From the Schedule 14A:
SHARE OWNERSHIP
The following table and footnotes set forth certain information
regarding the beneficial ownership of Procept's Common Stock as of August [22],
1997 by (i) persons known by Procept to be beneficial owners of more than 5% of
the Common Stock, (ii) the Chief Executive Officer and all other executive
officers whose 1996 salary and bonus exceeded $100,000, (iii) each director of
Procept, and (iv) all current executive officers and directors of Procept as a
group:
Shares
Beneficially Owned (1)
-------------------------
Beneficial Owner Shares Percent
---------------- ------ -------
The Aries Trust...................................................... 22,727,330(2) 62.4%
The Aries Domestic Fund
Paramount Capital Asset Management, Inc.
Dr. Lindsay A. Rosenwald
c/o Paramount Capital Asset Management, Inc.
787 Seventh Avenue
New York, NY 10019
Aeneas Venture Corporation........................................... 1,184,393 6.0%
600 Atlantic Avenue
Boston, MA 02110
Stanley C. Erck...................................................... 262,648(3) 1.3%
James C. Jenson, Ph.D................................................ 79,365(4) *
Michael J. Higgins................................................... 40,649(5) *
Michael S. Weiss..................................................... 0(6) *
Zola P. Horovitz, Ph.D............................................... 30,000(7) *
Max Link, Ph.D....................................................... 30,000(8) *
Ellis L. Reinherz, M.D............................................... 26,412(9) *
All current executive officers and directors as
a group (7 persons)............................................. 469,074(10) 2.3%
--------------------
* Indicates less than 1%
(1) Numbers of shares and percentages assume the conversion of the outstanding
shares of Series A Preferred Stock at the lowest conversion rate which the
Company knows will be in effect at any point in the 60 day period
commencing on August [22], 1997. Unless otherwise indicated in these
footnotes, each stockholder has sole voting and investment power with
respect to the shares of Common Stock shown as beneficially owned by such
stockholder, subject to community property laws where applicable. Shares of
Common Stock issuable upon the conversion of Series A Preferred Stock or on
the exercise of options or warrants currently exercisable or exercisable
within 60 days of August [22], 1997 are treated as outstanding solely for
the purpose of calculating the amount and percentage of shares beneficially
owned by the holder of such options or warrants.
(2) Represents the following shares which are issuable on conversion or
exercise of outstanding convertible securities within 60 days after August
[22,] 1997: (i) 6,275,862 shares of Common Stock issuable on conversion of
18,200 outstanding shares of Series A Preferred Stock held by The Aries
Fund, (ii) 448,275 shares of Common Stock issuable upon conversion of
outstanding Notes in the principal amount of $130,000 held by The Aries
Fund, assuming a conversion rate of $0.29, (iii) 8,048,628 shares of
Common Stock issuable upon exercise of outstanding warrants held by The
Aries Fund, (iv) 3,379,310 shares of Common Stock issuable on conversion of
9,800 outstanding shares of Series A Preferred Stock held by The Aries
Domestic Fund, L.P., (v) 241,379 shares of Common Stock issuable upon
conversion of outstanding Notes in the principal amount of $70,000 held by
The Aries Domestic Fund, L.P., assuming a conversion rate of $0.29, and
(vi) 4,333,876 shares of Common Stock issuable upon exercise of outstanding
warrants held by The Aries Domestic Fund, L.P. The conversion rate of the
Preferred Stock and the Notes and the number of shares issuable pursuant to
the Warrants held by the Purchasers are subject to increase in accordance
with the terms of such securities. Paramount Capital Asset Management, Inc.
("PCAM"), Dr. Lindsay A. Rosenwald, The Aries Fund and The Aries Domestic
Fund, L.P. (the "Purchasers") filed a Statement on Schedule 13D with the
Securities and Exchange Commission reflecting the Purchasers' acquisition
of these securities on June 30, 1997 (the "Schedule 13-D"). According to
the Schedule 13D, Dr. Rosenwald and PCAM may be deemed to have shared
voting and investment power over the shares of Common Stock that may be
deemed to be beneficially owned by the Purchasers. Pursuant to the
Securities Purchase Agreement dated June 30, 1997 with the Company, the
Purchasers have the right to appoint a majority of the members of the Board
of Directors of the Company; provided, however, that until the Approval
Date, the Purchasers have the contractual right to appoint only three
directors. As of the date of this Proxy Statement, the Purchasers have only
nominated one director to the Board of Directors, Michael S. Weiss.
(3) Includes 184,371 shares issuable to Mr. Erck upon the exercise of options
currently exercisable or exercisable within 60 days of August [22], 1997.
(4) Includes 40 shares held by Dr. Jenson's sons and 74,569 shares issuable
to Dr. Jenson upon the exercise of options currently exercisable or
exercisable within 60 days of August [22], 1997; these options, however,
will terminate on October [__], 1997.
