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As filed with the Securities and Exchange Commission on February 12, 1999
Registration No. 333-________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PHARMAPRINT INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
33-0640125
(I.R.S. Employer Identification Number)
2600 MICHELSON DRIVE, SUITE 1600
IRVINE, CALIFORNIA 92612
(Address of principal executive offices)
PHARMAPRINT INC.
1995 STOCK OPTION PLAN, AS AMENDED
OPTION GRANT AGREEMENTS
(Full Title of Plan)
JAMES R. WODACH
2600 MICHELSON DRIVE, SUITE 1600
IRVINE, CALIFORNIA 92612
(Name and address of agent for service)
(949) 794-7778
(Telephone number, including area code, of agent for service)
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Copies to:
Barry J. Siegel, Esquire
Klehr, Harrison, Harvey, Branzburg & Ellers LLP
1401 Walnut Street
Philadelphia, Pennsylvania 19102
(215) 568-6060
CALCULATION OF REGISTRATION FEE
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Proposed Proposed Amount of
Title of Securities Amount to be Maximum Offering Maximum Aggregate Registration
to be Registered Registered Price Per Share Offering Price Fee
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Common Stock 2,859,000(1) $13.53(2) $38,682,270(2) $10,754
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(1) Represents the maximum number of shares of the Registrant's Common
Stock issuable upon the exercise of the maximum number of options which
may be granted under the PharmaPrint Inc. 1995 Stock Option Plan, As
Amended and outstanding consulting agreements.
(2) Based on the average of the high and low trading price of the
Registrant's Common Stock as reported by the Nasdaq National Market
on February 11, 1999, estimated solely for the purpose of calculating
the registration fee in accordance with Rule 457(c) under the
Securities Act of 1933, as amended.
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PART I
INFORMATION REQUIRED IN PROSPECTUS
A reoffer prospectus prepared in accordance with the requirements of
Part I of Form S-3 is being filed with the Commission as part of this
Registration Statement. The Section 10(a) prospectus is omitted from this
Registration Statement in accordance with Rule 428 under the Securities Act of
1933, as amended, and the Note to Part I of Form S-8.
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PROSPECTUS
PHARMAPRINT INC.
2600 MICHELSON DRIVE, SUITE 1600
IRVINE, CALIFORNIA 92612
(949) 794-7778
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1,208,438 SHARES OF COMMON STOCK
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The persons listed in this Prospectus under "Selling Stockholders"
are offering and selling a total of 1,208,438 shares of common stock of
PharmaPrint Inc. which they may acquire upon exercise of stock options
granted by PharmaPrint pursuant to the terms of the PharmaPrint Inc. 1995
Stock Option Plan, as amended. Because such stock options are subject to a
vesting schedule, as of February 1, 1999 options to purchase approximately
2,008,005 shares of Common Stock were exercisable. In addition, the holders
of options to purchase 2,095,565 shares have entered into agreements with
PharmaPrint limiting the number of shares of Common Stock which they may sell
in any calendar quarter to 30% (and in the case of two holders 50%) of the
total number of shares issuable upon exercise of options held by each such
person.
The Selling Stockholders may offer the shares of common stock through
public or private transactions, on The Nasdaq National Market under the symbol
"PPRT" at prevailing market prices or in private transactions at negotiated
prices. PharmaPrint will pay all costs and expenses incurred in connection with
the registration of the issuance and resale of the shares of common stock under
the Securities Act of 1933. The Selling Stockholders will pay the costs
associated with any sales of the shares of common stock, including any
discounts, commissions and applicable transfer taxes.
SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR CERTAIN INFORMATION
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE
SHARES OF COMMON STOCK OR DETERMINED IF THIS PROSPECTUS
IS TRUTHFUL OR COMPLETED ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is February 12, 1999.
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TABLE OF CONTENTS
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS.................................................................3
RISK FACTORS......................................................................................................3
PHARMAPRINT......................................................................................................12
USE OF PROCEEDS..................................................................................................13
SELLING STOCKHOLDERS.............................................................................................14
PLAN OF DISTRIBUTION.............................................................................................15
LEGAL MATTERS....................................................................................................16
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..................................................................16
WHERE YOU CAN GET MORE INFORMATION...............................................................................16
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements contained in this Prospectus discuss future
expectations, contain projections of results of operations, financial condition,
growth, prospects and capital expenditures or state other "forward-looking"
information. Those statements are subject to known and unknown risks,
uncertainties and other factors that could cause the actual results to differ
materially from those contemplated by the statements. The forward-looking
information is based on various factors and was derived using numerous
assumptions.
Important factors that may cause actual results to differ from
projections and expectations include, for example,
- the revenues generated from or a change in our relationship
with AHP;
- the cost and availability of botanical extracts;
- the cost and availability of manufacturing service providers;
- the ability to obtain and enforce patents;
- uncertainties related to the PharmaPrint-TM- Process;
- government regulation and the uncertainty of product approvals;
- the ability to commercialize and market products;
- the future capital needs of PharmaPrint;
- control by existing stockholders;
- other risks described under "Risk Factors" below and which may
be described in the PharmaPrint's future filings with the SEC.
PharmaPrint does not promise, nor is it obligated, to update
forward-looking information to reflect actual results or changes in assumptions
or other factors that could affect those statements.
RISK FACTORS
You should carefully consider each of the following factors and other
information in this prospectus before deciding to invest in shares of common
stock.
EARLY STAGE OF MANUFACTURING AND PRODUCT DEVELOPMENT; HISTORY OF OPERATING
LOSSES
We have a limited operating history and have recognized substantial
losses each year since we began operations. Our prospects must be considered in
light of the risks, expenses and difficulties faced by businesses in the
consumer products and pharmaceutical industries. These industries have a large
number of market entrants, intense competition and a high failure rate. To
achieve profitable operations, we will need to continue to commit substantial
resources to successfully manufacture products. While we expect to be able to
satisfy our commitments, we can provide no assurance that we will be successful
in doing so or that we can generate sufficient revenue to fund our continuing
operations.
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DEPENDENCE ON AHP
EXCLUSIVE LICENSE
Under several agreements, we have granted American Home Products
Corporation ("AHP") an exclusive license to market and sell certain dietary
supplement products. Because we cannot sell these dietary supplement products by
any other means, we are relying on AHP as our only source of product revenues in
the near future.
RISK OF TERMINATION
AHP can terminate in their sole discretion our agreements as to
specific products upon ninety days notice and can terminate our agreements in
their entirety upon one year's notice. AHP could decide to terminate our
agreements for many reasons, including shifts in its strategic focus, poor
market reaction to Centrum-branded dietary supplements, lack of patent
protection for the PharmaPrint-TM- Process or a determination to pursue
alternative methods of producing dietary supplements. If AHP terminates our
agreements in whole or in part, we may not be able to enter into comparable
agreements for the distribution and sale of our products or establish our own
marketing and sales force. Termination of our agreements could have a material
adverse effect on our business, financial condition and results of operations.
RESEARCH AND DEVELOPMENT COSTS; FIXED PRICES
We must conduct, at our own expense, the research and development and
regulatory work necessary to produce the products for sale to AHP. This will
require significant expenditures that we may not recover if AHP terminates the
agreements in whole or in part or if sales with AHP are lower than anticipated.
Under an agreement reached in November 1998, AHP paid us an additional $5
million as reimbursement for certain development and production costs and
increased the price that AHP pays us for products delivered before February 28,
1999. AHP and PharmaPrint are currently negotiating an extension of this per
unit increase or alternative pricing provisions. Beginning March 1, 1999, the
prices that AHP pays us (with some limited exceptions) will revert to the
prices set in the original agreements based upon the manufacturing
specifications agreed upon in the original agreements. Such prices will
remain fixed until October 2000. Accordingly, increases in material or
production costs, without a corresponding increase in the price AHP pays us,
will reduce the profitability of the AHP supply arrangements.
LIMITED OBLIGATION TO PAY ROYALTIES; PATENT PROTECTION
AHP is not obligated to pay us royalties on sales of products that are
not covered by a patent relating to the PharmaPrint-TM- Process. We currently do
not have any such patents for any of the products that AHP is marketing and we
can provide no assurance that we will obtain patents for any of the products
sold through AHP. Our business, financial condition and results of operations
will suffer if AHP does not pay royalties to us.
LIMITED OBLIGATION TO MARKET PRODUCTS
Our agreements with AHP limit their obligation to provide marketing
support. During each of the first two years after the initial launch date of the
first product, AHP must spend the lesser of fifty percent of net sales of the
products or $20 million. Accordingly, poor initial sales could result in very
limited marketing support from AHP. AHP is obligated to devote the efforts and
resources it normally uses to market its own non-prescription products with
similar market potential and at a similar stage of product life. However, after
the first two years following the initial launch date, AHP is not required to
spend any specific amount on marketing support. If AHP does not provide
sufficient marketing support, our business, financial condition and results of
operations may suffer. In addition, our sole remedy if AHP fails to meet its
minimum spending commitments (provided that AHP has otherwise met its
obligations under our agreements), is to sell our dietary supplement products
under a national or regional brand through one additional party.
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RELIANCE ON CORPORATE PARTNERS
We expect to enter into agreements with other partners for the
development and marketing of other products. AHP has certain options to develop
with us other Food and Drug Administration regulated pharmaceutical products for
sale in the over-the-counter market. The success of any of our products, even if
successfully developed, will depend on the ability of our partners to market and
commercialize such products. We can provide no assurance that any partnership
will result in product revenues or profits. In addition, any of our corporate
partners may pursue alternative technologies or develop alternative therapeutics
targeted at the same markets or diseases that we have targeted. This risk may
increase if we are not successful in obtaining and maintaining patent protection
for the PharmaPrint-TM- Process.
COST AND AVAILABILITY OF BOTANICAL EXTRACTS
We procure the botanical extracts necessary to develop our products
from various sources in the United States, Europe and Asia. We have agreed and
have the exclusive right to supply AHP with all of AHP's requirements of the
products that we have licensed to AHP. We purchase a significant amount of
botanical extracts to meet these obligations. Since many of the botanical
extracts contained in our products are not commodities, we cannot hedge price
risk with traditional futures contracts. In addition, because some of these
plants are picked in the wild rather than farm cultivated, the supply may be
unavailable. This uncertain supply, in combination with the possibility of
continued increases in demand, could result in significant increases in the
price of the botanical extracts used in our products. In addition, if due to
supply shortages AHP is unable to meet the demand of its customers, even if for
a short time, the result could be a long-term decrease in sales. Our ability to
increase the price of our products licensed to AHP to adjust for increases in
raw material costs is limited. We can provide no assurance that an adequate
supply of botanical extracts will be available to us on commercially reasonable
terms. We have secured sufficient quantities of botanical extracts for our near
term requirements and believe there are numerous alternative suppliers
throughout the world from which we can obtain these botanical extracts. However,
any shortage of such botanical extracts may cause delays, as well as increased
material costs, that could have a material adverse effect on our business,
financial condition and results of operations.
NEED FOR ADDITIONAL FUNDING; UNCERTAIN ACCESS TO CAPITAL
We expect our current capital resources to last at least 9 months. We
will then need substantial additional funds to support our dietary supplement
business and long-term pharmaceutical product development programs. Under a loan
agreement, we recently borrowed $500,000 to fund the purchase of certain
equipment. Under the loan agreement, we will be permitted to borrow up to an
additional $4 million depending upon the availability of approved accounts
receivable and purchase orders as security for such additional loans. Under the
loan agreement, our ability to borrow funds is also subject to the satisfaction
of certain financial ratios and covenants. Our future capital requirements will
depend on many factors including:
- the amount of orders we receive from AHP;
- the amount of inventory we are required to maintain;
- the revenues generated under the agreements with AHP;
- the cost of botanical extracts and other manufacturing costs;
- scientific progress in our research and development programs;
- progress with toxicology testing and clinical trials;
- the time and cost involved in obtaining regulatory approvals;
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- patent costs;
- competing technological and market developments; and
- our corporate partnerships.
If our capital resources are insufficient to meet our operating
requirements, we will seek additional funds through equity or debt financings or
through arrangements with corporate partners. We may need funds sooner than
anticipated. Other than the $4.5 million loan agreement described in the prior
paragraph, we have no arrangements for additional financing. Any additional
financing may substantially dilute our existing stockholders. We can provide no
assurance that additional financing will be available when needed or upon
acceptable terms. Our ability to raise additional funds will be adversely
affected if we are unable to obtain patent protection for our technologies. If
adequate funds are not available, our business, financial condition and results
of operations may suffer.
UNCERTAINTIES RELATED TO THE PHARMAPRINT-TM- PROCESS
We believe that our competitive advantage is our unique ability,
through application of the PharmaPrint-TM- Process, to assess and standardize
the bioactive composition and potency of plant-derived dietary supplements and
pharmaceuticals. We can provide no assurance, however, that consumers in the
dietary supplement market will value this standardization, particularly in light
of the fact that these products cannot be marketed through any claims for the
treatment or prevention of disease. In addition, the PharmaPrint-TM- Process
itself does not assure efficacy of our products. We could make claims of
efficacy only after successful clinical trials, which will not be conducted with
respect to our dietary supplement products. Accordingly, we can provide no
assurance that our dietary supplement products will achieve commercial success.
In the pharmaceutical market, we depend on regulatory approval for our
plant-derived multi-molecule drug candidates. We do not believe that the Food
and Drug Administration and other regulatory authorities have ever approved
multi-molecule, botanical pharmaceuticals. We can provide no assurance that
regulators will approve these compounds in general, accept the PharmaPrint-TM-
Process as an appropriate method of standardizing botanical compounds for
clinical testing, or approve our particular drug candidates. Without regulatory
review and approval, we could not achieve our pharmaceutical development plans.
