<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 7, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
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)
DELAWARE 22-2389839
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
4350 EXECUTIVE DRIVE, SUITE 325
SAN DIEGO, CA 92121
(619) 452-2323
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE , INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
JAY D. KRANZLER
VICE CHAIRMAN OF THE BOARD OF DIRECTORS AND CHIEF EXECUTIVE OFFICER
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.
COOLEY GODWARD LLP
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 effective date of this Registration Statement.
If any of the securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
========================================== =================== ==================== ============== ==================
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE PRICE FEE
- ------------------------------------------ ------------------- -------------------- -------------- ------------------
<S> <C> <C> <C> <C>
Common Stock, $.02 par value per share 3,501,029 $1.50 $5,251,543.50 $1,591.38
- ------------------------------------------ ------------------- -------------------- -------------- ------------------
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 THAT 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.
=====================================================================================================================
</TABLE>
<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 BE 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.
PRELIMINARY PROSPECTUS DATED NOVEMBER 7, 1997
SUBJECT TO COMPLETION
CYPRESS BIOSCIENCE, INC.
3,501,029 SHARES OF COMMON STOCK
This Prospectus relates to the offer and sale by certain securityholders
(the "Selling Securityholders") of Cypress Bioscience, Inc. (the "Company") of
up to 3,501,029 shares of Common Stock, $.02 par value per share, of the Company
(the "Shares"). The Selling Securityholders acquired the Shares directly from
the Company pursuant to a private placement completed in October 1997. See "The
Company - The Private Placement."
The Shares may be offered by the Selling Securityholders from time to time
in transactions on the Nasdaq SmallCap Market, in privately negotiated
transactions or a combination of such methods of sale, at fixed prices which may
be changed, at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices. The Selling
Securityholders may effect such transactions by selling the Shares to or through
broker-dealers, and such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the Selling Securityholders or the
purchasers of the Shares for whom such broker-dealers may act as agent or to
whom they sell as principal or both (which compensation to a particular
broker-dealer might be in excess of customary commissions). See "Selling
Securityholders" and "Plan of Distribution."
None of the proceeds from the sale of the Shares by the Selling
Securityholders will be received by the Company. The Company has agreed to bear
certain expenses (other than fees and expenses, if any, of counsel or other
advisors to the Selling Securityholders) in connection with the registration of
the Shares being offered by the Selling Securityholders. Such expenses are
estimated to be $25,000. The Company has agreed also to indemnify the Selling
Securityholders against certain liabilities, including certain liabilities under
the Securities Act of 1933, as amended (the "Securities Act"). See "Plan of
Distribution."
The Common Stock of the Company is traded on the Nasdaq SmallCap Market
under the symbol "CYPB." The last reported sales price of the Company's Common
Stock on the Nasdaq SmallCap Market on November 3, 1997 was $1.66 per share.
<PAGE> 3
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THE SHARES OFFERED INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE
SECURITIES OFFERED HEREBY.
---------------
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.
THE DATE OF THIS IS NOVEMBER 7, 1997.
2.
<PAGE> 4
No person is authorized in connection with any offering made hereby to give
any information or make any representation not contained or incorporated by
reference in this Prospectus, and any information not contained or incorporated
herein must not be relied upon as having been authorized by the Company. This
Prospectus does not constitute an offer to sell, or a solicitation of an offer
to buy, by any person in any jurisdiction in which it is unlawful for such
person to make such offer or solicitation. Neither the delivery of this
Prospectus at any time nor any sale made hereunder shall, under any
circumstances, imply that the information herein is correct as of any date
subsequent to the date hereof.
This Prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934, as amended (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 the section
entitled "Risk Factors," as well as those discussed elsewhere in this
Prospectus. The information contained in this Prospectus should be considered
carefully before purchasing any of the securities being offered hereby.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information can be inspected and copied at
the public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the
Commission's following Regional Offices: Chicago Regional Office, Suite 1400,
Northwest Atrium Center, 500 West Madison Street, Chicago, Illinois 60661; and
New York Regional Office, 7 World Trade Center, 13th Floor, New York, New York
10048. Copies of such material also can 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 Commission also makes electronic filings
publicly available on the Internet within 24 hours of acceptance. The
Commission's Internet address is http://www.sec.gov. The Commission Web site
also contains reports, proxy and information statements, and other information
regarding the registrant that has been filed electronically with the Commission.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act with respect to the Shares being offered hereby of
which this Prospectus is a part. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain portions of which
are omitted in accordance with the rules and regulations of the Commission. For
further information pertaining to the Company and the Shares, reference is made
to the Registration Statement and the exhibits and schedules thereto, which may
be inspected without charge at, and copies thereof may be obtained at prescribed
rates from, the office of the Commission at 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549.
PROSORBA(R) column and Cyplex(TM) are registered trademarks of the Company.
All other brand names or trademarks appearing in this Prospectus are the
property of their respective holders.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1996, the Company's Proxy Statement for the 1997 Annual Meeting of
Stockholders filed pursuant to Rule 14a-6 of the Exchange Act, the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31,
3.
<PAGE> 5
1997, the Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1997, and the Company's Current Report on Form 8-K/A dated as of January 17,
1997, including all amendments thereto, 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 executive offices located at 4350
Executive Drive, Suite 325, San Diego, California 92121 (telephone (619)
452-2323).
4.
<PAGE> 6
THE COMPANY
GENERAL
Cypress Bioscience, Inc. was incorporated under the laws of the State of
Delaware in 1981 and researches, develops, manufactures and markets medical
devices and therapeutics for the treatment of certain types of immune system
disorders and is engaged in the development of novel therapeutic agents for the
treatment of blood platelet disorders. 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
received marketing approval from the U.S. Food and Drug Administration (the
"FDA") in December 1987 to distribute the PROSORBA(R) column for treatment of
idiopathic thrombocytopenic purpura ("ITP"), an immune-mediated bleeding
disorder.
In November 1996, the Company completed the acquisition of PRP, Inc.
("PRP"), a Boston-based biopharmaceutical company engaged in the
commercialization of novel agents to treat blood platelet disorders. In
connection with the acquisition of PRP, the Company acquired rights to
Cyplex(TM) platelet alternative, previously known as Infusible Platelet
Membranes ("IPM"), which the Company is developing as an alternative to
traditional platelet transfusions.
THE PRIVATE PLACEMENT
In October 1997, the Company completed a private placement (the "Private
Placement") of 3,851,029 shares of Common Stock, $.02 par value, of the Company
which were sold to certain "accredited investors" (as defined in Rule 501 of the
Securities Act) at a per share sales price of $1.50. Of such shares, 3,501,029
are being registered hereby. Net proceeds to the Company from the Private
Placement (after deducting placement agent fees of approximately $196,593) were
$5,579,950.50. The Private Placement was made in reliance on exemptions from the
registration and qualification requirements of the Securities Act and applicable
state securities laws.
The Company intends to use the net proceeds from the Private Placement
primarily to fund its ongoing Phase III pivotal clinical trials of the
PROSORBA(R) column in the area of rheumatoid arthritis. In addition the Company
may use a portion of the net proceeds to fund additional research and
development, including further development of Cyplex(TM) platelet alternative
and for general corporate and working capital purposes. The Company has not
determined the amounts it plans to expend on any of the foregoing uses or the
timing of such expenditures. The amounts actually expended for such uses, if
any, are at the discretion of the Company and may vary significantly depending
on a number of factors, including among others, the results of the clinical
trials of the PROSORBA(R) column.
In addition, the Company may use some or all of the proceeds of the Private
Placement for the acquisition of businesses, products or technologies
complementary to the Company's current business. The Company has no present
commitments or agreements and is not currently involved in any negotiations with
respect to any such acquisitions.
The Company will not receive any of the proceeds from the sale of the
Shares being offered hereby.
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
any of the Securities being offered hereby.
NEED FOR ADDITIONAL CAPITAL
The Company is actively seeking opportunities to raise additional capital
to be used primarily to fund existing operations related to the manufacture and
sale of the PROSORBA(R) column, to develop new and complete existing research
and development activities, and to fund ongoing Phase III clinical trials
related to the proposed use of the PROSORBA(R) column for the treatment of
rheumatoid arthritis. In addition, the Company will require substantial
additional capital over a period of a number of years to further the development
and marketing of Cyplex(TM) platelet alternative. Except in very limited
circumstances, the Company is obligated to expend no less than $4 million on the
development of Cyplex(TM) platelet alternative, of which the Company has
expended approximately $1.6 million as of September 30, 1997. To the extent the
Company decides to continue the development of products other than the
PROSORBA(R) column and Cyplex(TM) platelet alternative, it will be required to
raise additional capital. 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 Food and Drug
Administration ("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. Although the Company may seek to
raise additional capital through a combination of additional equity offerings,
joint ventures, strategic alliances, borrowings and other available sources,
there can be no assurance that the Company will be able to raise additional
capital through such sources 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. The
Company believes that current capital amounts, along with the net proceeds of
the Offering, will be sufficient to fund operations through 1998.
HISTORY OF OPERATING LOSSES
The Company has operated at a loss since its formation in October 1981. As
of December 31, 1996, the Company had an accumulated deficit of approximately
$57 million. 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 in disease
indications other than idiopathic thrombocytopenic purpura ("ITP") 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 or for Cyplex(TM) platelet alternative for the treatment of platelet
disorders. There can be no assurance that the
6.
<PAGE> 8
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."
FDA APPROVAL AND REGULATIONS
The Company is currently conducting a controlled clinical trial of the
PROSORBA(R) column for treatment of rheumatoid arthritis. In July 1997, the
Company announced that, based on an analysis of the interim results of the
Company's Phase III clinical trials for use of the PROSORBA(R) column in the
treatment of rheumatoid arthritis by an independent Data Safety Monitoring
Board, it would continue such Phase III clinical trial. 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,
or that the FDA will approve the PROSORBA(R) column for treatment of such
diseases in a timely manner, if at all.
The Company plans to continue development of Cyplex(TM) platelet
alternative with the additional Phase II clinical trials currently scheduled to
start in 1998. Clinical trials are vigorously regulated by the FDA and must meet
requirements for institutional review board oversight and informed consent as
well as FDA review and oversight and good clinical practice regulations. There
can be no assurance that the clinical trials being conducted for Cyplex(TM)
platelet alternative will be completed successfully within any specified period
of time, if at all, or that if successful the Company will be able to further
develop Cyplex(TM) platelet alternative. Furthermore, the Company or the FDA may
delay or suspend clinical trials at any time if it is determined that the
subjects participating in such trials are being exposed to unacceptable health
risks. Any such delay or suspension could have a material adverse effect on the
Company's business.
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. There can be no assurance
that 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 Process ("GMP") regulations. Failure to comply with the
FDA's 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.
7.
<PAGE> 9
Through December 31, 1996, production of commercial quantities of the raw
materials utilized in production of the PROSORBA(R) column had been performed at
the Company's GMP-approved facility located in Redmond, Washington while final
assembly of the PROSORBA(R) column had been performed at the Company's Seattle,
Washington facility. In conjunction with the Company's restructuring plan and
corresponding reduction in facilities, the Seattle and Redmond facilities have
been consolidated into a single manufacturing facility in Redmond. The Redmond
facility has been renovated 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 successfully
completed the GMP re-approval process during the first half of 1997.
Furthermore, PRP, a wholly owned subsidiary of the company occupies a
facility that includes a GMP-approved pilot production plant where all phases of
production of clinical-grade Cyplex(TM) occurs, except for filling and
lyophilization. There can be no assurance that the Company will be able to
maintain the facility's GMP-approved status or that, if approval is not
maintained, it will be able to find an alternate GMP-approved production
facility.
DEPENDENCE UPON KEY PERSONNEL
The Company's success is dependent upon certain key management and
technical personnel, including the 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.
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, 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 therapy 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 PROSORBA(R) column will prove effective in
the treatment of diseases other than ITP or that Cyplex(TM) platelet
alternative, if approved for sale by the FDA, will be an effective alternative
to traditional platelet therapy.
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.
8.
<PAGE> 10
PRIOR EXCLUSIVE AGREEMENT WITH BAXTER; NECESSITY OF ESTABLISHING A SALES FORCE
In March 1996, the Company and Baxter Healthcare Corporation ("Baxter")
terminated their 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 with Baxter, the Company has established 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. However, there
can be no assurance that the Company's domestic sales force will be successful
in selling the PROSORBA(R) column.
