<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 26, 1996
Registration No. 33-71278
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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POST-EFFECTIVE
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CYPRESS BIOSCIENCE, INC.
(Exact name of Registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 2831 22-2389839
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification Number)
incorporation or organization) Classification Code Number)
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4350 EXECUTIVE DRIVE, SUITE 325
SAN DIEGO, CA 92121
(619) 452-2323
(Address, including zip code, and telephone number, including area
code, of Registrant's principal executive offices)
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JAY D. KRANZLER
CHIEF EXECUTIVE OFFICER, CHIEF SCIENTIFIC OFFICER AND
VICE CHAIRMAN OF THE BOARD OF DIRECTORS
CYPRESS BIOSCIENCE, INC.
4350 EXECUTIVE DRIVE, SUITE 325
SAN DIEGO, CA 92121
(619) 452-2323
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
FREDERICK T. MUTO, ESQ.
CARL R. SANCHEZ, ESQ.
COOLEY GODWARD CASTRO
HUDDLESON & TATUM
4365 EXECUTIVE DRIVE, SUITE 1100
SAN DIEGO, CA 92121
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Approximate date of commencement of proposed sale to the public:
FROM TIME TO TIME AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
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If the only securities being registered in 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, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) of the Securities Act, please check the following box
and list the Securities Act registration serial number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
CALCULATION OF REGISTRATION FEE
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TITLE OF SECURITIES AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TO BE REGISTERED REGISTERED (1) OFFERING PRICE PER SHARE (2) AGGREGATE OFFERING PRICE (2) REGISTRATION FEE(3)
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<S> <C> <C> <C> <C>
Common Stock, $.02 par value ... 1,850,000 $2.50 $4,625,000 $1,594.83
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(1) Includes indeterminate number of shares of Common Stock that may be
issued in connection with a stock split, stock dividend, recapitalization
or similar event.
(2) Calculated in accordance with Rule 457(a).
(3) Filing fee was previously paid upon the initial filing of the
registration statement.
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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.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BY ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION DATED JULY __, 1996
PROSPECTUS
CYPRESS BIOSCIENCE, INC.
1,850,000
SHARES OF COMMON STOCK
(PAR VALUE $.02 PER SHARE)
ISSUABLE UPON EXERCISE
OF CERTAIN UNIT WARRANTS
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This Prospectus relates to an offering of up to 1,850,000 shares of
Common Stock par value $.02 per share (the "Common Stock") of Cypress
Bioscience, Inc. ("Cypress" or the "Company") issuable by the Company upon
exercise of certain outstanding transferable warrants (the "Unit Warrants")
originally issued by the Company to certain persons (the "Unit Warrant Holders")
in connection with the sale of certain units by means of a prospectus which was
part of a registration statement on Form S-1 (Registration No 33-41225) declared
effective by the Securities and Exchange Commission (the "Commission") on August
29, 1991. See "Description of Unit Warrants and Plan of Distribution."
As of May 21, 1996, the Common Stock of the Company has been traded on
the Nasdaq SmallCap Market under the symbol "CYPB." Prior to May 21, 1996, the
Common Stock of the Company was traded on the Nasdaq SmallCap Market under the
symbol "IMRE." The last reported sales price of the Company's Common Stock on
the Nasdaq SmallCap Market on July 25, 1996 was $2.00 per share."
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THE SECURITIES BEING OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" COMMENCING ON PAGE 6 OF THIS PROSPECTUS FOR INFORMATION THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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Price to Unit Warrant Holders Proceeds to Company(1)
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<S> <C> <C>
Per Share $2.50 $2.50
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Total $4,625,000 $4,625,000
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</TABLE>
(1) Does not exclude costs of registration to be paid by the Company estimated
at $20,000.
THE DATE OF THIS PROSPECTUS IS JULY ___, 1996.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files annual and quarterly reports, proxy statements and
other information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy statements and other information filed by the
Company may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Judiciary
Plaza, Washington, D.C. 20549, and at the Commission's following Regional
Offices: Chicago Regional Office, 500 West Madison Street, Suite 1400, Northwest
Atrium Center, Chicago, Illinois 60661; and New York Regional Office, Seven
World Trade Center, Suite 1300, New York, New York 10048. Copies of such
material can also be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549. The Common Stock of the Company is quoted on the Nasdaq
SmallCap Market. Reports and other information concerning the Company may be
inspected at the National Association of Securities Dealers, Inc. at 1735 K
Street, N.W., Washington, D.C. 20006.
ADDITIONAL INFORMATION
A registration statement on Form S-3 with respect to the Common Stock
offered hereby (the "Registration Statement") has been filed with the Commission
under the Securities Act of 1933, as amended (the "Securities Act"). This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto, certain portions of which have
been omitted pursuant to the rules and regulations of the Commission. Statements
contained in this Prospectus as to the contents of any contract or any other
document filed as an exhibit to the Registration Statement are not necessarily
complete and, in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference. A copy of the
Registration Statement and the exhibits and schedules thereto may be inspected
by anyone without charge at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549,
and copies of all or any part of the Registration Statement may be obtained from
the Public Reference Section of the Commission upon the payment of certain fees
prescribed by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on From 10-K for the fiscal year ended
December 31, 1995, the Company's Proxy Statement for the 1996 Annual Meeting of
Stockholders filed on March 11, 1996 pursuant to Rule 14a-6 of the Exchange Act,
the Company's Current Report on Form 8-K dated as of January 29, 1996, the
Company's Current Report on Form 8-K dated as of March 8, 1996, the Company's
Current Report on Form 8-K dated as of April 1, 1996, the Company's Annual
Report on Form 10-K/A for the fiscal year ended December 31, 1995 and the
Company's registration statement on Form S-1 (Registration No. 333-8125) dated
July 15, 1996 filed by the Company with the Commission are hereby incorporated
by reference in this Prospectus except as superseded or modified herein. All
documents filed by the Company with the Commission pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and
prior to the termination of the offering shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the date of filing
of such documents. Any statement contained in any document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner of shares of Common Stock of the Company, to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any and all of the documents that have been or may be incorporated by reference
herein (other than exhibits to such documents which are not specifically
incorporated by reference into such documents). Such requests should be directed
to the Director of Finance at the Company's principal executive offices at 4350
Executive Drive, Suite 325, San Diego, CA 92121, (telephone (619) 452-2323).
2.
<PAGE> 4
PROSORBA(R) is a registered trademark of the Company. All other brand
names or trademarks appearing in this Prospectus are the property of their
respective holders.
3.
<PAGE> 5
THE COMPANY
This Prospectus contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 as amended, that involve risks and
uncertainties. The Company's actual results could differ materially from those
projected in the forward-looking statements. Factors that might cause such a
difference include, but are not limited to, those discussed in "Risk Factors."
Cypress Bioscience, Inc. (the "Company") was incorporated in 1981 to
research, develop, manufacture and market medical devices for the treatment and
diagnosis of select immune-mediated diseases, transplantations and cancers. The
Company's first product, the PROSORBA(R) column, a medical device, treats a
patient's defective immune system so that it can more effectively respond to
certain diseases. The Company's PROSORBA(R) column is a therapeutic,
extracorporeal immunoadsorption device which removes circulating immune
complexes (CICs) and immunoglobulin G (IgG) from a patient's plasma in a
procedure that takes place in an extracorporeal loop (i.e., outside the body)
and returns all other necessary plasma compounds back to the patient. During
PROSORBA(R) column therapy, blood is drawn from one arm of the patient, plasma
and red bloods cells are separated, the plasma is filtered through the
PROSORBA(R) column to remove unwanted CICs and IgG, then combined with the red
blood cells and returned to the patient's other arm. The PROSORBA(R) column
therapy is noninvasive and is administered on an outpatient basis.
The Company received marketing approval from the U.S. Food and Drug
Administration (the "FDA") in December 1987 to distribute the PROSORBA(R)
column for the treatment of idiopathic thrombocytopenic purpura ("ITP"), an
immune-mediated bleeding disorder. Since 1987, the Company has had
approximately $23 million of sales of the PROSORBA(R) column for use in ITP
therapy.
The Company is currently in the process of conducting clinical trials
for the use of the PROSORBA(R) column therapy to treat rheumatoid arthritis. In
September 1995, the Company announced the results of its 15 patient pilot
clinical trial that used the PROSORBA(R) column therapy in the treatment of
rheumatoid arthritis. The Company believes that the clinical results, which
showed a statistically significant 76% reduction in painful joints and a 70%
reduction in swollen joints in 11 patients three months after completing the
PROSORBA(R) column treatment, confirms the potential utility of the PROSORBA(R)
column therapy in treating rheumatoid arthritis reported earlier in an
independent study published in the JOURNAL OF RHEUMATOLOGY in May 1994. In
November 1995, the FDA conditionally approved the Company's application to
begin a pivotal clinical trial at 12 centers using the PROSORBA(R) column in
the treatment of patients with rheumatoid arthritis. The Company has since
commenced such clinical trial.
The Company believes that its future success will depend on its ability
to improve PROSORBA(R) column sales for its currently approved indication, ITP,
obtain FDA marketing approval for additional disease indications and acquire
and/or develop complementary therapeutic and diagnostic therapies. The Company
recently terminated its exclusive distribution agreement with Baxter Healthcare
Corporation ("Baxter"), which granted to Baxter the exclusive right to
distribute the Company's PROSORBA(R) column in the United States and Canada. As
a result of the termination of the Baxter agreement, effective May 1, 1996, the
Company regained the right, among other things, to sell its PROSORBA(R) column
directly to customers who had previously purchased PROSORBA(R) columns through
Baxter, as well as directly to any other potential customers who wish to
purchase PROSORBA(R) columns. The Company has to establish its own sales force
to market and sell the PROSORBA(R) column, and is still in the process of
establishing such sales force. The Company believes that its own sales force,
dedicated solely to the marketing and sales of the PROSORBA(R) column, will be
more effective than distributing the PROSORBA(R) column through a third party.
The Company is in the process of implementing a substantial
restructuring plan intended to put in place experienced senior management and
consolidate the Company's operations. In December 1995, Jay D. Kranzler, M.D.,
Ph.D. was appointed as the Company's Chief Executive Officer and Vice Chairman
of the Board of Directors. In March 1996, Dr. Kranzler also assumed the
position of Chief Scientific Officer. Also
4.
<PAGE> 6
in December 1995, Debby Jo Blank, M.D., was appointed as the Company's
President, Chief Operating Officer and Director.
The restructuring plan includes consolidating the Company's
manufacturing operations into one central facility in Redmond, Washington. In
addition, the restructuring plan includes relocating all of the Company's
operations, except manufacturing, from Seattle, Washington to San Diego,
California by the end of 1996. The Company believes that relocating its
operations to San Diego, widely recognized as the fourth largest biotechnology
center in the United States, will provide the Company with greater exposure
within the industry and better position the Company to market its products. In
addition, in the event the Company wishes to expand staffing, San Diego's
highly skilled work force will provide significant resources from which the
Company may draw to meet future staffing needs.
The Company was incorporated under the laws of the State of Delaware in
1981. The Company's executive offices are located at 4350 Executive Drive, Suite
325, San Diego, California 92121 and its telephone number is (619) 452-2323.