In such case, our only potential business would be dietary supplements.
DEPENDENCE ON UNCERTAIN PATENTS AND OTHER PROPRIETARY RIGHTS
Our success will depend in part on our ability to obtain and maintain
patent protection for our technologies and dietary supplement and pharmaceutical
products, preserve our trade secrets, and operate without infringing on the
proprietary rights of third parties. We plan to achieve a competitive advantage
as the only provider of botanical dietary supplements and multi-molecule
pharmaceuticals that can market its products on the basis of consistent
composition, the presence of at least one bioactive and proven bioactivity. This
depends on our ability to obtain a patent covering the PharmaPrint-TM- Process
that is broad enough to prevent competitors from making such claims. We have
applied for a broad process patent covering a method for making high quality
botanical products that incorporates the steps that make up the PharmaPrint-TM-
Process, as well as additional patents covering the application of this method
to the manufacture of 11 specific botanical compositions. We intend to apply for
additional patents as we develop additional products or enhance our
technologies. To date, we have not received any patents or notices of allowance
of any patent application for the PharmaPrint-TM- Process or any products we
currently intend to commercialize, although we have received certain patents and
allowances on products we don't intend on commercializing. If we are not
successful in obtaining and maintaining adequate patent protection for the
PharmaPrint-TM- Process, we will not be able to protect our pharmaceutical
products and our ability to compete successfully in the dietary supplements
market will be impaired. Furthermore, AHP is not obligated to pay royalties on
sales of any products not covered by a patent relating to the PharmaPrint-TM-
Process.
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We can provide no assurance that we will obtain any patents covering
our technology or products, or that any patents that may be issued will provide
substantial protection or be of commercial benefit. Any patent covering the
PharmaPrint-TM- Process may be vulnerable to challenge on various grounds,
including lack of nonobviousness or novelty. A great deal of research and
development work has taken place in botanicals, including efforts focused on
single-molecule bioactivity and analysis of multiple botanical components. We
believe that the PharmaPrint-TM- Process is unique and patentable because of its
focus on determining high quality botanicals by identifying bioactive components
having activity relevant to clinical indications and establishing manufacturing
standards covering the range of bioactivity of the total of these components.
However, it is arguable that prior work on bioactivity relating to the
development of single molecule drugs or multi-molecule chemical composition
analysis could contradict novelty or nonobviousness of our invention.
The issuance of a patent is not conclusive as to its validity or
enforceability, and competitors may be able to design around any patent that we
obtain. Competitors may find ways to substantiate claims about the composition
or bioactivity of competing products without utilizing our process. We can
provide no assurance that any patent issued to us will not be invalidated, or
that we will not be forced to narrow, through reexamination, the scope of such a
patent claim to avoid its invalidation. In addition, we can provide no assurance
that any application of our technology will not infringe on patents or
proprietary rights of others. In addition, any licenses that might be required
as a result of such infringement for our processes or products may not be
available on commercially reasonable terms, if at all.
Litigation may be necessary to enforce our patent and propriety rights
or to determine the scope and validity of others' proprietary rights. Any such
litigation could be very costly and could distract our management and technical
personnel. We may participate in interference proceedings that may in the future
be declared by the Patent and Trademark Office to determine priority of
invention, which could be very costly. We can provide no assurance of a
favorable outcome of any litigation or interference proceedings. An unfavorable
outcome in any proceeding could have a material adverse effect on our business,
financial condition and results of operations.
The patent position of biotechnology and biopharmaceutical firms
generally is highly uncertain and involves complex legal and factual questions.
To date, no consistent policy has emerged regarding the breadth of claims
allowed in biotechnology and biopharmaceutical patents. Accordingly, there can
be no assurance that any patent applications that we own or license will result
in patents being issued or that, if issued, the patents will afford protection
against competitors with similar technology.
Many of the processes and much of the know-how that are important to
our technology depend upon the non-patentable skills, knowledge, and experience
of our scientific and technical personnel and collaborators. To help protect our
rights, we require employees, collaborators, and significant consultants and
advisors with access to confidential information, to sign confidentiality
agreements. We can provide no assurance, however, that these agreements will
provide adequate protection for our trade secrets, know-how or proprietary
information in the event of any unauthorized use or disclosure.
OUTSOURCING OF MANUFACTURING, RESEARCH AND DEVELOPMENT AND REGULATORY ACTIVITIES
Pursuant to a supply agreement with AHP, we are AHP's exclusive
supplier of the herbal products sold by AHP and must produce such products under
applicable current good manufacturing practices. We do not have the internal
facilities or capabilities to manufacture our products, but rather rely on third
party manufacturers. If we are unable to maintain contract manufacturing
relationships on acceptable terms or otherwise develop manufacturing
capabilities, our ability to deliver products to AHP or others may be adversely
affected.
If we fail to supply AHP with certain commercial quantities of
products for a period of 60 consecutive days for any reason, AHP has the
right to manufacture such products itself, or to retain a third party
manufacturer. This right is exercisable for a limited period of time if
PharmaPrint is able to continue manufacturing commercial quantities of these
products. We can provide no assurance that we will be able to meet our
obligation to supply such products in sufficient commercial quantities. A
loss of manufacturing
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rights to AHP or a third party would have a material adverse effect on our
business, financial condition and results of operations.
We have limited experience in the sale, marketing, distribution and
clinical testing of dietary supplements and pharmaceutical products. Therefore,
we rely on collaborative arrangements or license and distribution agreements
with third parties. To be successful, our pharmaceutical products must be
manufactured, at an acceptable cost, in commercial quantities under the Food and
Drug Administration's or other standards prescribed by regulatory agencies in
other countries.
Most of our manufacturing, research and development activities are
performed by third party laboratories and manufacturing facilities. Although we
believe that our partners have an economic motivation to perform their duties in
a timely and effective manner, the amount and timing of the resources devoted by
such parties to performing their duties may vary. Any failure to perform such
duties may result in a delay in our manufacturing, product development and
marketing activities. Any failure or delay could also result in a breach of our
obligations under the agreements with AHP and any other collaborative
arrangements. Any such failure or delay could have a material adverse effect on
our business, financial condition and results of operations.
In the future, we may transfer control of toxicology studies and
clinical trials, the preparation and submission of regulatory approvals and the
manufacture of products to a partner. If we do transfer such control, we would
then depend on our partners' efforts to effectively develop our drug candidates
Additionally, if we outsource the manufacturing of drug candidates, we may lose
the opportunity to generate profits from manufacturing.
COMPETITION AND TECHNOLOGICAL CHANGE
The pharmaceutical, consumer products and biotechnology industries are
subject to intense competition and rapid technological change. We face intense
competition from numerous sources, including pharmaceutical and consumer
products, herbal products, biotechnology and chemical companies, as well as
universities and other research organizations. Industry-wide interest in our
arrangement with AHP and the use of our PharmaPrint-TM- Process technology may
accelerate as the technology becomes more widely understood. Competitors may
then have additional incentive to develop technologies and products that compete
with ours. These competitors may succeed in developing technologies and products
that are more effective than ours or that would render our PharmaPrint-TM-
Process and products obsolete. If we are not successful in obtaining and
maintaining adequate patent protection for the PharmaPrint-TM- Process,
competitors may be able to duplicate or exceed our capabilities.
Many of our potential competitors have competitive advantages over us,
including:
- greater capital resources;
- greater experience in manufacturing and marketing products;
- greater research and development staffs and facilities;
- greater experience in conducting toxicology testing and human
clinical trials on new pharmaceutical products; and
- greater experience in obtaining Food and Drug Administration
and other regulatory approvals of products.
Accordingly, some of our competitors may succeed in obtaining
regulatory approval for products more rapidly or effectively. Moreover, we can
provide no assurance that we will have sufficient resources to undertake the
continuing research and development necessary to remain competitive.
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UNCERTAINTIES RELATED TO CLINICAL TRIALS
In order to obtain marketing approval from the Food and Drug
Administration, we must demonstrate through toxicology testing and clinical
trials that PPRT-321, our only drug candidate for which the Food and Drug
Administration has allowed clinical trials to date, is safe and effective for
use in its target indication. The results from initial clinical trials of
PPRT-321 and any other drug candidates may not be indicative of the results that
may be obtained in further clinical trials. Many companies have suffered
significant setbacks in advanced clinical trials, even after promising results
in earlier trials. The rate of completion of our clinical trials may be delayed
by many factors including slower than anticipated patient enrollment, a slower
than anticipated timetable, or any other adverse event.
During the course of clinical trials, patients can die or suffer other
adverse medical effects for reasons that may not be related to the drug being
tested, but which can affect clinical trial results. We can provide no assurance
that regulatory authorities will permit us to undertake additional clinical
trials of PPRT-321 or to initiate clinical trials of any other drug candidates.
In addition, we may not successfully complete any clinical trials that we
undertake. Any delays in or termination of our clinical trial efforts would have
a material adverse effect on our business, financial condition and results of
operations. We can provide no assurance that PPRT-321 or any other drug
candidate will be safe or effective in clinical trials, that PPRT-321 or any
other drug candidate will receive regulatory approval for any indication or that
any clinical trials undertaken will result in marketable products. If PPRT-321
or other drug candidates are not shown to be safe and effective in clinical
trials, our business, financial condition and results of operations would be
materially adversely affected.
GOVERNMENT REGULATION; NO ASSURANCE OF REGULATORY APPROVAL
The following information describes statutory or regulatory provisions.
This discussion highlights some aspects of applicable law and may not contain
all the information that may be important to you on this topic. The
manufacturing, processing, formulation, packaging, labeling, advertising and
sale of dietary supplements are regulated by the Federal Food, Drug and Cosmetic
Act, by the Dietary Supplement Health & Education Act of 1994, and by various
federal agencies, including the Food and Drug Administration and the Federal
Trade Commission. Our activities are also regulated by various agencies of the
states, provinces, localities and countries in which our products are sold.
The Dietary Supplement Health Education Act defines dietary
supplements, permits "structure/function" statements under certain conditions,
and regulates the use of published literature in connection with the sale of
herbal products. Dietary supplements do not require approval by the Food and
Drug Administration prior to marketing. Dietary supplements are subject to
various regulatory requirements concerning their composition, permissible claims
(including substantiation of any claims), manufacturing procedures and other
elements. The Dietary Supplement Health Education Act prohibits marketing
dietary supplements for the treatment or prevention of diseases. Because we are
limited in the type of claims we may make, we may not be able to effectively
differentiate our dietary supplement products from those of our competitors. We
cannot determine what effect current or future regulations will have on our
business, financial conditions or results of operations.
The development of pharmaceuticals is subject to extensive, costly and
rigorous regulation by the Food and Drug Administration and foreign regulatory
authorities. Drugs that have not been demonstrated to be safe and effective
according to Food and Drug Administration standards are typically classified as
"new drugs" and require Food and Drug Administration approval prior to
marketing. In order to initiate a clinical trial for a new drug, an
investigational new application must be submitted to the Food and Drug
Administration. The process of obtaining required regulatory approvals from the
Food and Drug Administration and other regulatory authorities often takes many
years. The process is expensive and can vary substantially based on the type,
complexity and novelty of the pharmaceutical product. Any additional
governmental regulations could delay regulatory approval of our pharmaceutical
products. We believe, based upon documentation in medical literature of safe
human use of botanical therapeutics, that we may be able to pursue a less
time-consuming development process in the United States and some foreign
jurisdictions. However, we must engage in extensive toxicology studies and
clinical testing in order to demonstrate the safety and efficacy of our
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pharmaceutical products for human use. We can provide no assurance of quick
approval or that we will obtain approval at all. Requests for additional data
and delays in obtaining regulatory approvals would adversely affect the
marketing of our pharmaceutical products and our ability to generate
pharmaceutical product revenues or royalties.
We can provide no assurance that regulatory authorities will permit us
to carry out further testing. If permitted, additional clinical testing may not
prove that our pharmaceutical products are as safe and effective as necessary to
permit marketing approvals for these products from regulatory authorities.
Additionally, the results of any initial toxicology and clinical testing are not
necessarily predictive of results that may be obtained from subsequent or more
extensive toxicology and clinical testing. We can provide no assurance that
further trials will be successful. Some companies in the pharmaceutical industry
have suffered significant setbacks in advanced clinical trials, even after
promising results in earlier trials. The failure to adequately demonstrate the
safety and efficacy of a pharmaceutical product under development would delay or
prevent regulatory approval of the product and would have a material adverse
effect on our business, financial condition and results of operations. Delays in
obtaining regulatory approvals could adversely affect the marketing of our
pharmaceutical products and diminish any competitive advantage we may attain. In
addition, delays in regulatory approvals encountered by any corporate partner
could adversely affect our ability to receive royalties. We can provide no
assurance that if clinical trials are completed, they will be successful or that
we will be able to submit any new drug application on its anticipated schedule.
Any such applications may not be reviewed and approved by regulatory agencies in
a timely manner, if at all.
The Food and Drug Administration has established a "botanical"
committee to provide regulatory guidelines, including guidelines for approval of
botanicals as pharmaceuticals. However, we believe that the Food and Drug
Administration has never approved for sale a pharmaceutical version of a
multi-molecule, botanical medicine. Food and Drug Administration approval of
botanicals that qualify as pharmaceuticals would presumably be evaluated under
the same statutory standards as are applied to all new drugs. However, Food and
Drug Administration review and approval practices adopted for botanical
medicines under these statutory standards could result in competitive natural
medicines that are not manufactured based on our PharmaPrint-TM- Process
technology.
