As filed with the Securities and Exchange Commission on July 10, 1998.
Registration No. 333-51245
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
AMENDMENT NO. 2 TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
----------------------
PROCEPT, INC.
(Exact name of registrant as specified in its charter)
Delaware 04-2893483
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
840 Memorial Drive, Cambridge, Massachusetts 02139; (617) 491-1100
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
----------------------
JOHN F. DEE
Chief Executive Officer and President
Procept, Inc.
840 Memorial Drive
Cambridge, Massachusetts 02139
(617) 491-1100
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
with copies to:
LYNNETTE C. FALLON, ESQ.
Palmer & Dodge LLP
One Beacon Street
Boston, Massachusetts 02108
(617) 573-0100
----------------------
Approximate date of commencement of proposed sale to
the public: From time to time after the effective date of
this Registration Statement.
----------------------
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box.[ ]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
----------------------
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
Subject to Completion, Dated July 10, 1998
17,316,544 Shares
PROCEPT, INC.
Common Stock
---------------------
All of the 17,316,544 shares (the "Registered Shares") of common stock,
$0.01 par value per share (the "Common Stock") of Procept, Inc. ("Procept" or
the "Company") offered hereby are being offered by certain stockholders of the
Company (the "Selling Stockholders"). The Registered Shares hereunder are
composed of (i) 2,802,180 shares currently held by certain of the Selling
Stockholders, (ii) 2,802,180 shares issuable to such Selling Stockholders upon
exercise of outstanding warrants (the "Class C Warrants") to purchase Common
Stock, (iii) 398,661 shares issuable to certain of the Selling Stockholders upon
exercise of options (the "Unit Purchase Options") to purchase units composed of
shares of Common Stock and Class C Warrants, (iv) 398,661 shares issuable to
such Selling Stockholders upon exercise of Class C Warrants that are issuable
upon exercise of the Unit Purchase Options and (v) 10,914,862 shares (the
"Contingent Shares") issuable to the Selling Stockholders pursuant to certain
contractual rights requiring additional issuances on April 9, 1999, October 9,
1999 and April 9, 2000, contingent on the performance of the market price of
Procept Common Stock. See "SELLING STOCKHOLDERS."
The Registered Shares may be offered and sold by the Selling Stockholders
from time to time in open-market or privately-negotiated transactions, or by a
combination of such methods of sale, at fixed prices that may be changed, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. The Selling Stockholders may
effect such transactions by selling the Registered Shares to or through
broker-dealers and such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the Selling Stockholders, the
purchasers of the Registered Shares or both (which compensation to a particular
broker-dealer might be in excess of customary commissions). See "SELLING
STOCKHOLDERS" and "PLAN OF DISTRIBUTION."
The Company will not receive any of the proceeds from the sale of the
Registered Shares, except that the Company could receive an aggregate of up to
$17,286,987 upon exercise of Unit Purchase Options and Class C Warrants by the
Selling Stockholders. See "USE OF PROCEEDS." The Company also has agreed to
indemnify the Selling Stockholders against certain liabilities, including
certain liabilities under the Securities Act of 1933, as amended (the
"Securities Act"). See "PLAN OF DISTRIBUTION."
Procept Common Stock is quoted on The Nasdaq SmallCap Market ("Nasdaq")
under the symbol PRCT. On July 9, 1998, the closing per share sale price of
Procept Common Stock, as reported by Nasdaq, was $3.625.
INVESTMENT IN PROCEPT COMMON STOCK IS SPECULATIVE AND INVOLVES A HIGH
DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 1.
----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
---------------------
No person is authorized to give any information or to make any
representations other than those contained in this Prospectus and, if given or
made, such information or representations must not be relied upon as having been
authorized by the Company or the Selling Stockholders. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy to any person
in any jurisdiction in which such offer or solicitation would be unlawful or to
any person to whom it is unlawful. Neither the delivery of this Prospectus nor
any offer or sale made hereunder shall, in any circumstances, create any
implication that there has been no change in the affairs of the Company or that
the information contained herein is correct as of any time subsequent to the
date hereof.
---------------------
The date of this Prospectus is _____________, 1998.
<PAGE>
AVAILABLE INFORMATION
Procept is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files periodic reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission") relating to its
business, financial statements and other matters. Reports and proxy and
information statements filed with the Commission, as well as copies of the
Registration Statement of which this Prospectus is a part, can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at
the following Regional Offices of the Commission: Midwest Regional Office, 500
West Madison Avenue, Suite 1400, Chicago, Illinois 60661; and Northeast Regional
Office, 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of
such material can also be obtained at prescribed rates from the Public Reference
Section of the Commission at its principal office at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549. In addition, Procept is required to
file electronic versions of such material with the Commission through the
Commission's Electronic Data Gathering, Analysis and Retrieval (EDGAR) system.
The Commission maintains a World Wide Web site at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. Procept
Common Stock is quoted on the Nasdaq SmallCap Market. Reports and other
information concerning Procept can also be inspected at the offices of the
National Association of Securities Dealers Inc., Market Listing Section, 1735 K
Street, N.W., Washington, D.C. 20006.
INCORPORATION BY REFERENCE
The following documents filed with the Commission (File No. 0-21134)
pursuant to the Exchange Act are incorporated herein by reference:
(a) Procept's Annual Report on Form 10-K for the year ended December
31, 1997 filed with the Commission on March 31, 1998;
(b) Procept's Current Report on Form 8-K dated April 9, 1998 filed with
the Commission on April 14, 1998;
(c) Procept's Quarterly Report on Form 10-Q for the Quarterly period
ended March 31, 1998 filed with the Commission on May 15, 1998;
(d) Procept's Annual Report on Form 10-K/A for the year ended December
31, 1997 filed with the Commission on June 23, 1998;
(e) Procept's Form 8-K/A dated April 9, 1998 filed with the Commission
on June 23, 1998;
(f) Procept's Quarterly Report on Form 10-Q/A for the quarterly period
ended March 31, 1998 filed with the Commission on June 23, 1998;
and
(g) The description of Procept Common Stock contained in Procept's
Registration Statement on Form 8-A, filed on January 21, 1993, as
amended by Procept's Registration Statement on Form 8-A/A filed
with the Commission on November 8, 1993 and February 7, 1994,
including any amendment or reports filed for the purpose of
updating such description.
Each document filed by Procept subsequent to the date of this Prospectus
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the
termination of the offering of the Shares shall be deemed to be incorporated
herein by reference and to be a part hereof from the date of filing of such
document. Any statement contained herein or in a document all or a portion of
which is incorporated or deemed to be incorporated herein by reference shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein (or in any other subsequently filed
document which also is or is deemed to be incorporated herein by reference or in
any prospectus supplement) 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.
<PAGE>
This Prospectus incorporates by reference documents of Procept that are not
presented herein or delivered herewith. Such documents (not including exhibits
thereto, unless such exhibits are specifically incorporated by reference in the
information incorporated herein by reference) are available without charge to
each person to whom this Prospectus is delivered, upon written or oral request
directed to Procept, Inc., 840 Memorial Drive, Cambridge, Massachusetts 02139,
Attention: John F. Dee (telephone: (617) 491-1100).
<PAGE>
TABLE OF CONTENTS
THE COMPANY............................................................... 1
RISK FACTORS.............................................................. 1
USE OF PROCEEDS........................................................... 10
SELLING STOCKHOLDERS...................................................... 11
PLAN OF DISTRIBUTION...................................................... 17
LEGAL MATTERS............................................................. 19
EXPERTS................................................................... 19
<PAGE>
THE COMPANY
Procept is a biopharmaceutical company currently engaged in the development
of novel drugs for the prevention of HIV and other infectious diseases, and the
treatment of autoimmune diseases. The Company is also seeking the acquisition or
in-license of drug development candidates that would benefit from Procept's
expertise in various therapeutic areas.
The Company was recently pursuing three principal research and development
programs. In order to focus its limited resources on its lead drug candidate,
PRO 2000 Gel, the Company suspended work in 1998 on its other research programs,
which it hopes to out-license, and underwent a significant downsizing.
The lead product candidate from the Company's AIDS program, PRO 2000 Gel,
is a vaginal topical microbicide designed to prevent the sexual transmission of
HIV and other sexually transmitted disease ("STD") pathogens. The results of
recently completed Phase I clinical trials indicated that PRO 2000 Gel is safe
and well tolerated by healthy women. In addition, through the Company's research
in immunomodulation, the Company discovered a series of small molecule
compounds, T cell enzyme inhibitors, that have demonstrated significant
immunosuppressive activity in animal models. The Company is currently seeking
out-licensing opportunities for these compounds.
On April 6, 1998, Procept's Board of Directors unanimously approved and
determined to submit to the stockholders of the Company at the annual meeting of
stockholders held May 14, 1998, an amendment to the Company's Restated
Certificate of Incorporation to effect a one-for-ten reverse stock split of the
Company's outstanding Common Stock (the "Reverse Split Amendment"). At an
adjourned session of the annual meeting held on May 18, 1998, Procept's
stockholders approved the Reverse Split Amendment. The Reverse Split Amendment
became effective on June 1, 1998. The Company currently is authorized to issue
30,000,000 shares of Common Stock, of which 3,001,705 were outstanding on June
19, 1998. The rights and preferences of the Common Stock were unaffected by the
Reverse Split Amendment. The par value per share of Common Stock remains at
$0.01 following the Reverse Split Amendment; as a consequence, the aggregate
capital in excess of par value attributable to the outstanding Common Stock for
statutory and accounting purposes has increased. See "RISK FACTORS -- Risk of
Nasdaq Delisting."
A more complete description of the business of Procept and its recent
activities can be found in the documents listed under "DOCUMENTS INCORPORATED BY
REFERENCE." The principal offices of Procept, a Delaware corporation, are
located at 840 Memorial Drive, Cambridge, Massachusetts 02139, and its telephone
number at such offices is (617) 491-1100.
