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Rule 424(b)(3) Prospectus
Registration No. 33-73622
PROSPECTUS
[NEOPROBE LOGO]
144,667 SHARES OF COMMON STOCK
This prospectus relates to 144,667 shares of common stock, par value $.001
per share ("Common Stock") of Neoprobe Corporation ("Neoprobe" or the "Company")
issuable upon exercise of certain warrants (the "Warrants") to purchase one
share of Common Stock. See "Warrants." The Common Stock is listed on the NASDAQ
National Market under the symbol "NEOP."
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THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 3.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
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PRICE UNDERWRITING
TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS THE COMPANY (1)
- -------------------------------------------------- ------------------- ------------------- -------------------
<S> <S> <C> <C>
67,670 SHARES OF COMMON STOCK (2).............. $3.32 --- $224,664.40
- -------------------------------------------------- ------------------- ------------------- -------------------
70,331 SHARES OF COMMON STOCK (3).............. $3.86 --- $271,477.66
- -------------------------------------------------- ------------------- ------------------- -------------------
6,666 SHARES OF COMMON STOCK (4)............... $3.00 --- $19,998.00
- -------------------------------------------------- ------------------- ------------------- -------------------
TOTAL MINIMUM (5).............................. --- --- ---
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TOTAL MAXIMUM (6).............................. $516,140.06 --- $516,140.06
================================================== =================== =================== ===================
<FN>
(1) Before deducting expenses payable by the Company, estimated at $12,100.
(2) Issuable upon exercise of Class A Warrants, see "Warrants."
(3) Issuable upon exercise of Class B Warrants, see "Warrants."
(4) Issuable upon exercise of Warrant 001, see "Warrants."
(5) This assumes that none of the Warrants is exercised.
(6) This assumes that all of the Warrants are exercised.
</TABLE>
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The date of this Prospectus is August 30, 1996
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, and in accordance therewith files reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). Copies of such reports, proxy statements and other
information may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Citicorp Center, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the following Regional Offices of the
Commission: 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511;
and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of such
material may be obtained at prescribed rates from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
The Company will furnish without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request, a copy of any or all of the documents incorporated herein, other than
exhibits to such documents (unless such exhibits are specifically incorporated
by reference into such documents). See "Incorporation of Certain Documents by
Reference." Requests should be directed to Neoprobe Corporation, 425 Metro Place
North, Suite 400, Dublin, Ohio 43017-1367; Attention: John Schroepfer, Vice
President--Finance and Administration; Telephone (614) 793-7500.
ADDITIONAL INFORMATION
The Company has filed with the Commission a registration statement under
the Securities Act of 1933 with respect to the securities described herein. This
Prospectus does not contain all of the information set forth in the registration
statement and the exhibits thereto. For further information regarding the
Company and these securities, reference is made to such registration statement,
including all amendments thereto and the schedules and exhibits filed as part
thereof. Statements contained herein concerning provisions of documents are
necessarily summaries of the documents, and each statement is qualified in its
entirety by reference to the copy of the applicable document filed with the
Commission. The Company's executive offices are located at 425 Metro Place
North, Suite 400, Dublin, Ohio 43017-1367. Its telephone number is (614)
793-7500.
NO DEALER, SALESMAN OR ANY OTHER PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES OFFERED BY THIS
PROSPECTUS, OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED OR IS UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS SHALL NOT, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO THE DATE OF THE PROSPECTUS.
TRADEMARKS
Neoprobe is the owner of United States and foreign registered trademarks
"Neoprobe(R)," "RIGS(R)" and "RIGScan(R)." "Radioimmunoguided SurgeryTM" and
"RIGS/ACT(TM)" are commercially used trademarks of Neoprobe.
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RISK FACTORS
The securities offered hereby involve a high degree of risk. Each
prospective investor should carefully consider the following risk factors
inherent in and affecting the business of the Company, together with the other
information in this Prospectus, before making an investment decision. The
discussion in this Prospectus contains forward-looking statements that involve
risks and uncertainties. The Company's actual results may differ significantly
from the results discussed in the forward-looking statements.
EARLY STAGE OF DEVELOPMENT; NO COMMERCIALIZED PRODUCTS
The Company is still in the development stage and has not received approval
to market any of its products. To date, the Company has completed a Phase III
clinical trial with the Company's lead product, RIGScan CR49, for the surgical
detection of metastatic and recurrent colorectal cancer in both the United
States and Europe. In May 1996, the Company filed a marketing application with
regulatory agencies in Europe for the detection of metastatic colorectal cancer.
Enrollment of patients in a separate Phase III clinical study for primary
colorectal cancer has been completed in the United States and enrollment in this
Phase III primary colorectal cancer study in Europe is expected to continue
until the fourth quarter of 1996. Substantial clinical and statistical analysis
of the data collected from the clinical trials of this product and substantial
clinical trials of the Company's other products must be completed before
submissions can be made to appropriate regulatory authorities. Such analysis and
trials require substantial financial and management resources and could require
more time than is currently estimated. There can be no assurance that the
Company will be able to conclude successfully the clinical tests or development
of any of its proposed products within the Company's expected time frame and
budget, if at all, or that the Company's products will prove to be safe and
effective in clinical trials. There also can be no assurance that the Company
will be able to obtain governmental approval for the commercial marketing and
sale of any of its proposed products. If the Company is unable to conclude
successfully the clinical tests or if the RIGS system does not prove to be safe
and effective, or if the Company does not obtain governmental approval or is
otherwise unable to commercialize the RIGS system successfully, the Company's
business, financial condition and results of operations will be materially
adversely affected and could result in the cessation of the Company's business.
LIMITED REVENUES; CONTINUING NET LOSSES; ACCUMULATED DEFICIT
The Company has a limited history of operations that makes the prediction
of future operating results difficult, if not impossible. The Company's
business, therefore, must be evaluated in light of the risks, expenses, delays
and complications normally encountered by development-stage companies in the
highly competitive biomedical industry, which is characterized by a high rate of
failure. Since its inception in 1983, the Company has been primarily engaged in
research and development of the RIGS technology. The Company has experienced
significant operating losses in each year since inception, and had an
accumulated deficit of $43.1 million as of December 31, 1995. For the years
ended December 31, 1993, 1994 and 1995, the Company's net losses were $8.0
million, $10.6 million, and $10.8 million, respectively. The Company expects
operating losses to increase as research and development and clinical trial
efforts expand. The Company's ability to achieve profitable operations is
dependent on obtaining regulatory approval of its products and making the
transition to a manufacturing and marketing company. There can be no assurance
that the Company will ever achieve a profitable level of operations.
