<PAGE> 1
Registrant requests automatic effectiveness upon filing as per Rule 462 of the
Securities Act of 1933
As filed with the Securities and Exchange Commission on November 18, 1998
Registration No. 333-_______
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
Registration Statement
Under
The Securities Act of 1933
XECHEM INTERNATIONAL, INC.
(Exact name of issuer as specified in its charter)
<TABLE>
<S> <C>
Delaware 22-3284803
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Jersey Avenue Building B, Suite 310 New Brunswick, New Jersey 08901-3279
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
Xechem International, Inc. Amended and Restated Stock Plan
(Full title of the plan)
Dr. Ramesh C. Pandey
President and Chief Executive Officer
100 Jersey Avenue, Building B
Suite 310
New Brunswick, New Jersey 08901-3279
With a copy to:
Mitchell D. Goldsmith, Esq.
Dennis B. O'Boyle, Esq.
Shefsky & Froelich Ltd.
444 N. Michigan Avenue
Chicago, IL 60611
(Name and address of agent for service)
(732) 247-3300
(Telephone number, including area code, of agent for service)
<PAGE> 2
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
====================================================================================================================================
Proposed
Proposed Maximum
Maximum Offering Aggregate
Title of Securities Amount to Price Offering Amount of
to be Registered be Registered Per Share Price Registration Fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value 12,600,000 shares (1) $.05(2) $630,000(2) $175.14
$.00001
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value 1,390,000 shares $.05(2) $ 69,500(2) $19.32
$.0001(3)
- ------------------------------------------------------------------------------------------------------------------------------------
Total 13,990,000 shares $699,500(2) $194.46(4)
====================================================================================================================================
</TABLE>
(1) Subject to increase (or decrease) in accordance with Rule 416 of
Regulation C to reflect a merger, consolidation, reorganization,
recapitalization, stock dividend, stock split or other change in the
corporate structure of the Registrant which results in a change in the
number of shares issuable pursuant to outstanding awards under the Xechem
International, Inc. Amended and Restated Stock Option Plan (the "Plan").
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rules 457(c) and 457(h) of Regulation C, on the basis of the
average of the high and low prices of the shares of common stock of the
Registrant on the OTC Bulletin Board on November 13, 1998.
(3) Represents shares of Common Stock issued under the upon exercise of options
and which are being registered for resale by the holders thereof.
(4) Pursuant to Rule 429, under the Securities Act of 1933, as amended, the
Registration Statement also relates to 2,600,000 shares of Common Stock
registered on Registration Statement No. 333-30539, previously filed
with the Commission on July 1, 1997 (2,000,000 shares), Registration
Statement No. 333-08221 filed with the Commission on July 16, 1996
(200,000 shares), Registration Statement No. 33-93300 filed with the
Commission on June 9, 1995 (200,000 shares), and Registration
Statement No. 33-87034 filed with the Commission on December 6, 1994
(200,000 shares). The Company previously paid registration fees of
$539.76 in connection with the filing of its previous Registration
Statement on Form S-8 (File No. 333-08221) 1996, and $68.97, $767.24
and $867.00 for each of its previous Registration Statements on Forms
S-8 (File Nos. 333-0822, 33-9330 and 33-87034, respectively), for a
total of $2,242.97. Since the amount of such previously paid
registration fee is greater than $194.46, the Company is not required
to pay any additional registration fee in connection with the filing
of this registration statement.
<PAGE> 3
PROSPECTUS
1,390,000 Shares
XECHEM INTERNATIONAL, INC.
COMMON STOCK
($0.00001 PAR VALUE)
This Prospectus relates to shares of Common Stock, $.00001 par value
(the "Shares" or the "Common Stock"), of Xechem International, Inc. (the
"Company").
THE SECURITIES OFFERED HEREBY ARE HIGHLY SPECULATIVE AND INVOLVE A HIGH
DEGREE OF RISK. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE
INFORMATION SET FORTH HEREIN UNDER "RISK FACTORS."
All of the shares of Common Stock offered hereby are being sold by the
selling shareholder named herein (the "Selling Shareholder"). See "Selling
Shareholder" and "Plan of Distribution." The Company will not receive any
proceeds from the sale of the shares of Common Stock by the Selling Shareholder.
The Company's Common Stock is quoted on the OTC Bulletin Board under the symbol
"ZKEM." On November 13, 1998 the last reported bid price for the Company's
Common Stock was $.05.
---------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THE PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The Selling Shareholder and any broker-dealers through whom such Shares are
sold may be deemed "underwriters," as that term is defined in the Securities Act
of 1933, as amended (the "Securities Act"). The Shares to be offered by the
Selling Shareholder may be offered in one or more transactions on the OTC
Bulletin Board or in negotiated transactions or a combination of such methods of
sale, at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
Brokers or dealers may receive commissions or discounts from the Selling
Shareholder in amounts to be negotiated immediately prior to the sale. The
Company will pay substantially all other expenses of this offering (including
the expense of preparing and duplicating this Prospectus and the Registration
Statement of which it is a part). The Company will not receive any proceeds from
the sale of any of the Shares by the Selling Shareholder.
SEE "RISK FACTORS" ON PAGE 7 FOR INFORMATION THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is November 18, 1998
<PAGE> 4
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated in this Prospectus by reference:
1. The Company's Annual Report on Form 10-KSB, for fiscal year ended December
31, 1997.
2. The Company's Registration Statement on Form 8-A, dated April 1, 1994.
3. The Company's Quarterly Reports on Form 10-QSB, for the quarters ended
March 31 and June 30, 1998.
4. All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), prior to the termination of the offering made hereby,
shall be deemed to be incorporated by reference in this Prospectus.
Any statements contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document which is also deemed to be incorporated by
reference herein modifies or supersedes such statements. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute part of this Prospectus.
2
<PAGE> 5
THE COMPANY
General
Xechem International, Inc. (together with its subsidiaries, except as the
context otherwise requires, the "Company") owns all the capital stock of Xechem,
Inc., a development stage pharmaceutical company currently engaged in research,
development and the limited production of generic and proprietary drugs from
natural sources. The Company has also established a subsidiary, XetaPharm, Inc.
("XetaPharm"), to develop and market over-the-counter natural products such as
GinkgoOnce(TM), GarlicOnce(TM), GinsengOnce(TM), Gugulon(TM), Melatonin and
DHEA. To date, XetaPharm has commenced only limited operations.
The Company is engaged primarily in applying its proprietary extraction,
isolation and purification technology to the production and manufacture of
paclitaxel (commonly referred to in scientific literature as "Taxol," a
registered trademark of Bristol-Myers Squibb Company), an anti-cancer compound.
Paclitaxel is an anti-cancer compound used for the treatment of refractory
(treatment resistant) ovarian and breast cancers. The Company has successfully
isolated greater than 97% pure paclitaxel and has obtained U.S. and
international patents on its technology.
Consistent with the Company's focus on the development and production of
paclitaxel, the Company will continue to apply its expertise to research and
develop other compounds, such as bleomycin and mitomycin, which no longer enjoy
patent protection, but experience limited competition due to their difficulty to
replicate. In addition, the Company has focused certain of its research and
development efforts on the development of drugs from sources derived from
Chinese and Indian folklore in the anti-cancer, anti-fungal, anti-viral
(including anti-AIDS), anti-inflammatory, anti-aging and memory enhancing areas.
Although paclitaxel is not, and is not intended to be, a cure for cancer,
it was recognized in June 1991 by the National Cancer Institute as "one of the
most important cancer drugs discovered in the past decade." To date, paclitaxel
has proven to be effective in treating refractory ovarian and breast cancers,
kaposi sarcoma, and, in preliminary clinical trials, has shown potential for
efficacy in treating refractory non-small cell lung cancer ("NSCLC") and certain
other cancer indications. The Company's objective for capitalizing on what it
perceives to be significant opportunities worldwide in the oncology market, in
general, and the paclitaxel and bleomycin markets, in particular, is to become a
low-cost producer of high-quality paclitaxel and bleomycin.
The Company's drug development process involves a multidisciplinary
exchange among folklore healers, ethnobotanists, natural product scientists,
pharmacologists, physicians and research pharmacists.
- --------
Some of the statements included in this Prospectus may be considered to be
"forward looking statements" since such statements relate to matters which have
not yet occurred. For example, phrases such as "the Company anticipates,"
"believes" or "expects" indicate that it is possible that the event anticipated,
believed or expected may not occur. Should such event not occur, then the result
which the Company expected also may not occur or occur in a different manner,
which may be more or less favorable to the Company. The Company does not
undertake any obligations to publicly release the result of any revisions to
these forward looking statements that may be made to reflect any future events
or circumstances.
Readers should carefully review the items included under the subsection
"Risk Factors" as they relate to forward looking statements as actual results
could differ materially from those projected in the forward looking statement.
3
<PAGE> 6
Since the Company's targeted plant material has, in certain instances, already
been used for many years in humans, the Company believes that there is greater
likelihood that a compound isolated from such material will work on humans and,
correspondingly, that there is a decreased likelihood of toxicity. In addition,
because traditional medicinal preparations are typically administered either
orally or topically, they are more likely to yield pharmaceuticals that are also
active orally or topically. These methods of administering a drug are product
attributes viewed by the medical community as convenient and desirable.
XetaPharm is developing a limited line of over-the-counter natural products
(not requiring FDA approval) for sale through health food outlets and physicians
specializing in natural medicines. The Company has selected several products to
be manufactured by contract manufacturers under XetaPharm trademarks. The
emphasis of the products will be the natural health benefits. Initial marketing
efforts commenced in the second quarter of 1996. XetaPharm has introduced six
products, to date. There can be no assurances as to the level of success for
this program. XetaPharm's marketing efforts and sales have been limited, due to
the financial constraints of the Company. The Company is evaluating its long
term commitment which includes continued investment in sales and marketing,
limited investment to product development for other companies or divestiture of
XetaPharm.
The Company has acquired the rights to a number of pure compounds isolated
by Chinese or Indian sources and is presently engaged in the preclinical testing
of certain of these compounds in its laboratory. Based on the folklore of those
countries, the Company believes that certain of these compounds may have
anti-cancer, anti-viral or other healing properties. The Company also has
collaborative relationships with researchers in India to develop pharmaceuticals
from the traditional medicinal plants of that country.
