<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 24, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CYGNUS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 94-2978092
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification
organization) No.)
</TABLE>
400 PENOBSCOT DRIVE
REDWOOD CITY, CALIFORNIA 94063-4719
(650) 369-4300
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
JOHN C. HODGMAN
PRESIDENT, CHIEF EXECUTIVE OFFICER & CHAIRMAN
CYGNUS, INC.
400 PENOBSCOT DRIVE
REDWOOD CITY, CALIFORNIA 94063-4719
(650) 369-4300
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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COPIES TO:
BLAIR W. WHITE
PILLSBURY MADISON & SUTRO LLP
P.O. BOX 7880
SAN FRANCISCO, CALIFORNIA 94120
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after this Registration Statement becomes effective.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / _________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / _________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $.001 par value(3)............ 1,757,989 shares $10.19 $17,909,513 $4,978.84
</TABLE>
(1) Includes (i) up to 1,101,928 shares of common stock to be issued upon
conversion of Cygnus' 8.5% Convertible Debentures due 2004 (the
"Debentures"), (ii) up to 606,061 shares of common stock to be issued upon
exercise of Common Stock Purchase Warrants issued in connection with the
Debentures (the "Debenture Warrants"), (iii) up to 50,000 shares of common
stock to be issued upon exercise of Common Stock Purchase Warrants held by
Reedland Capital Partners (the "Reedland Warrants"), and (iv) an
indeterminate number of additional shares of common stock as may from time
to time become issuable upon conversion of the Debentures, Debenture
Warrants and Reedland Warrants by reason of stock splits, stock dividends
and other similar transactions, which shares are registered hereunder
pursuant to Rule 416 under the Securities Act.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) based upon the average of the high and low prices of
the Company's Common Stock on the Nasdaq National Market on August 13, 1999.
(3) Associated with the Common Stock are Series A Participating Preferred Stock
Purchase Rights that will not be exercisable or be evidenced separately from
the Common Stock prior to the occurrence of certain events.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION, DATED AUGUST 24, 1999
PROSPECTUS
1,757,989 SHARES
CYGNUS, INC.
COMMON STOCK
------------------
These shares may be offered and sold at various times by the stockholders
identified in this prospectus. The offering is not being underwritten. These
shares were issued in connection with a Convertible Debenture and Warrant
Purchase Agreement.
The selling stockholders may offer and sell their shares in transactions on
the Nasdaq National Market, in negotiated transactions, or both. These sales may
occur at fixed prices that are subject to change, at prices that are determined
by prevailing market prices, or at negotiated prices.
The selling stockholders may sell shares to or through broker-dealers, who
may receive compensation in the form of discounts, concessions or commissions
from the selling stockholders, the purchasers of the shares, or both. We will
not receive any of the proceeds from the sale of the shares.
Our common stock is traded on the Nasdaq National Market under the symbol
"CYGN."
------------------------
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CAREFULLY READ AND CONSIDER THE "RISK FACTORS" BEGINNING ON PAGE 8.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The date of this prospectus is , 1999
<PAGE>
We have not authorized anyone to provide you with information or to
represent anything not contained in this prospectus. You must not rely on any
unauthorized information or representations. The selling stockholders are
offering to sell, and seeking offers to buy, only the shares of Cygnus common
stock covered by this prospectus, and only under circumstances and in
jurisdictions where it is lawful to do so. The information contained in this
prospectus is current only as of its date, regardless of the time of delivery of
this prospectus or of any sale of the shares.
YOU SHOULD READ CAREFULLY THE ENTIRE PROSPECTUS, AS WELL AS THE DOCUMENTS
INCORPORATED BY REFERENCE IN THE PROSPECTUS, BEFORE MAKING AN INVESTMENT
DECISION. ALL REFERENCES TO "WE," "US," "OUR," OR THE "COMPANY" IN THIS
PROSPECTUS MEAN CYGNUS, INC.