DEPENDENCE UPON PRINCIPAL PRODUCT LINE; UNCERTAINTY OF MARKET ACCEPTANCE
The Company's future success is dependent upon obtaining regulatory
approvals to market, and achieving market acceptance of, the Company's proposed
RIGS products, which represent the Company's principal proposed product line.
There can be no assurance that the Company will receive approval from the
appropriate regulatory body to market any of its RIGS products. Moreover,
achieving market acceptance for the RIGS products, if approved, will require
significant efforts and expenditures to create awareness and demand for the RIGS
products by surgeons, nuclear medicine departments of hospitals, oncologists
and, possibly, cancer patients. Widespread use of the Company's RIGS products
would require the training of numerous physicians, and the time required to
complete such training could result in a delay or dampening of market
acceptance. There can be no assurance that the Company's initial proposed
commercial products, RIGS products for colorectal cancer, or any other proposed
products will become standard surgical procedure or even generally accepted
medical practice, or that the
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Company will achieve any market penetration. In addition, purchase decisions are
greatly influenced by health care administrators who are subject to increasing
pressures to reduce costs. Healthcare administrators must determine that the
Company's products are cost-effective alternatives to current means of tumor
detection. The failure to obtain governmental approvals or achieve significant
market acceptance for such products would have a materially adverse effect on
the Company's business, financial condition and results of operations.
GOVERNMENT REGULATION
The Company's biologic products will require a regulatory license to market
by the United States Food & Drug Administration (the "FDA") and by comparable
agencies in foreign countries. In addition, various federal, state and foreign
statutes also govern or influence the manufacture, safety, labeling, storage,
record keeping and marketing of such products. The process of obtaining
regulatory licenses and approvals is costly and time consuming, and the Company
has encountered and may continue to encounter delays in the completion of
testing for certain proposed products. Future delays could result from, among
other things, slower than expected patient enrollment rates, difficulties in
analyzing data from clinical trials or in validating manufacturing processes,
changes in regulatory requirements, a longer than expected review process and
possible additional analysis and reconciliation of any perceived differences
between data generated in Phase I/II and Phase II clinical trials and data
generated in Phase III clinical trials. In addition, although certain members of
management and significant employees and consultants have had substantial
experience in conducting and supervising clinical trials for pharmaceutical and
biomedical products, the Company has not previously submitted a Biologic License
Application ("BLA") to the FDA or a dossier to European regulatory agencies for
approval of a license to market its products. There can be no assurance that
clinical data collected in the Company's pivotal Phase III trials will be
sufficient to support approval of licenses for the Company's products or that
the FDA or European regulatory agencies will not require additional information
and data, including additional clinical studies, or refuse to file the
application for substantive review. Failure to obtain these licenses and to
commence commercial marketing on a timely basis could jeopardize the Company's
rights under certain of its current or contemplated contractual arrangements for
the supply of necessary components of its RIGS system products and would have a
material adverse effect on the Company's business, financial condition and
results of operations. Moreover, foreign and domestic approvals, if granted, may
include significant limitations on uses of the products. Further, even if such
regulatory approval is obtained, use of the Company's products could reveal side
effects that, if serious, could result in suspension of existing licenses and
delays in obtaining licenses in other jurisdictions. A marketed product,
manufacturer and manufacturing facilities are subject to continual review and
periodic inspections, and later discovery of previously unknown problems with a
product, manufacturer or facility may result in restrictions on such product or
manufacturer, including withdrawal of the product from the market. Noncompliance
with applicable governmental requirements can result in import detentions,
fines, civil penalties, injunctions, suspensions or loss of regulatory
approvals, recall or seizure of the Company's products, operating restrictions,
government refusal to approve product export applications, or to allow the
Company to enter into supply contracts, and criminal prosecution. Additional
governmental regulation may be established which could prevent or delay
regulatory approval of the Company's products. Any delays or failure to receive
required approvals or limiting conditions on approvals could materially
adversely affect the Company's business, operating results and financial
condition.
In addition to regulations enforced by the FDA, the manufacture,
distribution and use of Neoprobe's products are also subject to regulation by
the Nuclear Regulatory Commission, the Department of Transportation and other
federal and state, and local government authorities. Neoprobe and/or its
manufacturer of the radiolabeled antibodies must obtain a specific license from
the Nuclear Regulatory Commission to manufacture and distribute radiolabeled
antibodies as well as comply with all applicable regulations. Neoprobe must also
comply with Department of Transportation regulations on the labeling and
packaging requirements for shipment of radiolabeled antibodies to licensed
clinics, and must comply with federal, state and local governmental laws
regarding the disposal of radioactive waste. There can be no assurance that the
Company will obtain all necessary licenses and permits and be able to comply
with all applicable laws, the failure of which would have a materially adverse
effect on the Company's business, financial condition and results of operations.
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NO ASSURANCE OF CONTINUED RIGHTS TO TARGETING AGENTS; ROYALTY PAYMENTS
Targeting agents, such as monoclonal antibodies or peptides which are able
to bind specifically to tumor antigens or receptors, are essential to the
Company's technology and the Company's ultimate success. The targeting agents
used by the Company in its research and clinical studies and as components of
its proposed RIGS products are the patented or proprietary technology of others.
The Company must purchase the rights to those targeting agents or must obtain
rights to use them through license agreements with their owners. There can be no
assurance that such arrangements will continue or that they will continue on
terms acceptable to the Company. Furthermore, license agreements typically
impose obligations to diligently develop commercial products and to pay
royalties on those products. Failure to perform such obligations may lead to the
termination of such license agreements. Loss of the Company's rights to
targeting agents for any reason (including, in the case where the Company is a
sublicensee of the targeting agents, a breach by a sublicensor under its
agreement with the owner of a targeting agent) or the inability to obtain
necessary rights on acceptable terms could have a material adverse effect on the
Company's business, financial condition and results of operations. Moreover,
there can be no assurance that improved targeting agents will not be developed
by other entities for which the Company will be required to seek satisfactory
additional license arrangements. If such licenses cannot be readily obtained,
the Company could encounter delays in product market introductions or could find
that the development, manufacture or sale of products requiring such licenses
could be foreclosed, which could have a material adverse impact on the Company's
business, operating results and financial condition. Upon commercialization of
the Company's products, the Company will be required to make royalty payments
pursuant to its existing and contemplated license agreements which could
adversely impact the Company's operating results.
