As filed with the Securities and Exchange Commission on
November 15, 1995
Registration No. 33-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED
PHARMOS CORPORATION
___________________
(Exact name of registrant as specified in its charter)
Nevada 36-3207413
______ __________
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
2 Innovation Drive
Alachua, Florida 32615
(904) 462-1210
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
S. COLIN NEILL
2 Innovation Drive
Alachua, Florida 32615
(904) 462-1210
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Copies to:
ADAM D. EILENBERG, ESQ.
Fitzpatrick Eilenberg & Zivian
666 Third Avenue, 30th Floor
New York, New York 10017
Approximate date of commencement of proposed sale to public:
As soon as practicable after the effective date of the
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. | |
___
<PAGE>
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 in connection with dividend or interest reinvestment
plans, check the following box. | X |
___
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<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
_______________________________
<S> <C> <C> <C> <C>
Proposed
Maximum Proposed
Title of Each Class of Amount to Offering Maximum Amount of
Securities to be be Price Aggregate Registration
Registered Registered Per Unit Price Fee
Shares of Common stock 6,000,000 $1.84(2) $11,040,000 $3807
to be sold by Selling
Security holders(1)
Shares of Common Stock 900,000 $1.80 $1,620,000 $559
issuable upon exercise
of Warrants to purchase
900,000 Shares at $1.80
per share*
Shares of Common Stock 10,000 $0.78 $7,800 $3
issuable upon exercise
of Warrants to purchase
10,000 Shares at $.78
per share*
Shares of Common Stock 50,000 $0.75 $37,500 $13
issuable upon exercise
of Warrants to purchase
50,000 Shares at $.75
per share*
Shares of Common Stock 50,000 $1.00 $50,000 $17
issuable upon exercise
of Warrants to purchase
50,000 Shares at $1.00
per share*
Shares of Common Stock 50,000 $1.50 $75,000 $26
issuable upon exercise
of Warrants to purchase
50,000 Shares at $1.50
per share*
Shares of Common Stock 10,000 $1.88 $18,800 $6
issuable upon exercise
of Warrants to purchase
10,000 Shares at $1.88
per share*
Total Registration Fee $12,849,100 $4,431
3
<PAGE>
<FN>
(1) To be offered by selling security holders, at their
discretion, from time to time over a period of three years
from the effective date of this Registration Statement, at
prevailing market prices at time of sale.
(2) Estimated solely for the purpose of calculating the
registration fee. Proposed maximum offering price per share
is estimated based upon the average of the high and low
prices of the Company's Common Stock listed on the Nasdaq
SmallCap Market on November 10, 1995.
* The amount of shares issuable upon exercise of the Warrants
may be increased solely to account for applicable anti-
dilution adjustments, if any.
_____________________
</FN>
</TABLE>
The registrant hereby amends the 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.
4
<PAGE>
PHARMOS CORPORATION
Cross Reference Sheet Showing Location in Prospectus of
Information Required Therein by Item 1 through 13 of Form S-3
Registration Statement Prospectus Caption
Item and Heading of Location
_______________________ ___________________
1 Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus . . . . . Outside Front Cover
2 Inside Front and Outside Back
Cover Pages and Prospectus . . . . Inside Front Cover Page
3 Summary Information,
Prospectus Summary
and Ratio of Earnings to Outside Front Cover,
Fixed Charges . . . . . . . . . . Risk Factors
4 Use of Proceeds . . . . . . . . . . Use of Proceeds
5 Determination of Offering Price . . Cover Page
6 Dilution . . . . . . . . . . . . . Dilution
7 Selling Security Holders . . . . . Selling Security Holders
8 Plan of Distribution . . . . . . . Cover Page, Plan of
Distribution
9 Description of the Securities to
be Registered . . . . . . . . . . . Description of Securities
10 Interest of Named Experts and
Counsel . . . . . . . . . . . . . . Experts
11 Material Changes . . . . . . . . . Recent Developments
12 Incorporation of Certain
Information by Reference . . . . . Incorporation of Certain
Documents by Reference
13 Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities . . . . . . . . . . Commission's Policy on
Indemnification for
Securities Act
Liabilities
5
<PAGE>
SUBJECT TO COMPLETION,
DATED NOVEMBER 15, 1995
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR
AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES
HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
THESE SECURITIES MAY INTO BE SOLD NOR MAY OFFERS TO BUY BE
ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY
SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
PHARMOS CORPORATION
6,000,000 SHARES OF COMMON STOCK,
$.03 PAR VALUE, TO BE SOLD BY
SELLING SECURITY HOLDERS
900,000 SHARES OF COMMON STOCK ISSUABLE
UPON EXERCISE OF WARRANTS TO PURCHASE SHARES
AT AN EXERCISE PRICE OF $1.80 PER SHARE
10,000 SHARES OF COMMON STOCK ISSUABLE
UPON EXERCISE OF WARRANTS TO PURCHASE SHARES
AT AN EXERCISE PRICE OF $0.78 PER SHARE
50,000 SHARES OF COMMON STOCK ISSUABLE
UPON EXERCISE OF WARRANTS TO PURCHASE SHARES
AT AN EXERCISE PRICE OF $0.75 PER SHARE
50,000 SHARES OF COMMON STOCK ISSUABLE
UPON EXERCISE OF WARRANTS TO PURCHASE SHARES
AT AN EXERCISE PRICE OF $1.00 PER SHARE
50,000 SHARES OF COMMON STOCK ISSUABLE
UPON EXERCISE OF WARRANTS TO PURCHASE SHARES
AT AN EXERCISE PRICE OF $1.50 PER SHARE
10,000 SHARES OF COMMON STOCK ISSUABLE
UPON EXERCISE OF WARRANTS TO PURCHASE SHARES
AT AN EXERCISE PRICE OF $1.88 PER SHARE
This Prospectus covers the proposed offer and resale of up
to 6,000,000 shares (the "Shares") of common stock, par value
$.03 ("Common Stock") of Pharmos Corporation (the "Company") held
by stockholders (the "Selling Stockholders") who purchased such
Shares in a private placement transaction in September 1995 (the
"Private Placement Transaction").
<PAGE>
This Prospectus also covers the offer and proposed sale by
the Company of up to (i) 900,000 shares of Common Stock issuable
upon the exercise by the holders thereof of warrants to purchase
900,000 shares (which amount may increase solely to account for
applicable anti-dilution adjustments, if any) at an exercise
price of $1.80 per share issued to the Selling Stockholders and
to two finders in connection with the Private Placement
Transaction; (ii) 10,000 shares of Common Stock issuable upon the
exercise by the holder thereof of warrants to purchase 10,000
shares at an exercise price of $0.78 per share issued to the
Company's financial advisor in connection with the Company's
acquisition of Oculon Corporation in April 1995; (iii) 150,000
shares of Common Stock issuable upon the exercise by the holder
thereof of warrants to purchase 150,000 shares issued to the
Company's investment banker\financial consultant and exercisable
as follows: 50,000 of such warrants are exercisable at a price of
$0.75 per share, 50,000 of such warrants are exercisable at a
price of $1.00 per share, and 50,000 of such warrants are
exercisable at a price of $1.50 per share; and (iv) 10,000 shares
of Common Stock issuable upon the exercise by the holder thereof
of warrants to purchase 10,000 shares at an exercise price of
$1.88 per share issued to the Company's Acting Chief Financial
Officer in connection with his efforts on behalf of the Company
in the Private Placement Transaction. (All of the warrants set
forth above are hereinafter separately and collectively referred
to as the "Warrants" and the shares of Common Stock issuable upon
the exercise of the Warrants are hereinafter separately and
collectively referred to as the "Warrant Shares.")
In connection with this offering, the Selling Stockholders
and certain holders of the Warrants who may be deemed to be
"affiliates" of the Company, as that term is defined under the
Securities Act of 1933, as amended (the "Act"), may be deemed to
be an "underwriter," as that term is defined under the Act, of
the Shares or Warrant Shares offered hereby. It is anticipated
that the Selling Stockholders and such affiliates intend to sell
the Shares or Warrant Shares offered hereby from time to time for
their own respective accounts in the open market at the prices
prevailing therein or in individually negotiated transactions at
such prices as may be agreed upon. Each Selling Stockholder and
such affiliate will bear all expenses with respect to the
offering of the Shares or Warrant Shares offered hereby by him
except the costs of legal counsel and costs associated with
registering such shares under the Act and preparing and printing
this Prospectus.
The net proceeds from Shares to be sold by the Selling
Stockholders (and by holders of Warrant Shares who exercise their
Warrants) will inure entirely to their benefit and not that of
the Company; however the Company will receive proceeds from the
exercise of the Warrants.
(ii)
<PAGE>
The Company's Common Stock is traded on the over-the-counter
market and is quoted on the Nasdaq SmallCap Market under the
symbol "PARS" The closing price of the Company's Common Stock on
November 10, 1995 was $1.88.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SUBSTANTIAL
DILUTION AS DESCRIBED HEREIN (SEE "RISK FACTORS" AND "DILUTION").
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is ____________________, 1995.
(iii)
<PAGE>
The laws of many states provide exemptions from
registration, particularly for sales of securities by persons
other than issuers, such as the certain of the Selling
Stockholders and holders of the Warrants, who do not have a
control relationship with the issuer, and for the subsequent
resale of such securities by purchasers thereof. Purchasers
hereunder should consult with their broker and/or attorney to
determine whether applicable state laws permit such purchases and
resales by them.
With respect to the proposed sale of the Shares offered
hereby by the Selling Stockholders and the sale of the Warrant
Shares by the Company upon exercise of the Warrants, the Company
is taking steps to register these securities or permit such sales
pursuant to exemption from registration only under the laws of
California, Colorado, Connecticut, Florida, Georgia, Illinois,
Kentucky, Pennsylvania, New Jersey and New York. However, if
holders of the Shares are not residents of the aforementioned
states, such holders will not be able to resell their Shares in
any other states, including the states in which they reside. In
such event, such holders must arrange either (i) to sell their
Shares (through a broker/dealer or otherwise) only to a resident
of one of the aforementioned states or to an entity, such as a
broker/dealer registered in such state, which may be exempt under
applicable state laws, or (ii) pursuant to another applicable
exemption. In such event, the Company will only permit the
transfer of the Shares if its transfer agent receives a
certification from the holder that the sale was made to a
resident of one of the aforementioned states or to a state
registered broker/dealer or the Company receives an opinion of
counsel, satisfactory to the Company's counsel, that the resale
of the Shares is otherwise exempt from registration under
applicable state law.
With respect to the proposed sale of the Warrant Shares, if
holders of the Warrants are not residents of the aforementioned
states, the Company will not be able to permit them to exercise
_______________________________________________________
Warrants held by them, unless such holders obtain an opinion of
______________________
counsel, satisfactory to the Company's counsel, that such
transaction is exempt from registration. Under such
circumstances, their only alternatives may be to sell their
Warrants and/or Common Stock to a resident of the aforementioned
states or to sell their Warrants and/or Warrant Shares to an
entity, such as a registered broker-dealer in such state, which
may be exempt under applicable state laws.
Holders of the Warrants and/or Warrant Shares should consult
with their broker and/or attorney to determine what actions
should be taken to comply with the laws of their state with
respect to any Warrants and/or Warrant Shares held by them and,
specifically with respect to the Warrants, ensure that such
(iv)
<PAGE>
action is taken well prior to the respective expiration dates of
the Warrants, if necessary.
The Company will furnish to each person to whom this
Prospectus is delivered, upon written request, a copy of any or
all of the documents referred to by reference, other than
exhibits to such documents unless such exhibits are specifically
incorporated herein by reference. Requests should be addressed
to: Mr. S. Colin Neill, Acting Chief Financial Officer, Pharmos
Corporation, 2 Innovation Drive, Alachua, Florida 32615, (904)
462-1210.
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN
THOSE CONTAINED IN THIS PROSPECTUS. ANY INFORMATION OR
REPRESENTATION NOT HEREIN CONTAINED, IF GIVEN OR MADE, MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN
RESPECT OF THE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER
OR SOLICITATION WOULD BE UNLAWFUL. DELIVERY OF THIS PROSPECTUS
SHALL NOT, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE
DATE OF THIS PROSPECTUS.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange
Commission, 450 Fifth Street, Washington, D.C. 20549, a
Registration Statement on Form S-3 under the Securities Act of
1933 with respect to the securities offered hereby. This
Prospectus filed as part of such Registration Statement does not
contain all the information set forth in, or annexed as exhibits
to, the Registration Statement. For further information
pertaining to the securities offered hereby and the Company,
reference is made to the Registration Statement and the exhibits
thereto. The Registration Statement and exhibits thereto may be
inspected at the Headquarters Office of the Securities and
Exchange Commission located at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549 and at certain of the Commission's
regional offices at the following addresses: 75 Park Place, New
York, New York; Room 1204, S. Dearborn Street, Chicago, IL 60604;
and Suite 500 East, 5757 Wilshire Blvd., Los Angeles, CA 90036.
Copies of such material may be obtained from the Public Reference
Section of the SEC, at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. at prescribed rates. The statements contained
in this Prospectus concerning the contents of any contract or
document referred to are not necessarily complete, and in each
instance, reference is made to such contract or document filed as
an exhibit to the Registration Statement, each statement being
qualified in all respects by provisions of such exhibit to which
reference is hereby made for a full statement of the provisions
thereof.
(v)
<PAGE>
THE COMPANY
The Company is engaged in the development of novel
pharmaceuticals based on innovative drug delivery technologies
targeting diseases of the eye, principally ocular inflammation,
and the brain, principally stroke and head trauma.
Its leading product, LotemaxTM, is an ophthalmic anti-
inflammatory drug designed with the Company's proprietary "site
active" delivery system and has demonstrated significant efficacy
in a series of completed Phase III clinical trials and a uniquely
superior safety profile compared to currently available
ophthalmic steroids. The Company has completed the submission of
its New Drug Application ("NDA") for LotemaxTM to the U.S. Food
and Drug Administration ("FDA").
The Company's principal executive offices are located at 2
Innovation Drive, Alachua, Florida 32615, telephone (904) 462-
1210.
RISK FACTORS
The Common Stock being offered hereby involves a high degree
of risk. Prospective investors should carefully consider the
following risk factors in addition to other information contained
in this Prospectus, in evaluating an investment in the shares of
Common Stock offered hereby.
Early Stage of Development; Technological Uncertainty
Pharmos is at an early stage of development. Apart from
LotemaxTM, most of the Company's other potential products are
early in the research and development phase, and product revenues
may not be realized from the sale of any such products for at
least the next several years, if at all. Many of the Company's
proposed products will require significant additional research
and development efforts prior to any commercial use, including
extensive preclinical and clinical testing as well as lengthy
regulatory approval. There can be no assurance that the
Company's research and development efforts will be successful,
that the Company's potential products will prove to be safe and
effective in clinical trials or that any commercially successful
products will ultimately be developed by the Company.
History of Operating Losses; Accumulated Deficit
The Company has experienced significant operating losses
since its inception. As of September 30, 1995, the Company had
an accumulated deficit of approximately $53 million. The Company
expects to incur operating losses over at least the next several
years as the Company's research and development efforts and
preclinical and clinical testing activities continue. The
Company's ability to achieve profitability depends in part upon
its ability, alone or with others, to successfully commercialize
<PAGE>
and receive approval on its first proposed product, to complete
development of its other proposed products, to obtain required
regulatory approvals and to manufacture and market such products.
Future Capital Needs; Uncertainty of Additional Financing
The Company's operations to date have consumed substantial
amounts of cash. The development of the Company's technology and
potential products will require a commitment of substantial funds
to conduct the costly and time-consuming research necessary to
develop and optimize such technology, and ultimately, to
establish manufacturing and marketing capabilities. The
Company's future capital requirements will depend on many
factors, including continued scientific progress in the research
and development of the Company's technology and drug programs,
the ability of the Company to establish and maintain
collaborative arrangements with others for drug development,
progress with preclinical and clinical trials, the time and costs
involved in obtaining regulatory approvals, the costs involved in
preparing, filing, prosecuting, maintaining and enforcing patent
claims, competing technological and market developments, changes
in its existing research relationships and effective product
commercialization activities and arrangements.