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 believes that its success depends primarily on the experience,
capabilities, and skills of its personnel. Notwithstanding this fact, however,
the Company seeks to protect its intellectual property rights by a variety of
means, including patents, the maintenance of trade secrets and proprietary
know-how, and technological innovation to develop and maintain its competitive
position. There can be no assurance that the Company will be able to obtain
additional patents either in the United States or in foreign jurisdictions or
that, if issued, such patents will provide sufficient protection 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. Finally, there can be no assurance that the Company will be
able to develop further technological innovations.
The Company presently owns nine issued U.S. patents and six international
patents (excluding patents relating to the area of platelet therapeutics) which
expire during 2004 to 2009. The process used in manufacturing the PROSORBA(R)
column is covered by one of these patents. Certain U.S. and international
applications are pending. 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. In addition, the Company has an exclusive license for a
U.S. patent for treating cellular Fc receptor-mediated hypersensitivity immune
disorders.
The Company presently owns four issued U.S. patents and three pending U.S.
patent applications relating to the area of platelet therapeutics. International
patent applications corresponding to the issued U.S. patents have been filed. To
date, four foreign patents have been issued while others are still pending in
countries or jurisdictions outside the U.S. These patents and those that might
issue on the pending patent applications are scheduled to expire during 2010 to
2014.
9.
<PAGE> 11
There can be no assurance that the Company's patents will afford
commercially significant protection of its proprietary technology or have
commercial application. There has been no judicial determination of the validity
or scope of its proprietary rights. Moreover, the patent laws in foreign
countries may differ from those of the United States, and the degree of
protection afforded by foreign patents may be different.
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 upheld as valid
by courts, the Company may be required to obtain licenses to use technology
covered by such patents.
On June 30, 1997, the Company settled a patent infringement claim filed
against the Company alleging that the manufacture, use and sale of the
PROSORBA(R) column infringed a patent issued to Dr. Meir Strahilevitz (the
"Strahilevitz Patent'). Pursuant to the terms of the settlement, the Company was
granted a nonexclusive license permitting the Company to use the Strahilevitz
Patent in connection with the manufacture, use and sale of its PROSORBA(R)
column for the treatment of ITP and rheumatoid arthritis.
In connection with the acquisition of PRP, the Company acquired certain
exclusive rights with respect to the use, manufacture and sale of products
and/or processes related to analogs of the compound diadenosine tetraphosphate
("AP4A"), which rights were granted to PRP in July 1992 pursuant to a license
agreement between PRP and a collaborator of PRP (the "Licensor"). Under the
terms of the license agreement, PRP was obligated to file an Investigational New
Drug Application ("IND") with respect to the commercial application of such
rights within four years of acquiring such rights. Neither PRP nor the Company
has filed such IND. Due to such failure, Licensor has the right to cancel upon
30 days written notice the exclusive license or to convert the exclusive license
to a nonexclusive license. If Licensor elects to cancel such license, there can
be no assurance that the Company will be able to acquire or license the similar
rights on terms acceptable to the Company, if at all.
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 November 3, 1997, Allen & Company Incorporated and Mr. Richard M.
Crooks, a director of the Company, beneficially owned approximately 15.6% and
3.2% respectively, of the outstanding Common Stock of the Company. Mr. Crooks is
also a director and consultant to Allen & Company Incorporated. In addition,
after giving effect to the closing of the Private Placement, Paramount Capital
Asset Management, Inc., through its affiliates, currently beneficially holds
13.7% of the Company's outstanding Common Stock. Together, Mr. Crooks, Allen &
Company Incorporated and Paramount Capital, Inc. 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.
10.
<PAGE> 12
INSURANCE REIMBURSEMENT
Successful commercialization of a new medical product, such as the
PROSORBA(R) column or Cyplex(TM) platelet alternative depends, in part, on
reimbursement by public and private health insurers to health care providers for
use of such products. 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 and continues development and commercialization of
Cyplex(TM). 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 the Company for the use of the PROSORBA(R)
column. In addition, there can be no assurance that health care providers will
reimburse the Company for the use of Cyplex(TM) platelet alternative, when and
if commercialized.
PRODUCT LIABILITY
The use of the PROSORBA(R) column and, when and if approved for use by the
FDA, Cyplex(TM) platelet alternative, involve 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.
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.
11.
<PAGE> 13
POSSIBLE VOLATILITY OF STOCK PRICE; ABSENCE OF DIVIDENDS
There has been significant volatility in the market prices of securities of
biomedical companies in general, including the Company's securities. Factors
such as announcements by the Company or by 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 and biomedical products may have a significant impact on the
Company's business and market price of the Company's securities. In addition, in
connection with the acquisition of PRP, the Company is obligated to make a
$5,000,000 milestone payment to the former holders of equity securities
(including holders of warrants and options) of PRP upon the public announcement
of an FDA approval letter relating to the use of Cyplex(TM) platelet alternative
for the treatment of thrombocytopenia. The Company has the option to make such
milestone payment in the form of Common Stock of the Company. The issuance of
Common Stock with a value of $5 million could have a significant impact on the
market price of the Company's securities.
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 sales of common stock in November 1990 and September 1991
when taken together with prior issuance's, caused the limitation of Section 382
of the Internal Revenue Code of 1986, as amended, 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 upon the limitations of Section 382 and before consideration
of the effect of issuance's of common stock after 1991, the Company may be
allowed to use no more than a prescribed amount 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 to 2010.
12.
<PAGE> 14
SELLING SECURITYHOLDERS
The Selling Securityholders represented in their purchase agreements that
they were acquiring the Shares for investment and with no present intention of
distributing the Shares. In recognition of the fact that the Selling
Securityholders, even though purchasing the Shares without a view to distribute,
may wish to be legally permitted to sell the Shares when each deems appropriate,
the Company has filed with the Commission a Registration Statement on Form S-3,
which this Prospectus forms a part, with respect to, among other things, the
resale of the Shares from time to time at prevailing prices on the Nasdaq
SmallCap Market or in privately-negotiated transactions and has agreed to
prepare and file such amendments and supplements to the Registration Statement
as may be necessary to keep the Registration Statement effective until all
Shares offered hereby have been sold pursuant thereto or until such Shares are
no longer, by reason of Rule 144 under the Securities Act or any other rule of
similar effect, required to be registered for the sale thereof by the Selling
Securityholders.
The following table sets forth the (i) name of each Selling Securityholder,
(ii) number of shares of Common Stock beneficially owned by each Selling
Securityholder as of October 27, 1997, (iii) number of Shares which may be
offered pursuant to this Prospectus, and (iv) number of Shares owned by each
Selling Securityholder upon completion of this offering. This information is
based upon information provided to the Company by the Selling Securityholders or
from the Company's records. Because the Selling Securityholders may offer all,
some or none of their Shares, no definitive estimate as to the number of shares
thereof that will be held by the Selling Securityholders after such offering can
be provided.
13.
<PAGE> 15
<TABLE>
<CAPTION>
Shares Beneficially Number of Shares Beneficially
Owned Prior to Shares Being Owned After
Offering(1) Offered Offering(1)(3)
--------------------------- ------------ ---------------------------
Name of Selling Stockholders Number Percent(2) Number Number Percent(2)
---------------------------- ------ ---------- ------ ------ ----------
<S> <C> <C> <C> <C> <C>
Allen & Company 5,474,218(4) 15.6 333,333 5,140,885(4) 14.7%
Aries Domestic Fund, L.P.(5) 1,473,516 4.3 440,000 1,033,516 3.0
Binder, Richard 76,666 * 26,666 50,000 *
Biotechnology Development LP 666,667 2.0 666,667 0 --
Cranshire Capital, LP 33,333 * 33,333 0 --
Drobny Fischer Partnership 448,583 1.3 33,333 415,250 1.1
Drobny, Sheldon 33,333 * 33,333 0 --
Emerald Investments Partnership 10,000 * 10,000 0 --
G-Bar Limited Partnership 40,000 * 40,000 0 --
Goby, Jeff 61,000 * 29,000 32,000 *
Gorlick, Bruce 4,100 * 4,100 0 --
Goulding Profit Sharing 6,700 * 6,700 0 --
Goulding, Randall S 77,517 * 33,333 44,184 *
Goulding, Richard E 49,700 * 8,500 41,200 *
Green, Richard 36,916 * 16,666 20,250 *
Greenwald, Jonathan 27,500 * 15,000 12,500 *
Hitchcock, William 100,000 * 100,000 0 --
Horberg, David 15,000 * 15,000 0 --
Horberg, Howard Todd 100,000 * 50,000 50,000 *
Infinity Fund, LP 350,000 1.0 150,000 200,000 *
Kalb, Voorhis & Co. 66,666 * 66,666 0 --
Kamberos, Sophia 10,000 * 10,000 0 --
Lake Shore Securities, Profit
Sharing Plan & Trust FBO
Jeffrey Kaufmann 7,500 * 7,500 0 --
Lake Shore Securities, Profit
Sharing Plan & Trust FBO
Michael Gallager 7,500 * 7,500 0 --
Leonard Loventhal Trust u/a/d 63,000 * 33,000 30,000 *
LeVine, Fred 18,000 * 6,500 12,500 *
Levy, Steve 205,000 * 100,000 105,000 *
Marvin D. Kaufmann TTEE of The
Marvin D. Kaufmann & Marjorie
Kaufmann Second Amended Inter
Vivos UAD 7/8/92 7,500 * 7,500 0 --
Mateles, Richard & Roslyn 21,250 * 15,000 6,250 *
Nagorsky, Sy 30,000 * 10,000 20,000 *
Paradigm Venture Investors 60,000 * 60,000 0 --
Pritikin, Mark 27,500 * 7,000 20,500 *
Rainone, Robert Jr 17,000 * 17,000 0 --
Rosin, Joseph 66,700 * 30,000 36,700 *
Schachter & Associates 32,000 * 32,000 0 --
Schachter, Jerome 78,333 * 33,333 45,000 *
Schwartz, Sarah 22,500 * 10,000 12,500 *
Seiden Revocable Trust 33,333 * 33,333 0 --
Sherman, Lawrence A 20,000 * 10,000 10,000 *
Shiffman, Roger 30,000 * 30,000 0 --
Sirazi, Semir 80,000 * 35,000 45,000 *
</TABLE>
14.
<PAGE> 16
<TABLE>
<CAPTION>
Shares Beneficially Number of Shares Beneficially
Owned Prior to Shares Being Owned After
Offering(1) Offered Offering(1)(3)
--------------------------- ------------ ---------------------------
Name of Selling Stockholders Number Percent(2) Number Number Percent(2)
---------------------------- ------ ---------- ------ ------ ----------
<S> <C> <C> <C> <C> <C>
The Aries Trust(5) 3,268,950 9.4 893,333 2,375,617 6.9%
Winter, Richard 1,400 * 1,400 0 --
</TABLE>
* Less than 1%
(1) Unless otherwise indicated below, the persons named in the table have sole
voting and investment power with respect to all shares beneficially owned
by them, subject to community property laws where applicable.
(2) Applicable percentage of ownership is based on 34,636,067 shares of Common
Stock of the Company outstanding on October 31, 1997 adjusted as required
by rules promulgated by the Commission.
(3) Assumes the sale of all shares offered hereby.
(4) Includes presently exercisable warrants to purchase up to 355,480 Shares of
Common Stock of the Company.
(5) Paramount Capital Asset Management, Inc. ("PCAM") is the investment manager
of the Aries Fund, a Cayman Island Trust (the "Trust") and the general
partner of Aries Domestic Fund, L.P. (the "Partnership" and collectively
with the Trust, the "Aries Funds"). Lindsay A. Rosenwald, M.D. is the
President and sole shareholders of PCAM. Dr. Rosenwald and PCAM share
voting and dispositive power with respect to the shares held by the Aries
Funds. Dr. Rosenwald and PCAM disclaim beneficial ownership of the shares
held by the Aries Funds except to the extent of their pecuniary interest
therein, if any.
15.
