Unassociated Document
As
filed with the Securities and Exchange Commission on October 1, 2007
Registration
No. ________
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
S-3
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
Acura
Pharmaceuticals, Inc.
(Exact
name of registrant as specified in its charter)
New
York
|
|
2834
|
|
11-0853640
|
(State
or other jurisdiction of
incorporation
or organization)
|
|
(Primary
Standard Industrial
Classification
Code Number)
|
|
(I.R.S.
Employer
Identification
Number)
|
Andrew
D. Reddick
President
and Chief Executive Officer
616
N. North Court, Suite 120
Palatine,
Illinois 60067
(847)
705-7709
(Address,
including zip code and telephone number, including area code, of Registrant’s
principal executive offices)
New
York Secretary of State
Department
of State
41
State Street
Albany,
New York 12207
(Name,
address, including zip code and telephone number, including area code, of agent
for service)
Copies
to:
John
P. Reilly
Seiden
Wayne LLC
Two
Penn Plaza East
Newark,
New Jersey 07105
(973)
491-3354
Approximate
date of commencement of proposed sale to the public:
From
time
to time after the effective date of this registration statement,
as
determined by market conditions and other factors.
If
the
only securities being registered on this Form are being offered pursuant to
dividend or interest reinvestment plans, please check the following box:
¨
If
any of
the securities being registered on this Form are to be offered on a delayed
or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, other
than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: x
If
this
Form is filed to register additional securities for an offering pursuant to
Rule
462(b) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering: ¨
If
this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering: ¨
If
this
Form is a registration statement pursuant to General Instruction I.D. or a
post-effective amendment thereto that shall become effective upon filing with
the Commission pursuant to Rule 462(e) under the Securities Act, check the
following box. ¨
If
this
Form is a post-effective amendment to a registration statement filed pursuant
to
General Instruction I.D. filed to register additional securities or additional
classes of securities pursuant to Rule 413(b) under the Securities Act, check
the following box. ¨
CALCULATION
OF REGISTRATION FEE
Title
of Each Class of Securities to Be Registered
|
|
Amount
to Be Registered(1)
|
|
Proposed
Maximum Offering Price Per Security(4)
|
|
Proposed
Maximum Aggregate Offering Price
|
|
Amount
of Registration Fee
|
|
Common
Stock, $0.01 par value.
|
|
|
|
(2) |
$
|
1.50
|
|
$
|
532,875,674
|
|
$
|
16,359.28
|
|
Common
Stock, $0.01 par value,
|
|
|
|
(3) |
$
|
1.50
|
|
$
|
43,273,425
|
|
$
|
1,328.49
|
|
|
|
|
384,099,399
|
|
$
|
1.50
|
|
$
|
576,149,099
|
|
$
|
17,687.78
|
|
(1)
|
In
accordance with Rule 416(a), the Registrant is also registering hereunder
an indeterminate number of shares that may be issued and resold resulting
from stock splits, stock dividends or similar transactions.
|
(2)
|
Represents
shares of the Registrant’s common stock being registered for resale that
have been issued to the selling stockholders named in this registration
statement.
|
(3)
|
Represents
shares of the Registrant’s common stock issuable upon exercise of warrants
being registered for resale that have been issued to the selling
stockholders named in this Registration Statement.
|
(4)
|
Estimated
pursuant to Rule 457 under the Securities Act of 1933, solely for
the
purposes of calculating the registration fee, upon the basis of the
average bid and asked prices of our common stock as reported on the
Over-the-Counter Bulletin Board on September 24, 2007, a date which
is
within five business days prior to the filing of this Registration
Statement.
|
The
Registrant hereby amends this Registration Statement on such date or dates
as
may be necessary to delay its effective date until the Registrant shall file
a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
THE
INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE
SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS
Subject
to Completion, dated October 1,
2007
384,099,399
shares
Acura
Pharmaceuticals, Inc.
Common
Stock
This
prospectus relates to the offer and sale of 384,099,399 shares of our common
stock which may be disposed of from time to time by the selling stockholders
named in the “Selling Stockholders” section of this prospectus, or their
transferees, pledgees, donees or successors-in-interest. Of the shares offered
by this prospectus, such shares include 28,848,950 shares of common stock
issuable upon exercise of warrants. The shares were initially sold, and the
warrants were initially issued, in private placement transactions.
The
prices at which the selling stockholders may sell the shares will be determined
by the selling stockholders or their transferees. While we will receive cash
if
and when the warrants are exercised for cash (but not in a cashless exercise),
we will not receive any proceeds from the disposition of the shares of common
stock covered hereby.
We
will
pay the expenses related to the registration of the shares covered by this
prospectus. The selling stockholders will pay commissions and selling expenses,
if any, incurred by them.
Our
common stock is traded on the Over-the-Counter Bulletin Board under the symbol
“ACUR.OB.” On September 28, 2007, the last reported sale price of our common
stock on the Over-the-Counter Bulletin Board was $1.68 per share.
Our
principal executive offices are located at 616 N. North Court, Palatine,
Illinois 60067, and our telephone number is (847) 705-7709.
Investing
in our securities involves risks. See “Risk Factors” beginning on page 5 of this
prospectus.
NEITHER
THE
SECURITIES
AND
EXCHANGE
COMMISSION
NOR
ANY
STATE
SECURITIES
COMMISSION
HAS
APPROVED
OR
DISAPPROVED
OF
THESE
SECURITIES
OR
DETERMINED
IF
THIS
PROSPECTUS
IS
TRUTHFUL
OR
COMPLETE.
ANY
REPRESENTATION
TO
THE
CONTRARY
IS
A
CRIMINAL
OFFENSE.
The
date of this prospectus is ________________, 2007.
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Page
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Information
Contained in This Prospectus
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2
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Special
Note Regarding Forward Looking Statements
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|
2
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Risk
Factors
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3
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About
Acura Pharmaceuticals, Inc.
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13
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Use
of Proceeds
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|
15
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Selling
Stockholders
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|
15
|
Plan
of Distribution
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|
19
|
Legal
Matters
|
|
20
|
Experts
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20
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Incorporation
Of Certain Information By Reference
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21
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Where
You Can Find More Information
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22
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You
should rely only on the information provided or incorporated by reference in
this prospectus or any prospectus supplement. Neither we nor the selling
stockholders have authorized anyone to provide you with additional or different
information. The selling stockholders are not making an offer of these
securities in any jurisdiction where the offer is not permitted. You should
assume that the information in this prospectus and any prospectus supplement
is
accurate only as of the date on the front of the document and that information
incorporated by reference in this prospectus or any prospectus supplement is
accurate only as of the date of the document incorporated by reference. In
this
prospectus and any prospectus supplement, unless otherwise indicated, “Acura,”
“we,” “us” and “our” refer to Acura Pharmaceuticals, Inc. and its subsidiary,
and do not refer to the selling stockholders. When we refer to “you” or “yours,”
we mean the persons to whom offers are made hereunder. Aversion® and Acura®
Pharmaceuticals are registered trademarks in the United States.
We
refer
to the U.S. Food and Drug Administration as the FDA.
We
have
made forward-looking statements in this prospectus and in documents that we
incorporate by reference into this prospectus. These forward-looking statements
involve known and unknown risks, uncertainties and other factors which may
cause
our actual results, performance or achievements, to be materially different
from
any future results, performance, or achievements expressed or implied by those
forward-looking statements. The most significant of such factors include, but
are not limited to, our ability to enter into contractual arrangements with
qualified pharmaceutical partners to license, develop and commercialize our
Aversion® Technology and related product candidates, and our ability to fulfill
the FDA’s requirements for approving our product candidates for commercial
distribution in the United States, including, without limitation, the adequacy
of the results of the laboratory and clinical studies completed to date and
the
results of other laboratory and clinical studies, to support FDA approval of
our
product candidates, the adequacy of the development program for our product
candidates, changes in regulatory requirements, adverse safety findings relating
to our product candidates, the risk that the FDA may not agree with our analysis
of our clinical studies and may evaluate the results of these studies by
different methods or conclude that the results of the studies are not
statistically significant, clinically meaningful or that there were human errors
in the conduct or otherwise of the studies, the risk that further studies of
our
product candidates do not support FDA approval or commercially viable product
labeling, and the uncertainties inherent in scientific research, drug
development, clinical trials and the regulatory approval process. Other
important factors that may also affect future results include, but are not
limited to: our ability to attract and retain highly skilled personnel; our
ability to secure and protect our patents, trademarks and proprietary rights;
our ability to avoid infringement of patents, trademarks and other proprietary
rights or trade secrets of third parties; litigation or regulatory action that
could require us to pay significant damages or change the way we conduct our
business; our ability to compete successfully against current and future
competitors; our dependence on third-party suppliers of raw materials; our
ability to secure U.S. Drug Enforcement Administration quotas and source
controlled substances that constitute the active ingredients in our product
candidates in development; difficulties or delays in clinical trials for our
product candidates or in the manufacture of our product candidates; and other
risks and uncertainties detailed in this prospectus. We are at a development
stage and may not ever have any products or technologies that generate revenue.
When used in this prospectus, the words "estimate," "project," "anticipate,"
"expect," "intend," "believe," and similar expressions are intended to identify
forward-looking statements.
An
investment in our common stock involves a high degree of risk. In addition
to
the other information contained in this prospectus and in documents that we
incorporate by reference into this prospectus, you should carefully consider
the
following risks before purchasing our common stock. If any of these risks
occurs, our business, financial condition and operating results could be
materially adversely affected. In that case, the trading price of our common
stock could decline and you could lose all or part of your investment. See
also
“Special Note Regarding Forward-Looking Statements.”
We
Received a "Going Concern" Opinion from Our Registered Independent Public
Accounting Firm, Have a History of Operating Losses and May Not Achieve
Profitability Sufficient to Generate a Positive Return on Shareholders'
Investment
We
incurred net losses of $11.4 million for the six months ended June 30, 2007
and
net losses of $6.0 million, $12.1 million and $70.0 million for calendar years
2006, 2005 and 2004, respectively. As of June 30, 2007, our accumulated deficit
was approximately $328.9 million. Our consolidated financial statements for
the
calendar years 2006, 2005 and 2004 were prepared on a “going concern” basis. In
its report dated March 13, 2007 regarding those financial statements, our
registered independent public accounting firm expressed substantial doubt about
our ability to continue as a going concern as a result of recurring losses,
net
capital deficiency and negative cash flows. Our future profitability will depend
on many factors, including: (i) the successful completion of the formulation
development, clinical testing and acceptable regulatory review of product
candidates utilizing our Aversion® Technology; (ii) the continued receipt of
issued patents from the U.S. Patent and Trademark Office (“USPTO”) for the
material claims in our patent applications relating to our Aversion® Technology;
(iii) our ability to negotiate and execute appropriate licensing, development
and commercialization agreements with qualified pharmaceutical companies
relating to the our product candidates; and (iv) the successful
commercialization of products incorporating our Aversion® Technology without
infringing the patents and other intellectual property rights of third parties.
We cannot assure you that we will ever have a product approved for
commercialization by the FDA, that we will bring any product to market or,
if we
are successful in doing so, that we will ever become profitable.
We
Require Additional Funding
While
we
recently raised gross proceeds of $15 million in a private offering of our
securities, we require additional funding to develop our product candidates.
Our
requirements for additional new funding will depend on many factors, including:
(i) the time required and expenses incurred in the development and
commercialization of product candidates incorporating our Aversion® Technology;
(ii) the structure of any future collaborative or development agreements
relating to our Aversion® Technology, including the timing and amount of
payments, if any, that may be received under possible future collaborative
agreements; (iii) our ability to develop additional product candidates utilizing
Aversion® Technology; (iv) our ability to negotiate agreements with qualified
pharmaceutical companies for development, manufacture, marketing, sale and
distribution of products utilizing our Aversion® Technology; (v) the
prosecution, defense and enforcement of patent claims and other intellectual
property rights relating to our Aversion® Technology; and (vi) the successful
commercialization of products incorporating our Aversion® Technology without
infringing third-party patents or other intellectual property
rights.
To
fund
continued development of our product candidates incorporating Aversion®
Technology
we
must
raise additional financing, or enter into collaborative or licensing agreements
with third parties. We are seeking to enter into collaboration or licensing
agreements with qualified pharmaceutical companies which, if we are successful
would result in our receipt of contract signing fees, milestone payments and
royalties and/or profit sharing payments. No assurance can be given that we
will
be successful in securing such collaborative or licensing agreements on
acceptable terms, if at all, or if secured, that such agreements will provide
for payments to us sufficient to continue funding operations and product
development activities. In the absence of such agreements or other sources
of
funding, we will be required to scale back or terminate operations and/or seek
protection under applicable bankruptcy laws. Even assuming we are successful
in
securing appropriate collaborative or licensing agreements relating to our
Aversion® Technology, there can be no assurance that our development efforts
will result in commercially viable products.
We
Have No Near Term Sources of Revenue and Must Rely on Current Cash Reserves,
Third-Party Financing, and Technology Licensing Fees to Fund
Operations
Pending
the negotiation, execution and delivery of appropriate collaborative or
licensing agreements with qualified pharmaceutical companies, of which no
assurance can be given, we must rely on our current cash reserves and
third-party financing to fund operations and product development activities.
No
assurance can be given that current cash reserves will be sufficient to fund
the
continued operations and development of our product candidates until such time
as we generate revenue from collaborative or licensing agreements. Moreover,
no
assurance can be given that we will be successful in raising additional
financing or, if funding is obtained, that such funding will be sufficient
to
fund operations until product candidates incorporating our Aversion® Technology,
may be commercialized.
We
Are Subject to Restrictions on the Incurrence of Additional Indebtedness, Which
May Adversely Impact the Company's Ability to Fund Operations and Clinical
Trials
Pursuant
to the terms of our outstanding secured term loan agreement we are limited
as to
the type and amount of future indebtedness we may incur. This restriction may
adversely impact our ability to fund the development of our product
candidates.
Our
Product Candidates Are Based on Technology That Could Ultimately Prove
Ineffective
We
are
committing substantially all of our resources and available capital to the
development of OxyADF (oxycodone HCl and niacin) Tablets. Additional clinical
and non-clinical testing will be required to continue development of OxyADF
Tablets and for the development, preparation and submission of a 505(b)(2)
New
Drug Application (“NDA”) with the FDA. There can be no assurance that OxyADF
Tablets or any other product candidate developed using Aversion® (abuse
deterrent) Technology
will achieve the primary end points in the required clinical studies or perform
as intended in other pre-clinical and clinical studies leading to commercially
viable product candidates, product labeling, or leading to a NDA submission.
If
a NDA is submitted to the FDA for OxyADF Tablets or any other product
candidates, there can be no assurances that the FDA will accept such submission
for filing and subsequently approve such NDA with commercially viable product
labeling or to ultimately approve such product candidates for commercial
distribution. Our failure to successfully develop and achieve final FDA approval
of a product candidate utilizing Aversion® Technology will have a material
adverse effect on our operations and financial condition.
If
Pre-Clinical or Clinical Testing For Our Product Candidates Are Unsuccessful
or
Delayed, We Will Be Unable to Meet Our Anticipated Development and
Commercialization Timelines
To
obtain
FDA approval to commercially market any of our product candidates, we must
submit to the FDA a NDA demonstrating, among other things, that the product
candidate is safe and effective for its intended use. This demonstration
requires significant pre-clinical and clinical testing. As we do not possess
the
resources or employ all the personnel necessary to conduct such testing, we
rely
on contract research organizations ("CROs") for the majority of this testing
with our product candidates. As a result, we have less control over our
development program than if we performed the testing entirely on our own. Third
parties may not perform their responsibilities on our anticipated schedule.
Delays in our development programs could significantly increase our product
development costs and delay product commercialization. In addition, many of
the
factors that may cause, or lead to a delay in the development program, may
also
ultimately lead to denial of regulatory approval of a product
candidate.
The
commencement of clinical trials with our product candidates may be delayed
for
several reasons, including but not limited to delays in demonstrating sufficient
pre-clinical safety required to obtain regulatory approval to commence a
clinical trial, reaching agreements on acceptable terms with prospective
licensees, manufacturing and quality assurance release of a sufficient supply
of
a product candidate for use in our clinical trials and/or obtaining
institutional review board approval to conduct a clinical trial at a prospective
clinical site. Once a clinical trial has begun, it may be delayed, suspended
or
terminated by us or regulatory authorities due to several factors, including
ongoing discussions with regulatory authorities regarding the scope or design
of
our clinical trials, failure to conduct clinical trials in accordance with
regulatory requirements, lower than anticipated recruitment or retention rate
of
patients in clinical trials, inspection of the clinical trial operations or
trial sites by regulatory authorities, the imposition of a clinical hold by
FDA,
lack of adequate funding to continue clinical trials, and/or negative or
unanticipated results of clinical trials.
Clinical
trials required by the FDA for commercial approval, may not demonstrate safety
or efficacy of our product candidates. Success in pre-clinical testing and
early
clinical trials does not ensure that later clinical trials will be successful.
Results of later clinical trials may not replicate the results of prior clinical
trials and pre-clinical testing. Even if the results of our pivotal phase III
clinical trials are positive, we and our licensees, if any, may have to commit
substantial time and additional resources to conduct further pre-clinical and
clinical studies before we can submit NDAs or obtain regulatory approval for
our
product candidates.
Clinical
trials may be expensive and difficult to design and implement, in part because
they are subject to rigorous regulatory requirements. Further, if participating
subjects or patients in clinical studies suffer drug-related adverse reactions
during the course of such trials, or if we, our licensees, if any, or the FDA
believes that participating patients are being exposed to unacceptable health
risks, we or our licensees, if any, may suspend the clinical trials. Failure
can
occur at any stage of the trials, and our licensees, if any, could encounter
problems causing the abandonment of clinical trials or the need to conduct
additional clinical studies, relating to a product candidate.
Even
if
our clinical trials are completed as planned, their results may not support
commercially viable product label claims. The clinical trial process may fail
to
demonstrate that our product candidates are safe and effective for their
intended use. Such failure would cause us or our licensees, if any, to abandon
a
product candidate and may delay the development of other product
candidates.
We
May Not Obtain Required FDA Approval; the FDA Approval Process Is Time-Consuming
and Expensive
The
development, testing, manufacturing, marketing and sale of pharmaceutical
products are subject to extensive federal, state and local regulation in the
United States and other countries. Satisfaction of all regulatory requirements
typically takes many years, is dependent upon the type, complexity and novelty
of the product candidate, and requires the expenditure of substantial resources
for research, development and testing. Substantially all of our operations
are
subject to compliance with FDA regulations. Failure to adhere to applicable
FDA
regulations by us or our licensees, if any, would have a material adverse effect
on our operations and financial condition. In addition, in the event we are
successful in developing product candidates for sale in other countries, we
would become subject to regulation in such countries. Such foreign regulations
and product approval requirements are expected to be time consuming and
expensive.
We
may
encounter delays or rejections during any stage of the regulatory approval
process based upon the failure of clinical or laboratory data to demonstrate
compliance with, or upon the failure of the product candidates to meet, the
FDA's requirements for safety, efficacy and quality; and those requirements
may
become more stringent due to changes in regulatory agency policy or the adoption
of new regulations. After submission of an NDA, or a 505(b)(2) NDA the FDA
may
refuse to file the application, deny approval of the application, require
additional testing or data and/or require post-marketing testing and
surveillance to monitor the safety or efficacy of a product. The FDA commonly
takes one to two years to grant final approval for a NDA, or 505(b)(2) NDA.
Further, the terms of approval of any NDA including the product labeling may
be
more restrictive than we desire and could affect the marketability of products
incorporating our Aversion® Technology.
Even
if
we comply with all FDA regulatory requirements we may never obtain regulatory
approval for any of our product candidates. If we fail to obtain regulatory
approval for any of our product candidates, we will have fewer saleable products
and correspondingly lower revenues. Even if we receive regulatory approval
of
our products, such approval may involve limitations on the indicated uses or
promotional claims we may make for our products.
The
FDA
also has the authority to revoke or suspend approvals of previously approved
products for cause, to debar companies and individuals from participating in
the
drug-approval process, to request recalls of allegedly violative products,
to
seize allegedly violative products, to obtain injunctions to close manufacturing
plants allegedly not operating in conformity with current Good Manufacturing
Practices (cGMP) and to stop shipments of allegedly violative products. As
any
future source of our revenue will be derived from the sale of FDA approved
products, the taking of any such action by the FDA would have a material adverse
effect on our operations and financial condition.
We
Must Maintain FDA Approval to Manufacture Clinical Supplies of Our Product
Candidates at Our Facility; Failure to Maintain Compliance with FDA Requirements
May Prevent or Delay the Manufacture of Our Product Candidates and Costs of
Manufacture May Be Higher Than Expected
We
have
constructed and installed the equipment necessary to manufacture clinical trial
supplies of our Aversion® (abuse deterrent) Technology
product candidates in tablet formulations at our Culver, Indiana facility.
To be
used in clinical trials, all of our product candidates must be manufactured
in
conformity with current Good Manufacturing Practice (cGMP) regulations as
interpreted and enforced by the FDA. All such product candidates must be
manufactured, packaged, and labeled and stored in accordance with cGMPs.
Modifications, enhancements or changes in manufacturing sites of marketed
products are, in many circumstances, subject to FDA approval, which may be
subject to a lengthy application process or which we may be unable to obtain.