The Company believes that its current cash resources and
interest income thereon, including approximately $8.1 million in
net cash and cash equivalents received by the Company from the
Private Placement Transaction and contractual amounts due from
Bausch & Lomb Pharmaceuticals, Inc. ("Bausch & Lomb") under the
Company's marketing and manufacturing agreement with Bausch &
Lomb (See "Recent Developments"), should be sufficient to fund
its operating expenses and capital requirements as currently
planned through March 1997. The Company will seek additional
funding through collaborative arrangements or through future
public or private equity or debt financing. There can be no
assurance that additional financing will be available on
acceptable terms, or at all. If additional funds are raised by
issuing equity securities, further dilution to stockholders may
result. If adequate funds are not available, the Company may be
required to delay, reduce the scope of or eliminate one or more
of its research or development programs or to obtain funds
through arrangements with collaborative partners or others that
may require the Company to relinquish rights to certain of its
technologies, product candidates or products that the Company
would otherwise seek to develop or commercialize itself.
Dependence on Potential Collaborative Partners
The Company's strategy for the development, clinical
testing, manufacturing, marketing and commercialization of
certain of its products includes entering into various
collaborations with corporate partners, licensors, licensees and
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<PAGE>
others. To date, the Company has entered into an agreement with
Bausch & Lomb to manufacture and market its lead product,
LotemaxTM, in the United States. The agreement also covers the
co-development of LotemaxTM line extension products currently
being developed by the Company (See "Recent Developments").
There can be no assurance that the Company will be able to
negotiate any future collaborative agreement with companies on
acceptable terms, or that any present or future collaborative
agreements will be successful. To the extent that the Company
chooses not to or is not able to establish such arrangements,
the Company would experience increased capital requirements to
undertake such activities at its own expense. In addition, the
Company may encounter significant delays in introducing its
proposed products currently under development into certain
markets or find that the development, manufacture, or sale of its
proposed products in such markets is adversely affected by the
absence of such collaborative agreements.
Technological Change and Competition
The pharmaceutical industry is subject to rapid,
unpredictable and significant technological change. Competition
from universities, research institutions and other
pharmaceutical, chemical and biotechnology companies is intense.
Many competitors or potential competitors have greater financial
resources, research and development capabilities, and
manufacturing and marketing experience than the Company. To this
end, the Company has entered into an agreement with Bausch & Lomb
for the manufacture and marketing of LotemaxTM (See "Recent
Developments"). There can be no assurance that developments by
the Company's competitors or potential competitors will not
render the Company's technology or proposed applications of its
technology obsolete.
3
<PAGE>
Technologies Subject to Licenses
As a licensee of certain research technologies, the Company
has various license agreements with certain U.S. federal agencies
and the State of Israel, certain universities and Dr. Nicholas
Bodor, a former director of the Company (who previously was also
a vice president of the Company), wherein the Company has
acquired exclusive and coexclusive rights to develop and
commercialize certain research technologies. The agreements
generally require the Company to pay royalties on sale of
products developed from the licensed technologies and fees on
revenues from sublicensees, where applicable, and the Company is
responsible for the costs of filing and prosecuting patent
applications. In addition, some of the Company's license
agreements require that the Company commit certain sums annually
for research and development of the licensed products. The
Company's license agreements with the University of Florida and
with Dr. Bodor require the Company to pay annual license
maintenance fees as well as make payments upon completion of
certain milestones occurring in the clinical trials of certain
licensed products. The Company is currently negotiating the
modification of its agreement with the University of Florida and
is involved in litigation with Dr. Bodor relating to its
agreement with him (see "Legal Proceedings and Disputes").
The exclusivity of license agreements generally expires
fifteen years after the later of commercialization or the
effectiveness of the patents. Each agreement is terminable by
either party, upon notice, if the other party defaults in its
obligations.
Uncertainty of Protection of Patents and Proprietary Rights
The Company's success will depend in large part on its
ability to obtain patents, maintain trade secrets and operate
without infringing on the proprietary rights of others, both in
the U.S. and in other countries. The patent positions of
pharmaceutical companies can be highly uncertain and involve
complex legal and factual questions, and therefore the breadth
and enforceability of claims allowed in pharmaceutical patents
cannot be predicted. There can be no assurance that any issued
or pending patents will not be challenged, invalidated or
circumvented, or that the rights granted thereunder will provide
proprietary protection or competitive advantages to the Company.
The commercial success of the Company also will depend, in
part, on Pharmos not infringing patents issued to others and not
breaching the technology licenses upon which any Company products
are based. It is uncertain whether any third-party patents will
require the Company to alter its products or processes, obtain
licenses or cease certain activities. In addition, if patents
are issued to others which contain competitive or conflicting
4
<PAGE>
claims, and such claims are ultimately determined to be valid,
the Company may be required to obtain licenses to these patents
or to develop or obtain alternative technology. If any licenses
are required, there can be no assurance that the Company will be
able to obtain any such licenses on commercially favorable terms,
if at all. The Company's breach of an existing license or
failure to obtain a license to any technology that it may require
to commercialize its products may have a material adverse impact
on the Company. Litigation, which could result in substantial
costs to the Company, may also be necessary to enforce any
patents licensed or issued to the Company or to determine the
scope and validity of third-party proprietary rights. If
competitors of the Company prepare and file patent applications
in the U.S. that claim technology also claimed by the Company,
the Company may have to participate in interference proceedings
declared by the U.S. Patent and Trademark Office to determine
priority of invention, which could result in substantial costs to
the Company, even if the eventual outcome is favorable to the
Company. An adverse outcome could subject the Company to
significant liabilities to third parties, require disputed rights
to be licensed from third parties or require the Company to cease
using such technology.
The Company also relies on secrecy to protect its
technology, especially where patent protection is not believed to
be appropriate or obtainable. Thus, Pharmos protects its
proprietary technology and processes, in part, by confidentiality
agreements with its employees, consultants and certain
contractors. There can be no assurance that these agreements
will not be breached, that the Company would have adequate
remedies for any breach, or that the Company's trade secrets will
not otherwise become known or be independently discovered by
competitors.
Legal Proceedings and Disputes
The Company recently commenced an action against Dr.
Nicholas Bodor, a former director of the Company, seeking to
enjoin Dr. Bodor from taking any steps to terminate or interfere
with the Company's rights under its License Agreement with Dr.
Bodor relating to LotemaxTM. Dr. Bodor claims that the advances
against future revenues of LotemaxTM recently received by the
Company under its Marketing Agreement with Bausch & Lomb
Pharmaceuticals, Inc. are an up front licensing fee of which Dr.
Bodor is entitled to receive a portion and that the failure to
pay would constitute grounds for his terminating the License
Agreement. Dr. Bodor also claims that the Marketing Agreement is
actually a sublicense entitling Dr. Bodor to additional royalties
under his License Agreement. The Company strongly disagrees with
Dr. Bodor's characterization of the Bausch & Lomb Marketing
Agreement and believes his interpretation is incorrect and has no
merit. To prevent Dr. Bodor from wrongfully terminating the
5
<PAGE>
License Agreement, the Company commenced the action to protect
its rights under both the License Agreement and the Marketing
Agreement (See "Recent Developments").
The Company is also involved in separate disputes with two
of its licensors regarding the applicability of the Company's
license to a new technology being developed by the licensor and
the priority of a licensed patent. While the Company believes
that its position is correct in both of these disputes and that
it will prevail, an adverse determination or resolution of both
or either of them could have a material adverse effect on the
Company and its operations.
The Company has been named as an additional co-defendant in
an amended complaint filed in a pending purported class action
suit against David Blech, D. Blech & Co. and a number of other
defendants, including eleven publicly traded biotechnology
companies. The complaint seeks damages for alleged unlawful
manipulation of the stock market prices of the named
biotechnology companies. The Company believes that the claims
against it have no factual or legal basis and are without merit
and has filed a motion to dismiss the claims asserted against it
(See "Recent Developments").
Extensive Government Regulation
The Company's products require the approval of the FDA
before they can be marketed in the U.S. In addition, approvals
are also required from health authorities in most foreign
countries before the Company's products can be marketed in such
countries. Before an NDA, a type of submission used to obtain
FDA approval to market a new drug, can be filed with the FDA, a
product must undergo, among other things, extensive animal
testing and human clinical trials, which can take up to seven
years to complete. Except for LotemaxTM, the Company has not yet
filed NDAs on its products. The time required for regulatory
approval of the Company's products after acceptance for filing an
NDA can vary and is usually one to three years or more, and the
FDA may require additional animal studies and/or clinical trials
before granting approval. There can be no assurance that the FDA
and foreign regulatory agencies will be satisfied with the
information, including that emanating from clinical trials,
submitted to them in applications (like NDAs) seeking approval
and will approve the marketing of any of the Company's potential
products, or that problems will not arise that could delay or
prevent the commercialization of the Company's future products.
There can be no assurance that any potential products
developed by the Company alone or in conjunction with others will
be proven to be safe and effective in clinical trials and will
meet all of the applicable regulatory requirements needed to
receive marketing approval. Data obtained from preclinical
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testing and clinical trials can be susceptible to varying
interpretations which could delay, limit or prevent regulatory
approvals. In addition, delays or disapprovals may be
encountered based upon additional government regulation resulting
from future legislation or administrative action or changes in
FDA policy made during the period of product development and FDA
regulatory review. Similar delays may also be encountered in
foreign countries. There can be no assurance that even after
such time and expenditures, regulatory approval will be obtained
for any potential products developed by the Company. If
regulatory approval of a product is granted, such approval will
be limited to those therapeutic uses for which the product has
been demonstrated through clinical studies and other means to be
safe and effective. Furthermore, approval may entail ongoing
requirements for post-marketing studies. Even if regulatory
approval is obtained, a marketed product, its manufacturer and
its manufacturing facilities are subject to continual review and
periodic inspections. The regulatory standards for manufacturing
are currently being applied stringently by the FDA. Discovery of
previously unknown problems with a product, manufacturer or
facility may result in FDA restrictions being placed on such
product or manufacturer or facility, including an order to
withdraw a specific product from the market, and may also result
in court enforced sanctions against the product, manufacturer or
facility.
The Company may establish collaborative relationships to
conduct clinical testing and seek regulatory approvals to market
its products in major markets outside the U.S. There can be no
assurance that the Company will be successful in establishing
such relationships or that such approvals will be received in a
timely manner, if at all. To market its products abroad, the
Company is also subject to numerous and varying foreign
regulatory requirements, implemented by foreign health
authorities, governing the design and conduct of human clinical
trials, pricing and marketing. The approval procedure varies
among countries and can involve additional testing, and the time
required to obtain approval may differ from that required to
obtain FDA approval. At present, foreign marketing
authorizations are applied for at a national level, although
within the European Union ("EU") certain registration procedures
are available to companies wishing to market a product in more
than one EU member country. If a regulatory authority is
satisfied that adequate evidence of safety, quality and efficacy
has been presented, marketing authorization is almost always
granted. The foreign regulatory approval process includes all of
the risks associated with obtaining FDA approval set forth above.
Approval by the FDA does not ensure approval by other countries.
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Lack of Sales and Marketing Capability
The Company has no experience in sales, marketing or
distribution. To market any of its products directly, the
Company must develop a marketing force and sales force with
technical expertise and with supporting distribution capability.
Alternatively, the Company may obtain the assistance of a
pharmaceutical company with an established distribution system
and sales force. The Company recently announced that it has
entered into an agreement with Bausch & Lomb to market LotemaxTM
(See "Recent Developments"). There can be no assurance, however,
that the Company will be able to establish sales and distribution
capabilities or be successful in gaining market acceptance for
its products.
Lack of Manufacturing Capability
The Company currently has limited manufacturing capacity to
produce its products for clinical trials. The Company's recent
agreement with Bausch & Lomb addresses the manufacturing of
LotemaxTM (See "Recent Developments"). The proposed products
under development by the Company have never been manufactured on
a commercial scale and there can be no assurances that such
products can be manufactured at a cost or in quantities necessary
to make them commercially viable. Any delay in availability of
products may result in delay in the submission of products for
regulatory approval or the market introduction and subsequent
sales of such products, which would have a material adverse
effect on the Company.
Need to Attract and Retain Key Employees and Consultants
The Company is highly dependent on the principal members of
its scientific and management staff. In addition, the Company
relies on consultants and advisors to assist the Company in
formulating its research and development strategy. Retaining and
attracting qualified personnel, consultants and advisors will be
critical to the Company's success. In order to pursue its
product development and marketing plans, the Company 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. The Company faces competition for
qualified individuals from numerous pharmaceutical and
biotechnology companies, universities and other research
institutions. There can be no assurance that the Company will be
able to attract and retain such individuals on acceptable terms
or at all.
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The Company's clinical development is conducted under
agreements with universities and medical institutions. The
Company depends on the availability of a principal investigator
for each such program, and the Company cannot assure that these
individuals or their research staffs will be available to conduct
clinical development. The Company's academic collaborators are
not employees of the Company. As a result, the Company has
limited control over their activities and can expect that only
limited amounts of their time will be dedicated to Company
activities. The Company's academic collaborators may have
relationships with other commercial entities, some of which
compete with the Company.
Uncertainty of Health Care Reform Measures and Third-Party
Reimbursement
The levels of revenues and profitability of biotechnology
and pharmaceutical companies may be affected by the continuing
efforts of governmental and third-party payors to contain or
reduce the costs of health care through various means. For
example, in certain foreign markets, pricing or profitability of
prescription pharmaceuticals is subject to government control.
In the U.S., there have been, and the Company expects that there
will continue to be, a number of federal and state proposals to
control health care costs. While the Company cannot predict
whether any such legislative or regulatory proposals will be
adopted or the effect such proposals may have on its business,
the uncertainty surrounding such proposals could have a material
adverse effect on the Company. Furthermore, the Company's
ability to commercialize its potential product portfolio may be
adversely affected to the extent that such proposals have a
material adverse effect on the business, financial condition and
profitability of other companies that are prospective
collaborators for certain of the Company's proposed products.
Dependence on Reimbursement
Pharmos' ability to commercialize its products successfully
may depend in part on the extent to which reimbursement for the
cost of such products and related treatments will be available
from government health administration authorities, private health
insurers and other organizations. Third-party payors are
increasingly challenging the price of medical products and
services. Significant uncertainty exists as to the reimbursement
status of newly approved health care products, and there can be
no assurance that adequate third-party coverage will be available
to enable Pharmos to maintain price levels sufficient to realize
an appropriate return on its investment in product development.
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Risk of Product Liability; Availability of Insurance
The design, development and manufacture of the Company's
products involve an inherent risk of product liability claims and
associated adverse publicity. Although the Company currently
maintains general liability insurance, there can be no assurance
that the coverage limits of the Company's insurance policies will
be adequate. Similarly, the Company currently maintains clinical
trial liability insurance, but there can be no assurance that the
coverage limit of the Company's insurance policies will be
adequate. The Company currently has no product liability
insurance, and there can be no assurance that the Company will be
able to obtain or maintain product liability insurance on
acceptable terms or with adequate coverage against potential
liabilities. Such insurance is expensive, difficult to obtain
and may not be available in the future on acceptable terms or at
all. A successful claim brought against the Company in excess of
the Company's insurance coverage could have a material adverse
effect upon the Company and its financial condition.
Use of Hazardous Materials; Potential Liability to Comply with
Environmental Problems
The Company's research and development involves the
controlled use of hazardous materials. Although the Company
believes that its safety procedures for handling and disposing of
such materials comply in all material respects with the standard
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, the
Company could be held liable for any damages that result, and any
such liability could exceed the resources of the Company. The
Company may incur substantial costs to comply with environmental
regulations if the Company develops manufacturing capacity.