<PAGE> 17
PLAN OF DISTRIBUTION
The Company has been advised that the Selling Securityholders or pledgees,
donees, transferees of or other successors in interest to the Selling
Securityholders may sell Shares from time to time in transactions on the Nasdaq
SmallCap Market, in privately negotiated transactions or a combination of such
methods of sale, at fixed prices which may be changed, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. The Selling Securityholders may effect such
transactions by selling the Shares to or through broker-dealers, and such
broker-dealers may receive compensation in the form of discounts, concession or
commissions from the Selling Securityholders or the purchasers of the Shares for
whom such broker-dealers may act as agent or to whom they sell as principal, or
both (which compensation to a particular broker-dealer might be in excess of
customary commission).
At any time a particular offer of Shares is made, to the extent required, a
supplemental Prospectus will be distributed which will set forth the number of
Shares offered and the terms of the offering including the names or names of any
underwriters, dealers or agents, the purchase price paid by any underwriter for
the Shares purchased from the Selling Securityholders, any discounts, commission
and other items constituting compensation from the Selling Securityholders and
any discounts, concessions or commissions allowed or reallowed or paid to
dealers.
The Selling Securityholders and any broker-dealers who act in connection
with the sale of Shares hereunder may be deemed to be "underwriters" as that
term is defined in the Securities Act, and any commissions received by them and
profit on any resale of the Shares as principal might be deemed to be
underwriting discounts and commissions under the Securities Act.
Any or all of the sales or other transactions involving the Shares
described above, whether effected by the Selling Securityholders, any
broker-dealer or others, may be made pursuant to this Prospectus. In addition,
any Shares that qualify for sale pursuant to Rule 144 under the Act may be sold
under rule 144 rather than pursuant to this Prospectus.
In order to comply with the securities laws of certain states, if
applicable, the Shares may be sold in such jurisdictions only through registered
or licensed brokers or dealers. In addition, in certain states the Shares may
not be sold unless they have been registered or qualified for sale or an
exemption from registration or qualification requirements is available and is
complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the Shares may not simultaneously engage in
market making activities with respect to the Company's Common Stock for a period
of two business days prior to the commencement of such distribution. In addition
and without limiting the foregoing, the Selling Securityholders will be subject
to applicable provisions of the Exchange Act and the rules and regulations
thereunder, including without limitation, Rules 10b-6 and 10b-7, which
provisions may limit the timing of purchases and sales of Shares by the Selling
Securityholders.
Notwithstanding the foregoing, broker-dealers who are qualifying registered
market makers on the National Association of Securities Dealers Automated
Quotation System (the "Nasdaq") may engage in passive market making transactions
in the Common Stock of the Company on the Nasdaq Stock Market in accordance with
Rule 10b-6A under the Exchange Act, during the two business day period before
commencement of sales in this offering. The passive market making transactions
must comply with applicable price and volume limits and be identified as such.
In general, a passive market maker
16.
<PAGE> 18
may display its bid at a price not in excess of the highest independent bid for
the security. If all independent bids are lowered below the passive market
maker's bid, however, such bid must then be lowered when certain purchase limits
are exceeded. Net purchases by a passive market maker on each day are generally
limited to a specified percentage of the passive market maker's average daily
trading volume in the Common Stock of the Company during a prior period and must
be discontinued when such limit is reached. Passive market making may stabilize
the market price of the Common Stock of the Company at a level above that which
might otherwise prevail and, if commenced, may be discontinued at any time.
All costs and expenses associated with registering the Shares being offered
hereunder with the Securities and Exchange Commission will be paid by the
Company. Such costs and expenses are estimated to be $25,000.
The Company and the Selling Securityholders may agree to indemnify certain
persons including broker-dealers or others, against certain liabilities in
connection with any offering of the Shares including liabilities under the
Securities Act.
LEGAL MATTERS
The validity of the issuance of the Shares will be passed upon for the
Company by Cooley Godward LLP, San Diego, California.
EXPERTS
The consolidated financial statements of the Company incorporated herein by
reference from the Company's Annual Report (Form 10-K) have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
17.
<PAGE> 19
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses payable by the Registrant in
connection with the sale of the Securities being registered. All the amounts
shown are estimates except for the SEC registration fee and the Nasdaq SmallCap
Market listing fee.
<TABLE>
<CAPTION>
<S> <C>
SEC Registration fee.......................... $ 1,591
Nasdaq SmallCap Market listing fee............ 7,500
Legal fees and expenses....................... 10,000
Blue sky qualification fees and expenses ..... 1,000
Accounting fees and expenses.................. 3,000
Printing and engraving expenses............... 1,000
Miscellaneous................................. 909
Total............................. $ 25,000
</TABLE>
ITEM 15. 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 Bylaws 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
II-1
<PAGE> 20
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 indemnification agreements with its
directors and executive officers providing for the indemnification by the
Company of such persons against expenses, damages, judgments fines and amounts
paid in settlement that such persons become legally obligated to pay as a result
of any threatened, pending or completed civil, criminal or other claims made
against such persons by reason of the fact that such persons are or were a
director or officer of the Company or any of its affiliated entities; provided,
however, that such persons conduct was not, among other things, knowingly
fraudulent, deliberately dishonest or constituted willful misconduct or a breach
of such person's duty of loyalty or resulted in any personal profit to such
person to which such person was not legally entitled. The indemnification
agreements also provide that the Company advance to its directors and executive
officers all expenses incurred by such persons prior to the final disposition of
any proceeding upon receipt of an undertaking by any such person requesting
advance payment that such person will repay the Company for all such advances in
the event it is ultimately determined that such person is not entitled to
indemnification under the provisions of the indemnity agreement, the Company's
bylaws, the DGCL or otherwise.
The Registrant has an insurance policy covering the directors and officers of
the Registrant with respect to certain liabilities, including liabilities
arising under the Securities Act or otherwise.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------ -----------------------
<S> <C>
5.1 Opinion of Cooley Godward LLP
10.1 Forms of Stock Purchase Agreement
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1
24.1 Power of Attorney. Reference is made to page II-5.
</TABLE>
II-2
<PAGE> 21
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors and executive officers of the Registrant pursuant
to provisions described in Item 15 or otherwise, the Registrant has been advised
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director or
executive officer of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director or executive officer in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement 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.
(2) That, for purposes of determining any liability under the Securities
Act, each filing of the Registrant's annual report pursuant to Section 13(a) or
15(d) of the Exchange Act (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that
is incorporated by reference in the registration statement shall be deemed to be
a new registration statement relating to the securities offered therein and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To deliver or cause to be delivered with the Prospectus, to each person
to whom the Prospectus is sent or given, the latest annual report to security
holders that is incorporated by reference in the Prospectus and furnished
pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the
Exchange Act; and where interim financial information required to be presented
by Article 3 of Regulation S-X are not set forth in the Prospectus, to deliver
or caused to be delivered to each person to whom the Prospectus is sent or
given, the latest quarterly report that is specifically incorporated by
reference in the Prospectus to provide such interim financial information.
(4) That, for the purposes of determining liability under the Securities
Act, each 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.
(5) 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.
(6) That, for purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
II-3
<PAGE> 22
(7) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus 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.
II-4
<PAGE> 23
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Diego, State of California, on November 7, 1997.
CYPRESS BIOSCIENCE, INC.
By: /s/ Susan E. Feiner
--------------------------------
Susan E. Feiner
Director of Finance, Controller and
Secretary
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 substitutes, may lawfully do or cause to be
done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Jay D. Kranzler, M.D. Ph.D. Vice Chairman of the Board of Directors and Chief November 7, 1997
- ---------------------------------------- Executive Officer
Jay D. Kranzler, M.D. Ph.D. (Principal Executive Officer)
/s/ Susan E. Feiner Director of Finance, Controller and Secretary November 7, 1997
- ---------------------------------------- (Principal Financial Officer)
Susan E. Feiner
/s/ Debby Jo Blank, M.D. Director, President and Chief Operating Officer November 7, 1997
- ----------------------------------------
Debby Jo Blank, M.D.
/s/ Richard M. Crooks, Jr. Chairman of the Board November 7, 1997
- ----------------------------------------
Richard M. Crooks, Jr.
/s/ Philip J. O'Reilly Director November 7, 1997
- ----------------------------------------
Philip J. O'Reilly
/s/ Jack H. Vaughn Director November 7, 1997
- ----------------------------------------
Jack H. Vaughn
</TABLE>
II-5
<PAGE> 24
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------ -----------------------
<S> <C>
5.1 Opinion of Cooley Godward LLP
10.1 Forms of Stock Purchase Agreement
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1
24.1 Power of Attorney. Reference is made to page II-5.
</TABLE>
<PAGE> 1
EXHIBIT 5.1
[COOLEY GODWARD LLP LETTERHEAD]
November 7, 1997
Cypress Bioscience, Inc.
4350 Executive Drive
Suite 325
San Diego, CA 92121
Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing by Cypress Bioscience, Inc. (the "Company") of a Registration
Statement on Form S-3 (the "Registration Statement") with the Securities and
Exchange Commission, including a related prospectus filed with the Registration
Statement (the "Prospectus"), covering the offering of 3,501,029 shares of the
Company's Common Stock, $.001 par value, to be sold by certain stockholders, as
described in the Registration Statement (the "Common Stock").
In connection with this opinion, we have examined and relied upon the
Registration Statement and related Prospectus, the Company's Certificate of
Incorporation and Bylaws, both as amended, and the originals or copies certified
to our satisfaction of such records, documents, certificates, memoranda and
other instruments as in our judgment are necessary or appropriate to enable us
to render the opinion expressed below. In rendering this opinion we have
assumed: the genuineness and authenticity of all signatures on original
documents; the authenticity of all documents submitted to us as originals; the
conformity to originals of all documents submitted to us as copies; the
accuracy, completeness and authenticity of certificates of public officials; and
the due authorization, execution and delivery of all documents where
authorization, execution and delivery are prerequisites to the effectiveness of
such documents. We have also assumed that all individuals executing and
delivering documents had the legal capacity to so execute and deliver.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Common Stock is validly issued, fully paid, and nonassessable
We consent to the reference to our firm under the caption "Legal Matters" in the
Prospectus included in the Registration Statement and to the filing of this
opinion as an exhibit to the Registration Statement.
Very truly yours,
COOLEY GODWARD LLP
By: /s/ Frederick T. Muto
-------------------------------------
Frederick T. Muto
<PAGE> 1
EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "Agreement") is made as of September __,
1997 between CYPRESS BIOSCIENCE, INC., a Delaware corporation with its principal
place of business at 4350 Executive Drive, Suite 325, San Diego, California
92121 (the "Company"), and the purchaser whose name and address is set forth on
the signature page hereof (the "Purchaser").
IN CONSIDERATION of the mutual covenants contained in this Agreement, and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Company and the Purchaser agree as follows:
1. AUTHORIZATION OF SALE OF THE SHARES. Subject to the terms and conditions of
this Agreement, the Company has authorized the sale of up to three million five
hundred thousand (3,500,000) shares of Common Stock of the Company (the
"Shares") at a sales price of $1.50 per Share.