5.
<PAGE> 7
RISK FACTORS
This Prospectus contains forward-looking statements within the meaning
of Section 27A of the Securities Act and Section 21E of the Exchange Act that
involve risks and uncertainties. The Company's actual results could differ
materially from those projected in the forward-looking statements. Factors that
could cause or contribute to such differences include, but are not limited, to
those discussed in this section, as well as those discussed elsewhere in this
Prospectus. The following risk factors should be considered carefully in
addition to the other information contained in this Prospectus before
purchasing the Shares being offered hereby.
NEED FOR ADDITIONAL CAPITAL. The Company is actively seeking
opportunities to raise additional capital through the private equity market and
corporate partners. Such capital would be used primarily to develop new and
complete existing research and development activities, including funding
clinical trials for rheumatoid arthritis and certain platelet disorders. The
amount of capital required by the Company is primarily dependent upon the
following factors: results of clinical trials, results of current research and
development efforts, the FDA regulatory process, potential competitive and
technological advances and levels of product sales. Because the Company is
unable to predict the outcome of the previously noted factors, some of which
are beyond the Company's control, the Company is unable to estimate, with
certainty, its mid- to long-term total capital needs. There can be no assurance
that the Company will be able to raise additional capital through the private
equity market or corporate partnering transactions or that funds raised thereby
will allow the Company to maintain its current and planned operations as
provided herein. If the Company is unable to obtain additional financing, it
may be required to delay, scale back or eliminate some or all of its research
and development activities, to license to third parties technologies that the
Company would otherwise seek to develop itself, to seek financing through the
debt market at potentially higher costs to the Company and/or to seek
additional methods of financing.
HISTORY OF OPERATING LOSSES. The Company has operated at a loss since
its formation in October 1981. As of March 31, 1996, the Company had an
accumulated deficit of $46,242,725. The ability of the Company to achieve
profitability is dependent upon, among other things, successful completion of
anticipated clinical trials and obtaining FDA marketing approval of the
PROSORBA(R) column for the treatment of additional diseases in a timely manner.
The Company would have to significantly scale back its plans, curtail clinical
trials, and limit its present operations in order to become profitable or
operate on a break-even basis if it does not receive marketing approval from
the FDA for the PROSORBA(R) column for the treatment of diseases in addition to
ITP. There can be no assurance that the Company will successfully complete any
present or future clinical trials, gain approval to begin any new clinical
trials, meet applicable regulatory standards or successfully market its
products to generate sufficient revenues to render the Company profitable. See
"--Prior Exclusive Agreement with Baxter; Necessity of Establishing a Sales
Force."
MANAGEMENT CHANGES; RESTRUCTURING PLAN; DEPENDENCE UPON KEY PERSONNEL.
The Company has recently undergone changes in senior management. In December
1995, Martin D. Cleary resigned as Chief Executive Officer and a member of the
Board of Directors of the Company. Mr. Cleary's resignation was a result of the
Company's determination that it would best be served by having senior
management resident on the West Coast near the Company's principal executive
offices and other operations. Mr. Cleary, resident on the East Coast, was
unable to relocate and consequently agreed to resign as Chief Executive Officer
and as a director. Also in December 1995, Harvey J. Hoyt, M.D. resigned as
Executive Vice President and as a director as a result of the appointments of
new members of senior management and the restructuring of the Company, which
restructuring eliminated Dr. Hoyt's position. In March 1996, Frank R. Jones
resigned as Chief Scientific Officer and as Chairman of the Board and in May
1996, Alex P. de Soto resigned as the Company's Vice President, Chief Financial
Officer, Secretary and Treasurer. Messrs. Jones' and de Soto's resignations
were a result of the restructuring of the Company and the Company's relocation
of its executive offices to San Diego, California. In December 1995, Jay D.
Kranzler, M.D., Ph.D. was appointed as Chief Executive Officer and Vice
Chairman of the Board of Directors and Debby Jo Blank, M.D. was appointed as
President, Chief Operating Officer and a member of the Board of Directors of
the Company. In April 1996, Susan E. Feiner was appointed as the Company's
Director of Finance, Controller, Secretary and Treasurer.
6.
<PAGE> 8
The Company is in the process of implementing a substantial
restructuring plan. The restructuring plan is intended to reduce the Company's
overhead and recurring costs by reducing the Company's work force and
consolidating its two manufacturing facilities into one central manufacturing
facility located in Redmond, Washington. By eliminating approximately 20
positions, the Company expects to realize an annual salary savings in excess of
$1.0 million. However, the Company estimates it will incur approximately $1.0
million in capital expenditures associated with the consolidation of its
manufacturing operations. The restructuring plan also includes relocating all
of the Company's operations, except manufacturing, from Seattle, Washington to
San Diego, California by the end of 1996. The restructuring is not yet
completed and there can be no assurance that such a restructuring will be
completed as scheduled, if at all. Even if such a restructuring is completed,
there can be no assurance that it will be successfully implemented.
The Company's success is dependent upon certain key management and
technical personnel, including the new members of senior management. The loss of
the services of any of these key employees could have a material adverse effect
on the Company. The Company does not currently maintain any key employee
insurance coverage.
FDA APPROVAL AND REGULATIONS. The Company is currently planning to
conduct a controlled clinical trial of the PROSORBA(R) column for treatment of
rheumatoid arthritis. Although the FDA has approved the commercial sale of the
PROSORBA(R) column for the treatment of ITP, there can be no assurance that
current or future clinical trials will produce data satisfactory to the FDA to
establish the effectiveness of the PROSORBA(R) column for treatment of diseases
other than ITP, such as rheumatoid arthritis, transplantations and certain
cancers, or that the FDA will approve the PROSORBA(R) column for treatment of
such diseases in a timely manner, if at all.
The PROSORBA(R) column is commercially distributed under a premarket
approval ("PMA") application that was approved by the FDA in 1987. Changes to
the product and its manufacturing process, and certain types of labeling changes
must be approved by the FDA prior to implementation. The Company currently has
one supplement to the PMA pending with the FDA for a labeling change addressing
the use of ancillary equipment during the use of the PROSORBA(R) column therapy.
The FDA has indicated to the Company that the PMA supplement would be approvable
if certain additional information is provided. There can be no assurance that
the Company will receive approval of its pending PMA supplement or any future
PMA supplements will be approved by the FDA.
Even if FDA approval is granted to market a product for the treatment
of a particular disease, subsequent discovery of previously unknown problems may
result in restrictions on the product's future use or withdrawal of the product
from the market. In addition, any other products developed in the future will
require clinical testing and FDA marketing approval before they can be
commercially exploited in the United States. Such approval process is typically
very lengthy and there is no assurance that FDA approvals will be obtained.
The manufacture and distribution of medical devices are subject to
continuing FDA regulation. In addition to the requirement that the device be
marketed only for its approved use, applicable law requires compliance with the
FDA's good manufacturing practices ("GMP") regulations. Failure to comply with
the GMP regulations or with other applicable legal requirements can lead to
federal seizure of non-complying products, injunctive actions brought by the
federal government, and potential criminal liability on the part of the Company
and of the officers and employees of the Company who are responsible for the
activities that lead to the violations.
To date, production of commercial quantities of the raw materials
utilized in production of the PROSORBA(R) column has been performed at the
Redmond facility. Final assembly of the PROSORBA(R) column has been performed at
the Seattle facility. In conjunction with the Company's restructuring plan and
corresponding reduction in facilities, the Seattle and Redmond, Washington
facilities are in the process of being consolidated into a single manufacturing
facility in Redmond. The Company has already subleased a major portion of its
Seattle facility to a third party. Under the terms of the Company's sub-lease of
its Seattle facility, the Company must vacate the remainder of the facility no
later than December 31, 1996 or else be subject to substantial financial
penalties. The Redmond facility is under renovation in order to enable both the
production of raw materials, as well as the final assembly of the PROSORBA(R)
column, to be performed in the Redmond facility. The renovated Redmond facility,
when complete, must comply with the FDA's GMP regulations and must complete the
GMP re-
7.
<PAGE> 9
approval process. There can be no assurance that the Company will complete the
renovations in time to sustain uninterrupted production of the PROSORBA(R)
column. In addition, there can be no assurance that the renovated facility will
receive GMP approval in a timely manner, if at all.
COMPETITIVE ENVIRONMENT; TECHNOLOGICAL CHANGE; EFFECTIVENESS OF
PRODUCTS. The field of medical devices in general and the particular areas in
which the Company will market its products are extremely competitive. In
developing and marketing medical devices to treat immune-mediated diseases and
cancers, the Company competes with other products, therapeutic techniques and
treatments which are offered by national and international healthcare and
pharmaceutical companies, many of which have greater marketing, human and
financial resources than the Company.
The immunological therapies market is characterized by rapid
technological change and potential introductions of new products or therapies.
To respond to these changes, the Company may be required to develop or purchase
new products to protect its technology from obsolescence. There can be no
assurance that the Company will be able to develop or obtain such products, or,
if developed or obtained, that such products will be commercially viable. In
addition, there can be no assurance that the Company's products will prove
effective in the treatment of diseases other than ITP.
DEPENDENCE ON THIRD PARTY ARRANGEMENTS. The Company's commercial sale
of its proposed products and its future product development may be dependent
upon entering into arrangements with corporate partners and other third parties
for the development, marketing, distribution and/or manufacturing of products
utilizing the Company's proprietary technology. While the Company is currently
seeking collaborative research and development arrangements and joint venture
opportunities with corporate sponsors and other partners, there can be no
assurance that the Company will be successful in entering into such arrangements
or joint ventures or that any such arrangements will prove to be successful.
PRIOR EXCLUSIVE AGREEMENT WITH BAXTER; NECESSITY OF ESTABLISHING A
SALES FORCE. In February 1994, the Company entered into a 10-year exclusive
distribution agreement with Baxter, granting to Baxter distribution rights to
its PROSORBA(R) column in the United States and Canada for the treatment of
thrombocytopenia and the first right to negotiate for new PROSORBA(R) column
indications. Baxter, at its own expense, was to provide sales and marketing
support for the sale of the product during the term of the agreement. Baxter
assumed the Company's sales and distribution responsibilities in April 1994.
In March 1996, the Company and Baxter terminated the exclusive
distribution agreement, whereby, effective May 1, 1996, the Company regained the
right, among other things, to sell its PROSORBA(R) column directly to customers
who had previously purchased PROSORBA(R) columns through Baxter as well as to
any other potential customers who wish to purchase PROSORBA(R) columns. As a
result of the termination of the distribution agreement, the Company has to
establish a domestic sales force to market and sell its PROSORBA(R) column.
There can be no assurances that the Company will be able to establish an
effective sales force to sell its PROSORBA(R) column directly to customers who
previously purchased PROSORBA(R) columns from Baxter or to any other potential
customers who wish to purchase PROSORBA(R) columns. In addition, even if the
Company can establish a sales force for its PROSORBA(R) column, there can be no
assurance that the Company will be successful in selling its PROSORBA(R) columns
directly to any new customers or to any customers who previously purchased
PROSORBA(R) columns through Baxter.