Market for the Company's Securities; Shares Eligible for Future
Sale; Possible Volatility of Share Prices
The market price of the Company's Common Stock, like that of
other emerging pharmaceutical companies, has fluctuated
significantly in recent years and is likely to fluctuate in the
future. Announcements by the Company or others regarding
scientific discoveries, technological innovations, litigation,
products, patents or proprietary rights, the progress of clinical
trials, government regulation, public concern as to the safety of
drugs and the reliability of the Company's testing processes and
general market conditions may have a significant impact on the
market price of the Common Stock. The addition of the shares
being offered hereby and the shares issuable upon exercise of the
Company's currently outstanding warrants and options to the
number of publicly-traded shares of the Company's Common Stock
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may affect the volatility of share prices of the Company's Common
Stock.
Outstanding Stock Options and Warrants
As of September 30, 1995, the Company had outstanding
incentive stock options to purchase an aggregate of 252,187
shares of Common Stock at an average exercise price of $6.66 per
share and non-qualified stock options to purchase an aggregate of
372,182 at an average exercise price of $6.63 per share issued to
employees, directors and consultants pursuant to stock option
plans and individual agreements with management and directors of
the Company and warrants to purchase 3,367,674 shares of the
Company's Common Stock at an average price of $2.31 per share,
excluding the Warrants to purchase an additional 10,000 shares at
an exercise price of $1.88 per share issued to the Company's
Acting Chief Financial Officer in connection with his efforts on
behalf of the Company in the Private Placement Transaction.
The Company may issue additional capital stock, warrants
and/or options to raise capital in the future. The Company
regularly examines opportunities to expand its technology base
and product line through means such as licenses, joint ventures
and acquisition of assets or ongoing businesses and may issue
securities in connection with such transactions. However, no
commitments to enter into or pursue any such transaction have
been made and there can be no assurance that any such discussions
will result in any such transaction being concluded. In order to
attract and retain key personnel, the Company may also issue
additional securities, including stock options, in connection
with its employee benefit plans. During the terms of such
options and warrants, the holders thereof are given the
opportunity to profit from a rise in the market price of the
Company's Common Stock. The exercise of such options and
warrants may have an adverse effect on the market value of the
Company's Common Stock. Also, the existence of such options and
warrants may adversely affect the terms on which the Company can
obtain additional equity financing.
Anti-Takeover Provisions
The Company is subject to Sections 78.411-.444 of the Nevada
General Corporation Law ("Nevada Law"), an anti-takeover law,
which may discourage certain types of transactions involving an
actual or potential change in control of the Company, including
transactions in which the stockholders might otherwise receive a
premium for their shares over the current prices, and may limit
the ability of the stockholders to approve a transaction that
they may deem to be in their best interests. In addition, the
Board of Directors has the authority without action by the
stockholders to fix the rights and preferences of and issue
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shares of Preferred Stock, which may have the effect of delaying
or preventing a change in control of the Company.
Potential Future Acquisitions
Due to the current uncertainties of the capital markets for
emerging pharmaceutical companies, the Company has had
preliminary discussions with several emerging pharmaceutical and
biotechnology companies about potential business and/or product
consolidations, joint ventures, acquisitions, mergers or other
business combinations (collectively "acquisitions"). In the
event the Company undertakes any such acquisitions it may use
some of its cash, including part of the cash received in
connection with the Private Placement Transaction, or may issue
its stock in connection therewith. Although management would
attempt to structure such acquisitions in a manner that will
minimize dilution of the equity owned by current stockholders, no
assurance can be given that acquisitions will not result in such
dilution or that control of the Company will not be changed as a
result of such acquisitions. Such acquisitions may be negotiated
or may be sought on an unsolicited basis and may involve
speculative and risky undertakings by the Company with increased
risks to its stockholders. Under Nevada law, acquisitions do not
require shareholders' approval except when accomplished by merger
or consolidation. The Company does not, in general, intend to
submit acquisitions to shareholder vote except where required by
Nevada law. The Company has not entered into any preliminary
undertaking with any third parties involving any acquisitions or
other business combination transactions.
Special Considerations of Doing Business in Israel
A significant part of the operations of the Company is
conducted in Israel through its wholly-owned subsidiary, Pharmos
Limited ("Pharmos Ltd."), and is directly affected by economic,
political and military conditions there. In addition, Pharmos
Ltd. has received certain funding from the Office of the Chief
Scientist of the Israel Ministry of Industry and Trade (the
"Chief Scientist") relating to its proprietary SubMicron Emulsion
Technology and expects to file an application to receive funding
with respect to Dexanabinol, a new chemical entity. Such funding
prohibits the transfer or license of know-how and the manufacture
of resulting products outside of Israel without the permission of
the Chief Scientist. Although it is the Company's belief that
the Chief Scientist does not unreasonably withhold this
permission if the request is based upon commercially justified
circumstances and any royalty obligations to the Chief Scientist
are sufficiently assured, there can be no assurance that such
consent, if requested, would be granted upon terms satisfactory
to the Company or granted at all.
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Absence of Dividends
No dividends have been paid on the Common Stock to date, and
the Company does not expect to pay cash dividends in the
foreseeable future.
DILUTION
As of September 30, 1995, the net tangible book value of the
Company was $6,887,165 or $0.24 per share. Net tangible book
value per share is determined by dividing the net tangible book
value (tangible assets less liabilities) of the Company by the
number of shares of Common Stock outstanding at that date.
If all 900,000 of the Warrants exercisable at an exercise
price of $1.80 per share are exercised (each of the Warrants
purchasing one share of Common Stock), there would be 30,030,679
shares of Common Stock outstanding with a net tangible book value
of $0.28 and the purchasers of shares through the exercise of
such Warrants at a price of $1.80 per share would suffer
immediate dilution of $1.52 per share.
If all 10,000 of the Warrants exercisable at an exercise
price of $0.78 per share are exercised (each of the Warrants
purchasing one share of Common Stock), there would be 29,140,679
shares of Common Stock outstanding with a net tangible book value
of $0.24 and the purchasers of shares through the exercise of
such Warrants at a price of $0.78 per share would suffer
immediate dilution of $0.54 per share.
If all 50,000 of the Warrants exercisable at an exercise
price of $0.75 per share are exercised (each of the Warrants
purchasing one share of Common Stock), there would be 29,180,679
shares of Common Stock outstanding with a net tangible book value
of $0.24 and the purchasers of shares through the exercise of
such Warrants at a price of $0.75 per share would suffer
immediate dilution of $0.51 per share.
If all 50,000 of the Warrants exercisable at an exercise
price of $1.00 per share are exercised (each of the Warrants
purchasing one share of Common Stock), there would be 29,180,679
shares of Common Stock outstanding with a net tangible book value
of $0.24 and the purchasers of shares through the exercise of
such Warrants at a price of $1.00 per share would suffer
immediate dilution of $0.76 per share.
If all 50,000 of the Warrants exercisable at an exercise
price of $1.50 per share are exercised (each of the Warrants
purchasing one share of Common Stock), there would be 29,180,679
shares of Common Stock outstanding with a net tangible book value
of $0.24 and the purchasers of shares through the exercise of
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<PAGE>
such Warrants at a price of $1.50 per share would suffer
immediate dilution of $1.26 per share.
If all 10,000 of the Warrants exercisable at an exercise
price of $1.88 per share are exercised (each of the Warrants
purchasing one share of Common Stock), there would be 29,140,679
shares of Common Stock outstanding with a net tangible book value
of $0.24 and the purchasers of shares through the exercise of
such Warrants at a price of $1.88 per share would suffer
immediate dilution of $1.64 per share.
If all of the Warrants are exercised (each of the Warrants
purchasing one share of Common Stock), there would be 30,200,679
shares of Common Stock outstanding with a net tangible book value
of $0.29. The purchasers of shares through the exercise of such
Warrants at a price of $1.80 per share would suffer immediate
dilution of $1.51 per share; the purchasers of shares through the
exercise of such Warrants at a price of $0.78 per share would
suffer immediate dilution of $0.49 per share; the purchasers of
shares through the exercise of such Warrants at a price of $0.75
per share would suffer immediate dilution of $0.46 per share; the
purchasers of shares through the exercise of such Warrants at a
price of $1.00 per share would suffer immediate dilution of $0.71
per share; the purchasers of shares through the exercise of such
Warrants at a price of $1.50 per share would suffer immediate
dilution of $1.21 per share; and the purchasers of shares through
the exercise of such Warrants at a price of $1.88 per share would
suffer immediate dilution of $1.59 per share.
USE OF PROCEEDS
The Company will receive no proceeds from the 6,000,000
shares of Common Stock to be offered and resold by the Selling
Stockholders.
Assuming that all of the 1,070,000 Warrants whose underlying
Common Stock is being offered hereby are exercised, the gross
proceeds to be received by the Company will be $1,809,100. Such
proceeds will be added to working capital and used for general
corporate purposes. The amount of proceeds to be received by the
Company, however, depends on the number of Warrants exercised.
The Company believes that its current cash resources and
interest income thereon, including the funds obtained from the
Private Placement Transaction, combined with the proceeds from
the exercise of the Warrants, assuming all of the 1,070,000
Warrants are exercised (as to which there can be no assurances),
should be sufficient to fund its operating expenses and capital
requirements as currently planned through May 1997. The amounts
and timing of expenditures for each purpose will depend on the
progress of the Company's research and development programs,
technological advances, determinations as to commercial
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potential, the terms of any collaborative arrangements entered
into by the Company for development and licensing, regulatory
approvals, and other factors, many of which are beyond the
Company's control.
Pending such uses, the cash received in connection with the
Private Placement Transaction and the net proceeds from the
exercise of the Warrants (if exercised) will be invested in
short-term, interest-bearing investment grade securities. Due to
the current uncertainties of the capital markets for emerging
pharmaceutical companies the Company has had preliminary
discussions with several emerging pharmaceutical and
biotechnology companies about potential acquisitions. Any such
transaction might involve the use of the Company's cash resources
as consideration, including part of the proceeds of this
Offering. The Company has not entered into any preliminary
understanding with any third parties involving any acquisitions
and is not currently in any negotiations. See "Risk Factors --
Potential Acquisitions."
DESCRIPTION OF SECURITIES
Common Stock
The Common Stock being offered hereby (i) by the Selling
Stockholders, (ii) by the Company upon the exercise of the
Warrants, and (iii) by any "affiliate" of the Company upon the
resale of such Common Stock obtained from exercising the Warrants
is fully described in the Company's Registration Statement on
Form 8-A dated January 30, 1984, filed pursuant to Section 12 of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). See "Incorporation of Certain Documents by Reference".
The Company's Restated Articles of Incorporation currently
authorize the issuance of up to 50,000,000 shares of Common
Stock. There are currently 29,130,679 shares outstanding, or
33,132,722 shares taking into account exercise of all outstanding
stock options (and stock options which the Company is
contractually obligated to issue) and warrants (including the
Warrants).
Warrants
The 900,000 Warrants exercisable at an exercise price of
$1.80 are exercisable commencing September 14, 1996, and expire
on September 14, 2000. The 10,000 Warrants exercisable at an
exercise price of $0.78 are exercisable from April 30, 1996 until
April 30, 2005. The 150,000 Warrants, 50,000 of which are
exercisable at an exercise price of $0.75, 50,000 of which are
exercisable at an exercise price of $1.00, and 50,000 of which
are exercisable at an exercise price of $1.50, are exercisable
from May 1, 1996 until April 30, 2000. The 10,000 Warrants
exercisable at an exercise price of $1.88 are exercisable from
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October 31, 1996 until October 31, 2001. All of the Warrants
contain anti-dilution provisions providing for an adjustment to
their respective exercise prices in the event that the Company
effects a stock split or stock dividend. In addition, the number
and kind of shares of Common Stock underlying the Warrants are
subject to adjustments in the event of any capital
reorganization, or reclassification of the capital stock of the
Company, or consolidation or merger of the Company with another
corporation or entity (other than a subsidiary of the Company in
which the Company is the surviving or continuing corporation and
no change occurs in the Company's Common Stock).
Other Securities--Preferred Stock
The Company's Restated Articles of Incorporation currently
authorize the issuance of up to 1,250,000 shares of Preferred
Stock, none of which is currently issued and outstanding, and
empower the Board of Directors, without the necessity of further
action or authorization by the stockholders, to authorize the
issuance of Preferred Stock from time to time in one or more
series and to fix the relative rights, preferences and
limitations of each such series. The issuance of Preferred Stock
could adversely affect the voting power of holders of Common
Stock and the likelihood that such holders will receive dividend
payments and payments upon liquidation and could have the effect
of delaying, deferring or preventing a change in control of the
Company. The Company has no present plan to issue any shares of
Preferred Stock.
Other Securities--Options and Class A and Class B Warrants
As of September 30, 1995, the Company had outstanding
incentive stock options to purchase an aggregate of 252,187
shares of Common Stock at an average exercise price of $6.66 per
share and non-qualified stock options to purchase an aggregate of
372,182 at an average exercise price of $6.63 per share issued to
employees, directors and consultants pursuant to stock option
plans and individual agreements with management and directors of
the Company and warrants (excluding the 10,000 Warrants
exercisable at an exercise price of $1.88) to purchase 3,367,674
shares of the Company's Common Stock at an average price of $2.31
per share, consisting of: 396,243 warrants which can be exercised
until November 1998 each to purchase a single share of Common
Stock for $3.06; 223,342 warrants which can be exercised until
November 1996 to each purchase a single share of Common Stock for
$5.23; 36,393 Class A warrants which can be exercised until March
1998 to purchase 36,393 shares of Common Stock for $2.29 per
share and 41,083 Class B warrants, which Class B warrants expire
in March 1999 and allow the holder to purchase one share of
Common Stock for $2.84; unit purchase options expiring in March
1998 which allow the holder to purchase 331,328 shares of Common
Stock for $1.66 per share and 200,146 Class A Warrants which can
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<PAGE>
be exercised to purchase 200,146 shares of Common Stock for $3.61
per share and 225,940 Class B Warrants, which warrants can be
exercised to purchase one share of Common Stock per warrant for
$2.84 per share; 63,913 warrants which can be exercised until
September 1999 each to purchase a single share of Common Stock
for $2.30; 214,286 warrants which can be exercised until October
1999 each to purchase a single share of Common Stock for $0.84;
75,000 warrants which can be exercised until February 2000 each
to purchase a single share of Common Stock for $0.52; 500,000
warrants which can be exercised from April 1996 until April 2005
to purchase one share of Common Stock per warrant for $2.75 per
share; 10,000 Warrants which can be exercised from April 1996
until April 2005 to purchase one share of Common Stock per
warrant for $0.78 per share; 50,000 Warrants which can be
exercised from May 1996 until April 2000 to purchase one share of
Common Stock per warrant for $.75 per share; 50,000 Warrants
which can be exercised from May 1996 until April 2000 to purchase
one share of Common Stock per warrant for $1.00 per share; 50,000
Warrants which can be exercised from May 1996 until April 2000 to
purchase one share of Common Stock per warrant for $1.50 per
share; and 900,000 Warrants which can be exercised from September
14, 1996 until September 14, 2000 to purchase one share of Common
Stock per warrant for $1.80 per share.
Nevada Anti-Takeover Laws
The Company is subject to the provisions of Sections 78.411
through 78.444 of the Nevada Law, an anti-takeover statute (the
"Business Combination Statute"). In general, the Business
Combination Statute prohibits a publicly-held Nevada corporation
from engaging in a "combination" with an "interested stockholder"
for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless such
combination is approved in a prescribed manner and continuing
thereafter unless such combination is approved in a prescribed
manner or satisfies certain fair value requirements. For the
purposes of the Business Combination Statute, "combination"
includes a merger, an asset sale, the issuance or transfer by the
corporation of its shares in one transaction or a series of
transactions, having an aggregate fair market value equal to five
percent or more of the aggregate market value of the
corporation's outstanding shares, to the interested stockholder
or to an associate of the interested stockholder, and certain
other types of transactions resulting in a financial benefit the
interested stockholder. An "interested stockholder" is a person
who is the beneficial owner, directly or indirectly, of ten
percent or more of the corporation's voting stock or an affiliate
or associate of the corporation that at any time within the three
years immediately preceding the date in question was the
beneficial owner, directly or indirectly, of ten percent or more
of the corporation's voting stock.
