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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
November 1, 1996
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Date of Report (Date of earliest event reported)
CYPRESS BIOSCIENCE, INC.
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(Exact name of registrant as specified in its charter)
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Delaware 0-12943 22-2389839
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(State or other jurisdiction of (Commission (IRS Employer Identification
incorporation) File Number) No.)
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4350 Executive Drive, Suite 325
San Diego, CA 92121
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(Address of principal executive offices)
(619) 452-2323
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(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On November 1, 1996, Cypress Bioscience, Inc., a Delaware corporation
(the "Company") completed its acquisition (the "Merger") of PRP, Inc., a
Delaware corporation ("PRP") pursuant to that certain Agreement and Plan of
Merger and Reorganization dated October 10, 1996 by and among the Company,
Cypress Acquisition Sub, Inc. and PRP (the "Merger Agreement"). Pursuant to the
terms of the Merger Agreement, upon the consummation of the Merger, the Company
assumed all of the assets and liabilities of PRP.
In connection with the Merger, the Company issued to the holders of
certain indebtedness of PRP (the "Bridge Debtholders") in full satisfaction and
settlement of such indebtedness a total of 1,118,438 Units (with each Unit
consisting of two shares of Common Stock of the Company (the "Shares") and one
warrant (the "Warrants") to purchase one share of Common Stock of the Company
(the "Warrant Shares")), with a total value equal to $4,473,799.85 (based upon a
price of $4.00 per Unit).
In addition, the holders of PRP equity securities (including holders of
options and warrants of PRP) (the "Equity Holders") will be entitled to receive
certain payments (the "Earn-Out Payments"), if any, on a pro rata basis, on net
sales of products developed using PRP's technology acquired by the Company in
the Merger (the "Earn-Out Products"). The Company's obligation to make Earn-Out
Payments with respect to Earn-Out Products shall commence on the date of first
commercial sale to any third party of such Earn-Out Product by the Company, its
affiliates or licensees and shall terminate on a country-by-country basis upon
the later of (i) the expiration or invalidation of the last issued patent owned,
licensed or otherwise controlled by the Company in such country, or abandonment,
disclaimer or rejection of the last pending patent application owned, licensed
or otherwise controlled by the Company in such country, covering the
manufacture, use or sale of such Earn-Out Product, and (ii) fourteen years after
the first commercial sale anywhere in the world of the Earn-Out Product by the
Company, its affiliates or sublicensees. The amount of any Earn-Out Payment to
be paid on Earn-Out Products sold in a country in which, at the time of such
sale, the Earn-Out Product is not covered by and encompassed within the scope of
one or more claims contained in an unexpired patent or in a pending patent
application included in the patents and patent applications acquired by the
Company pursuant to the Merger, shall be reduced by 50%.
In addition to the Earn-Out Payments described above, within 30 days of
the earlier of the date of (i) public announcement of an approvable letter or
other substantially similar form of approval from the United States Food and
Drug Administration (the "FDA") relating to the approval of the use of Infusible
Platelet Membranes ("IPM") for the treatment of thrombocytopenia (the "FDA
Approvable Letter"), and (ii) public announcement by the FDA of an equivalent
approval of IPM, if any, the Company shall make a payment of $5,000,000 (the
"Milestone Payment") to the Equity Holders, with such payment being in the form
of, at the Company's sole and absolute discretion, cash, Company Common Stock or
a combination of cash and Company Common Stock. In the event the Company elects
to make the Milestone Payment, in whole or in part, in the form of Company
Common Stock, the value of such Common Stock shall be determined based upon the
average closing sales prices, if the
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Company's Common Stock is quoted on a stock exchange or the Nasdaq National
Market System (or the average of the bid and asked prices of the Company's
Common Stock as reported by the National Association of Securities Dealers, Inc.
electronic interdealer quotation system) for the 15 trading day period
commencing on the 10 trading days immediately prior to and including the day of
public announcement of the FDA Approvable Letter or the public announcement by
the FDA of an equivalent approval of IPM, as the case may be, and for the 5
trading days immediately after the day of the public announcement of the FDA
Approvable Letter or the public announcement of an equivalent approval of IPM,
as the case may be. In the event the Company elects to make the Milestone
Payment, in whole or in part, in Company Common Stock, the Company will be
obligated, at its own expense, to register such shares for resale under the
Securities Act of 1933, as amended.