LIMITED INTERNATIONAL SALES AND MARKETING. The Company conducts limited
marketing of the PROSORBA(R) column outside the United States through foreign
distributors. Sales to foreign distributors have not been material to the
Company's results from operations. There can be no assurance that foreign sales
arrangements will become material to the Company's results of operations.
UNCERTAINTY OF PATENT PROTECTION AND CLAIMS TO TECHNOLOGY. The Company
currently holds nine United States and four foreign patents relating to its
technology and has also filed other patent applications related to its
technology. In addition, the Company has an exclusive license for a U.S. patent
for a genetic screening test to predict which rheumatoid arthritis patients will
develop severe disease. Neither the protection afforded by these
8.
<PAGE> 10
patents nor their enforceability can be assured. Furthermore, there can be no
assurance that additional patents will be obtained either in the United States
or in foreign jurisdictions or that, if issued, such additional patents will
provide sufficient protection to the Company's technology or be of commercial
benefit to the Company. Insofar as the Company relies on trade secrets and
unpatented proprietary know-how, there can be no assurance that others will not
independently develop similar technology or that secrecy will not be breached.
There can be no assurance that the Company will be able to develop further
technological innovations.
Others have filed applications for, or have been issued, patents and
may obtain additional patents and other proprietary rights relating to products
or processes competitive with those of the Company. The scope and validity of
such patents is presently unknown. If existing or future patents are challenged
in litigation or interference proceedings, the Company may become subject to
significant liabilities to third parties or be required to seek licenses from
third parties. There can be no assurance that such licenses would be available
or, if available, obtainable on acceptable terms.
Various scientific personnel of the Company were previously associated
with non-profit research or education institutions that typically require
researchers to execute agreements giving such institutions broad rights to
inventions created or developed during the period that the scientist is
associated with such institution. While no such institution has to date asserted
rights to the Company's technology, such assertions may be made in the future,
and if made, there can be no assurances that the Company will be successful in
any such litigation.
CONCENTRATION OF OWNERSHIP. As of June 14, 1996, Allen & Company
Incorporated and Mr. Richard M. Crooks, a director of the Company, beneficially
owned approximately 17.9% and 4.1%, respectively, of the outstanding Common
Stock of the Company. Mr. Crooks is also a director and consultant to Allen &
Company Incorporated. Together, Mr. Crooks and Allen & Company Incorporated own
a significant amount of the total outstanding Common Stock of the Company and
may be able to exert substantial influence over the outcome of matters requiring
stockholder approval.
RECOVERABILITY OF ENDING INVENTORIES. As of March 31, 1996, the
Company's ending inventory balances consisted of $488,774 of raw materials,
$733,714 of work in progress and $56,881 of finished goods. In order to recover
such ending inventory balances, the Company would have to sell approximately 20%
more PROSORBA(R) column units to customers than that amount sold to customers by
Baxter during 1995. Such increase represents approximately 60% of the total
sales made by the Company's sales force in fiscal year 1993 prior to entering
into the Baxter agreement. As a result of the termination of the distribution
agreement with Baxter, the Company is actively seeking to establish a domestic
sales force to sell the PROSORBA(R) column directly to customers who previously
purchased PROSORBA(R) columns from Baxter and to other potential customers who
wish to purchase PROSORBA(R) columns directly from the Company. Although there
can be no assurances that the Company's sales force, when and if established,
will be successful in selling the Company's product, the Company believes, based
upon historical sales figures, that it can generate sufficient sales to recover
the ending inventory balances described above with a sales force of between 5
and 7 salespersons dedicated solely to selling the Company's PROSORBA(R) column.
In addition, on May 1, 1996, the Company increased the sales price of the
PROSORBA(R) columns to be sold directly to customers by approximately 9%. This
is the first such price increase implemented by the Company since January 1,
1994. The Company believes that such price increase reflects a nominal price
increase for a medical device for the period covered by such increase. However,
there can be no assurance that the Company will be successful in selling the
PROSORBA(R) column at the increased price, if at all. See "--Prior Exclusive
Agreement with Baxter; Necessity of Establishing a Sales Force."
INSURANCE REIMBURSEMENT. Successful commercialization of a new medical
product, such as the PROSORBA(R) column depends, in part, on reimbursement by
public and private health insurers to health care providers for use of such
product. The availability of such reimbursement is subject to a variety of
factors, many of which could affect the Company as it commercializes use of the
PROSORBA(R) column. Although the Company has been generally successful in
assisting health care providers in arranging reimbursement for the use of the
PROSORBA(R) column in the treatment of ITP, there can no assurance that public
and private insurers will continue to reimburse for the use of the PROSORBA(R)
column.
9.
<PAGE> 11
UNCERTAINTY OF HEALTH CARE REFORM. There are widespread efforts to
control health care costs in the U.S. and worldwide. Various federal and state
legislative initiatives regarding health care reform and similar issues continue
to be at the forefront of social and political discussion. These trends may lead
third-party payors to decline or limit reimbursement for the Company's product,
which could negatively impact the pricing and profitability of, or demand for,
the Company's product. The Company believes that government and private efforts
to contain or reduce health care costs are likely to continue. There can be no
assurance concerning the likelihood that any such legislative or regulatory
initiative will be enacted, or market reform initiated, or that, if enacted such
reform or initiative will not result in a material adverse impact on the
business, financial condition or results of operations of the Company.
PRODUCT LIABILITY. The use of the PROSORBA(R) column involves the
possibility of adverse effects occurring to end-users that could expose the
Company to product liability claims. The Company believes that its product
liability insurance coverage is adequate in light of the Company's business.
However, although the Company currently maintains product liability insurance
coverage, there can be no assurance that such coverage or any increased amount
of coverage will be adequate to protect the Company and there can be no
assurance that the Company will have sufficient resources to pay any liability
resulting from such a claim.
POSSIBLE VOLATILITY OF STOCK PRICE; ABSENCE OF DIVIDENDS. There has
been a history of significant volatility in the market prices of securities of
biotechnology companies, including the Company's Common Stock. Factors such as
announcements by the Company or others of technological innovations, results of
clinical trials, new commercial products, regulatory approvals or proprietary
rights developments, coverage decisions by third-party payors for therapies and
public concerns regarding the safety and other implications of biotechnology all
may have a significant impact on the Company's business and market price of the
Company's Common Stock. No dividends have been paid on the Company's Common
Stock to date, and the Company does not anticipate paying dividends on its
Common Stock in the foreseeable future.
HAZARDOUS MATERIAL. The Company's research and development programs
involve the controlled use of biohazardous materials such as viruses, and may
include the use of the HIV virus that causes AIDS. Although the Company believes
that its safety procedures for handling such materials comply with the standards
prescribed by state and federal regulations, the risk of accidental
contamination or injury from these materials cannot be completely eliminated. In
the event of such an accident, the Company could be held liable for any damages
that result, and any such liability could exceed the resources of the Company.
LIMITATION OF NET OPERATING LOSS CARRYFORWARDS. The Company's sale of
Common Stock in November 1990 and September 1991 when taken together with prior
issuances, caused the limitation of Section 382 of the Internal Revenue Code of
1986, as amended (the "Internal Revenue Code"), to be applicable. This
limitation will allow the Company to use only a portion of the net operating
loss carryforwards to offset future taxable income, if any, for federal income
tax purposes. Based on the limitations of Section 382 and before consideration
of the effect of the sale of securities offered hereby, the Company may be
allowed to use no more than approximately $2,450,000 of such losses each year to
reduce taxable income, if any. To the extent not utilized by the Company, unused
losses will carry forward subject to the limitations to offset future taxable
income, if any, until such unused losses expire. All unused net operating losses
will expire 15 years after any year in which they were generated. The years in
which such expiration will take place range from 1998-2010.
USE OF PROCEEDS
The net proceeds to be received by the Company upon exercise of all of
the 1,850,000 Unit Warrants, after deducting expenses related to this offering,
are estimated to be $4,605,000. There can be no assurance that any of the Unit
Warrant Holders will exercise their Unit Warrants.
The Company anticipates that any proceeds received from the exercise of
any Unit Warrants will be used to fund the Company's research and development
efforts, including funding preclinical and clinical trials. The proceeds will
also be used for working capital and general corporate purposes. However, actual
expenditures could
10.
<PAGE> 12
vary significantly from these amounts depending upon a large number of factors,
some of which are outside the Company's control.
The Company anticipates that additional financing will be required
after the use of the proceeds of this offering. No assurance can be given that
such additional financing will be obtained when needed or on terms acceptable to
the Company.
Pending such uses, the net proceeds will be invested in short-term,
high-grade, interest-bearing securities. The company believes it meets the
exemptions from being considered an "investment company" as defined under the
Investment Company Act of 1940, as amended.
DESCRIPTION OF UNIT WARRANTS AND PLAN OF DISTRIBUTION
The following description of the Unit Warrants does not purport to be
complete and is qualified in its entirety by this reference to that certain
Warrant Agreement dated as August 29, 1991 (the "Warrant Agreement") between the
Company and Manufacturers Hanover Trust Company of California (now known as
Chemical Trust Company of California), which agreement was subsequently assigned
to American Stock Transfer and Trust Company on July 23, 1996, the warrant agent
for the Unit Warrants.
By means of a prospectus which was a part of a registration statement
on Form S-1 (Registration No. 33-41225) declared effective by the Commission on
August 29, 1991, the Company sold 1,850,000 units, each unit consisting of three
shares of the Company's Common Stock and one common stock purchase warrant (the
"Unit Warrants"). Pursuant to the Warrant Agreement, holders of each Unit
Warrant (the "Unit Warrant Holders") are entitled to purchase one share of the
Company's Common Stock at an exercise price of $2.50. The termination date of
the Warrants was August 29, 1996 until the Company on July 25, 1996 amended the
terms of the Unit Warrants to provide that they would be exercisable until
December 31, 1996. The Company will issue and sell fully paid and nonassessable
Common Stock to Unit Warrant Holders upon surrender of a Unit Warrant with the
form of election to exercise and payment of the applicable exercise price to the
Company's transfer agent. On or after August 29, 1994, all or any portion of the
Unit Warrants are redeemable, in whole or in part, at the option of the Company,
at a redemption price of $.75 per share. In the event of certain changes in the
Company's capitalization, however, the exercise price and number of shares of
Common Stock purchasable upon exercise of the Unit Warrants are subject to
adjustment. The Unit Warrants are transferable. The Company is bearing all costs
of registering the Common Stock issuable upon exercise of the Unit Warrants.
LEGAL MATTERS
The validity of the issuance of the Common Stock offered hereby was
passed upon for the Company by Bogle & Gates, Seattle, Washington.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1995 and 1994 and for the years then ended, incorporated herein by reference
from the Company's Registration Statement on Form S-1 filed with the Commission
on July 15, 1996 have been audited by Ernst & Young LLP, independent auditors,
as set forth in their report thereon appearing elsewhere herein, and are
included in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
The consolidated statements of operations, cash flows and stockholders'
equity of the Company for the year ended December 31, 1993, incorporated herein
by reference from the Company's Registration Statement on From S-1 filed with
the Commission on July 15, 1996 have been included herein in reliance on the
report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of that firm as experts in accounting and auditing.