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By an amendment to its By-laws, the Company has exempted
itself from the provisions of Sections 78.378 through 78.3793 of
the Nevada Law, a "control share" statute which otherwise
prohibits an acquiring person, under certain circumstances, from
voting certain shares of a target corporation's stock after such
acquiring person's percentage of ownership of such corporation's
stock crosses certain thresholds, unless the target corporation's
disinterested stockholders approve the granting of voting rights
to such shares.
Transfer Agent and Registrar
The transfer agent and registrar for the Company's Common
Stock is American Stock Transfer and Trust Company, New York, New
York.
PLAN OF DISTRIBUTION
The Shares offered hereby by the Selling Stockholders are
6,000,000 shares of Common Stock purchased by the Selling
Shareholders from the Company in the Private Placement
Transaction. This prospectus also covers the issuance by the
Company of up to 1,070,000 shares of Common Stock upon the
exercise of the Warrants, 900,000 of which were issued in
connection with the Private Placement Transaction, 10,000 of
which were issued to a financial advisor to the Company, 150,000
of which were issued to the Company's investment banker\financial
consultant, and 10,000 of which were issued to the Company's
Acting Chief Financial Officer in recognition for his efforts in
connection with the Private Placement Transaction.
The sale of all or a portion of the Shares and Warrant
Shares offered hereby by the Selling Stockholders may be effected
from time to time on the over-the-counter market at prevailing
prices at the time of such sales, at prices related to such
prevailing prices or at negotiated prices. The Selling
Stockholders may effect such transactions by selling to or though
one or more broker-dealers, and such broker-dealers may receive
compensation in the form of underwriting discounts, concessions
or commissions from the Selling Stockholders. The Selling
Stockholders and any broker-dealers that participate in the
distribution may under certain circumstances be deemed to be
"underwriters" within the meaning of the Securities Act, and any
commissions received by such broker-dealers and any profits
realized on the resale of shares by them may be deemed to be
underwriting discounts and commissions under the Securities Act.
The Company and the Selling Stockholders may agree to indemnify
such broker-dealers against certain liabilities, including,
without limitation, certain liabilities under the Securities Act,
or, if such indemnity is unavailable, to contribute toward
amounts required to be paid in respect of such liabilities.
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<PAGE>
To the extent required under the Securities Act, a
supplemental prospectus will be filed, disclosing (a) the name of
any such broker-dealers, (b) the number of shares involved, (c)
the price at which such shares are to be sold, (d) the
commissions paid or discounts or concessions allowed to such
broker-dealers, where applicable, (e) that such broker-dealers
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.
There is no assurance that any of the Selling Stockholders
will sell any or all of the shares of Common Stock hereby.
The Company has agreed to pay certain costs and expenses
incurred in connection with the registration of the shares of
Common Stock offered hereby, except that the Selling Stockholders
shall be responsible for all selling commissions, transfer taxes
and related charges in connection with the offer and sale of such
shares.
The Company has agreed to keep the Registration Statement of
which this Prospectus forms a part continuously effective until
the earlier of the date that all of such Shares have been sold or
three years from the date of this Prospectus.
SELLING SECURITY HOLDERS
The table below sets forth the name of each Selling
Stockholder; the total amount of (i) shares of Common Stock and
(ii) shares of Warrant Shares issuable upon the exercise of the
Warrants beneficially owned by such security holder; the
aggregate amount of Common Stock and/or Warrant Shares which may
be offered for sale for the account of such security holder, in
his/her discretion from time to time pursuant to this Prospectus;
and the amount of Common Stock which would be beneficially owned
by such security holder after sale of all securities offered by
the Selling Stockholder pursuant to this Prospectus, if they are
offered and sold, and assuming that any other shares held by such
security holders are not sold. None of the Selling Stockholders
referred to herein has held any position or office, or had any
material relationship, with the Company or any of its
predecessors or affiliates within the last three years, except as
noted below, and none of the Selling Stockholders will own 1% or
more of the outstanding stock of the Company after completion of
the offering, except as noted below.
Because the initial issuance by the Company of the Warrant Shares
to non-affiliated holders is covered by the Registration
Statement of which this Prospectus forms a part and the resale
thereof by such non-affiliated holders need not be registered
under the Securities Act, the table below does not include the
non-affiliated holders of the Warrants, except for the Company's
investment banker/financial consultant, Janssen-Meyers
Associates, L.P., who is an investor in the Private Placement
Transaction, as well as a holder of Warrants.
19<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Amount of
Warrant
Shares Shares of
Issuable Common
upon Stock
Shares of Exercise and/or Shares
Common of Warrant Owned
Stock Warrants Shares After
Names Held(1) Held Offered(2) Sale
________________________ _____________ _________ ___________ ________
Richard Stone 231,371 7,500 100,000 131,371
Michael G. Jesselson 4/8/71 120,833 9,063 120,833 0
Trust
Jesselson 12/18/80 Trust 120,833 9,062 120,833 0
FBO Grandchildren
Esther Blech 83,333 31,250 83,333 0
Edward Blech Family Trust 333,334 0 333,334 0
The Blech Family Trust 250,000 18,750 250,000 0
Stanley Shapiro 68,610 5,000 66,667 1,943
The Richard H. Davimos 140,000 7,500 100,000 40,000
Trust
UAD 5/12/92 FBO Richard
Davimos
David Russell 1,000,000 75,000 1,000,000 0
Robert E. Hernreich 50,000 3,750 50,000 0
Steven Oliveira 25,000 1,875 25,000 0
Janssen-Meyers Associates, 175,000 403,125 175,000 0
L.P.
J. M. Hull Associates, L.P. 250,000 18,750 250,000 0
Argonaut Partnership, L.P. 175,000 13,125 175,000 0
Argonaut Investment Fund 325,000 24,375 325,000 0
Ltd.
Stephen J. Buell 25,000 1,875 25,000 0
Apollo Capital Management 100,000 7,500 100,000 0
Group, L.P.
Fred Applegate 100,000 7,500 100,000 0
<PAGE>
<S> <C> <C> <C> <C>
Amount of
Warrant
Shares Shares of
Issuable Common
upon Stock
Shares of Exercise and/or Shares
Common of Warrant Owned
Stock Warrants Shares After
Names Held(1) Held Offered(2) Sale
__________________________ __________ _________ ___________ ________
Bulldog Capital Partners, 178,000 11,250 150,000 28,000
L.P.
Contrarian Opportunities 25,000 1,875 25,000 0
Fund, L.P.
Everglades Partners, L.P. 75,000 5,625 75,000 0
The Fairmont Fund 250,000 18,750 250,000 0
Richard A. Gibbs, II 185,000 9,375 125,000 60,000
Richard A. Hansen 100,000 7,500 100,000 0
Philip J. Hempleman 80,000 6,000 80,000 0
Infinity Fund, L.P. 165,400 7,500 100,000 65,400
Little Wing, L.P. 100,000 7,500 100,000 0
Pamela L. Miles Trust DTD 100,000 7,500 100,000 0
4/26/91
Harry Mittelman 130,000 7,500 100,000 30,000
Peqout Scout Fund, L.P. 350,000 26,250 350,000 0
Porter Partners, L.P. 400,000 30,000 400,000 0
Sanford Prater 20,000 1,500 20,000 0
Peter Rawlings 70,000 5,250 70,000 0
Morton H. Sachs, IRA 50,000 3,750 50,000 0
The Sachs Company 100,000 7,500 100,000 0
Seedling Fund, L.P. 25,000 1,875 25,000 0
Steven Silver 100,000 7,500 100,000 0
Sonz Partners, L.P. 100,000 7,500 100,000 0
John P. Weeks 130,000 9,750 130,000 0
Dr. Lance W. Willsey 50,000 3,750 50,000 0
S. Colin Neill 5,000 10,000 10,000(3) 5,000
<PAGE>
<FN>
____________________
(1) Does not include Common Stock issuable upon exercise of Warrants held
by Selling Stockholders.
(2) Does not include the Warrant Shares because the initial issuance by
the Company of the Warrant Shares to non-affiliated holders is covered
by the Registration Statement of which this Prospectus forms a part
and the resale thereof by such non-affiliated holders need not be
registered under the Securities Act.
(3) Includes Mr. Neill's Warrant Shares since Mr. Neill is currently an
affiliate of the Company, and, therefore, the Registration of which
this Prospectus forms a part covers the issuance of his Warrant Shares
by the Company upon the exercise of his Warrants and his resale of his
Warrant Shares.
____________________
</FN>
</TABLE>
RECENT DEVELOPMENTS
Bodor Dispute
On October 27, 1995, the Company commenced an action in
Supreme Court, New York County (the "State Court"), against Dr.
Nicholas Bodor, a former director of the Company, seeking to
enjoin Dr. Bodor from taking any steps to terminate or interfere
with the Company's rights under its License Agreement with Dr.
Bodor relating to LotemaxTM. Dr. Bodor claims that the advances
against future revenues of LotemaxTM recently received by the
Company under its Marketing Agreement with Bausch & Lomb
Pharmaceuticals, Inc. are an up front licensing fee of which Dr.
Bodor is entitled to receive a portion and that the failure to
pay would constitute grounds for his terminating the License
Agreement. Dr. Bodor also claims that the Marketing Agreement is
actually a sublicense entitling Dr. Bodor to additional royalties
under his License Agreement and in response has commenced a
separate action seeking judicial clarification of these issues.
In such event, Dr. Bodor would be entitled to receive a portion
of the Company's advances from Bausch & Lomb as well as a higher
royalty percentage from the Company on future sales of LotemaxTM.
The Company strongly disagrees with Dr. Bodor's
characterization of the Bausch & Lomb Marketing Agreement and
believes his interpretation is incorrect and has no merit. To
prevent Dr. Bodor from wrongfully terminating the License
Agreement, the Company commenced the action to protect its rights
under both the License Agreement and the Marketing Agreement.
22
<PAGE>
Amended Complaint in Blech Class Action
The Company has been named as an additional co-defendant in
an amended complaint filed in a pending purported class action
suit against David Blech, D. Blech & Co. and a number of other
defendants, including eleven publicly traded biotechnology
companies. The complaint seeks damages for alleged unlawful
manipulation of the stock market prices of the named
biotechnology companies. The Company believes that the claims
against it have no factual or legal basis and has filed a motion
to dismiss the claims asserted against it.
Marketing Agreement with Bausch & Lomb
On July 5, 1995, the Company announced that it has signed a
definitive agreement with Bausch & Lomb to manufacture and market
LotemaxTM in the United States. Also covered by the agreement
with Bausch & Lomb are LotemaxTM line extension products
currently being developed by the Company. Under the agreement,
Bausch & Lomb will purchase the active drug substance from the
Company for a cost of 29.4% of the drug selling price. The
agreement provides for cash advances relating to future sales by
the Company aggregating up to $4 million. The Company received
an initial $1 million upon signing and will receive another $3
million by March 1996. An additional $2 million is subject to
reaching certain development milestones in the LotemaxTM line
extension products. Bausch & Lomb will also collaborate in the
development of such additional products by making available
amounts up to $3 million to fund 50% of their Phase III clinical
trial costs. The Company will retain certain conditional co-
marketing rights to all of the products covered by the marketing
agreement.
23
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the
Commission are incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K, for the
fiscal year ended December 31, 1994, filed pursuant to Section 13
of the Exchange Act. The consolidated financial statements
included in the Company's Annual Report on Form 10-K should be
read in conjunction with the disclosures in Forms 8-K and a
related amendment filed subsequent to December 31, 1994.
(b) The Company's Quarterly Reports on Form 10-Q, for the
quarters ending March 31, June 30 (as amended) and September 30,
1995, filed pursuant to Section 13 of the Exchange Act.
(c) The Company's Current Report on Form 8-K, dated October
27, 1995, filed pursuant to Section 13 of the Exchange Act. As
described on page 17 of this Prospectus under the caption "Bodor
Dispute," such Form 8-K reported that the Company has commenced
an action against Dr. Nicholas Bodor, a former director of the
Company, seeking to enjoin Dr. Bodor from taking any steps to
terminate or interfere with the Company's rights under its
License Agreement with Dr. Bodor relating to LotemaxTM.
(d) The Company's Current Report on Form 8-K, dated
September 14, 1995, filed pursuant to Section 13 of the Exchange
Act, describing the Private Placement Transaction.
(e) The Company's Current Report on Form 8-K, dated July 5,
1995, filed pursuant to Section 13 of the Exchange Act,
describing the Bausch & Lomb Marketing and Manufacturing
Agreement.
(f) The Company's Current Report on Form 8-K, dated April
26, 1995, as amended, filed pursuant to Section 13 of the
Exchange Act, describing the Company's acquisition of Oculon
Corporation.
(g) The Company's Current Report on Form 8-K, dated April
10, 1995, filed pursuant to Section 13 of the Exchange Act. As
described on page 17 of this Prospectus under the caption
"Amended Complaint in Blech Class Action," such Form 8-K reported
that the Company has been named as an additional co-defendant in
an amended complaint filed in a pending class action suit against
David Blech, D. Blech & Co. and a number of other defendants,
including eleven publicly traded biotechnology companies.
(h) The description of the Common Stock contained in the
Company's Registration Statement on Form 8-A dated January 30,
1984, filed pursuant to Section 12 of the Exchange Act.
24
<PAGE>
In addition, all reports and other documents to be filed by
the Company pursuant to Sections 13(a), 13(c), 14 and 15(d) of
the Exchange Act, prior to the filing of a post-effective
amendment which indicates that all securities offered hereby have
been sold or which deregisters all securities offered hereby then
remaining unsold, as well as all such reports filed after the
date hereof and prior to the termination of this offering, shall
be deemed to be incorporated by reference herein and shall be
deemed to be a part hereof from the date of the filing of each
such report or document.
COMMISSION'S POLICY ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Article 12 of the Company's Restated Articles of
Incorporation directs the Company to provide in its bylaws for
provisions relating to the indemnification of directors and
officers to the full extent permitted by law, including the
federal securities law. Section 78.751 of the Nevada Revised
Statutes, as amended, authorizes the Company to indemnify any
director or officer under certain prescribed circumstances and
subject to certain limitations against certain costs and
expenses, including attorneys' fees actually and reasonably
incurred in connection with any action, suit or proceeding,
whether civil, criminal, administrative or investigative, to
which such person is a party by reason of being a director or
officer of the Company if it is determined that such person acted
in accordance with the applicable standard of conduct set forth
in such statutory provisions. The Company may also purchase and
maintain insurance for the benefit of any director or officer
which may cover claims for which the Company could not indemnify
such person.
Insofar as indemnification for liabilities arising
under the Act may be permitted to directors, officers, and
controlling persons of the Company, or to underwriters (or
controlling persons thereof) of which an officer, partner, or
controlling person thereof is one of the foregoing pursuant to
the foregoing provisions or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Company of expenses incurred or
paid by any such persons, in the successful defense of any
action, suit or proceeding) is asserted by any such persons in
connection with the securities being registered, the Company
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 of whether such
indemnification by it is against public policy as expressed in
25
<PAGE>
the Act and will be governed by the final adjudication of such
issue.
LEGAL OPINIONS
Legal matters in connection with the securities being
offered hereby will be passed upon for the Company by Fitzpatrick
Eilenberg & Zivian, 666 Third Avenue, New York, New York 10017.
EXPERTS
The financial statements incorporated in this Prospectus by
reference to the Annual Report on Form 10-K for the year ended
December 31, 1994, have been so incorporated in reliance on the
report of Price Waterhouse LLP, independent accountants, given on
the authority of said firm as experts in auditing and accounting.
26
<PAGE>
PHARMOS CORPORATION
___________________
__________, 1995
INDEX
_____
Page No.
THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . 1
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . 1
DILUTION . . . . . . . . . . . . . . . . . . . . . . . . . . 13
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . 14
DESCRIPTION OF SECURITIES . . . . . . . . . . . . . . . . . . 15
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . 18
SELLING SECURITY HOLDERS . . . . . . . . . . . . . . . . . . 19
RECENT DEVELOPMENTS . . . . . . . . . . . . . . . . . . . . . 22
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . . . . . . . 24
COMMISSION'S POLICY ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES . . . . . . . . . . . . . . . 25
LEGAL OPINIONS . . . . . . . . . . . . . . . . . . . . . . . 26
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
___________________________________________
The following statement sets forth the estimated expenses(1)
in connection with the offering described in the Registration
Statement, assuming all of the Warrants are exercised at their
respective exercise price (all of which will be borne by the
Registrant).
Securities and Exchange Commission Fee
$3,807
Printing and Engraving Expenses . . . 100
Accountants' Fees and Expenses . . 1,000
Legal Fees and Expenses . . . . . 15,000
Blue Sky Filing Fees . . . . . . 10,000
Miscellaneous . . . . . . . . . . . . 193
TOTAL $30,100
Item 15. Indemnification of Directors and Officers.
__________________________________________
Article 12 of the Registrant's Certificate of Incorporation
directs the Registrant to provide in its bylaws for provisions
relating to the indemnification of directors and officers to the
full extent permitted by law. Section 78.751 of the Nevada
Revised Statutes, as amended, authorizes the Registrant to
indemnify any director or officer under certain prescribed
circumstances and subject to certain limitations against certain
costs and expenses, including attorneys' fees actually and
reasonably incurred in connection with any action, suit or
proceeding, whether civil, criminal, administrative or
investigative, to which such person is a party by reason of being
a director or officer of the Registrant if it is determined that
such person acted in accordance with the applicable standard of
conduct set forth in such statutory provisions.
The Registrant may also purchase and maintain insurance for
the benefit of any director or officer which may cover claims for
which the Registrant could not indemnify such person.
Item 16. Exhibits
_________
4(a) Specimen of Common Stock Certificate
(incorporated by reference to Form S-3
Registration Statement of the Company dated
November 25, 1994 [No. 33-86720])
4(b) Restated Articles of Incorporation
(incorporated by reference to Appendix E to
II-1
<PAGE>
the Joint Proxy Statement/ Prospectus
included in the Form S-4 Registration
Statement of the Registrant dated September
28, 1992 [No. 33-52398])
4(c) Certificate of Amendment of Restated Articles
of Incorporation (incorporated by reference
to the Company's Annual Report on Form 10-K
for the year ended December 31, 1994 [No. 0-
11550])
4(d) Amended and Restated By-Laws (incorporated by
reference to Form S-1 Registration Statement
of the Company dated June 30, 1994 [No. 33-
80916])
4(e) Form of Unit Purchase Agreement dated as of
September 14, 1995 between the Company and
the Investors (incorporated by reference to
the Company's Current Report on Form 8-K
dated September 14, 1995 [No. 0-11550])
4(f) Form of Warrant Agreement dated as of
September 14, 1995 between the Company and
the Investors (incorporated by reference to
the Company's Current Report on Form 8-K
dated September 14, 1995 [No. 0-11550])
*4(g) Form of Warrant Agreement dated as of April
30, 1995 between the Company and Charles
Stolper
*4(h) Form of Warrant Agreement dated as of April
30, 1995 between the Company and
Janssen/Meyers Associates, L.P.
*4(i) Form of Warrant Agreement dated as of October
31, 1995 between the Company and S. Colin
Neill
*5 Opinion re: legality
23(a) Consent of Fitzpatrick Eilenberg & Zivian
(included in the Opinion filed as Exhibit 5)
*23(b) Consent of Price Waterhouse LLP
_______________
* Filed herewith
II-2
<PAGE>
Item 17. Undertakings.
____________
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 Paragraphs (i) and (ii) above do not
________ _______
apply if the Registration Statement is on Form S-3 and the
information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed 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.
(4) That, for the purpose of determining any liability under
the Securities Act of 1933, each filing of the registrant's
annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to
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
II-3
<PAGE>
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 the
foregoing provisions, 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 Act 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 pro-
ceeding) 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 public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
II-4
<PAGE>
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 Alachua and State of Florida on the 15th day of
November, 1995.
PHARMOS CORPORATION
By: /s/ HAIM AVIV
__________________________________
Dr. Haim Aviv, Chairman, Chief
Scientist, Chief Executive Officer
and Director (Principal Executive
Officer)
Pursuant to the requirements of the Securities Act of 1933, this
registration statement or amendment has been signed below by the
following persons in the capacities and on the dates indicated:
Signature Title Date
_________ _____ ____
/s/ S. COLIN NEILL Acting Chief November 15, 1995
__________________
S. Colin Neill Financial Officer
(Principal Financial and
Accounting Officer)
/s/ MARVIN P. LOEB Director November 15, 1995
______________________
Marvin P. Loeb
/s/ E. ANDREWS GRINSTEAD III Director November 15, 1995
____________________________
E. Andrews Grinstead III
/s/ STEPHEN C. KNIGHT Director November 15, 1995
_____________________
Stephen C. Knight
/s/ DAVID SCHLACHET Director November 15, 1995
____________________
David Schlachet
/s/ WILLIAM C. HULLEY Director November 15, 1995
_____________________
William C. Hulley
EXHIBIT 4(g)
<PAGE>
Form of Warrant Agreement
_________________________
WARRANT AGREEMENT, dated as of April 30, 1995, between
PHARMOS CORPORATION, a Nevada corporation (the "Company"), and
CHARLES STOLPER ("Holder").
W I T N E S S E T H:
_ _ _ _ _ _ _ _ _ _
WHEREAS, Holder, in consideration for his work as on behalf
of the Company as financial advisor shall be issued an aggregate
of 10,000 nine-year warrants to purchase shares of Common Stock
of the Company ("Common Stock") at an exercise price of $0.78 per
share.
NOW, THEREFORE, in consideration of the premises herein set
forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Issue. The Company hereby issues to Holder a
certificate (the "Warrant Certificate") dated as of the date
hereof providing Holder with the right to purchase, at any time
after the first anniversary date of the date hereof until 5:30
p.m., New York time, on the tenth anniversary of the date hereof,
10,000 shares of Common Stock (the "Warrant Shares") (subject to
adjustment as provided in Section 8 hereof) at an initial
exercise price (subject to adjustment as provided in Section 8
hereof) equal to $0.78 per share.
2. Warrant Certificate. The Warrant Certificate to be
delivered pursuant to this Agreement shall be in the form set
forth in Exhibit X, attached hereto and made a part hereof, with
such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Agreement.
3. Exercise of Warrant. The Warrants, when initially
exercisable, are exercisable at an aggregate initial exercise
price per share set forth in Section 6 hereof payable by
certified check or official bank check in New York Clearing House
funds. Upon surrender of a Warrant Certificate with the annexed
Form of Election to Purchase duly executed, together with payment
of the Exercise Price (as hereinafter defined) for the Warrant
Shares purchased, at the Company's principal offices in Florida
(presently located at 2 Innovation Drive, Alachua, Florida 32615)
Holder shall be entitled to receive a certificate for the Warrant
Shares so purchased. The purchase rights represented by the
Warrant Certificate are exercisable at the option of the Holder
thereof, in whole or in part (but not as to fractional shares of
the Common Stock underlying the Warrants). In the case of the
2
<PAGE>
purchase of less than all the Warrant Shares purchasable under
the Warrant Certificate, the Company shall cancel said Warrant
Certificate upon the surrender thereof and shall execute and
deliver a new Warrant Certificate of like tenor for the balance
of the Warrant Shares purchasable thereunder.
4. Issuance of Certificate. Upon the exercise of the
Warrants, the issuance of a certificate for Warrant Shares or
other securities, properties or rights underlying such Warrants
shall be made forthwith (and in any event within five (5)
business days thereafter) without charge to the Holder thereof
including, without limitation, any tax which may be payable in
respect of the issuance thereof, and such certificate shall
(subject to the provisions of Sections 5 and 7 hereof) be issued
in the name of, or in such names as may be directed by, the
Holder thereof; provided, however, that the Company shall not be
required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any such
certificate in a name other than that of the Holder and the
Company shall not be required to issue or deliver such
certificate unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
The Warrant Certificate and the certificate representing the
Warrant Shares (and/or other securities, property or rights
issuable upon exercise of the Warrants) shall be executed on
behalf of the Company by the manual or facsimile signature of the
then present Chairman or Vice Chairman of the Board of Directors
or President or any Vice President of the Company under its
corporate seal reproduced thereon, attested to by the manual or
facsimile signature of the then present Secretary or any
Assistant Secretary of the Company. The Warrant Certificate
shall be dated the date of execution by the Company upon initial
issuance, division, exchange, substitution or transfer.
5. Transfer of Warrants. The Holder of the Warrant
Certificate, by its acceptance thereof, covenants and agrees that
the Warrants are being acquired as an investment and not with a
view to the distribution thereof. The Warrants may be sold,
transferred, assigned, hypothecated or otherwise disposed of, in
whole or in part, without restriction, subject to compliance with
applicable securities laws.
6. Exercise Price.
6.1 Initial and Adjusted Exercise Price. Except as
otherwise provided in Section 8 hereof, the initial exercise
price of each Warrant shall be the price set forth in Section 1
hereof per Warrant Share issued thereunder. The adjusted
exercise price shall be the price which shall result from time to
3
<PAGE>
time from any and all adjustments of the initial exercise price
in accordance with the provisions of Section 8 hereof.
6.2 Exercise Price. The term "Exercise Price" herein
shall mean the initial exercise price or the adjusted exercise
price, depending upon the context.
7. Registration Under the Securities Act of 1933. The
Warrants, the Warrant Shares and any of the other securities
issuable upon exercise of the Warrants have not been registered
under the Securities Act of 1933, as amended (the "Act"). Upon
exercise, in whole or in part, of the Warrants, a certificate
representing the Warrant Shares underlying the Warrants, and any
of the other securities issuable upon exercise of the Warrants
(collectively, the "Warrant Securities") shall bear the following
legend unless such Warrant Shares previously have been registered
under the Act in accordance with the terms hereof:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED ("ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT, (ii) TO THE EXTENT APPLICABLE, RULE 144
UNDER THE ACT (OR ANY SIMILAR RULE UNDER THE ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN
OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY
SATISFACTORY TO COUNSEL TO THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER THE ACT IS AVAILABLE.
8. Adjustments to Exercise Price and Number of Securities.
8.1 Subdivision and Combination. In case the Company shall
at any time subdivide or combine the outstanding shares of Common
Stock, the Exercise Price shall forthwith be proportionately
decreased in the case of subdivision or increased in the case of
combination.
8.2 Adjustment in Number of Securities. Upon each
adjustment of the Exercise Price pursuant to the provisions of
this Section 8, the number of Warrant Shares issuable upon the
exercise of each Warrant shall be adjusted to the nearest full
amount by multiplying a number equal to the Exercise Price in
effect immediately prior to such adjustment by the number of
Warrant Shares issuable upon exercise of the Warrants immediately
prior to such adjustment and dividing the product so obtained by
the adjusted Exercise Price.
8.3 Merger or Consolidation. In case of any consolidation
of the Company with, or merger of the Company with, or merger of
the Company into, another corporation (other than a consolidation
4
<PAGE>
or merger which does not result in any reclassification or change
of the outstanding Common Stock), the corporation formed by such
consolidation or merger shall execute and deliver to the Holder a
supplemental warrant agreement providing that the holder of each
Warrant then outstanding or to be outstanding shall have the
right thereafter (until the expiration of such Warrant) to
receive, upon exercise of such Warrant, the kind and amount of
shares of stock and other securities and property receivable upon
such consolidation or merger, by a holder of the number of shares
of Common Stock of the Company for which such Warrant might have
been exercised immediately prior to such consolidation, merger,
sale or transfer. Such supplemental warrant agreement shall
provide for adjustments which shall be identical to the
adjustments provided in this Section 8. The above provision of
this subsection shall similarly apply to successive
consolidations or mergers.
8.4 No Adjustment of Exercise Price in Certain Cases. No
adjustment of the Exercise Price shall be made:
(a) Upon the issuance or sale of the Warrants or the
shares of Common Stock issuable upon the exercise of the
Warrants.
(b) If the amount of said adjustment shall be less
than two cents (2 ) per Warrant Share, provided, however,
that in such case any adjustment that would otherwise be
required then to be made shall be carried forward and shall
be made at the time of and together with the next subsequent
adjustment which, together with any adjustment so carried
forward, shall amount to at least two cents (2 ) per Warrant
Share.
(c) Upon the issuance or sale of Common Stock or
warrants, options or convertible securities, to be issued
and/or sold to employees, advisors, directors or officers
of, or consultants to, the Company or any of its
subsidiaries pursuant to a stock grant, stock option plan,
stock purchase plan, pension or profit sharing plan or other
stock agreement or arrangement currently existing or
approved by the Company's Board of Directors.
(d) Upon the issuance of shares of Common Stock,
warrants, options and convertible securities pursuant to
warrants, options and convertible securities outstanding as
of the date hereof.
(e) Upon the issuance of shares of Common Stock,
warrants, options and convertible securities in connection
with strategic partnerships or other business and/or product
consolidations or joint ventures.
5
<PAGE>
9. Exchange and Replacement of Warrant Certificate. The
Warrant Certificate is exchangeable without expense, upon the
surrender thereof by the registered Holder at the principal
executive office of the Company, for a new Warrant Certificate of
like tenor and date representing in the aggregate the right to
purchase the same number of Shares in such denominations as shall
be designated by the Holder thereof at the time of such
surrender.
Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation
of the Warrant Certificate, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to
it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the
Warrants, if mutilated, the Company will make and deliver a new
Warrant Certificate of like tenor, in lieu thereof.
10. Elimination of Fractional Interests. The Company shall
not be required to issue certificates representing fractions of
shares of Common Stock upon the exercise of the Warrants, nor
shall it be required to issue scrip or pay cash in lieu of
fractional interests, it being the intent of the parties that all
fractional interests shall be eliminated by rounding any fraction
up to the nearest whole number of shares of Common Stock or other
securities, properties or rights.
11. Reservation and Listing of Securities. The Company
shall at all times reserve and keep available out of its
authorized shares of Common Stock, solely for the purpose of
issuance upon the exercise of the Warrants, such number of shares
of Common Stock or other securities, properties or rights as
shall be issuable upon the exercise thereof. The Company
covenants and agrees that, upon exercise of the Warrants and
payment of the Exercise Price therefor, all shares of Common
Stock and other securities issuable upon such exercise shall be
duly and validly issued, fully paid, non-assessable and not
subject to the preemptive rights of any stockholder. As long as
the Warrants shall be outstanding, the Company shall use its best
efforts to cause all shares of Common Stock issuable upon the
exercise of the Warrants to be listed (subject to official notice
of issuance) on all securities exchanges on which the Common
Stock may then be listed and/or quoted on NASDAQ.
12. Notices to Warrant Holder. Nothing contained in this
Agreement shall be construed as conferring upon the Holder by
virtue of his holding the Warrant the right to vote or to consent
or to receive notice as a stockholder in respect of any meetings
of stockholders for the election of directors or any other
matter, or as having any rights whatsoever as a stockholder of
the Company. If, however, at any time prior to the expiration of
6
<PAGE>
the Warrants and their exercise, any of the following events
shall occur:
(a) the Company shall take a record of the holders of
its shares of Common Stock for the purpose of entitling them
to receive a dividend or distribution payable otherwise than
in cash, or a cash dividend or distribution payable
otherwise than out of current or retained earnings, as
indicated by the accounting treatment of such dividend or
distribution on the books of the Company; or
(b) the Company shall offer to all the holders of its
Common Stock any additional shares of capital stock of the
Company or securities convertible into or exchangeable for
shares of capital stock of the Company, or any option, right
or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the
Company (other than in connection with a consolidation or
merger) or a sale of all or substantially all of its
property, assets and business as an entirety shall be
proposed;
then, in any one or more of said events, the Company shall give
written notice of such event at least fifteen (15) days prior to
the date fixed as a record date or the date of closing the
transfer books for the determination of the stockholders entitled
to such dividend, distribution, convertible or exchangeable
securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale or any such
earlier date that notice of such event is given to stockholders
of the Company. Such notice shall specify such record date or
the date of closing the transfer books, as the case may be.