FORWARD-LOOKING STATEMENTS
Some of the statements under "Our Company" and "Risk Factors" and elsewhere
in this prospectus, including in the documents incorporated by reference, are
forward-looking statements that involve risks and uncertainties. These
forward-looking statements include statements about our plans, objectives,
expectations, intentions and assumptions and other statements contained in this
prospectus, including in the documents incorporated by reference, that are not
statements of historical fact. You can identify these statements by words such
as "may," "will," "should," "estimates," "predicts" "potential," "continue,"
"strategy," "believes," "anticipates," "plans," "expects," "intends" and similar
expressions. We cannot guarantee future results, levels of activity, performance
or achievements. Our actual results and the timing of certain events may differ
significantly from the results discussed in the forward-looking statements.
Factors that might cause such a discrepancy include those discussed in "Risk
Factors" and elsewhere in this prospectus, including in the documents
incorporated by reference.
You should rely only on the information contained in this prospectus. No
dealer, salesperson or other person is authorized to give information that is
not contained in this prospectus. This prospectus is not an offer to sell nor is
it seeking an offer to buy these securities in any jurisdiction where the offer
or sale is not permitted. The information contained in this prospectus is
current only as of its date, regardless of the time of its delivery or any sale
of these securities.
2
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THE COMPANY
We are engaged in the development and manufacture of diagnostic and drug
delivery systems, utilizing proprietary technologies to satisfy unmet medical
needs cost effectively. Our current efforts are primarily focused on two core
areas: a frequent, automatic and non-invasive glucose monitoring device (the
GlucoWatch-Registered Trademark- monitor) and transdermal drug delivery systems.
Cygnus was incorporated in California in 1985 and was merged into a Delaware
corporation in September 1995. Our principal executive offices are located at
400 Penobscot Drive, Redwood City, California 94063, and our telephone number at
that address is (650) 369-4300.
THE GLUCOWATCH-REGISTERED TRADEMARK- SYSTEM.
Our GlucoWatch-Registered Trademark- monitor represents a potential advance
in diabetes care technology as compared to the currently prevailing "finger
stick" blood monitoring method. The GlucoWatch-Registered Trademark- monitor is
designed to measure glucose frequently, automatically and non-invasively through
the ease and convenience of a device worn like a wristwatch. Worldwide sales of
blood glucose self-monitoring products were approximately $2.5 billion in 1997
(Boston Biomedical Consultants, Inc.). It is estimated that more than 40 million
people in North America, Europe, Japan and Korea have diabetes. In the United
States alone, more than ten million people have been diagnosed, with another
five million believed to have the condition. The number of people with diabetes
is expected to continue to grow with the aging of the population, while the
number of diagnosed cases is also expected to increase with changes in
diagnostic standards and new diagnostic technologies.
Clinical studies sponsored by the National Institutes of Health indicate
that better management of glucose levels through more frequent testing would
enable people with diabetes to reduce or significantly delay many serious
diabetes-related health complications. However, largely due to the pain of
repetitive finger sticking and the associated disruption of daily life, we
believe most people with diabetes currently test their glucose levels less than
half as often as recommended. As a result of the drawbacks of the finger stick
method, we believe that there is a significant unmet demand for an automatic and
continuous glucose-monitoring device.
To address this unmet demand, we are developing the
GlucoWatch-Registered Trademark- monitor, which is expected to reduce or
eliminate significant drawbacks of the finger stick testing technique. The
device, which is worn like a wristwatch, is designed to automatically and
non-invasively extract and measure glucose levels through intact skin up to
three times per hour. The extracted glucose is collected in a consumable
component called the AutoSensor, which is attached to the back of the device and
replaced approximately every twelve hours. The GlucoWatch-Registered Trademark-
monitor potentially offers a combination of features, such as:
- an electronic memory to store and display glucose levels;
- the ability to download stored information to personal computers to
analyze glucose data and trends;
- alerts indicating hypo- and hyperglycemic conditions; and
- event markers which record factors that affect glucose levels.