Our Culver, Indiana facility, as well as those of any third-party manufacturers
that we may use, are periodically subject to inspection by the FDA and other
governmental agencies, and operations at these facilities could be interrupted
or halted if such inspections are unsatisfactory. Failure to comply with FDA
or
other governmental regulations can result in fines, unanticipated compliance
expenditures, recall or seizure of products, total or partial suspension of
production or distribution, suspension of FDA review of our product candidates,
termination of ongoing research, disqualification of data for submission to
regulatory authorities, enforcement actions, injunctions and criminal
prosecution. We do not have the facilities, equipment or personnel to
manufacture commercial quantities of our product candidates and therefore must
rely on qualified companies with appropriate facilities and equipment to
contract manufacture commercial quantities of products utilizing our Aversion
Technology.
If
We Contract with Collaborative Partners and Our Partners Do Not Satisfy Their
Obligations, We Will Be Unable to Develop Our Partnered Product
Candidates
To
complete the development and regulatory approval of our product candidates
and
commercialize our product candidates, if any are approved by the FDA, we plan
to
enter into license agreements with qualified pharmaceutical companies providing
that such companies further develop, register, manufacture and commercialize
multiple strengths of each product candidate utilizing our Aversion® Technology.
We expect to receive contract signing fees, milestone payments and a share
of
profits and/or royalty payments derived from such licensee's sale of products
incorporating our Aversion® Technology. Currently, we do not have any such
license agreements, nor can there be any assurance that we will actually enter
into such agreements in the future. Our inability to enter into collaborative
agreements, or our failure to maintain such agreements, would limit the number
of product candidates that we can develop and ultimately, decrease our potential
sources of any future revenues. In the event we enter into any collaborative
agreements, we may not have day-to-day control over the activities of our
licensees with respect to any product candidate. Any collaborative partner
may
not fulfill its obligations under such agreements. If a collaborative partner
fails to fulfill its obligations under an agreement with us, we may be unable
to
assume the development of the product covered by that agreement or to enter
into
alternative arrangements with another third-party. In addition, we may encounter
delays in the commercialization of the product candidate that is the subject
of
a collaboration agreement. Accordingly, our ability to receive any revenue
from
the product candidates covered by collaboration agreements will be dependent
on
the efforts of our collaborative partner. We could be involved in disputes
with
a collaborative partner, which could lead to delays in or termination of, our
development and commercialization programs and result in time consuming and
expensive litigation or arbitration. In addition, any such dispute could
diminish our collaborative partners’ commitment to us and reduce the resources
they devote to developing and commercializing our products. If any collaborative
partner terminates or breaches its agreement, or otherwise fails to complete
its
obligations in a timely manner, our chances of successfully developing or
commercializing our product candidates would be materially adversely effected.
Additionally, due to the nature of the market for our product candidates, it
may
be necessary for us to license all or a significant portion of our product
candidates to a single company thereby eliminating our opportunity to
commercialize other product candidates with other collaborative
partners.
The
Market May Not Be Receptive to Products Incorporating Our Aversion®
Technology
The
commercial success of products incorporating our Aversion® Technology approved
for marketing by the FDA and other regulatory authorities will depend on
acceptance by health care providers and others that such products are clinically
useful, cost-effective and safe. There can be no assurance given, even if we
succeed in the development of products incorporating our Aversion® Technology
and receive FDA approval for such products, that products incorporating the
Aversion® Technology would be accepted by health care providers and others.
Factors that may materially affect market acceptance of products incorporating
our Aversion® Technology include but are not limited to: (i) the relative
advantages and disadvantages of our Aversion® Technology compared to competitive
products; (ii) the relative timing to commercial launch of products utilizing
our Aversion® Technology compared to competitive products ; (iii) the relative
safety and efficacy of products incorporating our Aversion® Technology compared
to competitive products; and (iv) the willingness of third party payors to
reimburse for or otherwise pay for products incorporating our Aversion®
Technology.
Our
product candidates, if successfully developed and commercially launched, will
compete with both currently marketed and new products marketed by other
companies. Health care providers may not accept or utilize any of our product
candidates. Physicians and other prescribers may not be inclined to prescribe
the products utilizing our Aversion® Technology unless our products bring clear
and demonstrable advantages over other products currently marketed for the
same
indications. If our products do not achieve market acceptance, we may not be
able to generate significant revenues or become profitable.
In
the Event That We Are Successful in Bringing Any Products to Market, Our
Revenues May Be Adversely Affected If We Fail to Obtain Acceptable Prices or
Adequate Reimbursement For Our Products From Third-Party
Payors
Our
ability to successfully commercialize products may depend in part on the
availability of reimbursement for our products from government health
administration authorities, private health insurers, and other third-party
payors and administrators, including Medicaid and Medicare. We cannot predict
the availability of reimbursement for newly-approved products incorporating
our
Aversion® Technology. Third-party payors and administrators, including state
Medicaid programs and Medicare, are challenging the prices charged for
pharmaceutical products. Government and other third-party payors increasingly
are limiting both coverage and the level of reimbursement for new drugs.
Third-party insurance coverage may not be available to patients for any of
our
products. The continuing efforts of government and third-party payors to contain
or reduce the costs of health care may limit our commercial opportunity. If
government and other third-party payors do not provide adequate coverage and
reimbursement for any product incorporating our Aversion® Technology, health
care providers may not prescribe them or patients may ask their health care
providers to prescribe competing products with more favorable reimbursement.
In
some foreign markets, pricing and profitability of pharmaceutical products
are
subject to government control. In the United States, we expect there will be
federal and state proposals for similar controls. In addition, we expect that
increasing emphasis on managed care in the United States will continue to put
pressure on the pricing of pharmaceutical products. Cost control initiatives
could decrease the price that we charge for any products in the future. Further,
cost control initiatives could impair our ability or the ability of our
licensees to commercialize our products and our ability to earn revenues from
this commercialization.
Our
Success Depends on Our Ability to Protect Our Intellectual
Property
Our
success depends in significant part on our ability to obtain patent protection
for our Aversion® Technology, in the United States and in other countries, and
to enforce these patents. The patent positions of pharmaceutical firms,
including us, are generally uncertain and involve complex legal and factual
questions. Notwithstanding our recent receipt of U.S. Patent No. 7,201,920
from
the USPTO relating to the Aversion® Technology, there is no assurance that any
of our patent application claims in our other pending non-provisional and
provisional patent applications for our Aversion® Technology will issue or if
issued, that any such patent claims will be valid and enforceable against
third-party infringement or that our products will not infringe any third-party
patent or intellectual property. Moreover, any patent claims relating to the
Aversion® Technology may not be sufficiently broad to protect the products
incorporating the Aversion® Technology. In addition, issued patent claims may be
challenged, invalidated or circumvented. Our patent claims may not afford us
protection against competitors with similar technology or permit the
commercialization of our products without infringing third-party patents or
other intellectual property rights.
Our
success also depends on our not infringing patents issued to competitors or
others. We may become aware of patents and patent applications belonging to
competitors and others that could require us to alter our technologies. Such
alterations could be time consuming and costly. We may not be able to obtain
a
license to any technology owned by or licensed to a third party that we require
to manufacture or market one or more products incorporating our Aversion®
Technology. Even if we can obtain a license, the financial and other terms
may
be disadvantageous.
Our
success also depends on our maintaining the confidentiality of our trade secrets
and know-how. We seek to protect such information by entering into
confidentiality agreements with employees, potential licensees, raw material
suppliers, potential investors and consultants. These agreements may be breached
by such parties. We may not be able to obtain an adequate, or perhaps, any
remedy to such a breach. In addition, our trade secrets may otherwise become
known or be independently developed by our competitors. Our inability to protect
our intellectual property or to commercialize our products without infringing
third-party patents or other intellectual property rights would have a material
adverse affect on our operations and financial condition.
We
May Become Involved in Patent Litigation or Other Intellectual Property
Proceedings Relating to Our Aversion® Technology or Product Candidates Which
Could Result in Liability for Damages or Delay or Stop Our Development and
Commercialization Efforts
The
pharmaceutical industry has been characterized by significant litigation and
other proceedings regarding patents, patent applications and other intellectual
property rights. The situations in which we may become parties to such
litigation or proceedings may include: (i) litigation or other proceedings
we
may initiate against third parties to enforce our patent rights or other
intellectual property rights; (ii) litigation or other proceedings we may
initiate against third parties to seek to invalidate the patents held by such
third parties or to obtain a judgment that our product candidates do not
infringe such third parties' patents; (iii) if our competitors file patent
applications that claim technology also claimed by us, we may participate in
interference or opposition proceedings to determine the priority of invention;
and (iv) if third parties initiate litigation claiming that our product
candidates infringe their patent or other intellectual property rights, we
will
need to defend against such proceedings. Our failure to avoid infringing
third-party patents and intellectual property rights in the commercialization
of
products utilizing the Aversion® Technology will have a material adverse affect
on our operations and financial condition.
The
costs
of resolving any patent litigation or other intellectual property proceeding,
even if resolved in our favor, could be substantial. Most of our competitors
will be able to sustain the cost of such litigation and proceedings more
effectively than we can because of their substantially greater resources.
Uncertainties resulting from the initiation and continuation of patent
litigation or other intellectual property proceedings could have a material
adverse effect on our ability to compete in the marketplace. Patent litigation
and other intellectual property proceedings may also consume significant
management time.
Our
Aversion® Technology may be found to infringe upon claims of patents owned by
others. If we determine or if we are found to be infringing on a patent held
by
another, we might have to seek a license to make, use, and sell the patented
technologies. In that case, we might not be able to obtain such license on
terms
acceptable to us, or at all. Our failure to obtain a license to any technology
that we may require would materially harm our business, financial condition
and
results of operations. If a legal action is brought against us, we could incur
substantial defense costs, and any such action might not be resolved in our
favor. If such a dispute is resolved against us, we may have to pay the other
party large sums of money and our use of our Aversion® Technology and the
testing, manufacturing, marketing or sale of one or more of our products could
be restricted or prohibited. Even prior to resolution of such a dispute, use
of
our Aversion® Technology and the testing, manufacturing, marketing or sale of
one or more of our products could be restricted or prohibited.
Moreover,
other parties could have blocking patent rights to products made using the
Aversion® Technology. We are aware of certain United States and international
pending patent applications owned by third parties claiming abuse deterrent
technologies, including at least one pending patent application which, if issued
in its present form, may encompass our lead product candidate. If such patent
applications result in issued patents, with claims encompassing our Aversion®
Technology or products, we may need to obtain a license to such patents, should
one be available, or alternatively, alter the Aversion® Technology so as to
avoid infringing such third-party patents. If we are unable to obtain a license
on commercially reasonable terms, we could be restricted or prevented from
commercializing products utilizing the Aversion® Technology. Additionally, any
alterations to the Aversion® Technology in view of pending third-party patent
applications could be time consuming and costly and may not result in
technologies or products that are non-infringing or commercially viable. We
cannot assure that our products and/or actions in developing products
incorporating our Aversion® Technology will not infringe third-party
patents.
We
May Be Exposed to Product Liability Claims and May Not Be Able to Obtain
Adequate Product Liability Insurance
Our
business exposes us to potential product liability risks, which are inherent
in
the testing, manufacturing, marketing and sale of pharmaceutical products.
Product liability claims might be made by patients, health care providers or
pharmaceutical companies or others that sell or consume our products. These
claims may be made even with respect to those products that possess regulatory
approval for commercial sale.
We
are
currently covered by clinical trial product liability insurance on a claims-made
basis. This coverage may not be adequate to cover any product liability claims.
Product liability coverage is expensive. In the future, we may not be able
to
maintain or obtain such product liability insurance at a reasonable cost or
in
sufficient amounts to protect us against losses due to liability claims. Any
claims that are not covered by product liability insurance could have a material
adverse effect on our business, financial condition and results of
operations.
The
pharmaceutical industry is characterized by
frequent litigation. Those companies with significant financial resources will
be better able to bring and defend any such litigation. No assurance can be
given that we would not become involved in such litigation. Such litigation
may
have material adverse consequences to our financial condition and results of
operations.
We
Face Significant Competition Which May Result in Others Developing or
Commercializing Products Before or More Successfully Than We
Do
The
pharmaceutical industry is highly competitive and is affected by new
technologies, governmental regulations, health care legislation, availability
of
financing, litigation and other factors. If our product candidates receive
FDA
approval, they will compete with a number of existing and future drugs and
therapies developed, manufactured and marketed by others. Existing or future
competing products may provide greater therapeutic convenience, clinical or
other benefits for a specific indication than our products, or may offer
comparable performance at lower costs. If our products are unable to capture
and
maintain market share, we or our licensees will not achieve significant product
revenues and our financial condition and results of operations will be
materially adversely affected.
We
will
compete for market share against fully integrated pharmaceutical companies
or
other companies that collaborate with larger pharmaceutical companies, academic
institutions, government agencies and other public and private research
organizations. Many of these competitors have products already approved,
marketed or in development. In addition, many of these competitors, either
alone
or together with their collaborative partners, operate larger research and
development programs, have substantially greater financial resources, experience
in developing products, obtaining FDA and other regulatory approvals,
formulating and manufacturing drugs, and commercializing drugs than we
do.
We
are
concentrating substantially all of our efforts on developing product candidates
incorporating our Aversion® Technology. The commercial success of products using
our Aversion® Technology will depend, in large part, on the intensity of
competition and the relative timing and sequence of new product approvals from
other companies developing, marketing, selling and distributing products that
compete with the products incorporating our Aversion® Technology. Alternative
technologies and products are being developed to improve or replace the use
of
opioid analgesics. In the event that such alternatives to opioid analgesics
are
widely adopted, then the market for products incorporating our Aversion®
Technology may be substantially decreased subsequently reducing our ability
to
generate future profits.
Key
Personnel Are Critical to Our Business, and Our Success Depends on Our Ability
to Retain Them
We
are
highly dependent on our management and scientific team, including Andrew D.
Reddick, our President and Chief Executive Officer, and Ron J. Spivey, Ph.D.
our
Senior Vice President and Chief Scientific Officer. We may not be able to
attract and retain personnel on acceptable terms given the intense competition
for such personnel among biotechnology, pharmaceutical and healthcare companies,
universities and non-profit research institutions. While we have employment
agreements with certain employees, all of our employees are at-will employees
who may terminate their employment at any time. We do not have key personnel
insurance on any of our officers or employees. The loss of any of our key
personnel, or the inability to attract and retain such personnel, may
significantly delay or prevent the achievement of our product and technology
development and business objectives and could materially adversely affect our
business, financial condition and results of operations.
The
U.S. Drug Enforcement Administration ("DEA") Limits the Availability of the
Active Ingredients Used in Our Product Candidates and, as a Result, Our Quota
May Not Be Sufficient to Complete Clinical Trials or May Result in Development
Delays
The
DEA
regulates certain finished drug products and active pharmaceutical ingredients.
Certain opioid active pharmaceutical ingredients in our current product
candidates are classified by the DEA as Schedule II substances under the
Controlled Substances Act of 1970. Consequently, their manufacture, research,
shipment, storage, sale and use are subject to a high degree of regulation.
Furthermore, the amount of Schedule II substances we can obtain for clinical
trials and commercial distribution is limited by the DEA and our quota may
not
be sufficient to complete clinical trials. There is a risk that DEA regulations
may interfere with the supply of the products used in our clinical
trials.
The
Market Price of Our Common Stock May Be Volatile
The
market price of our common stock, like the market price for securities of
pharmaceutical, biopharmaceutical and biotechnology companies, has historically
been highly volatile. The stock market from time to time experiences significant
price and volume fluctuations that are unrelated to the operating performance
of
particular companies. Factors, such as fluctuations in our operating results,
future sales of our common stock, announcements of technological innovations
or
new therapeutic products by us or our competitors, announcements regarding
collaborative agreements, laboratory or clinical trial results, government
regulation, developments in patent or other proprietary rights, public concern
as to the safety of drugs developed by us or others, changes in reimbursement
policies, comments made by securities analysts and general market conditions
may
have a significant effect on the market price of our common stock. In the past,
following periods of volatility in the market price of a company's securities,
securities class action litigation has often been instituted. A securities
class
action suit against us could result in substantial costs, potential liabilities
and the diversion of management's attention and resources and result in a
material adverse effect on our financial condition and results of
operations.
Our
Common Stock is Currently Traded on the Over-the-Counter Bulletin Board, and
the
Liquidity of our Stock may be Seriously Limited
Our
common stock is currently traded on the Over-the-Counter Bulletin Board. Trading
on the Over-the Counter Bulletin Board may adversely impact our stock price
and
liquidity, and the ability of our stockholders to purchase and sell our shares
in an orderly manner. As our common stock is not quoted on a stock exchange
and
is not qualified for inclusion on the NASDAQ Capital Market or AMEX market,
our
common stock could be subject to a rule of the Securities and Exchange
Commission that imposes additional sales practice requirements on broker-dealers
who sell such securities to persons other than established customers and
accredited investors. For transactions covered by this rule, the broker-dealer
must make a special suitability determination for the purchaser and have
received the purchaser's written consent for a transaction prior to sale.
Consequently, the rule may affect the ability of broker-dealers to sell our
common stock. There is no guarantee that an active trading market for our common
stock will be maintained on the Over-the-Counter Bulletin Board.
Our
Quarterly Results of Operations Will Fluctuate, and These Fluctuations Could
Cause Our Stock Price to Decline
Our
quarterly operating results are likely to fluctuate in the future. These
fluctuations could cause our stock price to decline. The nature of our business
involves variable factors, such as the timing of the research, development
and
regulatory submissions of our product candidates that could cause our operating
results to fluctuate.
We
Do Not Anticipate Paying Dividends on Our Common Stock in the Foreseeable
Future
We
have
not declared and paid cash dividends on our common stock in the past, and we
do
not anticipate paying any cash dividends in the foreseeable future. Our senior
term loan indebtedness prohibits the payment of cash dividends.
GCE
Holdings LLC Can Control All Matters Requiring Approval By
Shareholders
GCE
Holdings LLC beneficially owns approximately 78% of the Company's outstanding
common stock as of September 1, 2007 (calculated in accordance with Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended). In addition,
pursuant to the terms of the Amended and Restated Voting Agreement dated
February 6, 2004, as amended, between us and the former holders of our
previously outstanding convertible preferred stock, all such shareholders have
agreed that our Board of Directors shall be comprised of not more than seven
members, four of whom shall be the designees of GCE Holdings LLC. As a result,
GCE Holdings LLC, in view of its ownership percentage of our common stock and
by
virtue of its controlling position on our Board of Directors, will be able
to
control all matters requiring approval by our shareholders, including the
approval or rejection of mergers, sales or licenses of all or substantially
all
of our assets, or other business combination transactions. The interests of
GCE
Holdings LLC may not always coincide with the interests of our other
shareholders and such entity may we take action in advance of its interests
to
the detriment of our other shareholders. Accordingly, you may not be able to
influence any action we take or consider taking, even if it requires a
shareholder holder vote.
Any
Future Sale of a Substantial Number of Shares Eligible for Resale Could Depress
the Trading Price of our Stock, Lower our Value and Make It More Difficult
for
us to Raise Capital
384,099,399
shares (representing approximately 75% of our shares outstanding on a
fully-diluted basis - including all derivative securities, whether or not
currently exercisable) are being offered for sale by selling stockholders
hereby, including 355,164,234 shares held by affiliates. An additional 39.3
million shares of our common stock and common stock underlying, stock options,
restricted stock units and warrants, not being offered hereby are held by
affiliates. If some or all shares offered hereby are sold by affiliates and
others or if affiliates sell other shares, it will likely have the effect of
depressing the trading price of our common stock. In addition, such sales could
lower our value and make it more difficult for us to raise capital.
There
Can Be No Assurance That The Total Market Capitalization Of Our Common Stock
(The Aggregate Value Of Our Common Stock At The Then Market Price) After A
Reverse Stock Split Will Be Equal To Or Greater Than The Total Market
Capitalization Before A Reverse Stock Split Or That The Per Share Market Price
Of Our Common Stock Following A Reverse Stock Split Will Equal Or Exceed The
Current Per Share Market Price
On
December 14, 2006, our shareholders authorized our Board of Directors, in its
discretion, to effect a reverse stock split of our common stock at one of six
ratios on or prior to December 14, 2007. If our Board of Directors elects to
implement the reverse stock split prior to December 14, 2007, it would be
authorized to do so without need for any further shareholder action. Our Board
may also affect a reverse stock split following December 14, 2007 upon receipt
of the approval of our stockholders. If our Board elects to affect a reverse
stock split, there can be no assurance that the market price per new share
of
our common stock after the reverse stock split will increase in proportion
to
the reduction in the number of old shares of our common stock outstanding before
the reverse stock split. For example, if the market price of our common stock
on
the OTCBB before the reverse split was $1.00 per share, and if our Board of
Directors decided to implement the reverse stock split and selects a reverse
stock split ratio of one-for-ten, there can be no assurance that the post-split
market price of our common stock would be $10.00 per share or greater. By
decreasing the number of outstanding shares of common stock without altering
the
aggregate economic interest represented by the shares, we believe the market
price will be proportionally increased. The higher the market price of our
common stock rises above the two dollar minimum bid price requirement for
obtaining a listing on the American Stock Exchange, if we elect to apply for
listing there, or the four dollar minimum bid price requirement for obtaining
a
listing on the Nasdaq Capital Market, if we elect to apply for listing there,
the less risk there will be that we will fail to meet the relevant minimum
bid
price requirement. However, there can be no assurance that the market price
of
our common stock will rise to or maintain any particular level or that we will
at any time or at all times be able to meet the minimum-bid-price and other
requirements for obtaining a listing of our common stock on the American Stock
Exchange or the Nasdaq Capital Market and for maintaining such a
listing.