Any regulatory approval may involve marketing restrictions. In
addition, pharmaceutical products are subject to continuous governmental review
and post-market evaluation, which could result in withdrawal, suspension or
limitation of approvals. Any discovery of previously unrecognized problems could
result in restrictions on the pharmaceutical product or its manufacture,
including withdrawal of the pharmaceutical product from the market. Failure to
comply with applicable regulatory requirements can result in fines, suspension
of regulatory approvals, pharmaceutical product recalls, seizure of products,
operating restrictions or criminal prosecution.
DEPENDENCE ON KEY EMPLOYEES
We depend on the continuing services of Elliot P. Friedman, our
Chairman of the Board and Chief Executive Officer and Robert Burgess, our
President and Chief Operating Officer. Loss of the services of Mr. Friedman or
Mr. Burgess could be detrimental to our business. We have obtained key-man life
insurance in the amount of $1 million on the life of Mr. Friedman. Our success
also depends on our ability to attract and retain highly qualified scientific
and managerial personnel. We face competition for such personnel from other
companies, research and academic institutions, government entities and other
organizations, many of which have significantly greater resources. There can be
no assurance that we will be able to recruit and retain such personnel.
VOLATILITY OF COMMON STOCK PRICE
The market price of our common stock has historically been highly
volatile. This volatility is likely to continue. The market price of our common
stock may fluctuate and drop sharply for many reasons. Some events that may
cause a decline in the price of our common stock include:
- announcements concerning our business or competitors;
-10-
<PAGE>
- results of the sales of our products sold through AHP;
- failures or unexpected delays in manufacturing;
- patent developments;
- negative reaction to dietary supplements in general;
- results of toxicology testing and clinical trials;
- termination or modification of agreement with collaborative
partners;
- failures or unexpected delays in obtaining regulatory
approvals;
- technological innovations;
- statements or recommendations by the Food and Drug
Administration or their advisory panels;
- loss of key personnel;
- government regulations;
- litigation or public concern as to the safety or commercial
value of our technologies or products; and
- failure to meet the expectations of securities analysts or
investors.
In addition, market conditions for emerging growth companies and
pharmaceutical companies, economic conditions and general stock market
movements, even if unrelated to our operations, may have a significant impact on
the price of our common stock. A sharp decline in the price of our common stock
could also result in securities class action litigation against us. Such
litigation could be very costly and could divert management's attention and
resources, which may have a material adverse effect on our business, financial
condition and results of operations.
CONTROL BY EXISTING STOCKHOLDERS AND MANAGEMENT
Our current executive officers, directors and other significant
stockholders own approximately 39.3% of our issued and outstanding shares of
common stock. Accordingly, such persons will likely continue to control our
Board of Directors and direct the operation of our business.
-11-
<PAGE>
PHARMAPRINT
PharmaPrint Inc. uses its proprietary development and manufacturing
process technologies (the "PharmaPrint-TM- Process") to develop high quality
dietary supplement products and pharmaceutical candidates from botanical
sources. PharmaPrint believes that its PharmaPrint-TM- Process technology
represents a new paradigm in the development of therapeutic products from
botanical sources. Unlike traditional drug development process of identifying,
isolating and synthesizing single molecules from plant and other sources,
PharmaPrint's core technologies were developed based on empirical data
suggesting that the health benefits and safe usage of certain plant-derived
therapeutics might be the result of the natural combination of multiple
molecules found in the plant extract and that single molecules, in isolation,
may not replicate the natural plant's effectiveness. The PharmaPrint-TM- Process
technology enables PharmaPrint to identify, quantify and standardize the
bioactives within plant sources which are believed to provide therapeutic
benefits and produce products having consistent batch-to-batch quantities and
ratios of these bioactives.
PharmaPrint is applying a dual commercialization strategy for its
PharmaPrint-TM- Process technology. The first application of the PharmaPrint-TM-
Process is the development of high quality, herbal dietary supplements. In the
United States, dietary supplements are considered food products under the
Dietary Supplement Health and Education Act of 1994 ("DSHEA") and, as such, are
not regulated as drugs by the United States Food and Drug Administration (the
"FDA") and do not require FDA approval prior to marketing. PharmaPrint has
developed products derived from six of the most commonly used dietary
supplements (echinacea, garlic, ginkgo biloba, ginseng, saw palmetto and St.
John's wort).
In October 1997 PharmaPrint entered into several agreements (the "AHP
Agreements") with American Home Products Corporation ("AHP") whereby PharmaPrint
is applying the PharmaPrint-TM- Process to produce a line of high quality
dietary supplement products currently marketed by AHP under its Centrum brand
name (the "AHP Products"). Pursuant to the terms of the agreements, AHP paid
PharmaPrint $2.5 million as an up-front licensing fee and is required to pay
additional fees of $500,000 upon each of (i) the issuance of a patent containing
claims covering the PharmaPrint-TM- Process and (ii) receipt and approval by AHP
of the initial AHP Products in sufficient time to permit AHP to meet its
proposed launch date. AHP has agreed to spend at least the lesser of $20 million
or an amount equal to 50% of net sales of the AHP Products in advertising and
other marketing expenditures during each of the first two years following
initial product launch. AHP has also agreed to purchase the AHP Products from
PharmaPrint under a Supply Agreement at specified prices. In addition, if
PharmaPrint succeeds in securing a patent containing a claim or claims
comprising the PharmaPrint-TM- Process applied generally or on a
product-by-product basis, AHP will pay royalties to PharmaPrint on net sales of
such patented products of 4% in the first year and 6% thereafter. AHP commenced
marketing PharmaPrint's six dietary supplement products in October 1998. In
November 1998, AHP and PharmaPrint entered into an agreement pursuant to which
AHP paid PharmaPrint $5.0 Million as reimbursement for certain development and
production costs and increased the per unit amount to be paid by AHP to
PharmaPrint for the AHP Products delivered or to be delivered prior to February
28, 1999. AHP and PharmaPrint are currently negotiating an extension of this per
unit increase or alternative pricing provisions. If an agreement is not reached,
beginning March 1999 the prices at which AHP purchase products from PharmaPrint,
with certain limited exceptions, will revert to the prices agreed upon in the
AHP Agreements based upon the manufacturing specifications agreed upon in the
AHP Agreements. Such prices will remain fixed until October 2000. Accordingly,
increases in material or production costs, without a corresponding increase in
the price AHP pays us, will reduce the profitability to PharmaPrint of the AHP
supply arrangements.
The second application of the PharmaPrint-TM- Process is the
development of FDA-approvable pharmaceuticals from natural plant sources.
PharmaPrint is focusing its pharmaceutical development efforts initially on
certain plants and plant extracts (such as saw palmetto and St. John's wort)
that have shown indications of clinical effectiveness in treating a variety of
diseases and physical conditions. Although these multi-molecule, plant-derived
products are widely sold in many European countries on a prescription or OTC
basis, they currently are available only as dietary supplements in the United
States. PharmaPrint believes that these products have not been approved as
pharmaceuticals
-12-
<PAGE>
under FDA guidelines primarily due to the difficulties of identifying the
bioactives and manufacturing the compounds to FDA standards.
PharmaPrint believes that the PharmaPrint-TM- Process will, for the
first time, make it feasible to develop multi-molecule, plant-derived drug
candidates with sufficient quality and consistency of bioactives to potentially
qualify for FDA approval. Because of the well-documented history of safe usage
of products derived from the same plant sources as PharmaPrint's drug
candidates, PharmaPrint believes that, in certain cases, the FDA may allow
PharmaPrint to commence clinical trials at the Phase II stage while concurrently
performing toxicology studies. PharmaPrint received such FDA clearance for its
initial pharmaceutical product candidate, PPRT-321, derived from saw palmetto.
PharmaPrint is currently examining the results of its Phase II study on
PPRT-321.
PharmaPrint's principal executive offices are located at 2600 Michelson
Drive, Suite 1600, Irvine, CA 92612 and its telephone number is (949) 794-7778.
USE OF PROCEEDS
PharmaPrint will not receive any proceeds from the sale of the shares
of Common Stock offered hereby. The Selling Stockholders will receive all of the
net proceeds from the sale of the shares of Common Stock offered hereby. Upon
the exercise of stock options or warrants by the holders thereof, PharmaPrint
will receive the exercise price of the stock options or the warrants. To the
extent the stock options or warrants are exercised, PharmaPrint will apply the
proceeds thereof for its general corporate purposes.
-13-
<PAGE>
SELLING STOCKHOLDERS
The following persons are eligible to sell, pursuant to this
Prospectus, the number of shares of Common Stock set forth opposite their names
in the table below. The Selling Stockholders may offer and sell the shares of
Common Stock from time to time in the manner set forth in the Plan of
Distribution. However, the Selling Stockholders are under no obligation to sell
all or any portion of their shares of Common Stock offered hereby.
<TABLE>
<CAPTION>
PRE-OFFERING POST-OFFERING
------------ -------------
TOTAL TOTAL
NUMBER NUMBER
OF SHARES OF SHARES
NAME AND RELATIONSHIP BENEFICIALLY SHARES BENEFICIALLY PERCENTAGE
TO THE COMPANY(1) OWNED(2) OFFERED(2) OWNED(3) OF CLASS(4)
----------------- -------- ---------- -------- -----------
<S> <C> <C> <C> <C>
John Abeles 95,000 95,000 0 0
Joel Bresser 70,000 70,000 0 0
Robert J. Burgess(5) 1,556,248 150,000 1,406,248 10.3%
Elliot P. Friedman(6) 1,659,248 150,000 1,509,248 11%
Paul Johnston 65,000 65,000 0 0
Erinch Ozada 158,000 75,000 83,000 *
Phillip G. Trad 373,438 373,438 0 0
Nathan Troum 30,000 30,000 0 0
James R. Wodach 100,000 100,000 0 0
Kenneth Gorelick 100,000 100,000 0 0
</TABLE>
- ---------------------------------
* Indicates less than one percent (1%).
(1) All persons are officers and/or directors of the Company.
(2) Assumes the vesting and exercise of all Options to purchase shares of
Common Stock granted to the Selling Stockholders.
(3) Assumes the offer and sale of all shares of Common Stock eligible to be
offered and sold hereby by the Selling Stockholders to third parties
unaffiliated with such Selling Stockholders.
(4) These percentages are calculated in accordance with Section 13(d) of
the Securities Exchange Act of 1934, as amended, and the rules
promulgated thereunder. Based upon 13,651,589 shares of Common Stock
issued and outstanding as of February 5, 1999.
(5) Includes 509,000, 65,270, 274,270, and 557,708 shares of Common Stock
owned of record by Mr. Burgess, JadiJo, Inc., D-RAM Industries Pty
Ltd., and Dimension. Does not include 200,000 call options (options to
purchase) granted to Mr. Burgess by Dr. Tasneem A. Khwaja, Chief
Scientific Officer of the Company.
(6) Does not include 200,000 call options (options to purchase) granted to
Mr. Friedman by Dr. Tasneem A. Khwaja, Chief Scientific Officer of the
Company.
-14-
<PAGE>
PLAN OF DISTRIBUTION
The shares of Common Stock are being offered on behalf of the Selling
Stockholders and PharmaPrint will not receive any proceeds from the Offering.
The shares of Common Stock may be sold or distributed from time to time by the
Selling Stockholders, or by pledgees, donees or transferees of, or other
successors in interest to, the Selling Stockholders, directly to one or more
purchasers (including pledgees) or through brokers, dealers or underwriters who
may act solely as agent or may acquire such shares as principals, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices, at negotiated prices, or at fixed prices, which may be subject to
change. The sale of the shares of Common Stock may be effected in one or more of
the following methods: (i) ordinary brokers' transactions, which may include
long or short sales; (ii) transactions involving cross or block trades or
otherwise on The Nasdaq National Market; (iii) purchases by brokers, dealers or
underwriters as principal and resale by such purchasers for their own accounts
pursuant to this Prospectus; (iv) "at the market" to or through market makers or
into established trading markets, including direct sales to purchasers or sales
effected through agents; or (vi) any combination of the foregoing, or by any
other legally available means. In addition, the Selling Stockholders or their
successors in interest may enter into hedging transactions with broker-dealers
who may engage in short sales of shares of Common Stock in the course of hedging
the position they assume with the Selling Stockholders. The Selling Stockholders
or their successors in interest may also enter into option or other transactions
with broker-dealers that require the delivery by such broker-dealers of the
shares of Common Stock, which shares of Common Stock may be resold thereafter
pursuant to this Prospectus. There can be no assurance that all or any of the
shares of Common Stock will be issued to, or sold by, the Selling Stockholders.
Brokers, dealers, underwriters or agents participating in the sale of
the shares of Common Stock as agents may receive compensation in the form of
commissions, discounts or concessions from the Selling Stockholders and/or
purchasers of the Common Stock for whom such broker-dealers may act as agent, or
to whom they may sell as principal, or both (which compensation to a particular
broker-dealer may be less than or in excess of customary commissions). The
Selling Stockholders and any broker-dealers or other persons who act in
connection with the sale of the Common Stock hereunder may be deemed to be
"Underwriters" within the meaning of the Securities Act, and any commission they
receive and proceeds of any sale of such shares may be deemed to be underwriting
discounts and commissions under the Securities Act. Neither PharmaPrint nor the
Selling Stockholders can presently estimate the amount of such compensation.