To date, the Company has not received any revenues from sales of paclitaxel
or bleomycin, and has received minimal revenues from sales of only one other
product, a compound used as a reference standard in testing an antifungal
compound. The Company's only other source of revenues, to date, has been
contract research and testing and consulting services for other companies;
however, the Company does not anticipate that such services will continue to be
a source of revenues to the Company.
The Company conducts its pilot-scale manufacturing of its potential
products (other than nutraceuticals) under current Good Manufacturing Practices
("cGMP"). Management believes that its in-house pilot plant facility has
adequate capacity to manufacture a limited quantity of bulk drugs for sale. The
Company also plans to continue its in-house manufacturing of bulk paclitaxel for
sale abroad, once necessary stability testing is completed, subject to
compliance with applicable regulatory requirements. It is anticipated that no
such sales will be made prior to the fourth quarter of 1998, although there can
be no assurance that any such sales will occur.
The Company's initial potential products are targeted at the anti-cancer,
anti-viral, and anti-fungal markets. The Company is seeking corporate alliances
with large pharmaceutical companies for some of its programs in order to take
advantage of such companies' abilities to reach broad-based markets. There can
be no assurance that the Company will be able to enter into such collaborative
agreements. If the Company decides to conduct any direct marketing of its
potential products, there can be no assurance that the Company will be
successful in establishing a successful in-house marketing and sales force or
that sufficient financing will be available to develop its marketing and sales
capabilities.
XetaPharm sells its nutraceutical product line through health food stores
and pharmacies. The marketing of these products is through print, radio and
television advertising and trade publications. XetaPharm has no in-house
marketing and sales force at this time and is seeking to establish alliances
with distributors, as well as marketing firms, to promote its product line.
4
<PAGE> 7
FOUNDER AND CHIEF EXECUTIVE OFFICER
Dr. Ramesh C. Pandey, the founder, Chairman of the Board, President, and
Chief Executive Officer of the Company, has over 30 years of experience in the
field of natural products with leading universities, private companies and the
federal government. While with the predecessor to the Company, Dr. Pandey was
instrumental in the successful research, development, and production of a
generic version of Vancomycin, an anti-bacterial drug, which experienced
significant sales and profitability.
PROPERTY
The Company conducts its operations in a state-of-the-art laboratory
facility in New Brunswick, New Jersey which presently operates in accordance
with Federal and state standards for current Good Laboratory Practices ("cGLP")
and current Good Manufacturing Practices ("cGMP").
RECENT DEVELOPMENTS
Blech Stock Purchase Agreement
On November 18, 1996, the Company entered into and closed the initial stage
of a Stock Purchase Agreement (the "Blech Purchase Agreement") with David Blech
or his designees ("Blech") providing for the sale of up to 55,000 shares of
Class C Series 2 Voting Cumulative Preferred Stock (the "Series 2 Preferred
Shares") for a purchase price of $100 per share ($5,500,000 in the aggregate),
or the underlying shares of Common Stock, over approximately nine months. At the
initial closing, The Edward A. Blech Trust (the "Trust") purchased 5,000 Series
2 Preferred Shares for $500,000. The Trust purchased an additional 5,000 Series
2 Preferred Shares on December 30, 1996; 5,000 Series 2 Preferred Shares on
January 8, 1997; and 7,500 Series 2 Preferred Shares on February 7, 1997. The
Blech Purchase Agreement was amended, effective March 27, 1997, to modify the
dates for closing of other purchases of portions of the shares issuable
thereunder. Pursuant to the Blech Purchase Agreement, on February 7, 1997, Dr.
Ramesh Pandey, the Company's Chairman and Chief Executive Officer, exchanged
certain indebtedness owed by the Company to him and the 1,070 shares of Class B
Preferred Stock of the Company held by him for 13,180 shares of Series 3
Preferred Shares. Pursuant to their terms, effective February 8, 1997, the then
outstanding 22,500 Series 2 Preferred Shares and 13,180 Series 3 Preferred
Shares were converted into 45,000,000 and 21,088,000 shares of Common Stock,
respectively. For the period May 2, 1997 through December 31, 1997, the Edward
A. Blech Trust purchased 2,300,000 shares of Common Stock and twelve (12) other
assignees purchased 33,320,000 shares of Common Stock, which included two
affiliated individuals who purchased 1,960,000 shares of Common Stock.
Two other trusts, not otherwise affiliated with Blech, each purchased
5,000,000 shares of Common Stock on March 27, 1997 and Blech purchased a further
5,000,000 shares of Common Stock on April 14, 1997. On May 1, 1997, Blech sold
(at his cost) his 5,000,000 shares to the two referenced unaffiliated trusts and
a third unaffiliated trust.
Pursuant to the Blech Purchase Agreement, the Company, Dr. Pandey and Blech
have also entered into a stockholders' agreement, which, among other things: (i)
generally prohibits the sale of any of Dr. Pandey's shares of capital stock of
the Company for a period of five years, except with the consent of Blech; (ii)
provides Blech with the right to sell his pro rata portion (relative to the
holdings of Dr. Pandey) of any proposed sale of shares by Dr. Pandey, and a
reciprocal right in favor of Dr. Pandey to sell his pro rata portion of any
shares sold by Blech; (iii) requires Blech to vote for Dr. Pandey as a director
of the Company, and to use his efforts to cause Dr. Pandey to remain Chairman,
President and chief executive officer of the
5
<PAGE> 8
Company; (iv) requires the Company and its directors (subject to their fiduciary
duties to the Company and the shareholders of the Company) to take such actions
as Blech may request to elect his nominees to constitute a majority of the
directors of the Company (to date, Blech has not exercised such right); and (v)
provides for certain demand and piggyback registration rights in favor of Blech.
Nasdaq Delisting
Effective following the close of business on February 4, 1997, the
Company's Common Stock and Common Stock Purchase Warrants (the "Warrants") were
delisted from trading on the Nasdaq SmallCap Market. In its determination to
delist the Company's securities, Nasdaq noted that the bid price for the Common
Stock had fallen below the $1.00 per share level required for continued listing.
Although the Company believed that, with the capital provided under the Blech
Purchase Agreement, it had satisfied the criteria for alternative listing,
namely having capital and surplus of $2,000,000 and market value of the
publicly-traded shares of at least $1,000,000, Nasdaq stated that the Company's
evidence of such compliance was inadequate, and that, in light of certain delays
in the funding by Blech under the Blech Purchase Agreement, Nasdaq "lacked
confidence" in the Company's ability to maintain compliance. In addition, Nasdaq
raised concerns regarding Mr. Blech's involvement with the Company in light of
then pending Securities and Exchange Commission ("SEC") investigation regarding
the operations of D. Blech & Co., a broker-dealer controlled by Mr. Blech which
terminated operations in 1994.
The Company has announced its intention to cause a reverse split (the
"Reverse Split") of all outstanding shares of Common Stock (but not any
outstanding shares of Preferred Stock) on a one share for 75 shares basis. The
Company's Board of Directors intends to adopt a resolution in favor of this
Reverse Split and the Company intends to put the matter up for vote by the
Company's stockholders at its upcoming Annual Meeting of Stockholders (the
"Annual Meeting") which is set for December 11, 1998. An investor purchasing
Shares in this Offering prior to December 11, 1998 will receive pre-split Shares
which will be subsequently subject to the Reverse Split, upon Stockholders'
approval, and investors purchasing Shares after December 11, 1998 will receive
post-split Shares which reflect the Reverse Split.
6
<PAGE> 9
RISK FACTORS
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK AND SHOULD
BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD TO SUSTAIN A TOTAL LOSS OF THEIR
INVESTMENT. Prospective purchasers should consider carefully, in addition to the
other information contained in this Prospectus or incorporated by reference
herein, the following risk factors:
Nasdaq Delisting
Effective following the close of business on February 4, 1997, the
Company's Common Stock and Warrants were delisted from trading on the Nasdaq
SmallCap Market. The trading market for the Company's securities is now limited
to the "pink sheets" and the OTC Bulletin Board. So long as the Company's Common
Stock is not listed on Nasdaq or any exchange and the bid price for the Common
Stock remains below $5.00 per share, the Common Stock is subject to additional
federal and state regulatory requirements. Among other things, broker-dealers
are required to satisfy special sales practice requirements, including making
individualized written suitability determinations and receiving any purchaser's
consent prior to any transaction in the Common Stock. Also, the Company's
securities would be considered "penny stocks," which requires additional
disclosures in connection with trades in the Company's securities, including the
delivery of a disclosure schedule explaining the nature and risks of the penny
stock market. Such restricted market and additional regulatory requirements may
limit the liquidity of the Company's securities, as well as adversely affect the
ability of the Company to raise additional financing through issuances of its
securities.
Proposed Reverse Stock Split
The Company has announced its intention to cause a Reverse Split of all
outstanding shares of Common Stock on a one share for 75 shares basis. The
Company's Board of Directors intends to adopt a resolution in favor of the
Reverse Split and the Company intends to put the matter up for vote by the
Company's stockholders at its upcoming Annual Meeting. As a result of the
Reverse Split, the number of outstanding shares of Common Stock will be reduced.
The Company cannot guarantee that the per share trading price of the Common
Stock on the OTC Bulletin Board, where the Company's Common Stock is traded,
will increase 75 times. The fact that the number of outstanding shares of Common
Stock will be reduced by a factor of 75, as a result of the Reverse Split, may
cause a less active trading market in which a small number of shares traded can
materially effect the price per share.
Volatility of Stock Price
The securities of bio-technology companies have experienced extreme price
and volume fluctuations, which have often been unrelated to the companies'
operating performance. Announcements of technological innovations for new
commercial products by the Company or its competitors, developments concerning
proprietary rights or general conditions in the bio-technology and health
industries may have a significant effect on the Company's business and on the
market price of its securities. Sales of a substantial number of shares of
Common Stock by existing security holders could also have an adverse effect on
the market price of the Company's securities. In the past twelve months, the
Company's Common Stock has declined from approximately $.69 per share to present
values ($.05 per share).