RISK FACTORS
In addition to the other information contained in and incorporated by
reference in this Prospectus, the following factors should be considered
carefully in evaluating an investment in the shares of Procept Common Stock
offered hereby. This Prospectus, including the information incorporated by
reference, contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in such forward-looking statements. Factors that might cause
such a difference include those discussed below. Forward-looking statements are
usually identifiable by the use of the words or phrases "will likely result,"
"are expected to," "will continue," "is anticipated," "estimated," "project" and
similar words or phrases.
Early Stage of Product Development; Uncertainty of Successful Commercialization
Since its inception the Company has generated no revenue from product
sales. The Company's research and development programs are at an early stage.
Although the Company has identified compounds that it believes will have
clinical value, there can be no assurance that such compounds will develop into
commercial products or that additional products will be discovered, developed or
acquired in the future. The Company recently suspended development of all but
one of its research and development programs, PRO 2000 Gel. PRO 2000 Gel will
require significant additional research and development efforts, including
extensive clinical testing and regulatory approval, prior to commercial use.
Although PRO 2000 Gel has advanced to the clinical trial phase, it has not been
scaled-up for commercial production. The Company's potential products are
subject to the risks of failure inherent in the
<PAGE>
development of pharmaceutical products based on new technologies. These risks
include: (a) the possibilities that the Company's therapeutic approach will not
be successful; (b) that any or all of the Company's potential products will be
found to be unsafe, ineffective or toxic or otherwise fail to meet applicable
regulatory standards or receive necessary regulatory clearances; (c) that the
potential products, if safe and effective, will be difficult to develop into
commercially viable products or to manufacture on a large scale or will be
uneconomical to market; (d) that proprietary rights of third parties will
preclude the Company from marketing such products; or (e) that third parties
will market superior or equivalent products. Furthermore, the Company's products
in research or development or to be acquired may prove to have undesirable and
unintended side effects or other characteristics that may prevent or limit their
commercial use. There can be no assurance that the Company will be permitted to
undertake human clinical testing of any potential products or, if permitted,
that such products will be demonstrated to be safe and efficacious. In addition,
there can be no assurance that any of the Company's products will obtain United
States Food and Drug Administration ("FDA") or foreign regulatory approval for
any indication or that an approved compound would be capable of being produced
in commercial quantities at reasonable costs and successfully marketed.
Products, if any, resulting from the Company's research and development programs
are not expected to be commercially available, if at all, for a number of years
at the earliest.
Need for Additional Funds; Risk of Insolvency
The Company's operations to date have consumed substantial amounts of cash.
Substantial additional sources of financing will be required in order for the
Company to continue its planned operations. The Company is currently dependent
upon research and development collaborations, external financings and interest
income to provide working capital to pursue its intended business activities.
There can be no assurance, however, that additional funding will be available
from any of these sources or, if available, will be available on acceptable or
affordable terms. The Company has not been profitable since inception and has
incurred an accumulated deficit of $59,202,464 through March 31, 1998. Losses
have resulted principally from costs incurred in research and development
activities related to the Company's efforts to develop drug candidates and from
the associated administrative costs. The Company expects to incur significant
additional operating losses over the next several years and expects cumulative
losses to increase substantially due to continued research and development
efforts, preclinical and clinical testing and development of marketing, sales
and production capabilities. In the next few years, the Company's revenues, if
any, will likely be limited to amounts received under research or product
development relationships that the Company may establish. There can be no
assurance, however, that the Company will be able to establish any additional
relationships on terms acceptable to the Company, if at all. If the Company is
unable to secure additional financing, or to enter into corporate collaborations
that produce revenue for the Company, the Company's financial condition will be
materially adversely affected. The Company's future profitability is dependent
on its ability to identify and acquire commercially viable products, to enter
into agreements for product development and commercialization with corporate
sponsors, to develop and obtain patent protection and regulatory approvals for
its products and to develop the capability to manufacture and sell its products.
There can be no assurance that the Company will successfully identify, develop,
acquire, commercialize, patent, manufacture or market its products, obtain
required regulatory approvals or ever achieve profitability.
Uncertainty Regarding Success of Clinical Trials
Before obtaining required regulatory approvals for the commercial sale of
any drug candidates, the Company must independently demonstrate through
preclinical testing and clinical trials that such product is safe and effective
for use in each target indication. The results from preclinical testing and
early clinical trials may not be predictive of results that will be obtained in
pivotal clinical trials, and there can be no assurance that any clinical trials
will demonstrate sufficient safety and effectiveness to obtain required
regulatory approvals or will result in marketable products. A number of
companies in the pharmaceutical industry have suffered significant setbacks in
advanced clinical trials even after promising results in earlier trials.
Generally, only a very small percentage of the number of new pharmaceutical
products initially developed is approved for sale. Even products which are
approved for sale have no assurance of commercial success. The administration of
any drug candidate developed by the Company may produce undesirable side effects
in humans. The occurrence of side effects could interrupt, delay or halt
clinical trials of such drug candidate and could ultimately prevent its approval
by the FDA or foreign regulatory authorities for any and all target indications.
There can be no assurance that clinical trials will demonstrate that any drug
candidate under development is safe or effective. The Company may encounter
2
<PAGE>
unanticipated problems relating to development, manufacturing, distribution and
marketing, some of which may be beyond its financial and technical capacity to
solve. The failure to address such problems adequately could prevent the Company
from ever becoming a viable business or generating profits. No assurance can be
given that the Company will succeed in the development and marketing of any new
drug products, or that any such products will not be rendered obsolete by
products of competitors.
The rate of completion of clinical trials will depend upon, among other
factors, obtaining adequate clinical supplies and the rate of patient
enrollment. Patient enrollment is a function of many factors including the size
of the patient population, the nature of the protocol, the proximity of patients
to clinical sites and the eligibility criteria for the study. Delays in planned
patient enrollment can result in increased costs or delays or both, which could
have a material adverse effect on the Company's business.
Potential Future Dilution
As of June 23, 1998, 3,935,353 shares of Procept Common Stock were issuable
upon exercise of options and warrants to purchase Common Stock that either are
currently outstanding or the Company has an obligation to issue, including (a)
currently exercisable outstanding Class C Warrants to purchase an aggregate of
2,802,180 shares of Common Stock held by certain of the Selling Stockholders and
(b) outstanding Unit Purchase Options exercisable on or after October 9, 1998 to
purchase an aggregate of 398,661 shares of Common Stock and Class C Warrants to
purchase an aggregate of 398,661 shares of Common Stock held by certain of the
Selling Stockholders.
In addition, the Selling Stockholders who acquired their shares in
Procept's April 1998 private placement (the "1998 Private Placement"), or who
will acquire shares directly upon exercise of outstanding Unit Purchase Options,
are entitled to certain contractual rights requiring contingent additional
issuances of Common Stock (including but not limited to the Contingent Shares)
(x) based on the market price of Procept Common stock on the first anniversary
of the final closing date (the "Final Closing Date") of the 1998 Private
Placement (y) to protect them against future dilutive sales of securities and
(z) as a dividend substitute beginning 18 months after the Final Closing Date.
In the event of (i) a liquidation, dissolution or winding up of the Company,
(ii) the sale or other disposition of all or substantially all of the assets of
the Company, or (iii) any consolidation, merger, combination, reorganization or
other transaction in which the Company is not the surviving entity, the Selling
Stockholders are entitled to receive an amount equal to 140% of such Selling
Stockholder's investment as a liquidation "preference." Except in the case of a
liquidation, dissolution or winding up, such payment will be in the form that
equity holders will receive such as in cash, property or securities of the
entity surviving the acquisition transaction. In the event of a liquidation,
dissolution or winding up, such payment is contingent upon the Company having
available resources to make such payment. These contractual rights will
terminate after the first anniversary of the Final Closing Date if Procept
Common Stock trades at $15.00 per share or more. These contractual rights are
transferable to the purchasers of those Registered Shares currently outstanding
or issuable directly upon exercise of the Unit Purchase Options, but only if the
Selling Stockholder complies with certain requirements regarding transfer,
including (a) that the transferee execute a counterpart to the subscription
agreement to which each of the Selling Stockholders is, or will become upon
exercise of the Unit Purchase Options, a party and (b) that no transfer of these
contractual rights be made relating to fewer than 5,000 shares of Common Stock
(subject to adjustment). In addition, these contractual rights are subject to
applicable laws including Delaware General Corporate Law. There can be no
assurance that, if challenged, any of these rights will be enforced.
Concentration of Ownership and Control
The Aries Trust and the Aries Domestic Fund, L.P. (the "Aries Funds")
together are the holders of (i) an aggregate of 1,341,680 shares of Procept
Common Stock, (ii) Class C Warrants to purchase an aggregate of 1,341,680 shares
of Procept Common Stock, (iii) additional warrants to purchase an aggregate of
5,845 shares of Procept Common Stock and (iv) Unit Purchase Options exercisable
on or after October 9, 1998 to purchase an aggregate of 50,000 shares of Procept
Common Stock and Class C Warrants to purchase an aggregate of 50,000 shares of
Procept Common Stock (the "Aries Interest"), representing approximately 40.2% of
Procept Common Stock outstanding on a fully diluted basis. In addition, the
Aries Funds have the right to designate a majority of the members of the Board
of Directors. See "-- Certain Interlocking Relationships; Potential Conflicts of
Interest." Accordingly, the Aries Funds may effectively control matters
requiring approval by Procept stockholders, including electing directors,
adopting or amending certain provisions of the Company's certificate of
incorporation or bylaws and approving or preventing certain mergers or other
similar transactions, such as a sale of substantially all of the Company's
assets (including transactions that could give holders of Procept Common Stock
the opportunity to realize a premium over the then-prevailing price for their
shares). The control rights of the Aries Funds and their affiliate may have the
effect of discouraging a third party from making an acquisition proposal for the
Company and thereby
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<PAGE>
inhibit a change of control of the Company in circumstances that could give the
holders of Procept Common Stock the opportunity to realize a premium over the
then-prevailing market price of such stocks or affect the market price of the
Common Stock, or both. Purchasers of the Registered Shares offered hereby will
be minority equity holders of the Company and will be unable to control the
management or business policies of the Company. Moreover, subject to contractual
restrictions and general fiduciary obligations, the Company is not prohibited
from engaging in transactions with its management and principal stockholders, or
with entities in which such persons are interested.