11.
<PAGE> 13
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 4. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses payable by the Registrant
in connection with the sale of the Common Stock being registered. All of the
amounts shown are estimates, except for the registration fee and the Nasdaq fee.
<TABLE>
<S> <C>
SEC Registration fee.................. $ 1,595
Legal fees and expenses............... 10,000
Accounting fees and expenses.......... 5,000
Miscellaneous ........................ 3,405
-----
Total......................... $20,000
</TABLE>
ITEM 5. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Under Section 145 of the Delaware General Corporation Law (the "DGCL"),
the Registrant has broad powers to indemnify its directors and officers against
liabilities they may incur in such capacities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act").
The Registrant's Certificate of Incorporation and By-laws include
provisions to (i) eliminate the personal liability of its directors for monetary
damages resulting from breaches of their fiduciary duty to the extent permitted
by Section 102(b)(7) of the DGCL and (ii) require the Registrant to indemnify
its directors and officers to the fullest extent permitted by applicable law,
including circumstances in which indemnification is otherwise discretionary.
Pursuant to Section 145 of the DGCL, a corporation generally has the power to
indemnify its present and former directors, officers, employees and agents
against expenses incurred by them in connection with any suit to which they are
or are threatened to be made, a party by reason of their serving in such
positions so long as 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, they had no reasonable cause to believe
their conduct was unlawful. The Registrant believes that these provisions are
necessary to attract and retain qualified persons as directors and officers.
These provisions do not eliminate the directors' or officers' duty of care, and,
in appropriate circumstances, equitable remedies such as injunctive or other
forms of non-monetary relief will remain available under the DGCL. In addition,
each director will continue to be subject to liability pursuant to Section 174
of the DGCL, for breach of the director's duty of loyalty to the Registrant, for
acts or omissions not in good faith or involving intentional misconduct, for
knowing violations of law, for acts or omissions that the director believes to
be contrary to the best interests of the Registrant or its stockholders, for any
transaction from which the director derived an improper personal benefit, for
acts or omissions involving a reckless disregard for the director's duty to the
Registrant or its stockholders when the director was aware or should have been
aware of a risk of serious injury to the Registrant or its stockholders, for
acts or omission that constitute an unexcused pattern of inattention that
amounts to an abdication of the director's duty to the Registrant or its
stockholders, for improper transactions between the director and the Registrant
and for improper loans to directors and officers. The provision also does not
affect a director's responsibilities under any other law, such as the federal
securities law or state or federal environmental laws.
The Registrant has entered into a letter agreement with a certain
former executive officer whereby the Registrant has agreed to pay for expenses
(including attorney's fees) incurred by such executive officer in connection
with an ongoing SEC inquiry in advance of any final disposition of such inquiry.
In the event it is ultimately determined that such executive officer is not
entitled to indemnification under the terms of the Registrant's Bylaws or other
applicable laws or regulations such executive officer is obligated to repay all
amounts advanced by the Registrant on such executive officer's behalf.
The Registrant has an insurance policy covering the officers and
directors of the Registrant with respect to certain liabilities, including
liabilities arising under the Securities Act or otherwise.
II-1
<PAGE> 14
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
4.1 Certificate of Incorporation, as amended (Incorporated by
reference to Exhibit 3.2 of the Registrant's registration
statement, Registration No. 33-41225, declared effective by the
Commission on August 29, 1991.
4.2 By-Laws (Incorporated by reference to Exhibit 3.1 of the
Registrant's registration statement, Registration No. 33-41225,
declared effective by the Commission on August 29, 1991).
*5.1 Opinion of Bogle & Gates
*23.1 Consent of Bogle & Gates (included in Exhibit 5.1)
23.2 Consent of Ernst & Young LLP, 1994 and 1995 independent auditors
23.3 Consent of Coopers & Lybrand LLP, 1993 independent auditors
24.1 Power of Attorney. Reference is made to page II-3 of this
Registration Statement
*99.1 Warrant Agreement dated as of August 29, 1991 between IMRE
Corporation and Manufacturers Hanover Trust Company of
California (now known as Chemical Trust Company of California)
99.2 Successor Warrant Agent Agreement dated July 23, 1996 between
the Registrant and American Stock Transfer & Trust Company
- --------------------------------
* Previously filed with this registration statement
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) That, for the purpose of determining any liability under the
Securities Act, each filing of the Registrant's annual report pursuant to
Section 13(a) or 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.
(2) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement: (i) to include any
prospectus required by section 10(a)(3) of the Securities Act of 1933, (ii) to
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement 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.
(3) That, for the purposes of determining liability under the 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.
(4) 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.
II-2
<PAGE> 15
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
Post-Effective Amendment No. 1 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of San Diego,
State of California, on July 25, 1996.
CYPRESS BIOSCIENCE, INC.
By: /s/ JAY D. KRANZLER
-------------------------------------------------
Jay D. Kranzler, M.D., Ph.D.
Chief Executive Officer and Chief Scientific Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Jay D. Kranzler, M.D., Ph.D. and Susan E.
Feiner, and each of them, as his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming that all said attorneys-in-fact
and agents, or any of them or their or his substitute or substituted may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 1 to Form S-3 Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ JAY D. KRANZLER
- --------------------------------------- Chief Executive Officer, Chief Scientific July 25, 1996
Jay D. Kranzler, M.D., Ph.D. Officer and Vice Chairman of the Board
(Principal Executive Officer)
/s/ DEBBY JO BLANK
- --------------------------------------- President, Chief Operating Officer and July 25, 1996
Debby Jo Blank, M.D. Director
/s/ SUSAN E. FEINER
- --------------------------------------- Director of Finance, Controller, July 25, 1996
Susan E. Feiner Secretary and Treasurer
(Principal Financial Officer)
/s/ RICHARD M. CROOKS, JR.
- --------------------------------------- Chairman of the Board July 25, 1996
Richard M. Crooks, Jr.
/s/ PHILIP J. O'REILLY
- --------------------------------------- Director July 25, 1996
Philip J. O'Reilly
/s/ JACK H. VAUGHN
- --------------------------------------- Director July 25, 1996
Jack H. Vaughn
</TABLE>
II-3
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
- ------- ----------------------- ------------
<S> <C> <C>
4.1 Certificate of Incorporation, as amended (Incorporated by
reference to Exhibit 3.2 of the Registrant's registration
statement, Registration No. 33-41225, declared effective by the
Commission on August 29, 1991.
4.2 By-Laws (Incorporated by reference to Exhibit 3.1 of the
Registrant's registration statement, Registration No. 33-41225,
declared effective by the Commission on August 29, 1991).
*5.1 Opinion of Bogle & Gates
*23.1 Consent of Bogle & Gates (included in Exhibit 5.1)
23.2 Consent of Ernst & Young LLP, 1994 and 1995 independent auditors
23.3 Consent of Coopers & Lybrand LLP, 1993 independent auditors
24.1 Power of Attorney. Reference is made to page II-3 of this
Registration Statement
*99.1 Warrant Agreement dated as of August 29, 1991 between IMRE
Corporation and Manufacturers Hanover Trust Company of
California (now known as Chemical Trust Company of California)
99.2 Successor Warrant Agent Agreement dated July 23, 1996 between
the Registrant and American Stock Transfer & Trust Company
</TABLE>
<PAGE> 1
Exhibit 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated January 23, 1996, in Post-Effective Amendment No. 1 to
the Registration Statement (Form S-1) and related Prospectus of Cypress
Bioscience, Inc. for the registration of shares of its common stock.
/s/ ERNST & YOUNG LLP
-------------------------------
ERNST & YOUNG LLP
Seattle, Washington
July 25, 1996
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Post-effective Amendment No. 1
to Form S-3 (File No. 33-71278) of Cypress Bioscience, Inc. (formerly IMRE
Corporation) of our report dated March 15, 1994, on our audit of the
consolidated statements of operations, cash flows and stockholders' equity of
Cypress Bioscience, Inc. for the year ended December 31, 1993 included in its
Annual Report on Form 10-K, as amended, for the year ended December 31, 1995,
filed with the Securities and Exchange Commission. We also consent to the
reference to our firm under the caption "Experts."
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Seattle, Washington
July 26, 1996
<PAGE> 1
Exhibit 99.2
SUCCESSOR WARRANT AGENT AGREEMENT
This SUCCESSOR WARRANT AGENT AGREEMENT (the "Agreement") is entered
into as of the 23rd day of July 1996 by and between Cypress Bioscience, Inc.
(formerly IMRE Corporation) (the "Company") and American Stock Transfer & Trust
Company ("AST").
WHEREAS, the Company and Manufacturers Hanover Trust Company of
California ("Manufacturers Hanover"), were parties to that certain Warrant
Agreement dated August 29, 1991 (the "Warrant Agreement"), a copy of which is
attached hereto as Exhibit A, whereby Manufacturers Hanover was appointed by
the Company to serve as warrant agent (the "Warrant Agent") for the Company's
registered warrants (the "Warrants");
WHEREAS, the duties of Warrant Agent as specified in the Warrant
Agreement were subsequently assumed by Chemical Mellon Bank ("Chemical");
WHEREAS, by letter dated December 15, 1995 from the Company to
Chemical, the Company terminated the services of Chemical as Warrant Agent
under the Warrant Agreement and appointed AST to serve as Warrant Agent under
the Warrant Agreement; and
WHEREAS, the Company and AST wish to be bound by the terms and
provisions of the Warrant Agreement.
NOW, THEREFORE, in consideration of the mutual agreements set forth
herein, the parties hereto agree as follows:
1. Effective as of January 31, 1996, the Company hereby appoints AST
to serve as the Warrant Agent for the Company's Warrants in accordance with the
terms and conditions contained in the Warrant Agreement and AST hereby accepts
such appointment.
2. In addition to the duties and obligations of AST as Warrant Agent,
AST also shall serve as the transfer agent for the Warrants.
3. AST and the Company agree to be bound by the terms and conditions
of the Warrant Agreement as if such agreement originally had been executed by
the parties; provided however that all references in the Warrant Agreement to
"Warrant Agent" shall be deemed to refer to AST.
1.
<PAGE> 2
4. Nothing in this Agreement shall be deemed to amend or modify the
terms of the Warrant Agent except as expressly set forth herein.
IN WITNESS WHEREOF, the parties hereto hereby cause this Agreement to
be duly executed all as of the date first above written.
CYPRESS BIOSCIENCE, INC. AMERICAN STOCK TRANSFER &
TRUST COMPANY
By: /s/ Susan E. Feiner By: /s/ Herbert J. Lemmer
------------------------- --------------------------
Susan E. Feiner Name: Herbert J. Lemmer
Director of Finance Title: Vice President
2.
<PAGE> 3
EXHIBIT A
WARRANT AGREEMENT
3.