PharmaPrint knows of no existing arrangements between the Selling Stockholders
and any other stockholders, broker, dealer, underwriter or agent relating to the
sale or distribution of the shares of Common Stock.
The Selling Stockholders and any other persons participating in the
sale or distribution of the Common Stock will be subject to applicable
provisions of the Exchange Act and the rules and regulations thereunder, which
provisions may limit the timing of purchases and sales of any of the Common
Stock by the Selling Stockholders or any other such persons. The foregoing may
affect the marketability of the Common Stock.
Because such stock options are subject to a vesting schedule, as of
February 1, 1999 options to purchase approximately 2,008,005 shares of Common
Stock were exercisable. In addition, the holders of options to purchase
2,095,565 shares have entered into agreements with PharmaPrint limiting the
number of shares of Common Stock which they may sell in any calendar quarter
to 30% (and in the case of two holders 50%) of the total number of shares
issuable upon exercise of options held by each such person.
PharmaPrint will pay substantially all of the expenses incident to the
registration, offering and sale of the Common Stock to the public other than
commissions or discounts of underwriters, broker-dealers or agents. PharmaPrint
has also agreed to indemnify the Selling Stockholders and certain related
persons against certain liabilities, including liabilities under the Securities
Act.
-15-
<PAGE>
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby has been
passed upon for PharmaPrint by PharmaPrint's outside legal counsel, Klehr,
Harrison, Harvey, Branzburg & Ellers LLP, Philadelphia, Pennsylvania.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this Prospectus and information that we file later with
the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below and any future filings we will make with
the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934:
(a) PharmaPrint's Annual Report on Form 10-KSB for the fiscal year
ended March 31, 1998;
(b) PharmaPrint's Quarterly Reports on Form 10-QSB for the
quarters ended June 30, 1998 and September 30, 1998;
(c) PharmaPrint's proxy statement on Schedule 14A, dated July 29,
1998; and
(d) The description of the PharmaPrint's Common Stock contained in
the Registration Statement on Form 8-A, dated August 5, 1996,
including all amendments and reports filed for the purpose of
updating such description.
This Prospectus is part of a registration statement we filed with the
SEC. You should rely only on the information or representations provided in this
Prospectus. We have authorized no one to provide you with different information.
We are not offering or selling these securities in any state where the offer or
sale is not permitted. You should not assume that the information in this
Prospectus is accurate as of any date other than the date stated on the front
cover page of this Prospectus.
PharmaPrint will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request, a copy of any or all of
such documents which are incorporated herein by reference. You should direct
your requests for copies to PharmaPrint Inc., 2600 Michelson Drive, Suite 1600,
Irvine, California 92612; Attention: Chief Financial Officer, telephone number
949-794-7778, facsimile number 949-794-7777.
WHERE YOU CAN GET MORE INFORMATION
At your request, we will provide you, without charge, a copy of any
exhibits to PharmaPrint's Registration Statement. If you would like more
information, write or call us at:
PharmaPrint Inc.
2600 Michelson Drive, Suite 1600
Irvine, California 92612
Telephone: (949) 794-7778
Facsimile: (949) 794-7777
Our fiscal year ends on March 31. We intend to provide to our
stockholders annual reports containing audited financial statements and other
appropriate reports. In addition, we file annual, quarterly and current reports,
proxy statements and other information with the SEC. You may read and copy any
reports, statements or other information we file at the SEC's public reference
room in Washington, D.C. You can request copies of these documents, upon payment
of a duplicating fee, by writing to the SEC. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference
rooms. Our SEC filings are also available to the public on the SEC Internet site
at http\\www.sec.gov.
-16-
<PAGE>
No dealer, salesman or any other person has been authorized to give any
information or to make any representations not contained in this Prospectus in
connection with the offering described herein and, if given or made, such
information or representation must not be relied upon as having been authorized
by PharmaPrint or the Selling Stockholders. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy a security other than the
shares of Common Stock offered hereby, nor does it constitute an offer to sell
or a solicitation of an offer to buy any of the securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances, create any implication
that the information contained herein is correct as of any date subsequent to
the date hereof.
1,208,438 SHARES
COMMON STOCK
PHARMAPRINT INC.
PROSPECTUS
FEBRUARY 12, 1999
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents filed by the Company with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934, as amended, are incorporated into this Registration Statement by
reference:
1. The Company's Annual Report on Form 10-KSB for the
fiscal year ended March 31, 1998;
2. The Company's Quarterly Report on Form 10-QSB for the
quarterly period ended June 30, 1998;
3. The Company's Quarterly Report on Form 10-QSB for the
quarterly period ended September 30, 1998; and
4. The description of the Company's Common Stock
contained in the Registration Statement on Form 8-A
dated August 5, 1996 including all amendments and
reports filed for the purpose of updating such
description.
All documents filed pursuant to Section 13(a), 13(c), 14 or 15
(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the completion or termination of this offering shall be deemed to be
incorporated by reference in this Prospectus and to be part hereof from the date
of filing of such documents. Any statement contained in a document, all or a
portion of which is 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 other
subsequently filed document, which also is or is deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable. (shares registered under Section 12 of
Exchange Act.)
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
LIMITATION OF DIRECTOR'S LIABILITY.
The Company's Certificate of Incorporation eliminates the
liability of directors to the fullest extent permissible under Delaware law.
Delaware law permits a corporation to limit the personal liability of a director
to the corporation or its shareholders for monetary damages for breach of
certain fiduciary duties as a director, provided, that the director's liability
may not be eliminated or limited for (a) breaches of the director's duty of
loyalty to the corporation or its shareholders; (b) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law; (c)
the payment of unlawful dividends or unlawful stock repurchases or redemptions;
or (d) transactions in which the director received an improper personal benefit.
A director's liability may also not be limited for violation of, or otherwise
relieve the corporation or its directors from the necessity of complying with,
federal or state securities laws or affect the availability of non-monetary
remedies such as injunctive relief or rescission.
II-1
<PAGE>
INDEMNIFICATION OF OFFICERS AND DIRECTORS.
The Company's bylaws relating to indemnification require that
the Company indemnify its directors and its executive officers to the fullest
extent permitted under Delaware law, provided, that the Company may modify the
extent of such indemnification by individual contracts with its directors and
executive officers, and provided, further, that the Company will not be required
to indemnify any director or executive officer in connection with a proceeding
initiated by such person, with certain exceptions. Delaware corporate law, the
Company's bylaws, as well as any indemnity agreements, may also permit
indemnification for liabilities arising under the Securities Act or the
Securities Exchange Act of 1934, as amended. Without limiting any right an
indemnitee may have under Delaware corporate law and the Company's bylaws, the
Board of Directors has adopted an Indemnification and Hold Harmless Agreement
("Indemnity Agreement") to provide additional indemnification and reimbursement
to all qualified directors and officers of the Company, and to hold such
directors and officers harmless from certain liabilities, judgments and related
expenses. Any individual who is a duly elected or appointed member of the Board
of Directors, a corporate officer of the Company or any employee or agent as
approved by the Board of Directors is deemed a person who qualifies as an
indemnitee under the Indemnity Agreement.
The Board of Directors has been advised that, in the opinion
of the Securities and Exchange Commission, indemnification of liabilities
arising under the Securities Act of 1933, as amended, is contrary to public
policy as expressed in the Securities 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 or officer
of the Company in the successful defense of any action, suit or proceeding) is
asserted by such director or officer in connection with the shares being
registered hereby, the Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
4.1* PharmaPrint Inc. 1995 Stock Option Plan, As Amended.
4.2 Option Grant Agreement with Randolph C. Steer
4.3 Option Grant Agreement with Matilde Parente
4.4 Option Grant Agreement with Joerg Gruenwald
5 Opinion of Klehr, Harrison, Harvey, Branzburg & Ellers LLP
with respect to the legality of the shares of Common Stock
being registered hereunder.
23.1 Consent of Arthur Andersen LLP, independent auditors, with
respect to the consolidated financial statements of
PharmaPrint Inc. for the year ended March 31, 1998.
23.2 Consent of Klehr, Harrison, Harvey, Branzburg & Ellers LLP
(included in Exhibit 5).
24 Powers of Attorney (included on the signature pages hereto).
</TABLE>
- --------
* Incorporated by reference from Registrant's Annual Report on
Form 10-KSB for the year ended March 31, 1998.
II-2
<PAGE>
ITEM 9. UNDERTAKINGS.
(a) The Company 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;
(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; PROVIDED,
HOWEVER, that paragraphs (a) (1)(i) and (a) (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Company pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in 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 Company's annual report pursuant to
Section 13(a) or 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.
(b) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to its Certificate of Incorporation, its bylaws, or otherwise,
the Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 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 the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Irvine, State of California on this 10th day of
February, 1999.
PHARMAPRINT INC.
BY: /S/ ELLIOT P. FRIEDMAN
--------------------------------------------
Elliot P. Friedman, Chairman of the Board of
Directors and Chief Executive Officer
POWER OF ATTORNEY
Each of the undersigned officers and directors of PharmaPrint Inc.
whose signature appears below hereby appoints Elliot P. Friedman and James R.
Wodach and each of them individually as true and lawful attorney-in-fact for the
undersigned with full power of substitution, to execute in his name and on his
behalf in each capacity stated below, any and all amendments (including
post-effective amendments) to this Registration Statement as the
attorney-in-fact shall deem appropriate, and to cause to be filed any such
amendment (including exhibits thereto and other documents in connection
therewith) to this Registration Statement with the Securities and Exchange
Commission, as fully and to all intents and purposes as such person might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact, or any of them, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on this 10th day of February, 1999.
SIGNATURE TITLE(S)
--------- --------
/S/ ELLIOT P. FRIEDMAN Chairman of the Board of Directors and Chief
- ------------------------- Executive Officer (Principal Executive Officer)
Elliot P. Friedman
/S/ JAMES R. WODACH Senior Vice President and Chief Financial Officer
- ------------------------- (Principal Financial and Accounting Officer)
James R. Wodach
/S/ TASNEEM A. KHWAJA Chief Scientific Officer, Secretary, and Director
- -------------------------
Tasneem A. Khwaja
/S/ PHILLIP G. TRAD Senior Vice President, General Counsel, and
- ------------------------- Director
Phillip G. Trad
Director
- -------------------------
John H. Abeles, M.D.
/S/ ERINCH R. OZADA Director
- -------------------------
Erinch R. Ozada
Director
- -------------------------
Nathan F. Troum, M.D.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
4.2 Option Grant Agreement with Randolph C. Steer
4.3 Option Grant Agreement with Matilde Parente
4.4 Option Grant Agreement with Joerg Gruenwald
5 Opinion of Klehr, Harrison, Harvey, Branzburg & Ellers LLP with
respect to the legality of the shares of Common Stock being
registered hereunder.
23.1 Consent of Arthur Andersen LLP, independent auditors, with
respect to the consolidated financial statements of PharmaPrint
Inc. for the year ended March 31, 1998.
</TABLE>
<PAGE>
Exhibit 4.2
PHARMAPRINT INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
OPTIONEE : Randolph C. Steer
GRANT DATE : June 19, 1998
OPTION PRICE : $9.72
NUMBER OF SHARES : 75,000
EXPIRATION DATE : June 19, 2008
This Agreement, made as of, June 19, 1998, [the "GRANT DATE"] between
PharmaPrint Inc., a California corporation [hereinafter called the "COMPANY"],
and Randolph C. Steer [hereinafter called "OPTIONEE"].
WITNESSETH
WHEREAS, the Company has adopted the PHARMAPRINT INC., 1995 STOCK
OPTION PLAN, AS AMENDED [the "PLAN"], which Plan is incorporated herein by
reference and made a part of this Agreement; and
WHEREAS, the Company regards Optionee as a valuable contributor to
the success of the Company and its Affiliates, and has determined that it would
be to the advantage and interest of the Company and its shareholders to grant
the Option provided for in this Agreement to Optionee under the Plan [as an
inducement to remain in the service of the Company and its Affiliates , and as
an incentive for increased efforts during such service];
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, the parties to this Agreement hereby agree as follows:
1. NUMBER OF SHARES AND OPTION PRICE. The Company hereby grants to
Optionee the right and option to purchase from the Company on the terms and
conditions hereinafter set forth, all or any part of an aggregate of the number
of shares of the Common Stock, without par value, of the Company [hereinafter
called the "Stock"] set forth above. The purchase price of the Stock subject to
this Option shall be the Option Price per share set forth above.
Page 1 of 9
<PAGE>
2. VESTING SCHEDULE AND OPTION PERIOD.
[a] The Option Period to purchase shares of Common Stock shall
vest monthly at the rate of 3,125 shares per month over two years
from the Grant Date set forth above, and, except as provided in
paragraph 3 or paragraph 4, shall end on the Expiration Date as set
forth above upon the execution of this agreement. The maximum number
of shares to vest shall not exceed seventy-five thousand (75,000)
shares.
[b] This Option shall be exercisable only during the Option
Period, and during such Option Period, the exercise of the Option
shall be subject to the limitations of Paragraph 3 and Paragraph 4.
3. LIMITS ON OPTION PERIOD. The Option Period may end before the
Expiration Date, as follows:
[a] If Optionee's status as an employee of or consultant to
the Company or an Affiliate terminates for any reason during the
Option Period, other than as set forth in paragraphs 3[b], [c] or [d]
below, the Option Period shall end ninety [90] days after such
termination or on the Expiration Date, provided said options are
registered or ninety [90] days after said options shall have become
registered, whichever shall occur first. Optionee shall have the
right to exercise, to the extent then exercisable and vested [or on
such accelerated basis as the Plan Committee shall determine at or
after Grant Date], any portion of this Option in accordance with the
terms hereof.