PATENTS, PROPRIETARY TECHNOLOGY AND TRADE SECRETS
The Company's success depends, in part, on its ability to secure patent
protection and maintain trade secret protection, and on its ability to operate
without infringing on the patents of third parties. The Company has received 10
United States patents, including U.S. Patent No. 4,782,840, which relates to the
RIGS system surgical method and holds one additional patent jointly with The
Ohio State University Research Foundation ("OSURF"). The Company has received a
notification of allowance on two additional United States patents and the
Company has filed applications for certain additional United States and foreign
patents. There can be no assurance, however, that the patents for which the
Company has applied will be issued to the Company. Moreover, the Company
believes that some of the technology it develops will not be patentable in
certain foreign markets. The patent positions of biotechnology firms, including
the Company, are highly uncertain and involve complex legal and factual
questions. To date, a consistent and predictable application of United States
patent laws regarding the grant and interpretation of patent claims in the area
of biotechnology has not evolved. There can be no assurance that any of the
Company's patents or patent applications will not be challenged, invalidated, or
circumvented in the future. In addition, there can be no assurance that
competitors, many of which have substantially more resources than the Company
and have made substantial investments in competing technologies, will not seek
to apply for and obtain patents that will prevent, limit, or interfere with the
Company's ability to make, use, or sell its products either in the United States
or internationally.
Patent applications in the United States are maintained in secrecy until
patents issue, and patent applications in foreign countries are maintained in
secrecy for a period after filing. Publications of discoveries in the scientific
or patent literature tends to lag behind actual discoveries and the filing of
related patent applications. Patents issued and patent applications filed
relating to medical devices are numerous and there can be no assurance that
current and potential customers and other third parties have not filed or will
not file in the future applications for, or have not received or in the future
will not receive, patents or obtain additional proprietary rights relating to
products or processes used or proposed to be used by the Company.
The Company's U.S. Patent No. 4,782,840 includes claims to surgical
procedures having a number of steps, including, for example, the step of
administering an effective amount of an antibody specific for cancer tissue,
labeled with a radioactive isotope. The claims also include the step of delaying
surgery for a time interval following the administration step to permit the
radiolabeled antibody to concentrate preferentially in any cancer tissue that is
present and for the unbound radiolabeled antibody in the blood pool to be
cleared to a blood pool background level, so as to increase the ratio of
radiation from cancer tissue to background radiation. There can be no assurance
that
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potential competitors will not promote surgical procedures that do not include
one or more of the steps recited in the claims of U.S. Patent No. 4,782,840,
including the aforementioned steps.
The Company also relies upon trade secrets, technical know-how, and
continuing technological innovation to develop and maintain its competitive
position. The Company typically requires its employees, consultants, and
advisors to execute confidentiality and assignment of inventions agreements in
connection with their employment, consulting, or advisory relationships with the
Company. There can be no assurance, however, that these agreements will not be
breached or that the Company will have adequate remedies for any breach.
Further, there also can be no assurance that others will not gain access to the
Company's trade secret information or independently develop or acquire the same
or equivalent trade secret information. Certain of the research activities
relating to the development of antibody technology that may be components of the
Company's proposed RIGS system technology products were conducted by agencies of
the United States government. When the United States government participates in
research activities, it retains certain rights that include the right to use the
technologies for governmental purposes under a royalty-free license, as well as
rights to use and disclose technical data and computer software that could
preclude the Company from asserting trade secret rights in that data and
software.
The Company has not been notified by any third party that the Company's
products and procedures infringe any valid, enforceable claim of any patent
owned by others. Any such claim, however, whether with or without merit, could
be time-consuming and expensive to respond to and could divert the Company's
technical and management personnel. The Company may be involved in litigation to
defend against claims of infringement by the Company, to enforce patents issued
to the Company, or to protect trade secrets of the Company. If any relevant
claims of third-party patents are upheld as valid and enforceable in any
litigation or administrative proceeding, the Company could be prevented from
practicing the subject matter claimed in such patents, or would be required to
obtain licenses from such patent owners, or to redesign its products and
processes to avoid infringement. There can be no assurance that the Company will
be able to obtain acceptable licenses or rights, if at all, to other patents
which the Company deems necessary for its operations. Accordingly, an adverse
determination in a judicial or administrative proceeding or failure to obtain
necessary licenses would be available could prevent the Company from
manufacturing and selling its products, which would have a material adverse
effect on the Company's business, financial condition, and results of
operations. The Company intends to vigorously protect and defend its
intellectual property. Costly and time-consuming litigation brought by the
Company may be necessary to enforce patents issued to the Company, to protect
trade secrets or know-how owned by the Company, or to determine the
enforceability, scope, and validity of the proprietary rights of others.
LIMITED THIRD PARTY REIMBURSEMENT
The Company's products will be marketed to hospitals and other users that
bill various third party payers, including government programs, such as federal
Medicare and state Medicaid, and private insurance plans, for the health care
services provided to their patients. Third party payers carefully review and are
increasingly challenging the prices charged for medical products and services.
Although the Company intends to establish the prices for its products according
to criteria believed to be acceptable to third party payers, there can be no
assurance that such payers will not deny reimbursement on the basis that the
Company's products are not in accordance with established payer policies
regarding cost-effective treatment methods. There can be no assurance that the
Company would be able to provide economic and medical data to overcome any third
party payer objections.
In foreign markets, reimbursement is obtained from a variety of sources,
including governmental authorities, private health insurance plans, and labor
unions. In most foreign countries, there are also private insurance systems that
may offer payments for alternative therapies. Although not as prevalent as in
the United States, health maintenance organizations are emerging in certain
European countries. The Company may need to seek international reimbursement
approvals, although there can be no assurance that any such approvals will be
obtained in a timely manner or at all. Failure to receive international
reimbursement approvals could have an adverse effect on market acceptance of the
Company's products in the international markets in which such approvals are
sought.
There can be no assurance as to either United States or foreign markets
that third-party reimbursement and coverage or newly approved products will be
available or adequate, that current reimbursement policies of third-
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party payers will not be decreased in the future or that future legislation,
regulation, or reimbursement policies of third-party payers will not otherwise
adversely affect the demand for the Company's products or its ability to sell
its products on a profitable basis. If third-party payer coverage or
reimbursement is unavailable or inadequate, the Company's business, financial
condition, and results of operations could be materially adversely affected.