<PAGE> 4
IMRE CORPORATION
AND
MANUFACTURERS HANOVER TRUST COMPANY OF CALIFORNIA,
as Warrant Agent
---------------------------
WARRANT AGREEMENT
Dated as of August 29, 1991
---------------------------
<PAGE> 5
TABLE OF CONTENTS
-------------
PAGE
PARTIES ..................................................................1
RECITALS ..................................................................1
SECTION 1. Appointment of Warrant Agent......................................1
SECTION 2. Purchase Price; Form of Warrant...................................1
SECTION 3. Registration and Countersignature................................2
SECTION 4. Registration of Transfers and Exchanges...........................2
SECTION 5. Duration and Exercise of Warrrants................................3
SECTION 5A. Redemption of Warrants............................................5
SECTION 5B. Exchange, Transfer or Assignment of Warrants......................6
SECTION 6. Payment of Taxes..................................................7
SECTION 7. Mutilated or Missing Warrants.....................................8
SECTION 8. Reservation of Common Stock, etc. ................................8
SECTION 9. Adjustments to Exercise Price and Number of Shares................9
SECTION 10. Fractional Shares................................................12
SECTION 11. Warrant Holder Not Deemed a Stockholder; Notices.................13
SECTION 12. Disposition of Proceeds on Exercise of Warrants, etc. ...........13
SECTION 13. Merger or Consolidation or Change of Name of Warrant Agent.......13
SECTION 14. Duties of Warrant Agent..........................................14
SECTION 15. Change of Warrant Agent..........................................17
SECTION 16. Identity of Transfer Agent.......................................18
SECTION 17. Notices..........................................................18
SECTION 18. Supplements and Amendments.......................................19
- ------------------
*This Table of Contents does not constitute a part of this Agreement or have any
bearing upon the interpretation of any of its terms or provisions.
<PAGE> 6
ii
PAGE
SECTION 19. Successors....................................................19
SECTION 20. Termination...................................................19
SECTION 21. Governing Law.................................................19
SECTION 22. Benefits of this Agreement....................................20
SECTION 23. Descriptive Headings..........................................20
SECTION 24. Counterparts..................................................20
SIGNATURES AND SEALS.......................................................21
TESTIMONIUM................................................................22
EXHIBIT
<PAGE> 7
WARRANT AGREEMENT dated as of August 29, 1991 between IMRE Corporation,
a Delaware corporation (the "Company"), and Manufacturers Hanover Trust Company
of California, as warrant agent (the "Warrant Agent").
WHEREAS, the Company proposes to issue up to 2,127,500 warrants (the
"Warrants"), containing the terms and provisions set forth herein to the public
as part of Units, each consisting of three shares of Common Stock, $.02 par
value (the "Common Stock"), and one Warrant;
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing so to act, in connection with the
issuance, registration, registration of transfer, replacement and exchange of
Warrant Certificates and the exercise of Warrants;
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein set forth, the parties hereto agree as follows:
SECTION 1. Appointment of Warrant Agent. The Company hereby appoints
the Warrant Agent to act as agent for the Company in accordance with the
instructions hereinafter in this Agreement set forth, and the Warrant Agent
hereby accepts such appointment.
SECTION 2. Purchase Price; Form of Warrant. The Warrants shall be in
registered form only. The text of the Warrant and of the form of assignment and
form of election to exercise included as the last page thereof shall be
substantially as set forth in Exhibit A, which is made a part hereof by
reference.
Each Warrant shall entitle the holder thereof to purchase one share of
Common Stock upon the exercise thereof at the applicable exercise price (the
"Exercise Price") specified in Section 5 hereof subject to adjustment provided
in Section 9. The Warrant shall be executed on behalf of the Company by the
manual or facsimile signature of the present or any future Chairman of the
Board or Chief Executive Officer of the Company, under its corporate seal,
affixed or in facsimile, attested by the manual or facsimile
<PAGE> 8
signature of the present or any future Secretary or Assistant Secretary of the
Company. Warrants shall be dated as of the date of their initial issuance.
SECTION 3. Registration and Countersignature. The Warrant Agent shall
maintain books for the registration, and certification of transfer, of Warrants.
The Warrants shall be countersigned by the Warrant Agent and shall not be valid
for any purpose unless so countersigned. Warrants shall be so countersigned,
however, by the Warrant Agent and shall be delivered by the Warrant Agent,
notwithstanding that the persons whose manual or facsimile signatures appear
thereon as proper officers of the Company shall have ceased to be such officers
at the time of such countersignature or delivery.
Prior to due presentment for registration of transfer of the Warrants,
the Company and the Warrant Agent may deem and treat the registered Warrant
holder thereof as the absolute owner of the Warrants (notwithstanding any
notation of ownership or other writing thereon made by anyone other than the
Company or the Warrant Agent), for the purpose of any exercise thereof and for
all other purposes, and neither the Company nor the Warrant Agent shall be
affected by any notice to the contrary.
SECTION 4. Registration of Transfers and Exchanges. The Warrant Agent
shall from time to time register the transfer of any outstanding Warrants upon
the books to be maintained by the Warrant Agent for that purpose, upon
surrender thereof to the Company or the Warrant Agent accompanied (if so
required by the Company or the Warrant Agent) by a written instrument or
instruments of transfer in form satisfactory to the Company and the Warrant
Agent duly executed by the registered Warrant holder or by a duly authorized
representative or attorney. Upon any such registration of transfer, a new
Warrant shall be issued to the transferee and the surrendered Warrant shall be
cancelled by the Warrant Agent. Warrants so cancelled shall be delivered by the
Warrant Agent to Company from time to time or otherwise disposed of by the
Warrant Agent in a manner satisfactory to the Company. Warrants may be
exchanged at the option of the
<PAGE> 9
Warrant holder thereof, when surrendered at the principal office in San
Francisco, California of the Warrant Agent or the principal office of the
Company in Seattle, Washington (in which event the Company shall forward the
Warrants surrendered and the instruments of transfer to the Warrant Agent) for
another Warrant or other Warrants of like tenor and representing in the
aggregate the number of Warrants evidenced by the Warrant or Warrants so
surrendered. The Warrant Agent shall countersign and deliver, in accordance
with the provisions of this Section 4 and of Section 3, the new Warrant or
Warrants required pursuant to the provisions of this Section, and the Company,
whenever required by the Warrant Agent, will supply the Warrant Agent with
Warrants duly executed on behalf of the Company for such purpose.
SECTION 5. Duration and Exercise of Warrants. The Warrants may be
exercised at any time commencing November 27, 1991, or earlier if so notified
by the Company, but prior to redemption and will expire at 5:00 p.m. Pacific
Time on August 29, 1996 (the "Expiration Date"), at which time all rights
evidenced by the Warrants shall cease and the Warrants shall become void.
Subject to the provisions of this Agreement, the holder of each Warrant shall
have the right to purchase from the Company (and the Company shall issue and
sell to such holder of a Warrant) one fully paid and non-assessable share of
Common Stock at an exercise price of $2.50 per share (the "Exercise Price")
(subject to adjustment as provided in Section 9) upon surrender of the Warrants
to the Company at the principal office of the Warrant Agent in San Francisco,
California with the form of election to purchase appearing as the last page
thereof duly filled in and signed, and upon payment of the Exercise Price in
lawful money of the United States of America to the Warrant Agent for the
account of the Company. No adjustment shall be made for any dividends on any
share of Common Stock issuable on the exercise of a Warrant.
The Exercise Price payable upon exercise of Warrants may, at the option
of the Warrant holder, be paid by check or bank draft. Subject to Sections 6
and 11, upon such surrender of a Warrant and payment of the Exercise Price (and
if the Exercise Price is paid
<PAGE> 10
by check other than a certified or bank cashier's check, upon collection of the
proceeds of such check) the Company shall issue and cause to be registered,
countersigned and delivered to or upon the written order of the registered
holder of such Warrant and in such name or names as may duly be designated, a
certificate for the shares of Common Stock being issued pursuant to the Warrant
then being exercised (as adjusted as provided in Section 9). Such certificate
shall be deemed to have been issued and any person so designated to be named
therein shall be deemed to have become a holder of record of such share or
shares of Common Stock, as of the date of the surrender of such Warrant and
payment of the Exercise Price; provided, however, that if, at the date of
surrender of such Warrant and payment of such Exercise Price, the transfer
books for the Common Stock shall be closed, the certificate for such share or
shares of Common Stock shall be issuable as of the date on which such books
shall next be opened (whether before, on or after the Expiration Date) and
until such date the Company shall be under no duty to deliver any certificate
for such share or shares; provided, further, that such books, unless otherwise
required by law, shall not be closed at any one time for a period longer than
twenty (20) calendar days.
The Warrants shall be exercisable on or after November 27, 1991, or
such date as the Warrants shall first become separately transferable, whichever
is earlier, at the election of the registered Warrant holders thereof, either
as an entirety or from time to time for part only of the number of shares
purchasable upon exercise of the Warrant. In the event that less than all of the
Warrants are exercised as an entirety on or after the date hereof and prior to
redemption or before 5:00 p.m. on the Expiration Date, a new Warrant will be
issued for the remaining number of Warrants exercisable pursuant to the Warrant
so surrendered, and the Warrant Agent shall countersign and deliver the
required new Warrant pursuant to the provisions of this Section 5 and of
Section 3 and the Company, whenever required by the Warrant holder, will supply
the Warrant Agent with a Warrant duly executed on behalf of the Company for
such purpose.
<PAGE> 11
SECTION 5A. Redemption of Warrants. Warrants may be redeemed at the
option of the Company, in whole or in part, on either a selective or
non-discriminatory basis, at any time on or after August 29, 1994 (the
"Redemption Date"), at a price equal to $0.75 per Warrant (the "Redemption
Price"). On the Redemption Date, the holders of record of redeemed Warrants
shall be entitled to payment of the Redemption Price upon surrender of such
redeemed Warrants to the Company at the principal office of the Warrant Agent
in San Francisco, California.
Notice of redemption of Warrants shall be given at least twenty (20)
and not more than forty-five (45) calendar days prior to the Redemption Date by
mailing, by registered or certified mail, return receipt requested, a copy of
such notice to all of the holders of record of Warrants to be redeemed at their
respective addresses appearing on the books or transfer records of the Company
or such other address designated in writing by the holder of record to the
Warrant Agent not less than sixty (60) calendar days prior to the Redemption
Date and shall be effective upon receipt. In addition, notice of such
redemption will be published in The Wall Street Journal not less than ten (10)
nor more than Twenty (20) calendar days prior to the mailing of the notice. Any
Warrant so called for redemption by be exercised until the close of business on
the fifth business day preceding the Redemption Date specified in such notice
of redemption. If less than all the Warrants are to be redeemed, the Warrant
Agent shall select the Warrants to be redeemed by a method the Warrant Agent
considers fair and appropriate.
From and after the Redemption Date, all rights of the holders of
Warrants (except the right to receive the Redemption Price) shall terminate,
but only if (a) on or prior to the Redemption Date the Company shall have
irrevocably deposited with the Warrant Agent (or its successor as Warrant Agent)
a sufficient amount to pay on the Redemption Date the Redemption Price for all
Warrants called for redemption and (b) the notice of redemption shall have
stated the name and address of the Warrant Agent and the intention of the
<PAGE> 12
Company to deposit such amount with the Warrant Agent on or before the
Redemption Date.