(5) Includes 36,030 shares issuable to Mr. Higgins upon the exercise of
options currently exercisable or exercisable within 60 days of August
[22], 1997 and 100 shares held in a trust for the benefit of Mr.
Higgins' daughter.
(6) Does not include shares held of record or issuable to the Purchasers. Mr.
Weiss is a Senior Managing Director of Paramount Capital, Inc., an
affiliate of PCAM, which is the investment manager of The Aries Fund and
the General Partner of the Aries Domestic Fund, L.P. Mr. Weiss disclaims
beneficial ownership of the shares held by the Purchasers.
(7) Consists solely of shares issuable to Dr. Horovitz upon the exercise of
options currently exercisable or exercisable within 60 days of August
[22], 1997.
(8) Includes 15,000 shares issuable to Dr. Link upon the exercise of options
currently exercisable or exercisable within 60 days of August [22], 1997.
(9) Includes 2,500 shares held by Dr. Reinherz's son.
(10) See notes (3) through (9).
PROPOSAL 1 -- RATIFICATION AND APPROVAL OF THE JUNE 1997 AGREEMENTS
Nasdaq Requirements
The Company's shares of Common Stock are listed on the National Market
operated by The Nasdaq Stock Market, Inc. ("Nasdaq"), a subsidiary of the
National Association of Securities Dealers (the "NASD"). In the Company's Nasdaq
National Market Listing Agreement (the "Listing Agreement"), the Company agreed
to obtain shareholder approval for certain transactions and acknowledged that
the NASD may remove the Company's securities from the National Market if the
Company fails to comply with its agreement. Rule 4460 of the Nasdaq Marketplace
Rules requires issuers listed on the Nasdaq National Market to obtain
shareholder approval prior to the issuance of (i) securities resulting in a
change in control of the issuer and (ii) common stock (or securities convertible
into or exercisable for common stock) at a price less than market value if such
issuance equals 20% or more of the common stock or voting power outstanding
before the issuance, except in a public offering.
The Company believes that the Nasdaq Marketplace Rules require approval
of certain of the transactions and agreements contemplated by the June 1997
Agreements. Failure to obtain such approval, moreover, could result in the NASD
notifying the Company that its Common Stock will no longer be quoted on the
Nasdaq National Market. The Board of Directors believes that such a delisting
could adversely affect the ability of the Company to attract new investors, may
result in decreased liquidity of the outstanding shares of Common Stock and,
consequently, could reduce the price at which such shares trade and the
transactions costs inherent to trading such shares. As a result, the Board of
Directors is seeking ratification and approval of the June 1997 Agreements. See
"June 1997 Private Placement." There can be no assurance, however, that such
ratification and approval of the June 1997 Agreements will prevent The Nasdaq
from delisting the Common Stock from the National Market.
PROPOSAL 2 -- APPROVAL OF THE SERIES B UNIT OFFERING
The Company will require substantial additional capital to continue its
operations and has entered into a letter of intent (the "Letter of Intent") with
a placement agent (the "Placement Agent") for a private placement of its equity
securities (the "Series B Unit offering"). However, such Letter of Intent does
not constitute a legal commitment by the Placement Agent and there can be no
assurance that such offering will be consummated, in which event the Company
will require alternative financing to continue its operations or that the terms
of the proposed offering will not change as a result of negotiation between the
Company and the Placement Agent.
It is anticipated that the offering will be for a maximum of up to 200
units with each unit consisting of 1,000 shares of Series B Preferred Stock (a
series of preferred stock to be created by the Board of Directors) and B Unit
Warrants ("Series B Unit Warrants") to purchase 333,333 shares of Common Stock
(each a "Series B Unit"). There can be no assurance that the maximum number of
Series B Units will be sold.
Series B Preferred Stock.
Procept currently anticipates that the terms of the Series B Preferred
Stock will be substantially similar to the Series A Preferred Stock, with the
initial conversion price to Common Stock set at a substantial discount
(currently estimated to be 25%) to market at the closing of the Series B Unit
offering. Such terms, however, are subject to negotiation with the Placement
Agent.
The conversion price for the Series B Preferred Stock will be subject
to adjustment upon the occurrence of certain events, such as below market or
conversion price issuances or stock dividends or stock splits of the Common
Stock. In addition, the conversion price will be subject to certain reset
features in the event the Common Stock price at certain dates is less than the
then effective conversion price or fails to achieve certain agreed upon levels.
Additionally, an adjustment in the conversion price is expected to be made in
the case of the reclassification or exchange of the Common Stock, consolidation
or merger of the Company with or into another corporation or sale of all or
substantially all of the assets of the Company.
Series B Unit Warrants.
The following is a summary of the currently proposed terms of the
Series B Unit Warrants. Such terms are subject to negotiation with the Placement
Agent.