[b] If Optionee's status as an employee of or consultant to
the Company is terminated by reason of [i] the Company terminating
Optionee's Employment Agreement or Consulting Agreement, if any, for
Cause [as may defined therein] or [ii] Optionee terminating the
Employment Agreement in breach of the provisions thereof, the Option
Period shall immediately end as of the date of termination and
Optionee shall forfeit all rights which he may have to exercise any
unvested options. For purposes of determining the date of termination
of Optionee's Employment Agreement or Consulting Agreement in the
event of a termination by the Company for Cause, such date shall be
deemed for purposes of this paragraph 3[b] ,only, to be the date the
Company provides Optionee with written notice of his material failure
to perform his duties under the Employment Agreement or Consulting
Agreement.
[c] If Optionee's status as an employee of or consultant to
the Company is terminated by reason of death, the Option Period shall
end one year after the date of death or on the Expiration Date,
whichever shall occur first, and Optionee's executor or administrator
or the person or persons to whom Optionee's rights under this Option
shall pass by will or by the applicable laws of descent and
distribution may exercise, to the extent then exercisable [or on such
accelerated basis as the Plan Committee shall
Page 2 of 9
<PAGE>
determine at or after Grant Date], any portion of this Option in
accordance with the terms hereof.
[d] If Optionee's status as an employee of or consultant to
the Company is terminated by reason of disability, the Option Period
shall end one year after the date of cessation of such status or on
the Expiration Date, whichever shall first occur. Optionee shall have
the right to exercise, to the extent then exercisable [or on such
accelerated basis as the Plan Committee shall determine at or after
Grant Date], any portion of this Option in accordance with the terms
hereof.
4. VESTING OF RIGHT TO EXERCISE OPTIONS; PARTIAL EXERCISE; FRACTIONAL
SHARES.
[a] Subject to the terms of paragraphs 2 and 3 above, no
options shall vest after the date on which Optionee is no longer an
employee of or consultant to the Company. Any portion of the Option
that is not exercised shall accumulate and may be exercisable at any
time prior to the Expiration Date.
[b] No partial exercise of this Option may be for less than
five [5] percent of the total number of shares then available under
this Option to purchase shares of Stock.
[c] In no event shall the Company be required to issue
fractional shares.
[d] In the event of a Change of Control [as defined below] of
the Company, all unvested options shall immediately vest and become
exercisable. Change of Control shall mean the occurrence of any or
all of the following events: [i] the sale of all or substantially all
of the Company's assets, [ii] the merger or consolidation of the
Company where [x] the Company is not the surviving entity [other than
a merger for the purposes of reincorporating the Company in a
jurisdiction other than California] or [y] parties other than the
Company's security holders own, following consummation of the merger,
in excess of 50% of the Company's issued and outstanding shares of
Common Stock on a fully diluted basis after giving effect to the
exercise, exchange or conversion of any options, warrants, preferred
stock or other securities exercisable, exchangeable or convertible
into Common Stock of the Company, or [iii] if any individual,
corporation, partnership or other entity [a "Person"], other than the
Company or any employee benefit plan of the Company or of any
Affiliate or Associate [each as defined in Rule 12b-2 under the
Securities Exchange Act of 1934, as amended], shall, together with
Affiliates or Associates of such Person, acquire or become the
beneficial owner of, in the aggregate, in excess of 50% of the Common
Stock of the Company issued and outstanding following such
acquisition on a fully diluted basis after giving effect to the
exercise, exchange or conversion of any options, warrants, preferred
stock or other securities exercisable, exchangeable or convertible
into Common Stock of the Company.
Page 3 of 9
<PAGE>
5. METHOD OF EXERCISE. Subject to Section 4, Optionee may exercise
this Option with respect to all or any part of the shares of Stock then subject
to such exercise as follows:
[a] By giving the Company written notice of such exercise,
specifying the number of shares as to which this Option is exercised.
Such notice shall be accompanied by an amount equal to the Option
Price of such shares, in the form of any one or combination of the
following: cash, a certified check, bank draft, postal or express
money order payable to the order of the Company in lawful money of
the United States.
[b] Optionee shall be required, as a condition precedent to
acquiring Stock through exercise of the Option to execute one or more
agreements relating to obligations in connection with ownership of
the Stock or restrictions on transfer of the Stock no less
restrictive than the obligations and restrictions to which other
shareholders of the Company are subject at the time of such exercise.
[c] Optionee shall give the Company satisfactory assurance in
writing signed by Optionee or Optionee's legal representative, as the
case may be, that such shares are being purchased for investment and
not with a view to the distribution thereof; provided that such
assurance shall be deemed inapplicable to [1] any sale of such shares
by such Optionee made in accordance with the terms of a registration
statement covering such sale, which has heretofore been [or may
hereafter be] filed and become effective under the Securities Act of
1933, as, amended [the "Securities Act"], and with respect to which
no stop order suspending the effectiveness thereof has been issued,
and [2] any other sale of such shares with respect to which in the
opinion of counsel for the Company, such assurance is not required to
be given in order to comply with the provisions of the Securities
Act.
As soon as practicable after receipt of the notice required in
paragraph 5[a] hereof and satisfaction of the conditions set forth in paragraphs
5[b] and 5 [c], the Company shall, without transfer or issue tax and without
any other incidental expense to the Optionee, deliver to Optionee at the office
of the Company or such other place as may be mutually acceptable to the Company
and Optionee a certificate or certificates of such shares of Stock; provided,
however, that the time of such delivery may be postponed by the Company for such
period as may be required for it with reasonable diligence to comply with
applicable registration requirements under the Securities Act, the Securities
Exchange Act of 1934, as amended any applicable listing requirements of any
national securities exchange, and requirements under any other law or regulation
applicable to the issuance or transfer of such shares. Optionee shall not be
entitled to the privileges of stock ownership as to any shares of Stock
purchased hereunder until such certificate is delivered pursuant to this
paragraph 5. If Optionee fails to accept delivery any pay for all or any part of
the number of shares specified in such notice upon tender of delivery thereof,
Optionee's right to purchase such undelivered shares may be terminated by the
Company at its election.
Page 4 of 9
<PAGE>
6. ADJUSTMENTS. If there should be any change in the Stock subject to
this Option, through merger, consolidation, reorganization, recapitalization,
reincorporation, stock split, stock dividend or other change in the corporate
structure of the Company, appropriate adjustments shall be made to this Option
in order to preserve, but not to increase, the benefits to the Optionee,
including adjustments in the number of shares subject to the Option and in the
price per share. Any adjustments made pursuant to this paragraph 6 as a
consequence of a change in the corporate structure of the Company shall not
entitle Optionee to acquire a number of shares of Stock of the Company or shares
of stock of any successor company greater than the number of shares Optionee
would receive if, prior to such change, Optionee had actually held a number of
shares of Stock equal to the number of shares subject to this Option.
7. NON-TRANSFERABLE OPTION. This Option shall, during Optionee's
lifetime, be exercisable only by Optionee, and neither this Option nor any right
hereunder shall be transferable by Optionee by operation of law or otherwise
other than by will or the laws of descent and distribution. In the event of any
attempt by Optionee to alienate, assign, pledge, hypothecate, or otherwise
dispose of this Option or of any right hereunder, except as provided for in this
Agreement, or in the event of any attachment, execution, or similar process upon
the rights or interest hereby conferred, the Company at its election may
terminate this Option by notice to Optionee and this Option shall thereupon
become null and void.
8. NO SHAREHOLDER RIGHTS. Neither Optionee nor any person entitled to
exercise Optionee's rights in the event of Optionee's death shall have any of
the rights of a shareholder with respect to the shares of Stock subject to this
Option except to the extent the certificates for such shares shall have been
issued upon the exercise of this Option.
9. CONTINUATION OF SERVICE. Nothing in this Agreement shall confer
upon any person any right to continue in the service of the Company or any
Affiliate thereof, or interfere in any way with the right of the Company or any
such Affiliate to terminate such relationship at any time, with or without
cause, but nothing contained herein shall effect any other contractual rights of
an employee or consultant.
10. CONFLICT WITH THE PLAN. This Agreement and the Option herein
granted is expressly subject to the terms and conditions of the Plan, which
Optionee acknowledges is incorporated herein by reference. In the event of any
conflict between this Agreement and the Plan, the Plan shall prevail.
11. ABSENCE OF REGISTRATION OF OPTION SHARES AND EFFECT
THEREOF. The Optionee has been advised that the shares of stock acquired by
exercise of the option [the "Option Shares"] have not been registered with the
Securities and Exchange Commission [the "SEC"], or under applicable state
securities laws, and accordingly may not be offered, sold, or otherwise
transferred except in compliance with the Securities Act and applicable state
securities laws. The Optionee has been further advised that the effect of the
representations
Page 5 of 9
<PAGE>
and warranties above set forth is that the Optionee must bear the economic risk
of Optionee's investment in the stock indefinitely unless registered pursuant to
the Securities Act and applicable state securities laws or if, in the opinion of
counsel in form and substance satisfactory to the Company, an exemption from
such registration requirements is available.
12. REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE
OPTION SHARES. Optionee represents and warrants that Optionee is familiar with
the business and prospects of the Company. The Company shall make available the
by-laws, minute book, stock transfer book and other records of the Company for
inspection by Optionee, and that the Company shall make available the
opportunity to ask questions and receive answers concerning the business and
affairs of the Company.
The Company has discussed with Optionee certain aspects of its
business and prospects and provided Optionee access to the records referred to
above. Those discussions and written information were intended to describe the
aspects of the Company's business and prospects which it believes to be
material, but were no a thorough or exhaustive description of the Company's
business or prospects. Therefore, the Company does not warrant the completeness
of those discussions or information but only that such discussions and
information represent its good faith opinion of its business and prospects.
Optionee represents and warrants that the investment occurring by
reason of exercise of the Option is in accord with the nature and size of
Optionee's present investments and net worth and that Optionee is financially
able to bear the economic risk of this investment for an indefinite period of
time. Optionee covenants to make such representations, warranties and covenants
upon exercise, in whole or in part, of the Option as counsel to the Company may
deem appropriate to assure compliance with securities laws.
13. ABSENCE OF POSSIBILITIES FOR REGISTRATION RIGHTS. Only the
Company may file a registration statement with the SEC, and the Company is under
no obligation to file a registration statement or any other disclosure statement
with the SEC respecting the Option Shares.
14. EXEMPTION FROM REGISTRATION OF OPTION SHARES NOT ASSURED. The
Optionee also has been advised that holders of Option Shares cannot be assured
that any exemption from the Securities Act will be available, or if available,
will allow such holders to dispose of or otherwise transfer Option Shares, under
the circumstances, in the amounts, or at the times proposed by them.
Specifically, Optionee has been advised that Rule 144 promulgated under the
Securities Act which provides for certain limited, routine sales of unregistered
securities, is not available with respect to the Option Shares. If, as seems
unlikely, Rule 144 should come available, the Optionee understands that the
Company is under no obligation to furnish the Optionee or others with the
information necessary to enable the Optionee to sell any of the Optionee Shares
under Rule 144.
Page 6 of 9
<PAGE>
15. LEGENDS AND STOP-TRANSFER ORDER ON OPTION SHARES. The
certificates representing the Option Shares acquired by the Optionee upon
exercise of the Option shall bear legends substantially similar to the following
[in addition to any other legends deemed appropriate by counsel to the Company]:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED ["THE ACT"] OR ANY APPLICABLE STATE SECURITIES LAWS, AND
MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED, OR HYPOTHECATED
UNLESS AND UNTIL REGISTERED UNDER THE ACT AND ALL APPLICABLE STATE SECURITIES
LAWS OR, IN THE OPINION OF COUNSEL [IN FORM AND SUBSTANCE SATISFACTORY TO THE
COMPANY], SUCH OFFER, SALE OR TRANSFER OR HYPOTHECATION IS IN COMPLIANCE
THEREWITH.
Additionally, in order to conform with various state securities and
other laws the following or similar legend may appear on any and all share
certificates issued to the Optionee upon exercise of the Option:
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO RESTRICTIONS UPON TRANSFER
[INCLUDING RIGHTS OF FIRST REFUSAL AND OF REPURCHASE] AS SET FORTH IN A
NONQUALIFIED STOCK OPTION AGREEMENT AND STOCK PURCHASE AGREEMENT BY AND BETWEEN
THE COMPANY AND THE RECORD HOLDER, AND IN THE BYLAWS OF THE COMPANY.
The Optionee further agrees, in order to ensure compliance with the
restrictions referred to in the foregoing legends, or elsewhere herein, that the
Company may issue appropriate "stop transfer" instructions to its transfer
agent, if any, with respect to such certificates or instruments, or if the
Company transfers its own securities, that it may make appropriate notations to
the same effect in the Company's records.
16. NOTICES. Any notice required to be given under the terms of this
Option Agreement shall be addressed to the Company in care of its Chief
Financial Officer at the Office of the Company, and any notice given to Optionee
shall be addressed to Optionee at the address indicated beneath Optionee's
signature hereto or such other address as either party may here after designate
in writing to the other. Any such notice shall be deemed to have been duly given
when actually received or when enclosed in a properly sealed envelope or wrapper
addressed as aforesaid, registered or certified, and deposited [postage or
registration or certification fee prepaid] in a post office or branch post
office regularly maintained by the United States.