The GlucoWatch-Registered Trademark- monitor can be worn during the day and
night. We believe the GlucoWatch-Registered Trademark- monitor will provide the
frequent testing and trend analysis of glucose levels necessary to enable people
with diabetes to better manage their condition and eliminate the repetitive pain
and inconvenience associated with the finger stick monitoring method. We believe
this unique combination of features will result in better control of glucose
levels, improved quality of life and more cost-effective healthcare.
3
<PAGE>
In developing the GlucoWatch-Registered Trademark- monitor, Cygnus has
sought to design a device that would offer the above features and be safe and
effective for home use by patients with diabetes. In December 1998, we completed
extensive development clinical studies using a version of the
GlucoWatch-Registered Trademark- monitor designed for commercial sale. These
studies were conducted by independent clinical investigators across the U.S. on
people with diabetes. The results of these studies demonstrated that the
GlucoWatch-Registered Trademark- monitor is able to measure glucose levels with
accuracy and precision. The results of the most controlled testing portion of
the development clinical studies exceeded Cygnus' internal performance accuracy
target values. The protocols for the development clinical studies were designed
to be the same as the protocols used in our registration clinical studies.
On January 25, 1999 the Company submitted the first module of the Pre-Market
Approval Application ("PMA") to the FDA. This submission included a variety of
information, including manufacturing documentation. We submitted the second
module of the PMA in June 1999, which included analysis of a series of clinical
studies totaling more than 600 people that were completed in December 1998, as
well as at least two additional studies. Although we believe our clinical
results to date are encouraging, no assurance can be given that data generated
in the clinical studies to date will provide a sufficient basis for the approval
of the GlucoWatch-Registered Trademark- monitor by the FDA. The FDA notified
Cygnus that the PMA for the GlucoWatch-Registered Trademark- monitor has been
deemed suitable for filing. The FDA also granted an expedited review status for
Cygnus' GlucoWatch-Registered Trademark- automatic glucose monitoring device.
In 1996, we entered into collaboration agreements with Becton Dickinson &
Company and Yamanouchi Pharmaceutical Co., Ltd. for the commercialization of the
GlucoWatch-Registered Trademark- monitor. Under the Yamanouchi agreement, Cygnus
granted Yamanouchi the marketing and distribution rights of the
GlucoWatch-Registered Trademark- monitor in Japan and Korea. Cygnus is eligible
to receive up-front and milestone payments prior to commercialization and to
receive a percentage of the product's future commercial success. Under the
Becton Dickinson agreement, we granted Becton Dickinson exclusive worldwide
marketing and distribution rights, with the exception of Japan and Korea. On
March 31, 1998, we announced the termination of our agreement with Becton
Dickinson. Consequently, we will not receive any future milestone payments under
the Becton Dickinson agreement and will not be obligated to share future
revenue, if any, associated with commercialization of the
GlucoWatch-Registered Trademark- monitor in the Becton Dickinson territories. We
are currently in discussions with a short list of companies to establish an
alliance for the commercialization of the GlucoWatch-Registered Trademark-
monitor to provide for distribution, sales, marketing, and customer service
support in North America and Europe. There can be no assurance that we will be
able to enter into new collaborative arrangements.
In 1998, Cygnus entered into long term agreements with E.I. du Pont de
Nemours & Company ("DuPont") for the development and supply of thick film
materials for Cygnus' GlucoWatch-Registered Trademark- monitor. A key component
of the GlucoWatch-Registered Trademark- monitor is the sensor, which we
developed with DuPont's materials. The agreements call for continued cooperation
for future sensor technology developments and continued supply of materials.
OUR TRANSDERMAL DRUG DELIVERY SYSTEMS
Transdermal drug delivery systems provide for the controlled release of
drugs directly into the bloodstream through intact skin. Our transdermal drug
delivery products are thin multilayer systems, in the form of small adhesive
patches. Transdermal delivery can provide a number of advantages over
conventional methods of drug administration, including enhanced efficacy,
increased safety, greater convenience and improved patient compliance. By
delivering a steady flow of drugs into the bloodstream over an extended period
of time, transdermal systems can avoid the "peak and valley" effect of
traditional oral or injectable therapy and can enable more controlled, effective
treatment. By avoiding first pass metabolism through the gastrointestinal tract
and the liver, the therapeutically equivalent dosage for the transdermal
delivery of certain compounds can be significantly less than the corresponding
oral dosage, potentially reducing dosage-related side-effects.
