CEL-SCI CORPORATION 424(b)(3)
SEC File No. 333-57649
Common Stock
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS".
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus relates to shares (the "Shares") of common stock (the
"Common Stock") of CEL-SCI Corporation (the "Company") which may be issued
pursuant to certain employee incentive plans adopted by the Company. The
employee incentive plans provide for the grant, to selected employees of the
Company and other persons, of either stock bonuses or options to purchase shares
of the Company's Common Stock. Persons who received Shares pursuant to the Plans
and who are offering such Shares to the public by means of this Prospectus are
referred to as the "Selling Shareholders".
The Company has Incentive Stock Option Plans, Non-Qualified Stock
Option Plans and Stock Bonus Plans. In some cases the plans described above are
collectively referred to as the "Plans". The terms and conditions of any stock
bonus and the terms and conditions of any options, including the price of the
shares of Common Stock issuable on the exercise of options, are governed by the
provisions of the respective Plans and the stock bonus or stock option
agreements between the Company and the Plan participants.
The Selling Shareholders may offer the shares from time to time in
negotiated transactions in the over-the-counter market, at fixed prices which
may be changed from time to time, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated
prices. The Selling Shareholders may effect such transactions by selling the
Shares to or through securities broker/dealers, and such broker/dealers may
receive compensation in the form of discounts, concessions, or commissions from
the Selling Shareholders and/or the purchasers of the Shares for whom such
broker/dealers may act as agent or to whom they sell as principal, or both
(which compensation as to a particular broker/dealer might be in excess of
customary commissions). See "Selling Shareholders" and "Plan of Distribution".
None of the proceeds from the sale of the Shares by the Selling
Shareholders will be received by the Company. The Company has agreed to bear all
expenses (other than underwriting discounts, selling commissions and fees and
expenses of counsel and other advisers to the Selling Shareholders). The Company
has agreed to indemnify the Selling Shareholders against certain liabilities,
including liabilities under the Securities Act of 1933, as amended (the
"Securities Act").
The date of this Prospectus is September 16, 1999.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission"). Proxy statements, reports and other information
concerning the Company can be inspected and copied at Room 1024 of the
Commission's office at 450 Fifth Street, N.W., Washington, D.C. 20549, and the
Commission's Regional Offices in New York (7 World Trade Center, Suite l300, New
York, New York 10048), and Chicago (Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511), and copies of such material
can be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. Certain information
concerning the Company is also available at the Internet Web Site maintained by
the Securities and Exchange Commission at www.sec.gov. This Prospectus does not
contain all information set forth in the Registration Statement of which this
Prospectus forms a part and exhibits thereto which the Company has filed with
the Commission under the Securities Act and to which reference is hereby made.
DOCUMENTS INCORPORATED BY REFERENCE
The Company will provide, without charge, to each person to whom a copy
of this Prospectus is delivered, including any beneficial owner, upon the
written or oral request of such person, a copy of any or all of the documents
incorporated by reference herein (other than exhibits to such documents, unless
such exhibits are specifically incorporated by reference into this Prospectus).
Requests should be directed to:
CEL-SCI Corporation
8229 Boone Blvd., Suite 802
Vienna, Virginia 223l4
(703) 506-9460
Attention: Secretary
The following documents filed with the Commission by the Company
(Commission File No. 0-11503) are hereby incorporated by reference into this
Prospectus:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1998; and
(2) The Company's reports on Form 10-Q for the quarters ended December
31, 1998, March 31, 1999 and June 30, 1999.
(3) Proxy Statement relating to the April 12, 1999 Meeting of
Shareholders.
All documents filed with the Commission by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus and prior to the termination of the offering registered hereby
shall be deemed to be incorporated by reference into this Prospectus and to be a
part hereof from the date of the filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for the purposes of this
Prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
<PAGE>
TABLE OF CONTENTS
PAGE
THE COMPANY ................................................. 5
RISK FACTORS................................................. 6
DILUTION AND COMPARATIVE SHARE DATA ......................... 9
USE OF PROCEEDS .............................................. 11
SELLING SHAREHOLDERS ......................................... 11
PLAN OF DISTRIBUTION ........................................ 14
DESCRIPTION OF COMMON STOCK .................................. 14
GENERAL ...................................................... 15
<PAGE>
THE COMPANY
CEL-SCI Corporation was formed as a Colorado corporation in 1983 and is
involved in the research and development of certain drugs and vaccines. The
Company's first product, Multikine(TM), manufactured using the Company's
proprietary cell culture technologies, is a combination, or "cocktail", of
natural human interleukin-2 ("IL-2") and certain lymphokines and cytokines.