17. CONCLUSIVE AUTHORITY OF COMMITTEE AND BOARD. All decisions of the
Committee and the Board upon any question arising under the Plan or under this
Agreement shall be conclusive.
Page 7 of 9
<PAGE>
18. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of any successor or assignee of the Company. Where the
context permits, "Optionee" as used in this Agreement shall include Optionee's
executor, administrator or other legal representative or the person or persons
to whom Optionee's rights pass by will or the applicable laws of descent and
distribution.
19. WITHHOLDING. Optionee agrees to make appropriate arrangements
with the Company for satisfaction of any applicable state or local income tax
withholding requirements or social security requirements.
20. GOVERNING LAW. The interpretation, performance, and enforcement
of this Option Agreement shall be governed by the laws of the State of
California.
Page 8 of 9
<PAGE>
21. ATTORNEY'S FEES. In the event of litigation arising hereunder,
the prevailing party shall be entitled to reimbursement of reasonable attorney's
fees and costs.
IN WITNESS WHEREOF, the Company has caused these presents to be
executed on its behalf by a duly authorized individual, and Optionee has
hereunto set his hand as of the day and year first written above.
Company: PharmaPrint Inc.,
By: /S/ PHILLIP G. TRAD
------------------------------------------------
Phillip G. Trad
Senior Vice President and General Counsel
Optionee: By: /S/ RANDOLPH C. STEER
------------------------------------------------
Dr. Randolph C. Steer
Address: 119 Mission Hills Drive
Rancho Mirage, California, 92770
Page 9 of 9
<PAGE>
Exhibit 4.3
PHARMAPRINT INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
OPTIONEE : Matilde Parente
GRANT DATE : June 19, 1998
OPTION PRICE : $9.72
NUMBER OF SHARES : 24,000
EXPIRATION DATE : June 19, 2008
This Agreement, made as of, June 19, 1998, [the "GRANT DATE"] between
PharmaPrint Inc., a California corporation [hereinafter called the "COMPANY"],
and Matilde Parente [hereinafter called "OPTIONEE"].
WITNESSETH
WHEREAS, the Company has adopted the PHARMAPRINT INC., 1995 STOCK
OPTION PLAN, AS AMENDED [the "PLAN"], which Plan is incorporated herein by
reference and made a part of this Agreement; and
WHEREAS, the Company regards Optionee as a valuable contributor to
the success of the Company and its Affiliates, and has determined that it would
be to the advantage and interest of the Company and its shareholders to grant
the Option provided for in this Agreement to Optionee under the Plan [as an
inducement to remain in the service of the Company and its Affiliates , and as
an incentive for increased efforts during such service];
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, the parties to this Agreement hereby agree as follows:
1. NUMBER OF SHARES AND OPTION PRICE. The Company hereby grants to
Optionee the right and option to purchase from the Company on the terms and
conditions hereinafter set forth, all or any part of an aggregate of the number
of shares of the Common Stock, without par value, of the Company [hereinafter
called the "Stock"] set forth above. The purchase price of the Stock subject to
this Option shall be the Option Price per share set forth above.
Page 1 of 9
<PAGE>
2. VESTING SCHEDULE AND OPTION PERIOD.
[a] The Option Period to purchase shares of Common Stock shall
vest monthly at the rate of 2,000 shares per month over one year from
the Grant Date set forth above, and, except as provided in paragraph
3 or paragraph 4, shall end on the Expiration Date as set forth above
upon the execution of this agreement. The maximum number of shares to
vest shall not exceed twenty-four thousand (24,000) shares.
[b] This Option shall be exercisable only during the Option
Period, and during such Option Period, the exercise of the Option
shall be subject to the limitations of Paragraph 3 and Paragraph 4.
3. LIMITS ON OPTION PERIOD. The Option Period may end before the
Expiration Date, as follows:
[a] If Optionee's status as an employee of or consultant to
the Company or an Affiliate terminates for any reason during the
Option Period, other than as set forth in paragraphs 3[b], [c] or [d]
below, the Option Period shall end ninety [90] days after such
termination or on the Expiration Date, provided said options are
registered or ninety [90] days after said options shall have become
registered, whichever shall occur first. Optionee shall have the
right to exercise, to the extent then exercisable and vested [or on
such accelerated basis as the Plan Committee shall determine at or
after Grant Date], any portion of this Option in accordance with the
terms hereof.
[b] If Optionee's status as an employee of or consultant to
the Company is terminated by reason of [i] the Company terminating
Optionee's Employment Agreement or Consulting Agreement, if any, for
Cause [as may defined therein] or [ii] Optionee terminating the
Employment Agreement in breach of the provisions thereof, the Option
Period shall immediately end as of the date of termination and
Optionee shall forfeit all rights which he may have to exercise any
unvested options. For purposes of determining the date of termination
of Optionee's Employment Agreement or Consulting Agreement in the
event of a termination by the Company for Cause, such date shall be
deemed for purposes of this paragraph 3[b] ,only, to be the date the
Company provides Optionee with written notice of his material failure
to perform his duties under the Employment Agreement or Consulting
Agreement.
[c] If Optionee's status as an employee of or consultant to
the Company is terminated by reason of death, the Option Period shall
end one year after the date of death or on the Expiration Date,
whichever shall occur first, and Optionee's executor or administrator
or the person or persons to whom Optionee's rights under this Option
shall pass by will or by the applicable laws of descent and
distribution may exercise, to the extent then exercisable [or on such
accelerated basis as the Plan Committee shall
Page 2 of 9
<PAGE>
determine at or after Grant Date], any portion of this Option in
accordance with the terms hereof.
[d] If Optionee's status as an employee of or consultant to
the Company is terminated by reason of disability, the Option Period
shall end one year after the date of cessation of such status or on
the Expiration Date, whichever shall first occur. Optionee shall have
the right to exercise, to the extent then exercisable [or on such
accelerated basis as the Plan Committee shall determine at or after
Grant Date], any portion of this Option in accordance with the terms
hereof.
4. VESTING OF RIGHT TO EXERCISE OPTIONS; PARTIAL EXERCISE; FRACTIONAL
SHARES.
[a] Subject to the terms of paragraphs 2 and 3 above, no
options shall vest after the date on which Optionee is no longer an
employee of or consultant to the Company. Any portion of the Option
that is not exercised shall accumulate and may be exercisable at any
time prior to the Expiration Date.
[b] No partial exercise of this Option may be for less than
five [5] percent of the total number of shares then available under
this Option to purchase shares of Stock.
[c] In no event shall the Company be required to issue
fractional shares.
[d] In the event of a Change of Control [as defined below] of
the Company, all unvested options shall immediately vest and become
exercisable. Change of Control shall mean the occurrence of any or
all of the following events: [i] the sale of all or substantially all
of the Company's assets, [ii] the merger or consolidation of the
Company where [x] the Company is not the surviving entity [other than
a merger for the purposes of reincorporating the Company in a
jurisdiction other than California] or [y] parties other than the
Company's security holders own, following consummation of the merger,
in excess of 50% of the Company's issued and outstanding shares of
Common Stock on a fully diluted basis after giving effect to the
exercise, exchange or conversion of any options, warrants, preferred
stock or other securities exercisable, exchangeable or convertible
into Common Stock of the Company, or [iii] if any individual,
corporation, partnership or other entity [a "Person"], other than the
Company or any employee benefit plan of the Company or of any
Affiliate or Associate [each as defined in Rule 12b-2 under the
Securities Exchange Act of 1934, as amended], shall, together with
Affiliates or Associates of such Person, acquire or become the
beneficial owner of, in the aggregate, in excess of 50% of the Common
Stock of the Company issued and outstanding following such
acquisition on a fully diluted basis after giving effect to the
exercise, exchange or conversion of any options, warrants, preferred
stock or other securities exercisable, exchangeable or convertible
into Common Stock of the Company.
Page 3 of 9
<PAGE>
5. METHOD OF EXERCISE. Subject to Section 4, Optionee may exercise
this Option with respect to all or any part of the shares of Stock then subject
to such exercise as follows:
[a] By giving the Company written notice of such exercise,
specifying the number of shares as to which this Option is exercised.
Such notice shall be accompanied by an amount equal to the Option
Price of such shares, in the form of any one or combination of the
following: cash, a certified check, bank draft, postal or express
money order payable to the order of the Company in lawful money of
the United States.
[b] Optionee shall be required, as a condition precedent to
acquiring Stock through exercise of the Option to execute one or more
agreements relating to obligations in connection with ownership of
the Stock or restrictions on transfer of the Stock no less
restrictive than the obligations and restrictions to which other
shareholders of the Company are subject at the time of such exercise.
[c] Optionee shall give the Company satisfactory assurance in
writing signed by Optionee or Optionee's legal representative, as the
case may be, that such shares are being purchased for investment and
not with a view to the distribution thereof; provided that such
assurance shall be deemed inapplicable to [1] any sale of such shares
by such Optionee made in accordance with the terms of a registration
statement covering such sale, which has heretofore been [or may
hereafter be] filed and become effective under the Securities Act of
1933, as, amended [the "Securities Act"], and with respect to which
no stop order suspending the effectiveness thereof has been issued,
and [2] any other sale of such shares with respect to which in the
opinion of counsel for the Company, such assurance is not required to
be given in order to comply with the provisions of the Securities
Act.
As soon as practicable after receipt of the notice required in
paragraph 5[a] hereof and satisfaction of the conditions set forth in paragraphs
5[b] and 5 [c ], the Company shall, without transfer or issue tax and without
any other incidental expense to the Optionee, deliver to Optionee at the office
of the Company or such other place as may be mutually acceptable to the Company
and Optionee a certificate or certificates of such shares of Stock; provided,
however, that the time of such delivery may be postponed by the Company for such
period as may be required for it with reasonable diligence to comply with
applicable registration requirements under the Securities Act, the Securities
Exchange Act of 1934, as amended any applicable listing requirements of any
national securities exchange, and requirements under any other law or regulation
applicable to the issuance or transfer of such shares. Optionee shall not be
entitled to the privileges of stock ownership as to any shares of Stock
purchased hereunder until such certificate is delivered pursuant to this
paragraph 5. If Optionee fails to accept delivery any pay for all or any part of
the number of shares specified in such notice upon tender of delivery thereof,
Optionee's right to purchase such undelivered shares may be terminated by the
Company at its election.
Page 4 of 9
<PAGE>
6. ADJUSTMENTS. If there should be any change in the Stock subject to
this Option, through merger, consolidation, reorganization, recapitalization,
reincorporation, stock split, stock dividend or other change in the corporate
structure of the Company, appropriate adjustments shall be made to this Option
in order to preserve, but not to increase, the benefits to the Optionee,
including adjustments in the number of shares subject to the Option and in the
price per share. Any adjustments made pursuant to this paragraph 6 as a
consequence of a change in the corporate structure of the Company shall not
entitle Optionee to acquire a number of shares of Stock of the Company or shares
of stock of any successor company greater than the number of shares Optionee
would receive if, prior to such change, Optionee had actually held a number of
shares of Stock equal to the number of shares subject to this Option.
7. NON-TRANSFERABLE OPTION. This Option shall, during Optionee's
lifetime, be exercisable only by Optionee, and neither this Option nor any right
hereunder shall be transferable by Optionee by operation of law or otherwise
other than by will or the laws of descent and distribution. In the event of any
attempt by Optionee to alienate, assign, pledge, hypothecate, or otherwise
dispose of this Option or of any right hereunder, except as provided for in this
Agreement, or in the event of any attachment, execution, or similar process upon
the rights or interest hereby conferred, the Company at its election may
terminate this Option by notice to Optionee and this Option shall thereupon
become null and void.
8. NO SHAREHOLDER RIGHTS. Neither Optionee nor any person entitled to
exercise Optionee's rights in the event of Optionee's death shall have any of
the rights of a shareholder with respect to the shares of Stock subject to this
Option except to the extent the certificates for such shares shall have been
issued upon the exercise of this Option.
9. CONTINUATION OF SERVICE. Nothing in this Agreement shall confer
upon any person any right to continue in the service of the Company or any
Affiliate thereof, or interfere in any way with the right of the Company or any
such Affiliate to terminate such relationship at any time, with or without
cause, but nothing contained herein shall effect any other contractual rights of
an employee or consultant.
10. CONFLICT WITH THE PLAN. This Agreement and the Option herein
granted is expressly subject to the terms and conditions of the Plan, which
Optionee acknowledges is incorporated herein by reference. In the event of any
conflict between this Agreement and the Plan, the Plan shall prevail.
11. ABSENCE OF REGISTRATION OF OPTION SHARES AND EFFECT
THEREOF. The Optionee has been advised that the shares of stock acquired by
exercise of the option [the "Option Shares"] have not been registered with the
Securities and Exchange Commission [the "SEC"], or under applicable state
securities laws, and accordingly may not be offered, sold, or otherwise
transferred except in compliance with the Securities Act and applicable state
securities laws. The Optionee has been further advised that the effect of the
representations
Page 5 of 9
<PAGE>
and warranties above set forth is that the Optionee must bear the economic risk
of Optionee's investment in the stock indefinitely unless registered pursuant to
the Securities Act and applicable state securities laws or if, in the opinion of
counsel in form and substance satisfactory to the Company, an exemption from
such registration requirements is available.
12. REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE
OPTION SHARES. Optionee represents and warrants that Optionee is familiar with
the business and prospects of the Company. The Company shall make available the
by-laws, minute book, stock transfer book and other records of the Company for
inspection by Optionee, and that the Company shall make available the
opportunity to ask questions and receive answers concerning the business and
affairs of the Company.