7
<PAGE> 10
Control by Blech
As of December 31, 1997, Blech or persons who may be deemed to be
influenced by him beneficially owns 46,500,000 shares of Common Stock, or
approximately 38% of the 121,528,439 shares of issued and outstanding Common
Stock (entitling Blech to cast 37.5% of the aggregate votes entitled to be cast
by all stockholders in election of directors). As a result, Blech owns or
controls a sufficient number of shares of Common Stock to control the business
and affairs of the Company, including, but not limited to having sufficient
voting power to control the election of the Board of Directors of the Company
and, in general, to substantially determine the outcome of any corporate
transaction or other matters submitted to the stockholders of the Company for
approval, including mergers, consolidations or the sale of substantially all of
the Company's assets or preventing or causing a change in the control of the
Company. In addition, under the Blech Purchase Agreement, the Company and its
current directors have agreed, subject to their fiduciary duties, to take such
actions as Blech may request to cause his nominees to be elected to the Board of
Directors, which may enable Blech to exercise control over the Board more
quickly than he otherwise could. In addition to Blech's ability to control the
affairs of the Company, Blech's potential control of the Company may deter other
potential financing sources from making an investment in the Company.
No Developed or Approved Products; Early Stage of Development
The Company is a development stage company. The Company's primary potential
products, paclitaxel and its analogs and bleomycin, are in the early development
stage. Although the Company has isolated paclitaxel in a substantially pure
state, there can be no assurance that such compound will pass the necessary
stability testing or other regulatory requirements for approval for sale in the
United States or abroad. In addition, Bristol-Myers maintains a dominant market
share in the paclitaxel business and may choose to take legal action to impair
the entry of additional competitors in the market, such as by alleging
infringement on certain patents. To date, the Company has not received any such
infringement claims. Also, although the Company anticipates that it will be able
to submit an ANDA for paclitaxel immediately upon the expiration of Bristol
Myers' exclusive period (December 29, 2001), the Company does not yet have all
of the data for such ANDA and there can be no assurance that the Company will be
able to file the ANDA at that time. Although the Company has the capability to,
and may, sell paclitaxel for research purposes, to date, the Company has not
received any revenues from sales of paclitaxel for human consumption and has
received only minimal revenues from other product sales or sales of paclitaxel
for research and development. The Company's principal revenues have been
contract research and testing and consulting services for other companies, which
are not expected to continue and which have historically been minimal. To
achieve profitable operations, the Company, alone or with others, must
successfully develop, obtain regulatory approval for, introduce, and market its
potential products. No assurance can be given that the Company's product
research and development efforts will be successfully completed, that required
regulatory approvals will be obtained, or that any products, if developed and
introduced, will be successfully marketed or achieve market acceptance.
History of Operating Losses; Future Profitability Uncertain
The Company has experienced significant operating losses since its
inception and has generated minimal revenues from its operations. As of December
31, 1997, the Company's accumulated deficit was approximately $27,729,000, which
included losses from operations of $3,246,700, $3,032,500 and $5,386,300 for the
years ended December 31, 1995, 1996 and 1997, respectively and an additional
loss from operations of $1,180,261 for the six months ended June 30, 1998.
Approximately $12,963,000 of the Company's $27,729,000 accumulated deficit
resulted from a non-cash accounting adjustment based upon the difference between
the approximate market value of certain debt and equity which was exchanged for
8
<PAGE> 11
Common Stock of the Company simultaneously with the Company's initial public
offering (the "IPO"), and the initial public offering price of the Common Stock
in the Company's IPO. To date, the Company has been dependent on capital
infusions for financing. The Company's ability to achieve a profitable level of
operations is dependent in large part on its completing product development,
obtaining regulatory approvals for its potential products and making the
transition to commercializing such products. No assurance can be given that the
Company's product research and development efforts will be completed, that
required regulatory approvals will be obtained, that any products will be
manufactured or marketed or that profitability will be achieved. The Company may
require additional funds to achieve profitable operations.
Explanatory Going Concern Disclosure
As a result of its losses to date, negative working capital, and
accumulated deficit, the independent accountants' report on the Company's
financial statements for the years ended December 31, 1993, 1994, 1995, 1996 and
1997 contain an explanatory paragraph indicating that there is substantial doubt
about the Company's ability to continue as a going concern. The Company's
continuation as a going concern is dependent upon its ability to generate
sufficient cash flow to meet its obligations on a timely basis and ultimately to
attain profitable operations. The Company anticipates that it will continue to
incur significant losses until successful commercialization of one or more
products generates sufficient net revenues to cover all costs of operation. As a
development stage company, the Company has a limited relevant operating history
upon which an evaluation of the Company's prospects can be made. The Company's
prospects must, therefore, be evaluated in light of the problems, expenses,
delays and complications associated with a new business. As a result of the
development-stage nature of the Company's business, additional operating losses
can be expected. There can be no assurance that the Company can be operated
profitably in the future.
Limited Manufacturing Experience and Capacity
The Company believes that its current manufacturing facility is capable of
producing approximately two to four kilograms per year of 97% or greater pure
paclitaxel from crude bulk extract containing approximately 50% paclitaxel.
Formulation and packaging of paclitaxel in single injection dosages will have to
be performed by a contract packager. It is critical that single dosage packages,
once produced, be maintained in an efficient, ambient warehouse center to insure
proper handling and shipping of the drugs. While the Company has been seeking
producers, there can be no assurance that it will be able to locate such
producers, or that it will be able to enter into agreements with such producers.
Although the Company believes that it has the capability to significantly expand
production of bulk paclitaxel, should demand exceed the Company's manufacturing
capacity, it may have to seek third party contract manufacturing. In such
instance, there can be no assurance that the Company could locate satisfactory
contract manufacturing services to perform such functions at all or on
acceptable terms, or that it would have the funds or ability to develop such
capability internally.
Bleomycin is a fermentation product. Certain of the other niche generic
anti-cancer products that the Company is considering for production (excluding
paclitaxel) also are fermentation products. There is presently a world-wide
shortage of contract fermentation manufacturing capacity for pharmaceutical
products. Although the Company is presently considering several sources for the
production of its bleomycin and other fermentation products it may develop, it
has not yet located a reliable manufacturer. Although the Company may consider
the development of internal capacity for such manufacture, the Company currently
has no intention of developing such internal capabilities, as such an effort
would be costly, time consuming and would require FDA regulatory approval, which
might not be obtained. Should the Company develop other fermentation products,
there can be no assurances that regular and reasonable manufacture of bulk raw
material can be obtained. Once pure bulk material is obtained from manufacture,
it must be formulated,
9
<PAGE> 12
packaged in single dosage quantities and warehoused in a manner similar to that
for paclitaxel, subject to all the inherent associated risks.
Limited Marketing Experience and Capacity
Although the Company may market certain of its potential products through a
direct sales force if and when regulatory approval is obtained, currently it has
no sales and marketing employees. To the extent that the Company determines not
to, or is unable to, enter into collaborative agreements or to arrange for third
party distribution of its potential products, significant additional resources
will be required to develop a marketing and sales force. Should the Company
elect to license or sell products to distributors, a significant portion of the
profits from such products may be realized by such licensees or distributors,
rather than by the Company.
Dependence upon Dr. Pandey and Other Key Personnel
The Company's ability to develop its business depends upon its attracting
and retaining qualified management and scientific personnel, including
consultants and members of its Scientific Advisory Board ("SAB"). As the number
of qualified scientists is limited and competition for such personnel is
intense, there can be no assurance that the Company is able to attract or retain
such persons. In particular, the Company will be dependent upon the continued
services of Dr. Ramesh C. Pandey, the Company's Chairman of the Board, President
and Chief Executive Officer. The loss of key personnel, such as Dr. Pandey, or
the failure to recruit additional key personnel could significantly impede
attainment of the Company's objectives and have a material adverse affect on the
Company's financial condition and results of operations. Dr. Pandey has entered
into an employment agreement with the Company for at least a five-year term,
which commenced in 1994, providing for, among other things, an agreement not to
compete with the Company during his employment and for a period of up to six
months thereafter. The Company has obtained a $4,000,000 key man life insurance
policy on Dr. Pandey.
The Company will be required to make certain payments to Dr. Pandey in the
event of certain changes in control. A portion of such payments may constitute
excess employment severance payments, which would not be deductible by the
Company for income tax purposes. In addition, the Company may not be permitted
to deduct that portion of an executive's compensation which exceeds $1,000,000
in any year, excluding certain performance based compensation. There can be no
assurance that options or warrants issued or which may be issued to Dr. Pandey
would qualify as performance based compensation, or that the Company will be
able to deduct the entire amount earned by Dr. Pandey in any year.
In addition, the Company relies on members of the SAB to assist the Company
in formulating its product discovery strategy and therapeutic targets. The
members of the SAB are not employed by the Company and each of these members
have commitments to other entities that limit their availability to the Company.
Some of the members of the SAB are consultants for companies that may be
competitors of the Company. There is no assurance that the Company will be able
to retain key members of the SAB.
Management of Staff Growth
The Company expects to increase its staffing levels in the future. The
Company's ability to execute its strategies will depend in part upon its ability
to integrate such new employees into its operations. The Company's planned
activities will require the addition of new personnel, including management, and
the development of additional expertise by existing management personnel in
areas such as preclinical testing, clinical trial management, regulatory
affairs, manufacturing and marketing. The inability to acquire such
10
<PAGE> 13
services or to develop such expertise could have a material adverse impact on
the Company's operations.
Reliance on Collaborative Relationships
The Company believes that it will need to enter into collaborative
arrangements with other companies. There is no assurance that any collaborations
will be completed, or if completed, that they will be successful. Should any
collaborative partner fail in its contribution to the discovery, development,
manufacture or distribution of a marketable product, the Company's business may
be adversely affected. In addition, although the NIH has awarded three master
agreements to the Company, the Company has not yet been assigned any specific
projects or received any funding from the NIH under these master agreements.
These master agreements expired in October 1998.
Uncertainty Regarding Drug Development
The Company's principal strategy is to develop generic equivalents of
off-patent drugs which enjoy limited competition. There can be no assurance that
such strategy will prove successful or that any proposed products will be
commercially viable. Even if the Company successfully develops and markets such
products, with time, other competitors will likely enter the markets for these
products, which could adversely affect the Company's business. There can be no
assurance that the Company will be able to replicate products that come
off-patent, or that the Company will be able to obtain regulatory approval for
the sale of such compounds.