Risks of Low-Priced Stock; Possible Effect of "Penny Stock" Rules on Liquidity
for the Company's Securities
If Procept Common Stock fails to continue to be listed on a national
securities exchange or listed on a qualified automated quotation system, it may
become subject to Rule 15g-9 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), which imposes additional sales practice
requirements on broker-dealers that sell such securities. Rule 15g-9 defines a
"penny stock" to be any equity security that has a market price (as therein
defined) of less than $5.00 per share or with an exercise price of less than
$5.00 per share, subject to certain exceptions including the securities being
quoted on Nasdaq's SmallCap Market. For transactions covered by this rule, a
broker-dealer must make a special suitability determination for the purchaser,
have delivered the Commission's required disclosure statement regarding "penny
stock" and have received the purchaser's written consent to the transaction
prior to sale. In addition, Rule 15g-4 requires that a broker-dealer also must
disclose the sales commission payable to it and its registered representative
and current quotations for the security. Finally, Rule 15g-6 requires that a
broker-dealer send its customers who hold penny stock in their accounts monthly
statements disclosing recent price information for the penny stock held in the
account and information on the limited market in penny stock. Consequently, such
rules may affect the ability of broker-dealers to sell the Company's securities
and may affect the ability of purchasers of the Registered Shares to sell any of
their Procept Common Stock.
The foregoing required penny stock restrictions will not apply to the
Company's securities if the Company meets certain minimum net tangible assets or
average revenue criteria. There can be no assurance that the Company's
securities will qualify for exemption from the penny stock restrictions. In any
event, even if the Company's securities were exempt from such restrictions, the
Company would remain subject to Section 15(b)(6) of the Exchange Act, which
gives the Commission the authority to restrict any person from participating in
a distribution of penny stock, if the Commission finds that such a restriction
would be in the public interest.
If the Company's securities were subject to the rules on penny stocks, the
market liquidity for the Company's securities would be materially adversely
affected.
Uncertainty Regarding Future Collaborations
The Company has no experience with receipt of government approvals,
marketing pharmaceutical products or clinical testing and manufacturing and, as
a result, intends to depend on collaborators for expertise.
The Company is currently seeking corporate partners to assist in the
development of the Pro 2000 Gel. Although the Company currently plans to
continue to fund each of these programs, there can be no assurance that
4
<PAGE>
the Company will be able to continue such programs without a partner.
Furthermore, there can be no assurance that the Company will be successful in
forming or maintaining any such alliances or that the Company's partners would
devote adequate resources to the Company's product candidates or that any or all
of the contemplated benefits from such alliances will be realized. Certain of
the collaborative, license or other arrangements that the Company may enter into
may place responsibility on the collaborative partners for preclinical testing
and human clinical trials and for the preparation and submission of applications
for regulatory approval for other technologies or products. Should any
collaborative partner fail to develop or commercialize successfully any future
proprietary technologies or future product to which it has rights, the Company
may be materially adversely affected. There can be no assurance that
collaborators will not pursue alternative technologies or products either on
their own or in collaboration with others, including the Company's competitors,
as a means for developing treatments of the diseases sought to be addressed by
the respective company. If the Company instead performs such tasks itself, it
will be required to develop expertise internally or contract with third parties
to perform these tasks. This will place increased demands on its resources,
requiring the addition of new management personnel and the development of
additional expertise by existing management personnel. The failure to acquire
such services or to develop such expertise could materially adversely affect
prospects for success.
Volatility of Stock Price
The market price of Procept Common Stock has been highly volatile and may
be so in the future. Factors such as the results of preclinical studies and
clinical trials by the Company or its competitors, other evidence of the safety
or efficacy of the Company's or its competitors' products, announcements of
technological innovations or new therapeutic products by the Company, or its
competitors, governmental regulation, developments in patent or other
proprietary rights of the Company or its competitors, including litigation,
fluctuations in the Company's operating results, and market conditions for
biopharmaceutical stocks in general could have a significant impact on the
future price of Procept Common Stock. As of June 19, 1998 the Company had
3,001,705 shares of Common Stock outstanding. Future sales of Procept Common
Stock by existing stockholders and option holders also could adversely affect
the market price of Procept Common Stock.
Certain Interlocking Relationships; Potential Conflicts of Interest
The Aries Funds have the contractual right to appoint a majority of the
members of the Board of Directors of the Company. The Aries Funds have
designated Michael S. Weiss, who is a Senior Managing Director of Paramount
Capital, Inc. ("Paramount"), as a nominee to the Board of Directors. Mr. Weiss
was nominated to the Board and elected as Chairman. Paramount Capital Asset
Management, Inc. ("PCAM") is the investment manager and general partner of both
Aries Funds. See "-- Concentration of Ownership and Control." Lindsay A.
Rosenwald, M.D., the Chairman and sole stockholder of PCAM, is also the
Chairman and sole stockholder of Paramount. Dr. Rosenwald is also President of
Paramount Capital Investments, LLC ("PCI"), a New York-based merchant banking
and venture capital firm specializing in biotechnology companies. In the regular
course of its business, PCI identifies, evaluates and pursues investment
opportunities in biomedical and pharmaceutical products, technologies and
companies. Generally, Delaware corporate law requires that any transactions
between the Company and any of its affiliates be on terms that, when taken as a
whole, are substantially as favorable to the Company as those then reasonably
obtainable from a person who is not an affiliate in an arm's-length transaction.
Nevertheless, neither such affiliates nor PCI is obligated pursuant to any
agreement or understanding with the Company to make any additional products or
technologies available to the Company, nor can there be any assurance, and the
Company does not expect and purchasers of the Registered Shares should not
expect, that any biomedical or pharmaceutical product or technology identified
by such affiliates or PCI in the future will be made available to the Company.
In addition, certain of the current officers and directors of the Company or
certain of any officers or directors of the Company hereafter appointed may from
time to time serve as officers or directors of other biopharmaceutical or
biotechnology companies. There can be no assurance that such other companies
will not have interests in conflict with those of the Company.
5
<PAGE>
The Company has agreed to indemnify Paramount and/or any controlling
person, director and officer of Paramount and hold them harmless against any
losses or expenses incurred in connection with Paramount's services in a recent
private placement of Procept's securities to the Selling Stockholders. In
addition, the Company and Paramount have entered into an advisory agreement
pursuant to which Paramount acts as the Company's exclusive financial advisor,
at a monthly retainer of $4,000 (minimum engagement of 24 months) plus
out-of-pocket expenses and cash and equity success fees in the event Paramount
assists the Company in connection with certain additional financing or strategic
transactions.
Absence of Dividends on Common Stock
Dividends will be payable on Procept Common Stock only when, as and if
declared by the Company's Board of Directors, out of funds legally available
therefor. Dividends on Procept Common Stock may be paid only out of surplus
(within the meaning of the Delaware General Corporation Law) or, if there is not
such surplus, out of the net profits of the Company for the fiscal year in which
the dividend is declared and/or the preceding fiscal year. The Company has no
current expectations that dividends will be paid on its Common Stock in the
foreseeable future.
Certain Anti-Takeover Provisions
Certain provisions of the Company's certificate of incorporation and
by-laws may have the effect of discouraging a third party from making an
acquisition proposal for the Company and thereby inhibit a change in control of
the Company in circumstances that could give the holders of Procept Common Stock
the opportunity to realize a premium over the then-prevailing market price of
such stock. Such provisions may affect the market price of Procept Common Stock.
For example, the Company's certificate of incorporation authorizes the issuance
of "blank check" preferred stock with such designations, rights and preferences
as may be determined from time to time by the Company's Board of Directors. Such
preferred stock could be utilized, under certain circumstances, as a method of
discouraging, delaying or preventing a change in control of the Company. The
future issuance of such preferred stock may adversely affect the voting and
dividend rights, rights under liquidation and other rights of the holders of
Procept's other equity securities. In addition to the impact of a future
issuance of preferred stock, Section 203 of the Delaware General Corporation Law
contains certain provisions that may delay or prevent an attempt by a third
party to acquire control of the Company. Furthermore, the Company has
contractual obligations to certain of its security holders that may prevent
potential takeovers. See "-- Concentration of Ownership and Control."
Competition and Technological Change
Competitors of the Company in the United States and abroad are numerous and
include, among others, major pharmaceutical and chemical companies, specialized
biotechnology firms and universities and other research institutions.
Biotechnology and pharmaceutical companies are subject to intense competition
and rapid and significant technological change. Competition may increase as a
result of potential advances in the commercial application of biotechnology and
greater availability of capital for investment in these fields. Acquisitions of
competing companies and potential competitors by large pharmaceutical companies
or others could enhance financial, marketing and other resources available to
such competitors. As a result of academic and government institutions becoming
increasingly aware of the commercial value of their research findings, such
institutions are more likely to enter into exclusive licensing agreements with
commercial enterprises, including competitors of the Company, to market
commercial products. There can be no assurance that the Company's competitors
will not succeed in developing technologies and products that are more effective
than any that are being developed by the Company or that would render the
Company's technology and products obsolete and noncompetitive. Many of these
competitors have substantially greater financial and technical resources and
production and marketing capabilities than the Company. In addition, some of the
Company's competitors have greater experience than the Company in conducting
preclinical testing and human clinical trials and obtaining FDA and other
regulatory approvals. Accordingly, the Company's competitors may succeed in
obtaining FDA or other regulatory approvals for products more rapidly than the
Company. There can be no assurance that the Company's products will be able to
compete successfully with competitors' existing products or products under
development or that they will obtain regulatory approval in the United States or
elsewhere. If the Company commences significant commercial sales of its
products,
6
<PAGE>
it also will be competing with respect to manufacturing efficiency and marketing
capabilities, areas in which it has limited or no experience.