The Warrant Agent shall pay to the holders of record of redeemed
Warrants all monies received by the Warrant Agent for the redemption of
Warrants to which the holders of record of such redeemed Warrants who shall
have surrendered their Warrants are entitled under the provisions of this
agreement.
Any amounts deposited with the Warrant Agent which are not required for
redemption of Warrants may be withdrawn by the Company. Any amounts deposited
with the Warrant Agent which shall be unclaimed after six (6) months after the
Redemption Date may be withdrawn by the Company, and thereafter the holders of
the Warrants called for redemption for which such funds were deposited shall
look solely to the Company for payment. The Company shall not be entitled to the
interest, if any, on funds deposited with the Warrant Agent, and the holders of
redeemed Warrants shall have no right to any such interest.
If the Company fails to make a sufficient deposit with the Warrant
Agent as provided above, the holder of any Warrants called for redemption may
at the option of the holder (a) by notice to the Company declare the notice of
redemption a nullity, or (b) maintain an action against the Company for the
Redemption Price. If the holder brings such an action, the Company will pay for
reasonable attorneys' fees of the holder. If the holder fails to bring such an
action against the Company for the redemption price within sixty (60) days
after the Redemption Date, the holder shall be deemed to have elected to
declare the notice of redemption to be a nullity and such notice shall be
without any force or effect.
SECTION 5B. Exchange, Transfer or Assignment of Warrants
Before November 27, 1991, or earlier if so notified by the Company (the
"Separation Date"), a Warrant may not be divided or combined with other
Warrants or exchanged, assigned or transferred apart from the Common Stock with
which it was sold as a Unit to the Warrant holder. The Warrant Agent will not
record an exchange, assignment or
<PAGE> 13
transfer of a Warrant in the Warrant Register without certification that the
Warrant holder has transferred its Common Stock to the assignee named on the
Warrant assignment form contained in the Warrant.
After the Separation Date, the Warrants may be exchanged or
transferred, at the option of the Warrant holder, upon presentation and
surrender of Warrants to the Warrant Agent or to the Company, for other
Warrants of different denominations, entitling the holder or holders thereof to
exercise in the aggregate the same number of Warrants. Subject to the preceding
sentence, a Warrant may be divided or combined with other Warrants that carry
the same rights upon presentation thereof at the office of the Warrant Agent or
the Company, together with written notice specifying the names and
denominations in which new Warrants are to be issued and signed by the holder
thereof.
After the Separation Date, Warrants may be assigned or transferred, at
the option of the Warrant holder, upon surrender of Warrants to the Warrant
Agent, with the Warrant assignment form contained therein duly executed and
accompanied by funds sufficient to pay any transfer tax. The Warrant Agent
shall execute and deliver a new Warrant in the name of the assignee or
assignees named in such instrument of assignment and, if the holder's entire
interest in the Warrants is not being transferred or assigned, in the name of
the Warrant holder, and the Warrant surrendered shall promptly be cancelled.
Any transfer, exchange or assignment of the Warrants shall be without
charge (other than the cost of any transfer tax to be paid by the Warrant
holder pursuant to Section 6 hereof) to the Warrant holder and any new Warrant
issued pursuant to this Section 5B shall be dated the date such new Warrant is
issued.
SECTION 6. Payment of Taxes. The Company will pay all documentary stamp
taxes attributable to the original issuance of shares of Common Stock upon the
exercise of Warrants; provided, however, that the Company shall not be required
(i) to pay any tax which may be payable in respect of any transfer involved in
the transfer and delivery of Warrants or the issuance or delivery of
certificates of Common Stock in a name other than
7
<PAGE> 14
that of the registered holder of the Warrant surrendered for purchase, or (ii)
to issue or deliver any certificate for shares of Common Stock upon the
exercise of any Warrants until any such tax required to be paid under paragraph
(i) shall have been paid, all such tax being payable by the holder of such
Warrant at the time of surrender.
SECTION 7. Mutilated or Missing Warrants. In case any of the Warrants
shall be mutilated, lost, stolen or destroyed, the Company may in its
discretion issue and the Warrant Agent may countersign and deliver in exchange
and substitution for and upon cancellation of the mutilated Warrant, or in lieu
of and substitution for the lost, stolen or destroyed Warrant, a new Warrant of
like tenor and evidencing the number of shares purchasable upon exercise of the
Warrant so mutilated, lost, stolen or destroyed, but only upon receipt of
evidence satisfactory to the Warrant Agent of such loss, theft or destruction
of such Warrant and indemnity, if requested, also satisfactory to it.
Applicants for such substitute Warrant shall also comply with such other
reasonable regulations and pay such other reasonable charges as the Company or
the Warrant Agent may prescribe.
SECTION 8. Reservation of Common Stock, etc. There have been reserved,
and the Company shall at all times keep reserved, out of the authorized and
unissued shares of Common Stock, a number of shares sufficient to provide for
the exercise of the Warrants. The Company will keep a copy of this Agreement on
file with its Transfer Agent. The Warrant Agent is hereby irrevocably
authorized to requisition from time to time from such Transfer Agent stock
certificates issuable upon exercise of outstanding Warrants. The Company will
supply such Transfer Agent with duly executed stock certificates for such
purpose. All Warrants surrendered upon exercise shall be cancelled by the
Warrant Agent and shall thereafter be delivered to the Company or otherwise
disposed of in a manner satisfactory to the Company. Unless all Warrants shall
have been exercised prior to the Expiration Date of the Warrants, the Warrant
Agent shall certify to the Company, as of the close of business on the
Expiration Date, the total aggregate amount of Warrants then
8
<PAGE> 15
outstanding and thereafter no shares of Common Stock shall be subject to
reservation in respect of such Warrants.
SECTION 9. Adjustments to Exercise Price and Number of Shares.
The initial Exercise Price and the number of shares of Common Stock
issuable upon exercise of any Warrant (the "Warrant Shares") shall be subject
to adjustment from time to time as follows:
(a) In case, prior to the expiration of any Warrant by exercise or by
its terms, the Company shall issue any shares of its Common Stock as a stock
dividend or subdivide the number of outstanding shares of Common Stock into a
greater number of shares, then, in either of such cases, the Exercise Price per
share of the Warrant Shares purchasable pursuant to any Warrant in effect at
the time of such action shall be proportionately reduced and the number of
Warrant Shares at that time purchasable pursuant to any Warrant shall be
proportionately increased; and conversely, in the event the Company shall
contract the number of outstanding shares of Common Stock by combining such
shares into a smaller number of shares, then, in such case, the Exercise Price
per share of the Warrant Shares in effect at the time of such action shall be
proportionately increased and the number of Warrant Shares at that time
purchasable pursuant to any Warrant shall be proportionately decreased. Any
dividend paid or distributed upon the Common Stock in stock or any other class
of securities convertible into shares of Common Stock shall be treated as a
dividend paid in Common Stock to the extent that shares of Common Stock are
issuable upon the conversion thereof.
(b) In case, prior to the expiration of any Warrant by exercise or by
its terms, the Company shall be recapitalized by reclassifying its outstanding
Common Stock, par value $.02 per share, into stock with a different par value
or by changing its outstanding Common Stock with par value to stock without par
value, or the Company or a successor corporation shall be consolidated or merge
with or convey all or substantially all of its or of any successor
corporation's property and assets to any other corporation or corporations (any
9
<PAGE> 16
such corporation being included within the meaning of the term "successor
corporation" in the event of any consolidation or merger of any such corporation
with, or the sale of all or substantially all of the property of any such
corporation to, another corporation or corporations), in exchange for stock or
securities of a successor corporation, the holder of any Warrant shall
thereafter have the right to purchase upon the terms and conditions and during
the time specified in such Warrant, in lieu of the Warrant Shares theretofore
purchasable upon the exercise of such Warrant, the kind and amount of shares of
stock and other securities receivable upon such recapitalization or
consolidation, merger or conveyance by a holder of the number of shares of
Common Stock which the holder of such Warrant might have purchased immediately
prior to such recapitalization or consolidation, merger or conveyance.
(c) In case, prior to the expiration of any Warrant by exercise or by
its terms, the Company shall issue to all holders of its outstanding Common
Stock rights, warrants or options (expiring 45 days after the record date for
determining shareholders entitled to receive such rights, warrants or options)
to subscribe for or purchase shares of Common Stock at less than the current
market price, then, in such case, the Exercise Price per share of the Warrant
Shares purchasable pursuant to any Warrant shall be proportionately increased.
(d) In case, prior to the expiration of any Warrant by exercise or by
its terms, the Company shall distribute to all holders of shares of stock
(other than Common Stock), evidences of indebtedness, or assets (excluding cash
dividends or distributions payable out of Common Stock) rights, warrants or
options (other than those described in paragraph (c) above) to subscribe for or
purchase shares of Common Stock, then, in such case, the Exercise Price per
share of the Warrant Shares purchasable pursuant to any Warrant shall be
proportionately increased.
<PAGE> 17
(e) In case:
(i) the Company shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive a dividend or any
other distribution in respect of the Common Stock (including cash),
pursuant to, without limitation, any spin-off, split-off or
distribution of the Company's assets; or
(ii) the Company shall take a record of the holders of its Common
Stock for the purpose of entitling them to subscribe for or purchase
any shares of stock of any class or to receive any other rights; or
(iii) the Company shall take a record of the holders of its Common
Stock for the purpose of any classification, reclassification or other
reorganization of the capital stock of the Company, consolidation or
merger of the Company with or into another corporation, or conveyance
of all or substantially all of the assets of the Company; or
(iv) the Company shall take a record of the holders of its Common
Stock for the purpose of the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, and in any such case, the Company shall mail by first-class mail, postage
prepaid, to the Warrant holder, at least fifteen (15) calendar days prior
thereto, a notice stating the date or expected date on which a record is to be
taken for the purpose of such dividend, distribution or rights, or the date on
which such classification, reclassification, reorganization, consolidation,
merger, conveyance, dissolution, liquidation or winding up is to take place, as
the case may be. Such notice shall also specify the date or expected date, if
any is to be fixed, as of which holders of Common Stock of records shall be
entitled to participate in said dividend, distribution or rights, or shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such classification, reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidating or
winding up, as the case may be. The failure to give such notice
<PAGE> 18
shall not affect the validity of any such proceeding or transaction and shall
not affect the right of the holder of any Warrant to participate in said
dividend, distribution or rights or any such exchange.
(f) In case the Company at any time while any Warrant shall remain
unexpired and unexercised, shall dissolve, liquidate or wind up its affairs,
the holder of any Warrant may thereafter receive upon exercise hereof in lieu
of each share of Common Stock of the Company which it would have been entitled
to receive, the same kind and amount of any securities or assets as may be
issuable, distributable or payable upon any such dissolution, liquidation or
winding up with respect to each share of Common Stock of the Company.