If
A Reverse Stock Split Is Effected, The Resulting Per-Share Stock Price May
Not
Attract Institutional Investors Or Investment Funds And May Not Satisfy The
Investing Guidelines Of Such Investors
There
can
be no assurance that a reverse stock split will result in a per-share price
that
will attract institutional investors or investment funds or that such share
price will satisfy the investing guidelines of institutional investors or
investment funds.
General
We
are a
specialty pharmaceutical company engaged in research, development and
manufacture of our innovative Aversion® Technology and related product
candidates. Product candidates developed with Aversion® Technology and
containing opioid analgesic active ingredients are intended to effectively
treat
pain and also discourage the three most common methods of pharmaceutical product
misuse and abuse including: (i) intravenous injection of dissolved tablets
or
capsules, (ii) nasal snorting of crushed tablets or capsules and (iii)
intentional swallowing of excessive numbers of tablets or capsules. OxyADF
(oxycodone HCl and niacin) Tablets, our lead product candidate utilizing
Aversion® Technology, is being developed pursuant to an active investigational
new drug application (“IND”) on file with the U.S. Food and Drug Administration
("FDA"). We conduct internal research, development, laboratory, manufacturing
and warehousing activities for Aversion® Technology at our Culver, Indiana
facility. The 28,000 square foot facility is registered by the U.S. Drug
Enforcement Administration (“DEA”) to perform research, development and
manufacture of certain Schedule II - V finished dosage form products. In
addition to internal capabilities and activities, we engage numerous contract
research organizations (“CROs”) with expertise in regulatory affairs, clinical
trial design and monitoring, clinical data management, biostatistics, medical
writing, laboratory testing and related services. Such CROs perform development
services for OxyADF Tablets and other product candidates under our
direction.
Aversion®
Technology is applicable to orally administered tablets and capsules. Aversion®
Technology can be formulated into orally administered tablets containing
commonly utilized opioid active pharmaceutical ingredients (such as oxycodone,
hydrocodone, hydromorphone, oxymorphone, morphine, codeine, tramadol,
propoxyphene, etc.), or other potentially abuseable drugs. In addition to the
opioid active ingredient, Aversion® Technology utilizes certain combinations of
pharmaceutical product inactive excipients and active ingredients intended
to
discourage or deter pharmaceutical product abuse. Aversion® Technology does
not
utilize
opioid antagonists such as naltrexone and naloxone.
OxyADF
(oxycodone HCl and niacin) Tablets, our lead product candidate with Aversion®
Technology, is an orally administered immediate release tablet containing
oxycodone HCl as its sole active analgesic ingredient and a sub therapeutic
amount of niacin. We intend to file a 505(b)(2) NDA for OxyADF Tablets with
an
anticipated indication for treating moderate to moderately severe pain. OxyADF
Tablets are intended to effectively treat moderate to moderately severe pain
while also discouraging the three most common methods of misuse and abuse.
OxyADF Tablets are being developed pursuant to an active IND on file with the
FDA. The FDA has provided written guidance to us stating that OxyADF Tablets
are
an appropriate product candidate for submission as a 505(b)(2) NDA.
OxyADF
Tablets are currently the subject of a clinical study (referred to by us as
Study AP-ADF-105) titled “A Phase III, Randomized, Double-blind,
Placebo-controlled, Multicenter, Repeat-dose Study of the Safety and Efficacy
of
OxyADF (oxycodone HCl and niacin) Tablets versus Placebo for the Treatment
of
Acute, Moderate to Severe Postoperative Pain Following Bunionectomy Surgery
in
Adult Patients.” This short term phase III study is planned to enroll
approximately 400 patients with moderate to severe pain following bunionectomy
surgery. We submitted the study protocol to the FDA and requested a Special
Protocol Assessment (SPA). Clinical protocols for Phase III trials whose data
will form the primary basis for an efficacy claim are eligible for a SPA. A
SPA
from the FDA is an agreement that the Phase III trial protocol design, clinical
endpoints, and statistical analyses plan are acceptable to support regulatory
approval. A SPA is binding upon the FDA unless a substantial scientific issue
essential to determining safety or efficacy is identified after the testing
is
begun. On June 19, 2007, we announced that we had reached agreement with the
FDA
on the SPA for Study AP-ADF-105. We believe the completion of Study AP-ADF-105
is the critical time and events path to a 505(b)(2) NDA submission for OxyADF
Tablets.
In
April
2007, the United States Patent and Trademark Office (the “USPTO”) granted us a
U.S. Patent No. 7,201,920 titled ”Methods and Compositions for Deterring Abuse
of Opioid Containing Dosage Forms”. The allowed patent claims encompass
pharmaceutical compositions intended to reduce or discourage the three most
common methods of prescription opioid analgesic product misuse and abuse
including; (i) intravenous injection of dissolved tablets or capsules; (ii)
snorting of crushed tablets or capsules; and (iii) intentionally swallowing
excess quantities of tablets or capsules. The opioid analgesics in the allowed
patent claims include oxycodone, hydrocodone, hydromorphone, morphine, codeine,
tramadol, propoxyphene and many others. In addition to issued U.S. Patent No.
7,201,920, we currently have pending five U.S. non-provisional patent
applications, three WO/PCT patent applications and multiple additional U.S.
provisional and international patent filings relating to compositions containing
opioid analgesics and other abuseable drugs. As
present, we retain ownership of all intellectual property and commercial rights
to our product candidates and the Aversion®
Technology.
To
generate revenue we plan to
enter
into license agreements with strategically focused pharmaceutical company
partners (the "Partners") providing that such Partners license product
candidates utilizing our Aversion®
Technology and further develop, register and commercialize multiple strengths
of
such product candidates. We expect to receive contract signing fees, milestone
payments and a share of profits and/or royalty payments derived from the
Partners' sale of products incorporating the Aversion®
Technology. At
present, we do not have any executed collaborative agreements with Partners,
nor
can there be any assurance that we will successfully enter into such
collaborative agreements in the future.
Our
consolidated financial statements for each of the last four years in the period
ended December 31, 2006 were prepared on a going-concern basis, expressing
substantial doubt about our ability to continue as a going-concern as a result
of recurring losses and negative cash flows. Our future profitability will
depend on several factors, including
(i)
the
successful completion of the formulation development, clinical testing and
acceptable regulatory review of product candidates utilizing the
Aversion®
Technology; (ii) our ability to negotiate and execute appropriate licensing
agreements with Partners relating to our product candidates; and (iii) the
successful commercialization by Partners of products incorporating our
Aversion®
Technology without infringing the patents and other intellectual property rights
of third parties.
Pending
the negotiation of appropriate licensing agreements with Partners or securing
alternative sources of third party financing, of which no assurance can be
given, we must rely on our current cash reserves to fund operations and product
development activities. No assurance can be given that we will be successful
in
securing licensing agreements with Partners on acceptable terms, if at all,
or
if secured, that such agreements will provide for payments to us sufficient
to
continue to fund operations and product development activities. In the absence
of such licensing agreements, or alternative sources of financing, we will
be
required to scale back or terminate operations and/or seek protection under
applicable bankruptcy laws. Even assuming we are successful in entering into
licensing agreements relating to our Aversion®
Technology, there can be no assurance that our development efforts will result
in commercially viable products or that we will ever be profitable.
We
are a
publicly traded New York corporation. Our shares of common stock are traded
on
the Over-the-Counter Bulletin Board under the symbol “acur.ob”
Recent
Developments
In
August
2007, we completed a private offering of 23,651,847 units, at a price of $1.08
per unit, with each unit consisting of four shares of common stock and a
seven-year warrant to purchase one share of common stock exercisable at a price
of $0.34 per share. 13,888,886 of the units were issued for cash with the
balance of 9,762,961 units issued in consideration of the conversion to units
of
an aggregate of $10.544 million in principal amount of outstanding bridge loan
indebtedness. Estimated net cash proceeds from the private offering of units,
after related expenses, were approximately $14.2 million. We will utilize the
net proceeds from the private offering for general working capital and to fund
our Pivotal Phase III Clinical Trial for OxyADF Tablets, our lead product
candidate utilizing our Aversion® Technology.
After
giving effect to the issuance of the units, as of September 25, 2007, we had
426,756,493 shares issued and outstanding, 39,715,662 shares underlying
outstanding warrants, 18,994,995 shares underlying outstanding stock options
and
29,500,000 shares underlying outstanding restricted stock units.
Also
on
August 20, 2007, we amended our Loan Agreement dated as of March 29, 2000 and
related $5,000,000 note (the “Note”) held by certain lenders, to (i) extend the
maturity of the Note to December 31, 2008 from September 30, 2007, (ii) reduce
the interest rate to the fixed rate of 10% per annum from the prime rate plus
four and one-half percent, and (iii) have interest paid quarterly in cash,
instead of stock. In addition, the Note is subject to mandatory prepayment
in
whole or in part, with all proceeds in excess of $5 million that we might
receive from a third party pharmaceutical company or companies pursuant to
a
licensing agreement (a “Prepayment Event”). The Loan Agreement and Note were
further amended effective September 24, 2007 to defer the payment of cash
interest until the earlier to occur of (i) the December 31, 2008 maturity date
and (ii) the occurrence of a Prepayment Event.
As
a
result of the above transaction, our outstanding debt balance as of August
20,
2007 of $15,544,000 was reduced to $5,000,000 and our stockholders’ equity
balance increased by approximately $24,690,000.
All
proceeds from the sale of the shares of common stock will be for the account
of
the selling stockholders. We will not receive any of the proceeds from the
sale
of the shares of common stock sold under this prospectus. If all of the warrants
are exercised for cash (rather than on a cashless basis), we will, however,
receive up to approximately $9.98 million. We will use these proceeds, if any,
for working capital purposes and for such other uses as our Board deems
advisable at the time of exercise. We will not receive any proceeds from the
exercise of warrants in a cashless exercise. See “Selling Stockholders” and
“Plan of Distribution.”
Of
the
384,099,399 shares covered by this prospectus, 118,259,235 of such shares
(including shares underlying warrants) were acquired in a private placement
pursuant to a securities purchase agreement dated as of August 20,
2007 (the
“PIPE Transaction”). In the PIPE Transaction, we issued 23,651,847 units at a
price of $1.08 per unit, with each unit consisting of four shares of common
stock and a warrant exercisable for seven years to purchase an additional share
of common stock with an exercise price of $0.34 per share. We agreed to file
a
registration statement with the SEC covering the resale of the shares issued
in
the foregoing transactions, including the shares issuable upon exercise of
the
warrants.
The
remaining 265,840,164 shares of common stock (including shares underlying the
warrants) covered by this prospectus were acquired by the selling stockholders
from us in previous private placement transactions - the overwhelming majority
of such shares being attributable to private placements occurring in 1998 and
2004 - and are included herein because selling stockholders elected to exercise
piggyback registration rights with respect to such shares.
We
prepared the following table based on the information supplied to us by the
selling stockholders named in the table. The selling stockholders may, however,
have sold, transferred or otherwise disposed of all or a portion of their shares
of common stock since the date on which they provided such information. Except
as provided in the table below, none of the selling stockholders has held any
position or office with, or has otherwise had a material relationship with,
us
or any of our subsidiaries within the past three years.
We
do not
know when or in what amounts a selling stockholder may offer shares of common
stock for sale. For purposes of the columns entitled “Number
of shares beneficially owned after the Offering” and “Percentage Ownership After
Offering” we assumed that all shares included in the column labeled “Number of
Shares being offered” will be sold. The
selling stockholders may choose not to sell any of the shares offered by this
prospectus. Except as otherwise set forth below, each selling stockholder has
sole voting control over the shares shown as beneficially owned.
|
|
|
|
Number
of shares beneficially owned prior to the offering
(1)
|
|
Number
of shares being offered
|
|
Number
of shares beneficially owned after the Offering
|
|
Percentage
Ownership After Offering
|
|
GCE
Holdings LLC
|
|
|
(2)
|
|
|
345,649,572
|
(12)
|
|
345,649,572
|
(12)
|
|
0
|
|
|
*
|
|
Galen
Partners III, L.P.
|
|
|
(3)
|
|
|
6,156,335
|
(13)(14)
|
|
6,006,335
|
(13)
|
|
150,000
|
|
|
*
|
|
Galen
Partners International, III, L.P.
|
|
|
(3)
|
|
|
508,597
|
(15)
|
|
508,597
|
(15)
|
|
0
|
|
|
*
|
|
Galen
Employee Fund III, L.P.
|
|
|
(3)
|
|
|
26,047
|
(16)
|
|
26,047
|
(16)
|
|
0
|
|
|
*
|
|
Essex
Woodlands Health Ventures Fund
V, L.P.
|
|
|
(4)
|
|
|
1,806,781
|
(17)(18)
|
|
1,706,781
|
(17)
|
|
100,000
|
|
|
*
|
|
Care
Capital Investments II, LP
|
|
|
(5)
|
|
|
1,279,147
|
(19)(20)
|
|
1,185,567
|
(19)
|
|
93,580
|
|
|
*
|
|
Care
Capital Offshore Investments II, LP
|
|
|
(5)
|
|
|
87,755
|
(21)(22)
|
|
81,335
|
(22)
|
|
6,420
|
|
|
*
|
|
Vivo
Ventures Fund VI, L.P.
|
|
|
(6)
|
|
|
24,818,180
|
(23)
|
|
24,818,180
|
(23)
|
|
0
|
|
|
*
|
|
Vivo
Ventures VI Affiliates Fund, L.P
|
|
|
(6)
|
|
|
181,820
|
(24)
|
|
181,820
|
(24)
|
|
0
|
|
|
*
|
|
CGM
IRACustodian f/b/o Michael M. Weisbrot
|
|
|
(7)
|
|
|
1,114,925
|
(25)
|
|
925,925
|
(25)
|
|
189,000
|
|
|
*
|
|
Michael
Weisbrot and Susan Weisbrot JT
|
|
|
(8)
|
|
|
5,392,649
|
(26)
|
|
694,440
|
(27)
|
|
4,698,209
|
|
|
1.1
|
%
|
Dennis
Adams
|
|
|
(9)
|
|
|
5,349,641
|
(28)
|
|
694,440
|
(28)
|
|
4,700,201
|
|
|
1.1
|
%
|
George
Boudreau
|
|
|
(10)
|
|
|
910,211
|
(29)
|
|
694,440
|
(29)
|
|
215,771
|
|
|
*
|
|
Greg
Wood
|
|
|
|
|
|
894,639
|
(30)
|
|
231,480
|
(30)
|
|
663,159
|
|
|
*
|
|
Peter
Stieglitz
|
|
|
(11)
|
|
|
265,565
|
(31)
|
|
231,480
|
(31)
|
|
34,085
|
|
|
*
|
|
Ian
Meierdiercks
|
|
|
|
|
|
231,480
|
(32)
|
|
231,480
|
(32)
|
|
0
|
|
|
*
|
|
Blair
Johnson
|
|
|
|
|
|
231,480
|
(33)
|
|
231,480
|
(33)
|
|
0
|
|
|
*
|
|
*
Less
than One Percent
(1)
|
Beneficial
ownership is determined in accordance with the rules of the Securities
and
Exchange Commission. Amounts in this column assume full exercise
by the
respective selling stockholders of all warrants whose underlying
shares
are covered by this Prospectus.
|
(2)
|
GCE
Holdings LLC, a Delaware limited liability company, was the assignee
of
all of our preferred stock (prior to its conversion into common stock)
and
bridge loans entered into in 2005, 2006 and 2007 (prior to their
conversion into common stock and warrants) formerly held by each
of Galen
Partners III, L.P., Galen Partners International III, L.P., Galen
Employee
Fund III, L.P. (collectively, “Galen”), Care Capital Investments II, LP,
Care Capital Offshore Investments II, LP (collectively, “Care Capital”)
and Essex Woodlands Health Ventures Fund V, L.P. (“Essex”). Galen, Care
Capital and Essex own approximately 39.8%, 30.6% and 29.6%, respectively,
of the membership interests in GCE Holdings LLC. The following natural
persons exercise voting, investment and dispositive rights over our
securities held of record by GCE Holdings LLC: (i) Galen Partners
III,
L.P., Galen Partners International III, L.P. and Galen Employee Fund
III,
L.P.: Bruce F. Wesson, L. John Wilkenson, David W. Jahns, and Zubeen
Shroff; (ii) Care Capital Investments II, LP and Care Capital Offshore
Investments II, LP: Jan Leschly, Richard Markham, Argeris Karabelas
and
David Ramsay; and (iii) Essex Woodlands Health Ventures Fund V, L.P.:
Immanuel Thangaraj, James L. Currie and Martin P. Sutter. Pursuant
to a
voting agreement, GCE Holdings LLC has the right to designate four
members
to our Board of Directors. It has currently exercised such right
with
respect to three directors: Immanuel Tharangaj, Richard Markham and
Bruce
Wesson. Amounts listed for GCE Holdings LLC exclude amounts held
by Galen,
Care Capital or Essex. GCE Holdings LLC acquired units in the PIPE
Transaction for $9 million in cash and conversion of $10.294 million
in
bridge loans acquired from Galen, Care Capital and Essex.
|
(3)
|
Galen
Partners III, L.P., Galen Partners International III, L.P., Galen
Employee
Fund III, L.P. (collectively, “Galen”) collectively own approximately
39.8% of GCE Holdings LLC. Prior to November 2005, Galen had the
right to
designate one member to our Board of Directors. Galen had been one
of our
bridge lenders in the past three years and also holds a 35.1% interest
in
a secured $5 million note issued by us. Galen assigned to GCE Holdings
LLC
its interest in $3,431,333 in principal of our bridge loans prior
to the
closing of the PIPE Transaction and GCE Holdings LLC converted such
bridge
loans into units in the PIPE Transaction. The following natural persons
exercise voting, investment and dispositive rights over our securities
held by Galen: (i) Bruce F. Wesson, L. John Wilkenson, David W. Jahns,
and
Zubeen Shroff. Bruce Wesson has been one of our directors since March
1998, including as designee of Galen and currently as designee of
GCE
Holdings LLC. The amounts listed for each Galen entity exclude amounts
held by any other Galen entity or GCE Holdings
LLC.
|
(4)
|
Essex
Woodlands Health Ventures Fund V, L.P. (“Essex”) owns approximately 29.6%
of GCE Holdings LLC. Prior to November 2005, Essex had the right
to
designate one member to our Board of Directors. Essex had been one
of our
bridge lenders in the past three years and also holds a 35.1% an
interest
in a secured $5 million note issued by us. Essex assigned to GCE
Holdings
LLC its interest in $3,431,333 in principal of our bridge loans prior
to
the closing of the PIPE Transaction and GCE Holdings LLC converted
those
bridge loans into units in the PIPE Transaction. The following natural
persons exercise voting, investment and dispositive rights over our
securities held by Essex: Immanuel Thangaraj, James L. Currie and
Martin
P. Sutter. Mr. Tharangaj has been one of our directors since December
2002, as designee of Essex and now as designee of GCE Holdings LLC.
The
amounts listed for Essex exclude amounts held by GCE Holdings LLC.
|
(5)
|
Care
Capital Investments II, LP and Care Capital Offshore Investments
II, LP
(collectively, “Care Capital”) collectively own approximately 30.6% of GCE
Holdings LLC. Prior to November 2005, Care Capital had the right
to
designate one member to our Board of Directors. Care Capital had
been one
of our bridge lenders in the past three years and also holds a 27.0%
interest in a $5 Million note issued by us. Care Capital assigned
to GCE
Holdings LLC its interest in $3,431,333 of our bridge loans prior
to the closing of the PIPE Transaction and GCE Holdings LLC converted
those loans into units
in
the PIPE Transaction. The following natural persons exercise voting,
investment and dispositive rights over our securities held by Care
Capital: Jan Leschly, Richard Markham, Argeris Karabelas and David
Ramsay.
Argeris Karabelas was one of our directors from December 2002 to
May 2006,
as designee of Care Capital and Richard Markham has been a director
since
May 2006, as designee of Care Capital and now as designee of GCE
Holdings
LLC. The amounts listed for each Care Capital entity exclude amounts
held
by any other Care Capital entity or GCE Holdings
LLC.
|
(6)
|
Vivo
Ventures Fund VI, L.P. and Vivo Ventures VI Affiliates Fund, L.P.
are
affiliated entities (the “Vivo Entities”). Vivo Ventures Fund VI, L.P. has
the right to designate an observer to attend meetings of our Board
of
Directors, until such time as it disposes of 50% of the securities
it
acquired in the PIPE Transaction and Vivo Ventures Fund VI, L.P.
has
designated Albert Cha as such observer. The amounts listed for each
of the
Vivo Entities excludes the amounts held by any other Vivo Entity.
All
shares held by each Vivo Entity were acquired in the PIPE Transaction.