Patents
The Company's success depends in part on its ability to obtain patent
protection for its proprietary products and to preserve its trade secrets. The
Company has obtained five patents and has submitted several additional patent
applications in the United States and internationally. Any present or future
patents may not prevent others from developing competitive products. No
assurance can be given that the Company's patent applications will be approved,
that any current or future patents will provide the Company with competitive
advantages for its products, or that they will not be successfully challenged or
circumvented by the Company's competitors. The Company has not conducted an
exhaustive patent search and no assurance can be given that patents do not exist
or could not be filed which would have an adverse effect on the Company's
ability to market its products. If other companies were to successfully bring
legal actions against the Company claiming patent or other intellectual property
right infringements, in addition to any potential liability for damages, the
Company could be required to obtain a license to continue to use the affected
process or to manufacture or use the affected product or may be required to
cease using such products or process. There can be no assurance that the Company
would prevail in any such action or that any license required under any such
patent would be made available on acceptable terms, or at all. There could be
significant litigation in the industry regarding patent and other intellectual
property rights. If the Company becomes involved in such litigation, it could
consume a substantial portion of the Company's financial and human resources,
regardless of the outcome of such litigation.
The Company also relies on trade secrets and proprietary know-how which it
seeks to protect, in part, by confidentiality agreements with its employees,
consultants and others. There can be no assurance that these agreements will not
be breached, that the Company would have adequate remedies for any breach or
that the Company's trade secrets will not otherwise become known or
independently developed by competitors.
11
<PAGE> 14
Product and Professional Liability Exposure
The Company faces an inherent business risk of exposure to product
liability claims if the use of products manufactured by the Company results in
adverse effects. The Company may also face professional liability as a result of
its contract research and other services. While the Company will continue to
attempt to take appropriate precautions, there can be no assurance that it will
avoid significant exposure to such liabilities. Because the Company has not yet
sold any products except for research purposes, and because of the expense of
insurance, it does not carry product or professional liability insurance. While
management intends to obtain product liability insurance at such time as the
Company's operations require it, subject to the Company's ability to pay for
such insurance, the Company does not currently intend to obtain professional
liability insurance. There can be no assurance that any coverage which the
Company may obtain will be adequate or that adequate insurance coverage will be
available at acceptable cost, if at all, or that a product or professional
liability claim would not materially adversely affect the business or financial
condition of the Company.
Uncertainty of Healthcare Reimbursement; Government Healthcare Reform Proposal
The Company's ability to successfully commercialize paclitaxel and its
other potential products may depend in part on the extent to which reimbursement
for the cost of such products and related treatment will be available from
government health administration authorities, private health coverage insurers
and other organizations. Significant uncertainty exists as to the reimbursement
status of healthcare products and there can be no assurance that adequate
third-party coverage will be available for the Company to maintain price levels
sufficient for realization of an appropriate return on its investment in product
development. During the past several years, the healthcare industry has been
subject to an increase in government regulation of, among other things,
reimbursement rates. In addition, major third-party payors, insurance companies,
Medicare, and Medicaid have significantly revised payment procedures in efforts
to contain healthcare costs.
The Clinton Administration and various members of Congress have proposed
various programs to reform the U.S. healthcare system. Such programs may
increase governmental involvement in healthcare, lower reimbursement rates and
otherwise change the operating environment for the Company and its potential
products. The Company cannot predict with any certainty what impact, if any,
proposals or healthcare reforms might have on the Company's business.
Anti-Takeover Provisions
The Board of Directors has the authority to issue up to 2,996,350 shares of
Class C Preferred Stock in one or more series, and to fix the number of shares
constituting any such series, the voting powers, designation, preferences, and
relative participating, optional, or other special rights and qualifications,
limitations, or restrictions thereof, including the dividend rights, terms of
redemption (including sinking fund provisions), conversion rights, and
liquidation preferences of the shares constituting any series, without any
further vote or action by stockholders. The Board of Directors may, therefore,
in the future issue Class C Preferred Stock with voting and conversion rights
which could adversely affect the voting power of the holders of Common Stock. In
addition, the issuance of Class C Preferred Stock as well as certain statutory
provisions of Delaware law could potentially be used to discourage attempts by
others to obtain control of the Company through merger, tender offer, proxy
contest, or otherwise by making such attempts more difficult to achieve or more
costly.
12
<PAGE> 15
Absence of Dividends; Dividend Policy
The Company has not paid any dividends upon its Common Stock since its
formation. The Company does not currently intend to pay any dividends upon the
Common Stock in the foreseeable future and anticipates that earnings, if any,
will be used to finance the development and expansion of its business. The
Company's ability to pay dividends on its Common Stock will be limited by the
preferences of any Class C Preferred Stock which may be outstanding from time to
time and may be limited by future indebtedness. Any payment of future dividends
and the amounts thereof will be dependent upon the Company's earnings, financial
requirements and other factors deemed relevant by the Company's Board of
Directors, including the Company's contractual obligations.
USE OF PROCEEDS
The Company will not receive any of the proceeds form the sale of the
Shares offered by the Selling Shareholder. All such proceeds will be received by
the Selling Shareholder.
The following table sets forth, as of the date hereof, and upon completion
of this offering, the number of Shares beneficially owned by the Selling
Shareholder named herein. The following person has sole voting and investment
power with respect to the shares set forth opposite his name.
<TABLE>
<CAPTION>
SELLING SHAREHOLDER
Shares Beneficially
Shares Beneficially Owned Subsequent to
Owned Prior to this this Offering
Offering
Number of
Name and Address Number Percent Shares Offered Number Percent
<S> <C> <C> <C> <C> <C>
Fortress Financial Group, Ltd. 1,390,000 1% 1,390,000 0 0
600 W. Broadway
14th Floor
San Diego, CA 92101
</TABLE>
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 250,000,000 shares
comprised of 247,000,000 shares of Common Stock, par value $.00001 per share,
2,500 shares of Class A Preferred Stock, par value $.00001 per share, 1,150
shares of 8% Preferred Stock, par value $.00001 per share, and 2,996,350 shares
of Class C Preferred Stock, par value $.00001 per share.
The following description of the capital stock of the Company is a summary
and is qualified in its entirety by the provisions of the Company's Certificate
of Incorporation (the "Certificate") and By-Laws, copies of which are available
for review upon request.
13
<PAGE> 16
COMMON STOCK
Holders of Common Stock are entitled to one vote on each matter submitted
to a vote at a meeting of stockholders. The Common Stock does not have
cumulative voting rights, which means that the holders of a majority of Shares
voting for the election of directors can elect all of the members of the Board
of Directors. The Common Stock has no preemptive rights and no redemption or
conversion privileges. Subject to any preferences of any outstanding Preferred
Stock, the holders of the outstanding shares of Common Stock are entitled to
receive dividends out of assets legally available at such times and in such
amounts as the Board of Directors may, from time to time, determine, and upon
liquidation and dissolution are entitled to receive all assets available for
distribution to the stockholders. A majority vote of Shares represented at a
meeting at which a quorum is present is sufficient for all actions that require
the vote of stockholders. All of the outstanding Shares are, and the Shares
issued by the Company in connection with the exercise of the Warrants will be,
when issued and paid for, fully-paid and nonassessable.
PREFERRED STOCK
The Company's Board of Directors may, without further action by the
Company's stockholders, from time to time, issue shares of the Class C Preferred
Stock in series and may, at the time of issuance, determine the rights,
preferences, and limitations of each series. Any dividend preference of any
Class C Preferred Stock which may be issued would reduce the amount of funds
available for the payment of dividends on Common Stock. Also, holders of the
Class C Preferred Stock would normally be entitled to receive a preference
payment in the event of any liquidation, dissolution, or winding-up of the
Company before any payment is made to the holders of Common Stock. Under certain
circumstances, the issuance of such the Class C Preferred Stock may render more
difficult or tend to discourage a merger, tender offer, proxy contest, the
assumption of control by a holder of a large block of the Company's securities,
or the removal of incumbent management. Although the Company presently has no
plans to issue any of its shares of the Class C Preferred Stock, the Board of
Directors of the Company, without stockholder approval, may issue the Class C
Preferred Stock with voting and conversion rights which could adversely affect
the holders of Common Stock.
There are currently outstanding 2,500 shares of Class A Preferred Stock.
The holders of the Class A Preferred Stock are entitled to receive dividends of
$.00001 per share, and $.00001 per share in liquidation, before any dividends or
distributions on liquidation, respectively, may be paid to the holders of Common
Stock. The holders of the Class A Preferred Stock are entitled to cast 1,000
votes per share on each matter presented to stockholders of the Company, voting
together as a single class with the holders of the Common Stock, except as may
be required by the Delaware General Corporation Law, and except that the
affirmative vote or consent of holders of a majority of the outstanding Class A
Preferred Stock is required to approve any action to increase the number of
authorized shares of Class A Preferred Stock, to amend, alter, or repeal any of
the preferences of the Class A Preferred Stock, or to authorize any
reclassification of the Class A Preferred Stock. Dr. Ramesh C. Pandey owns all
of the outstanding Class A Preferred Stock which, together with his ownership of
Common Stock, will enable him to control the affairs of the Company. The Company
may redeem the Class A Preferred Stock for $.00001 per share at any time after
May 3, 2009.
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<PAGE> 17
REDEEMABLE WARRANTS
The Warrants were issued pursuant to an agreement, dated as of April 26,
1994 (the "Warrant Agreement"), between the Company and Continental Stock
Transfer & Trust Company, as warrant agent (the "Warrant Agent"). As of the date
of this Prospectus, 1,150,000 Warrants are issued and outstanding. Each Warrant
entitles the holder to purchase, at any time until April 26, 1999, twelve (12)
Shares at an exercise price of $0.50 per Share, subject to adjustments. The
Warrants may be exercised in whole or in part. The Warrants will automatically
expire on April 26, 1999, unless extended by the Company.
The Company may, at any time, redeem the Warrants, in whole or in part, at
the option of the Company, upon not less than 30 days' notice, at a price of
$.10 per Warrant, provided that: (i) the then-current market price of the
Common Stock is at least 175% of the then-current exercise price of the Warrants
for 20 consecutive business days ending within 30 days of the date of the notice
of redemption; and (ii) the Company is in compliance with its obligations to
register under the Securities Act the shares issuable on exercise of the
Warrants. If the Company exercises its right to redeem the Warrants, such
Warrants will be exercisable until the close of business on the date fixed for
redemption in such notice. If any Warrant called for redemption is not exercised
by such time, it will cease to be exercisable and the holder thereof will be
entitled only to the redemption price.