COMPETITION
The biotechnology industry is characterized by intense competition. Many
companies, research institutes and universities are working in a number of
pharmaceutical or biotechnology disciplines similar to the Company's field of
interest. In addition, many companies are engaged in the development of or
currently offer products which may be or are competitive with the Company's
proposed products. Most of these entities have substantially greater financial,
technical, manufacturing, marketing, distribution or other resources than the
Company. Competing tumor detection technologies include computed tomography
("CT"), magnetic resonance imaging ("MRI") and, more recently
immunoscintigraphy. The Company may compete against a number of these companies
including: Cytogen Corp., Immunomedics Inc. and NeoRx Corp. One or more of these
or other companies could also design and develop products that compete directly
with the Company's products, in which case the Company would face intense
competition. The Company is aware that other research and testing is being
conducted in Western Europe in connection with the use of radiolabeled targeting
agents and radiation-detection probes. There can be no assurance that one or
more of these or other companies will not develop technologies that are more
effective or less costly than the Company's products, or that would otherwise
render the Company's products and technology non-competitive or obsolete. Such
competition could have a material, adverse effect on the Company's business,
financial condition and results of operations.
Any product developed by the Company that gains regulatory approval will
have to compete for market acceptance and market share. An important factor in
such competition may be the timing of market introduction of competitive
products. Accordingly, the relative speed with which the Company can develop
products, complete clinical testing and regulatory approval processes, gain
reimbursement acceptance and supply commercial quantities of the product to the
market are expected to be important competitive factors. In addition, the
Company believes that the primary competitive factors in the market for tumor
detection products are safety, efficacy, ease of delivery, reliability,
innovation and price. The Company also believes that physician relationships and
customer support are important competitive factors. There can be no assurance
that the Company's competitive position will be maintained or that the Company's
intraoperative detection products for the treatment of cancer will be introduced
or marketed in a timely fashion or that any such products will achieve
significant market acceptance. In such event, the Company's business, operating
results and financial condition could be materially adversely affected.
RISK OF TECHNOLOGICAL OBSOLESCENCE
The medical device industry is characterized by rapid and significant
technological change. There can be no assurance that third parties will not
succeed in developing or marketing technologies and products that are more
effective than those developed or marketed by the Company or that would render
the Company's technology and products obsolete or noncompetitive. Additionally,
new surgical procedures and medications could be developed that replace or
reduce the importance of current procedures that use the Company's products.
Accordingly, the Company's success will depend in part on its ability to respond
quickly to medical and technological changes through the development and
introduction of new products. Product development involves a high degree of risk
and there can be no assurance that the Company's new product development efforts
will result in any commercially successful products. In such event, the
Company's business, operating results and financial condition could be
materially adversely affected.
LIMITED MARKETING EXPERIENCE
The Company has limited experience in sales, marketing or distribution of
any of its products. In order to commercialize its products, the Company may
need to enter into one or more agreements providing for the marketing of the
RIGS products by third parties. Although the Company has engaged in discussions
with third parties, no agreements have been executed and there can be no
assurance that the Company will be able to enter
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into marketing agreements on terms favorable to the Company. If the Company is
unable to secure one or more agreements with third parties for the marketing of
its proposed products, the Company will have to perform such marketing function
itself, a function which the Company has not undertaken in the past. There can
be no assurance that the Company could market its products successfully in the
future. In such event, the Company's business, operating results and financial
condition could be materially adversely affected.
LIMITED MANUFACTURING CAPACITY AND EXPERIENCE
To date, the Company's manufacturing activities have consisted primarily of
manufacturing limited quantities of products for use in laboratory testing and
clinical trials. In the event that sales of the Company's products increase
substantially, the Company must manufacture or have others manufacture its RIGS
products, including targeting agents, in commercial quantities at an acceptable
cost. If the Company scales up manufacturing its products, there can be no
assurance that the Company will not encounter difficulties such as problems
involving product yields, quality control and assurance, supplies of components,
and shortages of qualified personnel. Moreover, in order to assemble, complete,
package and distribute its RIGS products in commercial quantities, the Company
will have to maintain a current Good Manufacturing Practices ("GMP") facility to
manufacture its products or engage independent contractors to manufacture such
products. The GMP facility will have to adhere to GMP regulations and to
guidelines enforced by the FDA and other regulatory agencies through their
facilities inspection programs. If such an inspection by the FDA or another
regulatory agency results in a requirement for additional modifications to the
facility, the Company's ability to manufacture its products could be adversely
affected. There can be no assurance that the Company will be able to develop and
maintain a GMP facility or engage independent contractors at a cost acceptable
to the Company.
The Company uses or relies on certain components and services used in its
devices that are provided by sole source suppliers. Although the Company has
identified primary and alternative vendors, the qualification of additional or
replacement vendors for certain components or services is a lengthy process. Any
significant supply interruption would have a material adverse effect on the
Company's ability to manufacture its products and, therefore, a material adverse
effect on its business, financial condition, and results of operations.
The Company expects to manufacture its products based on forecasted product
orders. Lead times for materials and components ordered by the Company vary
significantly, and depend on factors such as the business practices of the
specific supplier, contract terms, and general demand for a component at a given
time. Certain components used in the Company's products have long lead times. As
a result, there is a risk of excess or inadequate inventory if orders do not
match forecasts.
POSSIBLE VOLATILITY OF STOCK PRICE
The market price of the shares of Common Stock of the Company, like that of
the securities of many other biotechnology companies, has been and is likely to
continue to be highly volatile. For example, the closing prices for shares of
the Company's Common Stock during the last two years have been as high as $22
and as low as $1.19. Factors such as the results of preclinical and clinical
trials by the Company or its competitors, other evidence of the safety and
efficacy of the Company's or competitors' products, announcements of
technological innovations or new commercial products by the Company or its
competitors, changes in securities analysts' estimates or recommendations,
governmental regulation, developments in patent or other proprietary rights of
the Company or its competitors, and fluctuations in the Company's operating
results may have a significant effect on the market price of the Common Stock.
In addition, the stock market has experienced and continues to experience
extreme price and volume fluctuations which have affected the market price of
many biotechnology companies and which have often been unrelated to the
operating performance of these companies. These broad market fluctuations, as
well as general economic and political conditions, may adversely affect the
market price of the Common Stock. The Company has more than 20 million shares of
Common Stock outstanding, almost all of which are freely tradeable. The Company
has approximately 2,600,000 warrants to purchase Common Stock and convertible
debentures, including approximately 2,300,000 Class E Warrants outstanding. The
Class E Warrants are exercisable at $6.50 per share and it is expected that they
will be exercised on or before their expiration date of November 12, 1996. The
exercise of the Class E Warrants and the sale of the shares so purchased could
have a
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material adverse effect on the market price of the Common Stock. See
"Description of Securities -- Other Options and Warrants."