Multikine is being tested to determine if it is effective in improving the
immune response of cancer patients. The Company's second product, HGP-30, is
being tested by the Company's wholly-owned subsidiary, Viral Technologies, Inc.
to determine if it is an effective vaccine/treatment against the AIDS virus. The
third technology the Company is developing, L.E.A.P.S. (Ligand Epitope Antigen
Presentation System) is a T-cell modulation technology which can be used to
direct a specific immune response and which is thought to be particularly
important in the case of diseases which have no approved vaccinations such as
herpes simplex, malaria, and AIDS. The Company intends to use this new
technology to improve the cellular immune response of persons vaccinated with
HGP-30 and to develop potential treatments and/or vaccines against various
diseases. Present target diseases are AIDS, herpes simplex, malaria,
tuberculosis, prostate cancer and breast cancer.
Before human testing can begin with respect to a drug or biological
product, pre-clinical studies are conducted in laboratory animals to evaluate
the potential efficacy and the safety of a product. Human clinical studies
generally involve a three-phase process. The initial clinical evaluation, Phase
I, consists of administering the product and testing for safe and tolerable
dosage levels. Phase II trials continue the evaluation of safety and determine
the appropriate dosage for the product, identify possible side effects and risks
in a larger group of subjects, and provide preliminary indications of efficacy.
Phase III trials consist of testing for actual clinical efficacy within an
expanded group of patients at geographically dispersed test sites.
The costs associated with the clinical trials relating to the Company's
technologies, research expenditures and the Company's administrative expenses
have been funded with the public and private sales of shares of the Company's
Common Stock and borrowings from third parties, including affiliates of the
Company.
The Company does not expect to develop commercial products for several
years, if at all. The Company has had operating losses since its inception, had
an accumulated deficit of approximately $50,461,000 at June 30, 1999, and
expects to incur substantial losses for the foreseeable future.
The Company's executive offices are located at 8229 Boone Blvd., #802,
Vienna, Virginia 22182, and its telephone number is (703) 506-9460.
As of September 15, 1999 the Company had 16,985,294 shares of Common
Stock issued and outstanding.
<PAGE>
RISK FACTORS
Investors should be aware that this offering involves certain risks,
including those described below, which could adversely affect the value of their
holdings of Common Stock. The Company does not make, nor has it authorized any
other person to make, any representation about the future market value of the
Company's Common Stock. In addition to the other information contained in this
Prospectus, the following factors should be considered carefully in evaluating
an investment in the shares offered by this Prospectus
The Company Has Earned Only Limited Revenues and Has a History of Losses.
The Company has had only limited revenues since it was formed in 1983.
Since the date of its formation and through June 30, 1999 the Company incurred
net losses of approximately $50,461,000. During the years ended September 30,
1996, 1997 and 1998 the Company suffered losses of $6,326,666, $8,189,458 and
$6,442,683 respectively. The Company has relied principally upon the proceeds of
public and private sales of securities to finance its activities to date. All of
the Company's potential products are in the early stages of development, and any
commercial sale of these products will be many years away. Accordingly, the
Company expects to incur substantial losses for the foreseeable future.
There can be no assurance the Company will be profitable. At the
present time, the Company intends to use available funds to finance the
Company's operations. Accordingly, while payment of dividends rests within the
discretion of the Board of Directors, no common stock dividends have been
declared or paid by the Company. The Company does not presently intend to pay
dividends on its common stock and there can be no assurance that common stock
dividends will ever be paid.
The Company Needs Additional Capital to Finance Its Operations.