4
<PAGE>
Our transdermal product line is focused on contraception, hormone
replacement therapy and smoking cessation. We have received FDA approval for two
products, one of which is currently marketed, the Nicotrol-Registered Trademark-
(Pharmacia AB, Stockholm, Sweden) nicotine patch. The Company has a strategic
collaboration for its transdermal products with Ortho-McNeil Pharmaceutical,
Inc. ("Ortho"), a subsidiary of Johnson & Johnson (contraception).
The FemPatch-Registered Trademark- (Warner-Lambert Co., Morris Plains, NJ)
system, commercially launched in 1997, is a low-dose, 7-day estrogen replacement
transdermal patch for the treatment of menopausal symptoms. Sanofi S.A.
("Sanofi"), our worldwide licensee, had sublicensed U.S. marketing rights to
Warner-Lambert. In November 1998, Warner-Lambert terminated its agreement with
Sanofi, which also terminated the Supply Agreement between Warner-Lambert and
Cygnus. Consequently, we do not expect product revenue related to the
FemPatch-Registered Trademark- system in 1999.
In July 1998, we were notified by American Home Products Corporation
("AHP"), the licensee for two of our transdermal hormone replacement products,
that AHP wanted to discuss the status of its agreements with Cygnus and that it
intended to exercise its right under the agreements to seek a sublicensee for
the products. AHP and Cygnus negotiated an amendment to the agreements in
November 1998 that provided Cygnus immediate ownership of the regulatory filing
packages for the two products and the right to co-promote the two products as
well. The amendment also provided that if AHP was unable to sign an agreement
with a sublicensee or opted not to reacquire its rights within six months, the
rights to the two products would revert to Cygnus; however, AHP would still be
obligated to continue development activities for the two products for an
additional six months. In June 1999, AHP notified us that a sublicense agreement
was not signed and that AHP would not be exercising its option to reacquire
rights, but that they would support development activities until mid-November
1999. It is uncertain what course of action we will take with regard to these
two products.
OUR PORTFOLIO OF PRODUCTS
The data in the following table summarize our current product portfolio, the
potential indications, development status and licensees of marketing and
distribution rights. The data in the table are qualified by reference to the
more detailed descriptions set forth in our Annual Report on Form 10-K for the
year ended December 31, 1998. Development of the various products listed is
being funded by the designated licensee or distributor, Cygnus, or both. Cygnus
has additional products in early development, which are not listed below, and is
conducting a number of new product feasibility studies.
5
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OUR PRODUCT PORTFOLIO
<TABLE>
<CAPTION>
PRODUCT INDICATIONS STATUS (1) MARKETING RIGHTS
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<S> <C> <C> <C>
DIAGNOSTIC SYSTEMS:
FREQUENT, AUTOMATIC GLUCOSE MONITORING:
GlucoWatch-Registered Trademark- Monitor Diabetes Filed with FDA Cygnus; Yamanouchi
DRUG DELIVERY SYSTEMS:
SMOKING CESSATION:
Nicotrol-Registered Trademark- Patch Smoking cessation Commercialized in North Pharmacia & Upjohn, Inc.;
America and certain Johnson & Johnson (2)
European countries
Nicotine Patch Smoking cessation Pre-clinical Undisclosed
HORMONE REPLACEMENT:
Low-Dose Estrogen 7-Day: Menopausal symptoms Commercialized in North Sanofi (3)
FemPatch-Registered Trademark- System America
Estrogen 7-Day Menopausal symptoms Submitted New Drug American Home Products
Application ("NDA") and (4)
European Dossier
Estrogen/Progestin: Combination 3.5-Day Menopausal symptoms Phase 3 clinicals American Home Products
(4)
CONTRACEPTION:
Combination 7-Day Estrogen/ Progestin: Contraception Phase 3 clinicals Johnson & Johnson (5)
OTHER PRODUCTS:
Clonazepam Anti-epileptic Pre-clinical National Institutes of
Health ("NIH") (6)
Mucosal Disk Breath freshening Marketing Authorization Undisclosed
Filed
Mucosal Disk Sore throat Marketing Authorization Undisclosed
Filed
</TABLE>
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(1) Cygnus' drug delivery products are generally developed in the following
stages: development, prototype, pre-clinical studies in preparation to file
an Investigational New Drug Application ("IND"), clinical trials, and
regulatory submission.