FUTURE CAPITAL NEEDS; UNCERTAINTY OF CAPITAL FUNDING
To date, the Company's capital requirements have been significant. The
Company is dependent on the proceeds of sales of its securities and other
financing vehicles to continue clinical testing of its proposed products and to
fund its working capital requirements. The Company believes that the funds it
has on hand will satisfy its cash needs through 1997. Obtaining approvals to
market is costly and time consuming and the Company may require significant
funds in addition to the proceeds of the sale of Common Stock and its current
cash resources to sustain its operations and to obtain regulatory approval to
commercialize any of its proposed products. No assurance can be given that the
necessary additional financing will be available to the Company on acceptable
terms, if at all, or that would not result in further dilution to the holders of
the Company's equity securities. The Company's ability to raise additional
financing may be dependent on many factors beyond the Company's control,
including the state of capital markets and the rate of progress of the Company's
clinical trials. If additional funding is unavailable to the Company when
needed, the Company will be required to curtail significantly one or more of its
research and development programs and the Company's business and financial
condition will be materially adversely affected.
PRODUCT LIABILITY
The testing, marketing and sale of the Company's proposed products could
expose the Company to liability claims. The Company currently has $5 million of
liability insurance, which the Company believes is adequate for its current
clinical activities. The Company intends to increase such coverage prior to
commercialization of its proposed products. There can be no assurance, however,
that the Company will be able to obtain such additional insurance at a
reasonable cost, if at all, or that such insurance, in combination with the
Company's existing insurance, would be sufficient to cover any liabilities
resulting from any product liability claims or that the Company would have funds
available to pay any claims over the limits of its insurance. Either an
underinsured or an uninsured claim could have a material adverse effect on the
Company's business, operating results and financial condition.
DEPENDENCE ON KEY PERSONNEL; ABILITY TO ATTRACT NEW PERSONNEL; POSSIBLE
CONFLICTS OF INTEREST
John L. Ridihalgh and David C. Bupp are key employees of the Company and
the loss of the services of either one of them could substantially delay the
achievement of the Company's goals. The Company carries "key man" life insurance
with a death benefit of $1 million on each of them. The Company has entered into
employment agreements with each of these individuals pursuant to which, among
other things, these individuals have agreed not to compete with the Company for
specified periods. The Company's success is dependent on its ability to attract
and retain additional technical and management personnel with expertise in
several technical and scientific disciplines and experience in the regulatory
approval process. The competition for qualified personnel in the biomedical
industry is intense and, accordingly, there can be no assurance that the Company
will be successful in hiring or retaining the requisite personnel. In addition,
the Company will rely on certain of its non-employee directors and members of
its Scientific Advisory Board to assist the Company in formulating and pursuing
its research and commercialization strategy. These directors and members of the
Scientific Advisory Board are and will be employed by entities other than the
Company and may serve as directors of or have a commitment to or consulting or
advisory contracts with other entities, including potential competitors of the
Company. Although the Company has confidentiality agreements with these
directors and with each member of its Scientific Advisory Board, conflicts of
interest may arise between those persons and the Company, which conflicts may
not necessarily be resolved in favor of the Company.
NEED TO MANAGE A CHANGING BUSINESS
In order to compete effectively against current and future competitors,
complete clinical trials in progress, prepare additional products for clinical
trials, and develop future products, the Company believes that it must continue
to expand its operations, particularly in the areas of research and development,
manufacturing and
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<PAGE> 10
marketing. If the Company were to experience significant growth in the future,
such growth would likely result in new and increased responsibilities for
management personnel and place significant strain upon the Company's management,
operating and financial systems and resources. To accommodate such growth and
compete effectively, the Company must continue to implement and improve
information systems, procedures and controls, and to expand, train, motivate,
and manage its work force. The Company's future success will depend to a
significant extent on the ability of its current and future management personnel
to operate effectively, both independently and as a group. There can be no
assurance that the Company's personnel, systems, procedures and controls will be
adequate to support the Company's future operations. Any failure to implement
and improve the Company's operational, financial, and management systems or to
expand, train, motivate or manage employees could have a material adverse effect
on the Company's business, financial condition and results of operations.
NO DIVIDENDS
The Company has never paid dividends on its Common Stock. The Company
intends to retain any future earnings to finance its growth. Accordingly, any
potential investor who anticipates the need for current dividends from its
investment should not purchase any of the Common Stock offered hereby.
ANTI-TAKEOVER PROVISIONS; BLANK CHECK PREFERRED STOCK
The Company has adopted a Stockholder Rights Plan. Certain provisions of
the Stockholder Rights Plan and certain of the Company's charter provisions and
applicable corporate laws could be used to hinder or delay a takeover bid for
the Company. Such provisions may inhibit takeover bids and decrease the chance
of stockholders realizing a premium over market price for their Common Stock as
a result of a takeover. The Company's Certificate of Incorporation authorizes
the issuance of "blank check" preferred stock with such designations, rights,
preferences and restrictions as may be determined from time to time by the Board
of Directors, 500,000 shares of which have been designated as Series A Junior
Participating Preferred Stock and reserved for issuance pursuant to the
Company's Stockholder Rights Plan. If the Company issues Preferred Stock, the
issuance could be used to thwart a takeover bid and may have a dilutive effect
upon the Company's common stockholders, including the purchasers of the
securities offered hereby. See "Description of Securities."
CURRENT PROSPECTUS AND STATE BLUE SKY REGISTRATION REQUIRED TO EXERCISE THE
WARRANTS
Holders of the Warrants have the right to exercise the Warrants for the
purchase of shares of Common Stock only if a current prospectus relating to such
shares is then in effect and only if the shares are qualified for sale under the
securities laws of the applicable state or states. This Prospectus when
distributed is a current prospectus for purposes of this requirement so long as
there has not been a material change in the operations of the Company that makes
the information contained herein misleading and so long as the Prospectus is not
used more than nine months after the date of this Prospectus and the information
contained herein is as of a date not more than 16 months prior to such use.