Clinical and other studies necessary to obtain approval of a new drug
can be time consuming and costly, especially in the United States, but also in
foreign countries. The different steps necessary to obtain regulatory approval,
especially that of the Food and Drug Administration ("FDA"), involve significant
costs and may require several years to complete. The Company expects that it
will need additional financing over an extended period of time in order to fund
the costs of future clinical trials, related research, and general and
administrative expenses. The Company may be forced to delay or postpone
development and research expenditures if the Company is unable to secure
adequate sources of funds. These delays in development may have an adverse
effect on the Company's ability to produce a timely and competitive product.
There can be no assurance that the Company will be able to obtain additional
funding from other sources.
Cost Estimates for Clinical Trials and Research May be Inaccurate.
The Company's estimates of the costs associated with future clinical
trials and research may be substantially lower than the actual costs of these
activities. If the Company's cost estimates are incorrect, the Company will need
additional funding for its research efforts.
<PAGE>
Products Which May Be Developed by the Company Will Require Regulatory Approvals
Prior to Sale.
Therapeutic agents, drugs and diagnostic products are subject to
approval, prior to general marketing, by the FDA in the United States and by
comparable agencies in most foreign countries. The process of obtaining FDA and
corresponding foreign approvals is costly and time consuming, particularly for
pharmaceutical products such as those which might ultimately be developed by the
Company, VTI or its licensees, and there can be no assurance that such approvals
will be granted. Any failure to obtain or any delay in obtaining such approvals
may adversely affect the ability of potential licensees or the Company to
successfully market any products developed. Also, the extent of adverse
government regulations which might arise from future legislative or
administrative action cannot be predicted.
The Company is Dependent on an Unrelated Corporation to Manufacture Multikine
The Company has an agreement with an unrelated corporation for the
production, until August 2000, of Multikine for research and testing purposes.
At present, this is the Company's only source of Multikine. If this corporation
could not, for any reason, supply the Company with Multikine, the Company
estimates that it would take approximately six to ten months to obtain supplies
of Multikine under an alternative manufacturing arrangement. The Company does
not know what cost it would incur to obtain this alternative source of supply.
The Biomedical Feld in Which the Company is Involved is Undergoing Rapid and
Significant Technological Change.
The successful development of therapeutic agents and diagnostic
products from the compounds, compositions and processes licensed to the Company,
through Company financed research or as a result of possible licensing
arrangements with pharmaceutical or other companies, will depend on its ability
to be in the technological forefront of this field. There can be no assurance
that the Company will achieve or maintain such a competitive position or that
other technological developments will not cause the Company's proprietary
technologies to become uneconomical or obsolete.
The Company's Patents Might Not Protect the Company's Technology.
Certain aspects of the Company's technologies are covered by U.S. and
foreign patents. In addition, the Company has a number of patent applications
pending. There is no assurance that the applications still pending or which may
be filed in the future will result in the issuance of any patents. Furthermore,
there is no assurance as to the breadth and degree of protection any issued
patents might afford the Company. Disputes may arise between the Company and
others as to the scope and validity of these or other patents. Any defense of
the patents could prove costly and time consuming and there can be no assurance
that the Company will be in a position, or will deem it advisable, to carry on
such a defense. Other private and public concerns, including universities, may
have filed applications for, or may have been issued, patents and are expected
to obtain additional patents and other proprietary rights to technology
potentially useful or necessary to the Company. The scope and validity of such
patents, if any, the extent to which the Company may wish or need to acquire the
rights to such patents, and the cost and availability of such rights are
presently unknown. Also, as far as the Company relies upon unpatented
proprietary technology, there is no assurance that others may not acquire or
independently develop the same or similar technology. The Company's first
MULTIKINE patent will expire in the year 2000. Since the Company does not know
if it will ever be able to sell MULTIKINE on a commercial basis, the Company
cannot predict what effect the expiration of this patent will have on the
Company. Notwithstanding the above, the Company believes that trade secrets and
later issued patents will protect the technology associated with Multikine past
the year 2000.
<PAGE>
The Company's Product Liability Insurance May Not Be Adequate.
Although the Company has product liability insurance for Multikine and
its HGP-30 vaccine, the successful prosecution of a product liability case
against the Company could have a materially adverse effect upon its business if
the amount of any judgment exceeds the Company's insurance coverage.