In consideration of certain investment banking advisory services
provided by EGS Securities Corp. ("EGS") to PRP in connection with the
transactions contemplated by the Merger, the Company issued to EGS 27,961 Units
with a total value equal to $118,845 (based upon a price of $4.00 per Unit). In
addition, the Company is obligated, upon the payment of the Milestone Payment,
if any, and each time any Earn-Out Payment is made to the Equity Holders, to pay
to EGS, for services rendered to PRP in connection with the Merger, from such
Milestone Payment or Earn-Out Payment, as the case may be, prior to any
distribution to be made to the Equity Holders, an amount in cash equal to two
and one-half percent (2 1/2%) of the Milestone Payment and each Earn-Out
Payment.
On November 4, 1996, the Company filed a registration statement on Form
S-3 with the Securities and Exchange Commission (the "SEC") registering for
resale the Shares, Warrants and Warrant Shares issued to the Bridge Debtholders
and EGS in connection with the Merger.
Pursuant to the terms of the Merger Agreement, subject to limited
exceptions, the Company is obligated to spend $4,000,000 to commercialize and
advance IPM as a principal product of the Company. The only circumstances under
which the Company may decrease or cease commercialization of IPM prior to
expending $4,000,000 would be if the Company encounters critical problems with
the commercialization of IPM, including problems related to IPM's safety,
efficacy or economic viability, such as would render IPM, on a stand-alone
basis, unsafe, ineffective or incapable of generating a reasonable, positive
cash flow. After the Company has expended $4,000,000 on the commercialization of
IPM, the Company has agreed to use commercially reasonable efforts to optimize
commercialization of Earn-Out Products.
There were no material relationships between the Company or any of its
affiliates, directors or officers and the persons to whom the Company issued
securities or to whom the Company is obligated to make future payments, if any,
in connection with the Merger.
The Company's principal executive offices are located at 4350 Executive
Drive, Suite 325, San Diego, California, 92121. The Company develops,
manufactures and markets medical devices for the treatment and diagnosis of
select immune-mediated diseases, transplantations and cancers.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
a. FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
At the time of the filing of this report, it is impracticable
to provide the financial statements and pro forma financial information required
to be filed with respect to the acquisition described above in Item 2 (the
"Financial Statements"). The Financial Statements will be filed within sixty
(60) days of the date this report on Form 8-K is required to be filed.
b. PRO FORMA FINANCIAL INFORMATION
See Item 7(a), above.
c. EXHIBITS
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Exhibit 2.1 Agreement and Plan of Merger and Reorganization dated October 10, 1996, by and
among Registrant, Cypress Acquisition Sub, Inc. and PRP, Inc. (1)(2)
Exhibit 4.1 Warrant Agreement dated September 18, 1996, between Registrant and American
Stock Transfer & Trust Company. (1)
Exhibit 4.2 Warrant Certificate. (1)
Exhibit 4.3 Exchange of Bridge Debt and Warrant Termination Agreement between Registrant
and certain holders of indebtedness of PRP, Inc. (1)
Exhibit 4.4 Modified Fee Agreement dated by and among Registrant, PRP, Inc. and EGS
Securities Corp. (1)
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(1) Filed with the SEC as an exhibit to Registrant's Registration Statement on
Form S-3 (No. 333-15483) filed on November 4, 1996, and incorporated herein by
this reference.
(2) Schedules omitted pursuant to Rule 601(b)(2) of Regulation S-K of the SEC.
Registrant undertakes to furnish such schedules and attachments thereto to the
SEC upon request.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CYPRESS BIOSCIENCE, INC.
Dated: November 15, 1996 By: /s/ SUSAN E. FEINER
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Susan E. Feiner
Director of Finance, Controller
and Secretary
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INDEX TO EXHIBITS
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EXHIBIT
NO. DESCRIPTION PAGE NO.
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Exhibit 2.1 Agreement and Plan of Merger and Reorganization dated October 10, 1996, by
and among Registrant, Cypress Acquisition Sub, Inc. and PRP, Inc. (1)(2)
Exhibit 4.1 Warrant Agreement dated September 18, 1996 between Registrant and American
Stock Transfer & Trust Company. (1)
Exhibit 4.2 Warrant Certificate. (1)
Exhibit 4.3 Exchange of Bridge Debt and Warrant Termination Agreement between
Registrant and certain holders of indebtedness of PRP, Inc. (1)
Exhibit 4.4 Modified Fee Agreement dated by and among Registrant, PRP, Inc. and EGS
Securities Corp. (1)
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(1) Filed with the SEC as an exhibit to Registrant's Registration Statement on
Form S-3 (No. 333-15483) filed on November 4, 1996, and incorporated herein by
this reference.
(2) Schedules omitted pursuant to Rule 601(b)(2) of Regulation S-K of the SEC.
Registrant undertakes to furnish such schedules and attachments thereto to the
SEC upon request.