2. AGREEMENT TO SELL AND PURCHASE THE SHARES. At the Closing (as defined in
Section 3), the Company will sell to the Purchaser, and the Purchaser will buy
from the Company, upon the terms and conditions hereinafter set forth, the
number of Shares for the aggregate purchase price set forth below:
<TABLE>
<CAPTION>
AGGREGATE
NUMBER OF SHARES PURCHASE PRICE PURCHASE
PURCHASED PER SHARE PRICE
--------- --------- -----
<S> <C> <C>
$1.50
</TABLE>
3. DELIVERY OF THE SHARES AT THE CLOSING. The completion of the purchase and
sale of the Shares to be issued pursuant to this Agreement (the "Closing") shall
occur upon (i) receipt by the Company of (A) a signed copy of this Agreement,
(B) a completed Stock Certificate and Funds Transfer Questionnaire, the form of
which is attached hereto as Exhibit A, (C) a signed and dated Investor
Qualification Questionnaire, a form of which is attached hereto as Exhibit B,
and (D) the aggregate purchase price for the Shares, or (ii) on such other date
as may be agreed to by the Company and the Purchaser. At the Closing, the
Company shall deliver to the Purchaser or the Purchaser's custodian bank, in
accordance with the Purchaser's delivery instructions, one or more stock
certificates registered in the name of the Purchaser, or in such nominee name(s)
as designated by the Purchaser, representing the number of Shares set forth in
Section 2 above. The name(s) in which the stock certificates are to be issued
are set forth in the Stock Certificate and Funds Transfer Questionnaire attached
hereto as part of Exhibit A. The Company's obligation to complete the purchase
and sale of the Shares and deliver such stock certificate(s) to the Purchaser at
the Closing shall be subject to the following conditions, any one or more of
which may be waived by the Company: (a) subject to delivery of the share
certificates to the Purchaser or Purchaser's custodian bank, receipt by the
Company of immediately available funds, by check or wire transfer, in the full
amount of the purchase price for the Shares being purchased hereunder;
<PAGE> 2
(b) receipt by the Company of a signed and dated Investor Qualification
Questionnaire attached as Exhibit B hereto; (c) the accuracy of the
representations and warranties made by the Purchaser herein as of the Closing;
and (d) the fulfillment of those undertakings of the Purchaser to be fulfilled
prior to the Closing. The Purchaser's obligation to accept delivery of such
stock certificate(s) and to pay for the Shares evidenced thereby shall be
subject to the following conditions: (i) the accuracy of the representations and
warranties made by the Company herein as of the Closing; and (ii) the
fulfillment in all material respects of those undertakings of the Company to be
fulfilled prior to the Closing. Upon receipt by the Purchaser's custodian bank
of certificates evidencing the number of Shares being purchased hereunder, the
Purchaser shall cause its custodian bank to remit the full amount of the
aggregate purchase price to the Company in immediately available funds, by check
or wire transfer. The Purchaser's obligations hereunder are expressly not
conditioned on the purchase of any or all of the Shares by any other person or
entity.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS. The Company hereby represents and
warrants to, and covenants with, the Purchaser as follows:
4.1 ORGANIZATION AND QUALIFICATION. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to conduct its
business as currently conducted.
4.2 DUE EXECUTION, DELIVERY AND PERFORMANCE OF THE AGREEMENTS. The
Company's execution, delivery and performance of this Agreement (a) has been
duly authorized by all requisite corporate action by the Company, and (b) will
not violate the Certificate of Incorporation or Bylaws of the Company or violate
or result in a breach of or constitute a default under, any provision of any
material indenture, mortgage, agreement, contract or other material instrument
to which the Company or any subsidiary is a party or by which the Company or any
subsidiary or any of their respective properties or assets is bound as of the
date hereof. Upon the execution and delivery, and assuming the valid execution
thereof by the Purchaser, this Agreement will constitute a valid and binding
obligation of the Company, enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law) and except as the indemnification agreements
of the Company in Section 7.8 hereof may be legally unenforceable.
4.3 ISSUANCE, SALE AND DELIVERY OF THE SHARES. The authorized capital stock
of the Company consists of sixty million (60,000,000) shares of Common Stock and
fifteen million (15,000,000) shares of Preferred Stock, $0.02 par value per
share. As of September 25, 1997, there were issued and outstanding 34,636,067
shares of the Company's Common Stock, which shares are duly authorized, validly
issued, fully paid and nonassessable. When issued, delivered to Purchaser or
Purchaser's custodian bank and paid for by Purchaser in accordance with the
terms and conditions of this Agreement, the Shares to be sold hereunder by the
Company will be validly issued, fully paid and nonassessable and will be
delivered to Purchaser free and clear of all liens, pledges, claims,
encumbrances, security interests or other restrictions, except for
2.
<PAGE> 3
restrictions on transfer imposed to ensure compliance with the Securities Act of
1993, as amended (the "Securities Act").
4.4 ADDITIONAL INFORMATION. The Company represents and warrants that the
information contained in the following documents, which the Company has
furnished to the Purchaser, is true and correct in all material respects as of
their respective final dates:
(a) the Company's Annual Report on Form 10-K for the year ended
December 31, 1996 (without exhibits);
(b) the Company's Quarterly Reports on Form 10-Q for the periods ended
March 31 and June 30, 1997 (the "Form 10-Qs");
(c) the Company's Current Report on Form 8-K dated as of January 17,
1997;
(d) the Company's Proxy Statement dated September 2, 1997 for the
Company's 1997 Annual Meeting of Stockholders;
(e) the Company's Press Releases dated June 30, 1997 and July 28, 1997
(collectively, the "Press Releases"); and
(f) the Company's Private Placement Memorandum dated September 8, 1997
(the "Memorandum") prepared in connection with the issuance of the Shares.
4.5 NO MATERIAL CHANGE. As of the date hereof, except as may be reflected
in the Form 10-Qs, the Memorandum or the Press Releases, there has been no
material adverse change in the financial condition or results of operations of
the Company since June 30, 1997.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER.
The Purchaser represents, warrants and covenants with the Company as
follows:
5.1 The Purchaser represents and warrants to, and covenants with, the
Company that: (i) the Purchaser, taking into account the personnel and resources
it can practically bring to bear on the purchase of the Shares contemplated
hereby, is knowledgeable, sophisticated and experienced in making, and is
qualified to make, decisions with respect to investments in shares presenting an
investment decision like that involved in the purchase of the Shares, including
investments in securities issued by the Company, and has requested, received,
reviewed and considered all information it deems relevant in making an informed
decision to purchase the Shares; (ii) the Purchaser is acquiring the number of
Shares set forth in Section 2 above for its own account for investment only and
with no present intention of distributing any of such Shares or any arrangement
or understanding with any other persons regarding the distribution of such
Shares; (iii) the Purchaser will not, directly or indirectly, offer, sell,
pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase
or otherwise acquire or take a pledge of) any of the Shares except in compliance
with the Securities Act and the rules and regulations promulgated thereunder;
(iv) the Purchaser has completed or caused to be completed the Stock Certificate
and Funds Transfer Questionnaire, attached hereto as Exhibit A and the answers
3.
<PAGE> 4
thereto are true and correct to the best knowledge of the Purchaser as of the
date hereof; (v) the Purchaser has, in connection with its decision to purchase
the number of Shares set forth in Section 2 above, relied solely upon the
information delivered to the Purchaser as described in Section 4.4 above and the
representations and warranties of the Company contained herein; and (vi) the
Purchaser is an "accredited investor" within the meaning of Rule 501 of
Regulation D promulgated under the Securities Act and has completed or caused to
be completed the relevant Investor Qualification Questionnaire attached hereto
as Exhibit B.
5.2 The Purchaser further represents and warrants to, and covenants with,
the Company that (i) the Purchaser has full right, power, authority and capacity
to enter into this Agreement and to consummate the transactions contemplated
hereby and has taken all necessary action to authorize the execution, delivery
and performance of this Agreement, and (ii) upon the execution and delivery of
this Agreement, this Agreement shall constitute a valid and binding obligation
of the Purchaser enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law) and except as the indemnification agreements
of the Purchaser in Section 7.8 hereof may be legally unenforceable.
5.3 Purchaser acknowledges and agrees that the Shares acquired by Purchaser
must be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. Purchaser
has been advised or is aware of the provisions of Rule 144 promulgated under the
Securities Act, which permits limited resale of securities in a private
placement subject to the satisfaction of certain conditions, including, among
other things: the availability of certain current public information about the
Company, the resale occurring not less than one year after a party has purchased
and paid for the security to be sold, the sale being made through an unsolicited
"broker's transaction" or in transactions directly with a market maker (as said
term is defined under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) and the number of shares being sold during any three-month
period not exceeding specified limitations.
6. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. Notwithstanding any
investigation made by any party to this Agreement, all covenants, agreements,
representations and warranties made by the Company and the Purchaser herein and
in the certificates for the Shares delivered pursuant hereto shall survive the
execution of this Agreement, the delivery to the Purchaser of the Shares being
purchased and the payment therefor.
7. REGISTRATION OF THE SHARES; COMPLIANCE WITH THE SECURITIES ACT.
7.1 DEFINITIONS. As used in this Section 7, the following terms shall have
the following respective meanings:
(a) The term "Holder" shall mean any person owning of record
Registrable Securities, including the original holder of Registrable Securities
and any and all concurrent or
4.
<PAGE> 5
subsequent holders of Registrable Securities whom have received such Registrable
Securities in compliance with this Agreement.
(b) The term "Registrable Securities" shall mean (i) the Shares; and
(ii) any capital stock of the Company issued as (or issuable upon the conversion
or exercise of any warrant, right or other security which is issued as) a
dividend or other distribution with respect to, or in exchange for, or in
replacement of, the Shares. Notwithstanding the foregoing, Registrable
Securities shall not include any securities sold by a person to the public
either pursuant to a registration statement or Rule 144 or sold in a private
transaction in which the transferor's rights under Section 7.9 of this Agreement
are not assigned.
(c) The term "Registration Expenses" shall mean all expenses incurred
by the Company in complying with Sections 7.3 and 7.4 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel and independent public accountants for the Company and
blue sky fees and expenses (but excluding underwriting and/or selling
commissions incurred with respect to the Registrable Securities).
(d) The term "Registration Statement" shall include any final
prospectus, exhibit, supplement or amendment included in or relating to any
registration statement referred to in this Section 7.
(e) The term "SEC" or "Commission" shall mean the Securities and
Exchange Commission.
(f) The term "untrue statement" shall include any untrue statement or
alleged untrue statement, or any omission or alleged omission to state in the
Registration Statement a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
7.2 RESTRICTIONS ON TRANSFER. Holder agrees not to make any disposition of
all or any portion of the Registrable Securities unless and until: (i) there is
then in effect a registration statement under the Securities Act covering such
proposed disposition and such disposition is made in accordance with such
registration statement; or (ii) there exists an applicable exemption under the
Securities Act.
7.3 PIGGY-BACK REGISTRATIONS.
(a) The Company shall notify all Holders of Registrable Securities in
writing of the proposed filing of any registration statement under the
Securities Act for purposes of a public offering of securities of the Company
(other than registration statements on Form S-8 or Form S-4) and will afford
each such Holder an opportunity to include in such registration statement (other
than registration statements on Form S-8 or Form S-4) all or part of any
Registrable Securities held by such Holder. Each Holder desiring to include in
any such registration statement all or any part of the Registrable Securities
held by it shall, within fifteen (15) days after the above-described notice from
the Company, so notify the Company in writing. If a Holder decides not to
include all of its Registrable Securities in any registration statement
thereafter filed by the Company, such Holder shall nevertheless continue to have
the right to
5.
<PAGE> 6
include any Registrable Securities in any subsequent registration statement or
registration statements as may be filed by the Company with respect to offerings
of its securities, all upon the terms and conditions set forth herein.
(b) UNDERWRITING. If the registration statement under which the
Company gives notice under this Section 7.3 is for an underwritten offering, the
Company shall so advise the Holders of Registrable Securities. In such event,
the right of any such Holder to be included in a registration pursuant to this
Section 7.3 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of this Agreement, if the underwriter determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting
shall be decreased (i) first by the number of Registrable Securities held by
directors, officers or employees of the Company so seeking to have such
Registrable Securities included in the registration statement, and, if such
decrease is not sufficient, then (ii) by the number of Registrable Securities
and other securities of the Company so proposed to be sold and so requested by
Holders of Registrable Securities (other than directors, officers or employees
of the Company holding Registrable Securities) to be included in such
registration statement and any other holder of securities of the Company with
rights to have securities included in such registration statement (pro rata on
the basis of the percentage of the securities of the Company held by such
Holders of Registrable Securities and holders of other securities) to the extent
necessary to reduce the number of securities to be included in the registration
statement to the level recommended by the underwriter. No such reduction shall
reduce the securities being offered by the Company for its own account to be
included in the registration and underwriting.
(c) RIGHT TO TERMINATE REGISTRATION. The Company shall have the right
to terminate or withdraw any registration statement initiated by it under this
Section 7.3 prior to the effectiveness of such registration statement whether or
not any Holder has elected to include securities in such registration statement.
The Registration Expenses of such withdrawn registration statement shall be
borne by the Company in accordance with Section 7.6 hereof.