Failure to give such notice or any defect therein shall not
affect the validity of any action taken in connection with the
declaration or payment of any such dividend, or the issuance of
any convertible or exchangeable securities, or subscription
rights, options or warrants, or any proposed dissolution,
liquidation, winding up or sale.
13. Notices.
All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been
duly made and sent when delivered, or mailed by registered or
certified mail, return receipt requested:
(a) If to the registered Holder of the Warrants, to the
address of such Holder as shown on the books of the Company;
or
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<PAGE>
(b) If to the Company, to the address set forth in
Section 3 hereof or to such other address as the Company may
designate by notice to the Holder.
14. Supplements and Amendments. The Company and Holder may
from time to time supplement or amend this Agreement in order to
cure any ambiguity, to correct or supplement any provision
contained herein which may be defective or inconsistent with any
provisions herein, or to make any other provisions in regard to
matters or questions arising hereunder which the Company and
Holder may deem necessary or desirable.
15. Successors. All the covenants and provisions of this
Agreement shall be binding upon and inure to the benefit of the
Company, the Holder and their respective successors and assigns
hereunder.
16. Termination. This Agreement shall terminate at the
close of business on the fifth anniversary of the issuance of the
Warrants.
17. Governing Law. This Agreement and the Warrant
Certificate issued hereunder shall be deemed to be a contract
made under the laws of the State of New York and for all purposes
shall be construed in accordance with the laws of the State of
New York without giving effect to the rules of the State of New
York governing the conflicts of laws.
18. Entire Agreement; Modification. This Agreement
contains the entire understanding between the parties hereto with
respect to the subject matter hereof and may not be modified or
amended except by a writing duly signed by the party against whom
enforcement of the modification or amendment is sought.
19. Severability. If any provision of this Agreement shall
be held to be invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision of this
Agreement.
20. Captions. The caption headings of the Sections of this
Agreement are for convenience of reference only and are not
intended, nor should they be construed as, a part of this
Agreement and shall be given no substantive effect.
21. Benefits of this Agreement. Nothing in this Agreement
shall be construed to give to any person or corporation other
than the Company and Holder any legal or equitable right, remedy
or claim under this Agreement; and this Agreement shall be for
the sole and exclusive benefit of the Company and Holder.
22. Counterparts. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for
8
<PAGE>
all purposes be deemed to be an original, and such counterparts
shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above
written.
PHARMOS CORPORATION
By:
________________________________
Name:
Title:
___________________________________
Charles Stolper
9
<PAGE>
EXHIBIT X
TO
WARRANT AGREEMENT
[FORM OF WARRANT CERTIFICATE]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER
SECURITIES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") (ii) TO
THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR
RULE UNDER THE ACT RELATING TO THE DISPOSITION OF SECURITIES), OR
(iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY
SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN EXEMPTION FROM
REGISTRATION UNDER THE ACT IS AVAILABLE.
EXERCISABLE FROM APRIL 30, 1996 UNTIL
5:30 P.M., NEW YORK TIME, APRIL 30, 2005
No. W-95X-1 10,000 Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that Charles Stolper
or his registered assigns, is the registered holder of 10,000
Warrants to purchase initially, at any time from April 30, 1996
until 5:30 p.m. New York time on April 30, 2005 ("Expiration
Date"), up to 10,000 fully-paid and non-assessable shares of
common stock, par value $.03 per share ("Common Stock") of
PHARMOS CORPORATION, a Nevada corporation (the "Company"), at the
initial exercise price, subject to adjustment in certain events
(the "Exercise Price"), equal to $0.78 per share upon surrender
of this Warrant Certificate and payment of the Exercise Price at
an office or agency of the Company, but subject to the conditions
set forth herein and in the Warrant Agreement dated as of April
30, 1995 between the Company and Charles Stolper (the "Warrant
Agreement"). Payment of the Exercise Price shall be made by
certified check or official bank check in New York Clearing House
funds payable to the order of the Company.
No Warrant may be exercised after 5:30 p.m., New York
time, on the Expiration Date, at which time all Warrants
evidenced hereby, unless exercised prior thereto, shall
thereafter be void.
The Warrants evidenced by this Warrant Certificate are
part of a duly authorized issue of Warrants issued pursuant to
the Warrant Agreement, which Warrant Agreement is hereby
incorporated by reference in and made a part of this instrument
and is hereby referred to for a description of the rights,
X-1
<PAGE>
limitation of rights, obligations, duties and immunities
thereunder of the Company and the holder (the word "holder"
meaning the registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence
of certain events the Exercise Price and the type and/or number
of the Company's securities issuable thereupon may, subject to
certain conditions, be adjusted. In such event, the Company
will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and
the number and/or type of securities issuable upon the exercise
of the Warrants; provided, however, that the failure of the
Company to issue such new Warrant Certificate shall not in any
way change, alter, or otherwise impair, the rights of the holder
as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of
this Warrant Certificate at an office or agency of the Company, a
new Warrant Certificate or Warrant Certificates of like tenor and
evidencing in the aggregate a like number of Warrants shall be
issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in
the Warrant Agreement, without any charge except for any tax or
other governmental charge imposed in connection with such
transfer.
Upon the exercise of less than all of the Warrants
evidenced by this Certificate, the Company shall forthwith issue
to the holder hereof a new Warrant Certificate representing such
number of unexercised Warrants.
The Company may deem and treat the registered holder(s)
hereof as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing
hereon made by anyone), for the purpose of any exercise hereof,
and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any
notice to the contrary.
All terms used in this Warrant Certificate which are
defined in the Warrant Agreement shall have the meanings assigned
to them in the Warrant Agreement.
X-2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed.
Dated as of April 30, 1995.
PHARMOS CORPORATION
By:
________________________________
Name: Colin Neill
Title: Acting Secretary and
Chief Financial Officer
X-3
<PAGE>
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise
the right, represented by this Warrant Certificate, to purchase
______________ shares of Common Stock and herewith tenders in
payment for such securities a certified check or official bank
check payable in New York Clearing House Funds to the order of
PHARMOS CORPORATION in the amount of $ _____, all in accordance
with the terms of Section 3 of the Warrant Agreement dated as of
April 30, 1995 between Pharmos Corporation and Charles Stolper.
The undersigned requests that a certificate for such securities
be registered in the name of ____________ whose address is
_______________ and that such Certificate be delivered to
______________ whose address is ______________.
Dated: ________________ Signature ______________________
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant Certificate.)
________________________________
(Insert Social Security or Other
Identifying Number of Holder)
X-4
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED
__________________ hereby sells, assigns and transfers unto
________________________________________________________________
________________________________________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and
appoint _______________ Attorney, to transfer the within Warrant
Certificate on the books of the within-named Company, with full
power of substitution.
Dated: __________________ Signature: ______________________
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant Certificate.)
_________________________________
(Insert Social Security or Other
Identifying Number of Assignee)
X-5
EXHIBIT 4(h)
<PAGE>
Form of Warrant Agreement
_________________________
WARRANT AGREEMENT, dated as of May 1, 1995, between
PHARMOS CORPORATION, a Nevada corporation (the "Company"), and
JANSSEN/MEYERS ASSOCIATES, L.P. ("Holder").
W I T N E S S E T H:
_ _ _ _ _ _ _ _ _ _
WHEREAS, Holder, in consideration for its work as on
behalf of the Company as investment banker and financial
consultant shall be issued an aggregate of 150,000 four-year
warrants ("Warrants") to purchase shares of Common Stock of the
Company ("Common Stock") at exercise prices of $0.75, $1.00 and
$1.50 per share.
NOW, THEREFORE, in consideration of the premises
herein set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Issue. The Company hereby issues to Holder a
certificate (the "Warrant Certificate") dated as of the date
hereof providing Holder with the right to purchase, subject to
the vesting schedule set forth in Section 2 below, (i) at any
time after the first anniversary date of the date hereof until
5:30 p.m., New York time, on April 30, 2000, 112,500 shares of
Common Stock and (ii) at any time after the second anniversary
date of the date hereof until 5:30 p.m., New York time, on April
30, 2000, 37,500 shares of Common Stock (the "Warrant Shares")
(subject to adjustment as provided in Section 8 hereof). Of the
150,000 Warrants, 50,000 shall be exercisable at an initial
exercise price (subject to adjustment as provided in Section 8
hereof) equal to $0.75 per share (the "$.75 Warrants"), 50,000
shall be exercisable at an initial exercise price (subject to
adjustment as provided in Section 8 hereof) equal to $1.00 per
share (the "$1.00 Warrants"), and 50,000 shall be exercisable at
an initial exercise price (subject to adjustment as provided in
Section 8 hereof) equal to $1.50 per share (the "$1.50
Warrants").
2. Vesting. The Warrants shall vest as follows:
(A) 12,500 each of the $.75 Warrants, the $1.00
Warrants and the $1.50 Warrants (an aggregate of
37,500 Warrants) shall vest immediately (although
not exercisable until May 1, 1996);
(B) 12,500 each of the $.75 Warrants, the $1.00
Warrants and the $1.50 Warrants (an aggregate of
37,500 Warrants) shall vest on November 1, 1995
(although not exercisable until May 1, 1996);
<PAGE>
(C) 12,500 each of the $.75 Warrants, the $1.00
Warrants and the $1.50 Warrants (an aggregate of
37,500 Warrants) shall vest on May 1, 1996 (and
shall be exercisable commencing as of such date);
and
(D) 12,500 each of the $.75 Warrants, the $1.00
Warrants and the $1.50 Warrants (an aggregate of
37,500 Warrants) shall also vest on May 1, 1996,
but shall only be exercisable commencing as of
May 1, 1997.
3. Warrant Certificate. The Warrant Certificate to
be delivered pursuant to this Agreement shall be in the form set
forth in Exhibit X, attached hereto and made a part hereof, with
such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Agreement.
4. Exercise of Warrants. The Warrants, when
initially exercisable, are exercisable at the aggregate initial
exercise prices per share set forth in Section 6 hereof payable
by certified check or official bank check in New York Clearing
House funds. Upon surrender of a Warrant Certificate with the
annexed Form of Election to Purchase duly executed, together with
payment of the Exercise Price (as hereinafter defined) for the
Warrant Shares purchased, at the Company's principal offices in
Florida (presently located at 2 Innovation Drive, Alachua,
Florida 32615) Holder shall be entitled to receive a certificate
for the Warrant Shares so purchased. The purchase rights
represented by the Warrant Certificate are exercisable at the
option of the Holder thereof, in whole or in part (but not as to
fractional shares of the Common Stock underlying the Warrants).
In the case of the purchase of less than all the Warrant Shares
purchasable under the Warrant Certificate, the Company shall
cancel said Warrant Certificate upon the surrender thereof and
shall execute and deliver a new Warrant Certificate of like tenor
for the balance of the Warrant Shares purchasable thereunder.
5. Issuance of Certificate. Upon the exercise of
the Warrants, the issuance of a certificate for Warrant Shares or
other securities, properties or rights underlying such Warrants
shall be made forthwith (and in any event within five (5)
business days thereafter) without charge to the Holder thereof
including, without limitation, any tax which may be payable in
respect of the issuance thereof, and such certificate shall
(subject to the provisions of Sections 5 and 7 hereof) be issued
in the name of, or in such names as may be directed by, the
Holder thereof; provided, however, that the Company shall not be
required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any such
certificate in a name other than that of the Holder and the
Company shall not be required to issue or deliver such
2
<PAGE>
certificate unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
The Warrant Certificate and the certificate
representing the Warrant Shares (and/or other securities,
property or rights issuable upon exercise of the Warrants) shall
be executed on behalf of the Company by the manual or facsimile
signature of the then present Chairman or Vice Chairman of the
Board of Directors or President or any Vice President of the
Company under its corporate seal reproduced thereon, attested to
by the manual or facsimile signature of the then present
Secretary or any Assistant Secretary of the Company. The Warrant
Certificate shall be dated the date of execution by the Company
upon initial issuance, division, exchange, substitution or
transfer.
6. Transfer of Warrants. The Holder of the Warrant
Certificate, by its acceptance thereof, covenants and agrees that
the Warrants are being acquired as an investment and not with a
view to the distribution thereof. The Warrants may be sold,
transferred, assigned, hypothecated or otherwise disposed of, in
whole or in part, without restriction, subject to compliance with
applicable securities laws.
7. Exercise Prices.
7.1 Initial and Adjusted Exercise Prices. Except as
otherwise provided in Section 8 hereof, the initial exercise
price of each Warrant shall be the price set forth in Section 1
hereof per Warrant Share issued thereunder. The adjusted
exercise price shall be the price which shall result from time to
time from any and all adjustments of the initial exercise price
in accordance with the provisions of Section 8 hereof.
7.2 Exercise Price. The term "Exercise Price" (or
"Exercise Prices") herein shall mean the initial exercise price
or the adjusted exercise price, depending upon the context.
8. Registration Under the Securities Act of 1933.
The Warrants, the Warrant Shares and any of the other securities
issuable upon exercise of the Warrants have not been registered
under the Securities Act of 1933, as amended (the "Act"). Upon
exercise, in whole or in part, of the Warrants, a certificate
representing the Warrant Shares underlying the Warrants, and any
of the other securities issuable upon exercise of the Warrants
(collectively, the "Warrant Securities") shall bear the following
legend unless such Warrant Shares previously have been registered
under the Act in accordance with the terms hereof:
3
<PAGE>
THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED
("ACT"), AND MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO (i) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT, (ii)
TO THE EXTENT APPLICABLE, RULE 144 UNDER THE
ACT (OR ANY SIMILAR RULE UNDER THE ACT
RELATING TO THE DISPOSITION OF SECURITIES),
OR (iii) AN OPINION OF COUNSEL, IF SUCH
OPINION SHALL BE REASONABLY SATISFACTORY TO
COUNSEL TO THE ISSUER, THAT AN EXEMPTION
FROM REGISTRATION UNDER THE ACT IS
AVAILABLE.
9. Adjustments to Exercise Prices and Number of
Securities.
9.1 Subdivision and Combination. In case the Company
shall at any time subdivide or combine the outstanding shares of
Common Stock, the Exercise Prices shall forthwith be
proportionately decreased in the case of subdivision or increased
in the case of combination.
9.2 Adjustment in Number of Securities. Upon each
adjustment of the Exercise Prices pursuant to the provisions of
this Section 8, the number of Warrant Shares issuable upon the
exercise of each Warrant shall be adjusted to the nearest full
amount by multiplying a number equal to the Exercise Price in
effect immediately prior to such adjustment by the number of
Warrant Shares issuable upon exercise of the Warrants immediately
prior to such adjustment and dividing the product so obtained by
the adjusted Exercise Price.
9.3 Merger or Consolidation. In case of any
consolidation of the Company with, or merger of the Company with,
or merger of the Company into, another corporation (other than a
consolidation or merger which does not result in any
reclassification or change of the outstanding Common Stock), the
corporation formed by such consolidation or merger shall execute
and deliver to the Holder a supplemental warrant agreement
providing that the holder of each Warrant then outstanding or to
be outstanding shall have the right thereafter (until the
expiration of such Warrant) to receive, upon exercise of such
Warrant, the kind and amount of shares of stock and other
securities and property receivable upon such consolidation or
merger, by a holder of the number of shares of Common Stock of
the Company for which such Warrant might have been exercised
immediately prior to such consolidation, merger, sale or
transfer. Such supplemental warrant agreement shall provide for
4
<PAGE>
adjustments which shall be identical to the adjustments provided
in this Section 8. The above provision of this subsection shall
similarly apply to successive consolidations or mergers.
9.4 No Adjustment of Exercise Prices in Certain
Cases. No adjustment of the Exercise Prices shall be made:
(a) Upon the issuance or sale of the Warrants or
the shares of Common Stock issuable upon the exercise
of the Warrants.