Vivo Ventures Fund VI, L.P. invested $5 million and Vivo Ventures
VI
Affiliates Fund, L.P. invested $0.4 million in the PIPE
Transaction.
|
(7)
|
CGM
IRA Custodian f/b/o Michael M. Weisbrot invested $200,000 in cash
in the
PIPE Transaction. Amounts exclude shares and shares underlying warrants
held by Michael and Susan Weisbrot.
|
(8)
|
Michael
and Susan Weisbrot own a 1.2% interest in a secured $5 million note
issued
by us.
|
(9)
|
Amounts
include shares and shares underlying warrants acquired by Mr. Adams
for
$100,000 in cash and upon conversion of $50,000 in bridge loans extended
in November 2005 into units in the PIPE Transaction. Mr. Adams owns
a 0.9%
interest in a secured $5 million note issued by us.
|
(10)
|
Amounts
include shares and shares underlying warrants acquired by Mr. Boudreau
for
$100,000 in cash and upon conversion of $50,000 in bridge loans extended
in November 2005 into units in the PIPE Transaction. Mr. Boudreau
owns a
0.4% interest in a secured $5 million note issued by us.
|
(11)
|
Amounts
include shares and shares underlying warrants acquired by Mr. Stieglitz
for $50,000 in cash in the PIPE Transaction. Mr. Stieglitz owns a
0.15%
interest in a secured $5 million note issued by us.
|
(12)
|
Includes
17,864,814 shares underlying warrants acquired in the PIPE Transaction,
exercisable at $0.34 per share.
|
(13)
|
Includes
424,663, 137,030 and 3,732,365 shares underlying warrants exercisable
at
$0.99, $0.1285, and $0.34,
respectively.
|
(14)
|
Includes
100,000 shares underlying options exercisable at $0.36 per share
and
50,000 shares underlying options with exercise prices ranging from
$1.14
to $2.375 per share.
|
(15)
|
Includes
37,284, 12,409 and 337,797 shares underlying warrants exercisable
at
$0.99, $0.1285 and $0.34,
respectively.
|
(16)
|
Includes
4,716, 561 and 15,279 shares underlying warrants exercisable at $0.99,
$0.1285 and $0.34, respectively.
|
(17)
|
Includes
345,000 shares underlying warrants exercisable at $.01285 per
share.
|
(18)
|
Includes
100,000 shares underlying options exercisable at $0.36 per share.
|
(19)
|
Includes
140,370 shares underlying warrants exercisable at $0.1285 per share.
|
(20)
|
Includes
93,580 shares underlying options exercisable at $0.36 per share.
|
(21)
|
Includes
9,630 shares underlying warrants exercisable at $0.1285 per share.
|
(22)
|
Includes
6,420 shares underlying options exercisable at $0.36 per share.
|
(23)
|
Includes
4,963,636 shares underlying warrants acquired in the PIPE Transaction,
exercisable at $0.34 per share.
|
(24)
|
Includes
36,364 shares underlying warrants acquired in the PIPE Transaction,
exercisable at $0.34 per share.
|
(25)
|
Includes
185,185 shares underlying warrants acquired in the PIPE Transaction,
exercisable at $0.34 per share.
|
(26)
|
Amounts
include shares and shares underlying warrants acquired by Susan and
Michael Weisbrot upon conversion of $150,000 in bridge loans extended
in
November 2005 into units in the PIPE Transaction. Amounts
include shares and shares underlying warrants of CGM IRA Custodian
f/b/o
Michael M. Weisbrot, over which Michael Weisbrot has voting and investment
control. Included
in the foregoing are 324,073 shares underlying warrants acquired
in the
PIPE Transaction by Susan and Michael Weisbrot and by CGM IRA Custodian
f/b/o Michael M. Weisbrot, exercisable at $0.34 per share. Also
includes the following over which Michael Weisbrot has or shares
voting
and investment control: 6,438 shares in another retirement account
owned
by Michael Weisbrot and 10,000 shares held by Michael Weisbrot as
custodian for the son of Michael and Susan Weisbrot. Also includes
the
following over which Susan Weisbrot has or shares voting and investment
control: 6,323 shares in a retirement account owned by Susan
Weisbrot,
and
12,000 shares held jointly be Susan Weisbrot and the daughter of
Michael
and Susan Weisbrot.
Michael and Susan
Weisbrot each share voting and investment control over the remaining
shares.
|
(27)
|
Includes
138,888 shares underlying warrants acquired in the PIPE Transaction
by
Susan and Michael Weisbrot exercisable at $0.34 per share. Excludes
shares
and shares underlying warrants being offered by CGM IRA Custodian
f/b/o
Michael M. Weisbrot.
|
(28)
|
Includes
138,888 shares underlying warrants acquired in the PIPE Transaction,
exercisable at $0.34 per share.
|
(29)
|
Includes
138,888 shares underlying warrants acquired in the PIPE Transaction,
exercisable at $0.34 per share.
|
(30)
|
Includes
46,296 shares underlying warrants acquired in the PIPE Transaction,
exercisable at $0.34 per share. Mr. Wood invested $50,000 in cash
in the
PIPE Transaction.
|
(31)
|
Includes
46,296 shares underlying warrants acquired in the PIPE Transaction,
exercisable at $0.34 per share.
|
(32)
|
Includes
46,296 shares underlying warrants acquired in the PIPE Transaction,
exercisable at $0.34 per share. Mr.
Meierdiercks invested
$50,000 in cash in the PIPE
Transaction.
|
(33)
|
Includes
46,296 shares underlying warrants acquired in the PIPE Transaction,
exercisable at $0.34 per share. Mr. Johnson invested $50,000 in cash
in
the PIPE Transaction.
|
The
selling stockholders may, from time to time, sell any or all of their shares
of
common stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The selling stockholders may use any one or more of the
following methods when selling shares:
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
|
block trades in which the broker-dealer
will
attempt to sell the shares as agent but may position and resell a
portion
of the block as principal to facilitate the
transaction; |
|
purchases by a broker-dealer as
principal and
resale by the broker-dealer for its
account; |
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
|
privately
negotiated transactions;
|
|
through
the writing or settlement of options or other hedging
transactions,
whether through an options exchange or
otherwise;
|
|
broker-dealers
may agree with the selling stockholders to sell a specified
number of such
shares at a stipulated price per
share;
|
|
a
combination of any such methods of sale;
and
|
|
any
other method permitted pursuant to applicable
law.
|
The
selling stockholders may also sell shares under Rule 144 under the Securities
Act, if available, rather than under this prospectus
Broker-dealers
engaged by the selling stockholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from
the selling stockholders (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated. The
selling stockholders do not expect these commissions and discounts to exceed
what is customary in the types of transactions involved. Any profits on the
resale of shares of common stock by a broker-dealer acting as principal might
be
deemed to be underwriting discounts or commissions under the Securities Act.
Discounts, concessions, commissions and similar selling expenses, if any,
attributable to the sale of shares will be borne by a selling stockholder.
The
selling stockholders may agree to indemnify any agent, dealer or broker-dealer
that participates in transactions involving sales of the shares if liabilities
are imposed on that person under the Securities Act.
The
selling stockholders may from time to time pledge or grant a security interest
in some or all of the shares of common stock owned by them and, if they default
in the performance of their secured obligations, the pledgees or secured parties
may offer and sell the shares of common stock from time to time under this
prospectus after we have filed a supplement to this prospectus under Rule
424(b)(3) or other applicable provision of the Securities Act of 1933
supplementing or amending the list of selling stockholders to include the
pledgee, transferee or other successors in interest as selling stockholders
under this prospectus.
The
selling stockholders also may transfer the shares of common stock in other
circumstances, in which case the transferees, pledgees or other successors
in
interest will be the selling beneficial owners for purposes of this prospectus
and may sell the shares of common stock from time to time under this prospectus
after we have filed a supplement to this prospectus under Rule 424(b)(3) or
other applicable provision of the Securities Act of 1933 supplementing or
amending the list of selling stockholders to include the pledgee, transferee
or
other successors in interest as selling stockholders under this
prospectus.
The
selling stockholders and any broker-dealers or agents that are involved in
selling the shares of common stock may be deemed to be “underwriters” within the
meaning of the Securities Act in connection with such sales. In such event,
any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares of common stock purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
We
are
required to pay all fees and expenses incident to the registration of the shares
of common stock. We have agreed to indemnify the selling stockholders against
certain losses, claims, damages and liabilities, including liabilities under
the
Securities Act.
The
selling stockholders have advised us that they have not entered into any
agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their shares of common stock, nor is there
an underwriter or coordinating broker acting in connection with a proposed
sale
of shares of common stock by any selling stockholder. If we are notified by
any
selling stockholder that any material arrangement has been entered into with
a
broker-dealer for the sale of shares of common stock, if required, we will
file
a supplement to this prospectus. If the selling stockholders use this prospectus
for any sale of the shares of common stock, they will be subject to the
prospectus delivery requirements of the Securities Act.
The
anti-manipulation rules of Regulation M under the Securities Exchange Act of
1934 may apply to sales of our common stock and activities of the selling
stockholders.
The
validity of the common stock offered hereby has been passed upon by Seiden
Wayne
LLC. Seiden Wayne LLC holds 24,530 shares
of
our common stock.
The
consolidated financial statements incorporated by reference in this Prospectus
and in the Registration Statement have been audited by BDO Seidman, LLP, an
independent registered public accounting firm, to the extent and for the periods
set forth in their report incorporated herein and are included herein in
reliance upon such report, given upon authority of said firm as experts in
auditing and accounting. This report contains an explanatory paragraph regarding
the Company’s ability to continue as a going concern.
The
Securities and Exchange Commission, or SEC, allows us to “incorporate by
reference” in this prospectus the information that we file with them. This means
that we can disclose important information to you in this document by referring
you to other filings we have made with the SEC. The information incorporated
by
reference is considered to be part of this prospectus, and later information
we
file with the SEC will update and supersede this information. We incorporate
by
reference the documents listed below and any future filings made with the
SEC
under Section 13(a), 13(c), 14, or 15(d) of the Exchange Act prior to the
completion of the offering covered by this prospectus:
|
our
Annual Report on Form 10-K for our fiscal year ended December
31,
2006;
|
|
our
Current Report on Form 8-K filed with the SEC on February
20, 2007;
|
|
our
Current Reports on Form 8-K each filed with the SEC
on March 15, 2007;
|
|
our
Current Report on Form 8-K filed with the SEC
on April 2, 2007;
|
|
our
Amendment to Current Report on Form 8-K/A
filed with the SEC on April 3,
2007, amending our Current Report on
Form 8-K filed on April 2, 2007
|
|
our
Current Report on Form 8-K filed
with the SEC on May 4, 2007;
|
|
our
Quarterly Report on Form
10-Q for our fiscal quarter
ended March 31, 2007
filed with the SEC on May
4, 2007;
|
|
our
Current Report on Form
8-K filed with the
SEC on May 18, 2007;
|
|
our
Current Report
on Form 8-K filed
with the SEC
on June 19, 2007;
|
|
our
Current
Report
on Form
8-K filed
with the
SEC on
July 5,
2007;
|
|
our
Current
Report
on
Form
8-K
filed
with
the
SEC
on
July
10,
2007;
|
|
our
Current
Report
on
Form
8-K
filed
with
the
SEC
on
August
9,
2007;
|
|
our
Quarterly
Report
on
Form
10-Q
for
our
fiscal
quarter
ended
June
30,
2007
filed
with
the
SEC
on
August
9,
2007;
|
|
our
Current
Report
on
Form
8-K
filed
with
the
SEC
on
August
21,
2007;
and
|
|
our
Current
Report
on
Form
8-K
filed
with
the
SEC
on
September
24,
2007;
and
|
|
the
description
of
our
common
stock
contained
in
our
registration
statements
on
Form
8-A
filed
with
the
SEC
on
March
6,
1986
and
November
14,
1998.
|
Documents
incorporated by reference in this prospectus, filed after the date of any other
document incorporated by reference may contain information that updates,
modifies or is contrary to information in such earlier document. This prospectus
may contain information that updates, modifies or is contrary to information
in
one or more of the documents incorporated by reference in this prospectus.
Reports we file with the SEC after the date of this prospectus may also contain
information that updates, modifies or is contrary to information in this
prospectus or in documents incorporated by reference in this prospectus.
Investors should review these reports as they may disclose a change in our
business, prospects, financial condition or other affairs after the date of
this
prospectus.
Upon
your
written or oral request, we will provide at no cost to you a copy of any and
all
of the information that is incorporated by reference in this prospectus.
Requests
for such documents should be directed to:
Acura
Pharmaceuticals, Inc.
Attn:
Investor Relations
616
N.
North Court, Suite 120
Palatine,
Illinois 60067
(847)
705-7709
We
have
filed with the Securities and Exchange Commission a registration statement
on
Form S-3, of which this prospectus is a part, under the Securities Act with
respect to the shares of common stock offered hereby. This prospectus does
not
contain all of the information included in the registration statement.
Statements in this prospectus concerning the provisions of any document are
not
necessarily complete. You should refer to the copies of these documents filed
as
exhibits to the registration statement or otherwise filed by us with the SEC
for
a more complete understanding of the matter involved. Each statement concerning
these documents is qualified in its entirety by such reference.
We
are
subject to the informational requirements of the Securities and Exchange Act
of
1934, as amended, and, accordingly, file reports, proxy statements and other
information with the SEC. The SEC maintains a web site at http://www.sec.gov
that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC. Copies of our
reports, proxy statements and other information also may be inspected and copied
at the SEC’s Public Reference Room located at 100 F Street, N.E., Washington,
D.C. 20549. The public may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330.
384,099,399
Shares
ACURA
PHARMACEUTICALS, INC.
Common
Stock
PROSPECTUS
________________________,
2007
PART
II
INFORMATION
NOT REQUIRED IN THE PROSPECTUS
Item
14. Other Expenses of Issuance and Distribution.
The
following table sets forth the costs and expenses payable by us in connection
with the sale of common stock being registered. All amounts are estimates except
the Securities and Exchange Commission registration fee.
Securities
and Exchange Commission registration fee
|
|
$
|
17,688
|
|
Legal
fees and expenses
|
|
$
|
60,000
|
|
Accounting
fees and expenses
|
|
$
|
20,000
|
|
Transfer
Agent and Registrar fees
|
|
$
|
2,000
|
|
Miscellaneous
expenses
|
|
$
|
15,000
|
|
Total
|
|
$
|
114,688
|
|
Item
15. Indemnification of Directors and Officers.
Section
722 of the New York Business Corporation Law (the "BCL") provides that a
corporation may indemnify directors and officers as well as other employees
and
individuals against judgments, fines, amounts paid in settlement and reasonable
expenses, including attorney's fees, in connection with actions or proceedings,
whether civil or criminal (other than an action by or in the right of the
corporation, referred to as a "derivative action"), if they acted in good faith
and in a manner they reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe their conduct was unlawful.
A
similar standard is applicable in the case of derivative actions, except that
indemnification only extends to amounts paid in settlement and reasonable
expenses (including attorney's fees) incurred in connection with the defense
or
settlement of such actions, and the statute does not apply in respect of a
threatened action, or a pending action that is settled or otherwise disposed
of,
and requires court approval before there can be any indemnification where the
person seeking indemnification has been found liable to the corporation. Section
721 of the BCL provides that Article 7 of the BCL is not exclusive of other
indemnification that may be granted by a corporation's certificate of
incorporation or by-laws. Article Ninth of our Restated Certificate of
Incorporation and Article IV, Section 6 of our Restated By-Laws require us
to
indemnify its officers and directors to the fullest extent permitted under
the
BCL.
Set
forth
below is Article Ninth of Acura Pharmaceuticals, Inc. Restated Certificate
of
Incorporation:
NINTH:
The Corporation shall, to the fullest extent possible permitted by Sections
721
through 726 of the Business Corporation Law of New York, indemnify any and
all
directors and officers whom it shall have the power to indemnify under said
sections from and against any and all of the expenses, liabilities or other
matters referred to in or covered by such sections of the Business Corporation
Law, and the indemnification provided for herein shall not be deemed exclusive
of any other rights to which the person so indemnified may be entitled under
any
By-Law, agreement, vote of shareholders or disinterested directors or otherwise,
both as to action in his/her official capacity and as to action in another
capacity by holding such office, and shall continue as to a person who has
ceased to be a director or officer and shall inure to the benefit of the heirs,
executors and administrators of such person.
Set
forth
below is Article IV, Section 6 of Acura Pharmaceuticals’ Inc.’s Restated
By-Laws:
SECTION
6. Indemnification.
It is
expressly provided that any and every person made a party to any action, suit,
or proceeding by or in the right of the corporation to procure a judgment in
its
favor by reason of the fact that he, his testator or intestate, is or was a
director or officer of this corporation or of any corporation which be served
as
such at the request of this corporation, may be indemnified by the corporation
to the full extent permitted by law, against any and all reasonable expenses,
including attorneys' fees, actually and necessarily incurred by him in
connection with the defense of such action or in connection with any appeal
therein, except in relation to matters as to which it shall be adjudged in
such
action, suit or proceeding that such officer or director has breached his duty
to the corporation.
It
is
further expressly provided that any and every person made a party to any action,
suit, or proceeding other than one by or in the right of the corporation to
procure a judgment in its favor, whether civil or criminal, including an action
by or in the right of any other corporation of any type or kind, domestic or
foreign, which any director or officer of the corporation served in any capacity
at the request of the corporation, by reason of the fact that he, his testator
or interstate, was a director or officer of the corporation, or served such
other corporation in any capacity, may be indemnified by the corporation, to
the
full extent permitted by law, against judgments, fines, amounts paid in
settlement, and reasonable expenses, including attorneys' fees, actually and
necessarily incurred as a result of such action, suit or proceeding, or any
appeal therein, if such person acted in good faith for a purpose which he
reasonably believed to be in the best interests of the corporation and, in
criminal actions or proceedings, in addition, had no reasonable cause to believe
that his conduct was unlawful.
We
maintain a director and officer liability insurance policy that, subject to
the
terms, conditions and limits of the policy, provides coverage for wrongful
acts
(as defined by the policy) committed by a director or officer in his or her
capacity as a director or officer of the Registrant. The policy reimburses
us
for amounts spent in lawful indemnification of a director or officer or amounts
provided by us to indemnify its directors and officers as required or permitted
by law.
Agreements
between the registrant and the selling stockholders provides for
cross-indemnification in connection with registration of the registrant’s common
stock on behalf of such investors.
Item
16. Exhibits.
3.1
|
|
Amended
and Restated Certificate of Incorporation (incorporated by reference
to
Exhibit 10.3 of our Current Report on Form 8-K filed on February
10,
2004).
|
|
|
|
3.2
|
|
Restated
By-Laws (incorporated by reference to Exhibit 3.3 to our Annual Report
on
Form 10-K for the year ended December 31, 1998).
|
|
|
|
*5.1
|
|
Legal
Opinion of Seiden Wayne LLC regarding the legality of the securities
being
registered
|
|
|
|
10.1
|
|
Form
of Securities Purchase Agreement among the Company and certain investors
in connection with the PIPE Transaction completed on August 20, 2007
(incorporated by reference to Exhibit 10.1 to our Current Report
on Form
8-K filed on August 21, 2007).
|
|
|
|
10.2
|
|
Form
of Warrant issued to investors in the PIPE Transaction on August
20, 2007
(incorporated by reference to Exhibit 4.1 to our Current Report on
Form
8-K filed on August 21, 2007).
|
|
|
|
*10.3
|
|
Form
of Warrants dated August 15, 2001 issued to Galen Partners III, L.P.,
Galen Partners International, III, L.P. and Galen Employee Fund III,
L.P.