7.4 RESALE S-3 REGISTRATION RIGHTS.
The Company shall:
(A) upon the earlier to occur of (i) the day that is ninety (90) days
after the consummation of the next underwritten public offering of equity
securities of the Company, and (ii) three hundred (300) days following the
Closing, prepare and file with the Commission a Registration Statement on Form
S-3 in order to register the Registrable Securities with the Commission for
resale by the Holders from time to time through underwriters, agents or
otherwise, in negotiated or market transactions or through the automated
quotation system of the Nasdaq or the facilities of any national securities
exchange on which the Company's Common Stock is then traded or in privately
negotiated transactions;
6.
<PAGE> 7
(B) use its best efforts, subject to the receipt of necessary
information from the Holders, to cause the Registration Statement to become
effective within sixty (60) days after the Registration Statement is filed by
the Company;
(C) prepare and file with the Commission such amendments and
supplements to the Registration Statement and the prospectus used in connection
therewith as may be necessary to keep the Registration Statement effective until
the earlier to occur of (i) the sale of all Registrable Securities registered
pursuant thereto, and (ii) the date that all Registrable Securities held by each
Holder may be sold under Rule 144 during any ninety (90) day period (provided
that the Company shall not be deemed to have used its best efforts to keep the
Registration Statement effective if it voluntarily takes any action that would
result in Holder not being able to sell any of its Registrable Securities
pursuant to the Registration Statement unless (i) such action is required under
applicable law or taken by the Company in good faith and for valid business
reasons, including without limitation the acquisition or divestiture of assets
and (ii) the Company promptly complies with the requirements of this Section
7.4, if applicable);
(D) furnish to the Holder with respect to the Registrable Securities
registered under the Registration Statement such number of copies of
prospectuses and preliminary prospectuses in conformity with the requirements of
the Securities Act, in order to facilitate the public sale or other disposition
of all or any of the Registrable Securities by the Holder; provided, however,
that the obligation of the Company to deliver copies of prospectuses or
preliminary prospectuses to the Holder shall be subject to the receipt by the
Company of reasonable assurances from the Holder that the Holder will comply
with the applicable provisions of the Securities Act and of such other
securities or blue sky laws as may be applicable in connection with any use of
such prospectuses or preliminary prospectuses; and
(E) file documents required of the Company for normal blue sky
clearance in states specified in writing by the Holder; provided, however, that
the Company shall not be required to qualify to do business or consent to
service of process in any jurisdiction in which it is not now so qualified or
has not so consented.
7.5 TRANSFER OF SHARES AFTER REGISTRATION. The Holder agrees that it will
not effect any disposition of the Registrable Securities that would constitute a
sale within the meaning of the Securities Act except as contemplated in Section
7.2 and that it will promptly notify the Company of any changes in the
information set forth in the Registration Statement regarding the Holder or its
plan of distribution.
7.6 EXPENSES OF REGISTRATION. Except as specifically provided herein, all
Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Sections 7.3 and 7.4 herein shall be
borne by the Company.
7.7 TERMINATION OF REGISTRATION RIGHTS. A Holder's registration rights
under this Section 7 shall expire on the date that all Registrable Securities
held by and issuable to such Holder (and its affiliates) may be sold under Rule
144 during any ninety (90) day period.
7.
<PAGE> 8
7.8 INDEMNIFICATION. In the event any Registrable Securities are included
in a registration statement under Sections 7.3 or 7.4:
(a) The Company agrees to indemnify and hold harmless each Holder from
and against any losses, claims, damages or liabilities to which such Holder may
become subject (under the Securities Act or otherwise), insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of, or are based upon, any untrue statement of a material fact
contained in the Registration Statement on the effective date of such
Registration Statement, or arise out of any failure by the Company to fulfill
any undertaking included in the Registration Statement, and the Company will
reimburse such Holder for any reasonable legal or other expenses reasonably
incurred in investigating, defending or preparing to defend any such action,
proceeding or claim; provided, however, that the Company shall not be liable in
any such case to the extent that such loss, claim, damage or liability arises
out of, or is based upon, an untrue statement made in such Registration
Statement in reliance upon and in conformity with written information furnished
to the Company by or on behalf of such Holder specifically for use in
preparation of the Registration Statement, or the failure of such Holder to
comply with the covenants and agreements contained in Sections 5.1 and 7.5
hereof respecting the sale of the Shares or any statement or omission in any
prospectus that is corrected in any subsequent prospectus that was delivered to
the Holder prior to the pertinent sale or sales by the Holder.
(b) The Holder agrees to indemnify and hold harmless the Company (and
each person, if any, who controls the Company within the meaning of Section 15
of the Securities Act, each officer of the Company who signs the Registration
Statement and each director of the Company) from and against any losses, claims,
damages or liabilities to which the Company (or any such officer, director or
controlling person) may become subject (under the Securities Act or otherwise),
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon, any failure to
comply with the covenants and agreements contained in Sections 5.1 and 7.5
hereof respecting the sale of the Registrable Securities, or any untrue
statement of a material fact contained in the Registration Statement on the
effective date of such Registration Statement if such untrue statement was made
in reliance upon and in conformity with written information furnished by or on
behalf of the Holder specifically for use in preparation of the Registration
Statement, and the Holder will reimburse the Company (or such officer, director
or controlling person), as the case may be, for any legal or other expenses
reasonably incurred in investigating, defending or preparing to defend any such
action, proceeding or claim. In no event shall the liability of the Holder
hereunder be greater in amount than the dollar amount of the proceeds received
by the Holder upon the sale of Registrable Securities giving rise to such
indemnification obligation.
(c) Promptly after receipt by an indemnified party under this Section
7.8 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 7.8, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and
8.
<PAGE> 9
expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, if materially
prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
7.8, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 7.8.
(d) If the indemnification provided for in this Section 7.8 is held by
a court of competent jurisdiction to be unavailable to an indemnified party with
respect to any losses, claims, damages or liabilities referred to herein, the
indemnifying party, in lieu of indemnifying such indemnified party thereunder,
shall to the extent permitted by applicable law contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the violation(s) that resulted in such loss, claim, damage or
liability, as well as any other relevant equitable considerations. The relative
fault of the indemnifying party and of the indemnified party shall be determined
by a court of law by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a material
fact relates to information supplied by the indemnifying party or by the
indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission;
provided, that in no event shall any contribution by a Holder hereunder exceed
the proceeds from the offering received by such Holder.
(e) The obligations of the Company and Holders under this Section 7.8
shall survive completion of any offering of Registrable Securities in a
registration statement and the termination of this Agreement. No indemnifying
party, in the defense of any such claim or litigation, shall, except with the
consent of each indemnified party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation.
7.9 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company to
include Registrable Securities in a registration statement pursuant to this
Section 7 may be assigned by a Holder to a transferee or assignee of Registrable
Securities which (i) is a subsidiary, parent, general partner, limited partner
or retired partner of a Holder or (ii) is a Holder's family member or trust
created for the benefit of an individual Holder; provided, however, (A) the
transferor shall, within ten (10) days after such transfer, furnish to the
Company written notice of the name and address of such transferee or assignee
and the securities with respect to which such registration rights are being
assigned and (B) such transferee shall agree to be subject to all restrictions
set forth in this Agreement.
9.
<PAGE> 10
7.10 RULE 144 REPORTING. With a view to making available to the Holders the
benefits of certain rules and regulations of the SEC which may permit the sale
of the Registrable Securities to the public without registration, the Company
agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act; and
(b) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Exchange Act.
8. BROKER'S FEE.
(a) Each of the parties hereto hereby represents that, except as
provided in Section 8(b), on the basis of any actions and agreements by it,
there are no brokers or finders entitled to compensation in connection with the
sale of Shares to the Purchaser.
(b) The Company has agreed to pay to certain persons or entities who
have been retained by the Company to assist it with the sale of Shares being
offered hereby a fee in an amount equal to six percent (6%) of the total sales
price of any Shares sold by any such person or entity.
9. NOTICES. All notices, requests, consents and other communications hereunder
shall be in writing, shall be sent by facsimile or mailed by first class
registered or certified airmail, or nationally recognized overnight express
courier postage prepaid, and shall be deemed given when so sent by facsimile or
mailed and shall be delivered as follows:
(a) if to the Company, to:
Cypress Bioscience, Inc.
4350 Executive Drive
Suite 325
San Diego, CA 92121
Attention: Director of Finance
with a copy so mailed to:
Cooley Godward LLP
4365 Executive Drive
Suite 1100
San Diego, California 92121
Attention: Frederick T. Muto, Esq.
or to such other person at such other place as the Company shall designate to
the Purchaser in writing; and
(b) if to the Purchaser, at its address as set forth at the end of
this Agreement, or at such other address or addresses as may have been furnished
to the Company in writing.
10.
<PAGE> 11
10. CHANGES. This Agreement may not be modified or amended except pursuant to an
instrument in writing signed by the Company and the Purchaser.
11. HEADINGS. The headings of the various sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be part of
this Agreement.
12. SEVERABILITY. In case any provision contained in this Agreement should be
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
13. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware as applied to contracts
entered into and performed entirely in Delaware by Delaware residents.
14. COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which shall constitute an original, but all of which, when taken
together, shall constitute but one instrument.
15. REMEDIES. In addition to being entitled to exercise all rights and remedies
provided herein or granted by law for any breach by the Company hereunder, the
Purchaser will be entitled to specific performance of its rights under this
Agreement. In that regard, the Company acknowledges and agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of this Agreement and hereby agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate.
11.
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
CYPRESS BIOSCIENCE, INC. PURCHASER
-----------------------------------
Print Name
By: By
-------------------------------- ---------------------------------
Name: Name
------------------------------ -------------------------------
Title: Title
----------------------------- ------------------------------
Address:
---------------------------
---------------------------
---------------------------
---------------------------
Telephone:
-------------------------
Telecopier:
------------------------
12.
<PAGE> 13
SUMMARY INSTRUCTION SHEET FOR PURCHASER
(TO BE READ IN CONJUNCTION WITH THE ENTIRE
STOCK PURCHASE AGREEMENT WHICH FOLLOWS)
A. Complete the following items on the Purchase Agreement:
1. Page 11 - Signature:
(I) Name of Purchaser (Individual or Institution)
(II) Name of Individual representing Purchaser (if an Institution)
(III) Title of Individual representing Purchaser (if an Institution)
(IV) Signature of Individual Purchaser or Individual representing
Purchaser
2. Exhibit A - Stock Certificate and Funds Transfer Questionnaire:
Provide the information requested by the Stock Certificate and
Funds Transfer Questionnaire.
3. Exhibit B - Investor Qualification Questionnaire:
Two forms of Investor Qualification Questionnaires have been
included as Exhibit B, one to be completed by individual
purchasers and one to be completed by entity purchasers (e.g.,
corporation, trust, partnership). Please complete, sign and
return the appropriate Investor Qualification Questionnaire.
4. Return the properly completed and signed Stock Purchase Agreement
including properly completed Exhibit A and Exhibit B and, if paying by
check, a check for the full purchase price, to:
Cypress Bioscience, Inc.
4350 Executive Drive, Suite 325
San Diego, CA 92121
Attn: Susan E. Feiner
T: (619) 452-2323
F: (619) 452-1222
PLEASE RETURN THE FOREGOING DOCUMENTS BY FEDEX.
<PAGE> 14
EXHIBIT A
CYPRESS BIOSCIENCE, INC.
STOCK CERTIFICATE AND FUNDS TRANSFER QUESTIONNAIRE
Pursuant to Section 3 of the Stock Purchase Agreement, please provide us
with the following information:
1. The exact name that your Shares are
to be registered in (this is the ------------------------------
name that will appear on your stock
certificate(s)). You may use a
nominee name if appropriate:
2. The relationship between the
Purchaser of the Shares and the ------------------------------
Registered Holder listed in
response to item 1 above:
3. The mailing address of the
Registered Holder listed in ------------------------------
response to item 1 above:
4. The Social Security Number or Tax
Identification Number of the ------------------------------
Registered Holder listed in the
response to item 1 above:
5. Whether you will be making payment Check [ ]
for the Shares with a check or wire
transfer (check appropriate box). Wire Transfer [ ]
If you will be sending a wire
transfer, please provide the name
of your bank and the proposed
initiation date of the wire: Name of your bank
-------------
------------------------------
------------------------------
Date of initiation
------------
------------------------------
2.