Pursuant to the Warrant Agreement, the Company, by notice to the Warrant
Agent, may reduce the exercise price permanently or for such period as it may
determine, or extend the expiration date of the Warrants. The Warrant Agent is
required to send a notice of any such change to each registered holder of
Warrants.
LIMITATION OF DIRECTOR LIABILITY
The Certificate includes a provision which eliminates the personal
liability of the Company's directors for monetary damages resulting from
breaches of their fiduciary duty of care (provided that such provision does not
eliminate liability for breaches of the duty of loyalty, acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, violations of Section 174 of the Delaware Corporation Law, or for any
transaction from which the director derived an improper personal benefit). This
provision does not limit or eliminate the right of the Company or any
shareholder to seek non-monetary relief such as an injunction or rescission in
the event of a breach of a director's duty of care. The Certificate also
provides that the Company shall indemnify its directors and officers to the
fullest extent permitted by Section 145 of the Delaware Corporation Law,
including circumstances in which indemnification is otherwise discretionary. The
Company believes that these provisions are necessary to attract and retain
qualified persons as directors and officers.
TRANSFER AGENT AND REGISTRAR
Continental Stock Transfer & Trust Company is the Transfer Agent and
Registrar for the Common Stock and Warrants.
DELAWARE ANTI-TAKEOVER LAW
Under Section 203 of the Delaware Corporation Law (the "Delaware
anti-takeover law"), certain "business combinations" are prohibited between a
Delaware corporation, the stock of which is generally publicly traded or held of
record by more than 2,000 stockholders, and an "interested stockholder" of such
15
<PAGE> 18
corporation for a three-year period following the date that such stockholder
became an interested stockholder, unless: (i) the corporation has elected in its
certificate of incorporation not to be governed by the Delaware anti-takeover
law (the Company has not made such an election); (ii) the business combination
was approved by the board of directors of the corporation before the other party
to the business combination became an interested stockholder; (iii) upon
consummation of the transaction which resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the commencement of the
transaction (excluding voting stock owned by directors who are also officers or
held in employee benefit plans in which the employees do not have a confidential
right to tender or vote stock held by the plan); or (iv) the business
combination was approved by the board of directors of the corporation and
ratified by 66 2/3% of the voting stock which the interested stockholder did not
own. The three-year prohibition also does not apply to certain business
combinations proposed by an interested stockholder following the announcement or
notification of certain extraordinary transactions involving the corporation and
a person who had not been an interested stockholder during the previous three
years or who became an interested stockholder with the approval of a majority of
the corporation's directors. The term "business combination" is defined,
generally to include mergers or consolidations between a Delaware corporation
and an interested stockholder, transactions with an interested stockholder
involving the assets or stock of the corporation or its majority-owned
subsidiaries, and transactions which increase an interested stockholder's
percentage ownership of stock. The term "interested stockholder" is defined
generally as those stockholders who become beneficial owners of 15% or more of a
Delaware corporation's voting stock.
These provisions, together with the ability of the Company's Board of
Directors to issue Class C Preferred Stock without further stockholder action,
could delay or frustrate the removal of incumbent directors or a change in
control of the Company. The provisions also could discourage, impede, or prevent
a merger, tender offer or proxy contest, even is such event would be favorable
to the interests of stockholders.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law authorizes
indemnification of directors, officers, employees, and agents of the Company;
allows the advancement of costs of defending against litigation; and permits
companies incorporated in Delaware to purchase insurance on behalf of directors,
officers, employees, and agents against liabilities whether or not in the
circumstances such companies would have the power to indemnify against such
liabilities under the provisions of the statute.
The Company's Certificate of Incorporation provides for indemnification of
the Company's officers and directors to the fullest extent permitted by Section
145 of the Delaware General Corporation Law. The Company does not maintain
directors and officers insurance covering its executive officers and directors.
The Delaware General Corporation Law authorizes corporations to limit or
eliminate the personal liability of directors and officers to corporations and
their stockholders for monetary damages for breach of directors' fiduciary duty
of care. The duty of care requires that, when acting on behalf of the
corporation, directors must exercise an informed business judgment based on all
material information reasonably available to them. Absent the limitations
authorized by the Delaware statute, directors could be accountable to
corporations and their stockholders for monetary damages for conduct that does
not satisfy their duty of care. Although the statute does not change directors'
duty of care, it enables corporations to limit available relief to equitable
remedies such as injunction or rescission. The Company's Certificate of
Incorporation limits the liability of the Company's directors and officers to
the Company or its stockholders to the fullest
16
<PAGE> 19
extent permitted by the Delaware statute. The inclusion of this provision in the
Certificate of Incorporation may have the effect of reducing the likelihood of
derivative litigation against directors and may discourage or deter stockholders
or management from bringing a lawsuit against directors for breach of their duty
of care, even though such an action, if successful, might otherwise have
benefitted the Company and its stockholders.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted for directors, officers and controlling
persons of the Company pursuant to the foregoing, or otherwise, the Company has
been advised that in the opinion of the Securities and Exchange Commission (the
"Commission") such indemnification is against public policy as expressed in said
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or controlling person of the
Company 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 Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction and the question whether such indemnification by it
is against public policy as expressed in said Act and will be governed by the
final adjudication of such issue.
PLAN OF DISTRIBUTION
This Prospectus, as appropriately amended or as supplemented, may be used
from time to time by the Selling Stockholder, or its transferees, to offer and
sell the Shares in transactions in which the Selling Stockholder and any
broker-dealer through whom any of the Shares are sold may be deemed to be
underwriters within the meaning of the Securities Act. The Company will receive
none of the proceeds from any such sales. There presently are no arrangements or
understandings, formal or informal, pertaining to the distribution of the
Shares.
The Company anticipates that resales of the Shares by the Selling
Shareholder will be effected from time to time on the open market in ordinary
brokerage transactions on the OTC Bulletin Board, on which the common Stock is
included for quotation, in the over-the-counter market, or in private
transactions. The Shares will be offered for sale at market prices prevailing at
the time of sale or at negotiated prices and on terms to be determined when the
agreement to sell is made or at the time of sale, as the case may be. The Shares
may be offered directly by the Selling Shareholder or through brokers or
dealers. A member firm of the National Association of Securities Dealers, Inc.
("NASD") may be engaged to act as the Selling Shareholder's agent in the sale of
the Shares by the Selling Shareholder and/or may acquire Shares as principal.
Member firms participating in such transactions as agent may receive commissions
from the Selling Shareholder (and, if they act as agent for the purchaser of
such Shares, from such purchaser), such commissions computed, in appropriate
cases, in accordance with the applicable rates of the NASD, which commissions
may be negotiated rates where permissible. Sales of the Shares by the member
firm may be made on the OTC Bulletin Board from time to time at prices related
to prices then prevailing.
Participating broker-dealers may agree with the Selling Stockholder to sell
a specified number of shares at a stipulated price per share and, to the extent
such broker dealer is unable to do so acting as agent for the Selling
Shareholder, to purchase as principal any unsold shares at the price required to
fulfill the broker-dealer's commitment to the Selling Shareholder.
Broker-dealers who acquire Shares as principal may thereafter resell such Shares
form time to time in transactions on the OTC Bulletin Board, in negotiated
transactions, or otherwise, at market prices prevailing at the time of sale or
at negotiated prices.
17
<PAGE> 20
Shares may be sold directly by the Selling Shareholder or through agents
designated by the Selling Shareholder from time to time. Unless otherwise
indicated in any supplement to this Prospectus, any such agent will be acting on
a best efforts basis for the period of its appointment.
The Selling Shareholder and any brokers, dealers, agents, member firm or
others that participate with the Selling Shareholder in the distribution of the
Shares may be deemed to be "underwriters" within the meaning of the Securities
Act, and any commissions or fees received by such persons and any profit on the
resale of the Shares purchased by such person may be deemed to be underwriting
commissions or discounts under the Securities Act.
The Selling Shareholder will be subject to the applicable provisions of the
Securities Act and the Exchange Act and the rules and regulations thereunder,
including without limitation, Regulation M under the Securities Act, which
provisions may limit the timing of purchases and sales of any of the Shares by
the Selling Shareholder. All of the foregoing may affect the marketability of
the Shares.
The Company will pay substantially all the expenses incident to this
offering of the Shares by the Selling Shareholder to the public other than
brokerage fees, commissions and discounts of underwriters, dealers and agents.
In order to comply with certain states' securities laws, if applicable, the
Shares will be sold in such jurisdictions only through registered or licensed
brokers or dealers. In addition, in certain states the Shares may not be sold
unless the Shares have been registered or qualified for sale in such state or an
exemption from registration or qualification is available and the Company or
Selling Shareholder comply with the applicable requirements.
LEGAL MATTERS
The validity of the issuance of the Shares offered hereby has been passed
on for the Company by Shefsky & Froelich Ltd., Chicago, Illinois.
EXPERTS
The financial statements of Xechem International, Inc. as of and for the
years ended December 31, 1997 and the related consolidated statements of
operations, stockholders' equity, and cash flows for the years ended December
31, 1997 and 1996, and for the cumulative period from March 15, 1990 (date of
inception) to December 31, 1997, incorporated by reference in this Prospectus,
have been audited by Moore Stephens, P.C., independent public accountants, as
indicated in their reports with respect thereto, and are incorporated by
reference herein in reliance upon the authority of said firm as experts in
giving said reports.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement (of
which this Prospectus is a part) on Form S-8 under the Securities Act with
respect to the Shares offered hereby. This Prospectus does not contain all of
the information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission. The
Registration Statement and any amendments thereto, including exhibits filed as a
part thereof, are available for inspection and copying as set forth below.
18
<PAGE> 21
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Commission. These reports, proxy statements and other
information can be inspected and copied at the public reference facilities of
the Commission, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, the
New York Regional Office, Public Reference Room, Seven World Trade Center, 13th
Floor, New York, New York 10048, and the Chicago Regional Office, Suite 1400,
500 West Madison Street, Chicago, Illinois 60661. Copies of this material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
maintains a Web site on the Internet that contains reports, proxy and
information statements and other information regarding registrants (including
the Company) that file electronically with the Commission via EDGAR. The address
of such Web site is http://www.sec.gov.