(currently exercisable for an aggregate of 466,663 shares at an exercise
price of $0.99 per share).
|
|
|
|
*10.4
|
|
Form
of Warrants dated January 9, 2002, February 1, 2002, March 1, 2002,
and
April 5, 2002 issued to Galen Partners III, L.P., Galen Partners
International, III, L.P. and Galen Employee Fund III, L.P. (currently
exercisable for an aggregate of 433,126 shares at an exercise price
of
$0.34 per share).
|
|
|
|
*10.5
|
|
Form
of Warrants dated May 8, 2002, June 3, 2002, July 1, 2002, July 23,
2002,
August 5, 2002, September 3, 2002, October 1, 2002, November 4, 2002,
November 12, 2002, November 21, 2002 and December 5, 2002 issued
to Galen
Partners III, L.P., Galen Partners International, III, L.P. and Galen
Employee Fund III, L.P. (current exercisable for an aggregate of
3,652,315
shares at an exercise price of $0.34 per share).
|
|
|
|
*10.6
|
|
Form
of Warrant dated May 5, 2003 issued to Galen Partners III, L.P.,
Galen
Partners International, III, L.P.,Galen Employee Fund III, L.P.,
Essex
Woodlands Health Ventures Fund V, L.P. and Care Capital Investments
II, LP
(currently exercisable for an aggregate of 645,000 shares at an exercise
price of $0.1285 per share).
|
|
|
|
10.7
|
|
Amended
and Restated Voting Agreement dated as of February 6, 2004 by and
among
the Registrant, Galen Partners III, LP and the other signatories
thereto
(incorporated by reference to Exhibit 10.5 to our Current Report
on Form
8-K filed on February 10, 2004).
|
|
|
|
10.8
|
|
Joinder
and Amendment to Amended and Restated Voting Agreement dated November
9,
2005 between the Registrant, Galen Partners III, LP, GCE Holdings
LLC and
the other signatories thereto (incorporated by reference to Exhibit
10.1
to our Current Report on Form 8-K filed on November 10,
2006).
|
|
|
|
10.9
|
|
Amended
and Restated Registration Rights Agreement dated as of February 6,
2004 by
and among the Registrant, Watson Pharmaceuticals, Galen Partners
III, L.P.
and the other signatories thereto (incorporated by reference to Exhibit
10.6 to our Current Report on Form 8- filed on February 10,
2004).
|
|
|
|
*23.1
|
|
Consent
of BDO Seidman, LLP, independent registered public accounting
firm.
|
|
|
|
*23.2
|
|
Consent
of Seiden Wayne LLC (included with opinion filed as Exhibit
5.1).
|
|
|
|
*24
|
|
Power
of Attorney (included on signature page of this registration
statement).
|
*
Filed
herewith
Item
17. Undertakings.
(a)
|
The
undersigned registrant hereby undertakes:
|
|
(1)
|
To
file, during any period in which offers or sales are being made,
a
post-effective amendment to this registration statement:
|
|
(i)
|
To
include any prospectus required by Section 10(a)(3) of the Securities
Act;
|
|
(ii)
|
To
reflect in the prospectus any facts or events arising after the effective
date of the registration statement (or the most recent post-effective
amendment thereof) which, individually, or in the aggregate, represent
a
fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease
in
volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation
from
the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the SEC pursuant to
Rule
424(b) if, in the aggregate, the changes in volume and price represent
no
more than a 20% change in the maximum aggregate offering price set
forth
in the “Calculation of Registration Fee” table in the effective
registration statement; and
|
|
(iii)
|
To
include any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any material
change to such information in the registration statement; provided,
however, that the undertakings set forth in clauses (i) and (ii)
above
shall not apply if the information required to be included in a
post-effective amendment by these clauses is contained in periodic
reports
filed by the registrant pursuant to Section 13 or Section 15(d) of
the
Exchange Act that are incorporated by reference in this registration
statement.
|
|
(2)
|
That,
for the purpose of determining any liability under the Securities
Act,
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.
|
(b)
|
The
undersigned registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act, each filing of the registrant’s
annual report pursuant to Section 13(a) or Section 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan’s
annual report pursuant to Section 15(d) of the Exchange Act) that
is
incorporated by reference in the registration statement 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.
|
(c)
|
Insofar
as indemnification for liabilities arising under the Securities Act
may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant
has
been advised that in the opinion of the SEC such indemnification
is
against 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 registrant
of
expenses incurred or paid by a director, officer or controlling person
of
the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in
connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled
by
controlling precedent, submit to a court of appropriate jurisdiction
the
question whether such indemnification by it is against public policy
as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
|
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, as amended, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Exton, State of Pennsylvania, on the 28th
day of
September, 2007.
|
|
|
|
ACURA
PHARMACEUTICALS, INC.
|
|
|
|
|
By: |
/s/Andrew
D. Reddick
|
|
Andrew
D. Reddick
|
|
President
and Chief Executive
Officer
|
POWER
OF ATTORNEY
KNOW
ALL
PERSONS BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Andrew D. Reddick and Peter A. Clemens, and each of
them, as his attorney-in-fact, with full power of substitution in each, for
him
in any and all capacities, to sign any amendments to this Registration Statement
on Form S-3, and to file the same, with exhibits thereto and other documents
in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that said attorney-in-fact, or his substitutes,
may
do or cause to be done by virtue hereof.
Pursuant
to the requirements of the Securities Act of 1933, this registration statement
has been signed by the following persons in the capacities and on the dates
indicated.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/S/
Andrew D. Reddick
Andrew
D. Reddick
|
|
President
and Chief Executive Officer, Director
(Principal
Executive Officer)
|
|
September
28, 2007
|
|
|
|
|
|
|
/S/
Peter A. Clemens
Peter
A. Clemens
|
|
Senior
Vice President and Chief Financial Officer
(Principal
Financial and Accounting Officer)
|
|
September
28, 2007
|
|
|
|
|
|
|
/S/
Bruce F. Wesson
Bruce
F. Wesson
|
|
Director
|
|
September
28, 2007
|
|
|
|
|
|
|
/S/
William Skelly
William
Skelly
|
|
Director
|
|
September
28, 2007
|
|
|
|
|
|
|
/S/
William Sumner
William
Sumner
|
|
Director
|
|
September
28, 2007
|
|
|
|
|
|
|
/S/
Richard J. Markham
Richard
J. Markham
|
|
Director
|
|
September
28, 2007
|
|
|
|
|
|
|
/S/
Immanuel Thangaraj
Immanuel
Thangaraj
|
|
Director
|
|
September
28, 2007
|
Index
to Exhibits
3.1
|
|
Amended
and Restated Certificate of Incorporation (incorporated by reference
to
Exhibit 10.3 of our Current Report on Form 8-K filed on February
10,
2004).
|
|
|
|
3.2
|
|
Restated
By-Laws (incorporated by reference to Exhibit 3.3 to our Annual Report
on
Form 10-K for the year ended December 31, 1998).
|
|
|
|
*5.1
|
|
Legal
Opinion of Seiden Wayne LLC regarding the legality of the securities
being
registered
|
|
|
|
10.1
|
|
Form
of Securities Purchase Agreement among the Company and certain investors
in connection with the PIPE Transaction completed on August 20, 2007
(incorporated by reference to Exhibit 10.1 to our Current Report
on Form
8-K filed on August 21, 2007).
|
|
|
|
10.2
|
|
Form
of Warrant issued to investors in the PIPE Transaction on August
20, 2007
(incorporated by reference to Exhibit 4.1 to our Current Report on
Form
8-K filed on August 21, 2007).
|
|
|
|
*10.3
|
|
Form
of Warrants dated August 15, 2001 issued to Galen Partners III, L.P.,
Galen Partners International, III, L.P. and Galen Employee Fund III,
L.P.
(currently exercisable for an aggregate of 466,663 shares at an exercise
price of $0.99 per share).
|
|
|
|
*10.4
|
|
Form
of Warrants dated January 9, 2002, February 1, 2002, March 1, 2002,
and
April 5, 2002 issued to Galen Partners III, L.P., Galen Partners
International, III, L.P. and Galen Employee Fund III, L.P. (currently
exercisable for an aggregate of 433,126 shares at an exercise price
of
$0.34 per share).
|
|
|
|
*10.5
|
|
Form
of Warrants dated May 8, 2002, June 3, 2002, July 1, 2002, July 23,
2002,
August 5, 2002, September 3, 2002, October 1, 2002, November 4, 2002,
November 12, 2002, November 21, 2002 and December 5, 2002 issued
to Galen
Partners III, L.P., Galen Partners International, III, L.P. and Galen
Employee Fund III, L.P. (current exercisable for an aggregate of
3,652,315
shares at an exercise price of $0.34 per share).
|
|
|
|
*10.6
|
|
Form
of Warrants dated May 5, 2003 issued to Galen Partners III, L.P.,
Galen
Partners International, III, L.P.,Galen Employee Fund III, L.P.,
Essex
Woodlands Health Ventures Fund V, L.P. and Care Capital Investments
II, LP
(currently exercisable for an aggregate of 645,000 shares at an exercise
price of $0.1285 per share).
|
|
|
|
10.7
|
|
Amended
and Restated Voting Agreement dated as of February 6, 2004 by and
among
the Registrant, Galen Partners III, LP and the other signatories
thereto
(incorporated by reference to Exhibit 10.5 to our Current Report
on Form
8- K filed on February 10, 2004).
|
|
|
|
10.8
|
|
Joinder
and Amendment to Amended and Restated Voting Agreement dated November
9,
2005 between the Registrant, Galen Partners III, LP, GCE Holdings
LLC and
the other signatories thereto (incorporated by reference to Exhibit
10.1
to our Current Report on Form 8-K filed on November 10,
2006).
|
|
|
|
10.9
|
|
Amended
and Restated Registration Rights Agreement dated as of February 6,
2004 by
and among the Registrant, Watson Pharmaceuticals, Galen Partners
III, L.P.
and the other signatories thereto (incorporated by reference to Exhibit
10.6 to our Current Report on Form 8-K filed on February 10,
2004).
|
|
|
|
*23.1
|
|
Consent
of BDO Seidman, LLP, independent registered public accounting
firm.
|
|
|
|
*23.2
|
|
Consent
of Seiden Wayne LLC (included with opinion filed as Exhibit
5.1).
|
|
|
|
*24
|
|
Power
of Attorney (included on signature page of this registration
statement).
|
ATTORNEYS
AT LAW
|
HERON
TOWER
70
EAST 55TH
STREET
NEW
YORK, NEW YORK 10022
(212)
446-5000
TELECOPIER
(212) 446-5055
|
|
|
TWO
PENN PLAZA EAST
NEWARK,
NEW JERSEY 07105-2249
(973)
491-3600
TELECOPIER
(973) 491-3555
http://www.stjohnlaw.com
|
1500
MARKET STREET
12TH
FLOOR, EAST TOWER
PHILADELPHIA,
PENNSYLVANIA 19102
(215)
665-5644
TELECOPIER
(215) 569-8228
|
SIBLEY
TOWER, SUITE 1172
25
FRANKLIN STREET
ROCHESTER,
NEW YORK 14604-1009
(585)
232-4560
TELECOPIER
(585) 232-4606
|
October
1, 2007
Acura
Pharmaceuticals, Inc.
616
N.
North Court, Suite 120
Palatine,
Illinois 60067
Ladies
and Gentlemen:
We
have
examined the Registration Statement on Form S-3 to be filed by you with the
Securities and Exchange Commission on or about October 1, 2007 (the
“Registration Statement”) in connection with the registration for resale under
the Securities Act of 1933, as amended, of up to 335,250,449 shares of your
common stock (the “Shares”) and up to 28,848,950 shares of your common stock
(the “Warrant Shares”) issuable upon the exercise of warrants (“Warrants”). As
your legal counsel, we have examined the proceedings taken by you in connection
with the issuance and sale of the Shares and the Warrants and such other
documents, certificates and records that we have deemed necessary or appropriate
for the basis of the opinions hereinafter expressed.
It
is our
opinion that the Shares have been legally and validly issued and are fully
paid
and nonassessable and the Warrant Shares when issued in accordance with the
terms of the Warrant and your Certificate of Incorporation, will be legally
and
validly issued, fully paid and nonassessable.
We
consent to the use of this opinion as an exhibit to the Registration Statement
and further consent to the use of our name wherever appearing in the
Registration Statement, including the prospectus constituting a part thereof,
and any amendment thereto.
This
opinion is furnished to you in connection with the filing of the Registration
Statement, and is not to be used, circulated, quoted or otherwise relied upon
for any other purpose, except as expressly provided in the preceding
paragraphs.
|
|
|
|
Very
truly
yours, |
|
|
|
|
|
/s/ Seiden
Wayne LLC |
|
SEIDEN WAYNE
LLC |
WARRANT
TO PURCHASE
COMMON
STOCK, PAR VALUE $.01 PER SHARE
OF
HALSEY
DRUG CO., INC.
THIS
WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”)
NOR
UNDER ANY STATE SECURITIES LAW AND MAY NOT BE PLEDGED, SOLD, ASSIGNED,
HYPOTHECATED OR OTHERWISE TRANSFERRED UNTIL (1) A REGISTRATION STATEMENT WITH
RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES
LAW OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE COMPANY OR OTHER
COUNSEL TO THE HOLDER OF SUCH WARRANT REASONABLY SATISFACTORY TO THE COMPANY
THAT SUCH WARRANT AND/OR COMMON STOCK MAY BE PLEDGED, SOLD, ASSIGNED,
HYPOTHECATED OR TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT OR APPLICABLE STATE SECURITIES LAWS.
This
certifies that, for value received, _________ or registered assigns
(“Warrantholder”),
is
entitled to purchase from HALSEY
DRUG CO., INC.
(the
“Company”),
subject to the provisions of this Warrant, at any time during the Exercise
Period (as hereinafter defined) ________ shares of the Company's Common Stock,
par value $.01 per share (“Warrant
Shares”).
The
purchase price payable upon the exercise of this Warrant shall be $3.012 per
Warrant Share. The purchase price and the number of Warrant Shares which the
Warrantholder is entitled to purchase are subject to adjustment upon the
occurrence of the contingencies set forth in this Warrant, and as adjusted
from
time to time, such purchase price is hereinafter referred to as the
“Warrant
Price.”
For
purposes of this Warrant, the term “Exercise
Period”
means
the period commencing on the date of issuance of this Warrant and ending on
the
seventh anniversary of such date.
This
Warrant is subject to the following terms and conditions:
1. Exercise
of Warrant.
(a)
This
Warrant may be exercised in whole or in part but not for a fractional share.
Upon delivery of this Warrant at the offices of the Company or at such other
address as the Company may designate by notice in writing to the registered
holder hereof with the Subscription Form annexed hereto duly executed,
accompanied by payment of the Warrant Price for the number of Warrant Shares
purchased (in cash, by certified, cashier's or other check acceptable to the
Company, by Common Stock or other securities of the Company having a market
value equal to the aggregate Warrant Price for the Warrant Shares to be
purchased, or any combination of the foregoing), the registered holder of this
Warrant shall be entitled to receive a certificate or certificates for the
Warrant Shares so purchased. Such certificate or certificates shall be promptly
delivered to the Warrantholder. Upon any partial exercise of this Warrant,
the
Company shall execute and deliver a new Warrant of like tenor for the balance
of
the Warrant Shares purchasable hereunder.
(b) In
lieu
of exercising this Warrant pursuant to Section
1(a),
the
holder may elect to receive shares of Common Stock equal to the value of this
Warrant determined in the manner described below (or any portion thereof
remaining unexercised) upon delivery of this Warrant at the offices of the
Company or at such other address as the Company may designate by notice in
writing to the registered holder hereof with the Notice of Cashless Exercise
Form annexed hereto duly executed. In such event the Company shall issue to
the
holder a number of shares of the Company's Common Stock computed using the
following formula:
X
=
Y
(A-B)
A
Where
X =
the number of shares of Common Stock to be issued to the holder.
Y = the
number of shares of Common Stock purchasable under this Warrant (at the date
of
such calculation).
A = the
Market Value of the Company's Common Stock on the business day immediately
preceding the day on which the Notice of Cashless Exercise is received by the
Company.
B = Warrant
Price (as adjusted to the date of such calculation).
(c) The
Warrant Shares deliverable hereunder shall, upon issuance, be fully paid and
non-assessable and the Company agrees that at all times during the term of
this
Warrant it shall cause to be reserved for issuance such number of shares of
its
Common Stock as shall be required for issuance and delivery upon exercise of
this Warrant.
(d) For
purposes of Section
1(b)
of this
Warrant, the Market Value of a share of Common Stock on any date shall be equal
to (A) the closing sale price per share as published by a national securities
exchange on which shares of Common Stock are traded (an “Exchange”) on such date
or, if there is no sale of Common Stock on such date, the average of the bid
and
asked prices on such Exchange at the close of trading on such date or,
(B) if shares of Common Stock are not listed on an Exchange on such date,
the closing price per share as published on the National Association of
Securities Dealers Automatic Quotation System (“NASDAQ”)
National Market System if the shares are quoted on such system on such date,
or
(C) the average of the bid and asked prices in the over-the-counter market
at
the close of trading on such date if the shares are not traded on an Exchange
or
listed on the NASDAQ National Market System, or (D) if the security is not
traded on an Exchange or in the over-the-counter market, the fair market value
of a share of Common Stock on such date as determined in good faith by the
Board
of Directors. If the holder disagrees with the determination of the Market
Value
of any securities of the Common Stock determined by the Board of Directors
under
Section
1(d)(i)(D)
the
Market Value shall be determined by an independent appraiser acceptable to
the
Company and the holder. If they cannot agree on such an appraiser, then each
of
the Company and the holder shall select an independent appraiser, such two
appraisers shall select a third independent appraiser and Market Value shall
be
the median of the appraisals made by such appraisers. If there is one appraiser,
the cost of the appraisal shall be shared equally between the Company and the
holder. If there are three appraisers, each of the Company and the holder shall
pay for its own appraiser and shall share equally the cost of the third
appraiser.
2. Transfer
or Assignment of Warrant.
(a)
Any
assignment or transfer of this Warrant shall be made by surrender of this
Warrant at the offices of the Company or at such other address as the Company
may designate in writing to the registered holder hereof with the Assignment
Form annexed hereto duly executed and accompanied by payment of any requisite
transfer taxes, and the Company shall, without charge, execute and deliver
a new
Warrant of like tenor in the name of the assignee for the portion so assigned
in
case of only a partial assignment, with a new Warrant of like tenor to the
assignor for the balance of the Warrant Shares purchasable.
(b) Prior
to
any assignment or transfer of this Warrant, the holder thereof shall deliver
an
opinion of counsel to the Company to the effect that the proposed transfer
may
be effected without registration under the Securities Act of 1933, as amended
(the “Securities
Act”)
and
any applicable state securities laws. Each Warrant issued upon or in connection
with such transfer shall bear the restrictive legend set forth on the front
of
this Warrant unless, in the opinion of the Company's counsel, such legend is
no
longer required to insure compliance with the Securities Act.
3. Adjustments
to Warrant Price and Warrant Shares -- Anti-Dilution Provisions.
In
order to prevent dilution of the exercise right granted hereunder, the Warrant
Price shall be subject to adjustment from time to time in accordance with this
Section
3.
Upon
each adjustment of the Warrant Price pursuant to this Section
3,
the
holder shall thereafter be entitled to acquire upon exercise of this Warrant,
at
the Applicable Warrant Price (as hereinafter defined), the number of shares
of
Common Stock obtainable by multiplying the Warrant Price in effect immediately
prior to such adjustment by the number of shares of Common Stock acquirable
immediately prior to such adjustment and dividing the product thereof by the
Applicable Warrant Price resulting from such adjustment.
The
Warrant Price in effect at the time of the exercise of this Warrant shall be
subject to adjustment from time to time as follows:
(a)
In
the event that the Company shall at any time: (i) declare or pay to the holders
of the Common Stock a dividend payable in any kind of shares of capital stock
of
the Company; or (ii) change or divide or otherwise reclassify its Common Stock
into the same or a different number of shares with or without par value, or
in
shares of any class or classes; or (iii) transfer its property as an entirety
or
substantially as an entirety to any other company or entity; or (iv) make any
distribution of its assets to holders of its Common Stock as a liquidation
or
partial liquidation dividend or by way of return of capital; then, upon the
subsequent exercise of this Warrant, the holder thereof shall receive, in
addition to or in substitution for the shares of Common Stock to which it would
otherwise be entitled upon such exercise, such additional shares of stock or
scrip of the Company, or such reclassified shares of stock of the Company,
or
such shares of the securities or property of the company resulting from
transfer, or such assets of the Company, which it would have been entitled
to
receive had it exercised these rights prior to the happening of any of the
foregoing events.
(b) If
at any
time after the date of issuance hereof the Company shall grant or issue any
shares of Common Stock, or grant or issue any rights or options for the purchase
of, or stock or other securities convertible into, Common Stock (such
convertible stock or securities being herein collectively referred to as
“Convertible
Securities”)
other
than:
(i) shares
to
be issued upon conversion of the Note to be issued in connection with the
$2,500,000 Bridge Loan Agreement by and among the Company and the Galen Entities
(as such term is defined therein) dated the same date herewith;
(ii) shares
issued in a transaction described in subsection 3(c); or
(iii) shares
issued, subdivided or combined in transactions described in subsection 3(a)
if
and to the extent that the number of shares of Common Stock receivable upon
exercise of this Warrant shall have been previously adjusted pursuant to
subsection 3(a) as a result of such issuance, subdivision or combination of
such
securities;
for
a
consideration per share which is less than the Fair Market Value (as hereinafter
defined) of the Common Stock, then the Warrant Price in effect immediately
prior
to such issuance or sale (the “Applicable
Warrant Price”)
shall,
and thereafter upon each issuance or sale for a consideration per share which
is
less than the Fair Market Value of the Common Stock, the Applicable Warrant
Price shall, simultaneously with such issuance or sale, be adjusted, so that
such Applicable Warrant Price shall equal a price determined by multiplying
the
Applicable Warrant Price by a fraction, the numerator of which shall
be:
(A) the
sum
of (x) the total number of shares of Common Stock outstanding when the
Applicable Warrant Price became effective, plus (y) the number of shares of
Common Stock which the aggregate consideration received, as determined in
accordance with subsection 3(d) for the issuance or sale of such additional
Common Stock or Convertible Securities deemed to be an issuance of Common Stock
as provided in subsection 3(e), would purchase (including any consideration
received by the Company upon the issuance of any shares of Common Stock since
the date the Applicable Warrant Price became effective not previously included
in any computation resulting in an adjustment pursuant to this subsection 3(b))
at the Fair Market Value of the Common Stock; and the denominator of which
shall
be
(B) the
total
number of shares of Common Stock outstanding (or deemed to be outstanding as
provided in subsection 3(e) hereof) immediately after the issuance or sale
of
such additional shares.
For
purposes of this Section 3, “Fair
Market Value”
shall
mean the average of the closing price of the Common Stock for each of the twenty
(20) consecutive trading days prior to such issuance or sale on an Exchange
or
if shares of Common Stock are not listed on an Exchange during such period,
the
closing price per share as reported by NASDAQ National Market System if the
shares are quoted on such system during such period, or the average of the
bid
and asked prices of the Common Stock in the over-the-counter market at the
close
of trading during such period if the shares are not traded on an Exchange or
listed on the NASDAQ National Market System, or if the Common Stock is not
traded on an Exchange or in the over-the-counter market, the fair market value
of a share of Common Stock during such period as determined in good faith by
the
Board of Directors.