(g) Whenever the Exercise Price shall be adjusted as required by
the provisions of this Section 9, the Company shall forthwith file in the
custody of its Secretary at its principal office, with the Warrant Agent, and
with its stock transfer agent, if any, an officer's certificate showing the
adjusted Exercise Price determined as therein provided, setting forth in
reasonable detail the facts requiring such adjustment, including a statement of
the number of additional shares of Common Stock, if any, the consideration for
such shares, determined as in this Section 9 provided, and such other facts as
shall be necessary to show the reason for and the manner of computing such
adjustment. Each such officer's certificate shall be made available at all
reasonable times for inspection by the Warrant holder and the Company shall,
forthwith after each such adjustment, mail by first-class mail, postage
prepaid, a copy of such certificate to the Warrant holder, and thereafter said
certificate shall be conclusive and shall be binding upon each Warrant holder
unless contested by such Warrant holder by written notice to the Company within
ten (10) calendar days after receipt of the certificate by the Warrant holder.
SECTION 10. Fractional Shares. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of any
Warrant. With respect to any fraction of a share called for upon exercise
hereof, the Company shall pay to the Warrant
<PAGE> 19
holder an amount in cash equal to such fraction multiplied by the current
market value of such fractional share, which shall be determined by the Company
as follows:
(a) If the Common Stock is listed on a national securities exchange
or admitted to unlisted trading privileges on such exchange the current value
shall be the last reported sale price of the Common Stock on such exchange on
the last business day prior to the date of exercise of the Warrant or if no
such sale is made on such day, the average closing bid and asked prices for
such day on such exchange; or
(b) If the Common Stock is not so listed or admitted to unlisted
trading privileges, the current market value shall be the average of the high
bid and low asked prices as furnished by the National Association of Securities
Dealers, Inc., electronic inter-dealer quotation system ("NASDAQ") on the last
business day prior to the date of exercise, or if not so quoted on NASDAQ, the
current market value shall be the average of the high bid and low asked prices
as reported on the "pink sheets" by the National Daily Quotation Bureau, Inc.,
dated the last business day prior to the date of exercise of any Warrant;
provided that the term "business day" as used in this sentence shall mean a day
on which trading took place in the domestic over-the-counter market.
(c) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported, the current
value shall be an amount, not less than book value, determined by the Company
in such reasonable manner as may be prescribed by the Board of Directors of the
Company.
SECTION 11. Warrant Holder Not Deemed a Stockholder; Notices. No
holder, as such, of any Warrant shall be entitled to vote or receive dividends
or be deemed the holder of Common Stock or any other securities of the Company
which may at any time be issuable on the exercise thereof for any purpose
whatever, nor shall anything contained herein or in any Warrant be construed to
confer upon the holder of any Warrant, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors
or upon any matter submitted to stockholders at any meeting thereof, or to give
<PAGE> 20
or withhold consent to any corporate action (whether upon any recapitalization,
issue of stock, reclassification of stock, change of par value or change of
stock to no par value, consolidation, merger, conveyance or otherwise), or to
receive notice of meetings, or to receive dividends or subscription rights, or
otherwise, until such Warrant shall have been exercised in accordance with the
provisions hereof and the receipt by the Warrant Agent of the Exercise Price
payable upon such exercise.
SECTION 12. Disposition of Proceeds on Exercise of Warrants, etc.
(a) The Warrant Agent shall account promptly to the Company with
respect to Warrants exercised and concurrently pay to the Company all monies
received by the Warrant Agent for the purchase of shares of Common Stock through
the exercise of such Warrants.
(b) The Warrant Agent shall keep copies of this Agreement available for
inspection by holders of Warrants during normal business hours at its office in
San Francisco, California.
SECTION 13. Merger or Consolidation or Change of Name of Warrant Agent.
Any corporation into which the Warrant Agent may be merged or with which it may
be consolidated, or any corporation resulting from any merger or consolidation
to which the Warrant Agent shall be a party, or any corporation succeeding to
the corporate trust business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor warrant agent under
the provisions of Section 15. In case at the time such successor to the Warrant
Agent shall succeed to the agency created by this Agreement, and in case at that
time any of the Warrants shall have been countersigned but not delivered, any
such successor to the Warrant Agent may adopt the countersignature of the
predecessor warrant agent and deliver such Warrants so countersigned; and in
case at that time any of the Warrants shall not have been countersigned, any
successor to the Warrant
<PAGE> 21
Agent may countersign such Warrants either in the name of the predecessor
warrant agent or in the name of the successor warrant agent; and in all such
cases such Warrants shall have the full force and effect provided in the
Warrants and in this Agreement.
In case at any time the name of the Warrant Agent shall be changed and
at such time any of the Warrants shall have been countersigned but not
delivered, the Warrant Agent may adopt the countersignature under its prior
name and deliver Warrants so countersigned; and in case at that time any of the
Warrants shall not have been countersigned, the Warrant Agent may countersign
such Warrants either in its prior name or in its changed name; and in all such
cases such Warrants shall have the full force and effect provided in the
Warrants and in this Agreement.
SECTION 14. Duties of Warrant Agent. The Warrant Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Warrants, by their
acceptance thereof, shall be bound:
(a) The statements contained herein and in the Warrant
Certificates shall be taken as statements of the Company, and the Warrant Agent
assumes no responsibility for the correctness of any of the same except such as
describe the Warrant Agent or action taken or to be taken by it. The Warrant
Agent assumes no responsibility with respect to the delivery of Warrants except
as herein otherwise provided.
(b) The Warrant Agent shall not be responsible for any failure
of the Company to comply with any of the covenants contained in this Agreement
or in the Warrant Certificates to be complied with by the Company.
(c) The Warrant Agent may consult at any time with counsel
satisfactory to it (who may be counsel for the Company) and the Warrant Agent
shall incur no liability or responsibility to the Company or to any holder of
any Warrant in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with the opinion
<PAGE> 22
or the advice of such counsel, provided the Warrant Agent shall have exercised
reasonable care in the selection and continued employment of such counsel.
(d) The Warrant Agent shall incur no liability or responsibility to
the Company or to any holder of any Warrant for any action taken in reliance on
any notice, resolution, waiver, consent, order, certificate or other paper,
document or instrument believed by it to be genuine and to have been signed,
sent or presented by the party or parties to this Agreement.
(e) The Company agrees (i) to pay to the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent in the execution of
this Agreement, (ii) to reimburse the Warrant Agent for all expenses, taxes and
governmental charges and other charges of any kind and nature incurred by the
Warrant Agent in the execution of this Agreement (other than taxes measured by
the Warrant Agent's net income), and (iii) upon request, to advance to the
Warrant Agent funds to pay cash in lieu of fractional shares of Common Stock
issuable on exercise of Warrants.
(f) The Warrant Agent shall be under no obligation to institute any
action, suit or legal proceeding or to take any other action likely to involve
expense unless the Company or one of more registered holders of Warrants shall
furnish the Warrant Agent with reasonable security and indemnity for any costs
and expenses which may be incurred. All rights of action under this Agreement or
under any of the Warrants may be enforced by the Warrant Agent without the
possession of any of the Warrant Certificates or the production thereof at any
trial or other proceeding relative thereto, and any such action, suit or
proceeding instituted by the Warrant Agent shall be brought in its name as
Warrant Agent, and any recovery of judgment shall be for the ratable benefit of
the registered holders of the Warrants, as their respective rights or interests
may appear.
(g) The Warrant Agent and any stockholder, director, officer or
employee of the Warrant Agent may buy, sell or deal in any of the Warrants or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may
<PAGE> 23
be interested, or contract with or lend money to or otherwise act as fully
and freely as though it were not Warrant Agent under this Agreement. Nothing
herein shall preclude the Warrant Agent from acting in any other capacity for
the Company or for any other legal entity.
The Warrant Agent shall act hereunder solely as agent, and its duties
shall be determined solely by the provisions hereof. The Warrant Agent shall not
be liable for anything which it may do or refrain from doing in connection with
this Agreement except for its own gross negligence or bad faith.
SECTION 15. Change of Warrant Agent. The Warrant Agent may resign and
be discharged from its duties under this Agreement by giving to the Company
notice in writing, and to the holders of the Warrants notice in writing and sent
by first-class mail, postage prepaid, to each registered holder of a Warrant at
such holder's address appearing in the Warrant Register, specifying a date when
such resignation shall take effect, which notice shall be sent at least thirty
(30) calendar days prior to the date so specified. The Company may replace the
Warrant Agent by giving written notice to the Warrant Agent and to the holders
of the Warrants, such notice to be sent by first-class mail, postage prepaid, to
each registered holder of a Warrant at such holder's address appearing in the
Warrant Register, specifying a date when such replacement shall take effect,
which notice shall be sent at least thirty (30) calendar days prior to the date
so specified. If the Warrant Agent shall resign, be replaced or shall otherwise
become incapable of acting, the Company shall appoint a successor to the Warrant
Agent. If the Company shall fail to make such appointment within a period of
thirty (30) calendar days after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Warrant Agent or by
the registered holder of a Warrant (who shall, with such notice, submit such
holder's Warrant Certificate for inspection by the Company), then the registered
holder of any Warrant may apply to any court of competent jurisdiction for the
appointment of a successor to the Warrant Agent. After appointment the
successor
<PAGE> 24
warrant agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Warrant Agent without
further act or deed; but the former Warrant Agent shall deliver and transfer to
the successor warrant agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Failure to give any notice provided for in this Section 15,
however, or any defect therein, shall not affect the legality or validity of the
resignation or removal of the Warrant Agent or the appointment of the successor
warrant agent, as the case may be.
SECTION 16. Identity of Transfer Agent. Forthwith upon the appointment
after the date hereof of any Transfer Agent for the Common Stock, or of any
subsequent Transfer Agent for shares of the Common Stock, the Company will file
with the Warrant Agent a statement setting forth the name and address of such
Transfer Agent.
SECTION 17. Notices. Any notice pursuant to this Agreement to be given
by the Warrant Agent or by the registered holder of any Warrant Certificate to
the Company shall be sufficiently given if sent by first-class mail, postage
prepaid, addressed (until another address is filed in writing by the Company
with the Warrant Agent) as follows:
IMRE Corporation
130 Fifth Avenue North
Seattle, Washington 98109
Attn: Chief Executive Officer
Any notice pursuant to this Agreement to be given by the Company or by the
registered holder of any Warrant to the Warrant Agent shall be sufficiently
given if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing by the Warrant Agent with the Company) as follows:
Manufacturers Hanover Trust Company of California
50 California Street, 10th Floor
San Francisco, California 94111
Attn: Stock Transfer Department
<PAGE> 25
SECTION 18. Supplements and Amendments. The Company and the Warrant
Agent may from time to time supplement or amend this Agreement without the
approval of any holders of Warrants in order to cure any ambiguity or to
correct or supplement any provision contained herein which may be defective or
inconsistent with any provision herein, or to make any other provisions in
regard to matters or questions arising hereunder which the Company and the
Warrant Agent may deem necessary or desirable and which shall not adversely
affect the interests of the holders of Warrants. The Company and the Warrant
Agent also may supplement or amend the Warrant Agreement in any other respect
with the written consent of the holders of at least two-thirds in number of the
Warrants then outstanding; however, no such supplement nor amendment may (a)
make any modification of the terms upon which the Warrants are exercisable or
may be redeemed or (b) change the percentage of the holders of the Warrants who
must consent to such amendment or supplement, without the consent of each
Warrant holder affected thereby.