The Company will provide without charge to each person to whom a Prospectus
is delivered, on the written or oral request of any such person, a copy of any
or all of the documents incorporated by reference herein, other than exhibits to
such documents. Such requests should be addressed to Dr. Ramesh Pandey, Xechem
International, Inc., 100 Jersey Avenue, Building B, Suite 310, New Brunswick,
New Jersey 08901 (telephone number: (732) 247-3300).
19
<PAGE> 22
<TABLE>
<CAPTION>
<S> <C>
============================================================ =========================
No dealer, salesperson or other person has been authorized 1,390,000 SHARES
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 autho rized by the Company. This
Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy to any person in any juris XECHEM
diction in which such offer or solicitation would be INTERNATIONAL, INC.
unlawful or to any person to whom it is unlawful. Neither
the delivery of this Prospectus nor any offer or sale made
hereun der shall, under any circumstances, create any
implication that there has been no change in the affairs of
the Company or that information contained herein is correct
as of any time subsequent to the date hereof. COMMON STOCK
($0.00001 PAR VALUE)
---------------------------
---------------------------
TABLE OF CONTENTS PROSPECTUS
Page
---------------------------
DOCUMENTS INCORPORATED
BY REFERENCE........................................2
THE COMPANY.................................................3
RISK FACTORS................................................7
USE OF PROCEEDS............................................13
DESCRIPTION OF SECURITIES..................................13
INDEMNIFICATION OF DIRECTORS
AND OFFICERS.......................................16
LEGAL MATTERS..............................................18
EXPERTS....................................................18
AVAILABLE INFORMATION......................................18
============================================================ =========================
</TABLE>
<PAGE> 23
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The documents listed below are hereby incorporated by reference into
this Registration Statement:
1. The Annual Report on Form 10-KSB of Xechem International,
Inc. (the "Company") for the fiscal year ended December 31,
1997.
2. The Quarterly Reports on Form 10-QSB of the Company for the three
month periods ended March 31 and June 30, 1998.
3. The Company's Registration Statement on Form 8-A, dated April 1,
1994.
All documents filed subsequent to the foregoing by the Company
pursuant to Sections 13(a) or 15(d) of the Exchange Act, prior to the filing of
a post-effective amendment which indicates that all securities registered have
been sold or which deregisters all securities then remaining unsold, shall be
deemed to be incorporated by reference into this Registration Statement and to
be a part hereof from the date of filing of such documents.
Item 4. Description of Securities.
(See Item 3)
Item 5. Interests of Named Experts and Counsel.
Not Applicable
Item 6. Indemnification of Directors and Officers.
The Company's Certificate of Incorporation includes a provision which
eliminates the personal liability of the Company's directors for monetary
damages resulting from breaches of their fiduciary duty of care (provided that
such provision does not eliminate liability for breaches of the duty of loyalty,
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, violations of Section 174 of the Delaware General
Corporation Law, or for any transaction from which the director derived an
improper personal benefit). This provision does not limit or eliminate the right
of the Company or any stockholder to seek non -monetary relief such as an
injunction or rescission in the event of a breach of a director's duty of care.
The Certificate of Incorporation also provides that the Company shall indemnify
its directors and officers to the fullest extent permitted by Section 145 of the
Delaware General Corporation Law, including circumstances in which
indemnification is otherwise discretionary.
II-1
<PAGE> 24
Item 7. Exemption from Registration Claimed.
The restricted securities which are included in the reoffering
prospectus, which is part of this Registration Statement, were issued solely to
the holder thereof upon the exercise of an option granted to the Selling
Shareholder pursuant to the private offering exemption found under Section 4(2)
of the Securities Act of 1933, as amended.
Item 8. Exhibits.
Exhibit No.
5 Opinion of Shefsky & Froelich Ltd.
10 Xechem International, Inc. Amended and Restated Stock Option
Plan
24(a) Consent of Shefsky & Froelich Ltd. (see Exhibit 5)
24(b) Consent of Moore Stephens P.C.
25(a) Power of Attorney (included as part of the signature pages of
this registration statement)
Since the Xechem International, Inc. Amended and Restated Stock
Option Plan (the "Plan") is not required to comply with ERISA, the Company has
not obtained either an opinion of counsel concerning compliance with the
requirements of ERISA or an Internal Revenue Service determination letter that
the Plan is qualified under Section 401 of the Internal Revenue Code. As a
result, the Company does not undertake that it will submit the Plan or any
amendment thereto to the Internal Revenue Service in order to qualify the Plan.
Item 9. Undertakings.
The undersigned Registrant hereby undertakes:
1. To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement;
(i) To include any Prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events
arising after the effective date of this
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 this Registration Statement; and
(iii) To include any material information with respect
to the plan of distribution not previously
disclosed in this Registration Statement or any
material change to such information in this
Registration Statement;
II-2
<PAGE> 25
Provided however, that paragraphs (1)(i) and (ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in a periodic report filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference into this Registration Statement.
2. That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
3. To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
4. That, for purposes of determining any liability under the Securities Act
of 1933, each filing of the Registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in 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.
5. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in such
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> 26
SIGNATURES
The Registrant.
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New Brunswick, State of New Jersey, on November 18,
1998.
XECHEM INTERNATIONAL, INC.
By /s/ Ramesh C. Pandey
--------------------------------------
Ramesh C. Pandey, Ph.D.
President and Chief Executive Officer
<PAGE> 27
EXHIBITS
Exhibit No.
5 Opinion of Shefsky & Froelich Ltd.
10 Xechem International, Inc. Amended and Restated Stock Option
Plan
24(a) Consent of Shefsky & Froelich Ltd. (see Exhibit 5)
24(b) Consent of Moore Stephens P.C.
25(a) Power of Attorney (included as part of the signature pages
of this registration statement)
<PAGE> 28
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that each person whose signature appears
below constitutes and appoints Ramesh C. Pandey, his attorney-in-fact, with
power of substitution for him in any and all capacities, to sign any future
amendments to the Registration Statement, and to file the same, with the
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Ramesh C. Pandey Chief Executive Officer, November 18, 1998
- ----------------------- President, Chief Accounting Officer
Ramesh C. Pandey, Ph.D. and Director
(Principal Executive Officer)
/s/ Stephen Burg Director November 18, 1998
- -----------------------
Stephen Burg
</TABLE>
<PAGE> 1
[SHEFSKY, FROELICH AND DEVINE LTD LETTERHEAD]
EXHIBIT 5
7508-00022-0105
November 18, 1998
Xechem International, Inc.
100 Jersey Avenue, Building B
Suite 310
New Brunswick, New Jersey 08901
Re: Xechem International, Inc.
Registration Statement on Form S-8
Ladies and Gentlemen:
We have acted as special securities counsel to Xechem International, Inc.,
a Delaware corporation (the "Company"), in connection with the preparation and
filing of the registration statement on Form S-8 (the "Registration Statement"),
with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act") and the prospectus contained
therein with respect to the public offering of up to 10,000,000 shares of the
Company's common stock, par value $0.01 (the "Option Shares") to be issued in
connection with the exercise of options granted under the Company's Share Option
Plan and 1,390,000 shares of the Company's Common Stock (the "Resale Shares")
offered for sale to the public by certain selling stockholders (the "Selling
Stockholders"). In connection with the registration of the Option Shares and the
Resale Shares, you have requested our opinion with respect to the matters set
forth below.
For purposes of this opinion, we have reviewed the Registration Statement.
In addition, we have examined the originals or copies certified or otherwise
identified to our satisfaction of: (i) the Company's Certificate of
Incorporation, as amended to date; (ii) the By-laws of the Company, as amended
to date; (iii) records of the corporate proceedings of the Company as we deemed
necessary or appropriate as a basis for the opinions set forth herein; and (iv)
those matters of law as we have deemed necessary or appropriate as a basis for
the opinions set forth herein. We have not made any independent review or
investigation of the organization, existence, good standing, assets, business or
affairs of the Company, or of any other matters. In rendering our opinion, we
have assumed without inquiry the legal capacity of all natural persons, the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals, the conformity to original documents of
<PAGE> 2
Xechem International, Inc.
November 18, 1998
Page 2
all documents submitted to us as certified or photostatic copies and the
authenticity of the originals of these documents submitted to us as copies.
We have not undertaken any independent investigation to determine facts
bearing on this opinion, and no inference as to the best of our knowledge of
facts based on an independent investigation should be drawn from this
representation. Further, our opinions, as hereinafter expressed, are subject to
the following exceptions, limitations and qualifications: (i) the effect of
bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement,
moratorium or other similar laws now or hereafter in effect relating to or
affecting the rights and remedies of creditors; and (ii) the effect of general
principles of equity whether enforcement is considered in a proceeding in equity
or at law and the discretion of the court before which any proceeding therefore
may be brought.
We are admitted to the practice of law only in the State of Illinois and,
accordingly, we do not purport to be experts on the laws of any other
jurisdiction nor do we express an opinion as to the laws of jurisdictions other
than the laws of the State of Illinois and the General Corporation Law of the
State of Delaware, as currently in effect.
On the basis of, and in reliance upon, the foregoing, and subject to the
qualifications contained herein, we are of the opinion that the Option Shares,
when issued pursuant to the Plan, will be validly issued, fully-paid and
nonassessable and that the Resale Shares are validly issued fully paid and
non-assessable.
We hereby consent to your filing this opinion as an exhibit to the
Registration Statement and to the reference to our firm contained under the
heading "Legal Matters."
This opinion is rendered only to you and is solely for your benefit in
connection with the transactions covered hereby. This opinion may not be relied
upon by you for any other purpose or furnished, or quoted to, or relied upon by
any other person, firm or corporation for any purpose without our prior express
written consent.
Respectfully submitted,
/s/ Shefsky & Froelich Ltd.
SHEFSKY & FROELICH LTD.
MDG/MJC/rlb
<PAGE> 1
EXHIBIT 10
XECHEM INTERNATIONAL, INC.
AMENDED AND RESTATED STOCK OPTION PLAN
I. DEFINITIONS AND PURPOSES
A. Definitions
Unless otherwise specified or unless the context otherwise requires, the
following terms, as used in this Stock Option Plan, have the following meanings:
1. "Affiliate" means a corporation which, for purposes of Section 422 of
the Code, is a parent or subsidiary of the Corporation, direct or indirect, each
as defined in Section 424 of the Code.