If,
however, the Applicable Warrant Price thus obtained would result in the issuance
of a lesser number of shares upon conversion than would be issued at the initial
Warrant Price, the Applicable Warrant Price shall be such initial Warrant
Price.
Upon
each
adjustment of the Warrant Price pursuant to this subsection 3(b), the total
number of shares of Common Stock for which this Warrant shall be exercisable
shall be such number of shares (calculated to the nearest tenth) purchasable
at
the Applicable Warrant Price multiplied by a fraction, the numerator of which
shall be the Warrant Price in effect immediately prior to such adjustment and
the denominator of which shall be the exercise price in effect immediately
after
such adjustment.
(c) Anything
in this Section
3
to the
contrary notwithstanding, no adjustment in the Warrant Price shall be made
in
connection with:
(i) the
grant, issuance or exercise of any Convertible Securities pursuant to the
Company's qualified or non-qualified Employee Stock Option Plans or any other
bona fide employee benefit plan or incentive arrangement, adopted or approved
by
the Company's Board of Directors and approved by the Company's shareholders,
as
may be amended from time to time, or under any other bona fide employee benefit
plan hereafter adopted by the Company's Board of Directors; or
(ii) the
grant, issuance or exercise of any Convertible Securities in connection with
the
hire or retention of any officer, director or key employee of the Company,
provided such grant is approved by the Company’s Board of Directors; or
(d) For
the
purpose of subsection 3(b), the following provisions shall also be
applied:
(i) In
case
of the issuance or sale of additional shares of Common Stock for cash, the
consideration received by the Company therefor shall be deemed to be the amount
of cash received by the Company for such shares, before deducting therefrom
any
commissions, compensation or other expenses paid or incurred by the Company
for
any underwriting of, or otherwise in connection with, the issuance or sale
of
such shares.
(ii) In
the
case of the issuance of Convertible Securities, the consideration received
by
the Company therefor shall be deemed to be the amount of cash, if any, received
by the Company for the issuance of such rights or options, plus the minimum
amounts of cash and fair value of other consideration, if any, payable to the
Company upon the exercise of such rights or options or payable to the Company
upon conversion of such Convertible Securities.
(iii) In
the
case of the issuance of shares of Common Stock or Convertible Securities for
a
consideration in whole or in part, other than cash, the consideration other
than
cash shall be deemed to be the fair market value thereof as reasonably
determined in good faith by the Board of Directors of the Company (irrespective
of accounting treatment thereof); provided,
however,
that if
such consideration consists of the cancellation of debt issued by the Company,
the consideration shall be deemed to be the amount the Company received upon
issuance of such debt (gross proceeds) plus accrued interest and, in the case
of
original issue discount or zero coupon indebtedness, accrued value to the date
of such cancellation, but not including any premium or discount at which the
debt may then be trading or which might otherwise be appropriate for such class
of debt.
(iv) In
case
of the issuance of additional shares of Common Stock upon the conversion or
exchange of any obligations (other than Convertible Securities), the amount
of
the consideration received by the Company for such Common Stock shall be deemed
to be the consideration received by the Company for such obligations or shares
so converted or exchanged, before deducting from such consideration so received
by the Company any expenses or commissions or compensation incurred or paid
by
the Company for any underwriting of, or otherwise in connection with, the
issuance or sale of such obligations or shares, plus any consideration received
by the Company in connection with such conversion or exchange other than a
payment in adjustment of interest and dividends. If obligations or shares of
the
same class or series of a class as the obligations or shares so converted or
exchanged have been originally issued for different amounts of consideration,
then the amount of consideration received by the Company upon the original
issuance of each of the obligations or shares so converted or exchange shall
be
deemed to be the average amount of the consideration received by the Company
upon the original issuance of all such obligations or shares. The amount of
consideration received by the Company upon the original issuance of the
obligations or shares so converted or exchanged and the amount of the
consideration, if any, other than such obligations or shares, received by the
Company upon such conversion or exchange shall be determined in the same manner
as provided in paragraphs (i) and (ii) above with respect to the consideration
received by the Company in case of the issuance of additional shares of Common
Stock or Convertible Securities.
(v) In
the
case of the issuance of additional shares of Common Stock as a dividend, the
aggregate number of shares of Common Stock issued in payment of such dividend
shall be deemed to have been issued at the close of business on the record
date
fixed for the determination of stockholders entitled to such dividend and shall
be deemed to have been issued without consideration; provided, however, that
if
the Company, after fixing such record date, shall legally abandon its plan
to so
issue Common Stock as a dividend, no adjustment of the Applicable Conversion
Price shall be required by reason of the fixing of such record
date.
(e) For
purposes of the adjustment provided for in subsection 3(b) above, if at any
time
the Company shall issue any Convertible Securities, the Company shall be deemed
to have issued at the time of the issuance of such Convertible Securities the
maximum number of shares of Common Stock issuable upon conversion of the total
amount of such Convertible Securities.
(f) On
the
expiration, cancellation or redemption of any Convertible Securities, the
Warrant Price then in effect hereunder shall forthwith be readjusted to such
Warrant Price as would have been obtained (a) had the adjustments made upon
the
issuance or sale of such expired, canceled or redeemed Convertible Securities
been made upon the basis of the issuance of only the number of shares of Common
Stock theretofore actually delivered upon the exercise or conversion of such
Convertible Securities (and the total consideration received therefor) and
(b)
had all subsequent adjustments been made on only the basis of the Warrant Price
as readjusted under this subsection 3(f) for all transactions (which would
have
affected such adjusted Warrant Price) made after the issuance or sale of such
Convertible Securities.
(g) Anything
in this Section
3
to the
contrary notwithstanding, no adjustment in the Warrant Price shall be required
unless such adjustment would require an increase or decrease of at least 1%
in
such Warrant Price; provided,
however,
that
any adjustments which by reason of this subsection 3(g) are not required to
be
made shall be carried forward and taken into account in making subsequent
adjustments. All calculations under this Section
3
shall be
made to the nearest cent.
(h) If,
at
any time while this Warrant is outstanding, the Company shall pay any dividend
payable in cash or in Common Stock, shall offer to the holders of its Common
Stock for subscription or purchase by them any shares of stock of any class
or
any other rights, shall enter into an agreement to merge or consolidate with
another corporation, shall propose any capital reorganization or
reclassification of the capital stock of the Company, including any subdivision
or combination of its outstanding shares of Common Stock or there shall be
contemplated a voluntary or involuntary dissolution, liquidation or winding
up
of the Company, the Company shall cause notice thereof to be mailed to the
registered holder of this Warrant at its address appearing on the registration
books of the Company, at least thirty (30) days prior to the record date as
of
which holders of Common Stock shall participate in such dividend, distribution
or subscription or other rights or at least thirty (30) days prior to the
effective date of the merger, consolidation, reorganization, reclassification
or
dissolution. Upon any adjustment of any Warrant Price, then and in each such
case the Company shall promptly deliver a notice to the registered holder of
this Warrant, which notice shall state the Warrant Price resulting from such
adjustment, setting forth in reasonable detail the method of calculation and
the
facts upon which such calculation is based.
(i)
If
the Company is a party to a merger or other transaction which reclassifies
or
changes its outstanding Common Stock, upon consummation of such transaction
this
Warrant shall automatically become exercisable for the kind and amount of
securities, cash or other assets which the holder of this Warrant would have
owned immediately after such transaction if the holder had converted this
Warrant at the Warrant Price in effect immediately before the effective date
of
the transaction. Concurrently with the consummation of such transaction, the
person obligated to issue securities or deliver cash or other assets upon
exercise of this Warrant shall execute and deliver to the holder a supplemental
Warrant so providing and further providing for adjustments which shall be as
nearly equivalent as may be practical to the adjustments provided in this
Section
3.
The
successor company shall mail to the holder a notice describing the supplemental
Warrant.
If
securities deliverable upon exercise of this Warrant, as provided above, are
themselves convertible into or exercisable for the securities of an affiliate
of
a corporation formed, surviving or otherwise affected by the merger or other
transaction, that issuer shall join in the supplemental Warrant which shall
so
provide. If this subsection 3(i) applies, subsection 3(a) does not
apply.
4. Charges,
Taxes and Expenses.
The
issuance of certificates for Warrant Shares upon any exercise of this Warrant
shall be made without charge to the holder of this Warrant for any tax or other
expense in respect to the issuance of such certificates, all of which taxes
and
expenses shall be paid by the Company, and such certificates shall be issued
only in the name of the holder of this Warrant.
5. Miscellaneous.
(a) The
terms
of this Warrant shall be binding upon and shall inure to the benefit of any
successors or assigns of the Company and of the holder or holders hereof and
of
the shares of Common Stock issued or issuable upon the exercise
hereof.
(b) No
holder
of this Warrant, as such, shall be entitled to vote or receive dividends or
be
deemed to be a stockholder of the Company for any purpose, nor shall anything
contained in this Warrant be construed to confer upon the holder of this
Warrant, as such, any rights of a stockholder of the Company or any right to
vote, give or withhold consent to any corporate action, receive notice of
meetings, receive dividends or subscription rights, or otherwise.
(c) Receipt
of this Warrant by the holder hereof shall constitute acceptance of an agreement
to the foregoing terms and conditions.
(d) The
Warrant and the performance of the parties hereunder shall be construed and
interpreted in accordance with the laws of the State of New York wherein it
was
negotiated and executed and the parties hereunder consent and agree that the
State and Federal Courts which sit in the State of New York and the County
of
New York shall have exclusive jurisdiction with respect to all controversies
and
disputes arising hereunder.
(e) The
shares issuable upon exercise of this Warrant are entitled to the benefits
of
the registration rights provisions of Section
11
of the
Debenture and Warrant Purchase Agreement dated March 10, 1998 between the
Company, the Warrantholder and the other signatories thereto (the "Purchase
Agreement").
(f) This
Warrant is subject to certain other provisions contained in the Purchase
Agreement. Shares issued upon exercise of this Warrant shall contain a legend
substantially to the same effect as the legend set forth on the first page
of
this Warrant.
IN
WITNESS WHEREOF,
the
Company has caused this Warrant to be signed by its duly authorized officer
and
its corporate seal to be affixed hereto.
Dated:
________________, 2001
|
|
|
(SEAL) |
HALSEY
DRUG CO., INC. |
|
|
|
|
BY:
|
|
|
Name: Peter
A. Clemens |
|
Title: Chief
Financial Officer |
SUBSCRIPTION
FORM
(TO
BE EXECUTED
BY
THE REGISTERED
HOLDER
IF
HE DESIRES
TO EXERCISE
THE WARRANT)
To: HALSEY
DRUG CO., INC.
The
undersigned hereby exercises the right to purchase _________ shares of Common
Stock, par value $.01 per share, covered by the attached Warrant in accordance
with the terms and conditions thereof, and herewith makes payment of the Warrant
Price for such shares in full.
NOTICE
OF EXERCISE OF COMMON STOCK WARRANT
PURSUANT
TO NET ISSUE (“CASHLESS”) EXERCISE PROVISIONS
[
Date ]
Halsey
Drug Co., Inc.
|
|
Aggregate
Price of
|
$_______________________________________
|
a
New York corporation
|
of
Warrant
|
|
695
No. Perryville Road
|
Aggregate
Price Being
|
|
Crimson
Bldg. 2
Rockford,
Illinois 61107
|
|
Exercised:
|
$_______________________________________
|
Attention:
|
|
|
|
|
Warrant
Price (per
share):
|
$_______________________________________
|
|
|
|
|
|
|
Market
Value (per share):
|
$_______________________________________
|
|
|
|
|
|
|
Number
of Shares of Common Stock under this Warrant:
|
_______________________________________
|
|
|
|
|
|
|
Number
of Shares of Common Stock to be Issued Under this Notice:
|
_______________________________________
|
Gentlemen:
The
undersigned, the registered holder of the Warrant to Purchase Common Stock
delivered herewith (“Warrant”),
hereby irrevocably exercises such Warrant for, and purchases thereunder, shares
of the Common Stock of HALSEY
DRUG CO., INC.,
a New
York corporation, as provided below. Capitalized terms used herein, unless
otherwise defined herein, shall have the meanings given in the Warrant. The
portion of the Aggregate Price (as hereinafter defined) to be applied toward
the
purchase of Common Stock pursuant to this Notice of Exercise is
$_______,
thereby
leaving a remainder Aggregate Price (if any) equal to $_______.
Such
exercise shall be pursuant to the net issue exercise provisions of Section
1(b)
of the
Warrant; therefore, the holder makes no payment with this Notice of Exercise.
The number of shares to be issued pursuant to this exercise shall be determined
by reference to the formula in Section
1(b)
of the
Warrant which requires the use of the Market Value (as defined in Section
1(d)
of the
Warrant) of the Company's Common Stock on the business day immediately preceding
the day on which this Notice is received by the Company. To the extent the
foregoing exercise is for less than the full Aggregate Price of the Warrant,
the
remainder of the Warrant representing a number of Shares equal to the quotient
obtained by dividing the remainder of the Aggregate Price by the Warrant Price
(and otherwise of like form, tenor and effect) may be exercised under
Section
1(a)
of the
Warrant. For purposes of this Notice the term “Aggregate
Price”
means
the product obtained by multiplying the number of shares of Common Stock for
which the Warrant is exercisable times the Warrant Price.
|
|
|
|
|
|
|
SIGNATURE
|
DATE:__________________
|
ADDRESS
|
ASSIGNMENT
(To
be Executed by the Registered Holder
if
he Desires to Transfer the Warrant)
FOR
VALUE RECEIVED,
the
undersigned hereby sells, assigns and transfers unto_________
the
right to purchase shares of Common Stock of HALSEY
DRUG CO., INC.,
evidenced by the within Warrant, and does hereby irrevocably constitute and
appoint Attorney to transfer the said Warrant on the books of the Company,
with
full power of substitution.
WARRANT
TO PURCHASE
COMMON
STOCK, PAR VALUE $.01 PER SHARE
OF
HALSEY
DRUG CO., INC.
THIS
WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”)
NOR
UNDER ANY STATE SECURITIES LAW AND MAY NOT BE PLEDGED, SOLD, ASSIGNED,
HYPOTHECATED OR OTHERWISE TRANSFERRED UNTIL (1) A REGISTRATION STATEMENT WITH
RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES
LAW OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE COMPANY OR OTHER
COUNSEL TO THE HOLDER OF SUCH WARRANT REASONABLY SATISFACTORY TO THE COMPANY
THAT SUCH WARRANT AND/OR COMMON STOCK MAY BE PLEDGED, SOLD, ASSIGNED,
HYPOTHECATED OR TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT OR APPLICABLE STATE SECURITIES LAWS.
This
certifies that, for value received, ___________ or
its
registered assigns (“Warrantholder”),
is
entitled to purchase from HALSEY
DRUG CO., INC.
(the
“Company”),
subject to the provisions of this Warrant, at any time during the Exercise
Period (as hereinafter defined) _________ shares of the Company's Common Stock,
par value $.01 per share (“Warrant
Shares”).
The
purchase price payable upon the exercise of this Warrant shall be the lesser
of
(i) $_____
per
Warrant Share and (ii) the consideration per share received by the Company
for
the Company's Common Stock, or conversion/exercise price per share of the
Company's Common Stock issuable under convertible securities, issued by the
Company in the first Subsequent Offering (as defined in Section 3 hereof)
completed following the date of this Warrant. The purchase price and the number
of Warrant Shares which the Warrantholder is entitled to purchase are subject
to
adjustment upon the occurrence of the contingencies set forth in this Warrant,
and as adjusted from time to time, such purchase price is hereinafter referred
to as the “Warrant
Price.”
For
purposes of this Warrant, the term “Exercise
Period”
means
the period commencing on the date of issuance of this Warrant and ending on
the
seventh anniversary of such date.
This
Warrant is subject to the following terms and conditions:
1. Exercise
of Warrant.
(a)
This
Warrant may be exercised in whole or in part but not for a fractional share.
Upon delivery of this Warrant at the offices of the Company or at such other
address as the Company may designate by notice in writing to the registered
holder hereof with the Subscription Form annexed hereto duly executed,
accompanied by payment of the Warrant Price for the number of Warrant Shares
purchased (in cash, by certified, cashier's or other check acceptable to the
Company, by Common Stock or other securities of the Company having a market
value equal to the aggregate Warrant Price for the Warrant Shares to be
purchased, or any combination of the foregoing), the registered holder of this
Warrant shall be entitled to receive a certificate or certificates for the
Warrant Shares so purchased. Such certificate or certificates shall be promptly
delivered to the Warrantholder. Upon any partial exercise of this Warrant,
the
Company shall execute and deliver a new Warrant of like tenor for the balance
of
the Warrant Shares purchasable hereunder.
(b) In
lieu
of exercising this Warrant pursuant to Section
1(a),
the
holder may elect to receive shares of Common Stock equal to the value of this
Warrant determined in the manner described below (or any portion thereof
remaining unexercised) upon delivery of this Warrant at the offices of the
Company or at such other address as the Company may designate by notice in
writing to the registered holder hereof with the Notice of Cashless Exercise
Form annexed hereto duly executed. In such event the Company shall issue to
the
holder a number of shares of the Company's Common Stock computed using the
following formula:
X
=
Y
(A-B)
A
Where
X =
the number of shares of Common Stock to be issued to the holder.
Y = the
number of shares of Common Stock purchasable under this Warrant (at the date
of
such calculation).
A = the
Market Value of the Company's Common Stock on the business day immediately
preceding the day on which the Notice of Cashless Exercise is received by the
Company.
B = Warrant
Price (as adjusted to the date of such calculation).
(c) The
Warrant Shares deliverable hereunder shall, upon issuance, be fully paid and
non-assessable and the Company agrees that at all times during the term of
this
Warrant it shall cause to be reserved for issuance such number of shares of
its
Common Stock as shall be required for issuance and delivery upon exercise of
this Warrant.
(d) For
purposes of Section
1(b)
of this
Warrant, the Market Value of a share of Common Stock on any date shall be equal
to (A) the closing sale price per share as published by a national securities
exchange on which shares of Common Stock are traded (an “Exchange”)
on such
date or, if there is no sale of Common Stock on such date, the average of the
bid and asked prices on such Exchange at the close of trading on such date
or,
(B) if shares of Common Stock are not listed on an Exchange on such date,
the closing price per share as published on the National Association of
Securities Dealers Automatic Quotation System (“NASDAQ”)
National Market System if the shares are quoted on such system on such date,
or
(C) the average of the bid and asked prices in the over-the-counter market
at
the close of trading on such date if the shares are not traded on an Exchange
or
listed on the NASDAQ National Market System, or (D) if the security is not
traded on an Exchange or in the over-the-counter market, the fair market value
of a share of Common Stock on such date as determined in good faith by the
Board
of Directors. If the holder disagrees with the determination of the Market
Value
of any securities of the Common Stock determined by the Board of Directors
under
Section
1(d)(i)(D),
the
Market Value shall be determined by an independent appraiser acceptable to
the
Company and the holder. If they cannot agree on such an appraiser, then each
of
the Company and the holder shall select an independent appraiser, such two
appraisers shall select a third independent appraiser and Market Value shall
be
the average of the appraisals made by such appraisers. If there is one
appraiser, the cost of the appraisal shall be shared equally between the Company
and the holder. If there are three appraisers, each of the Company and the
holder shall pay for its own appraiser and shall share equally the cost of
the
third appraiser.
2. Transfer
or Assignment of Warrant.
(a)
Any
assignment or transfer of this Warrant shall be made by surrender of this
Warrant at the offices of the Company or at such other address as the Company
may designate in writing to the registered holder hereof with the Assignment
Form annexed hereto duly executed and accompanied by payment of any requisite
transfer taxes, and the Company shall, without charge, execute and deliver
a new
Warrant of like tenor in the name of the assignee for the portion so assigned
in
case of only a partial assignment, with a new Warrant of like tenor to the
assignor for the balance of the Warrant Shares purchasable.
(b) Prior
to
any assignment or transfer of this Warrant, the holder thereof shall deliver
an
opinion of counsel to the Company to the effect that the proposed transfer
may
be effected without registration under the Securities Act of 1933, as amended
(the “Securities
Act”)
and
any applicable state securities laws. Each Warrant issued upon or in connection
with such transfer shall bear the restrictive legend set forth on the front
of
this Warrant unless, in the opinion of the Company's counsel, such legend is
no
longer required to insure compliance with the Securities Act.
3. Adjustments
to Warrant Price and Warrant Shares -- Anti-Dilution Provisions.
In
order to prevent dilution of the exercise right granted hereunder, the Warrant
Price shall be subject to adjustment from time to time in accordance with this
Section
3.
The
Warrant Price in effect at the time of exercise of the exercise rights granted
hereunder shall be subject to adjustment, or further adjustment, from time
to
time as follows:
(a)
In
the event that the Company shall at any time: (i) declare or pay to the holders
of the Common Stock a dividend payable in any kind of shares of capital stock
of
the Company; or (ii) change or divide or otherwise reclassify its Common Stock
into the same or a different number of shares with or without par value, or
in
shares of any class or classes; or (iii) transfer its property as an entirety
or
substantially as an entirety to any other company or entity; or (iv) make any
distribution of its assets to holders of its Common Stock as a liquidation
or
partial liquidation dividend or by way of return of capital; then, upon the
subsequent exercise of this Warrant, the holder thereof shall receive, in
addition to or in substitution for the shares of Common Stock to which it would
otherwise be entitled upon such exercise, such additional shares of stock or
scrip of the Company, or such reclassified shares of stock of the Company,
or
such shares of the securities or property of the company resulting from
transfer, or such assets of the Company, which it would have been entitled
to
receive had it exercised these rights prior to the happening of any of the
foregoing events.