The Company has discussed with Optionee certain aspects of its
business and prospects and provided Optionee access to the records referred to
above. Those discussions and written information were intended to describe the
aspects of the Company's business and prospects which it believes to be
material, but were no a thorough or exhaustive description of the Company's
business or prospects. Therefore, the Company does not warrant the completeness
of those discussions or information but only that such discussions and
information represent its good faith opinion of its business and prospects.
Optionee represents and warrants that the investment occurring by
reason of exercise of the Option is in accord with the nature and size of
Optionee's present investments and net worth and that Optionee is financially
able to bear the economic risk of this investment for an indefinite period of
time. Optionee covenants to make such representations, warranties and covenants
upon exercise, in whole or in part, of the Option as counsel to the Company may
deem appropriate to assure compliance with securities laws.
13. ABSENCE OF POSSIBILITIES FOR REGISTRATION RIGHTS. Only the
Company may file a registration statement with the SEC, and the Company is under
no obligation to file a registration statement or any other disclosure statement
with the SEC respecting the Option Shares.
14. EXEMPTION FROM REGISTRATION OF OPTION SHARES NOT ASSURED. The
Optionee also has been advised that holders of Option Shares cannot be assured
that any exemption from the Securities Act will be available, or if available,
will allow such holders to dispose of or otherwise transfer Option Shares, under
the circumstances, in the amounts, or at the times proposed by them.
Specifically, Optionee has been advised that Rule 144 promulgated under the
Securities Act which provides for certain limited, routine sales of unregistered
securities, is not available with respect to the Option Shares. If, as seems
unlikely, Rule 144 should come available, the Optionee understands that the
Company is under no obligation to furnish the Optionee or others with the
information necessary to enable the Optionee to sell any of the Optionee Shares
under Rule 144.
Page 6 of 9
<PAGE>
15. LEGENDS AND STOP-TRANSFER ORDER ON OPTION SHARES. The
certificates representing the Option Shares acquired by the Optionee upon
exercise of the Option shall bear legends substantially similar to the following
[in addition to any other legends deemed appropriate by counsel to the Company]:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED ["THE ACT"] OR ANY APPLICABLE STATE SECURITIES LAWS, AND
MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED, OR HYPOTHECATED
UNLESS AND UNTIL REGISTERED UNDER THE ACT AND ALL APPLICABLE STATE SECURITIES
LAWS OR, IN THE OPINION OF COUNSEL [IN FORM AND SUBSTANCE SATISFACTORY TO THE
COMPANY], SUCH OFFER, SALE OR TRANSFER OR HYPOTHECATION IS IN COMPLIANCE
THEREWITH.
Additionally, in order to conform with various state securities and
other laws the following or similar legend may appear on any and all share
certificates issued to the Optionee upon exercise of the Option:
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO RESTRICTIONS UPON TRANSFER
[INCLUDING RIGHTS OF FIRST REFUSAL AND OF REPURCHASE] AS SET FORTH IN A
NONQUALIFIED STOCK OPTION AGREEMENT AND STOCK PURCHASE AGREEMENT BY AND BETWEEN
THE COMPANY AND THE RECORD HOLDER, AND IN THE BYLAWS OF THE COMPANY.
The Optionee further agrees, in order to ensure compliance with the
restrictions referred to in the foregoing legends, or elsewhere herein, that the
Company may issue appropriate "stop transfer" instructions to its transfer
agent, if any, with respect to such certificates or instruments, or if the
Company transfers its own securities, that it may make appropriate notations to
the same effect in the Company's records.
16. NOTICES. Any notice required to be given under the terms of this
Option Agreement shall be addressed to the Company in care of its Chief
Financial Officer at the Office of the Company, and any notice given to Optionee
shall be addressed to Optionee at the address indicated beneath Optionee's
signature hereto or such other address as either party may here after designate
in writing to the other. Any such notice shall be deemed to have been duly given
when actually received or when enclosed in a properly sealed envelope or wrapper
addressed as aforesaid, registered or certified, and deposited [postage or
registration or certification fee prepaid] in a post office or branch post
office regularly maintained by the United States.
17. CONCLUSIVE AUTHORITY OF COMMITTEE AND BOARD. All decisions of the
Committee and the Board upon any question arising under the Plan or under this
Agreement shall be conclusive.
Page 7 of 9
<PAGE>
18. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of any successor or assignee of the Company. Where the
context permits, "Optionee" as used in this Agreement shall include Optionee's
executor, administrator or other legal representative or the person or persons
to whom Optionee's rights pass by will or the applicable laws of descent and
distribution.
19. WITHHOLDING. Optionee agrees to make appropriate arrangements
with the Company for satisfaction of any applicable state or local income tax
withholding requirements or social security requirements.
20. GOVERNING LAW. The interpretation, performance, and enforcement
of this Option Agreement shall be governed by the laws of the State of
California.
Page 8 of 9
<PAGE>
21. ATTORNEY'S FEES. In the event of litigation arising hereunder,
the prevailing party shall be entitled to reimbursement of reasonable attorney's
fees and costs.
IN WITNESS WHEREOF, the Company has caused these presents to be
executed on its behalf by a duly authorized individual, and Optionee has
hereunto set his hand as of the day and year first written above.
Company: PharmaPrint Inc.,
By: /S/ PHILLIP G. TRAD
--------------------------------------------
Phillip G. Trad
Senior Vice President & General Counsel
Optionee: By: /S/ MATILDE PARENTE
--------------------------------------------
Matilde Parente
Page 9 of 9
<PAGE>
Exhibit 4.4
PHARMAPRINT INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
OPTIONEE : Joerg Gruenwald
GRANT DATE : July 7, 1998
OPTION PRICE : $8.875
NUMBER OF SHARES : 50,000
EXPIRATION DATE : July 7, 2008
This Agreement, made as of July 7, 1998, [the "GRANT DATE"] between
PharmaPrint Inc., a California corporation [hereinafter called the "COMPANY"],
and Joerg Gruenwald [hereinafter called "OPTIONEE"]. Upon execution of this
Agreement, the previously executed Non-qualified Stock Option Agreement dated
June 22, 1998 shall be deemed null and void.
WITNESSETH
WHEREAS, the Company has adopted the PHARMAPRINT INC., 1995 STOCK
OPTION PLAN, AS AMENDED [the "PLAN"], which Plan is incorporated herein by
reference and made a part of this Agreement; and
WHEREAS, the Company regards Optionee as a valuable contributor to
the success of the Company and its Affiliates, and has determined that it would
be to the advantage and interest of the Company and its shareholders to grant
the Option provided for in this Agreement to Optionee under the Plan [as an
inducement to remain in the service of the Company and its Affiliates , and as
an incentive for increased efforts during such service];
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, the parties to this Agreement hereby agree as follows:
1. NUMBER OF SHARES AND OPTION PRICE. The Company hereby grants to
Optionee the right and option to purchase from the Company on the terms and
conditions hereinafter set forth, all or any part of an aggregate of the number
of shares of the Common Stock,
Page 1 of 8
<PAGE>
without par value, of the Company [hereinafter called the "Stock"] set forth
above. The purchase price of the Stock subject to this Option shall be the
Option Price per share set forth above.
2. VESTING SCHEDULE AND OPTION PERIOD.
[a] The Option Period to purchase shares of Common Stock shall
vest quarterly over one year from the Grant Date set forth above,
and, except as provided in paragraph 3 or paragraph 4, shall end on
the Expiration Date as set forth above upon the execution of this
agreement. Optionee shall be entitled to vest a limit of fifty
thousand options per year for each year of Optionee's Consulting
Agreement dated June 22, 1998. All unvested options only, for the
year in which a sale of the Company shall occur, will accelerate and
fully vest up to the maximum of options available in that sale year.
The maximum number of shares available over the three year term of
Optionee's Consulting Agreement that can be purchased is one hundred
fifty thousand (150,000) shares.
[b] This Option shall be exercisable only during the Option
Period, and during such Option Period, the exercise of the Option
shall be subject to the limitations of Paragraph 3 and Paragraph 4.
3. LIMITS ON OPTION PERIOD. The Option Period may end before the
Expiration Date, as follows:
[a] If Optionee's status as an employee of or consultant to
the Company or an Affiliate terminates for any reason during the
Option Period, other than as set forth in paragraphs 3[b], [c] or [d]
below, the Option Period shall end ninety [90] days after such
termination or on the Expiration Date, provided said options are
registered or ninety [90] days after said options shall have become
registered, whichever shall occur first. Optionee shall have the
right to exercise, to the extent then exercisable and vested [or on
such accelerated basis as the Plan Committee shall determine at or
after Grant Date], any portion of this Option in accordance with the
terms hereof.
[b] If Optionee's status as an employee of or consultant to
the Company is terminated by reason of [i] the Company terminating
Optionee's Employment Agreement or Consulting Agreement, if any, for
Cause [as may defined therein] or [ii] Optionee terminating the
Employment Agreement in breach of the provisions thereof, the Option
Period shall immediately end as of the date of termination and
Optionee shall forfeit all rights which he may have to exercise any
unvested options. For purposes of determining the date of termination
of Optionee's Employment Agreement or Consulting Agreement in the
event of a termination by the Company for Cause, such date shall be
deemed for purposes of this paragraph 3[b] ,only, to be the date the
Company provides Optionee with written notice of his material failure
to perform his duties under the Employment Agreement or Consulting
Agreement.
Page 2 of 8
<PAGE>
[c] If Optionee's status as an employee of or consultant to
the Company is terminated by reason of death, the Option Period shall
end one year after the date of death or on the Expiration Date,
whichever shall occur first, and Optionee's executor or administrator
or the person or persons to whom Optionee's rights under this Option
shall pass by will or by the applicable laws of descent and
distribution may exercise, to the extent then exercisable [or on such
accelerated basis as the Plan Committee shall determine at or after
Grant Date], any portion of this Option in accordance with the terms
hereof.
[d] If Optionee's status as an employee of or consultant to
the Company is terminated by reason of disability, the Option Period
shall end one year after the date of cessation of such status or on
the Expiration Date, whichever shall first occur. Optionee shall have
the right to exercise, to the extent then exercisable [or on such
accelerated basis as the Plan Committee shall determine at or after
Grant Date], any portion of this Option in accordance with the terms
hereof.
4. VESTING OF RIGHT TO EXERCISE OPTIONS; PARTIAL EXERCISE; FRACTIONAL
SHARES.
[a] Subject to the terms of paragraphs 2 and 3 above, no
options shall vest after the date on which Optionee is no longer an
employee of or consultant to the Company. Any portion of the Option
that is not exercised shall accumulate and may be exercisable at any
time prior to the Expiration Date.
[b] No partial exercise of this Option may be for less than
five [5] percent of the total number of shares then available under
this Option to purchase shares of Stock.
[c] In no event shall the Company be required to issue
fractional shares.
[d] In the event of a Change of Control [as defined below] of
the Company, all unvested options shall immediately vest and become
exercisable. Change of Control shall mean the occurrence of any or
all of the following events: [i] the sale of all or substantially all
of the Company's assets, [ii] the merger or consolidation of the
Company where [x] the Company is not the surviving entity [other than
a merger for the purposes of reincorporating the Company in a
jurisdiction other than California] or [y] parties other than the
Company's security holders own, following consummation of the merger,
in excess of 50% of the Company's issued and outstanding shares of
Common Stock on a fully diluted basis after giving effect to the
exercise, exchange or conversion of any options, warrants, preferred
stock or other securities exercisable, exchangeable or convertible
into Common Stock of the Company, or [iii] if any individual,
corporation, partnership or other entity [a "Person"], other than the
Company or any employee benefit plan of the Company or of any
Affiliate or Associate [each as defined in Rule 12b-2
Page 3 of 8
<PAGE>
under the Securities Exchange Act of 1934, as amended], shall,
together with Affiliates or Associates of such Person, acquire or
become the beneficial owner of, in the aggregate, in excess of 50% of
the Common Stock of the Company issued and outstanding following such
acquisition on a fully diluted basis after giving effect to the
exercise, exchange or conversion of any options, warrants, preferred
stock or other securities exercisable, exchangeable or convertible
into Common Stock of the Company.
5. METHOD OF EXERCISE. Subject to Section 4, Optionee may exercise
this Option with respect to all or any part of the shares of Stock then subject
to such exercise as follows:
[a] By giving the Company written notice of such exercise,
specifying the number of shares as to which this Option is exercised.
Such notice shall be accompanied by an amount equal to the Option
Price of such shares, in the form of any one or combination of the
following: cash, a certified check, bank draft, postal or express
money order payable to the order of the Company in lawful money of
the United States.
[b] Optionee shall be required, as a condition precedent to
acquiring Stock through exercise of the Option to execute one or more
agreements relating to obligations in connection with ownership of
the Stock or restrictions on transfer of the Stock no less
restrictive than the obligations and restrictions to which other
shareholders of the Company are subject at the time of such exercise.
[c] Optionee shall give the Company satisfactory assurance in
writing signed by Optionee or Optionee's legal representative, as the
case may be, that such shares are being purchased for investment and
not with a view to the distribution thereof; provided that such
assurance shall be deemed inapplicable to [1] any sale of such shares
by such Optionee made in accordance with the terms of a registration
statement covering such sale, which has heretofore been [or may
hereafter be] filed and become effective under the Securities Act of
1933, as, amended [the "Securities Act"], and with respect to which
no stop order suspending the effectiveness thereof has been issued,
and [2] any other sale of such shares with respect to which in the
opinion of counsel for the Company, such assurance is not required to
be given in order to comply with the provisions of the Securities
Act.