Uncertainty of Patents and Proprietary Rights
The Company's success will depend in part on its ability to obtain United
States and foreign patent protection for its products, preserve its trade
secrets and operate without infringing on the proprietary rights of third
parties. Because of the length of time and expense associated with bringing new
drugs through development and regulatory approval to the marketplace, the health
care industry has traditionally placed considerable importance on obtaining
patent and trade secret protection for significant new technologies, products
and processes. There can be no assurance that any patents will issue from any of
the patent applications owned by, or licensed to, the Company. Further, there
can be no assurance that any rights the Company may have under issued patents
will provide the Company with significant protection against competitive
products or otherwise be commercially valuable. Legal standards relating to the
validity of patents covering pharmaceutical and biotechnological inventions and
the scope of claims made under such patents are still developing. There can be
no assurance that any existing or future patents issued to, or licensed by, the
Company will not subsequently be challenged, infringed upon, invalidated or
circumvented by others. If the Company's product candidates are found to
infringe upon the patents or otherwise impermissibly utilize the intellectual
property of others, the Company's development, manufacture and sale of such
product candidates could be severely restricted or prohibited. In such event,
the Company may be required to obtain licenses from third parties or otherwise
obtain licenses to utilize patents or proprietary rights of others. There can be
no assurance that the Company will be able to obtain such licenses on acceptable
terms, or at all.
Dependence on Confidentiality Agreements
The Company also relies on unpatented proprietary technology, and there can
be no assurance that others may not independently develop the same or similar
technology or otherwise obtain access to the Company's unpatented technology. To
protect its trade secrets and other proprietary information, the Company
requires employees, consultants, advisors and collaborators to enter into
confidentiality agreements. There can be no assurance that these agreements will
provide meaningful protection for the Company's trade secrets, know-how or other
proprietary information in the event of any unauthorized use, misappropriation
or disclosure of such trade secrets, know-how or other proprietary information.
If the Company is unable to maintain the proprietary nature of its technologies,
the Company could be adversely affected.
Impact of Government Regulation; Product Clearance and Approval
The FDA and comparable agencies in foreign countries impose substantial
requirements upon the introduction of therapeutic pharmaceutical products
through lengthy and detailed laboratory and clinical testing procedures,
sampling activities and other costly and time-consuming procedures. Satisfaction
of these requirements, which includes demonstrating to the satisfaction of the
FDA and foreign regulatory agencies that the product is both safe and effective,
typically takes several years or more and can vary substantially based upon the
type, complexity and novelty of the product. There can be no assurance that such
testing will show any product to be safe or efficacious. The Company cannot yet
accurately predict when it might first submit new drug applications for products
for FDA or other regulatory review. Government regulation also affects the
manufacturing and marketing of pharmaceutical products.
The effect of government regulation may be to delay marketing of the
Company's products for a considerable or indefinite period of time, to impose
costly procedural requirements upon the Company's activities and to furnish a
competitive advantage to larger companies or companies more experienced in
regulatory affairs. There can be no assurance that FDA or other regulatory
approvals for any products developed by the Company will be granted on a timely
basis, if at all, or, if granted, that such approval will cover all the clinical
indications for which the Company is seeking approval or will not contain
significant limitations in the form of warnings, precautions or
contraindications with respect to conditions of use. Any delay in obtaining or
any failure to obtain such approvals would adversely affect the Company's
ability to generate revenue. Even if initial regulatory approvals for the
Company's product candidates are obtained, the Company, its products and its
manufacturing facilities would be subject to continual review and periodic
inspection. Moreover, additional government regulation
7
<PAGE>
from future legislation or administrative action may be established which could
prevent or delay regulatory approval of the Company's products or further
regulate the prices at which the Company's proposed products may be sold. The
regulatory standards for manufacturing are applied stringently by the FDA.
Discovery of previously unknown problems with a product, manufacturer or
facility may result in restrictions on such product, manufacturer or facility,
including warning letters, fines, suspensions of regulatory approvals, product
recalls, operating restrictions, delays in obtaining new product approvals,
withdrawal of the product from the market and criminal prosecutions.
Other violations of FDA requirements can result in similar penalties.
Uncertainty of Health Care Reform Measures and Third Party Reimbursement
The business and financial condition of pharmaceutical and biotechnology
companies will continue to be affected by the efforts of third-party payers,
such as government health administration authorities, private health insurers
and other organizations, to contain or reduce the cost of health care. In the
United States and in certain foreign jurisdictions there have been, and the
Company expects that there will continue to be, a number of legislative and
regulatory proposals aimed at changing the health care system. While the Company
cannot predict whether any such legislative or regulatory proposals will be
adopted or the effect that such proposals may have on its business, the
consideration or approval of such proposals could have a material adverse effect
on the value of its securities, including the Shares registered hereby, or its
ability to raise capital or to obtain additional collaborative partners, and the
adoption of such proposals could have a material adverse effect on the Company's
business, financial condition and results of operations.
In both domestic and foreign markets, successful commercial sales of
potential products of the Company will depend in part on the availability of
reimbursement from governmental and health administrative authorities, private
health insurers or other third-party payers. Third-party payers are increasingly
challenging the price and cost-effectiveness of medical products and services.
Significant uncertainty exists as to the reimbursement status of newly approved
health care products. Future legislation and regulations affecting the pricing
of pharmaceuticals could further limit reimbursement for medical products and
services. There can be no assurance that any of the Company's potential products
will be considered cost-effective or that adequate third-party reimbursement
will be available to enable the Company to maintain price levels sufficient to
realize an appropriate return on its investments. In addition, the trend toward
managed health care in the United States and the concurrent growth of managed
care organizations, such as health maintenance organizations, that could control
or significantly influence the purchase of health care services and products, as
well as legislative proposals to reduce government insurance programs, could
result in pricing pressure for any products that might be developed by the
Company. If adequate reimbursement is not provided by government and other
third-party payers of the Company's potential products, there would be a
material adverse effect on the Company's business, financial condition and
results of operations.
Management Transition; Need for Additional Personnel; Dependence on Qualified
Personnel
Financial constraints have dictated that the Company terminate a
significant number of employees during the last year. The loss of such
individuals has decreased the scope of the Company's activities and may,
therefore, have reduced the prospects for commercially successful product
development. In February 1998, Procept's Board of Directors appointed John F.
Dee as the Company's President and Chief Executive Officer. Until the Company
recruits additional administrative personnel, Mr. Dee, in addition to serving as
Procept's Principal Executive Officer, also will serve as its Principal
Financial Officer and Principal Accounting Officer. If Mr. Dee were not able to
continue in these capacities, the Company could be adversely affected.
The Company is highly dependent upon the efforts of Mr. Dee and its
remaining scientific team. The loss of the services of one or more of these
individuals might impede the achievement of the Company's development
objectives. Because of the specialized scientific nature of the Company's
business, the Company is highly dependent upon its ability to attract and retain
qualified scientific and technical personnel. There is intense competition among
major pharmaceutical and chemical companies, specialized biotechnology firms and
universities and other research institutions for qualified personnel in the
areas of the Company's activities, and there can be no assurance that the
Company will be able to continue to attract and retain the qualified personnel
necessary for the development of its business. Loss of the services of, or
failure to recruit, key scientific and technical personnel would be
significantly detrimental to the Company's product development programs.
8
<PAGE>
Limited Manufacturing, Marketing and Sales Capability and Experience
The Company has not yet invested in the development of manufacturing,
marketing or sales capabilities. The Company lacks the facilities and personnel
to manufacture products in accordance with Quality System ("QS," formerly
current good manufacturing practice, or "GMP") requirements as prescribed by the
FDA or to produce an adequate supply of compounds to meet future requirements
for clinical trials. If the Company is unable to develop or contract for
manufacturing capabilities on acceptable terms, the Company's ability to conduct
human clinical testing with PRO 2000 and preclinical and clinical testing with
respect to additional product candidates, if any, will be adversely affected,
resulting in delays in the submission of products for regulatory approvals and
in the initiation of new development programs, which in turn could materially
impair the Company's competitive position and the possibility of achieving
profitability. The Company also will need to hire additional personnel skilled
in marketing and sales as it develops products with commercial potential or
enter into arrangements with third parties for sales and marketing. There can be
no assurance that the Company will be able to acquire, or establish third-party
relationships to provide, any or all of these capabilities.
Product Liability; Availability of Insurance; Risk of Product Recalls
The Company's business exposes it to potential liability risks that are
inherent in the testing, manufacturing and marketing of medical products. The
use of the Company's products in clinical trials may expose the Company to
product liability claims and possible adverse publicity. These risks will expand
with respect to the Company's products, if any, that receive regulatory approval
for commercial sale. The Company currently has limited product liability
coverage for the clinical research use of its products, which management
believes is customary for a Company with products at this stage of clinical
development. The Company does not have product liability insurance for the
commercial sale of its products but intends to obtain such coverage if and when
its products are commercialized. However, such coverage is becoming increasingly
expensive and there can be no assurance that the coverage is adequate or that
the Company will be able to maintain its existing insurance coverage or obtain
additional insurance coverage at acceptable costs, if at all, or that a product
liability claim would not adversely affect the business or financial condition
of the Company. Furthermore, there can be no assurance that any collaborators or
licensees of the Company will agree to indemnify the Company or be sufficiently
insured or have a net worth sufficient to satisfy any such product liability
claims. In addition, a product of the Company may be subject to recall for
unforeseen reasons. Such a recall could have a material adverse effect on the
Company.
Limited Availability of Net Operating Loss Carry Forwards
For Federal income tax purposes, net operating loss and tax credit
carryforwards as of December 31, 1997 are approximately $57.3 million and $1.6
million, respectively. These carryforwards will expire beginning in 2000. The
Tax Reform Act of 1986 provided for a limitation on the annual use of net
operating loss and tax credit carryforwards following certain ownership changes.