The Loss of Management and Scientific Personnel Could Adversly Affect the
Company.
The Company is dependent for its success on the continued availability
of its executive officers. The loss of the services of any of the Company's
executive officers could have an adverse effect on the Company's business. The
Company does not carry key man life insurance on any of its officers. The
Company's future success will also depend upon its ability to attract and retain
qualified scientific personnel. There can be no assurance that the Company will
be able to hire and retain such necessary personnel.
Shares Issuable Upon the Conversion of Options, Warrants and Convertible
Securities May Depress the Price of the Company's Common Stock.
The Company has issued options to its officers, directors, employees
and consultants which allow the holders to acquire additional shares of the
Company's Common Stock. In some cases the Company has agreed that, at its
expense, it will make appropriate filings with the Securities and Exchange
Commission so that the securities issuable upon the exercise of the options will
be available for public sale. Such filings could result in substantial expense
to the Company and could hinder future financings by the Company.
Until the options expire, the holders will have an opportunity to
profit from any increase in the market price of the Company's Common Stock
without assuming the risks of ownership. Holders of the options may exercise
them at a time when the Company could obtain additional capital on terms more
favorable than those provided by the options. The exercise of the options will
dilute the voting interest of the owners of presently outstanding shares of the
Company's Common Stock and may adversely affect the ability of the Company to
obtain additional capital in the future. The sale of the shares of Common Stock
issuable upon the exercise of the options could adversely affect the market
price of the Company's stock.
<PAGE>
In addition, in connection with the sale of the Company's Series D
Preferred Stock, the Company issued Series A and Series B Warrants which
collectively allow for the purchase of 1,100,000 shares of the Company's common
stock. See "Comparative Share Data".
The issuance of common stock upon the exercise of the Series A or
Series B Warrants, as well as future sales of such common stock or of shares of
common stock held by existing stockholders, or the perception that such sales
could occur, could adversely affect the market price of the Company's common
stock.
Competition in the Research, Development and Commercialization of Products Which
May be Used in the Prevention or Treatment of Cancer and AIDS is Intense.
Major pharmaceutical and chemical companies, as well as specialized
genetic engineering firms, are developing products for these diseases. Many of
these companies have substantial financial, research and development, and
marketing resources and are capable of providing significant long-term
competition either by establishing in-house research groups or by forming
collaborative ventures with other entities. In addition, both smaller companies
and non-profit institutions are active in research relating to cancer and AIDS
and are expected to become more active in the future.
The Market Price for the Company's Common Stock is Volatile.
The market price of the Company's common stock, as well as the
securities of other biopharmaceutical and biotechnology companies, have
historically been highly volatile, and the market has from time to time
experienced significant price and volume fluctuations that are unrelated to the
operating performance of particular companies. Factors such as fluctuations in
the Company's operating results, announcements of technological innovations or
new therapeutic products by the Company or its competitors, governmental
regulation, developments in patent or other proprietary rights, public concern
as to the safety of products developed by the Company or other biotechnology and
pharmaceutical companies, and general market conditions may have a significant
effect on the market price of the Company's Common Stock.
DILUTION AND COMPARATIVE SHARE DATA
As of September 15, 1999, the Company had 16,985,294 shares of its
common stock outstanding with a net tangible book value (total assets less total
liabilities and intangible assets) of approximately $0.40 per share.
"Net tangible book value per share" is the amount that results from
subtracting the total liabilities and intangible assets of the Company from its
total assets and dividing such amount by the shares of common stock then
outstanding.
The net tangible book value of a share of the Company's common stock is
substantially less than the price which investors will pay for the shares
offered by this Prospectus. The difference between the price paid by persons who
purchase the Securities offered by this Prospectus and the net tangible book
value of the Company's common stock is the dilution attributable to each share
of common stock.
<PAGE>
The following table reflects the additional shares which may be issued
as a result of the exercise of outstanding options and warrants or the
conversion of other securities issued by the Company. By means of separate
registration statements filed with the Securities and Exchange Commission, the
shares of common stock referenced in Notes A through D are being offered for
public sale. The shares of common stock issuable upon the exercise of options
which are held by the Company's officers and directors, and which are referenced
in Note E, are being offered for sale by means of this prospectus. See "Selling
Shareholders".