Although the Company intends to maintain this Prospectus as a current prospectus
and to seek to qualify the shares of Common Stock underlying the Warrants for
sale in those states where they are offered, there is no assurance that it will
be able to do so. The Warrants may be deprived of any value if a current
prospectus covering the shares underlying the Warrants is not kept effective or
if such underlying shares are not or cannot be registered in the applicable
states. See "Warrants."
USE OF PROCEEDS
The net proceeds to the Company from the exercise of the Warrants would be
approximately $500,000 if all of the Warrants were exercised. There can be no
assurance that any of the Warrants will be exercised. The Company expects to
allocate these proceeds together with existing cash resources to conduct
clinical trials, to provide regulatory, scientific and other support to its
product development program, and for general working capital purposes including
general and administrative expenses and equipment purchases.
The allocation of the net proceeds of the exercise of the Warrants and the
Company's other capital resources among its various product development programs
and other projects is based on certain assumptions, including the
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<PAGE> 11
expected progress of the Company's clinical trials and FDA approval of its
RIGScan CR49 product, and is subject to change at the Company's discretion. The
foregoing represents the Company's best estimate of its allocation of the net
proceeds of the exercise of the Warrants based on the current state of its
business operations and current business plan and current economic and industry
conditions, and such estimate is subject to a reapportionment of proceeds among
categories listed above or a reapportionment to new categories. The amount and
timing of expenditures will vary depending on a number of factors, including the
progress of development of the Company's products, the availability of other
funding from third parties, governmental regulation, technological advances and
changing competitive conditions, and determinations with respect to the
commercial potential of the Company's products. In particular, proceeds
allocated to research and development may be reallocated depending on the
progress of the research efforts and the presently unknowable results of
scientific investigations. Pending such uses, the net proceeds of this offering
will be invested in interest-bearing deposit accounts, certificates of deposit
or similar short-term, investment-grade financial instruments.
Based on its current business plan, the Company anticipates that its cash
resources on hand will be adequate to satisfy its capital and operating
requirements through 1997. In light of the uncertainties associated with
obtaining FDA approval of the Company's RIGScan CR49 product and other products,
among other things, there can be no assurance that the Company's resources of
liquidity (including the proceeds of the exercise of the Warrants) will satisfy
the Company's funding requirements during the FDA review period. There can be no
assurance that any additional financing, if required, will be obtainable at the
times, in the amounts, or on terms that meet the Company's needs or are
acceptable to the Company. See "Risk Factors -- Future Capital Needs;
Uncertainty of Capital Funding," and "-- Government Regulation."
WARRANTS
The shares of Common Stock saleable hereunder are issuable upon the
exercise of the following transferable Warrants issued by the Company:
<TABLE>
<CAPTION>
Number of Current Exercise Date First
Title Warrants Price Date of Issue Exercisable Expiration Date
<S> <C> <C> <C> <C> <C>
001 6,666 (a) $3.00 (a) 2/11/91 2/11/91 12/31/99 (b)
Class A 67,670 (c) $3.32 (c) 2/28/92 2/28/92 (d) 2/28/97
Class B 70,331 (c) $3.86 (c) 2/28/92 2/28/92 (d) 2/28/99
<FN>
(a) Subject to adjustment for splits and combinations of Common Stock.
(b) Expires two years after the Company makes a public offering of shares on
Form S-1 at $24.00 per share with proceeds of at least $10,000,000 if
latter.
(c) Subject to proportionate adjustment for splits and combinations of Common
Stock and for certain issuances thereof at less than the then current
market or exercise price.
(d) Certain warrants in this class did not become exercisable until February
28, 1994.
</TABLE>
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<PAGE> 12
DESCRIPTION OF SECURITIES
Neoprobe is authorized to issue 50,000,000 shares of Common Stock, par
value $.001 per share, 20,117,937 shares of which were outstanding as of August
8, 1996 and 5,000,000 shares of Preferred Stock, par value $.001 per share,
none of which is outstanding. The following brief description of the capital
stock of Neoprobe is qualified in its entirety by reference to Neoprobe's
Certificate of Incorporation, a copy of which is on file with the Commission.
COMMON STOCK
All outstanding shares of Common Stock are, and the shares of Common Stock
issuable in this offering will be, upon receipt of payment therefor and delivery
thereof, duly authorized, validly issued, fully paid and nonassessable. Each
share of Common Stock entitles the holder thereof to one vote on all matters
submitted to a vote of the stockholders including the election of directors.
Since the holders of Common Stock do not have cumulative voting rights, the
holders of a simple majority of the outstanding shares have the power to elect
all of the directors to be elected at a given meeting and the holders of the
remaining shares by themselves would not be able to elect any directors at that
meeting. See "Risk Factors -- Anti-Takeover Provisions; Blank Check Preferred
Stock." The holders of Common Stock do not have preemptive, redemption or
conversion rights. Holders of Common Stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors, from time to time, out
of funds legally available therefor. See "Risk Factors -- No Dividends." If
Neoprobe is liquidated, dissolved, or wound up, holders of the Common Stock have
the right to receive a ratable portion of the assets remaining after the payment
of creditors and the holders of the shares of any class or series of Preferred
Stock to the extent that the then existing terms of the Preferred Stock grant
them priority over the holders of shares of Common Stock.
PREFERRED STOCK
The Company's Certificate of Incorporation authorizes the issuance of
"blank check" Preferred Stock in one or more classes or series with such
designations, rights, preferences and restrictions as may be determined from
time to time by the Board of Directors, 500,000 shares of which have been
designated as Series A Junior Participating Preferred Stock ("Series A Preferred
Stock") and reserved for issuance pursuant to the stockholder rights plan
described below. As of the date hereof, there are no shares of Preferred Stock
outstanding. The Board of Directors may, without prior stockholder approval,
issue Preferred Stock with dividend, liquidation, conversion, voting or other
rights which could adversely affect the relative voting power or other rights of
the holders of Common Stock. Preferred Stock could be used, under certain
circumstances, as a method of discouraging, delaying, or preventing a change in
control of Neoprobe. Although Neoprobe has no present intention of issuing any
shares of Preferred Stock, there can be no assurance that it will not do so in
the future. If Neoprobe issues Preferred Stock, such issuance may have a
dilutive effect upon the common stockholders, including the purchasers of the
securities offered hereby. See "Risk Factors -- Anti-Takeover Provisions; Blank
Check Preferred Stock."