(b) If the amount of said adjustment shall be
less than two cents (2 ) per Warrant Share, provided,
however, that in such case any adjustment that would
otherwise be required then to be made shall be carried
forward and shall be made at the time of and together
with the next subsequent adjustment which, together
with any adjustment so carried forward, shall amount
to at least two cents (2 ) per Warrant Share.
(c) Upon the issuance or sale of Common Stock or
warrants, options or convertible securities, to be
issued and/or sold to employees, advisors, directors
or officers of, or consultants to, the Company or any
of its subsidiaries pursuant to a stock grant, stock
option plan, stock purchase plan, pension or profit
sharing plan or other stock agreement or arrangement
currently existing or approved by the Company's Board
of Directors.
(d) Upon the issuance of shares of Common Stock,
warrants, options and convertible securities pursuant
to warrants, options and convertible securities
outstanding as of the date hereof.
(e) Upon the issuance of shares of Common Stock,
warrants, options and convertible securities in
connection with strategic partnerships or other
business and/or product consolidations or joint
ventures.
10. Exchange and Replacement of Warrant Certificate.
The Warrant Certificate is exchangeable without expense, upon the
surrender thereof by the registered Holder at the principal
executive office of the Company, for a new Warrant Certificate of
like tenor and date representing in the aggregate the right to
purchase the same number of Shares in such denominations as shall
be designated by the Holder thereof at the time of such
surrender.
Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation
5
<PAGE>
of the Warrant Certificate, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to
it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the
Warrants, if mutilated, the Company will make and deliver a new
Warrant Certificate of like tenor, in lieu thereof.
11. Elimination of Fractional Interests. The Company
shall not be required to issue certificates representing
fractions of shares of Common Stock upon the exercise of the
Warrants, nor shall it be required to issue scrip or pay cash in
lieu of fractional interests, it being the intent of the parties
that all fractional interests shall be eliminated by rounding any
fraction up to the nearest whole number of shares of Common Stock
or other securities, properties or rights.
12. Reservation and Listing of Securities. The
Company shall at all times reserve and keep available out of its
authorized shares of Common Stock, solely for the purpose of
issuance upon the exercise of the Warrants, such number of shares
of Common Stock or other securities, properties or rights as
shall be issuable upon the exercise thereof. The Company
covenants and agrees that, upon exercise of the Warrants and
payment of the Exercise Price therefor, all shares of Common
Stock and other securities issuable upon such exercise shall be
duly and validly issued, fully paid, non-assessable and not
subject to the preemptive rights of any stockholder. As long as
the Warrants shall be outstanding, the Company shall use its best
efforts to cause all shares of Common Stock issuable upon the
exercise of the Warrants to be listed (subject to official notice
of issuance) on all securities exchanges on which the Common
Stock may then be listed and/or quoted on NASDAQ.
13. Notices to Warrant Holder. Nothing contained in
this Agreement shall be construed as conferring upon the Holder
by virtue of its holding the Warrant the right to vote or to
consent or to receive notice as a stockholder in respect of any
meetings of stockholders for the election of directors or any
other matter, or as having any rights whatsoever as a stockholder
of the Company. If, however, at any time prior to the expiration
of the Warrants and their exercise, any of the following events
shall occur:
(a) the Company shall take a record of the
holders of its shares of Common Stock for the purpose
of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash
dividend or distribution payable otherwise than out of
current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution
on the books of the Company; or
6
<PAGE>
(b) the Company shall offer to all the holders of
its Common Stock any additional shares of capital
stock of the Company or securities convertible into or
exchangeable for shares of capital stock of the
Company, or any option, right or warrant to subscribe
therefor; or
(c) a dissolution, liquidation or winding up of
the Company (other than in connection with a
consolidation or merger) or a sale of all or
substantially all of its property, assets and business
as an entirety shall be proposed;
then, in any one or more of said events, the Company shall give
written notice of such event at least fifteen (15) days prior to
the date fixed as a record date or the date of closing the
transfer books for the determination of the stockholders entitled
to such dividend, distribution, convertible or exchangeable
securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale or any such
earlier date that notice of such event is given to stockholders
of the Company. Such notice shall specify such record date or
the date of closing the transfer books, as the case may be.
Failure to give such notice or any defect therein shall not
affect the validity of any action taken in connection with the
declaration or payment of any such dividend, or the issuance of
any convertible or exchangeable securities, or subscription
rights, options or warrants, or any proposed dissolution,
liquidation, winding up or sale.
14. Notices.
All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed
to have been duly made and sent when delivered, or mailed by
registered or certified mail, return receipt requested:
(a) If to the registered Holder of the Warrants,
to the address of such Holder as shown on the books of
the Company; or
(b) If to the Company, to the address set forth
in Section 3 hereof or to such other address as the
Company may designate by notice to the Holder.
15. Supplements and Amendments. The Company and
Holder may from time to time supplement or amend this Agreement
in order to cure any ambiguity, to correct or supplement any
provision contained herein which may be defective or inconsistent
with any provisions herein, or to make any other provisions in
regard to matters or questions arising hereunder which the
Company and Holder may deem necessary or desirable.
7
<PAGE>
16. Successors. All the covenants and provisions of
this Agreement shall be binding upon and inure to the benefit of
the Company, the Holder and their respective successors and
assigns hereunder.
17. Termination. This Agreement shall terminate at
the close of business on the fifth anniversary of the issuance of
the Warrants.
18. Governing Law. This Agreement and the Warrant
Certificate issued hereunder shall be deemed to be a contract
made under the laws of the State of New York and for all purposes
shall be construed in accordance with the laws of the State of
New York without giving effect to the rules of the State of New
York governing the conflicts of laws.
19. Entire Agreement; Modification. This Agreement
contains the entire understanding between the parties hereto with
respect to the subject matter hereof and may not be modified or
amended except by a writing duly signed by the party against whom
enforcement of the modification or amendment is sought.
20. Severability. If any provision of this Agreement
shall be held to be invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision of this
Agreement.
21. Captions. The caption headings of the Sections
of this Agreement are for convenience of reference only and are
not intended, nor should they be construed as, a part of this
Agreement and shall be given no substantive effect.
22. Benefits of this Agreement. Nothing in this
Agreement shall be construed to give to any person or corporation
other than the Company and Holder any legal or equitable right,
remedy or claim under this Agreement; and this Agreement shall be
for the sole and exclusive benefit of the Company and Holder.
23. Counterparts. This Agreement may be executed in
any number of counterparts and each of such counterparts shall
for all purposes be deemed to be an original, and such
counterparts shall together constitute but one and the same
instrument.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed, as of the day and year first above written.
PHARMOS CORPORATION
By:
___________________________________
Name:
Title:
JANSSEN/MEYERS ASSOCIATES, L.P.
By: Meyers-Janssen Securities Corp.,
General Partner
By: _________________________________
Authorized Officer
9
<PAGE>
EXHIBIT X
TO
WARRANT AGREEMENT
[FORM OF WARRANT CERTIFICATE]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER
SECURITIES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") (ii) TO
THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR
RULE UNDER THE ACT RELATING TO THE DISPOSITION OF SECURITIES), OR
(iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY
SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN EXEMPTION FROM
REGISTRATION UNDER THE ACT IS AVAILABLE.
EXERCISABLE FROM MAY 1, 1996 UNTIL
5:30 P.M., NEW YORK TIME, APRIL 30, 2000
No. W-95Z-1 150,000 Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that Janssen/Meyers
Associates, L.P. or its registered assigns, is the registered
holder of 150,000 Warrants to purchase initially, (i) at any time
from May 1, 1996 until 5:30 p.m. New York time on April 30, 2000
("Expiration Date"), up to 112,500, and (ii) at any time from May
1, 1997 until 5:30 p.m. New York time on the Expiration Date up
to 37,500, fully-paid and non-assessable shares of common stock,
par value $.03 per share ("Common Stock") of PHARMOS CORPORATION,
a Nevada corporation (the "Company"), at initial exercise prices,
subject to adjustment in certain events (the "Exercise Prices"),
equal to $0.75 per share, $1.00 per share, and $1.50 per share
for 50,000 Warrant Shares each, respectively, upon surrender of
this Warrant Certificate and payment of the Exercise Prices at an
office or agency of the Company, but subject to the conditions
set forth herein and in the Warrant Agreement dated as of May 1,
1995 between the Company and Janssen/Meyers Associates, L.P. (the
"Warrant Agreement"). Payment of the Exercise Prices shall be
made by certified check or official bank check in New York
Clearing House funds payable to the order of the Company.
No Warrant may be exercised after 5:30 p.m., New York time,
on the Expiration Date, at which time all Warrants evidenced
hereby, unless exercised prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part
of a duly authorized issue of Warrants issued pursuant to the
Warrant Agreement, which Warrant Agreement is hereby incorporated
X-1
<PAGE>
by reference in and made a part of this instrument and is hereby
referred to for a description of the rights, limitation of
rights, obligations, duties and immunities thereunder of the
Company and the holder (the word "holder" meaning the registered
holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of
certain events the Exercise Prices and the type and/or number of
the Company's securities issuable thereupon may, subject to
certain conditions, be adjusted. In such event, the Company
will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Prices and
the number and/or type of securities issuable upon the exercise
of the Warrants; provided, however, that the failure of the
Company to issue such new Warrant Certificate shall not in any
way change, alter, or otherwise impair, the rights of the holder
as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this
Warrant Certificate at an office or agency of the Company, a new
Warrant Certificate or Warrant Certificates of like tenor and
evidencing in the aggregate a like number of Warrants shall be
issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in
the Warrant Agreement, without any charge except for any tax or
other governmental charge imposed in connection with such
transfer.
Upon the exercise of less than all of the Warrants evidenced
by this Certificate, the Company shall forthwith issue to the
holder hereof a new Warrant Certificate representing such number
of unexercised Warrants.
The Company may deem and treat the registered holder(s)
hereof as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing
hereon made by anyone), for the purpose of any exercise hereof,
and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any
notice to the contrary.
All terms used in this Warrant Certificate which are defined
in the Warrant Agreement shall have the meanings assigned to them
in the Warrant Agreement.
X-2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed.
Dated as of May 1, 1995.
PHARMOS CORPORATION
By:_______________________________
Name: Colin Neill
Title: Acting Secretary and Chief
Financial Officer
X-3
<PAGE>
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise
the right, represented by this Warrant Certificate, to purchase
______________ shares of Common Stock and herewith tenders in
payment for such securities a certified check or official bank
check payable in New York Clearing House Funds to the order of
PHARMOS CORPORATION in the amount of $_______, all in accordance
with the terms of Section 3 of the Warrant Agreement dated as of
May 1, 1995 between Pharmos Corporation and Janssen/Meyers
Associates, L.P. The undersigned requests that a certificate
for such securities be registered in the name of
____________ whose address is _________________ and that such
Certificate be delivered to ______________________ whose address
is ______________.
Dated: ________________ Signature ____________________
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant Certificate.)
_______________________________
(Insert Social Security or Other
Identifying Number of Holder)
X-4
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED __________________ hereby
sells, assigns and transfers unto
________________________________________________________________
________________________________________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and
appoint _______________ Attorney, to transfer the within Warrant
Certificate on the books of the within-named Company, with full
power of substitution.
Dated: _________________ Signature:____________________
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant Certificate.)
_______________________________
(Insert Social Security or Other
Identifying Number of Assignee)
X-5
EXHIBIT 4(i)
<PAGE>
Form of Warrant Agreement
_________________________
WARRANT AGREEMENT, dated as of October 31, 1995,
between PHARMOS CORPORATION, a Nevada corporation (the
"Company"), and S. COLIN NEILL
("Holder").
W I T N E S S E T H:
_ _ _ _ _ _ _ _ _ _
WHEREAS, Holder, in consideration for his work as on
behalf of the Company as Acting Chief Financial Officer shall be
issued an aggregate of 10,000 five-year warrants to purchase
shares of Common Stock of the Company ("Common Stock") at an
exercise price of $1.88 per share.
NOW, THEREFORE, in consideration of the premises
herein set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Issue. The Company hereby issues to Holder a
certificate (the "Warrant Certificate") dated as of the date
hereof providing Holder with the right to purchase, at any time
after the first anniversary date of the date hereof until 5:30
p.m., New York time, on the sixth anniversary of the date hereof,
10,000 shares of Common Stock (the "Warrant Shares") (subject to
adjustment as provided in Section 8 hereof) at an initial
exercise price (subject to adjustment as provided in Section 8
hereof) equal to $1.88 per share.
2. Warrant Certificate. The Warrant Certificate to
be delivered pursuant to this Agreement shall be in the form set
forth in Exhibit X, attached hereto and made a part hereof, with
such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Agreement.
3. Exercise of Warrant. The Warrants, when initially
exercisable, are exercisable at an aggregate initial exercise
price per share set forth in Section 6 hereof payable by
certified check or official bank check in New York Clearing House
funds. Upon surrender of a Warrant Certificate with the annexed
Form of Election to Purchase duly executed, together with payment
of the Exercise Price (as hereinafter defined) for the Warrant
Shares purchased, at the Company's principal offices in Florida
(presently located at 2 Innovation Drive, Alachua, Florida 32615)
Holder shall be entitled to receive a certificate for the Warrant
Shares so purchased. The purchase rights represented by the
Warrant Certificate are exercisable at the option of the Holder
thereof, in whole or in part (but not as to fractional shares of
the Common Stock underlying the Warrants). In the case of the
purchase of less than all the Warrant Shares purchasable under
<PAGE>
the Warrant Certificate, the Company shall cancel said Warrant
Certificate upon the surrender thereof and shall execute and
deliver a new Warrant Certificate of like tenor for the balance
of the Warrant Shares purchasable thereunder.
4. Issuance of Certificate. Upon the exercise of
the Warrants, the issuance of a certificate for Warrant Shares or
other securities, properties or rights underlying such Warrants
shall be made forthwith (and in any event within five (5)
business days thereafter) without charge to the Holder thereof
including, without limitation, any tax which may be payable in
respect of the issuance thereof, and such certificate shall
(subject to the provisions of Sections 5 and 7 hereof) be issued
in the name of, or in such names as may be directed by, the
Holder thereof; provided, however, that the Company shall not be
required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any such
certificate in a name other than that of the Holder and the
Company shall not be required to issue or deliver such
certificate unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
The Warrant Certificate and the certificate
representing the Warrant Shares (and/or other securities,
property or rights issuable upon exercise of the Warrants) shall
be executed on behalf of the Company by the manual or facsimile
signature of the then present Chairman or Vice Chairman of the
Board of Directors or President or any Vice President of the
Company under its corporate seal reproduced thereon, attested to
by the manual or facsimile signature of the then present
Secretary or any Assistant Secretary of the Company. The Warrant
Certificate shall be dated the date of execution by the Company
upon initial issuance, division, exchange, substitution or
transfer.
5. Transfer of Warrants. The Holder of the Warrant
Certificate, by its acceptance thereof, covenants and agrees that
the Warrants are being acquired as an investment and not with a
view to the distribution thereof. The Warrants may be sold,
transferred, assigned, hypothecated or otherwise disposed of, in
whole or in part, without restriction, subject to compliance with
applicable securities laws.
6. Exercise Price.
6.1 Initial and Adjusted Exercise Price. Except as
otherwise provided in Section 8 hereof, the initial exercise
price of each Warrant shall be the price set forth in Section 1
hereof per Warrant Share issued thereunder. The adjusted
exercise price shall be the price which shall result from time to
2
<PAGE>
time from any and all adjustments of the initial exercise price
in accordance with the provisions of Section 8 hereof.
6.2 Exercise Price. The term "Exercise Price"
herein shall mean the initial exercise price or the adjusted
exercise price, depending upon the context.