(b) For
purposes hereof, "Subsequent Offering" shall mean the grant or issuance of
any
shares of Common Stock, or the grant or issuance of any rights or options for
the purchase of, or stock or other securities convertible into, Common Stock
(such convertible stock or securities being herein collectively referred to
as
“Convertible
Securities”)
for an
aggregate gross consideration of at least $1,000,000.
(c) Anything
in this Section
3
to the
contrary notwithstanding, a Subsequent Offering shall expressly
exclude:
(i) the
grant, issuance or exercise of any Convertible Securities pursuant to the
Company's qualified or non-qualified Employee Stock Option Plans or any other
bona fide employee benefit plan or incentive arrangement, adopted or approved
by
the Company's Board of Directors and approved by the Company's shareholders,
as
may be amended from time to time, or under any other bona fide employee benefit
plan hereafter adopted by the Company's Board of Directors; or
(ii) the
grant, issuance or exercise of any Convertible Securities in connection with
the
hire or retention of any officer, director or key employee of the Company,
provided such grant is approved by the Company’s Board of Directors; and
(d) If,
at
any time while this Warrant is outstanding, the Company shall pay any dividend
payable in cash or in Common Stock, shall offer to the holders of its Common
Stock for subscription or purchase by them any shares of stock of any class
or
any other rights, shall enter into an agreement to merge or consolidate with
another corporation, shall propose any capital reorganization or
reclassification of the capital stock of the Company, including any subdivision
or combination of its outstanding shares of Common Stock or there shall be
contemplated a voluntary or involuntary dissolution, liquidation or winding
up
of the Company, the Company shall cause notice thereof to be mailed to the
registered holder of this Warrant at its address appearing on the registration
books of the Company, at least thirty (30) days prior to the record date as
of
which holders of Common Stock shall participate in such dividend, distribution
or subscription or other rights or at least thirty (30) days prior to the
effective date of the merger, consolidation, reorganization, reclassification
or
dissolution. Upon any adjustment of any Warrant Price, then and in each such
case the Company shall promptly deliver a notice to the registered holder of
this Warrant, which notice shall state the Warrant Price resulting from such
adjustment, setting forth in reasonable detail the method of calculation and
the
facts upon which such calculation is based.
(e) If
the
Company is a party to a merger or other transaction which reclassifies or
changes its outstanding Common Stock, upon consummation of such transaction
this
Warrant shall automatically become exercisable for the kind and amount of
securities, cash or other assets which the holder of this Warrant would have
owned immediately after such transaction if the holder had converted this
Warrant at the Warrant Price in effect immediately before the effective date
of
the transaction. Concurrently with the consummation of such transaction, the
person obligated to issue securities or deliver cash or other assets upon
exercise of this Warrant shall execute and deliver to the holder a supplemental
Warrant so providing and further providing for adjustments which shall be as
nearly equivalent as may be practical to the adjustments provided in this
Section
3.
The
successor company shall mail to the holder a notice describing the supplemental
Warrant.
If
securities deliverable upon exercise of this Warrant, as provided above, are
themselves convertible into or exercisable for the securities of an affiliate
of
a corporation formed, surviving or otherwise affected by the merger or other
transaction, that issuer shall join in the supplemental Warrant which shall
so
provide. If this subsection 3(e) applies, subsection 3(a) does not
apply.
4. Charges,
Taxes and Expenses.
The
issuance of certificates for Warrant Shares upon any exercise of this Warrant
shall be made without charge to the holder of this Warrant for any tax or other
expense in respect to the issuance of such certificates, all of which taxes
and
expenses shall be paid by the Company, and such certificates shall be issued
only in the name of the holder of this Warrant.
5. Miscellaneous.
(a) The
terms
of this Warrant shall be binding upon and shall inure to the benefit of any
successors or assigns of the Company and of the holder or holders hereof and
of
the shares of Common Stock issued or issuable upon the exercise
hereof.
(b) No
holder
of this Warrant, as such, shall be entitled to vote or receive dividends or
be
deemed to be a stockholder of the Company for any purpose, nor shall anything
contained in this Warrant be construed to confer upon the holder of this
Warrant, as such, any rights of a stockholder of the Company or any right to
vote, give or withhold consent to any corporate action, receive notice of
meetings, receive dividends or subscription rights, or otherwise.
(c) Receipt
of this Warrant by the holder hereof shall constitute acceptance of an agreement
to the foregoing terms and conditions.
(d) The
Warrant and the performance of the parties hereunder shall be construed and
interpreted in accordance with the laws of the State of New York wherein it
was
negotiated and executed and the parties hereunder consent and agree that the
State and Federal Courts which sit in the State of New York and the County
of
New York shall have exclusive jurisdiction with respect to all controversies
and
disputes arising hereunder.
(e) The
shares issuable upon exercise of this Warrant are entitled to the benefits
of
the registration rights provisions of Section
8
of the
Bridge Loan Agreement dated August 15, 2001 between the Company, the
Warrantholder and the other signatories thereto [(as amended through the date
hereof,]* the "Loan
Agreement").
*[Bracketed Phrase only Appears in April 5, 2002 Warrant]
(f) This
Warrant is subject to certain other provisions contained in the Loan Agreement.
Shares issued upon exercise of this Warrant shall contain a legend substantially
to the same effect as the legend set forth on the first page of this
Warrant.
IN
WITNESS WHEREOF,
the
Company has caused this Warrant to be signed by its duly authorized officer
and
its corporate seal to be affixed hereto.
Dated:
______________
|
|
|
(SEAL) |
HALSEY
DRUG CO., INC. |
|
|
|
|
BY:
|
|
|
Name: Peter
A. Clemens |
|
Title: Chief
Financial Officer |
SUBSCRIPTION
FORM
(TO
BE EXECUTED
BY
THE REGISTERED
HOLDER
IF
HE DESIRES
TO EXERCISE
THE WARRANT)
To: HALSEY
DRUG CO., INC.
The
undersigned hereby exercises the right to purchase _________ shares of Common
Stock, par value $.01 per share, covered by the attached Warrant in accordance
with the terms and conditions thereof, and herewith makes payment of the Warrant
Price for such shares in full.
DATED:
NOTICE
OF EXERCISE OF COMMON STOCK WARRANT
PURSUANT
TO NET ISSUE (“CASHLESS”) EXERCISE PROVISIONS
[
Date ]
Halsey
Drug Co., Inc.
|
|
Aggregate
Price of
|
$_________________________________________
|
a
New York corporation
|
of
Warrant
|
|
695
No. Perryville Road
|
Aggregate
Price Being
|
|
Crimson
Bldg. 2
Rockford,
Illinois 61107
|
|
Exercised:
|
$_________________________________________
|
Attention:
|
|
|
|
|
Warrant
Price (per
share):
|
$_________________________________________
|
|
|
|
|
|
|
Market
Value (per share):
|
$_________________________________________
|
|
|
|
|
|
|
Number
of Shares of Common Stock under this Warrant:
|
_________________________________________
|
|
|
|
|
|
|
Number
of Shares of Common Stock to be Issued Under this Notice:
|
_________________________________________
|
CASHLESS
EXERCISE
Gentlemen:
The
undersigned, the registered holder of the Warrant to Purchase Common Stock
delivered herewith (“Warrant”),
hereby irrevocably exercises such Warrant for, and purchases thereunder, shares
of the Common Stock of HALSEY
DRUG CO., INC.,
a New
York corporation, as provided below. Capitalized terms used herein, unless
otherwise defined herein, shall have the meanings given in the Warrant. The
portion of the Aggregate Price (as hereinafter defined) to be applied toward
the
purchase of Common Stock pursuant to this Notice of Exercise is
$________,
thereby
leaving a remainder Aggregate Price (if any) equal to $________.
Such
exercise shall be pursuant to the net issue exercise provisions of Section
1(b)
of the
Warrant; therefore, the holder makes no payment with this Notice of Exercise.
The number of shares to be issued pursuant to this exercise shall be determined
by reference to the formula in Section
1(b)
of the
Warrant which requires the use of the Market Value (as defined in Section
1(d)
of the
Warrant) of the Company's Common Stock on the business day immediately preceding
the day on which this Notice is received by the Company. To the extent the
foregoing exercise is for less than the full Aggregate Price of the Warrant,
the
remainder of the Warrant representing a number of Shares equal to the quotient
obtained by dividing the remainder of the Aggregate Price by the Warrant Price
(and otherwise of like form, tenor and effect) may be exercised under
Section
1(a)
of the
Warrant. For purposes of this Notice the term “Aggregate
Price”
means
the product obtained by multiplying the number of shares of Common Stock for
which the Warrant is exercisable times the Warrant Price.
|
|
|
|
|
|
|
SIGNATURE
|
DATE:_____________
|
ADDRESS
|
ASSIGNMENT
(To
be Executed by the Registered Holder
if
he Desires to Transfer the Warrant)
FOR
VALUE RECEIVED,
the
undersigned hereby sells, assigns and transfers unto_____________
the
right to purchase shares of Common Stock of HALSEY
DRUG CO., INC.,
evidenced by the within Warrant, and does hereby irrevocably constitute and
appoint Attorney to transfer the said Warrant on the books of the Company,
with
full power of substitution.
|
|
|
|
|
|
|
SIGNATURE
|
DATED:_____________
|
ADDRESS
|
EXHIBIT
10.5
WARRANT
TO PURCHASE
COMMON
STOCK, PAR VALUE $.01 PER SHARE
OF
HALSEY
DRUG CO., INC.
THIS
WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”)
NOR
UNDER ANY STATE SECURITIES LAW AND MAY NOT BE PLEDGED, SOLD, ASSIGNED,
HYPOTHECATED OR OTHERWISE TRANSFERRED UNTIL (1) A REGISTRATION STATEMENT WITH
RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES
LAW OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE COMPANY OR OTHER
COUNSEL TO THE HOLDER OF SUCH WARRANT REASONABLY SATISFACTORY TO THE COMPANY
THAT SUCH WARRANT AND/OR COMMON STOCK MAY BE PLEDGED, SOLD, ASSIGNED,
HYPOTHECATED OR TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT OR APPLICABLE STATE SECURITIES LAWS.
This
certifies that, for value received, _________________________
or its
registered assigns (“Warrantholder”),
is
entitled to purchase from HALSEY
DRUG CO., INC.
(the
“Company”),
subject to the provisions of this Warrant, at any time during the Exercise
Period (as hereinafter defined) [_________]
shares
of the Company's Common Stock, par value $.01 per share (“Warrant
Shares”).
The
purchase price payable upon the exercise of this Warrant shall be the lesser
of
(i) $_______ per Warrant Share and (ii) the consideration per share received
by
the Company for the Company's Common Stock, or conversion/exercise price per
share of the Company's Common Stock issuable under convertible securities,
issued by the Company in the first Subsequent Offering (as defined in Section
3
hereof) completed following the date of this Warrant. The purchase price and
the
number of Warrant Shares which the Warrantholder is entitled to purchase are
subject to adjustment upon the occurrence of the contingencies set forth in
this
Warrant, and as adjusted from time to time, such purchase price is hereinafter
referred to as the “Warrant
Price.”
For
purposes of this Warrant, the term “Exercise
Period”
means
the period commencing on the date of issuance of this Warrant and ending on
the
seventh anniversary of such date.
This
Warrant is subject to the following terms and conditions:
1. Exercise
of Warrant.
(a)
This
Warrant may be exercised in whole or in part but not for a fractional share.
Upon delivery of this Warrant at the offices of the Company or at such other
address as the Company may designate by notice in writing to the registered
holder hereof with the Subscription Form annexed hereto duly executed,
accompanied by payment of the Warrant Price for the number of Warrant Shares
purchased (in cash, by certified, cashier's or other check acceptable to the
Company, by Common Stock or other securities of the Company having a market
value equal to the aggregate Warrant Price for the Warrant Shares to be
purchased, or any combination of the foregoing), the registered holder of this
Warrant shall be entitled to receive a certificate or certificates for the
Warrant Shares so purchased. Such certificate or certificates shall be promptly
delivered to the Warrantholder. Upon any partial exercise of this Warrant,
the
Company shall execute and deliver a new Warrant of like tenor for the balance
of
the Warrant Shares purchasable hereunder.
(b) In
lieu
of exercising this Warrant pursuant to Section
1(a),
the
holder may elect to receive shares of Common Stock equal to the value of this
Warrant determined in the manner described below (or any portion thereof
remaining unexercised) upon delivery of this Warrant at the offices of the
Company or at such other address as the Company may designate by notice in
writing to the registered holder hereof with the Notice of Cashless Exercise
Form annexed hereto duly executed. In such event the Company shall issue to
the
holder a number of shares of the Company's Common Stock computed using the
following formula:
X
=
Y
(A-B)
A
Where
X =
the number of shares of Common Stock to be issued to the holder.
Y = the
number of shares of Common Stock purchasable under this Warrant (at the date
of
such calculation).
A = the
Market Value of the Company's Common Stock on the business day immediately
preceding the day on which the Notice of Cashless Exercise is received by the
Company.
B = Warrant
Price (as adjusted to the date of such calculation).
(c) The
Warrant Shares deliverable hereunder shall, upon issuance, be fully paid and
non-assessable and the Company agrees that at all times during the term of
this
Warrant it shall cause to be reserved for issuance such number of shares of
its
Common Stock as shall be required for issuance and delivery upon exercise of
this Warrant.
(d) For
purposes of Section
1(b)
of this
Warrant, the Market Value of a share of Common Stock on any date shall be equal
to (A) the closing sale price per share as published by a national securities
exchange on which shares of Common Stock are traded (an “Exchange”)
on such
date or, if there is no sale of Common Stock on such date, the average of the
bid and asked prices on such Exchange at the close of trading on such date
or,
(B) if shares of Common Stock are not listed on an Exchange on such date,
the closing price per share as published on the National Association of
Securities Dealers Automatic Quotation System (“NASDAQ”)
National Market System if the shares are quoted on such system on such date,
or
(C) the average of the bid and asked prices in the over-the-counter market
at
the close of trading on such date if the shares are not traded on an Exchange
or
listed on the NASDAQ National Market System, or (D) if the security is not
traded on an Exchange or in the over-the-counter market, the fair market value
of a share of Common Stock on such date as determined in good faith by the
Board
of Directors. If the holder disagrees with the determination of the Market
Value
of any securities of the Common Stock determined by the Board of Directors
under
Section
1(d)(i)(D),
the
Market Value shall be determined by an independent appraiser acceptable to
the
Company and the holder. If they cannot agree on such an appraiser, then each
of
the Company and the holder shall select an independent appraiser, such two
appraisers shall select a third independent appraiser and Market Value shall
be
the average of the appraisals made by such appraisers. If there is one
appraiser, the cost of the appraisal shall be shared equally between the Company
and the holder. If there are three appraisers, each of the Company and the
holder shall pay for its own appraiser and shall share equally the cost of
the
third appraiser.
2. Transfer
or Assignment of Warrant.
(a)
Any
assignment or transfer of this Warrant shall be made by surrender of this
Warrant at the offices of the Company or at such other address as the Company
may designate in writing to the registered holder hereof with the Assignment
Form annexed hereto duly executed and accompanied by payment of any requisite
transfer taxes, and the Company shall, without charge, execute and deliver
a new
Warrant of like tenor in the name of the assignee for the portion so assigned
in
case of only a partial assignment, with a new Warrant of like tenor to the
assignor for the balance of the Warrant Shares purchasable.
(b) Prior
to
any assignment or transfer of this Warrant, the holder thereof shall deliver
an
opinion of counsel to the Company to the effect that the proposed transfer
may
be effected without registration under the Securities Act of 1933, as amended
(the “Securities
Act”)
and
any applicable state securities laws. Each Warrant issued upon or in connection
with such transfer shall bear the restrictive legend set forth on the front
of
this Warrant unless, in the opinion of the Company's counsel, such legend is
no
longer required to insure compliance with the Securities Act.
3. Adjustments
to Warrant Price and Warrant Shares -- Anti-Dilution Provisions.
In
order to prevent dilution of the exercise right granted hereunder, the Warrant
Price shall be subject to adjustment from time to time in accordance with this
Section
3.
The
Warrant Price in effect at the time of exercise of the exercise rights granted
hereunder shall be subject to adjustment, or further adjustment, from time
to
time as follows:
(a)
In
the event that the Company shall at any time: (i) declare or pay to the holders
of the Common Stock a dividend payable in any kind of shares of capital stock
of
the Company; or (ii) change or divide or otherwise reclassify its Common Stock
into the same or a different number of shares with or without par value, or
in
shares of any class or classes; or (iii) transfer its property as an entirety
or
substantially as an entirety to any other company or entity; or (iv) make any
distribution of its assets to holders of its Common Stock as a liquidation
or
partial liquidation dividend or by way of return of capital; then, upon the
subsequent exercise of this Warrant, the holder thereof shall receive, in
addition to or in substitution for the shares of Common Stock to which it would
otherwise be entitled upon such exercise, such additional shares of stock or
scrip of the Company, or such reclassified shares of stock of the Company,
or
such shares of the securities or property of the company resulting from
transfer, or such assets of the Company, which it would have been entitled
to
receive had it exercised these rights prior to the happening of any of the
foregoing events.
(b) For
purposes hereof, "Subsequent Offering" shall mean the grant or issuance of
any
shares of Common Stock, or the grant or issuance of any rights or options for
the purchase of, or stock or other securities convertible into, Common Stock
(such convertible stock or securities being herein collectively referred to
as
“Convertible
Securities”)
for an
aggregate gross consideration of at least $1,000,000.
(c) Anything
in this Section
3
to the
contrary notwithstanding, a Subsequent Offering shall expressly
exclude:
(i) the
grant, issuance or exercise of any Convertible Securities pursuant to the
Company's qualified or non-qualified Employee Stock Option Plans or any other
bona fide employee benefit plan or incentive arrangement, adopted or approved
by
the Company's Board of Directors and approved by the Company's shareholders,
as
may be amended from time to time, or under any other bona fide employee benefit
plan hereafter adopted by the Company's Board of Directors; or
(ii) the
grant, issuance or exercise of any Convertible Securities in connection with
the
hire or retention of any officer, director or key employee of the Company,
provided such grant is approved by the Company’s Board of Directors; and
(d) If,
at
any time while this Warrant is outstanding, the Company shall pay any dividend
payable in cash or in Common Stock, shall offer to the holders of its Common
Stock for subscription or purchase by them any shares of stock of any class
or
any other rights, shall enter into an agreement to merge or consolidate with
another corporation, shall propose any capital reorganization or
reclassification of the capital stock of the Company, including any subdivision
or combination of its outstanding shares of Common Stock or there shall be
contemplated a voluntary or involuntary dissolution, liquidation or winding
up
of the Company, the Company shall cause notice thereof to be mailed to the
registered holder of this Warrant at its address appearing on the registration
books of the Company, at least thirty (30) days prior to the record date as
of
which holders of Common Stock shall participate in such dividend, distribution
or subscription or other rights or at least thirty (30) days prior to the
effective date of the merger, consolidation, reorganization, reclassification
or
dissolution. Upon any adjustment of any Warrant Price, then and in each such
case the Company shall promptly deliver a notice to the registered holder of
this Warrant, which notice shall state the Warrant Price resulting from such
adjustment, setting forth in reasonable detail the method of calculation and
the
facts upon which such calculation is based.
(e) If
the
Company is a party to a merger or other transaction which reclassifies or
changes its outstanding Common Stock, upon consummation of such transaction
this
Warrant shall automatically become exercisable for the kind and amount of
securities, cash or other assets which the holder of this Warrant would have
owned immediately after such transaction if the holder had converted this
Warrant at the Warrant Price in effect immediately before the effective date
of
the transaction. Concurrently with the consummation of such transaction, the
person obligated to issue securities or deliver cash or other assets upon
exercise of this Warrant shall execute and deliver to the holder a supplemental
Warrant so providing and further providing for adjustments which shall be as
nearly equivalent as may be practical to the adjustments provided in this
Section
3.
The
successor company shall mail to the holder a notice describing the supplemental
Warrant.
If
securities deliverable upon exercise of this Warrant, as provided above, are
themselves convertible into or exercisable for the securities of an affiliate
of
a corporation formed, surviving or otherwise affected by the merger or other
transaction, that issuer shall join in the supplemental Warrant which shall
so
provide. If this subsection 3(e) applies, subsection 3(a) does not
apply.
4. Charges,
Taxes and Expenses.
The
issuance of certificates for Warrant Shares upon any exercise of this Warrant
shall be made without charge to the holder of this Warrant for any tax or other
expense in respect to the issuance of such certificates, all of which taxes
and
expenses shall be paid by the Company, and such certificates shall be issued
only in the name of the holder of this Warrant.
5. Miscellaneous.
(a) The
terms
of this Warrant shall be binding upon and shall inure to the benefit of any
successors or assigns of the Company and of the holder or holders hereof and
of
the shares of Common Stock issued or issuable upon the exercise
hereof.
(b) No
holder
of this Warrant, as such, shall be entitled to vote or receive dividends or
be
deemed to be a stockholder of the Company for any purpose, nor shall anything
contained in this Warrant be construed to confer upon the holder of this
Warrant, as such, any rights of a stockholder of the Company or any right to
vote, give or withhold consent to any corporate action, receive notice of
meetings, receive dividends or subscription rights, or otherwise.