(2) Pharmacia has worldwide rights and has sublicensed rights in North America
to Johnson & Johnson.
(3) In November 1998, Warner-Lambert terminated its agreement with Sanofi, which
also terminated the Supply Agreement between Warner-Lambert and Cygnus.
(4) In June 1999, American Home Products ("AHP") notified Cygnus that AHP would
not be exercising its option to reacquire rights, but that AHP would support
development activities until mid-November 1999.
(5) Cygnus' agreement with Johnson & Johnson grants Johnson & Johnson exclusive
rights to the estrogen/ progestin combination 7-day contraception product.
(6) Product being funded through the first clinical trial by an NIH grant.
6
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RISK FACTORS
IN DETERMINING WHETHER TO INVEST IN THE COMMON STOCK, YOU SHOULD CAREFULLY
CONSIDER THE INFORMATION BELOW IN ADDITION TO ALL OTHER INFORMATION PROVIDED TO
YOU IN THIS PROSPECTUS, INCLUDING THE INFORMATION INCORPORATED BY REFERENCE IN
THIS PROSPECTUS.
WE HAVE INCURRED SUBSTANTIAL LOSSES AND ANTICIPATE CONTINUING LOSSES.
We have a limited operating history to evaluate our prospects. You should
consider our prospects in light of the substantial risks, expenses and
difficulties encountered by companies entering into the medical device and drug
delivery industry. We reported a net loss of $5.0 million for the quarter ended
June 30, 1999 and have experienced annual operating losses since our inception.
We expect to continue to incur operating losses at least until we have
significant sales, if we ever do, of the GlucoWatch-Registered Trademark-
monitor or the contraceptive patch. We cannot assure you that we will generate
significant revenues or achieve profitability. We have, and expect to continue
to have, fluctuations in quarterly results based on varying contract revenues
and expenses associated with our contracts and collaborative projects. Some of
these fluctuations could be significant. To date, we have generated limited
revenues from product sales. We do not have significant experience in
manufacturing, marketing or selling our products. Our future development efforts
may not result in commercially viable products. We may fail in our efforts to
introduce our products or to obtain required regulatory clearances. Our products
may never gain market acceptance, and we may never generate revenues or achieve
profitability.
Our revenues to date have been derived primarily from:
- product development and licensing fees related to our products under
development, and
- manufacturing and royalty revenues from the Nicotrol-Registered Trademark-
(Pharmacia AB, Stockholm, Sweden) nicotine patch and the
FemPatch-Registered Trademark- system.
In the future, we will no longer receive manufacturing revenue from the
Nicotrol-Registered Trademark- patch or the FemPatch-Registered Trademark-
system. We will, however, continue to receive royalty payments for the
Nicotrol-Registered Trademark- patch. If we obtain regulatory approvals, we
expect that a substantial portion of our future revenues will be derived from
sales of the GlucoWatch-Registered Trademark- monitor and other products
currently under development.
WE MAY NEED ADDITIONAL FINANCING AND IT MAY NOT BE AVAILABLE.
In order to continue to develop our products, we will require substantial
resources to conduct research and conduct preclinical development and clinical
trials necessary to bring our products to market and to establish production and
marketing capabilities. We may seek additional funding through public or private
financings, including debt or equity financings. We may also seek other
arrangements, including collaborative arrangements. Any additional equity
financings may dilute the holdings of current stockholders. Debt financing, if
available, may restrict our ability to issue dividends and take other actions.