7. Registration Under the Securities Act of 1933.
The Warrants, the Warrant Shares and any of the other securities
issuable upon exercise of the Warrants have not been registered
under the Securities Act of 1933, as amended (the "Act"). Upon
exercise, in whole or in part, of the Warrants, a certificate
representing the Warrant Shares underlying the Warrants, and any
of the other securities issuable upon exercise of the Warrants
(collectively, the "Warrant Securities") shall bear the following
legend unless such Warrant Shares previously have been registered
under the Act in accordance with the terms hereof:
THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED
("ACT"), AND MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO (i) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT, (ii)
TO THE EXTENT APPLICABLE, RULE 144 UNDER THE
ACT (OR ANY SIMILAR RULE UNDER THE ACT
RELATING TO THE DISPOSITION OF SECURITIES),
OR (iii) AN OPINION OF COUNSEL, IF SUCH
OPINION SHALL BE REASONABLY SATISFACTORY TO
COUNSEL TO THE ISSUER, THAT AN EXEMPTION
FROM REGISTRATION UNDER THE ACT IS
AVAILABLE.
8. Adjustments to Exercise Price and Number of
Securities.
8.1 Subdivision and Combination. In case the Company
shall at any time subdivide or combine the outstanding shares of
Common Stock, the Exercise Price shall forthwith be
proportionately decreased in the case of subdivision or increased
in the case of combination.
8.2 Adjustment in Number of Securities. Upon each
adjustment of the Exercise Price pursuant to the provisions of
this Section 8, the number of Warrant Shares issuable upon the
exercise of each Warrant shall be adjusted to the nearest full
amount by multiplying a number equal to the Exercise Price in
effect immediately prior to such adjustment by the number of
Warrant Shares issuable upon exercise of the Warrants immediately
prior to such adjustment and dividing the product so obtained by
the adjusted Exercise Price.
3
<PAGE>
8.3 Merger or Consolidation. In case of any
consolidation of the Company with, or merger of the Company with,
or merger of the Company into, another corporation (other than a
consolidation or merger which does not result in any
reclassification or change of the outstanding Common Stock), the
corporation formed by such consolidation or merger shall execute
and deliver to the Holder a supplemental warrant agreement
providing that the holder of each Warrant then outstanding or to
be outstanding shall have the right thereafter (until the
expiration of such Warrant) to receive, upon exercise of such
Warrant, the kind and amount of shares of stock and other
securities and property receivable upon such consolidation or
merger, by a holder of the number of shares of Common Stock of
the Company for which such Warrant might have been exercised
immediately prior to such consolidation, merger, sale or
transfer. Such supplemental warrant agreement shall provide for
adjustments which shall be identical to the adjustments provided
in this Section 8. The above provision of this subsection shall
similarly apply to successive consolidations or mergers.
8.4 No Adjustment of Exercise Price in Certain
Cases. No adjustment of the Exercise Price shall be made:
(a) Upon the issuance or sale of the Warrants or
the shares of Common Stock issuable upon the exercise
of the Warrants.
(b) If the amount of said adjustment shall be
less than two cents (2 ) per Warrant Share, provided,
however, that in such case any adjustment that would
otherwise be required then to be made shall be carried
forward and shall be made at the time of and together
with the next subsequent adjustment which, together
with any adjustment so carried forward, shall amount
to at least two cents (2 ) per Warrant Share.
(c) Upon the issuance or sale of Common Stock or
warrants, options or convertible securities, to be
issued and/or sold to employees, advisors, directors
or officers of, or consultants to, the Company or any
of its subsidiaries pursuant to a stock grant, stock
option plan, stock purchase plan, pension or profit
sharing plan or other stock agreement or arrangement
currently existing or approved by the Company's Board
of Directors.
(d) Upon the issuance of shares of Common Stock,
warrants, options and convertible securities pursuant
to warrants, options and convertible securities
outstanding as of the date hereof.
4
<PAGE>
(e) Upon the issuance of shares of Common Stock,
warrants, options and convertible securities in
connection with strategic partnerships or other
business and/or product consolidations or joint
ventures.
9. Exchange and Replacement of Warrant Certificate.
The Warrant Certificate is exchangeable without expense, upon the
surrender thereof by the registered Holder at the principal
executive office of the Company, for a new Warrant Certificate of
like tenor and date representing in the aggregate the right to
purchase the same number of Shares in such denominations as shall
be designated by the Holder thereof at the time of such
surrender.
Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation
of the Warrant Certificate, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to
it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the
Warrants, if mutilated, the Company will make and deliver a new
Warrant Certificate of like tenor, in lieu thereof.
10. Elimination of Fractional Interests. The Company
shall not be required to issue certificates representing
fractions of shares of Common Stock upon the exercise of the
Warrants, nor shall it be required to issue scrip or pay cash in
lieu of fractional interests, it being the intent of the parties
that all fractional interests shall be eliminated by rounding any
fraction up to the nearest whole number of shares of Common Stock
or other securities, properties or rights.
11. Reservation and Listing of Securities. The
Company shall at all times reserve and keep available out of its
authorized shares of Common Stock, solely for the purpose of
issuance upon the exercise of the Warrants, such number of shares
of Common Stock or other securities, properties or rights as
shall be issuable upon the exercise thereof. The Company
covenants and agrees that, upon exercise of the Warrants and
payment of the Exercise Price therefor, all shares of Common
Stock and other securities issuable upon such exercise shall be
duly and validly issued, fully paid, non-assessable and not
subject to the preemptive rights of any stockholder. As long as
the Warrants shall be outstanding, the Company shall use its best
efforts to cause all shares of Common Stock issuable upon the
exercise of the Warrants to be listed (subject to official notice
of issuance) on all securities exchanges on which the Common
Stock may then be listed and/or quoted on NASDAQ.
12. Notices to Warrant Holder. Nothing contained in
this Agreement shall be construed as conferring upon the Holder
5
<PAGE>
by virtue of his holding the Warrant the right to vote or to
consent or to receive notice as a stockholder in respect of any
meetings of stockholders for the election of directors or any
other matter, or as having any rights whatsoever as a stockholder
of the Company. If, however, at any time prior to the expiration
of the Warrants and their exercise, any of the following events
shall occur:
(a) the Company shall take a record of the
holders of its shares of Common Stock for the purpose
of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash
dividend or distribution payable otherwise than out of
current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution
on the books of the Company; or
(b) the Company shall offer to all the holders of
its Common Stock any additional shares of capital
stock of the Company or securities convertible into or
exchangeable for shares of capital stock of the
Company, or any option, right or warrant to subscribe
therefor; or
(c) a dissolution, liquidation or winding up of
the Company (other than in connection with a
consolidation or merger) or a sale of all or
substantially all of its property, assets and business
as an entirety shall be proposed;
then, in any one or more of said events, the Company shall give
written notice of such event at least fifteen (15) days prior to
the date fixed as a record date or the date of closing the
transfer books for the determination of the stockholders entitled
to such dividend, distribution, convertible or exchangeable
securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale or any such
earlier date that notice of such event is given to stockholders
of the Company. Such notice shall specify such record date or
the date of closing the transfer books, as the case may be.
Failure to give such notice or any defect therein shall not
affect the validity of any action taken in connection with the
declaration or payment of any such dividend, or the issuance of
any convertible or exchangeable securities, or subscription
rights, options or warrants, or any proposed dissolution,
liquidation, winding up or sale.
6
<PAGE>
13. Notices.
All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed
to have been duly made and sent when delivered, or mailed by
registered or certified mail, return receipt requested:
(a) If to the registered Holder of the Warrants,
to the address of such Holder as shown on the books of
the Company; or
(b) If to the Company, to the address set forth
in Section 3 hereof or to such other address as the
Company may designate by notice to the Holder.
14. Supplements and Amendments. The Company and
Holder may from time to time supplement or amend this Agreement
in order to cure any ambiguity, to correct or supplement any
provision contained herein which may be defective or inconsistent
with any provisions herein, or to make any other provisions in
regard to matters or questions arising hereunder which the
Company and Holder may deem necessary or desirable.
15. Successors. All the covenants and provisions of
this Agreement shall be binding upon and inure to the benefit of
the Company, the Holder and their respective successors and
assigns hereunder.
16. Termination. This Agreement shall terminate at
the close of business on the fifth anniversary of the issuance of
the Warrants.
17. Governing Law. This Agreement and the Warrant
Certificate issued hereunder shall be deemed to be a contract
made under the laws of the State of New York and for all purposes
shall be construed in accordance with the laws of the State of
New York without giving effect to the rules of the State of New
York governing the conflicts of laws.
18. Entire Agreement; Modification. This Agreement
contains the entire understanding between the parties hereto with
respect to the subject matter hereof and may not be modified or
amended except by a writing duly signed by the party against whom
enforcement of the modification or amendment is sought.
19. Severability. If any provision of this Agreement
shall be held to be invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision of this
Agreement.
20. Captions. The caption headings of the Sections
of this Agreement are for convenience of reference only and are
7
<PAGE>
not intended, nor should they be construed as, a part of this
Agreement and shall be given no substantive effect.
21. Benefits of this Agreement. Nothing in this
Agreement shall be construed to give to any person or corporation
other than the Company and Holder any legal or equitable right,
remedy or claim under this Agreement; and this Agreement shall be
for the sole and exclusive benefit of the Company and Holder.
22. Counterparts. This Agreement may be executed in
any number of counterparts and each of such counterparts shall
for all purposes be deemed to be an original, and such
counterparts shall together constitute but one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed, as of the day and year first
above written.
PHARMOS CORPORATION
By: ____________________________
Name:
Title:
________________________________
S. Colin Neill
8
<PAGE>
EXHIBIT X
TO
WARRANT AGREEMENT
[FORM OF WARRANT CERTIFICATE]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER
SECURITIES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") (ii) TO
THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR
RULE UNDER THE ACT RELATING TO THE DISPOSITION OF SECURITIES), OR
(iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY
SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN EXEMPTION FROM
REGISTRATION UNDER THE ACT IS AVAILABLE.
EXERCISABLE FROM OCTOBER 31, 1996 UNTIL
5:30 P.M., NEW YORK TIME, OCTOBER 31, 2001
No. W-95Y-1 10,000 Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that S. Colin Neill
or his registered assigns, is the registered holder of 10,000
Warrants to purchase initially, at any time from October 31, 1996
until 5:30 p.m. New York time on October 31, 2001 ("Expiration
Date"), up to 10,000 fully-paid and non-assessable shares of
common stock, par value $.03 per share ("Common Stock") of
PHARMOS CORPORATION, a Nevada corporation (the "Company"), at the
initial exercise price, subject to adjustment in certain events
(the "Exercise Price"), equal to $1.88 per share upon surrender
of this Warrant Certificate and payment of the Exercise Price at
an office or agency of the Company, but subject to the conditions
set forth herein and in the Warrant Agreement dated as of October
31, 1995 between the Company and S. Colin Neill (the "Warrant
Agreement"). Payment of the Exercise Price shall be made by
certified check or official bank check in New York Clearing House
funds payable to the order of the Company.
No Warrant may be exercised after 5:30 p.m., New York
time, on the Expiration Date, at which time all Warrants
evidenced hereby, unless exercised prior thereto, shall
thereafter be void.
The Warrants evidenced by this Warrant Certificate are
part of a duly authorized issue of Warrants issued pursuant to
the Warrant Agreement, which Warrant Agreement is hereby
incorporated by reference in and made a part of this instrument
and is hereby referred to for a description of the rights,
X-1
<PAGE>
limitation of rights, obligations, duties and immunities
thereunder of the Company and the holder (the word "holder"
meaning the registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence
of certain events the Exercise Price and the type and/or number
of the Company's securities issuable thereupon may, subject to
certain conditions, be adjusted. In such event, the Company
will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and
the number and/or type of securities issuable upon the exercise
of the Warrants; provided, however, that the failure of the
Company to issue such new Warrant Certificate shall not in any
way change, alter, or otherwise impair, the rights of the holder
as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of
this Warrant Certificate at an office or agency of the Company, a
new Warrant Certificate or Warrant Certificates of like tenor and
evidencing in the aggregate a like number of Warrants shall be
issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in
the Warrant Agreement, without any charge except for any tax or
other governmental charge imposed in connection with such
transfer.
Upon the exercise of less than all of the Warrants
evidenced by this Certificate, the Company shall forthwith issue
to the holder hereof a new Warrant Certificate representing such
number of unexercised Warrants.
The Company may deem and treat the registered holder(s)
hereof as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing
hereon made by anyone), for the purpose of any exercise hereof,
and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any
notice to the contrary.
All terms used in this Warrant Certificate which are
defined in the Warrant Agreement shall have the meanings assigned
to them in the Warrant Agreement.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed.
Dated as of October 31, 1995.
PHARMOS CORPORATION
By:______________________________
Name: Haim Aviv
Title: Chief Executive Officer
X-3
<PAGE>
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise
the right, represented by this Warrant Certificate, to purchase
________________ shares of Common Stock and herewith tenders in
payment for such securities a certified check or official bank
check payable in New York Clearing House Funds to the order of
PHARMOS CORPORATION in the amount of $______, all in accordance
with the terms of Section 3 of the Warrant Agreement dated as of
October 31, 1995 between Pharmos Corporation and S. Colin Neill.
The undersigned requests that a certificate for such securities
be registered in the name of _____________ whose address is
_____________________ and that such Certificate be delivered to
______________________ whose address is ______________.
Dated: __________________ Signature ______________________
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant Certificate.)
________________________________
(Insert Social Security or Other
Identifying Number of Holder)
X-4
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED __________________ hereby sells,
assigns and transfers unto
________________________________________________________________
________________________________________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and
appoint ______________ Attorney, to transfer the within Warrant
Certificate on the books of the within-named Company, with full
power of substitution.
Dated: _____________ Signature:__________________
(Signature must conform in
all respects to name of
holder as specified on the
face of the Warrant
Certificate.)
___________________________
(Insert Social Security or
Other Identifying Number of
Assignee)
X-5
EXHIBIT 5
<PAGE>
November 13, 1995
Pharmos Corporation
2 Innovation Drive
Alachua, FL 32615
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-3 (the
"Registration Statement") to be filed by you with the Securities
and Exchange Commission in connection with the offer of certain
selling stockholders named therein (the "Selling Stockholders")
to sell from time to time up to 6,000,000 shares (the "Shares")
of the Common Stock, par value $.03 per share, of Pharmos
Corporation (the "Company") issued in connection with the
September 14, 1995 private placement transaction (the "Private
Placement Transaction") and up to 1,070,000 shares of the
Company's Common Stock (the "Warrant Shares") issuable upon the
exercise of certain warrants issued in connection with the
Private Placement Transaction, certain warrants issued to the
Company's financial advisor, certain warrants issued to the
Company's investment banker\financial consultant and certain
warrants issued to the Company's Acting Chief Financial Officer
(the "Warrants"). As your counsel in connection with the Private
Placement Transaction and the offer and sale of the Shares and
the issuance of the Warrants, we have examined the originals, or
photostatic or certified copies, of such records of the Company,
certificates of the Company and of public officials and such
other matters and documents as we have deemed necessary or
relevant as a basis for this opinion.
Based on these examinations, it is our opinion that the Shares
and the Warrant Shares, when issued upon payment therefor, will
be validly issued, fully paid and non-assessable shares of Common
Stock of the Company.
We consent to the use of this opinion as an exhibit to the
Registration Statement and further consent to the reference to
this firm under the caption "Legal Opinions" in the Prospectus
forming a part of the Registration Statement.
Very truly yours,
FITZPATRICK EILENBERG & ZIVIAN
/s/ FITZPATRICK EILENBERG & ZIVIAN
__________________________________
EXHIBIT 23(b)
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Pharmos Corporation
We hereby consent to the incorporation by reference in the
Prospectus constituting part of this Registration Statement on
Form S-3 of our report dated March 17, 1995 appearing in Pharmos
Corporation's Annual Report on Form 10-K for the year ended
December 31, 1994. We also consent to the reference to us under
the heading "Experts" in such Prospectus.
/s/PRICE WATERHOUSE LLP
_______________________
PRICE WATERHOUSE LLP
New York, New York
November 10, 1995