(c) Receipt
of this Warrant by the holder hereof shall constitute acceptance of an agreement
to the foregoing terms and conditions.
(d) The
Warrant and the performance of the parties hereunder shall be construed and
interpreted in accordance with the laws of the State of New York wherein it
was
negotiated and executed and the parties hereunder consent and agree that the
State and Federal Courts which sit in the State of New York and the County
of
New York shall have exclusive jurisdiction with respect to all controversies
and
disputes arising hereunder.
(e) The
shares issuable upon exercise of this Warrant are entitled to the benefits
of
the registration rights provisions of Section
8
of the
Bridge Loan Agreement dated August 15, 2001 between the Company, the
Warrantholder and the other signatories thereto (the "Loan
Agreement").
(f) This
Warrant is subject to certain other provisions contained in the Loan Agreement.
Shares issued upon exercise of this Warrant shall contain a legend substantially
to the same effect as the legend set forth on the first page of this
Warrant.
IN
WITNESS WHEREOF,
the
Company has caused this Warrant to be signed by its duly authorized officer
and
its corporate seal to be affixed hereto.
Dated:
___________
|
|
|
(SEAL) |
HALSEY
DRUG CO., INC. |
|
|
|
|
BY:
|
|
|
Name: Peter
A. Clemens |
|
Title: Chief
Financial Officer |
SUBSCRIPTION
FORM
(TO
BE EXECUTED
BY
THE REGISTERED
HOLDER
IF
HE DESIRES
TO EXERCISE
THE WARRANT
To: HALSEY
DRUG CO., INC.
The
undersigned hereby exercises the right to purchase _________ shares of Common
Stock, par value $.01 per share, covered by the attached Warrant in accordance
with the terms and conditions thereof, and herewith makes payment of the Warrant
Price for such shares in full.
NOTICE
OF EXERCISE OF COMMON STOCK WARRANT
PURSUANT
TO NET ISSUE (“CASHLESS”) EXERCISE PROVISIONS
[
Date ]
Halsey
Drug Co., Inc.
|
|
Aggregate
Price of
|
$_________________________________________
|
a
New York corporation
|
of
Warrant
|
|
695
No. Perryville Road
|
Aggregate
Price Being
|
|
Crimson
Bldg. 2
Rockford,
Illinois 61107
|
|
Exercised:
|
$_________________________________________
|
Attention:
|
|
|
|
|
Warrant
Price (per
share):
|
$_________________________________________
|
|
|
|
|
|
|
Market
Value (per share):
|
$_________________________________________
|
|
|
|
|
|
|
Number
of Shares of Common Stock under this Warrant:
|
_________________________________________
|
|
|
|
|
|
|
Number
of Shares of Common Stock to be Issued Under this Notice:
|
_________________________________________
|
CASHLESS
EXERCISE
Gentlemen:
The
undersigned, the registered holder of the Warrant to Purchase Common Stock
delivered herewith (“Warrant”),
hereby irrevocably exercises such Warrant for, and purchases thereunder, shares
of the Common Stock of HALSEY
DRUG CO., INC.,
a New
York corporation, as provided below. Capitalized terms used herein, unless
otherwise defined herein, shall have the meanings given in the Warrant. The
portion of the Aggregate Price (as hereinafter defined) to be applied toward
the
purchase of Common Stock pursuant to this Notice of Exercise is
$_______,
thereby
leaving a remainder Aggregate Price (if any) equal to $_______.
Such
exercise shall be pursuant to the net issue exercise provisions of Section
1(b)
of the
Warrant; therefore, the holder makes no payment with this Notice of Exercise.
The number of shares to be issued pursuant to this exercise shall be determined
by reference to the formula in Section
1(b)
of the
Warrant which requires the use of the Market Value (as defined in Section
1(d)
of the
Warrant) of the Company's Common Stock on the business day immediately preceding
the day on which this Notice is received by the Company. To the extent the
foregoing exercise is for less than the full Aggregate Price of the Warrant,
the
remainder of the Warrant representing a number of Shares equal to the quotient
obtained by dividing the remainder of the Aggregate Price by the Warrant Price
(and otherwise of like form, tenor and effect) may be exercised under
Section
1(a)
of the
Warrant. For purposes of this Notice the term “Aggregate
Price”
means
the product obtained by multiplying the number of shares of Common Stock for
which the Warrant is exercisable times the Warrant Price.
|
|
|
|
|
|
|
SIGNATURE
|
DATE:_________________
|
ADDRESS
|
ASSIGNMENT
(To
be Executed by the Registered Holder
if
he Desires to Transfer the Warrant)
FOR
VALUE RECEIVED,
the
undersigned hereby sells, assigns and transfers unto __________
the
right to purchase shares of Common Stock of HALSEY
DRUG CO., INC.,
evidenced by the within Warrant, and does hereby irrevocably constitute and
appoint Attorney to transfer the said Warrant on the books of the Company,
with
full power of substitution.
EXHIBIT
10.6
WARRANT
TO PURCHASE
COMMON
STOCK, PAR VALUE $.01 PER SHARE
OF
HALSEY
DRUG CO., INC.
THIS
WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”)
NOR
UNDER ANY STATE SECURITIES LAW AND MAY NOT BE PLEDGED, SOLD, ASSIGNED,
HYPOTHECATED OR OTHERWISE TRANSFERRED UNTIL (1) A REGISTRATION STATEMENT WITH
RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES
LAW OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE COMPANY OR OTHER
COUNSEL TO THE HOLDER OF SUCH WARRANT REASONABLY SATISFACTORY TO THE COMPANY
THAT SUCH WARRANT AND/OR COMMON STOCK MAY BE PLEDGED, SOLD, ASSIGNED,
HYPOTHECATED OR TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT OR APPLICABLE STATE SECURITIES LAWS.
This
certifies that, for value received,
______________ or
its
registered assigns (“Warrantholder”),
is
entitled to purchase from HALSEY
DRUG CO., INC.
(the
“Company”),
subject to the provisions of this Warrant, at any time during the Exercise
Period (as hereinafter defined) _________ shares of the Company's Common Stock,
par value $.01 per share (“Warrant
Shares”).
The
purchase price payable upon the exercise of this Warrant (the “Warrant
Price”)
shall
be the lesser of (i) $0.34 per
Warrant Share and (ii) the consideration per share received by the Company
for
the Company's Common Stock, or conversion/exercise price per share of the
Company's Common Stock issuable under convertible securities, issued by the
Company in the first Subsequent Offering (as defined in Section 3(b) hereof)
completed following the date of this Warrant.
For
purposes of this Warrant, the term “Exercise
Period”
means
the period commencing on the date of issuance of this Warrant and ending on
the
seventh anniversary of such date.
This
Warrant is subject to the following terms and conditions:
1. Exercise
of Warrant.
(a)
This
Warrant may be exercised in whole or in part but not for a fractional share.
Upon delivery of this Warrant at the offices of the Company or at such other
address as the Company may designate by notice in writing to the registered
holder hereof with the Subscription Form annexed hereto duly executed,
accompanied by payment of the Warrant Price for the number of Warrant Shares
purchased (in cash, by certified, cashier's or other check acceptable to the
Company, by Common Stock or other securities of the Company having a market
value equal to the aggregate Warrant Price for the Warrant Shares to be
purchased, or any combination of the foregoing), the registered holder of this
Warrant shall be entitled to receive a certificate or certificates for the
Warrant Shares so purchased. Such certificate or certificates shall be promptly
delivered to the Warrantholder. Upon any partial exercise of this Warrant,
the
Company shall execute and deliver a new Warrant of like tenor for the balance
of
the Warrant Shares purchasable hereunder.
(b) In
lieu
of exercising this Warrant pursuant to Section
1(a),
the
holder may elect to receive shares of Common Stock equal to the value of this
Warrant determined in the manner described below (or any portion thereof
remaining unexercised) upon delivery of this Warrant at the offices of the
Company or at such other address as the Company may designate by notice in
writing to the registered holder hereof with the Notice of Cashless Exercise
Form annexed hereto duly executed. In such event the Company shall issue to
the
holder a number of shares of the Company's Common Stock computed using the
following formula:
X
=
Y
(A-B)
A
Where
X =
the number of shares of Common Stock to be issued to the holder.
Y = the
number of shares of Common Stock purchasable under this Warrant (at the date
of
such calculation).
A = the
Market Value of the Company's Common Stock on the business day immediately
preceding the day on which the Notice of Cashless Exercise is received by the
Company.
B = Warrant
Price.
(c) The
Warrant Shares deliverable hereunder shall, upon issuance, be fully paid and
non-assessable and the Company agrees that at all times during the term of
this
Warrant it shall cause to be reserved for issuance such number of shares of
its
Common Stock as shall be required for issuance and delivery upon exercise of
this Warrant.
(d) For
purposes of Section
1(b)
of this
Warrant, the Market Value of a share of Common Stock on any date shall be equal
to (A) the closing sale price per share as published by a national securities
exchange on which shares of Common Stock are traded (an “Exchange”)
on such
date or, if there is no sale of Common Stock on such date, the average of the
bid and asked prices on such Exchange at the close of trading on such date
or,
(B) if shares of Common Stock are not listed on an Exchange on such date,
the closing price per share as published on the National Association of
Securities Dealers Automatic Quotation System (“NASDAQ”)
National Market System if the shares are quoted on such system on such date,
or
(C) the average of the bid and asked prices in the over-the-counter market
at
the close of trading on such date if the shares are not traded on an Exchange
or
listed on the NASDAQ National Market System, or (D) if the security is not
traded on an Exchange or in the over-the-counter market, the fair market value
of a share of Common Stock on such date as determined in good faith by the
Board
of Directors. If the holder disagrees with the determination of the Market
Value
of any securities of the Common Stock determined by the Board of Directors
under
Section
1(d)(i)(D),
the
Market Value shall be determined by an independent appraiser acceptable to
the
Company and the holder. If they cannot agree on such an appraiser, then each
of
the Company and the holder shall select an independent appraiser, such two
appraisers shall select a third independent appraiser and Market Value shall
be
the average of the appraisals made by such appraisers. If there is one
appraiser, the cost of the appraisal shall be shared equally between the Company
and the holder. If there are three appraisers, each of the Company and the
holder shall pay for its own appraiser and shall share equally the cost of
the
third appraiser.
2. Transfer
or Assignment of Warrant.
(a)
Any
assignment or transfer of this Warrant shall be made by surrender of this
Warrant at the offices of the Company or at such other address as the Company
may designate in writing to the registered holder hereof with the Assignment
Form annexed hereto duly executed and accompanied by payment of any requisite
transfer taxes, and the Company shall, without charge, execute and deliver
a new
Warrant of like tenor in the name of the assignee for the portion so assigned
in
case of only a partial assignment, with a new Warrant of like tenor to the
assignor for the balance of the Warrant Shares purchasable.
(b) Prior
to
any assignment or transfer of this Warrant, the holder thereof shall deliver
an
opinion of counsel to the Company to the effect that the proposed transfer
may
be effected without registration under the Securities Act of 1933, as amended
(the “Securities
Act”)
and
any applicable state securities laws. Each Warrant issued upon or in connection
with such transfer shall bear the restrictive legend set forth on the front
of
this Warrant unless, in the opinion of the Company's counsel, such legend is
no
longer required to insure compliance with the Securities Act.
3. Anti-Dilution
Provisions.
(a)
In
the event that the Company shall at any time: (i) declare or pay to the holders
of the Common Stock a dividend payable in any kind of shares of capital stock
of
the Company; or (ii) change or divide or otherwise reclassify its Common Stock
into the same or a different number of shares with or without par value, or
in
shares of any class or classes; or (iii) transfer its property as an entirety
or
substantially as an entirety to any other company or entity; or (iv) make any
distribution of its assets to holders of its Common Stock as a liquidation
or
partial liquidation dividend or by way of return of capital; then, upon the
subsequent exercise of this Warrant, the holder thereof shall receive, in
addition to or in substitution for the shares of Common Stock to which it would
otherwise be entitled upon such exercise, such additional shares of stock or
scrip of the Company, or such reclassified shares of stock of the Company,
or
such shares of the securities or property of the company resulting from
transfer, or such assets of the Company, which it would have been entitled
to
receive had it exercised these rights prior to the happening of any of the
foregoing events.
(b) For
purposes hereof, "Subsequent Offering" shall mean the grant or issuance of
any
shares of Common Stock, or the grant or issuance of any rights or options for
the purchase of, or stock or other securities convertible into, Common Stock
(such convertible stock or securities being herein collectively referred to
as
“Convertible
Securities”)
for an
aggregate gross consideration of at least $1,000,000.
(c) Anything
in this Section
3
to the
contrary notwithstanding, a Subsequent Offering shall expressly
exclude:
(i) the
grant, issuance or exercise of any Convertible Securities pursuant to the
Company's qualified or non-qualified Employee Stock Option Plans or any other
bona fide employee benefit plan or incentive arrangement, adopted or approved
by
the Company's Board of Directors and approved by the Company's shareholders,
as
may be amended from time to time, or under any other bona fide employee benefit
plan hereafter adopted by the Company's Board of Directors; or
(ii) the
grant, issuance or exercise of any Convertible Securities in connection with
the
hire or retention of any officer, director or key employee of the Company,
provided such grant is approved by the Company’s Board of Directors; and
(d) If,
at
any time while this Warrant is outstanding, the Company shall pay any dividend
payable in cash or in Common Stock, shall offer to the holders of its Common
Stock for subscription or purchase by them any shares of stock of any class
or
any other rights, shall enter into an agreement to merge or consolidate with
another corporation, shall propose any capital reorganization or
reclassification of the capital stock of the Company, including any subdivision
or combination of its outstanding shares of Common Stock or there shall be
contemplated a voluntary or involuntary dissolution, liquidation or winding
up
of the Company, the Company shall cause notice thereof to be mailed to the
registered holder of this Warrant at its address appearing on the registration
books of the Company, at least thirty (30) days prior to the record date as
of
which holders of Common Stock shall participate in such dividend, distribution
or subscription or other rights or at least thirty (30) days prior to the
effective date of the merger, consolidation, reorganization, reclassification
or
dissolution. Upon any adjustment of any Warrant Price, then and in each such
case the Company shall promptly deliver a notice to the registered holder of
this Warrant, which notice shall state the Warrant Price resulting from such
adjustment, setting forth in reasonable detail the method of calculation and
the
facts upon which such calculation is based.
(e) If
the
Company is a party to a merger or other transaction which reclassifies or
changes its outstanding Common Stock, upon consummation of such transaction
this
Warrant shall automatically become exercisable for the kind and amount of
securities, cash or other assets which the holder of this Warrant would have
owned immediately after such transaction if the holder had converted this
Warrant at the Warrant Price in effect immediately before the effective date
of
the transaction. Concurrently with the consummation of such transaction, the
person obligated to issue securities or deliver cash or other assets upon
exercise of this Warrant shall execute and deliver to the holder a supplemental
Warrant so providing and further providing for adjustments which shall be as
nearly equivalent as may be practical to the adjustments provided in this
Section
3.
The
successor company shall mail to the holder a notice describing the supplemental
Warrant.
If
securities deliverable upon exercise of this Warrant, as provided above, are
themselves convertible into or exercisable for the securities of an affiliate
of
a corporation formed, surviving or otherwise affected by the merger or other
transaction, that issuer shall join in the supplemental Warrant which shall
so
provide. If this subsection 3(e) applies, subsection 3(a) does not
apply.
4. Charges,
Taxes and Expenses.
The
issuance of certificates for Warrant Shares upon any exercise of this Warrant
shall be made without charge to the holder of this Warrant for any tax or other
expense in respect to the issuance of such certificates, all of which taxes
and
expenses shall be paid by the Company, and such certificates shall be issued
only in the name of the holder of this Warrant.
5. Miscellaneous.
(a) The
terms
of this Warrant shall be binding upon and shall inure to the benefit of any
successors or assigns of the Company and of the holder or holders hereof and
of
the shares of Common Stock issued or issuable upon the exercise
hereof.
(b) No
holder
of this Warrant, as such, shall be entitled to vote or receive dividends or
be
deemed to be a stockholder of the Company for any purpose, nor shall anything
contained in this Warrant be construed to confer upon the holder of this
Warrant, as such, any rights of a stockholder of the Company or any right to
vote, give or withhold consent to any corporate action, receive notice of
meetings, receive dividends or subscription rights, or otherwise.
(c) Receipt
of this Warrant by the holder hereof shall constitute acceptance of an agreement
to the foregoing terms and conditions.
(d) The
Warrant and the performance of the parties hereunder shall be construed and
interpreted in accordance with the laws of the State of New York wherein it
was
negotiated and executed and the parties hereunder consent and agree that the
State and Federal Courts which sit in the State of New York and the County
of
New York shall have exclusive jurisdiction with respect to all controversies
and
disputes arising hereunder.
(e) Shares
issued upon exercise of this Warrant shall contain a legend substantially to
the
same effect as the legend set forth on the first page of this
Warrant.
IN
WITNESS WHEREOF,
the
Company has caused this Warrant to be signed by its duly authorized officer
and
its corporate seal to be affixed hereto.
Dated:
As
of May 5, 2003
|
|
|
(SEAL) |
HALSEY
DRUG CO., INC. |
|
|
|
|
BY:
|
|
|
Name: Peter
A. Clemens |
|
Title: Chief
Financial Officer |
SUBSCRIPTION
FORM
((TO
BE EXECUTED
BY
THE REGISTERED
HOLDER
IF
HEDESIRESTOEXERCISE
THEWARRANT
To: HALSEY
DRUG CO., INC.
The
undersigned hereby exercises the right to purchase _________ shares of Common
Stock, par value $.01 per share, covered by the attached Warrant in accordance
with the terms and conditions thereof, and herewith makes payment of the Warrant
Price for such shares in full.
NOTICE
OF EXERCISE OF COMMON STOCK WARRANT
PURSUANT
TO NET ISSUE (“CASHLESS”) EXERCISE PROVISIONS
[
Date ]
Acura
Pharmaceuticals Inc.
|
|
Aggregate
Price of
|
$_______________________________________
|
a
New York corporation
|
of
Warrant
|
|
616
N. North Court, Suite 120
Palatine,
IL 60067
|
Aggregate
Price Being
|
|
Attention:
President
|
|
Exercised:
|
$_______________________________________
|
|
|
|
|
|
Warrant
Price (per
share):
|
$_______________________________________
|
|
|
|
|
|
|
Market
Value (per share):
|
$_______________________________________
|
|
|
|
|
|
|
Number
of Shares of Common Stock under this Warrant:
|
_______________________________________
|
|
|
|
|
|
|
Number
of Shares of Common Stock to be Issued Under this Notice:
|
_______________________________________
|
CASHLESS
EXERCISE
Gentlemen:
The
undersigned, the registered holder of the Warrant to Purchase Common Stock
delivered herewith (“Warrant”),
hereby irrevocably exercises such Warrant for, and purchases thereunder, shares
of the Common Stock of HALSEY
DRUG CO., INC.,
a New
York corporation, as provided below. Capitalized terms used herein, unless
otherwise defined herein, shall have the meanings given in the Warrant. The
portion of the Aggregate Price (as hereinafter defined) to be applied toward
the
purchase of Common Stock pursuant to this Notice of Exercise is
$_________,
thereby
leaving a remainder Aggregate Price (if any) equal to $_________.
Such
exercise shall be pursuant to the net issue exercise provisions of Section
1(b)
of the
Warrant; therefore, the holder makes no payment with this Notice of Exercise.
The number of shares to be issued pursuant to this exercise shall be determined
by reference to the formula in Section
1(b)
of the
Warrant which requires the use of the Market Value (as defined in Section
1(d)
of the
Warrant) of the Company's Common Stock on the business day immediately preceding
the day on which this Notice is received by the Company. To the extent the
foregoing exercise is for less than the full Aggregate Price of the Warrant,
the
remainder of the Warrant representing a number of Shares equal to the quotient
obtained by dividing the remainder of the Aggregate Price by the Warrant Price
(and otherwise of like form, tenor and effect) may be exercised under
Section
1(a)
of the
Warrant. For purposes of this Notice the term “Aggregate
Price”
means
the product obtained by multiplying the number of shares of Common Stock for
which the Warrant is exercisable times the Warrant Price.
|
|
|
|
|
|
|
SIGNATURE |
DATE:____________________
|
ADDRESS
|
ASSIGNMENT
(To
be Executed by the Registered Holder
if
he Desires to Transfer the Warrant)
FOR
VALUE RECEIVED,
the
undersigned hereby sells, assigns and transfers unto _________
the
right to purchase shares of Common Stock of HALSEY
DRUG CO., INC.,
evidenced by the within Warrant, and does hereby irrevocably constitute and
appoint Attorney to transfer the said Warrant on the books of the Company,
with
full power of substitution.
EXHIBIT
23.1
CONSENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Acura
Pharmaceuticals, Inc.
Palatine,
Illinois
We
hereby
consent to the incorporation by reference in the Prospectus constituting a
part
of this Registration Statement of our report dated March 13, 2007, relating
to
the consolidated financial statements appearing in Acura Pharmaceuticals, Inc.’s
Annual Report on Form 10-K for the year ended December 31, 2006. Our report
contains an explanatory paragraph regarding the Company’s ability to continue as
a going concern.
We
also
consent to the reference to us under the caption “Experts” in the
Prospectus.
/s/
BDO
Seidman, LLP
Chicago,
Illinois
September
28, 2007