As soon as practicable after receipt of the notice required in
paragraph 5[a] hereof and satisfaction of the conditions set forth in paragraphs
5[b] and 5 [c ], the Company shall, without transfer or issue tax and without
any other incidental expense to the Optionee, deliver to Optionee at the office
of the Company or such other place as may be mutually acceptable to the Company
and Optionee a certificate or certificates of such shares of Stock; provided,
however, that the time of such delivery may be postponed by the Company for such
period as may be required for it with reasonable diligence to comply with
applicable registration requirements under the Securities Act, the Securities
Exchange Act of 1934, as amended any applicable listing requirements of any
Page 4 of 8
<PAGE>
national securities exchange, and requirements under any other law or regulation
applicable to the issuance or transfer of such shares. Optionee shall not be
entitled to the privileges of stock ownership as to any shares of Stock
purchased hereunder until such certificate is delivered pursuant to this
paragraph 5. If Optionee fails to accept delivery any pay for all or any part of
the number of shares specified in such notice upon tender of delivery thereof,
Optionee's right to purchase such undelivered shares may be terminated by the
Company at its election.
6. ADJUSTMENTS. If there should be any change in the Stock subject to
this Option, through merger, consolidation, reorganization, recapitalization,
reincorporation, stock split, stock dividend or other change in the corporate
structure of the Company, appropriate adjustments shall be made to this Option
in order to preserve, but not to increase, the benefits to the Optionee,
including adjustments in the number of shares subject to the Option and in the
price per share. Any adjustments made pursuant to this paragraph 6 as a
consequence of a change in the corporate structure of the Company shall not
entitle Optionee to acquire a number of shares of Stock of the Company or shares
of stock of any successor company greater than the number of shares Optionee
would receive if, prior to such change, Optionee had actually held a number of
shares of Stock equal to the number of shares subject to this Option.
7. NON-TRANSFERABLE OPTION. This Option shall, during Optionee's
lifetime, be exercisable only by Optionee, and neither this Option nor any right
hereunder shall be transferable by Optionee by operation of law or otherwise
other than by will or the laws of descent and distribution. In the event of any
attempt by Optionee to alienate, assign, pledge, hypothecate, or otherwise
dispose of this Option or of any right hereunder, except as provided for in this
Agreement, or in the event of any attachment, execution, or similar process upon
the rights or interest hereby conferred, the Company at its election may
terminate this Option by notice to Optionee and this Option shall thereupon
become null and void.
8. NO SHAREHOLDER RIGHTS. Neither Optionee nor any person entitled to
exercise Optionee's rights in the event of Optionee's death shall have any of
the rights of a shareholder with respect to the shares of Stock subject to this
Option except to the extent the certificates for such shares shall have been
issued upon the exercise of this Option.
9. CONTINUATION OF SERVICE. Nothing in this Agreement shall confer
upon any person any right to continue in the service of the Company or any
Affiliate thereof, or interfere in any way with the right of the Company or any
such Affiliate to terminate such relationship at any time, with or without
cause, but nothing contained herein shall effect any other contractual rights of
an employee or consultant.
10. CONFLICT WITH THE PLAN. This Agreement and the Option herein
granted is expressly subject to the terms and conditions of the Plan, which
Optionee acknowledges is incorporated herein by reference. In the event of any
conflict between this Agreement and the Plan, the Plan shall prevail.
Page 5 of 8
<PAGE>
11. ABSENCE OF REGISTRATION OF OPTION SHARES AND EFFECT
THEREOF. The Optionee has been advised that the shares of stock acquired by
exercise of the option [the "Option Shares"] have not been registered with the
Securities and Exchange Commission [the "SEC"], or under applicable state
securities laws, and accordingly may not be offered, sold, or otherwise
transferred except in compliance with the Securities Act and applicable state
securities laws. The Optionee has been further advised that the effect of the
representations and warranties above set forth is that the Optionee must bear
the economic risk of Optionee's investment in the stock indefinitely unless
registered pursuant to the Securities Act and applicable state securities laws
or if, in the opinion of counsel in form and substance satisfactory to the
Company, an exemption from such registration requirements is available.
12. REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE
OPTION SHARES. Optionee represents and warrants that Optionee is familiar with
the business and prospects of the Company. The Company shall make available the
by-laws, minute book, stock transfer book and other records of the Company for
inspection by Optionee, and that the Company shall make available the
opportunity to ask questions and receive answers concerning the business and
affairs of the Company.
The Company has discussed with Optionee certain aspects of its
business and prospects and provided Optionee access to the records referred to
above. Those discussions and written information were intended to describe the
aspects of the Company's business and prospects which it believes to be
material, but were no a thorough or exhaustive description of the Company's
business or prospects. Therefore, the Company does not warrant the completeness
of those discussions or information but only that such discussions and
information represent its good faith opinion of its business and prospects.
Optionee represents and warrants that the investment occurring by
reason of exercise of the Option is in accord with the nature and size of
Optionee's present investments and net worth and that Optionee is financially
able to bear the economic risk of this investment for an indefinite period of
time. Optionee covenants to make such representations, warranties and covenants
upon exercise, in whole or in part, of the Option as counsel to the Company may
deem appropriate to assure compliance with securities laws.
13. ABSENCE OF POSSIBILITIES FOR REGISTRATION RIGHTS. Only the
Company may file a registration statement with the SEC, and the Company is under
no obligation to file a registration statement or any other disclosure statement
with the SEC respecting the Option Shares.
14. EXEMPTION FROM REGISTRATION OF OPTION SHARES NOT ASSURED. The
Optionee also has been advised that holders of Option Shares cannot be assured
that any exemption from the Securities Act will be available, or if available,
will allow such holders to dispose of or otherwise transfer Option Shares, under
the circumstances, in the amounts, or at
Page 6 of 8
<PAGE>
the times proposed by them. Specifically, Optionee has been advised that Rule
144 promulgated under the Securities Act which provides for certain limited,
routine sales of unregistered securities, is not available with respect to the
Option Shares. If, as seems unlikely, Rule 144 should come available, the
Optionee understands that the Company is under no obligation to furnish the
Optionee or others with the information necessary to enable the Optionee to sell
any of the Optionee Shares under Rule 144.
15. LEGENDS AND STOP-TRANSFER ORDER ON OPTION SHARES. The
certificates representing the Option Shares acquired by the Optionee upon
exercise of the Option shall bear legends substantially similar to the following
[in addition to any other legends deemed appropriate by counsel to the Company]:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED ["THE ACT"] OR ANY APPLICABLE STATE SECURITIES LAWS, AND
MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED, OR HYPOTHECATED
UNLESS AND UNTIL REGISTERED UNDER THE ACT AND ALL APPLICABLE STATE SECURITIES
LAWS OR, IN THE OPINION OF COUNSEL [IN FORM AND SUBSTANCE SATISFACTORY TO THE
COMPANY], SUCH OFFER, SALE OR TRANSFER OR HYPOTHECATION IS IN COMPLIANCE
THEREWITH.
Additionally, in order to conform with various state securities and
other laws the following or similar legend may appear on any and all share
certificates issued to the Optionee upon exercise of the Option:
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO RESTRICTIONS UPON TRANSFER
[INCLUDING RIGHTS OF FIRST REFUSAL AND OF REPURCHASE] AS SET FORTH IN A
NONQUALIFIED STOCK OPTION AGREEMENT AND STOCK PURCHASE AGREEMENT BY AND BETWEEN
THE COMPANY AND THE RECORD HOLDER, AND IN THE BYLAWS OF THE COMPANY.
The Optionee further agrees, in order to ensure compliance with the
restrictions referred to in the foregoing legends, or elsewhere herein, that the
Company may issue appropriate "stop transfer" instructions to its transfer
agent, if any, with respect to such certificates or instruments, or if the
Company transfers its own securities, that it may make appropriate notations to
the same effect in the Company's records.
16. NOTICES. Any notice required to be given under the terms of this
Option Agreement shall be addressed to the Company in care of its Chief
Financial Officer at the Office of the Company, and any notice given to Optionee
shall be addressed to Optionee at the address indicated beneath Optionee's
signature hereto or such other address as either party may here after designate
in writing to the other. Any such notice shall be deemed to have been duly given
when
Page 7 of 8
<PAGE>
actually received or when enclosed in a properly sealed envelope or wrapper
addressed as aforesaid, registered or certified, and deposited [postage or
registration or certification fee prepaid] in a post office or branch post
office regularly maintained by the United States.
17. CONCLUSIVE AUTHORITY OF COMMITTEE AND BOARD. All decisions of the
Committee and the Board upon any question arising under the Plan or under this
Agreement shall be conclusive.
18. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of any successor or assignee of the Company. Where the
context permits, "Optionee" as used in this Agreement shall include Optionee's
executor, administrator or other legal representative or the person or persons
to whom Optionee's rights pass by will or the applicable laws of descent and
distribution.
19. WITHHOLDING. Optionee agrees to make appropriate arrangements
with the Company for satisfaction of any applicable state or local income tax
withholding requirements or social security requirements.
20. GOVERNING LAW. The interpretation, performance, and enforcement
of this Option Agreement shall be governed by the laws of the State of
California.
21. ATTORNEY'S FEES. In the event of litigation arising hereunder,
the prevailing party shall be entitled to reimbursement of reasonable attorney's
fees and costs.
IN WITNESS WHEREOF, the Company has caused these presents to be
executed on its behalf by a duly authorized individual, and Optionee has
hereunto set his hand as of the day and year first written above.
Company: PharmaPrint Inc.,
By: /S/ ROBERT J. BURGESS
--------------------------------------------
Robert J. Burgess, President &
Chief Operating Officer
Optionee: By: /S/ JOERG GRUENWALD
--------------------------------------------
Joerg Gruenwald
Page 8 of 8
<PAGE>
Exhibit 5
[LETTERHEAD OF KLEHR, HARRISON, HARVEY, BRANZBURG & ELLERS LLP]
February 12, 1999
Board of Directors
PharmaPrint Inc.
2600 Michelson Drive, Suite 1600
Irvine, California 92612
Re: REGISTRATION STATEMENT ON FORM S-8
Gentlemen:
We have acted as counsel to PharmaPrint Inc. (the "Company") in
connection with the proposed registration of shares (the "Shares") of the
Company's common stock, par value $.001 per share (the "Common Stock"), on a
registration statement on Form S-8 being filed by the Company with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended (the "Securities Act"). Such registration statement, as it may be
amended or supplemented from time to time, including all exhibits thereto, is
referred to hereinafter as the "Registration Statement."
The Shares consist of 2,859,000 shares of Common Stock issuable upon
the exercise of options (the "Plan Options") granted or to be granted to certain
officers, directors and key employees (or former officers, directors and key
employees) of the Company pursuant to the PharmaPrint Inc. 1995 Stock Option
Plan, As Amended (the "Option Plan") and an aggregate of 149,000 shares of
Common Stock issuable upon exercise of options (collectively with the Plan
Options, the "Options") granted pursuant to consulting agreements (the
"Consulting Agreements"). Certain of the Shares may be offered and sold from
time to time for the account of the persons referred to in the Registration
Statement as "Selling Shareholders."
In this regard, we have examined: (i) the Option Plan; (ii) the
Consulting Agreements; (iii) the award agreements granting Options pursuant to
the Option Plan and Consulting Agreements to certain of the officers, directors
and consultants of the Company; (iii) the Company's Certificate of Incorporation
and Bylaws, each as amended and as presently in effect; (iv) the Registration
Statement; and (v) such officers' certificates, resolutions, minutes, corporate
records and other documents as we have deemed necessary or appropriate for
purposes of rendering the opinions expressed herein.
In rendering such opinions, we have assumed the authenticity of all
documents and records examined, the conformity with the original documents of
all documents submitted to us as copies and the genuineness of all signatures.
-1-
<PAGE>
Board of Directors
February 12, 1999
Page 2
The opinions expressed herein are based solely upon our review of the
documents and other materials expressly referred to above. Other than such
documents and other materials, we have not reviewed any other documents in
rendering such opinions. Such opinions are therefore qualified by the scope of
that document examination.
Based upon and subject to the foregoing, and on such other examinations
of law and fact as we have deemed necessary or appropriate in connection
herewith, we are of the opinion that, upon exercise of the Options in accordance
with the provisions of the Option Plan and the applicable award agreements, the
Shares issued pursuant to the Options, as the case may be, are or will be, as
the case may be, duly authorized, validly issued, fully paid and nonassessable
shares of Common Stock.
This opinion is limited to the law of the State of Delaware and the
Federal securities law of the United States. Except as expressly otherwise noted
herein, this opinion is given as of the date hereof.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference made to this firm under the caption
"Legal Matters" in the Prospectus constituting a part of the Registration
Statement. By giving such consent, we do not hereby admit that we fall within
the category of persons whose consent is required pursuant to Section 7 of the
Securities Act.
Very truly yours,
/s/ Klehr, Harrison, Harvey, Branzburg & Ellers LLP
-2-
<PAGE>
Exhibit 23.1
Arthur Anderson LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporated by
reference in this registration statement on Form S-8, of our report dated
June 1, 1998 included in PharmaPrint Inc. and Subsidiary's Form 10-KSB for
the year ended March 31, 1998 and to all references to our Firm in this
registration statement.
/S/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Orange County, CA
February 9, 1999
