purchasing the Shares will
do so for their own account and at their own risk. It is possible that the
Selling Shareholder will attempt to sell shares of Common Stock in block
transactions to market makers or other purchasers at a price per share which may
be below the then market price. There can be no assurance with all or any of the
Shares offered hereby will be issued to, or sold by , the Selling Shareholder.
The Selling Shareholder and any brokers, dealers or agents, upon effecting the
sale of any of the Shares offered hereby, may be deemed "underwriters" as that
term is defined under the Securities Act or the Exchange Act, or the rules and
regulations thereunder.
The Selling Shareholder, alternatively, may sell all or any
part of the Shares offered hereby through an underwriter. The Selling
Shareholder has not entered into any agreement with a prospective underwriter
and there is no assurance that any such agreement will be entered into. If the
Selling Shareholder enters into such an agreement or agreements, the relevant
details will be set forth in a supplement or revisions to this Prospectus.
Upon the Company being notified by the Selling Shareholder
that any material arrangement has been entered into with a broker or dealer for
the sale of Shares through a block trade, special offering, exchange
distribution or secondary distribution or a purchase by a broker or dealer, a
supplemented Prospectus will be filed, if required, pursuant to Rule 424(c)
under the Securities Act, disclosing (a) the name of each such broker-dealer,
(b) the number of Shares involved, (c) the price at which such Shares were sold,
(d) the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable, (e) that such broker-dealer(s) did not
conduct any investigation to verify the information set out or incorporated by
reference in this Prospectus, as supplemented, and (f) other facts material to
the transaction.
<PAGE> 22
The Selling Shareholder and any other persons participating in
the sale or distribution of the Shares will be subject to applicable provisions
of the Exchange Act and the rules and regulations thereunder, which provisions
may limit the timing of purchases and sales of any of the Shares by the Selling
Shareholder or any other such person. The foregoing may affect the marketability
of the Shares.
The Company has agreed to indemnify the Selling Shareholder,
or its transferees or assignees, against certain liabilities, including
liabilities under the Securities Act, or to contribute to payments the Selling
Shareholder or its respective pledgees, donees, transferees or other successors
in interest, may be required to make in respect thereof.
The Company is bearing all costs relating to the registration
of the Shares (other than fees and expenses, if any, of counsel or other
advisers to the Selling Shareholder). Any commissions, discounts or other fees
payable to broker-dealers in connection with any sale of the Shares will be
borne by the Selling Shareholder.
<PAGE> 23
APPENDIX II
Attention:
PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE
The undersigned, [AN OFFICER OF, OR OTHER PERSON DULY AUTHORIZED BY]
---------------------------------------------- [FILL IN OFFICIAL NAME OF
INDIVIDUAL OR INSTITUTION] hereby certifies that he/she [said institution] is
the Purchaser of the shares evidenced by the attached certificate, and as such,
sold such shares on ----- [DATE] pursuant to and in accordance with registration
statement number----------------------[FILL IN THE NUMBER OF OR OTHERWISE
IDENTIFY REGISTRATION STATEMENT] and the requirement of delivering a current
prospectus by the Company has been complied with in connection with such sale.
Print or Type:
Name of Purchaser
(individual or
institution): --------------------------
Name of individual
representing
Purchaser (if an --------------------------
institution)
Title of individual
representing
Purchaser (if an
institution): --------------------------
Signature by:
Individual purchaser
or individual repre-
senting purchaser: --------------------------
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Cell Pathways, Inc.:
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated March 16, 1999
included in Cell Pathways, Inc.'s Form 10-K for the year ended December 31, 1998
and to all references to our Firm included in this registration statement.
/s/ Arthur Andersen LLP
Philadelphia, Pennsylvania
December 29, 1999