We may not be able to obtain adequate funds when we need them from financial
markets or arrangements with corporate partners or other sources. Even if funds
are available, they may not be on acceptable terms. If we cannot obtain
sufficient additional funds, we may have to delay, scale back or eliminate some
or all of our research and product development programs or license or sell
products or technologies that we would otherwise seek to develop ourselves.
We believe that our existing cash, cash equivalents and investments, plus
cash from revenues, other fundings such as potential product funding
collaborations or financings, and earnings from investments, will suffice to
meet our operating expenses, debt servicing and repayments and capital
expenditure requirements at least through June 30, 2000. The amounts and timing
of future expenditures will depend on:
- progress of ongoing research and development;
7
<PAGE>
- results of preclinical testing and clinical trials;
- rates at which operating losses are incurred;
- executing any development and licensing agreements with corporate
partners;
- developing our products;
- the FDA regulatory process; and
- other factors, many of which are beyond our control.
WE DEPEND ON LICENSEES, DISTRIBUTORS AND COLLABORATIVE ARRANGEMENTS.
Our strategy to develop, clinically test, obtain regulatory approval,
manufacture and commercialize our products depends, in large part, upon our
ability to selectively enter into and maintain collaborative arrangements with
licensees and distributors. If we commercialize our
GlucoWatch-Registered Trademark- monitor, we will depend upon Yamanouchi
Pharmaceutical Co., Ltd. to market and distribute the
GlucoWatch-Registered Trademark- monitor in Japan and Korea. We do not have any
marketing or distribution agreements for the GlucoWatch-Registered Trademark-
monitor other than the Yamanouchi collaboration. However, we are currently
involved in discussions with a short list of companies about collaborating to
market and distribute the GlucoWatch-Registered Trademark- monitor in the U.S.,
Europe and elsewhere outside Japan and Korea.
Our licensees and distributors generally have the right to terminate product
development, for any reason without significant penalty, at any time before we
are granted regulatory approval. These cancelations may cause us to delay,
suspend or abandon our clinical testing, regulatory filings and product
development and commercialization efforts. Licensees have exercised this right
in the past and we cannot assure you that current and future licensees or
distributors will not exercise this right in the future. All payments to us
under our licensing and distribution agreements depend on future events or sales
levels, and the licensee or distributor may terminate these agreements. As a
result, we cannot assure you when or if we will receive any particular payment.
In the past, some of our licensees, distributors and collaborators have asked us
to modify the terms of existing agreements. If a licensee or distributor stopped
funding one of our products, we would either fund development efforts ourselves,
enter into an agreement with an alternative licensee or distributor, or suspend
further development work on the product. We cannot assure you that we would be
able to negotiate an acceptable agreement with an alternative licensee or
distributor.
Additionally, we may choose to self-fund certain research and development
projects in order to exploit our technologies. If these activities result in a
commercial product, they will help our long-term operating results. However, any
increase in self-sponsored research and development or sales and marketing
activities will negatively affect our short-term operating results. Furthermore,
we cannot control the resources and attention a licensee or distributor devotes
to a product. As a result, we may experience delays in clinical testing,
regulatory filings and commercialization efforts conducted by our licensees or
distributors. We cannot assure you that our licensees or distributors will not,
for competitive reasons, support, directly or indirectly, a company or product
that competes with one of our products that is the subject of its license or
distributor agreement with us. Furthermore, any dispute between us and one of
our licensees or distributors might require us to initiate or defend against
expensive litigation or arbitration proceedings. If one of our licensees or
distributors terminates an arrangement, cannot fund or otherwise satisfy its
obligations under its arrangements, or significantly disputes or breaches a
contractual commitment, then we would likely be required to seek an alternative
licensee or distributor. We cannot assure you that we would be able to reach
agreement with a replacement licensee or distributor. If we were unable to find
a replacement licensee or distributor, we might not be able to perform or fund
the activities of the current licensee or distributor. Even if we were able to
perform and fund these activities, our capital requirements would increase
substantially. In addition, the further development and the clinical testing,
regulatory approval process, marketing, distribution
8
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and sale of the product covered by such licensee or distributor would be
significantly delayed. (See "Risk Factors--we have limited marketing and sales
experience.")