<PAGE> 15
EXHIBIT B
CYPRESS BIOSCIENCE, INC.
INVESTOR QUALIFICATION QUESTIONNAIRE
[INDIVIDUALS]
In connection with a proposed offer to the undersigned of securities of
Cypress Bioscience, Inc., a Delaware corporation (the "Company"), the
undersigned makes the following representations on which the Company shall be
entitled to rely:
1. The undersigned makes on the following representations regarding his or
her net worth and/or income, and has checked the applicable representation:
( ) a. The undersigned has a net worth, either individually or upon a
joint basis with the undersigned's spouse, of at least
$1,000,000.
( ) b. The undersigned has had an individual income in excess of
$200,000 for each of the two most recent years, or joint income
with the undersigned's spouse in excess of $300,000 in each of
those years, and has a reasonable expectation of reaching the
same income level in the current year.
( ) c. The undersigned is a director or executive officer of the
Company.
( ) d. The undersigned cannot make any of the representations set forth
above.
In addition, the undersigned represents as follows:
2. My full name and primary business address and phone number are
---------
-----------------------------------------------------------------------
3. I am a resident of the state of
----------------------------------------
4. I am acquiring the securities solely for my own account and not directly
or indirectly for the account of any other person whatsoever, for investment and
not with a view to, or for sale in connection with, any distribution of the
securities. I do not have any contract, undertaking or arrangement with any
person to sell, transfer or grant a participation to any person with respect to
the securities.
------------------------------
(Signature)
------------------------------
(Date)
<PAGE> 16
EXHIBIT B
CYPRESS BIOSCIENCE, INC.
INVESTOR QUALIFICATION QUESTIONNAIRE
[PARTNERSHIP, TRUST OR OTHER ENTITY]
In connection with a proposed offer to the undersigned of securities of
Cypress Bioscience, Inc., a Delaware corporation (the "Company"), the
undersigned makes the following representations on which the Company shall be
entitled to rely:
1. The undersigned makes one of the following representations regarding its
net worth and certain related matters, and has checked the applicable
representation:
( ) a. The undersigned is a trust with total assets in excess of
$5,000,000, whose purchase is directed by a person with such
knowledge and experience in financial and business matters that
he is capable of evaluating the merits and risks of the
prospective investment.
( ) b. The undersigned represents that it is a bank, insurance company,
investment company registered under the Investment Company Act of
1940, a business development company, Small Business Investment
Company licensed by the U.S. Small Business Administration, or a
private business development company.
( ) c. If the undersigned is an employee benefit plan, the undersigned
represents either that all investment decisions are ------ made
by a bank, insurance company, or registered investment advisor,
or that the undersigned has total assets in excess -- of
$5,000,000.
( ) d. If the undersigned is a corporation, partnership or business
trust, the undersigned represents that it has total assets in
excess of $5,000,000.
( ) e. If the undersigned is not an entity described in paragraphs "a"
through "d", the undersigned represents that each of its equity
owners is either (i) an entity described in paragraphs "b"
through "d"; or (ii) an individual who (A) has an individual net
worth, or a joint net worth with such individual's spouse, in
excess of $1,000,000, or (B) has had an individual income in
excess of $200,000 in each of the two most recent years and
reasonably expects an income in excess of $200,000 in the current
year, or (C) is a director or executive officer of the Company.
( ) f. The undersigned cannot make any of the representations set forth
in paragraphs "a" through "e" above.
In addition, the undersigned represents as follows:
<PAGE> 17
2. Its full name and primary business address and phone number are:
-------
- -------------------------------------------------------------------------------
3. Its form, state and date of organization are (i.e., partnership,
corporation or trust, state where organized, date of organization):
------------
- -------------------------------------------------------------------------------
4. The entity has sufficient profits and net assets that it does not
contemplate disposing of any investment in the Company to satisfy other
undertakings or indebtedness. It has made other investments in early stage
privately-held companies and the person(s) making the investment decision on its
behalf understand the risks attendant with such investments. The knowledge and
experience in financial and business matters of the person(s) making the
investment decision on its behalf are such that he/she/they are capable of
evaluating the merits and risks of an investment in the Company. It is able to
bear the economic risk of an investment in the Company as well as the
restriction on its ability to sell or transfer the investment for an indefinite
period of time. It has had access to such information concerning the Company and
the securities as it considered necessary to make an informed decision
concerning the proposed investment.
5. It was not formed for the specific purpose of making an investment in
the Company.
6. It is acquiring the securities solely for its own account and not
directly or indirectly for the account of any other person whatsoever, for
investment and not with a view to, or for sale in connection with, any
distribution of the securities. It does not have any contract, undertaking or
arrangement with any person to sell, transfer or grant a participation to any
person with respect to the securities.
Name of Entity:
By:
--------------------------------
(Signature)
-----------------------------------
(Name)
-----------------------------------
(Title)
-----------------------------------
(Date)
<PAGE> 18
EXHIBIT C
Attention:
CERTIFICATE OF SUBSEQUENT SALE
The undersigned, an officer of, or other person duly authorized by
------------------------------------------------------------------
[fill in official name of individual or institution]
hereby certifies that he/she sold the shares evidenced by the attached
certificate on ________ in accordance with registration statement
number
[date]
____________________________________________and the requirement of
[fill in the number of or otherwise identify registration statement]
delivering a current prospectus has been complied with in connection
with such sale.
Print or Type:
Name (Individual or Institution):
-----------------------------
Name of Individual representing Institution
(if applicable)
-----------------------------
Title of Individual representing Institution
(if applicable):
-----------------------------
Signature by:
Individual Purchaser or Individual
representing Institution:
-----------------------------
<PAGE> 19
STOCK PURCHASE AGREEMENT
<PAGE> 20
TABLE OF CONTENTS
1. AUTHORIZATION OF SALE OF THE SHARES......................................1
2. AGREEMENT TO SELL AND PURCHASE THE SHARES................................1
3. DELIVERY OF THE SHARES AT THE CLOSING....................................1
4. REPRESENTATIONS, WARRANTIES AND COVENANTS................................2
4.1 Organization and Qualification...............................2
4.2 Due Execution, Delivery and Performance of the Agreements....2
4.3 Issuance, Sale and Delivery of the Shares....................2
4.4 Additional Information.......................................3
4.5 No Material Change...........................................3
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER...............3
6. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS...................4
7. REGISTRATION OF THE SHARES; COMPLIANCE WITH THE SECURITIES ACT...........4
7.1 Definitions..................................................4
7.2 Restrictions on Transfer.....................................5
7.3 Piggy-back Registrations.....................................5
7.4 Resale S-3 Registration Rights...............................6
7.5 Transfer of Shares After Registration........................7
7.6 Expenses of Registration.....................................7
7.7 Termination of Registration Rights...........................7
7.8 Indemnification..............................................8
7.9 Assignment of Registration Rights............................9
7.10 Rule 144 Reporting..........................................10
8. BROKER'S FEE............................................................10
9. NOTICES.................................................................10
10. CHANGES.................................................................11
11. HEADINGS................................................................11
12. SEVERABILITY............................................................11
13. GOVERNING LAW...........................................................11
14. COUNTERPARTS............................................................11
15. REMEDIES................................................................11
<PAGE> 21
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "Agreement") is made as of October __,
1997 between CYPRESS BIOSCIENCE, INC., a Delaware corporation with its principal
place of business at 4350 Executive Drive, Suite 325, San Diego, California
92121 (the "Company"), and the purchaser whose name and address is set forth on
the signature page hereof (the "Purchaser").
IN CONSIDERATION of the mutual covenants contained in this Agreement, and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Company and the Purchaser agree as follows:
1. AUTHORIZATION OF SALE OF THE SHARES. Subject to the terms and conditions of
this Agreement, the Company has authorized the sale of up to three million five
hundred thousand (3,500,000) shares of Common Stock of the Company (the
"Shares") at a sales price of $1.50 per Share.
2. AGREEMENT TO SELL AND PURCHASE THE SHARES. At the Closing (as defined in
Section 3), the Company will sell to the Purchaser, and the Purchaser will buy
from the Company, upon the terms and conditions hereinafter set forth, the
number of Shares for the aggregate purchase price set forth below:
<TABLE>
<CAPTION>
AGGREGATE
NUMBER OF SHARES PURCHASE PRICE PURCHASE
PURCHASED PER SHARE PRICE
--------- --------- -----
<S> <C> <C>
$1.50
</TABLE>
3. DELIVERY OF THE SHARES AT THE CLOSING. The completion of the purchase and
sale of the Shares to be issued pursuant to this Agreement (the "Closing") shall
occur upon (i) receipt by the Company of (A) a signed copy of this Agreement,
(B) a completed Stock Certificate and Funds Transfer Questionnaire, the form of
which is attached hereto as Exhibit A, (C) a signed and dated Investor
Qualification Questionnaire, a form of which is attached hereto as Exhibit B,
and (D) the aggregate purchase price for the Shares, or (ii) on such other date
as may be agreed to by the Company and the Purchaser. At the Closing, the
Company shall deliver to the Purchaser or the Purchaser's custodian bank, in
accordance with the Purchaser's delivery instructions, one or more stock
certificates registered in the name of the Purchaser, or in such nominee name(s)
as designated by the Purchaser, representing the number of Shares set forth in
Section 2 above. The name(s) in which the stock certificates are to be issued
are set forth in the Stock Certificate and Funds Transfer Questionnaire attached
hereto as part of Exhibit A. The Company's obligation to complete the purchase
and sale of the Shares and deliver such stock certificate(s) to the Purchaser at
the Closing shall be subject to the following conditions, any one or more of
which may be waived by the Company: (a) subject to delivery of the share
certificates to the Purchaser or Purchaser's custodian bank, receipt by the
Company of immediately available funds, by check or wire transfer, in the full
amount of the purchase price for the Shares being purchased hereunder;
<PAGE> 22
(b) receipt by the Company of a signed and dated Investor Qualification
Questionnaire attached as Exhibit B hereto; (c) the accuracy of the
representations and warranties made by the Purchaser herein as of the Closing;
and (d) the fulfillment of those undertakings of the Purchaser to be fulfilled
prior to the Closing. The Purchaser's obligation to accept delivery of such
stock certificate(s) and to pay for the Shares evidenced thereby shall be
subject to the following conditions: (i) the accuracy of the representations and
warranties made by the Company herein as of the Closing; and (ii) the
fulfillment in all material respects of those undertakings of the Company to be
fulfilled prior to the Closing. Upon receipt by the Purchaser's custodian bank
of certificates evidencing the number of Shares being purchased hereunder, the
Purchaser shall cause its custodian bank to remit the full amount of the
aggregate purchase price to the Company in immediately available funds, by check
or wire transfer. The Purchaser's obligations hereunder are expressly not
conditioned on the purchase of any or all of the Shares by any other person or
entity.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS. The Company hereby represents and
warrants to, and covenants with, the Purchaser as follows:
4.1 ORGANIZATION AND QUALIFICATION. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to conduct its
business as currently conducted.
4.2 DUE EXECUTION, DELIVERY AND PERFORMANCE OF THE AGREEMENTS. The
Company's execution, delivery and performance of this Agreement (a) has been
duly authorized by all requisite corporate action by the Company, and (b) will
not violate the Certificate of Incorporation or Bylaws of the Company or violate
or result in a breach of or constitute a default under, any provision of any
material indenture, mortgage, agreement, contract or other material instrument
to which the Company or any subsidiary is a party or by which the Company or any
subsidiary or any of their respective properties or assets is bound as of the
date hereof. Upon the execution and delivery, and assuming the valid execution
thereof by the Purchaser, this Agreement will constitute a valid and binding
obligation of the Company, enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law) and except as the indemnification agreements
of the Company in Section 7.5 hereof may be legally unenforceable.
4.3 ISSUANCE, SALE AND DELIVERY OF THE SHARES. The authorized capital stock
of the Company consists of sixty million (60,000,000) shares of Common Stock and
fifteen million (15,000,000) shares of Preferred Stock, $0.02 par value per
share. As of September 25, 1997, there were issued and outstanding 34,636,067
shares of the Company's Common Stock, which shares are duly authorized, validly
issued, fully paid and nonassessable. When issued, delivered to Purchaser or
Purchaser's custodian bank and paid for by Purchaser in accordance with the
terms and conditions of this Agreement, the Shares to be sold hereunder by the
Company will be validly issued, fully paid and nonassessable and will be
delivered to Purchaser free and clear of all liens, pledges, claims,
encumbrances, security interests or other restrictions, except for
2.