2. "Board of Directors" or "Board" means the Board of Directors of the
Corporation.
3. "Code" means the United States Internal Revenue Code of 1986, as such
may be amended from time to time.
4. "Committee" means the committee to which the Board of Directors
delegates the power to act under or pursuant to the provisions of the Plan, or
the Board of Directors if no committee is selected.
5. "Corporation" means XECHEM INTERNATIONAL, INC., a Delaware
corporation.
6. "Disability" or "Disabled" means permanent and total disability as
defined in Section 22(e)(3) of the Code.
7. "Incentive Option" means an Option, as identified below, which is
designated by the Committee as such and which, when granted, is intended to be
an "incentive stock option" as defined in Section 422 of the Code.
8. "Key Employee" means an employee of the Corporation or of an
Affiliate, (including, without limitation, an employee who is also serving as an
officer or director of the Corporation or of an Affiliate, other than Dr. Ramesh
Pandey), designated by the Board of Directors or the Committee to be eligible to
be granted one or more Options under the Plan.
-1-
<PAGE> 2
9. "Nonstatutory Option" shall mean an Option, as defined below, which is
designated by the Committee as such and which, when granted, is not intended to
be an "incentive stock option," as defined in Code Section 422.
10. "Option" means a right or option granted under the Plan.
11. "Option Agreement" means an agreement between the Corporation and a
Participant executed and delivered pursuant to the Plan.
12. "Participant" means a Key Employee to whom one or more Incentive
Options or Nonstatutory Options are granted under the Plan and an employee,
nonemployee director, advisor or independent contractor ("Non Key Employee") to
whom one or more Nonstatutory Options are granted under the Plan.
13. "Plan" means this Stock Option Plan.
14. "Shares" means the following shares of the capital stock of the
Corporation as to which Options have been or may be granted under the Plan:
authorized and unissued Common Stock, $.0001 par value, including fractional
shares, any shares of capital stock into which the Shares are changed or for
which they are exchanged within the provisions of Article VI of the Plan.
15. "Survivors" means a deceased Participant's legal representative and/or
any person or persons who acquired the Participant's rights to an Option by will
or by the laws of descent and distribution.
B. Purposes of the Plan
The Plan is intended to encourage ownership of Shares by Key Employees,
non-employee directors and advisors, including, without limitation, members of
the Corporation's Scientific Advisory Board, in order to attract such persons,
to induce such persons to remain in the employ of the Corporation or of an
Affiliate, or to serve or continue to serve as an advisor to the Corporation,
and to provide additional incentive for such persons to promote the success of
the Corporation or of an Affiliate.
II. SHARES SUBJECT TO THE PLAN
The aggregate number of Shares as to which Options may be granted from time
to time shall be Twelve Million Six Hundred Thousand (12,600,000) Shares of the
authorized and unissued Common
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<PAGE> 3
Stock, no par value all of which shall be eligible for grant as Incentive Stock
Options or Nonstatutory Options.
If an Option ceases to be "outstanding," in whole or in part, the Shares
which were subject to such Option shall be available for the granting of other
Options.
The aggregate number of Shares as to which Options may be granted shall be
subject to change only by means of an amendment of the Plan duly adopted by the
Corporation and approved by the stockholders of the Corporation within one year
before or after the date of the adoption of any such amendment, subject to the
provisions of Article VI.
III. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Board of Directors except to the
extent the Board of Directors delegates its authority hereunder to the
Committee. Subject to the provisions of the Plan, the Board of Directors or, if
such authority be delegated, the Committee is authorized to:
A. interpret the provisions of the Plan or of any Option or Option
Agreement and to make all rules and determinations which it deems necessary or
advisable for the administration of the Plan;
B. determine which employees of the Corporation or of an Affiliate shall be
designated as Key Employees and which of the Key Employees shall be granted
Options;
C. determine the Non Key Employees to whom Nonstatutory Options shall be
granted;
D. determine whether the Option to be granted shall be an Incentive Option
or Nonstatutory Option;
E. determine the number of Shares for which an Option or Options shall be
granted; and
F. specify the terms and conditions upon which Options may be granted;
provided however, that with respect to Incentive Options all such
interpretations, rules, determinations, terms and conditions shall be made and
prescribed in the context of preserving the tax status of the Incentive Options
as incentive stock options within the meaning of Section 422 of the Code.
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<PAGE> 4
All determinations of the Board of Directors or the Committee, if
applicable, shall be made by a majority of its members. No member of the Board
or the Committee shall be liable for any action or determination made in good
faith with respect to the Plan or any Option.
IV. ELIGIBILITY FOR PARTICIPATION
Each Participant receiving an Incentive Option must be a Key Employee of
the Corporation or of an Affiliate at the time an Incentive Option is granted.
The Board of Directors, or if such authority be delegated, the Committee,
may at any time and from time to time grant one or more Options to one or more
Key Employees or Non-Key Employees and may designate the number of Shares to be
optioned under each Option so granted, provided, however, that no Incentive
Options shall be granted after the expiration of the earlier of ten (10) years
from the date of the adoption of the Plan by the Corporation or the approval of
the Plan by the Stockholders of the Corporation, and provided further, that the
fair market value (determined at the time the Option is granted) of the Shares
with respect to which Incentive Options are exercisable for the first time by
such Key Employee during any calendar year (under the Plan and under any other
Incentive Option plan of the Corporation or an Affiliate) shall not exceed
$100,000.
Notwithstanding the foregoing, no individual who is a director of the
Corporation or a member of the Committee shall be eligible to receive an Option
under the Plan unless the granting of such Option shall be approved by the Board
of Directors or the Committee, with all of the members voting thereon being
disinterested directors or members unless such vote is unanimous. For the
purpose of this Article IV, a "disinterested director or member" shall be any
director or member, as the case may be, who shall not then be, or at any time
within the year prior thereto eligible to receive an Option under the Plan.
Notwithstanding any of the foregoing provisions, the Board of Directors (or
the Committee if applicable) may authorize the grant of an Incentive Option to a
person not then in the employ of the Corporation or of an Affiliate, conditioned
upon such person becoming eligible to become a Participant at or prior to the
grant of such Option.
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<PAGE> 5
V. TERMS AND CONDITIONS OF OPTIONS
Each Incentive Option shall be set forth in an Option Agreement
substantially in the form hereto annexed and marked Exhibit A, duly executed on
behalf of the Corporation and by the Participant to whom such Option is granted.
Each Nonstatutory Option shall be set forth in an Option Agreement substantially
in the form hereto annexed and marked Exhibit B duly executed on behalf of the
Corporation and by the Participant to whom such Option is granted. Each such
Option Agreement shall be subject to at least the following terms and
conditions:
A. Option Price
The option price of each Option granted under the Plan shall be determined
by the Board of Directors (or the Committee, if such authority is delegated).
The Option price per share of the Shares covered by each Nonstatutory Option
shall be at such amount as may be determined by the Board of Directors in its
sole discretion on the date of the grant of the Option. In the case of an
Incentive Option, if the optionee owns directly or by reason of the applicable
attribution rules 10% or less of the total combined voting power of all classes
of share capital of the Corporation, the Option price per share of the Shares
covered by each Incentive Option shall be not less than the fair market value
per share of the Shares on the date of the grant of the Incentive Option. In all
other cases of Incentive Options, the Option price shall be not less than one
hundred ten percent (110%) of the said fair market value on the date of grant.
If such Shares are then listed on any national securities exchange, the fair
market value shall be the mean between the high and low sales prices, if any, on
the largest such exchange on the date of the grant of the Option, or, if none,
on the most recent trade date thirty (30) days or less prior to the date of the
grant of the Option. If the Shares are not then listed on any such exchange, the
fair market value of such Shares shall be the closing sales price if such is
reported or otherwise the mean between the closing "Bid" and the closing "Ask"
prices, if any, as reported in the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") for the date of the grant of the Option,
or if none, on the most recent trade date thirty (30) days or less prior to the
date of the grant of the Option for which such quotations are reported. If the
Shares are not then either listed on any such exchange or quoted in NASDAQ, the
fair market value shall be the mean between the average of the "Bid" and the
average of the "Ask" prices, if any, as reported in the National Daily Quotation
Service for the date of the grant of the Option, or, if none, for the most
recent trade date thirty (30) days or less prior to the date of the grant of the
option for which such quotations are reported. If the fair market value cannot
be
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<PAGE> 6
determined under the preceding three sentences, it shall be determined in good
faith by the Board of Directors (or the Committee if applicable).
B. Number of Shares
Each Option shall state the number of Shares to which it pertains.
C. Term of Option
Each Incentive Option shall terminate not more than ten (10) years from the
date of the grant thereof, or at such earlier time as the Option Agreement may
provide, and shall be subject to earlier termination as herein provided, except
that if the Option price is required under Paragraph A of this Article V to be
at least 110% of fair market value, each such Incentive Option shall terminate
not more than five (5) years from the date of the grant thereof. Each
Nonstatutory Option shall terminate not more than eleven (11) years from the
date of the grant thereof, or at such other earlier time as the Option Agreement
may provide, and shall be subject to earlier termination as herein provided.
D. Date of Exercise
Upon the authorization of the grant of an Option the Board of Directors (or
the Committee if applicable) may, subject to the provisions of Paragraph C of
this Article V, prescribe the date or dates on which the Option becomes
exercisable, and may provide that the Option rights accrue or become exercisable
in installments over a period of years, or upon the attainment of stated goals
or combination thereof.
E. Medium of Payment
The Option price shall be payable upon the exercise of the Option. It shall
be payable in such form (permitted by Section 422 of the Code in the case of
Incentive Options), as the Board of Directors (or the Committee if applicable)
shall either by rules promulgated pursuant to the provisions of Article III of
the Plan, or in the particular Option Agreement, provide.
F. Termination of Employment
(1) An employee Participant who ceases to be an employee of the
Corporation or of an Affiliate for any reason, other than the death or
Disability of the
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<PAGE> 7
Participant, may exercise all or any portion of his Options to the extent
that such right to exercise has occurred on the date of his termination
within thirty (30) days after such termination. A Participant's employment
shall not be deemed terminated by reason of a transfer to another Employer
which is an Affiliate of the Corporation.
(2) An employee Participant who ceases to be an employee of the
Company or of an Affiliate by reason of Disability may exercise all or a
portion of his Option to the extent that such right to exercise has accrued
on the date of his termination during the six (6) months immediately
following his termination.