Number of Note
Shares Reference
Shares outstanding as of September 15, 1999(1) 16,985,294
Net tangible book value per share as of
September 15, 1999 (unaudited) $0.40
Shares issuable upon exercise of 1,100,000 A
Series A and Series B Warrants
Shares issuable upon exercise of 50,000 B
Sales Agent Warrants
Shares issuable upon exercise 285,000 C
of options granted to financial consultants
Shares issuable upon exercise of warrants
held by former holders of the
Company's Series B Preferred Stock. 82,250 D
Shares issuable upon exercise of options
and warrants granted to Company's officers,
directors, employees, consultants, and third
parties 2,946,084 E
A. In December 1997, the Company sold 10,000 shares of its Series D Preferred
Stock, 550,000 Series A Warrants and 550,000 Series B Warrants, to ten
institutional investors for $10,000,000. Each Series A Warrant allows the
holder to purchase one share of the Company's common stock for $8.62 at any
time prior to December 22, 2001. Each Series B Warrant allows the holder to
purchase one share of the Company's Common Stock for $9.31 at any time prior
to December 22, 2001. As of September 15, 1999, all Series D Preferred
Shares had been converted into shares of the Company's common stock.
<PAGE>
B. In connection with the Company's December l997 sale of Series D Preferred
Shares and Warrants Shoreline Pacific Institutional Finance, the Sales Agent
for such offering, received a commission plus warrants to purchase 50,000
shares of the Company's Common Stock (the "Sales Agent Warrants"). The Sales
Agent Warrants are exercisable at a price of $8.62 per share at any time
prior to December 22, 2001.
C. The Company has granted options for the purchase of an additional 285,000
shares of common stock to certain investor relations consultants in
consideration for services provided to the Company. The options are
exercisable at prices ranging between $2.50 and $7.31 per share and expire
between September 1999 and February 2004.
D. These warrants allow the holders to purchase up to 82,250 shares of the
Company's common stock for $4.25 per share at any time prior to December 15,
1999.
E. The options are exercisable at prices ranging from $2.06 to $11.00 per
share. The Company may also grant options to purchase additional shares
under its Incentive Stock Option and Non-Qualified Stock Option Plans.
USE OF PROCEEDS
All of the shares offered by this Prospectus are being offered by
certain owners of the Company's Common Stock (the Selling Shareholders) and were
issued by the Company in connection with the Company's employee stock bonus or
stock option plans. None of the proceeds from this offering will be received by
the Company. Expenses expected to be incurred by the Company in connection with
this offering are estimated to be approximately $10,000. The Selling
Shareholders have agreed to pay all commissions and other compensation to any
securities broker/dealers through whom they sell any of the Shares.
SELLING SHAREHOLDERS
The Company has issued (or may in the future issue) shares of its
common stock to various persons pursuant to certain employee incentive plans
adopted by the Company. The employee incentive plans provide for the grant, to
selected employees of the Company and other persons, of either stock bonuses or
options to purchase shares of the Company's Common Stock. Persons who received
Shares pursuant to the Plans and who are offering such Shares to the public by
means of this Prospectus are referred to as the "Selling Shareholders".
The Company has adopted a number of Stock Option Plans as well as a
Stock Bonus Plan. A summary description of these Plans follows. In some cases
these Plans are collectively referred to as the "Plans".
Incentive Stock Option Plans. The Company has Incentive Stock Option
Plans which collectively authorize the issuance of up to 1,100,000 shares of the
Company's Common Stock to persons that exercise options granted pursuant to the
Plan. Only Company employees may be granted options pursuant to the Incentive
Stock Option Plan.
<PAGE>
Non-Qualified Stock Option Plans. The Company has Non-Qualified Stock
Option Plans which collectively authorize the issuance of up to 2,760,000 shares
of the Company's Common Stock to persons that exercise options granted pursuant
to the Plans. The Company's employees, directors, officers, consultants and
advisors are eligible to be granted options pursuant to the Plans, provided
however that bona fide services must be rendered by such consultants or advisors
and such services must not be in connection with the offer or sale of securities
in a capital-raising transaction. The option exercise price is determined by the
Committee but cannot be less than the market price of the Company's Common Stock
on the date the option is granted.