The Company believes that certain recent issuances of its securities, including
those pursuant to which the Selling Stockholders acquired the Registered Shares
or the right to acquire the Registered Shares, are likely to restrict severely
the Company's ability to utilize its net operating losses and tax credits in any
particular year. Additionally, because the U.S. tax laws limit the time during
which net operating loss and tax credit carryforwards may be applied against
future taxable income and tax liabilities, respectively, the Company may never
be fully able to use its net operating loss and tax credits for federal income
tax purposes.
Hazardous Materials; Environmental Matters
The Company's research and development and manufacturing processes involve
the controlled storage, use and disposal of hazardous materials, biological
hazardous materials and radioactive compounds. The Company is subject to
federal, state and local laws and regulations governing the use, manufacture,
storage, handling and disposal of such materials and certain waste products.
Although the Company believes that its safety procedures for handling and
disposing of such materials comply with the standards prescribed by such laws
and regulations, the risk of accidental contamination or injury from these
materials cannot be completely eliminated. In the event of such an accident, the
Company may be held liable for any damages that result, and any such liability
could
9
<PAGE>
exceed the resources of the Company. There can be no assurance that the Company
will not be required to incur significant costs to comply with environmental
laws and regulations in the future, nor that the operations, business or assets
of the Company will not be materially adversely affected by current or future
environmental laws or regulations.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Registered
Shares. The Company could, however, receive an aggregate of up to $17,286,987
upon exercise of outstanding options and warrants that must be exercised before
4,958,932 of the Registered Shares could be sold hereunder, including (i) an
aggregate of up to $13,310,355 upon the exercise of outstanding Class C Warrants
held by certain of the Selling Stockholders, (ii) an aggregate of up to
$2,082,992 upon exercise of outstanding Unit Purchase Options held by certain of
the Selling Stockholders and (iii) an aggregate of $1,893,640 issuable upon
exercise of Class C Warrants that are issuable upon exercise of the Unit
Purchase Options.
10
<PAGE>
SELLING STOCKHOLDERS
The Selling Stockholders are the holders of units (the "Units") or, as
noted, options (the "Unit Purchase Options") to purchase Units, each Unit
consisting of (a) 20,000 shares of Procept Common Stock and (b) currently
exercisable warrants (the "Class C Warrants") to purchase, at $5.00 per share,
at any time prior to April 9, 2003, 20,000 shares of Procept Common Stock. The
Units and the Unit Purchase Options were issued by the Company in a private
placement of such securities completed in April 1998 (the "1998 Private
Placement").
The following table sets forth as of June 23, 1998: (i) the name of each
Selling Stockholder; (ii) the aggregate number of shares ("Shares Held") of
Common Stock owned by or issuable upon exercise of outstanding warrants, Class C
Warrants and Unit Purchase Options owned by each Selling Stockholder; (iii) the
aggregate number of shares (the "Registered Shares") to be offered by each
Selling Stockholder pursuant to this Prospectus, made up of (A) the aggregate
number of shares (the "Contingent Shares") of Common Stock issuable to each
Selling Stockholder, either directly or upon exercise of Unit Purchase Options,
on or after April 9, 1999 in satisfaction of certain contractual rights held by
the Selling Stockholders and (B) "Non-Contingent Shares," which except as noted,
equals Shares Held; and (iv) the number and percentage of shares to be
beneficially owned by each Selling Stockholder after this Offering if all of the
Registered Shares are sold as described herein. The percentage figures are based
on 3,001,705 shares of Procept Common Stock outstanding on June 19, 1998.
Except as indicated with respect to Unit Purchase Options and other
securities not being offered, each Selling Stockholder acquired fifty percent
(50%) of the Shares Held in the 1998 Private Placement; the remaining fifty
percent (50%) are issuable upon exercise of Class C Warrants. The Contingent
Shares are issuable in satisfaction of certain contractual rights under the
Subscription Agreements executed in the 1998 Private Placement (x) based on the
market price of Procept Common Stock on April 9, 1999, the first anniversary of
the final closing date of the 1998 Private Placement (the "Reset Issuance") and
(y) as a dividend substitute on each of October 9, 1999 and April 9, 2000 (each
a "Semi-Annual Issuance") equal to five percent (5%) of the sum of Shares Held
and the number of shares of Common Stock held as a result of any Reset Issuance
or prior Semi-Annual Issuance. For purposes of calculating the number of
Contingent Shares, the Company assumed that it will conduct no further dilutive
issuances and that the maximum number of shares (300% of the number of shares
acquired in the 1998 Private Placement, but excluding shares issuable upon
exercise of Class C Warrants) of Common Stock issuable to a Selling Stockholder
upon a Reset Issuance will be issued. Based on these assumptions, the Contingent
Shares for any Selling Stockholders may be allocated approximately eighty
percent (88%) to the Reset Issuance and six percent (6%) to each of the October
9, 1999 and April 9, 2000 Semi-Annual Issuances.
Common Stock ownership information is based solely upon information
furnished to the Company or reports furnished to the Company by the respective
individuals or entities, as the case may be, pursuant to the rules of the
Commission. Except as described elsewhere in this Prospectus, none of the
Selling Stockholders have held any position or office with, been employed by, or
otherwise had a material relationship with, the Company or any of its
predecessors or affiliates within the past three years. See "RISK FACTORS --
Concentration of Ownership and Control"; "-- Certain Interlocking Relationships;
Potential Conflicts of Interest"; and the footnotes to the following table.
<TABLE>
<CAPTION>
Beneficial Ownership
Registered After This Offering
Shares --------------------
----------
Name of Shares Contingent Non-Contingent Number
Selling Stockholder Held Shares Shares of Shares Percent
------------------- ------ ---------- ---------------- --------- --------
<S> <C> <C> <C> <C> <C>
Ross D. Ain 8,000 13,640 8,000 0 0%
Alae Partners 40,000 68,200 40,000 0 0%
Philip J. Angelastro 10,000 17,050 10,000 0 0%
11
<PAGE>
Beneficial Ownership
Registered After This Offering
Shares --------------------
----------
Name of Shares Contingent Non-Contingent Number
Selling Stockholder Held Shares Shares of Shares Percent
------------------- ------ ---------- ---------------- --------- --------
The Alfred J. Anzalone Family
Limited Partnership 20,000 34,100 20,000 0 0%
Mauricio Arias 10,000 17,050 10,000 0 0%
Aries Domestic Fund, L.P. (1) 953,929 1,623,459 952,176 (2) 1,753 *
The Aries Trust (1) 1,835,276 3,122,168 1,831,184 (3) 4,092 *
Mario Aristizabal 10,000 17,050 10,000 0 0%
Morris A. Arntson, Jr. 10,000 17,050 10,000 0 0%
Martin G. Ballweg 20,000 34,100 20,000 0 0%
Raul Baz 10,000 17,050 10,000 0 0%
Beagle Limited 80,000 136,400 80,000 0 0%
Eckardt C. Beck, Defined Pension
Plan U/A 1/1/95 10,000 17,050 10,000 0 0%
Lawrence Bernstein 6,000 10,230 6,000 0 0%
Richard Berry, MD & Beverly Berry 10,000 17,050 10,000 0 0%
Bios Equity Fund L.P. 60,000 102,300 60,000 0 0%
Barry Birbrower, P.C. Profit
Sharing Trust 10,000 17,050 10,000 0 0%
Robert S. Bogatin Trust UDT 3/15/91 10,000 17,050 10,000 0 0%
James W. Brady 4,000 6,820 4,000 0 0%
Ronald W. Braziel 40,000 68,200 40,000 0 0%
Elliott Broidy 20,000 34,100 20,000 0 0%
Thomas L. Cassidy IRA Rollover 20,000 34,100 20,000 0 0%
Jack R. Cline, Jr. 10,000 17,050 10,000 0 0%
Robert J. Conrads 20,000 34,100 20,000 0 0%
Continental Consulting Corporation 10,000 17,050 10,000 0 0%
Couderay Partners 40,000 68,200 40,000 0 0%
Archibald Cox, Jr. 80,000 136,400 80,000 0 0%
Tommy L. Davis 60,000 102,300 60,000 0 0%
Praful Desai, MD 10,000 17,050 10,000 0 0%
J. William Doyle 30,000 51,150 30,000 0 0%
James L. Dritz 10,000 17,050 10,000 0 0%
12
<PAGE>
Beneficial Ownership
Registered After This Offering
Shares --------------------
----------
Name of Shares Contingent Non-Contingent Number
Selling Stockholder Held Shares Shares of Shares Percent
------------------- ------ ---------- ---------------- --------- --------
Edward Dworetzky 20,000 34,100 20,000 0 0%
Norma Dworetzky 20,000 34,100 20,000 0 0%
Joseph Edelman (5) 3,564 6,076 3,564 (4) 0 0%
Lauren S. Fischer (5) 1,200 2,046 1,200 (4) 0 0%
Marc Florin (5) 2,840 4,842 2,840 (4) 0 0%
Roxanne H. Frank Revocable Trust 40,000 68,200 40,000 0 0%
Ben & Sharyn Friedman 10,000 17,050 10,000 0 0%
Furman Selz, LLC 50,000 85,250 50,000 0 0%
Gallans & Brooks Associates, Inc.