Each Series B Unit Warrant will be exercisable, initially, for one
share of Common Stock at an exercise price equal to a substantial discount to
the then current price. As proposed, the Series B Unit Warrants will be
exercisable prior to the fifth anniversary of the final closing date of the
Series B Unit Offering, but will be subject to earlier redemption based on
market prices. No fractional shares will be issued upon exercise of the Series B
Unit Warrants, and the Company will pay cash in lieu of fractional shares.
The exercise price and the number of shares of Common Stock purchasable
upon the exercise of the Series B Unit Warrants are expected
to be subject to adjustment upon the occurrence of certain events, such as below
market or conversion price issuances or stock dividends or stock splits of the
Common Stock. Additionally, an adjustment is expected to made in the case of the
reclassification or exchange of the Common Stock, consolidation or merger of the
Company with or into another corporation or sale of all or substantially all of
the assets of the Company, in order to enable warrant holders to acquire the
kind and number of shares of Common Stock that might otherwise have been
purchased upon the exercise of the B Unit Warrants. No adjustment to the
exercise price of the shares subject to the B Unit Warrants will be made for
dividends (other than dividends in the form of stock), if any, paid on the
Common Stock.
The Placement Agent.
The Company anticipates that it will enter into a Placement Agency
Agreement (the "Placement Agency Agreement") with the Placement Agent whereby
the Placement Agent will act as placement agent in connection with a "best
efforts" offering of the Series B Units in the Series B Unit offering.
Under the proposed terms, the Placement Agent will receive cash
commissions of 9% of the gross proceeds from the sale of all units in the Series
B Unit Offering. The Company is also expected to cover the Placement Agent's
expenses including without limitation, payment of a non-accountable expense
allowance equal to 4% of the gross proceeds from the sale of all of the units in
the Private Placement. Furthermore, it is anticipated that upon the final
closing of the Series B Unit Offering, the Company will grant the Placement
Agent or its designees warrants to purchase additional securities.
PROPOSAL 3 -- APPROVAL AN AMENDMENT OF PROCEPT'S
CERTIFICATE OF INCORPORATION TO EFFECT A REVERSE STOCK SPLIT
Proposed Reverse Split
The Company's Board of Directors has unanimously approved and
determined to submit to the stockholders of the Company an amendment to the
Company's Restated Certificate of Incorporation (the "Restated Certificate of
Incorporation"), to effect a one for seven reverse stock split (a stock
combination) of the Company's outstanding Common Stock (the "Reverse Split
Amendment"). The Reverse Split Amendment would not affect the number of shares
of Series A Preferred Stock outstanding, although the conversion rate of the
Series A Preferred Stock to Common Stock would be proportionally adjusted. The
Company is currently authorized to issue 30,000,000 shares of Common Stock, of
which 13,722,334 were outstanding on August 25, 1997. If the Reverse Split
Amendment is effected, the number of authorized shares would remain the same,
but the number of shares outstanding would be decreased to approximately
1,960,333. The relative rights and preferences of the Common Stock and Series A
Preferred Stock would be unaffected by the reverse split. Furthermore, the
stockholders' percentage ownership of the Company and the number of Company
stockholders should not materially change as a result of the Reverse Split
Amendment being effected. The par value per share of Common Stock would remain
at $0.01 following the reverse stock split; as a consequence, the aggregate
capital in excess of par value attributable to the outstanding Common Stock for
statutory and accounting purposes would be increased.
Nasdaq Minimum Bid Price
As amended effective August 22, 1997, Rule 4450 of the Nasdaq
Marketplace Rules provides that issuers listed on the Nasdaq National Market
maintain a minimum bid price of $1.00 per share for the listed stock. Nasdaq has
informally indicated that it will begin to review issuers for compliance with
the requirement in February 1998.
The Company's shares of Common Stock have continuously traded below
$1.00 since March 25, 1997 and may be delisted from the Nasdaq National Market
unless such shares achieve a minimum bid price of $1.00 or more. The Board of
Directors believes that such a delisting could adversely affect the ability of
the Company to attract new investors, may result in decreased liquidity of the
outstanding shares of Common Stock and, consequently, reduce the price at which
such shares trade and the transactions costs inherent to trading shares. The
Company believes that, if the Reverse Split Amendment is approved, there is a
greater likelihood that the minimum bid price of the Common Stock will be
maintained at a level over $1.00 per share. Even though a reverse stock split,
by itself, does not impact a corporation's assets or prospects, reverse stock
splits can result in a decrease in the aggregate market value of a corporation's
equity capital. The Board of Directors, however, believes that this risk is
off-set by the prospect that the reverse stock split will improve the likelihood
that the Company will be able to maintain its Nasdaq National Market listing and
may, by increasing the per share price, make an investment in the Common Stock
more attractive for certain investors. There can be no assurance, however, that
approval of the Reverse Split Amendment will succeed in raising the bid price of
the Company's Common Stock above $1.00 per share, that such minimum price, if
achieved, would be maintained, or that even if the Nasdaq's minimum bid price
requirement were satisfied, the Company's Common Stock would not be delisted
from the Nasdaq National Market for other reasons. |