Stock Bonus Plans. The Company has Stock Bonus Plans which collectively
allow for the issuance of up to 340,000 shares of Common Stock. Such shares may
consist, in whole or in part, of authorized but unissued shares, or treasury
shares. Under the Stock Bonus Plan, the Company's employees, directors,
officers, consultants and advisors are eligible to receive a grant of the
Company's shares, provided however that bona fide services must be rendered by
consultants or advisors and such services must not be in connection with the
offer or sale of securities in a capital-raising transaction.
Summary. The following sets forth certain information, as of September
15, 1999, concerning the stock options and stock bonuses granted by the Company.
Each option represents the right to purchase one share of the Company's Common
Stock.
Total Shares Shares Reserved Shares issued Remaining
Reserved for Outstanding as Stock Options/Shares
Name of Plan Under Plan Options Bonus Under Plans
Incentive Stock
Option Plans 1,100,000 789,384 N/A 292,449
Non-Qualified
Stock Option Plans 2,760,000 1,959,700 N/A 441,924
Stock Bonus Plans 340,000 N/A 251,811 88,189
TOTAL:
The following table summarizes the options granted to the Company's
officers, directors, employees and consultants pursuant to the Plans as of
September 15, 1999. Certain options were granted in accordance with the
Company's Salary Reduction Plan. Pursuant to the Salary Reduction Plan, any
employee of the Company was allowed to receive options (exercisable at market
price at time of grant) in exchange for a reduction in such employee's salary.
<PAGE>
Name of
Option Holder Shares Subject to Options (1)
------------- -----------------------------
Maximilian de Clara 590,333
Geert R. Kersten 975,750
Patricia B. Prichep 105,334
M. Douglas Winship 67,000
Eyal Talor, Ph.D 100,500
Prem Sarin, Ph.D 107,500
Daniel Zimmerman, Ph.D 85,000
Employees and consultants to Company 717,667
(1)The options are exercisable at prices ranging from $2.06 to $11.00 per share.
Shares issuable upon the exercise of options granted to the Company's
officers and directors pursuant to the Plans, as well as shares issued pursuant
to the Stock Bonus Plan, are being offered by means of this Prospectus. The
following table provides certain information concerning the shareholdings of the
Company's officers and directors and the shares offered by means of this
Prospectus.
Number of Shares
Number of Number of Shares to be Beneficial-
Name of Shares Being Offered ly Owned on Com- Percent
Selling Beneficially Bonus Option pletion of the of
Shareholder Owned Shares(2) Shares(2) Offering Class
Maximilian de Clara -- 200,000 590,333 -- --
Geert R. Kersten 108,449 (1) -- 975,750 108,449 *
Patricia B. Prichep 3,030 -- 105,334 3,030 *
M. Douglas Winship 2,598 -- 67,000 2,598 *
Eyal Talor, Ph.D 4,290 -- 100,500 4,290 *
Prem Sarin, Ph.D 2,538 -- 107,500 2,538 *
Daniel Zimmerman, Ph.D 21,383 -- 85,000 21,383 *
* Less than 1%.
(1) Includes shares held in trusts for the benefit of Mr. Kersten's children.
(2) Represents shares issued or issuable upon exercise of stock options.
Mr. de Clara and Mr.Kersten are officers and directors of the Company. Ms.
Prichep, Mr. Winship, Dr. Talor, Dr. Sarin and Dr. Zimmerman are officers of the
Company.
Each Selling Shareholder has represented that the Shares were purchased
for investment and with no present intention of distributing or reselling such
Shares. However, in recognition of the fact that holders of restricted
securities may wish to be legally permitted to sell their Shares when they deem
appropriate, the Company has filed with the Commission under the Securities Act
of 1933 a Form S-8 registration statement of which this Prospectus forms a part
with respect to the resale of the Shares from time to time in the
over-the-counter market or in privately negotiated transactions.