Pension Fund 10,000 17,050 10,000 0 0%
A. Mark Gambee, MD and
Karen D. Todd, MD JTWROS 20,000 34,100 20,000 0 0%
Shelley Garfinkel 20,000 34,100 20,000 0 0%
Anthony J. Gerace 16,000 27,280 16,000 0 0%
Joseph Giamanco 40,000 68,200 40,000 0 0%
Howard Gittis 40,000 68,200 40,000 0 0%
Stuart Goldberg and Rhoda
Goldberg JTWROS 10,000 17,050 10,000 0 0%
Gilbert Goldstein, Paul Shapiro
Trustees, UIT Howard Gittis,
dated 12/23/88 40,000 68,200 40,000 0 0%
John M. Goodman 10,000 17,050 10,000 0 0%
Michael J. Gordon 5,000 8,525 5,000 0 0%
HJK, LLC 40,000 68,200 40,000 0 0%
Alan and Paula Halperin 20,000 34,100 20,000 0 0%
Irving B. Harris Revocable Trust 40,000 68,200 40,000 0 0%
Hawk Management and Financial
Services, Inc. 40,000 68,200 40,000 0 0%
Edward F. Heil 20,000 34,100 20,000 0 0%
Paul R. Herman 10,000 17,050 10,000 0 0%
Fred Holubow 8,000 13,640 8,000 0 0%
Harry Huang & Adrienne Masters 10,000 17,050 10,000 0 0%
13
<PAGE>
Beneficial Ownership
Registered After This Offering
Shares --------------------
----------
Name of Shares Contingent Non-Contingent Number
Selling Stockholder Held Shares Shares of Shares Percent
------------------- ------ ---------- ---------------- --------- --------
IMS Global Investments X, Ltd. 80,000 136,400 80,000 0 0%
Jackson Hole Investments
Acquisition LP 20,000 34,100 20,000 0 0%
Michael Joyce 40,000 68,200 40,000 0 0%
Charles Jurgensmeyer 20,000 34,100 20,000 0 0%
Jerome Kahn Jr. Revocable Trust 18,000 30,690 18,000 0 0%
Donald B. and Sylvia A. Kaiserman 10,000 17,050 10,000 0 0%
Patrick M. Kane 12,000 20,460 12,000 0 0%
Ellen I. Kaplan Revocable Trust 20,000 34,100 20,000 0 0%
Scott A. Katzmann (5) 42,070 71,729 42,070 (4) 0 0%
Ery W. Kehaya 20,000 34,100 20,000 0 0%
Donald R. Kendall, Jr. 20,000 34,100 20,000 0 0%
Lawrence & Shirley Kessel 10,000 17,050 10,000 0 0%
Keys Foundation 140,000 238,700 140,000 0 0%
George & Mary Ellen Kimble 10,000 17,050 10,000 0 0%
John Knox (5) 1,600 2,728 1,600 (4) 0 0%
Harold Ksiazek and Jeanette Ksiazek 10,000 17,050 10,000 0 0%
John LaRocque 120,000 240,600 120,000 0 0%
Roger S. Lash 20,000 34,100 20,000 0 0%
Brad Levine DMD 20,000 34,100 20,000 0 0%
Jeff Levine (5) 8,500 14,492 8,500 (4) 0 0%
Hyman A. Lezell Revocable Trust 10,000 17,050 10,000 0 0%
Donald W. Linscott 10,000 17,050 10,000 0 0%
Donna Lipman and Lawrence
Lipman, Tenants in Common 10,000 17,050 10,000 0 0%
Stephen A. Lisenby and
Patricia J. Lisenby 30,000 51,150 30,000 0 0%
John Loeb, Jr. 10,000 17,050 10,000 0 0%
Richard A. & Gay C. Lydecker 2,000 3,410 2,000 0 0%
Harris R.L. Lydon, Jr. 10,000 17,050 10,000 0 0%
Geo. Manos & Associates, Inc. 10,000 17,050 10,000 0 0%
14
<PAGE>
Beneficial Ownership
Registered After This Offering
Shares --------------------
----------
Name of Shares Contingent Non-Contingent Number
Selling Stockholder Held Shares Shares of Shares Percent
------------------- ------ ---------- ---------------- --------- --------
Mike McCullick 10,000 17,050 10,000 0 0%
Tim McInerney (5) 6,750 11,508 6,750 (4) 0 0%
Kirkland Messina (6) 600 1,023 600 (4) 0 0%
Milfam I 10,000 17,050 10,000 0 0%
Mike & Terry Miller 40,000 68,200 40,000 0 0%
Albert Milstein 10,000 17,050 10,000 0 0%
Donald Minerva 20,000 34,100 20,000 0 0%
William Kymmerly Murphy & Linda
Carolyn Murphy Revocable Trust 10,000 17,050 10,000 0 0%
Arthur J. Nagle 10,000 17,050 10,000 0 0%
Joseph A. Natiello 20,000 34,100 20,000 0 0%
Kevin P. Newman 10,000 17,050 10,000 0 0%
John S. Osterweis, Trustee for
The Osterweis Revocable Trust
U/A dated 1/13/93 10,000 17,050 10,000 0 0%
Paul D. & Rebecca L. Ostrovsky 5,000 8,525 5,000 0 0%
Steven N. Ostrovsky 15,000 25,575 15,000 0 0%
Palmetto Partners, LTD. 80,000 136,400 80,000 0 0%
James J. Pelts 4,000 6,820 4,000 0 0%
Pequot Scout Fund, LP 100,000 170,500 100,000 0 0%
Pharm-Eco Laboratories, Inc. 20,000 34,100 20,000 0 0%
Pictet Bank & Trust Nassau Ltd. 20,000 34,100 20,000 0 0%
Porlana Capital Corp. PTE Ltd. 40,000 68,200 40,000 0 0%
Tis Prager 20,000 34,100 20,000 0 0%
James K. Ramaker 20,000 34,100 20,000 0 0%
Louis Reaback 10,000 17,050 10,000 0 0%
Raymond Reaback 10,000 17,050 10,000 0 0%
Michael Resnick 8,000 13,640 8,000 0 0%
David Rosenbaum and Margot
Kahn JTWROS 2,000 3,410 2,000 0 0%
Lindsay A. Rosenwald, M.D. (7) 557,690 950,861 557,690 (4) 0 0%
15
<PAGE>
Beneficial Ownership
Registered After This Offering
Shares --------------------
----------
Name of Shares Contingent Non-Contingent Number
Selling Stockholder Held Shares Shares of Shares Percent
------------------- ------ ---------- ---------------- --------- --------
Wayne L. Rubin (5) 17,698 30,174 17,698 (4) 0 0%
Karl Ruggeberg (5) 9,200 15,686 9,200 (4) 0 0%
David W. Ruttenberg 10,000 17,050 10,000 0 0%
Maria-Eugenia A. de Salas-Porras 10,000 17,050 10,000 0 0%
Roy and Marlena Schaefer, JTWROS 10,000 17,050 10,000 0 0%
Sandra Schawelson 10,000 17,050 10,000 0 0%
J.F. Shea Co., Inc. 120,000 204,600 120,000 0 0%
Thomas C. Siirola 10,000 17,050 10,000 0 0%
William S. Silver 10,000 17,050 10,000 0 0%
Melvin Spencer 10,000 17,050 10,000 0 0%
Joseph Stevens & Co. (6) 34,000 57,970 34,000 (4) 0 0%
Andrew Strassman 10,000 17,050 10,000 0 0%
Joseph Strassman and
Barbara Strassman 20,000 34,100 20,000 0 0%
Richard Strassman (5) 19,000 32,395 19,000 (8) 0 0%
Myron M. Teitelbaum, M.D. 20,000 34,100 20,000 0 0%
Tokenhouse Trading Company Limited 40,000 68,200 40,000 0 0%
Rodrigo Villamizar 10,000 17,050 10,000 0 0%
Donald E. and Virginia V.
Vinson Trust 10,000 17,050 10,000 0 0%
Juris Vitols 20,000 34,100 20,000 0 0%
David Walner (5) 2,610 4,450 2,610 (4) 0 0%
Melvyn I. Weiss 20,000 34,100 20,000 0 0%
Westbury Nursery Products Ltd. 40,000 68,200 40,000 0 0%
Bruno Widmer 20,000 34,100 20,000 0 0%
Wolfson Equities 40,000 68,200 40,000 0 0%
Lincoln Wood Investment 60,000 102,300 60,000 0 0%
Gabriel Zambrano 8,000 13,640 8,000 0 0%
----- ------ ----- - --
TOTALS 6,407,527 10,914,862 6,401,682 5,845 *
========= ========== ========= ===== =
</TABLE>
16
<PAGE>
* Indicates less than 1%
(1) Paramount Capital Asset Management, Inc. ("PCAM") is the general partner
of the Aries Domestic Fund, L.P. ("Aries Domestic") and the investment
manager of The Aries Trust (collectively with Aries Domestic, the "Aries
Funds"); PCAM therefore may be deemed an affiliate of the Company. See
"RISK FACTORS -- Concentration of Ownership and Control"; "-- Certain
Interlocking Relationships; Potential Conflicts of Interest."
(2) Non-Contingent Shares includes (i) 165,000 shares and 165,000 shares
issuable upon exercise of Class C Warrants acquired in the 1998 Private
Placement, (ii) 294,588 shares and 294,588 shares issuable upon exercise
of Class C Warrants acquired in exchange for (A) 10,521 shares of Series A
Convertible Preferred Stock, $0.01 par value per share and (B) related
warrants exercisable for 114,910 shares of Common Stock, in connection
with the 1998 Private Placement, and (iii) 16,500 shares issuable on or
after October 9, 1998 upon exercise of Unit Purchase Options and 16,500
shares issuable upon exercise of immediately exercisable Class C Warrants
issuable on or after October 9, 1998 upon exercise of Unit Purchase
Options. Non-Contingent Shares do not include 1,753 shares of Common Stock
issuable upon exercise of warrants, which shares are not being offered
hereby.
(3) Non-Contingent Shares includes (i) 335,000 shares and 335,000 shares
issuable upon exercise of Class C Warrants acquired in the 1998 Private
Placement, (ii) 547,092 shares and 547,092 shares issuable upon exercise
of Class C Warrants acquired in exchange for (A) 19,559 shares of Series A
Convertible Preferred Stock, $0.01 par value per share and (B) related
warrants exercisable for 213,404 shares of Common Stock, in connection
with the 1998 Private Placement, and (iii) 33,500 shares issuable on or
after October 9, 1998 upon exercise of Unit Purchase Options and 33,500
shares issuable upon exercise of immediately exercisable Class C Warrants
issuable on or after October 9, 1998 upon exercise of Unit Purchase
Options. Non-Contingent Shares does not include 4,092 shares of Common
Stock issuable upon exercise of warrants, which shares are not being
offered hereby.