SECTION 19. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company, the Warrant Agent or holders of
the Warrants shall bind and inure to the benefit of their respective
successors, assigns, heirs and personal representatives.
SECTION 20. Termination. This Agreement shall terminate at 5:00 p.m.,
Pacific Time, on August 29, 1996 or such earlier date upon which all Warrants
have been exercised or redeemed, except that the Warrant Agent shall account to
the Company pursuant to Section 12 for all cash held by it at 5:00 p.m. on such
date of termination. The provisions of Section 14 shall survive such
termination.
SECTION 21. Governing Law. This Agreement and each Warrant issued
hereunder shall be deemed to be a contract made under the laws of the State of
<PAGE> 26
Washington and for all purposes shall be construed in accordance with the laws
of said State.
SECTION 22. Benefits of this Agreement. Nothing in this Agreement
shall be construed to give to any person or corporation other than the Company,
the Warrant Agent and the holders of the Warrants any legal or equitable right,
remedy or claim under this Agreement; and this Agreement shall be for the sole
and exclusive benefit of the Company, the Warrant Agent and the registered
holders of the Warrants.
SECTION 23. Descriptive Headings. The descriptive headings of the
several Sections of this Agreement are inserted for convenience only and shall
not control or affect the meanings or construction of any of the provisions
hereof.
SECTION 24. Counterparts. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the day and year first above written.
IMRE CORPORATION
By: /s/ Dr. Frank R. Jones
-----------------------------------
Dr. Frank R. Jones
Chief Executive Officer
Chairman of the Board
[SEAL]
Attest:
/s/ Lois Yoshida
- -------------------------------------
Lois Yoshida, Secretary
MANUFACTURERS HANOVER
TRUST COMPANY OF CALIFORNIA
By: /s/ Frank Rico
-----------------------------------
Frank Rico
Assistant Vice President
[SEAL]
Attest:
/s/ [Signature Illegible]
- -------------------------------------
[Title Illegible]
<PAGE> 28
STATE OF WASHINGTON )
) ss.:
COUNTY OF KING )
On the 23rd day of September, 1991, before me personally came DR. FRANK
R. JONES, to me known, who, being by me duly sworn, did depose and say that he
is the Chief Executive Officer and Chairman of the Board of IMRE CORPORATION,
the corporation described in and which executed the foregoing instrument; that
he knows the seal of said corporation; that the seal affixed to said instrument
is such corporate seal; that it was so affixed by order of the Board of
Directors of said corporation; and that he signed his name thereto by like
order.
Notary Public in and for the State of
Washington, residing in Seattle.
[SEAL]
/s/ Edward M. Yoshida
--------------------------------------
My Commission Expires:
STATE OF CALIFORNIA )
) ss.:
COUNTY OF SAN FRANCISCO )
On the 25th Day of September, 1991, before me personally came Frank
Rico, to me known, who, being by me duly sworn, did depose and say that (s)he
is the Assistant Vice President of Manufacturers Hanover Trust Company of
California, the corporation described in and which executed the foregoing
instrument; that (s)he knows the seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
order of the Board of Directors of said corporation; and that (s)he signed
his/her name thereto by like order.
[SEAL] /s/ Joyce M. Evans
----------------------------------
My Commission Expires:
<PAGE> 29
EXHIBIT A
IMRE Corporation
WARRANT CERTIFICATE (Front)
THIS CERTIFIES THAT ______________________________ or registered assigns, is the
owner of _______________________WARRANTS, each of which Warrants entitles the
owner thereof to purchase one fully paid and nonassessable share (subject to
adjustment as hereinafter referred to) of the Common Stock, par value $.02, of
IMRE Corporation, a Delaware corporation (the "Company"), upon surrender of
this Warrant Certificate and payment of the purchase price in lawful money of
the United States of America at the principal office in San Francisco,
California of the Warrant Agent hereinafter referred to (or at the principal
office of its successor as Warrant Agent), but only subject to the conditions
set forth herein and in the Warrant Agreement dated as of August 29, 1991
between the Company and Manufacturers Hanover Trust Company of California as
Warrant Agent (the "Warrant Agent"). Warrants may be exercised on and after
November 27, 1991, or earlier at the discretion of Allen & Company Incorporated
(the "Underwriter") and prior to 5:00 P.M., Pacific Time on August 29, 1996.
The purchase price payable upon exercise of a Warrant (the "Purchase Price")
shall be $2.50 per share at any time on or after November 27, 1991, or earlier
at the discretion of the Underwriter, until 5:00 P.M., Pacific Time August 29,
1996.
The Purchase Price shall be paid at the principal office in San
Francisco, California of the Warrant Agent (or at the principal office of its
successor as Warrant Agent) by bank cashier's check or personal check which
shall be subject to collection. Checks shall be payable to the order of the
Company.
Upon any exercise of Warrants evidenced hereby, the form of election to
purchase set forth on the reverse side hereof shall be properly completed and
executed; in the event that upon any exercise of Warrants evidenced hereby the
number of Warrants exercised shall be less than the total number of Warrants
evidenced hereby, there shall be issued to the holder hereof, a new Warrant
certificate, in all respects similar to this Warrant Certificate, evidencing
the number of Warrants not exercised.
Upon the occurrence of certain events set forth in the Warrant
Agreement, the Purchase Price per share and the number of shares of Common
Stock issuable upon exercise hereof shall be adjusted, all as provided in the
Warrant Agreement. No fractional shares of Common Stock will be issued upon the
exercise of any Warrant or Warrants evidenced hereby, but in lieu thereof a
cash payment will be made, as provided in the Warrant Agreement.
This Warrant Certificate shall not be valid unless countersigned by the
Warrant Agent.
<PAGE> 30
EXHIBIT A (cont.)
WARRANT CERTIFICATE (Back)
The Warrant Certificate is issued under and the Warrants evidenced
hereby are subject to the terms and provisions contained in the Warrant
Agreement, to all the terms and provisions of which the holder of this Warrant
Certificate, by acceptance hereof, assents. Reference is hereby made to said
Warrant Agreement for a more complete statement of the rights and obligations
of the Company thereunder. Copies of said Warrant Agreement are on file at the
office of the Warrant Agent and at the principal office of the Company.
This Warrant Certificate and similar Warrant Certificates, when
surrendered at the principal office in San Francisco, California of the Warrant
Agent (or at the principal office of its successor as Warrant Agent) by the
registered holder hereof or by his duly authorized attorney or representative,
may be exchanged, in the manner and subject to limitations provided in the
Warrant Agreement, but without payment of any service charge, for another
Warrant Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate the number of Warrants evidenced by the Warrant Certificate so
surrendered.
Prior to due presentment for registration of transfer of this Warrant
Certificate, the Company and the Warrant Agent may deem and treat the
registered holder hereof as the absolute owner of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereof made by
anyone other than the Company or the Warrant Agent), for the purpose of any
exercise hereof and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary.
If this Warrant Certificate shall be surrendered upon exercise of
Warrants evidenced hereby within any period during which the transfer books for
the Company's Common Stock are closed for any purpose, the Company shall not
be required to make delivery of certificates for shares of Common Stock until
the date of the reopening of said transfer books.
This Warrant may be redeemed at the option of the Company, in whole or
in part, in accordance with the Warrant Agreement, at any time after August
29, 1994 and prior to the expiration of the Warrants at a price of $.75 per
Warrant.
No Warrant may be exercised after 5:00 P.M., Pacific Time on August 29,
1996 and to the extent not exercised by such time, all Warrants evidenced
hereby shall become void.
The Company agrees that while this Warrant and all other similar
Warrants are exercisable, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the delivery of
shares of Common Stock pursuant to the exercise of this or any other such
Warrants.
This Warrant shall not entitle the holder hereof to any voting rights
or other rights as a shareholder of the Company, or to any other rights
whatsoever except the rights herein expressed and such as are set forth, and no
dividends shall be payable or accrue in respect of this Warrant or the interest
represented hereby or the shares purchasable hereunder until or unless, and
except to the extent that, this Warrant shall be exercised.
<PAGE> 31
EXHIBIT A (cont).
EXERCISE FORM
(TO BE EXECUTED UPON EXERCISE OF WARRANT
PRIOR TO THE CLOSE OF BUSINESS ON THE EXPIRATION DATE)
The undersigned hereby irrevocably elects to exercise the right represented by
this Warrant Certificate to purchase ________________________________ Shares
and herewith tenders payment for such Shares in the amount of $________________
in accordance with the terms hereof. The undersigned requests that a certificate
representing such Shares be registered in the name of __________________________
__________________________________ and that such certificate be delivered to
________________________________ at ___________________________________________.
If said number of Shares is less than all the Shares purchasable hereunder, the
undersigned requests that a new Warrant Certificate representing the balance of
the Shares be registered in the name of ________________________________________
whose address is _______________________________________________________________
and delivered to ______________________________________________________________.
Any cash payments to be paid in lieu of a fractional Share shall be made to
_____________________________________________________ and the check representing
payment thereof shall be delivered to __________________________________________
at ____________________________________________________.
Dated: ______________________________________ 19_____
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF
PERSON IN WHOSE NAME SHARES ARE
TO BE REGISTERED
________________________________________
________________________________________
Name of holder of Warrant Certificate:
_________________________________________________________________ (Please Print)
Address: _____________________________________________________________________
_____________________________________________________________________
Signature: _____________________________________________________________________
Note: The above signature must correspond with the name as written
upon the face of this Warrant Certificate in every particular,
without alteration or enlargement or any change whatever, and if
the certificate representing Warrants not exercised is to be
registered in a name other than that in which this Warrant
Certificate is registered, the signature of the holder hereof must
be guaranteed.
<PAGE> 32
EXHIBIT A (cont.)
Signature Guaranteed:
IMRE Corporation
(To be executed by the registered holder to
effect a transfer of the foregoing Warrant)
ASSIGNMENT
For value received, _________________________________ hereby sells, assigns and
transfers unto ___________________________________ all right, title and
interest herein, and does hereby irrevocably constitute and appoint ___________
_________________________ attorney, to transfer said Warrant Certificate on the
books of the within-named Company, with full power of substitution in the
premises.
Dated: _________________________ 19____
Signature: __________________________________________________________________
NOTE: The above signature must correspond with the name written
upon the face of this Warrant Certificate in every particular,
without alteration of enlargement or any change whatever.
<PAGE> 33
WARRANT TO PURCHASE
W
OF COMMON STOCK
[IMRE CORPORATION LOGO]
COMMON STOCK PURCHASE WARRANT
VOID AFTER 5:00 P.M., PACIFIC TIME ON AUGUST 29, 1996
CUSIP 449695 12 1
THIS CERTIFIES THAT
SAMPLE SAMPLE SAMPLE
or registered assigns, is the owner of WARRANTS,
[COPY ILLEGIBLE]
CHEMICAL TRUST COMPANY OF CALIFORNIA
As Warrant Agent
BY
Authorized Signature
IMRE CORPORATION
/s/ Dr. Frank R. Jones
--------------------------
Chairman of the Board
ATTEST:
/s/ Lois Yoshida
-------------------------
Secretary
IMRE CORPORATION
CORPORATE
S E A L
1981
DELAWARE