<PAGE>
Certain of the Selling Shareholders, their associates and affiliates
may from time to time be employees of, customers of, engage in transactions
with, and/or perform services for the Company or its subsidiaries in the
ordinary course of business.
PLAN OF DISTRIBUTION
The Selling Shareholders may sell the Shares offered by this Prospectus
from time to time in negotiated transactions in the over-the-counter market at
fixed prices which may be changed from time to time, at market prices prevailing
at the time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Selling Shareholders may effect such transactions by
selling the Shares to or through broker/dealers, and such broker/dealers may
receive compensation in the form of discounts, concessions, or commissions from
the Selling Shareholders and/or the purchasers of the Shares for which such
broker/dealers may act as agent or to whom they may sell, as principal, or both
(which compensation as to a particular broker/dealer may be in excess of
customary compensation).
The Selling Shareholders and any broker/dealers who act in connection
with the sale of the Shares hereunder may be deemed to be "underwriters" within
the meaning of ss.2(11) of the Securities Acts of 1933, and any commissions
received by them and profit on any resale of the Shares as principal might be
deemed to be underwriting discounts and commissions under the Securities Act.
The Company has agreed to indemnify the Selling Shareholders and any securities
broker/dealers who may be deemed to be underwriters against certain liabilities,
including liabilities under the Securities Act as underwriters or otherwise.
The Company has advised the Selling Shareholders that they and any
securities broker/dealers or others who may be deemed to be statutory
underwriters will be subject to the Prospectus delivery requirements under the
Securities Act of 1933. The Company has also advised each Selling Shareholder
that in the event of a "distribution" of the shares owned by the Selling
Shareholder, such Selling Shareholder, any "affiliated purchasers", and any
broker/ dealer or other person who participates in such distribution may be
subject to Rule 102 under the Securities Exchange Act of 1934 ("1934 Act") until
their participation in that distribution is completed. A "distribution" is
defined in Rule 102 as an offering of securities "that is distinguished from
ordinary trading transactions by the magnitude of the offering and the presence
of special selling efforts and selling methods". The Company has also advised
the Selling Shareholders that Rule 101 under the 1934 Act prohibits any
"stabilizing bid" or "stabilizing purchase" for the purpose of pegging, fixing
or stabilizing the price of the Common Stock in connection with this offering.
<PAGE>
DESCRIPTION OF COMMON STOCK
The shares of Common Stock offered by this Prospectus are fully paid
and non-assessable. Holders of the Common Stock do not have preemptive rights.
Each stockholder is entitled to one vote for each share of Common stock held of
record by such stockholder. There is no right to cumulate votes for election of
directors. Upon liquidation of the Company, the assets then legally available
for distribution to holders of the Common Stock will be distributed ratably
among such shareholders in proportion to their stock holdings. Holders of Common
Stock are entitled to dividends when, as and if declared by the Board of
Directors out of funds legally available therefor.
GENERAL
The Company's Bylaws provide that the Company will indemnify its
directors and officers against expense and liabilities they incur to defend,
settle or satisfy any civil or criminal action brought against them as a result
of their being or having been Company directors or officers unless, in any such
action, they have acted with gross negligence or willful misconduct. Officers
and Directors are not entitled to be indemnified for claims or losses resulting
from a breach of their duty of loyalty to the Company, for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law or a transaction from which the director derived an improper personal
benefit. Insofar as indemnification for liabilities arising under the Securities
Act of l933 may be permitted to the Company's directors and officers, the
Company has been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of l933, and is, therefore, unenforceable.
No dealer, salesman, or any other person has been authorized to give
any information or to make any representations other than those contained in
this prospectus in connection with this offering and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Company or the selling shareholders. This prospectus does not constitute
an offer to sell, or a solicitation of any offer to buy, the securities offered
in any jurisdiction to any person to whom it is unlawful to make an offer or
solicitation. Neither the delivery of this prospectus nor any sale made
hereunder shall, under any circumstances, create an implication that there has
not been any change in the affairs of the Company since the date hereof or that
any information contained herein is correct as to any time subsequent to its
date.
All dealers effecting transactions in the registered securities,
whether or not participating in this distribution, may be required to deliver a
prospectus. This is an addition to the obligation of dealers to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