(4) Fifty percent (50%) of the Non-Contingent Shares are issuable on or after
October 9, 1998 upon exercise of Unit Purchase Options and fifty percent
(50%) of these shares are issuable upon exercise of immediately
exercisable Class C Warrants issuable on or after October 9, 1998 upon
exercise of Unit Purchase Options.
(5) Employee, salesperson or other affiliate of Paramount Capital, Inc.
("Paramount"), the Company's placement agent in the 1998 Private Placement
and an affiliate of PCAM.
(6) Acted as a selected dealer in the 1998 Private Placement.
(7) Share figures do not include shares being offered for the account of
the Aries Funds. Dr. Rosenwald is the Chairman and sole stockholder of
both PCAM and Paramount and he may be deemed the beneficial owner of
the shares being offered by the Aries Funds.
(8) Non-Contingent Shares includes 4,500 shares issuable on or after October
9, 1998 upon exercise of Unit Purchase Options and 4,500 shares issuable
upon exercise of immediately exercisable Class C Warrants issuable on or
after October 9, 1998 upon exercise of Unit Purchase Options.
PLAN OF DISTRIBUTION
A total of 17,316,544 shares of Procept Common Stock are being directly
offered for sale by the Selling Stockholders to the public. The Company has
filed with the Commission a Registration Statement on Form S-3, of which this
Prospectus forms a part, with respect to the resale of the Registered Shares
from time to time in open market or privately negotiated transactions and has
agreed to prepare and file such amendments and supplements
17
<PAGE>
to the Registration Statement as required by the Securities Act and as may be
necessary to keep the Registration Statement effective until the earlier of (i)
the date such shares can be sold pursuant to Section 144(k) of the Securities
Act or (ii) the date on which the Selling Stockholders no longer hold any of the
Registered Shares. During any time when a supplement or amendment is so
required, after notice from the Company, the Selling Stockholders are required
to cease sales until this Prospectus has been supplemented or amended.
The Company has been advised that the Selling Stockholders may sell the
Registered Shares from time to time in open-market or privately-negotiated
transactions, or by a combination of such methods of sale, at fixed prices that
may be changed, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. Other than as
described below, the Selling Stockholders will act independently of the Company
in making decisions with respect to the timing, pricing, manner and size of each
sale. The Selling Stockholders may effect such transactions by selling the
Registered Shares to or through broker-dealers, and such broker-dealers may
receive compensation in the form of discounts, concessions or commissions from
the Selling Stockholders or the purchasers of the Registered Shares or both
(which compensation to a particular broker-dealer might be in excess of
customary commissions). Such broker-dealers, upon their resale of such
securities, may be deemed Selling Stockholders in this Offering. The Selling
Stockholders have advised the Company, that, as of the date of this Prospectus,
they have not made any arrangements relating to the distribution of the
Registered Shares.
Upon the Company's being notified by the Selling Stockholders that any
material arrangement has been entered into with a broker-dealer for the sale of
Procept Common Stock through a secondary distribution, or a purchase by a
broker-dealer, a Prospectus supplement will be filed, if required, pursuant to
Rule 424 under the 1933 Act, disclosing facts material to the transaction.
The Selling Stockholders may, upon request of the Company, be prohibited
from selling any of the Registered Shares offered hereby during (a) a period,
not to exceed two 30-day periods within any one 12-month period, required in
connection with a primary underwritten offering of Procept's securities and (b)
any period, not to exceed one 45-day period per circumstance or development,
during which the presence of material undisclosed information could make the
information disclosed in this Prospectus misleading, as determined by the
Company in good faith.
The Selling Stockholders and any broker-dealer who acts in connection with
the sale of Registered Shares hereunder may be deemed to be "underwriters" as
that term is defined in the Securities Act, and any commissions or discounts
received by them and profit on the resale of Registered Shares may be deemed to
constitute underwriting discounts or commissions under the Securities Act.
Pursuant to the terms of the subscription agreements between Procept and
each of the Selling Stockholders, 75% of each Selling Stockholder's Registered
Shares, including shares issuable upon exercise of the Class C Warrants, shall
be subject to lock-up for the first three months after the effective date of the
registration statement of which this Prospectus forms a part (the "Effective
Date"). Thereafter, 50% of such securities will be subject to such a "lock-up"
until six months after the Effective Date and the remaining 25% of such
securities will be "locked-up" until nine months after the Effective Date. 25%
of such securities will not be subject to any contractual "lock-up."
The Company has agreed to pay for certain costs and expenses incurred by it
in connection with the issuance, offer, sale and delivery of the Registered
Shares, including, but not limited to, all registration and filing fees, any
blue sky fees and expenses, all necessary printing and duplicating expenses and
all fees and disbursements of counsel and accountants for the Company (including
the expenses of any audit of financial statements). The Company has agreed,
subject to certain limitations, to bear the expenses of counsel to the Selling
Stockholders if separate counsel is retained. The Company also has agreed to
indemnify the Selling Stockholders against certain civil liabilities, including
liabilities under the Securities Act. The Company will not pay brokerage
commissions or taxes associated with sales by the Selling Stockholders or any
accounting and other non-legal expenses incurred by Selling Stockholders.
The Company will inform the Selling Stockholders that the antimanipulation
provision of Regulation M promulgated under the Exchange Act may apply to the
sales of their Registered Shares offered hereby. The
18
<PAGE>
Company will advise the Selling Stockholders of the requirement for delivery of
this Prospectus in connection with any sale of the Registered Shares offered
hereby.
Certain Selling Stockholders may from time to time purchase shares of
Procept Common Stock in the open market. These Selling Stockholders will be
notified that they should not commence any distribution of the Registered Shares
offered hereby unless they have terminated their purchasing and bidding for
Procept Common Stock in the open market as provided in applicable securities
regulations, including, with limitation, Regulation M.
LEGAL MATTERS
The validity of the shares of Procept Common Stock offered hereby have been
passed upon for the Company by Palmer & Dodge LLP, Boston, Massachusetts.
EXPERTS
The balance sheets as of December 31, 1997 and 1996 and statements of
operations, shareholders' equity and cash flows for each of the three years in
the period ended December 31, 1997 included in Procept's Annual Report on Form
10-K/A for the year ended December 31, 1997 and incorporated by reference in
this Prospectus, have been incorporated herein in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
that firm as experts in accounting and auditing.
19
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The expenses to be borne by the registrant in connection with the offering
of the Registered Shares are estimated as follows:
SEC Registration Fee.................................$ 31,619
Nasdaq listing fee...................................$ 17,500
NASD fees and expenses...............................$ 6,000
Blue Sky fees and expenses...........................$ 12,000
Printing expenses....................................$ 1,500
Accounting fees and expenses.........................$ 5,000
Legal fees and expenses..............................$ 15,000
Transfer Agent and Registrar fees....................$ 3,000
Miscellaneous expenses...............................$ 2,881
--------
Total...........................................$ 95,000
========
Item 15. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law grants the Company the
power to indemnify each person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative by reason of the fact
that he is or was a director, officer, employee or agent of the Company, or is
or was serving at the request of the Company as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgements, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Company, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful, provided, however, no
indemnification shall be made in connection with any proceeding brought by or in
the right of the Company where the person involved is adjudged to be liable to
the Company except to the extent approved by a court. ARTICLE EIGHTH of the
Company's Restated Certificate of Incorporation as currently in effect provides
that the Company shall, to the fullest extent permitted by the Delaware General
Corporation Law, as amended from time to time, indemnify each person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding by reason of the fact that he is or was, or
has agreed to become, a director or officer of the Company, or is or was
serving, or has agreed to serve, at the request of the Company, as a director,
officer or trustee of, or in a similar capacity with, another corporation,
partnership, joint venture, trust or other enterprise. The indemnification
provided for in ARTICLE EIGHTH is expressly not exclusive of any other rights to
which those seeking indemnification may be entitled under any law, agreement or
vote of stockholders or disinterested directors or otherwise, and shall inure to
the benefit of the heirs, executors and administrators of such persons. ARTICLE
EIGHTH permits the Board of Directors to authorize the grant of indemnification
rights to other employees and agents of the Company and such rights may be
equivalent to, or greater or less than, those set forth in ARTICLE EIGHTH.
Article V, Section 1 of the Company's By-Laws provides that the Company
shall have the power to purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the Company, or is or
was serving at the request of the Company, as a director, officer or trustee of,
or in a similar capacity with, another corporation, partnership, joint venture,
trust or other enterprise, against any liability asserted against and incurred
by such person in any such capacity.
II-1
<PAGE>
Pursuant to Section 102(b)(7) of the Delaware General Corporation Law,
ARTICLE NINTH of the Company's Restated Certificate of Incorporation eliminates
a director's personal liability for monetary damages to the Company and its
stockholders for breaches of fiduciary duty as a director, except in
circumstances involving a breach of a director's duty of loyalty to the Company
or its stockholders, acts or omissions not in good faith, intentional
misconduct, knowing violations of the law, self-dealing or the unlawful payment
of dividends or repurchase of stock.
Item 16. Exhibits
See Exhibit Index immediately following signature page.
Item 17. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high and of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
registrant pursuant to Section 13 of 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) If the registrant is a foreign private issuer, to file a post-effective
amendment to the registration statement to include any financial statements
required by Rule 3-19 of this chapter at the start of any delayed offering or
throughout a continuous offering. Financial statements and information otherwise
required by Section 10(a)(3) of the Act need not be furnished, provided, that
the registrant includes in the prospectus, by means of a post-effective
amendment, financial statements required pursuant to this paragraph (a)(4) and
other information necessary to ensure that all other information in the
prospectus is at least as current as the date of those financial statements.