<PAGE> 23
restrictions on transfer imposed to ensure compliance with the Securities Act of
1993, as amended (the "Securities Act").
4.4 ADDITIONAL INFORMATION. The Company represents and warrants that the
information contained in the following documents, which the Company has
furnished to the Purchaser, is true and correct in all material respects as of
their respective final dates:
(a) the Company's Annual Report on Form 10-K for the year ended
December 31, 1996 (without exhibits);
(b) the Company's Quarterly Reports on Form 10-Q for the periods ended
March 31 and June 30, 1997 (the "Form 10-Qs");
(c) the Company's Current Report on Form 8-K dated as of January 17,
1997;
(d) the Company's Proxy Statement dated September 2, 1997 for the
Company's 1997 Annual Meeting of Stockholders;
(e) the Company's Press Releases dated June 30, 1997 and July 28, 1997
(collectively, the "Press Releases"); and
(f) the Company's Private Placement Memorandum dated September 8, 1997
prepared in connection with the issuance of the Shares, as amended by that
certain First Supplement to Private Placement Memorandum dated September 30,
1997 (the "Memorandum").
4.5 NO MATERIAL CHANGE. As of the date hereof, except as may be reflected
in the Form 10-Qs, the Memorandum or the Press Releases, there has been no
material adverse change in the financial condition or results of operations of
the Company since June 30, 1997.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER.
The Purchaser represents, warrants and covenants with the Company as
follows:
5.1 The Purchaser represents and warrants to, and covenants with, the
Company that: (i) the Purchaser, taking into account the personnel and resources
it can practically bring to bear on the purchase of the Shares contemplated
hereby, is knowledgeable, sophisticated and experienced in making, and is
qualified to make, decisions with respect to investments in shares presenting an
investment decision like that involved in the purchase of the Shares, including
investments in securities issued by the Company, and has requested, received,
reviewed and considered all information it deems relevant in making an informed
decision to purchase the Shares; (ii) the Purchaser is acquiring the number of
Shares set forth in Section 2 above for its own account for investment only and
with no present intention of distributing any of such Shares or any arrangement
or understanding with any other persons regarding the distribution of such
Shares; (iii) the Purchaser will not, directly or indirectly, offer, sell,
pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase
or otherwise acquire or take a pledge of) any of the Shares except in compliance
with the Securities Act and the rules and regulations
3.
<PAGE> 24
promulgated thereunder; (iv) the Purchaser has completed or caused to be
completed the Stock Certificate and Funds Transfer Questionnaire, attached
hereto as Exhibit A and the answers thereto are true and correct to the best
knowledge of the Purchaser as of the date hereof; (v) the Purchaser has, in
connection with its decision to purchase the number of Shares set forth in
Section 2 above, relied solely upon the information delivered to the Purchaser
as described in Section 4.4 above and the representations and warranties of the
Company contained herein; and (vi) the Purchaser is an "accredited investor"
within the meaning of Rule 501 of Regulation D promulgated under the Securities
Act and has completed or caused to be completed the relevant Investor
Qualification Questionnaire attached hereto as Exhibit B.
5.2 The Purchaser further represents and warrants to, and covenants with,
the Company that (i) the Purchaser has full right, power, authority and capacity
to enter into this Agreement and to consummate the transactions contemplated
hereby and has taken all necessary action to authorize the execution, delivery
and performance of this Agreement, and (ii) upon the execution and delivery of
this Agreement, this Agreement shall constitute a valid and binding obligation
of the Purchaser enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law) and except as the indemnification agreements
of the Purchaser in Section 7.5 hereof may be legally unenforceable.
5.3 Purchaser acknowledges and agrees that the Shares acquired by Purchaser
must be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. Purchaser
has been advised or is aware of the provisions of Rule 144 promulgated under the
Securities Act, which permits limited resale of securities in a private
placement subject to the satisfaction of certain conditions, including, among
other things: the availability of certain current public information about the
Company, the resale occurring not less than one year after a party has purchased
and paid for the security to be sold, the sale being made through an unsolicited
"broker's transaction" or in transactions directly with a market maker (as said
term is defined under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) and the number of shares being sold during any three-month
period not exceeding specified limitations.
6. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. Notwithstanding any
investigation made by any party to this Agreement, all covenants, agreements,
representations and warranties made by the Company and the Purchaser herein and
in the certificates for the Shares delivered pursuant hereto shall survive the
execution of this Agreement, the delivery to the Purchaser of the Shares being
purchased and the payment therefor.
7. REGISTRATION OF THE SHARES; COMPLIANCE WITH THE SECURITIES ACT.
7.1 RESALE REGISTRATION RIGHTS.
(A) The Company shall within thirty (30) days following receipt by the
Company of a written request by the Purchaser, prepare and file with the
Securities and
4.
<PAGE> 25
Exchange Commission (the "Commission") a registration statement (the
"Registration Statement") in order to register the Shares with the Commission
for resale by Purchaser from time to time through underwriters, agents or
otherwise, in negotiated or market transactions or through the automated
quotation system of the Nasdaq or the facilities of any national securities
exchange on which the Company's Common Stock is then traded or in privately
negotiated transactions;
(B) use its best efforts, subject to the receipt of necessary
information from the Purchaser, to cause the Registration Statement to become
effective within sixty (60) days after the Registration Statement is filed by
the Company;
(C) prepare and file with the Commission such amendments and
supplements to the Registration Statement and the prospectus used in connection
therewith as may be necessary to keep the Registration Statement effective for a
period of sixty (60) days after it is declared effective by the Commission or,
if earlier, until Purchaser has sold all of the Shares covered by such
Registration Statement (provided that the Company shall not be deemed to have
used its best efforts to keep the Registration Statement effective if it
voluntarily takes any action that would result in Purchaser not being able to
sell any of its Shares pursuant to the Registration Statement unless (i) such
action is required under applicable law or taken by the Company in good faith
and for valid business reasons, including without limitation the acquisition or
divestiture of assets and (ii) the Company promptly complies with the
requirements of this Section 7.1, if applicable);
(D) furnish to Purchaser with respect to the Shares registered under
the Registration Statement such number of copies of prospectuses and preliminary
prospectuses in conformity with the requirements of the Securities Act, in order
to facilitate the public sale or other disposition of all or any of the Shares
by Purchaser; provided, however, that the obligation of the Company to deliver
copies of prospectuses or preliminary prospectuses to Purchaser shall be subject
to the receipt by the Company of reasonable assurances from Purchaser that
Purchaser will comply with the applicable provisions of the Securities Act and
of such other securities or blue sky laws as may be applicable in connection
with any use of such prospectuses or preliminary prospectuses; and
(E) file documents required of the Company for normal blue sky
clearance in states specified in writing by Purchaser; provided, however, that
the Company shall not be required to qualify to do business or consent to
service of process in any jurisdiction in which it is not now so qualified or
has not so consented.
7.2 TRANSFER OF SHARES AFTER REGISTRATION. Purchaser agrees that it will
not effect any disposition of the Shares that would constitute a sale within the
meaning of the Securities Act except as contemplated in Section 7.1 and that it
will promptly notify the Company of any changes in the information set forth in
the Registration Statement regarding Purchaser or its plan of distribution.
7.3 EXPENSES OF REGISTRATION. All expenses incurred by the Company in
complying with Section 7.1, including without limitation, all registration and
filing fees, printing expenses, fees and disbursements of counsel and
independent public accountants for the Company and blue
5.
<PAGE> 26
sky fees and expenses (but excluding underwriting and/or selling commissions
incurred with respect to the resale of the Shares) shall be borne by the
Company.
7.4 TERMINATION OF REGISTRATION RIGHTS. All registration rights granted
under this Section 7 shall terminate and be of no further force and effect one
(1) year after the date of the Closing.
7.5 INDEMNIFICATION.
(a) For the purposes of this Section 7.5, the following terms shall
have the following meanings:
(i) "Registration Statement" shall include any final prospectus,
exhibit supplement or amendment included in or relating to any registration
statement referred to in this Section 7; and
(ii) "untrue statement" shall include any untrue statement or
alleged untrue statement, or any omission or alleged omission to state in the
Registration Statement a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(b) The Company agrees to indemnify and hold harmless each Holder from
and against any losses, claims, damages or liabilities to which such Purchaser
may become subject (under the Securities Act or otherwise), insofar as such
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) arise out of, or are based upon, any untrue statement of a material
fact contained in the Registration Statement on the effective date of such
Registration Statement, or arise out of any failure by the Company to fulfill
any undertaking included in the Registration Statement, and the Company will
reimburse such Purchaser for any reasonable legal or other expenses reasonably
incurred in investigating, defending or preparing to defend any such action,
proceeding or claim; provided, however, that the Company shall not be liable in
any such case to the extent that such loss, claim, damage or liability arises
out of, or is based upon, an untrue statement made in such Registration
Statement in reliance upon and in conformity with written information furnished
to the Company by or on behalf of such Purchaser specifically for use in
preparation of the Registration Statement, or the failure of such Purchaser to
comply with the covenants and agreements contained in Sections 5.1 and 7.2
hereof respecting the sale of the Shares or any statement or omission in any
prospectus that is corrected in any subsequent prospectus that was delivered to
Purchaser prior to the pertinent sale or sales by Purchaser.
(c) Purchaser agrees to indemnify and hold harmless the Company (and
each person, if any, who controls the Company within the meaning of Section 15
of the Securities Act, each officer of the Company who signs the Registration
Statement and each director of the Company) from and against any losses, claims,
damages or liabilities to which the Company (or any such officer, director or
controlling person) may become subject (under the Securities Act or otherwise),
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon, any failure to
comply with the covenants and agreements contained in Sections 5.1 and 7.2
hereof respecting the sale of the Shares, or any
6.
<PAGE> 27
untrue statement of a material fact contained in the Registration Statement on
the effective date of such Registration Statement if such untrue statement was
made in reliance upon and in conformity with written information furnished by or
on behalf of Purchaser specifically for use in preparation of the Registration
Statement, and Purchaser will reimburse the Company (or such officer, director
or controlling person, as the case may be) for any legal or other expenses
reasonably incurred in investigating, defending or preparing to defend any such
action, proceeding or claim. In no event shall the liability of Purchaser
hereunder be greater in amount than the dollar amount of the proceeds received
by Purchaser upon the sale of Shares giving rise to such indemnification
obligation.
(d) Promptly after receipt by an indemnified party under this Section
7.5 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 7.5, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 7.5, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 7.5.
(e) If the indemnification provided for in this Section 7.5 is held by
a court of competent jurisdiction to be unavailable to an indemnified party with
respect to any losses, claims, damages or liabilities referred to herein, the
indemnifying party, in lieu of indemnifying such indemnified party thereunder,
shall to the extent permitted by applicable law contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the violation(s) that resulted in such loss, claim, damage or
liability, as well as any other relevant equitable considerations. The relative
fault of the indemnifying party and of the indemnified party shall be determined
by a court of law by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a material
fact relates to information supplied by the indemnifying party or by the
indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission;
provided, that in no event shall any contribution by a Purchaser hereunder
exceed the proceeds from the offering received by such Purchaser.
(f) The obligations of the Company and Purchasers under this Section
7.5 shall survive completion of any offering of Shares in a Registration
Statement and the
7.
<PAGE> 28
termination of this Agreement. No indemnifying party, in the defense of any such
claim or litigation, shall, except with the consent of each indemnified party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect to such
claim or litigation.
7.6 RULE 144 REPORTING. With a view to making available to Purchasers the
benefits of certain rules and regulations of the SEC which may permit the sale
of the Shares to the public without registration, the Company agrees to use its
best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in Commission Rule 144 or any similar or analogous rule
promulgated under the Securities Act; and
(b) File with the Commission, in a timely manner, all reports and
other documents required of the Company under the Exchange Act.
8. BROKER'S FEE.
(a) Each of the parties hereto hereby represents that, except as
provided in Section 8(b), on the basis of any actions and agreements by it,
there are no brokers or finders entitled to compensation in connection with the
sale of Shares to the Purchaser.