(3) The Survivor of an employee Participant who ceases to be an
employee by reason of such employee's death, may exercise all or a portion
of an Option to the extent that such right to exercise has accrued on the
date of such Participant's death during the six (6) months immediately
following his death.
An employee Participant to whom an Option has been granted under the Plan
who is absent from work with the Corporation or with an Affiliate because of
temporary disability (any disability other than a Disability as defined in
Paragraph A.6. Article 1 hereof), or who is on leave of absence for any purpose
permitted by any authoritative interpretation (i.e., regulation, ruling, case
law, etc.) of Section 422 of the Code, shall not, during the period of any such
absence be deemed, by virtue of any such absence alone, to have terminated such
Participant's employment with the Corporation or an Affiliate, except as the
Board of Directors (or the Committee if applicable) may otherwise expressly
provide or determine.
I. Exercise of Option and Issue of Stock
Options shall be exercised by giving written notice to the Corporation.
Such written notice shall: (1) be signed by the person exercising the Option,
(2) state the number of Shares with respect to which the Option, if any, is
being exercised, (3) contain the warranty required by paragraph M of this
Article V, and (4) specify a date (other than a Saturday, Sunday or legal
holiday) not less than five (5) nor more than ten (10) days after the date of
such written notice, as the date on which the Shares will be taken up and
payment made therefor. The conditions specified above may be waived in the sole
discretion of the Corporation. Such tender and conveyance shall take place at
the principal office of the Corporation during ordinary business hours, or at
such other
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<PAGE> 8
hour and place agreed upon by the Corporation and the person or persons
exercising the Option. On the date specified in such written notice (which date
may be extended by the Corporation in order to comply with any law or regulation
which requires the Corporation to take any action with respect to the Option
Shares prior to the issuance thereof, whether pursuant to the provisions of
Article VII or otherwise), the Corporation shall accept payment for the Option
Shares and shall deliver to the person or persons exercising the Option in
exchange therefor a certificate or certificates for fully paid non-assessable
Shares. In the event of any failure to take up and pay for the number of Shares
specified in such written notice of the exercise of an Option on the date set
forth therein (or on the extended date as above provided) the exercise of the
Option shall terminate with respect to such number of Shares, but shall continue
with respect to the remaining Shares covered by the Option and not yet acquired
pursuant thereto.
J. Rights as a Stockholder
No Participant to whom an Option has been granted shall have rights as a
stockholder with respect to any Shares covered by such Option except as to such
Shares as have been issued to or registered in the Corporation's share register
in the name of such Participant upon the due exercise of the Option and tender
of the full Option price.
K. Assignability and Transferability of Option
By its terms, an Option granted to a Participant shall not be transferable
by the Participant and shall be exercisable, during the Participant's lifetime,
only by such Participant. Such Option shall not be assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise) and shall not
be subject to execution, attachment or similar process. Any attempted transfer,
assignment, pledge, hypothecation or other disposition of any Option or of any
rights granted thereunder contrary to the provisions of this Article V, or the
levy of any attachment or similar process upon an Option or such rights, shall
be null and void.
L. Other Provisions
The Option Agreement for an Incentive Option shall contain such limitations
and restrictions upon the exercise of the Option as shall be necessary in order
that such Option can be an "incentive stock option" within the meaning of
Section 422 of the Code. Further, the Option Agreements authorized under the
Plan shall be subject to such other terms and conditions including, without
limitation, restrictions upon the exercise of the Option, as the Board of
Directors (or the Committee, if applicable) shall deem
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<PAGE> 9
advisable and which in the case of Incentive Options are not inconsistent with
the requirements of Code Section 422.
M. Purchase For Investment
Unless the Shares to be issued upon the particular exercise of an Option
shall have been effectively registered under the Securities Act of 1933, as now
in force or hereafter amended, the Corporation shall be under no obligation to
issue the shares covered by such exercise unless and until the following
conditions have been fulfilled. The persons who exercise such Option shall war
rant to the Corporation that, at the time of such exercise, such persons are
acquiring their option shares for investment and not with a view to, or for sale
in connection with, the distribution of any such Shares. In such event, the
person(s) acquiring such Shares shall be bound by the provisions of the
following legend (or similar legend) which shall be endorsed upon the
certificate(s) evidencing their Option Shares issued pursuant to such exercise.
"The shares represented by this certificate have been acquired
for investment and they may not be sold or otherwise transferred by
any person, including a pledgee, in the absence of registration of the
shares under the Securities Act of 1933 or an opinion of counsel
satisfactory to the Corporation that an exemption from registration is
then available."
N. Other Restrictions
In addition, the following legends, and such other legends as the
Board may determine, may be endorsed upon the certificate:
"The shares represented by this certificate are subject to all of
the terms, conditions, limitations and restrictions set forth in
Xechem International, Inc. Amended and Restated Stock Option Plan
("Plan") approved by the Corporation's stockholders on ________,
199__, and a copy of which is on file with the Corporation, and an
option agreement (the "Option Agreement") pursuant to which the shares
have been acquired. All terms, conditions, limitations and
restrictions of the Plan and the Option Agreement are fully binding
upon the holder of this Certificate, his or her successors, estate,
heirs, assigns, personal representative, administrator, executor or
guardian as the case may be, for all purposes until such time as all
terms, conditions, limitations and restrictions of the Plan or the
Option Agreement are removed waived or otherwise vacated in a manner
expressly authorized thereunder."
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Without limiting the generality of the foregoing the Corporation may delay
issuance of the Shares until completion of any action or obtaining any consent,
which the Corporation deems neces sary under any applicable law (including
without limitation state securities or "blue sky" laws).
VI. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
In the event that the authorized and outstanding Shares of the Corporation
are changed into or exchanged for a different number or kind of shares or other
securities of the Corporation or of another corporation by reason of any
reorganization, merger, consolidation, recapitalization, reclassification,
change in par value, stock split-up, combination of shares or dividend payable
in capital stock, or the like, appropriate adjustments to prevent dilution or
enlargement of the rights granted to or available for, Participants, shall be
made in the manner and kind of shares for the purpose of which Options may be
granted under the Plan, and, in addition, appropriate adjustment shall be made
in the number and kind of shares and in the option price per share subject to
outstanding Options. No such adjustment shall be made which shall, within the
meaning of Section 424 of the Code, constitute such a modification, extension or
renewal of an Incentive Option as to cause it to be considered as the grant of a
new Incentive Option.
VII. DISSOLUTION OR LIQUIDATION OF THE CORPORATION
Upon the dissolution or liquidation of the Corporation other than in
connection with a transaction to which the preceding Article VI is applicable,
all Options granted hereunder shall terminate and become null and void; provided
however, that if the rights of a Participant have not otherwise terminated and
expired, the Participant shall have the right immediately prior to such
dissolution or liquidation to exercise any Option granted hereunder to the
extent that the right to purchase shares thereunder has accrued as of the date
immediately prior to such dissolution or liquidation.
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VIII. TERMINATION OF THE PLAN
The Plan shall terminate (10) years from the earlier of the date of its
adoption or the date of its approval by the stockholders. The Plan may be
terminated at an earlier date by vote of the stockholders or the Board of
Directors; provided, however, that any such earlier termination shall not affect
any Options granted or Option Agreements executed prior to the effective date of
such termination.
IX. AMENDMENT OF THE PLAN
The Plan may be amended by the Board of Directors (but not by the
Committee); provided however, that no amendment may increase the number of
Shares on which Options may be granted other than as provided by Article VI or
change the designation of the class of employees eligible to receive Incentive
Options unless such amendment is approved by the stockholders within one (1)
year after such action by the Board of Directors. Except as approved by Article
VI, no amendment shall affect any Options theretofore granted or any Option
Agreements theretofore executed unless such amendment shall expressly so provide
and unless any Participant to whom an Option has been granted who would be
adversely affected by such amendment consents in writing thereto.
X. EMPLOYMENT RELATIONSHIP
Nothing herein contained shall be deemed to prevent the Corporation or an
Affiliate from terminating the employment or other service, including service as
a member of the Corporation's Scientific Advisory Board, of a Participant, nor
to prevent a Participant from terminating the Par ticipant's employment or other
service with the Corporation or an Affiliate.
XI. INDEMNIFICATION OF COMMITTEE
In addition to such other rights of indemnification as they may have as
directors or as members of the Committee, the members of the Committee (or the
directors acting with respect to the Plan if there is no Committee) shall be
indemnified by the Corporation against all reasonable expenses, including
attorneys fees, actually and reasonably incurred in connection with the defense
of any action, suit or proceeding, or in connection with any appeal therein to
which they or any of them may be a party by reason of any action taken by them
as members of the Committee and against all amounts paid by them in settlement
thereof (provided such settlement is approved by independent legal counsel
selected by the
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Corporation) or paid by them in satisfaction of a judgment in any such action,
suit or proceeding, except in relation to matters as to which it shall be
adjudged in such action, suit or proceeding that such Committee member is liable
for gross negligence or willful misconduct in the performance of his or her
duties. To receive such indemnification, a Committee member must first offer in
writing to the Corporation the opportunity, at its own expense, to defend any
such action, suit or proceeding.
XII. EFFECTIVE DATE
This Plan shall become effective upon adoption by the Board of Directors,
provided that within one (1) year, before or after, such adoption by the Board
of Directors the Plan is approved by the stockholders of the Corporation.
XIII. GOVERNING LAW
This Plan and all determinations made and actions taken pursuant hereto,
shall be governed by the laws of the State of New Jersey and construed in
accordance therewith.
A True Copy
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Secretary
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EXHIBIT 24(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Xechem International, Inc. and its subsidiaries on Form S-8 (File No. 333-____)
of our report, which includes an explanatory paragraph, relating to factors
which raise substantial doubt about the company's ability to continue as a
going concern, dated March 20, 1998, on our audits of the consolidated
financial statements of Xechem International, Inc. and its subsidiaries as of
December 31, 1997, and for each of the two years in the period ended
December 31, 1997 and for the cumulative period from March 15, 1990 (date of
inception) to December 31, 1997.
/s/ Moore Stephens, P.C.
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MOORE STEPHENS, P.C.
Certified Public Accountants
Cranford, New Jersey
November 17, 1998