OTHER OPTIONS AND WARRANTS
At June 30, 1996, Neoprobe had outstanding options to purchase 1,938,192
shares of Common Stock to its employees, directors and consultants under the
Company's Incentive Stock Option and Restricted Stock Purchase Plan. At June 30,
1996, the Company had outstanding warrants (other than the Warrants) to purchase
approximately 2,464,004 shares of Common Stock having a weighted average
exercise price of $6.45 per share. In addition, 100,000 shares of Common Stock
were issuable upon conversion of outstanding convertible debentures. The
expiration dates of these warrants range from November 12, 1996 to January 2001.
To the extent that such options and warrants are exercised, the interests of the
Company's stockholders will be diluted.
STOCKHOLDER RIGHTS PLAN
Adoption of the Stockholder Rights Plan. On July 18, 1995, the Board of
Directors adopted a stockholder rights plan for the Company. The purpose of the
stockholder rights plan is to protect the interests of the Company's
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<PAGE> 13
stockholders if the Company is confronted with coercive or unfair takeover
tactics by encouraging third parties interested in acquiring the Company to
negotiate with the Board of Directors.
The stockholder rights plan is a plan by which the Company has distributed
rights ("Rights") to purchase (at the rate of one Right per share of Common
Stock) one hundredth of a share of Series A Preferred Stock at an exercise price
of $35 per Right. The Rights are attached to the Common Stock and are not
exercisable until after 15 percent of the Common Stock has been acquired or
tendered for. At that point, they would be separately traded and exercisable.
Upon certain events, including a third party crossing the 15 percent threshold,
the Rights would "flip-in" (but not the Rights of such substantial stockholder)
and become Rights to acquire, upon payment of the exercise price, Common Stock
(or, in certain circumstances, other consideration) with a value of twice the
exercise price of the Right. If a third party were to take certain action to
acquire the Company, such as a merger, the Rights would "flip-over" and entitle
the holder to acquire stock of the acquiring person with a value of twice the
exercise price. The Rights are redeemable by the Company at any time before they
become exercisable for $.01 per Right and expire on August 28, 2005. The number
of Rights per share of Common Stock will be adjusted in the future to reflect
future splits and combinations of, and Common Stock dividends on, the Common
Stock. The exercise price of the Rights will be adjusted to reflect changes in
the Series A Preferred Stock.
Series A Preferred Stock. The Series A Preferred Stock purchasable upon
exercise of the Rights will be redeemable at a price equal to 100 times the
current per share market price of the Common Stock at the time of redemption,
together with accrued but unpaid dividends. Each share of Series A Preferred
Stock will have a minimum preferential quarterly dividend of $.05 per share and
will be entitled to an aggregate dividend of 100 times the dividend declared on
the Common Stock. In the event of liquidation, the holders of the Series A
Preferred Stock will receive a preferred liquidation payment equal to $.10 per
share and, after the Common Stock has received a proportionate distribution,
will share in the remaining assets on a proportionate basis with the Common
Stock. If dividends on Series A Preferred Stock are in arrears in an amount
equal to six quarterly dividend payments, all holders of Preferred Stock of the
Company (including holders of Series A Preferred Stock) with dividends in
arrears equal to such amount, voting as a class, would have the right to elect
two directors of the Company. Series A Preferred Stock would rank senior to the
Company's Common Stock, but junior to any other outstanding class of Preferred
Stock of the Company as to both the payment of dividends and the distribution of
assets. Each share of Series A Preferred Stock will have 100 votes on all
matters submitted to the stockholders. In the event of any merger, consolidation
or other transaction in which Common Stock is exchanged, each share of Series A
Preferred Stock will be entitled to receive 100 times the amount received per
share of Common Stock. It was the intention of the Company that each share of
Series A Preferred Stock approximate 100 shares of Common Stock as they existed
on the date the Rights were distributed (August 28, 1995); therefore, the
redemption price, dividend, liquidation price and voting rights have been, and
will in the future be, adjusted to reflect splits and combinations of, and
Common Stock dividends on, the Common Stock.
Anti-Takeover Effects. The Company's stockholder rights plan is designed to
deter coercive takeover tactics and otherwise to encourage persons interested in
acquiring the Company to negotiate with the Board of Directors. The stockholder
rights plan will confront a potential acquirer of the Company with the
possibility that the Company's stockholders will be able to substantially dilute
the acquirer's equity interest by exercising Rights to buy additional stock in
the Company or, in certain cases, stock in the acquirer, at a substantial
discount and may have the effect of deterring third parties from making takeover
bids for control of the Company or may be used to hinder or delay a takeover bid
thereby decreasing the chance of the stockholders of the Company realizing a
premium over market price for their shares of Common Stock as a result of such
bids. See "Risk Factors -- Anti-Takeover Provisions; Blank Check Preferred
Stock." The Board of Directors may redeem the Rights at a nominal consideration
if it considers the proposed acquisition of the Company to be in the best
interests of the Company and its stockholders. Accordingly, the stockholder
rights plan should not interfere with any merger or other business combination
which has been approved by the Board of Directors. Any plan or arrangement which
effectively requires an acquiring company to negotiate with the Company's
management may be characterized as increasing such management's ability to
maintain its position with the Company, including the approval of a transaction
which provides less value to the stockholders while providing benefits to
management.
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<PAGE> 14
CERTAIN CHARTER PROVISIONS AND LAWS
In addition to the stockholder rights plan and the Preferred Stock
provisions described above, certain features of the Company's Certificate of
Incorporation and By-laws and the General Corporation Law of the State of
Delaware ("GCL"), which are further described below, may have the effect of
deterring third parties from making takeover bids for control of the Company or
may be used to hinder or delay a takeover bid thereby decreasing the chance of
the stockholders of the Company realizing a premium over market price for their
shares of Common Stock as a result of such bids.
Limitations on Stockholder Actions. The Certificate of Incorporation
provides that stockholder action may only be taken at a meeting of the
stockholders. Thus a holder of a majority of the voting power could not take
action to replace the Board of Directors, or any class thereof, without a
meeting of the stockholders nor could such a holder amend the By-laws without
presenting the amendment to a meeting of the stockholders. Furthermore, under
the provisions of the Certificate of Incorporation and By-laws of the Company,
special meetings of the stockholders may only be called by the Board. Therefore,
a stockholder, even one who holds a majority of the voting power, may neither
replace sitting Board members nor amend the By-laws before the next annual
meeting of stockholders.