(b) The Company has agreed to pay to certain persons or entities who
have been retained by the Company to assist it with the sale of Shares being
offered hereby a fee in an amount equal to six percent (6%) of the total sales
price of any Shares sold by any such person or entity.
8.
<PAGE> 29
9. NOTICES. All notices, requests, consents and other communications hereunder
shall be in writing, shall be sent by facsimile or mailed by first class
registered or certified airmail, or nationally recognized overnight express
courier postage prepaid, and shall be deemed given when so sent by facsimile or
mailed and shall be delivered as follows:
(a) if to the Company, to:
Cypress Bioscience, Inc.
4350 Executive Drive
Suite 325
San Diego, CA 92121
Attention: Director of Finance
with a copy so mailed to:
Cooley Godward LLP
4365 Executive Drive
Suite 1100
San Diego, California 92121
Attention: Frederick T. Muto, Esq.
or to such other person at such other place as the Company shall designate to
the Purchaser in writing; and
(b) if to the Purchaser, at its address as set forth at the end of
this Agreement, or at such other address or addresses as may have been furnished
to the Company in writing.
10. CHANGES. This Agreement may not be modified or amended except pursuant to an
instrument in writing signed by the Company and the Purchaser.
11. HEADINGS. The headings of the various sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be part of
this Agreement.
12. SEVERABILITY. In case any provision contained in this Agreement should be
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
13. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware as applied to contracts
entered into and performed entirely in Delaware by Delaware residents.
14. COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which shall constitute an original, but all of which, when taken
together, shall constitute but one instrument.
15. REMEDIES. In addition to being entitled to exercise all rights and remedies
provided herein or granted by law for any breach by the Company hereunder, the
Purchaser will be entitled to specific performance of its rights under this
Agreement. In that regard, the Company
9.
<PAGE> 30
acknowledges and agrees that monetary damages would not be adequate compensation
for any loss incurred by reason of a breach by it of the provisions of this
Agreement and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
10.
<PAGE> 31
IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase
Agreement to be executed by their duly authorized representatives as of the day
and year first above written.
CYPRESS BIOSCIENCE, INC. PURCHASER
-----------------------------------
Print Name
By: By
-------------------------------- ---------------------------------
Name: Name
------------------------------ -------------------------------
Title: Title
----------------------------- ------------------------------
Address:
---------------------------
---------------------------
---------------------------
---------------------------
Telephone:
-------------------------
Telecopier:
------------------------
11.
<PAGE> 32
SUMMARY INSTRUCTION SHEET FOR PURCHASER
(TO BE READ IN CONJUNCTION WITH THE ENTIRE
STOCK PURCHASE AGREEMENT WHICH FOLLOWS)
A. Complete the following items on the Purchase Agreement:
1. Page 11 - Signature:
(I) Name of Purchaser (Individual or Institution)
(II) Name of Individual representing Purchaser (if an Institution)
(III) Title of Individual representing Purchaser (if an Institution)
(IV) Signature of Individual Purchaser or Individual representing
Purchaser
2. Exhibit A - Stock Certificate and Funds Transfer Questionnaire:
Provide the information requested by the Stock Certificate and
Funds Transfer Questionnaire.
3. Exhibit B - Investor Qualification Questionnaire:
Two forms of Investor Qualification Questionnaires have been
included as Exhibit B, one to be completed by individual
purchasers and one to be completed by entity purchasers (e.g.,
corporation, trust, partnership). Please complete, sign and
return the appropriate Investor Qualification Questionnaire.
4. Return the properly completed and signed Stock Purchase Agreement
including properly completed Exhibit A and Exhibit B and, if paying by
check, a check for the full purchase price, to:
Cypress Bioscience, Inc.
4350 Executive Drive, Suite 325
San Diego, CA 92121
Attn: Susan E. Feiner
T: (619) 452-2323
F: (619) 452-1222
PLEASE RETURN THE FOREGOING DOCUMENTS BY FEDEX.
<PAGE> 33
EXHIBIT A
CYPRESS BIOSCIENCE, INC.
STOCK CERTIFICATE AND FUNDS TRANSFER QUESTIONNAIRE
Pursuant to Section 3 of the Stock Purchase Agreement, please provide us
with the following information:
1. The exact name that your Shares are
to be registered in (this is the ------------------------------
name that will appear on your stock
certificate(s)). You may use a
nominee name if appropriate:
2. The relationship between the
Purchaser of the Shares and the ------------------------------
Registered Holder listed in
response to item 1 above:
3. The mailing address of the
Registered Holder listed in ------------------------------
response to item 1 above:
4. The Social Security Number or Tax
Identification Number of the ------------------------------
Registered Holder listed in the
response to item 1 above:
5. Whether you will be making payment Check [ ]
for the Shares with a check or wire
transfer (check appropriate box). Wire Transfer [ ]
If you will be sending a wire
transfer, please provide the name
of your bank and the proposed
initiation date of the wire: Name of your bank
-------------
------------------------------
------------------------------
Date of initiation
------------
------------------------------
2.
<PAGE> 34
EXHIBIT B
CYPRESS BIOSCIENCE, INC.
INVESTOR QUALIFICATION QUESTIONNAIRE
[INDIVIDUALS]
In connection with a proposed offer to the undersigned of securities of
Cypress Bioscience, Inc., a Delaware corporation (the "Company"), the
undersigned makes the following representations on which the Company shall be
entitled to rely:
1. The undersigned makes on the following representations regarding his or
her net worth and/or income, and has checked the applicable representation:
( ) a. The undersigned has a net worth, either individually or upon a
joint basis with the undersigned's spouse, of at least
$1,000,000.
( ) b. The undersigned has had an individual income in excess of
$200,000 for each of the two most recent years, or joint income
with the undersigned's spouse in excess of $300,000 in each of
those years, and has a reasonable expectation of reaching the
same income level in the current year.
( ) c. The undersigned is a director or executive officer of the
Company.
( ) d. The undersigned cannot make any of the representations set forth
above.
In addition, the undersigned represents as follows:
2. My full name and primary business address and phone number are
---------
-----------------------------------------------------------------------
3. I am a resident of the state of
----------------------------------------
4. I am acquiring the securities solely for my own account and not directly
or indirectly for the account of any other person whatsoever, for investment and
not with a view to, or for sale in connection with, any distribution of the
securities. I do not have any contract, undertaking or arrangement with any
person to sell, transfer or grant a participation to any person with respect to
the securities.
------------------------------
(Signature)
------------------------------
(Date)
<PAGE> 35
EXHIBIT B
CYPRESS BIOSCIENCE, INC.
INVESTOR QUALIFICATION QUESTIONNAIRE
[PARTNERSHIP, TRUST OR OTHER ENTITY]
In connection with a proposed offer to the undersigned of securities of
Cypress Bioscience, Inc., a Delaware corporation (the "Company"), the
undersigned makes the following representations on which the Company shall be
entitled to rely:
1. The undersigned makes one of the following representations regarding its
net worth and certain related matters, and has checked the applicable
representation:
( ) a. The undersigned is a trust with total assets in excess of
$5,000,000, whose purchase is directed by a person with such
knowledge and experience in financial and business matters that
he is capable of evaluating the merits and risks of the
prospective investment.
( ) b. The undersigned represents that it is a bank, insurance company,
investment company registered under the Investment Company Act of
1940, a business development company, Small Business Investment
Company licensed by the U.S. Small Business Administration, or a
private business development company.
( ) c. If the undersigned is an employee benefit plan, the undersigned
represents either that all investment decisions are ------ made
by a bank, insurance company, or registered investment advisor,
or that the undersigned has total assets in excess -- of
$5,000,000.
( ) d. If the undersigned is a corporation, partnership or business
trust, the undersigned represents that it has total assets in
excess of $5,000,000.
( ) e. If the undersigned is not an entity described in paragraphs "a"
through "d", the undersigned represents that each of its equity
owners is either (i) an entity described in paragraphs "b"
through "d"; or (ii) an individual who (A) has an individual net
worth, or a joint net worth with such individual's spouse, in
excess of $1,000,000, or (B) has had an individual income in
excess of $200,000 in each of the two most recent years and
reasonably expects an income in excess of $200,000 in the current
year, or (C) is a director or executive officer of the Company.
( ) f. The undersigned cannot make any of the representations set forth
in paragraphs "a" through "e" above.
In addition, the undersigned represents as follows:
<PAGE> 36
2. Its full name and primary business address and phone number are:
-------
- -------------------------------------------------------------------------------
3. Its form, state and date of organization are (i.e., partnership,
corporation or trust, state where organized, date of organization):
------------
- -------------------------------------------------------------------------------
4. The entity has sufficient profits and net assets that it does not
contemplate disposing of any investment in the Company to satisfy other
undertakings or indebtedness. It has made other investments in early stage
privately-held companies and the person(s) making the investment decision on its
behalf understand the risks attendant with such investments. The knowledge and
experience in financial and business matters of the person(s) making the
investment decision on its behalf are such that he/she/they are capable of
evaluating the merits and risks of an investment in the Company. It is able to
bear the economic risk of an investment in the Company as well as the
restriction on its ability to sell or transfer the investment for an indefinite
period of time. It has had access to such information concerning the Company and
the securities as it considered necessary to make an informed decision
concerning the proposed investment.
5. It was not formed for the specific purpose of making an investment in
the Company.
6. It is acquiring the securities solely for its own account and not
directly or indirectly for the account of any other person whatsoever, for
investment and not with a view to, or for sale in connection with, any
distribution of the securities. It does not have any contract, undertaking or
arrangement with any person to sell, transfer or grant a participation to any
person with respect to the securities.
Name of Entity:
By:
--------------------------------
(Signature)
-----------------------------------
(Name)
-----------------------------------
(Title)
-----------------------------------
(Date)
<PAGE> 37
EXHIBIT C
Attention:
CERTIFICATE OF SUBSEQUENT SALE
The undersigned, an officer of, or other person duly authorized by
------------------------------------------------------------------
[fill in official name of individual or institution]
hereby certifies that he/she sold the shares evidenced by the attached
certificate on ________ in accordance with registration statement
number
[date]
____________________________________________and the requirement of
[fill in the number of or otherwise identify registration statement]
delivering a current prospectus has been complied with in connection
with such sale.
Print or Type:
Name (Individual or Institution):
-----------------------------
Name of Individual representing Institution
(if applicable)
-----------------------------
Title of Individual representing Institution
(if applicable):
-----------------------------
Signature by:
Individual Purchaser or Individual
representing Institution:
-----------------------------
<PAGE> 38
CYPRESS BIOSCIENCE, INC.
STOCK PURCHASE AGREEMENT
<PAGE> 39
TABLE OF CONTENTS
1. AUTHORIZATION OF SALE OF THE SHARES.....................................1
2. AGREEMENT TO SELL AND PURCHASE THE SHARES...............................1
3. DELIVERY OF THE SHARES AT THE CLOSING...................................1
4. REPRESENTATIONS, WARRANTIES AND COVENANTS...............................2
4.1 Organization and Qualification..............................2
4.2 Due Execution, Delivery and Performance of the Agreements...2
4.3 Issuance, Sale and Delivery of the Shares...................2
4.4 Additional Information......................................3
4.5 No Material Change..........................................3
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER..............3
6. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS..................4
7. REGISTRATION OF THE SHARES; COMPLIANCE WITH THE SECURITIES ACT..........4
7.1 Resale S-3 Registration Rights..............................4
7.2 Transfer of Shares After Registration.......................5
7.3 Expenses of Registration....................................5
7.4 Indemnification.............................................6
7.5 Rule 144 Reporting..........................................8
8. BROKER'S FEE............................................................8
9. NOTICES.................................................................8
10. CHANGES.................................................................9
11. HEADINGS................................................................9
12. SEVERABILITY............................................................9
13. GOVERNING LAW...........................................................9
14. COUNTERPARTS............................................................9
15. REMEDIES................................................................9
<PAGE> 1
EXHIBIT 23.1
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 17, 1997, in the Registration Statement (Form
S-3) and related Prospectus of Cypress Bioscience, Inc. for the registration of
shares of its common stock.
ERNST & YOUNG LLP
San Diego, California
November 4, 1997