Notwithstanding the foregoing, with respect to registration statements on Form
F-3, a post-effective
II-2
<PAGE>
amendment need not be filed to include financial statements and information
required by Section 10(a)(3) of the Act or Rule 3-19 of this chapter if such
financial statements and information are contained in periodic reports filed
with or furnished to the Commission by the registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the Form F-3.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of any
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Act of 1934) that is incorporated by reference in this Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions referred to in Item 15 hereof, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Amendment No. 2 to its Registration Statement (File No. 333-51245) to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Cambridge, the Commonwealth of Massachusetts, on July 10, 1998.
PROCEPT, INC.
By: * Michael S. Weiss
-----------------------------
Michael S. Weiss
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on July 10, 1998.
Signature Title
- --------- ------
* Michael S. Weiss Chairman of the Board and a Director
- ----------------------------
Michael S. Weiss
/s/ John F. Dee President and Chief Executive Officer
- ---------------------------- (Principal Executive Officer and
John F. Dee Principal Financial and Accounting Officer)
* Zola P. Horovitz Director
- ----------------------------
Zola P. Horovitz
* Max Link Director
- ----------------------------
Max Link
* Mark C. Rogers Director
- ----------------------------
Mark C. Rogers
* Elliott H. Vernon Director
- ----------------------------
Elliott H. Vernon
*By: /s/ John F. Dee
----------------------
John F. Dee
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
4.1 Restated Certificate of Incorporation of Procept. Filed as Exhibit 3.1
to Procept's Form 10-Q for the quarter ended June 30, 1997, Commission
File No. 0-21134, and incorporated herein by reference.
4.2 Certificate of Designation of Series A Convertible Preferred Stock.
Filed as Exhibit 3.2 to Procept's Form 10-Q for the quarter ended June
30, 1997, Commission File No. 0-21134, and incorporated herein by
reference.
4.3 Certificate of Amendment of the Restated Certificate of Incorporation
of Procept, filed with the Secretary of State of Delaware on October 7,
1997, to be effective as of October 14, 1997. Filed as Exhibit 3.1 to
Procept's Form 10-Q for the quarter ended September 31, 1997,
Commission File No. 0-21134, and incorporated herein by reference.
4.4 Bylaws of Procept. Filed as Exhibit 3.2 to Procept's Registration
Statement on Form S-1, Commission File No. 33-57188, and incorporated
by reference.
4.5 Specimen Stock Certificate for Common Stock, $.01 par value. Filed as
Exhibit 4.1 to Procept's Registration Statement on Form S-1, Commission
File No. 33-57188, and incorporated herein by reference.
4.6 Warrant Agreement to Purchase Class D Convertible Preferred Stock dated
August 1, 1991, issued to Comdisco, Inc. Filed as Exhibit 4.2 to
Procept's Registration Statement on Form S-1, Commission File No.
33-57188, and incorporated herein by reference.
4.7 Warrant Agreement to Purchase Class D Convertible Preferred Stock dated
September 11, 1992, issued to Comdisco, Inc. Filed as Exhibit 4.3 to
Procept's Registration Statement on Form S-1, Commission File No.
33-57188, and incorporated herein by reference.
4.8 Warrant to Purchase Common Stock dated January 5, 1993, issued to
Tucker Anthony Incorporated. Filed as Exhibit 4.6 to Procept's
Registration Statement on Form S-1, Commission File No. 33-57188, and
incorporated herein by reference.
4.9 Warrant to Purchase Common Stock dated as of February 17, 1994, issued
to D. Blech & Company, Incorporated. Filed as Exhibit 4.6 to Procept's
Form 10-K for the year ended December 31, 1994, Commission File No.
0-21134, and incorporated herein by reference.
4.10 Warrant Agreement dated February 17, 1994 between the Company and D.
Blech & Company, Incorporated. Filed as Exhibit 4.7 to Procept's Form
10-K for the year ended December 31, 1994, Commission File No. 0-21134,
and incorporated herein by reference.
4.11 Warrant to Purchase Common Stock dated as of April 1, 1994, issued to
Hambrecht & Quist Guaranty Finance, L.P. Filed as Exhibit 4 to
Procept's Form 10-Q for the quarter ended March 31, 1994, Commission
File No. 0-21134, and incorporated herein by reference.
4.12 Warrant to Purchase Common stock dated as of September 11, 1995, issued
to Oppenheimer & Co., Inc. Filed as Exhibit 4.10 to Procept's
Registration Statement on Form S-1, Commission File No. 33-96798, and
incorporated herein by reference.
<PAGE>
4.13 Form of Warrant Agreement between the Company and Commonwealth
Associates. Filed as Exhibit 4.11 to Procept's Registration Statement
on Form S-1, Commission File No. 33-96798, and incorporated herein
by reference.
4.14 Form of Warrant to Purchase Common Stock dated as of May 17, 1996, and
Schedule of Holders. Filed as Exhibit 4.11 to Procept's Form 10-K for
the year ended December 31, 1996, Commission File No. 0- 21134, and
incorporated herein by reference.
4.15 Warrant to Purchase Common Stock dated as of January 6, 1997, issued to
Furman Selz LLC. Filed as Exhibit 4.13 to Procept's Form 10-K for the
year ended December 31, 1996, Commission File No. 0- 21134, and
incorporated herein by reference.
4.16 Unit Purchase Warrant Agreement dated May 17, 1996, issued to David
Blech. Filed as Exhibit 4.1 to Procept's Form 10-Q for the quarter
ended June 30, 1997, Commission File No. 0-21134, and incorporated
herein by reference.
4.17* Form of Subscription Agreement between Procept and Subscribers of
Procept Common Stock listed on Schedule of Subscribers. Filed herewith.
4.18* Form of Warrant to Purchase Common Stock dated April 9, 1998, including
Schedule of Holders. Filed herewith.
4.19* Form of Unit Purchase Option, including Schedule of Holders.
Filed herewith.
5.1 Opinion of Palmer & Dodge LLP. Filed herewith.
23.1 Consent of Coopers & Lybrand L.L.P., independent accountants to
Procept. Filed herewith.
23.2 Consent of Palmer & Dodge LLP (contained in Exhibit 5.1).
24.1* Power of Attorney (included on the signature page of this Registration
Statement).
99.1 Placement Agency Agreement between the Company and Paramount Capital,
Inc. dated as of October 26, 1997. Filed as Exhibit 10.40 to Procept's
Form 10-K for the year ended December 31, 1997, Commission File No.
0-21134, and incorporated herein by reference.
99.2* Side Letter No. 1 to the Placement Agency Agreement between the
Company and Paramount Capital, Inc. dated as of January 13, 1998.
Filed herewith.
* Previously filed.
PALMER & DODGE LLP
ONE BEACON STREET, BOSTON, MA 02108-3190
TELEPHONE: (617) 573-0100 FACSIMILE: (617) 227-4420
July 10, 1998
Procept, Inc.
840 Memorial Drive
Cambridge, Massachusetts 02139
Ladies & Gentlemen:
We are rendering this opinion in connection with the Registration Statement
on Form S-3 (the "Registration Statement") filed by Procept, Inc. (the
"Company") with the Securities and Exchange Commission under the Securities Act
of 1933, as amended, on or about the date hereof. This opinion replaces our
opinion dated June 22, 1998. The Registration Statement relates to up to
17,316,544 shares (the "Registered Shares") of the Company's Common Stock, $0.01
par value, (the "Common Stock"), comprising (i) 2,802,180 shares of Common Stock
(the "Shares") currently outstanding, (ii) 2,802,180 shares of Common Stock (the
"Warrant Shares") issuable upon exercise of warrants (the "Class C Warrants") to
purchase Common Stock currently outstanding, (iii) 398,661 shares of Common
Stock (the "Option Shares") issuable upon exercise of options (the "Unit
Purchase Options") to purchase units made up of shares of Common Stock and Class
C Warrants, (iv) 398,661 shares of Common Stock (the "Option Warrant Shares")
issuable upon exercise of Class C Warrants issuable upon exercise of the Unit
Purchase Options and (v) 10,914,862 shares of Common Stock (the "Contingent
Shares") issuable on or after April 9, 1999, October 9, 1999 and April 9, 2000
pursuant to the Subscription Agreements with the holders of the Registered
Shares (the "Subscription Agreements"), which issuances are contingent on the
performance of the market price of the Company's Common Stock. We understand
that the Registered Shares are to be offered and sold in the manner described in
the Registration Statement.
We have acted as your counsel in connection with the preparation of the
Registration Statement. We are familiar with the proceedings of the Board of
Directors on January 13, 1998 in connection with the authorization, issuance and
sale of the Shares, the Contingent Shares, the Class C Warrants and the Unit
Purchase Options. We have examined such other documents as we consider necessary
to render this opinion, including without limitation the Subscription Agreements
between the Company and the stockholders on whose behalf the Company is filing
the Registration Statement.
<PAGE>
Procept, Inc.
July 10, 1998
Page 2
Based upon the foregoing, we are of the opinion (i) that the Shares have
been duly authorized and are validly issued, fully paid and non-assessable, (ii)
that upon exercise of the Class C Warrants and the Unit Purchase Options in
accordance with the terms thereof, the Warrant Shares, the Options Shares, and
the Option Warrant Shares will be validly issued, fully paid and non-assessable
and (iii) that when issued in accordance with the terms of Article VI of the
Subscription Agreements, the Contingent Shares will be validly issued, fully
paid and non-assessable.
We hereby consent to the filing of this opinion as a part of the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Prospectus filed as part thereof.
Very truly yours,
/s/ Palmer & Dodge LLP
PALMER & DODGE LLP
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Amendment No. 2 to the
registration statement of Procept, Inc. (the "Company") on Form S-3 (File No.
333-51245) of our report, which includes an explanatory paragraph related to the
restatement of the financial statements for the year ended December 31, 1997,
dated June 15, 1998, on our audits of the financial statements of the Company as
of December 31, 1997 and 1996, and for each of the three years in the period
ended December 31, 1997, which report is included in the Company's 1997 Annual
Report on Form 10-K/A filed on June 23, 1998. We also consent to the reference
to our firm under the caption "Experts."
/s/ PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
July 10, 1998