Advance Notice Provisions. The Company's By-laws provide for an advance
notice procedure for the nomination, other than by the Board, of candidates for
election as directors as well as for other stockholder proposals to be
considered at annual meetings of stockholders. In general, notice of intent to
nominate a director or raise matters at meetings must be received by the Company
not less than 120 days before the first anniversary of the mailing of the
Company's proxy statement for the previous year's annual meeting, and must
contain certain information concerning the person to be nominated or the matters
to be brought before the meeting and concerning the stockholder submitting the
proposal.
Delaware Law. The Company is subject to Section 203 of the GCL, which
provides that a corporation may not engage in any business combination with an
"interested stockholder" during the three years after he becomes an interested
stockholder unless the corporation's board of directors approved in advance
either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder; the interested stockholder owned
at least 85 percent of the voting stock of the corporation outstanding at the
time the transaction commenced; or the business combination is approved by the
corporation's board of directors and the affirmative vote of at least two-thirds
of the outstanding voting stock which is not owned by the interested
stockholder. An interested stockholder is anyone who owns 15 percent or more of
the outstanding voting stock of the corporation, or is an affiliate or associate
of the corporation and was the owner of 15 percent or more of the outstanding
voting stock of the corporation at any time within the previous three years; and
the affiliates and associates of any such person. Under certain circumstances,
Section 203 of the GCL makes it more difficult for an "interested stockholder"
to effect various business combinations with a corporation for a three-year
period, although the stockholders of a corporation may elect to exclude a
corporation from the section's restrictions.
Classified Board. The Certificate of Incorporation and By-laws of the
Company divide the Board into three classes with staggered three year terms.
There are currently nine directors, three in each class. At each annual meeting
of stockholders, the terms of one class of directors will expire and the newly
nominated directors of that class will be elected for a term of three years. The
Board will be able to determine the total number of directors constituting the
full Board and the number of directors in each class, but the total number of
directors may not exceed 17 nor may the number of directors in any class exceed
six. Subject to these rules, the classes of directors need not have equal
numbers of members. No reduction in the total number of directors or in the
number of directors in a given class will have the effect of removing a director
from office or reducing the term of any then sitting director. Stockholders may
only remove directors for cause. If the Board increases the number of directors
in a class, it will be able to fill the vacancies created for the full remaining
term of a director in that class even though the term may extend beyond the next
annual meeting. The directors will also be able to fill any other vacancies for
the full remaining term of the director whose death, resignation or removal
caused the vacancy.
A person who has a majority of the voting power at a given meeting will not
in any one year be able to replace a majority of the directors since only one
class of the directors will stand for election in any one year. As a result, at
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<PAGE> 15
least two annual meeting elections will be required to change the majority of
the directors by the requisite vote of stockholders. The purpose of classifying
the Board is to provide for a continuing body, even in the face of a person who
accumulates a sufficient amount of voting power, whether by ownership or proxy
or a combination, to have a majority of the voting power at a given meeting and
who may seek to take control of the Company without paying a fair premium for
control to all the holders of Common Stock. This will allow the Board time to
negotiate with such a person and to protect the interests of the other
stockholders who may constitute a majority of the shares not actually owned by
such person. However, it may also have the effect of deterring third parties
from making takeover bids for control of the Company or may be used to hinder or
delay a takeover bid thereby decreasing the chance of the stockholders of the
Company realizing a premium over market price for their shares of Common Stock
as a result of such bids. See "Risk Factors -- Anti-Takeover Provisions; Blank
Check Preferred Stock."
TRANSFER AGENT
The transfer agent for the Common Stock and the rights agent for the
stockholder rights plan is Continental Stock Transfer & Trust Company, Two
Broadway, New York, New York 10004; telephone (212) 509-4000.
INDEMNIFICATION
Section 145 of the General Corporation Law of the State of Delaware
("Section 145") provides that directors and officers of Delaware corporations
may, under certain circumstances, be indemnified against expenses (including
attorneys' fees) and other liabilities actually and reasonably incurred by them
as a result of any suit brought against them in their capacity as a director or
officer, if they acted in good faith and in a manner they reasonably believed to
be in or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, if they had no reasonable cause to believe
their conduct was unlawful. Section 145 also provides that directors and
officers may also be indemnified against expenses (including attorneys' fees)
incurred by them in connection with a derivative suit if they acted in good
faith and in a manner they reasonably believed to be in or not opposed to the
best interests of the corporation, except that no indemnification may be made
without court approval if such person was adjudged liable to the corporation.
Article V of the Company's By-laws has provisions requiring the Company to
indemnify its officers, directors, employees and agents which are in
substantially the same language as Section 145.
Article Nine, section (b), of the Company's Certificate of Incorporation
further provides that no director will be personally liable to the Company or
its stockholders for monetary damages or for any breach of fiduciary duty except
for breach of the director's duty of loyalty to the Company or its stockholders,
for acts or omissions not in good faith or involving intentional misconduct or a
knowing violation of law, pursuant to Section 174 of the Delaware General
Corporation Law (which imposes liability in connection with the payment of
certain unlawful dividends, stock purchases or redemptions), or any amendment or
successor provision thereto, or for any transaction from which the director
derived an improper personal benefit.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Company 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.
LEGAL MATTERS
The validity of the securities offered hereunder has been passed upon for
the Company by Schwartz, Warren & Ramirez a Limited Liability Company, Columbus,
Ohio.
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<PAGE> 16
EXPERTS
The audited financial statements incorporated in this Prospectus have been
so incorporated in reliance on the report of Coopers & Lybrand L.L.P., as
independent accountants, for the periods indicated in their report, given on the
authority of such firm as experts in auditing and accounting.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Company are
incorporated in this Prospectus by reference:
1. The Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1995 (Commission File Number 0-20676);
2. The Company's Quarterly Reports on Form 10-QSB for the fiscal quarters
ended March 31, 1996 and June 30, 1996 (Commission File Number
0-20676);
3. The description of the Company's Common Stock, par value $.001 per
share, contained in the Company's Registration Statement on Form 8-A,
as amended by Amendment No. 4 (Commission File Number 0-20676);
4. The description of Rights to Purchase Series A Junior Participating
Preferred Stock contained in the Company's Registration Statement on
Form 8-A (Commission File No. 0-20676); and
5 All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934,
prior to the termination of the offering of the securities hereunder.
Any statement contained in a document incorporated or deemed to be
incorporated by reference in this Prospectus shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained in this Prospectus or in any other subsequently filed document which
also is or is deemed to be incorporated by reference in this Prospectus modifies
or supersedes such statement. Any statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
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