For us to be competitive, we will need to develop, license or acquire new
diagnostic and drug delivery products. Furthermore, our ability to develop and
commercialize products in the future will depend, in part, on our ability to
enter into collaborative arrangements with additional licensees on favorable
terms. We cannot assure you that we will be able to enter into new collaborative
arrangements on favorable terms, if at all, or that existing or future
collaborative arrangements will succeed.
WE DEPEND ON LICENSED PATENT APPLICATIONS AND PROPRIETARY TECHNOLOGY.
Our success depends in large part on our ability to obtain patent protection
for our products, preserve our trade secrets and operate without infringing the
proprietary rights of others, both in the U.S. and abroad. Since patent
applications in the U.S. are secret until issuance, and publication of
discoveries in the scientific or patent literature tends to lag behind actual
discovery by several months, we cannot be certain that we were the first to file
our patent applications or that we will not infringe upon third party patents.
We cannot assure you that any patents will be issued with respect to any of our
patent applications or that any patents will provide competitive advantages for
our products or will not be challenged or circumvented by our competitors.
We also rely on trade secrets and proprietary know-how that we seek to
protect, in part, by confidentiality agreements with our licensees, employees
and consultants. We cannot assure you that these agreements will not be
breached, that we would have adequate remedies for any breach or that our trade
secrets will not otherwise become known or be independently developed by our
competitors. Any litigation, in the U.S. or abroad, as well as foreign
opposition and/or domestic interference proceedings, could result in substantial
expense to us and significant diversion of effort by our technical and
management personnel. We may resort to litigation to enforce our patents or
protect trade secrets or know-how as well as to defend against infringement
charges. A negative determination in such proceedings could subject us to
significant liabilities or require us to seek licenses from third parties.
Although patent and intellectual property disputes in the pharmaceutical product
area have often been settled through licensing or similar arrangements, costs
associated with such arrangements may be substantial and could include ongoing
royalties. Furthermore, we cannot assure you that necessary licenses would be
available to us on satisfactory terms, if at all. Accordingly, an adverse
determination in a judicial or administrative proceeding or failure to obtain
necessary licenses could prevent us from manufacturing and selling certain of
our products, and could materially adversely affect us.
WE ARE HIGHLY LEVERAGED AND MAY BE UNABLE TO SERVICE OUR DEBT.
As of June 30, 1999, we had indebtedness of $61.9 million ($49.0 million net
of the $12.9 million, July 1999 Senior Subordinated Convertible Debt
redemption). The degree to which we are leveraged could materially and adversely
affect our ability to obtain financing for working capital, acquisitions or
other purposes and could make us more vulnerable to industry downturns and
competitive pressures. Our ability to meet our debt service obligations depend
upon our future performance, which will depend upon financial, business and
other factors, many of which are beyond our control. Although we believe our
cash flows will be adequate to meet our interest payments, we cannot assure you
that we will continue to generate cash flows in the future sufficient to cover
our fixed charges or to permit us to satisfy any redemption obligations pursuant
to the our indebtedness. If we cannot generate cash flows in the future
sufficient to cover our fixed charges or to permit us to satisfy any redemption
obligations pursuant to our indebtedness, and we cannot borrow sufficient funds
either under our credit facilities or from other sources, me may need to
refinance all or a portion of our existing debt, to sell all or a portion of our
assets, or to sell equity securities. There is no assurance that we could
successfully refinance, sell our assets or sell equity securities, or, if we
could, we cannot give any assurance as to the amount of proceeds we could
realize.
9
<PAGE>
In the event of insolvency, bankruptcy, liquidation, reorganization,
dissolution or winding up of our business or upon default or acceleration
relating to our debt obligations, our assets will first be available to pay the
amounts due under our debt obligations. Holders of common stock would only
receive the assets remaining, if any, after payment of all indebtedness and
preferred stock. Although we do not currently conduct operations through
subsidiaries, we may elect to do so as products become commercialized. In such
event, our cash flow and our ability to service debt would partially depend upon
the earnings of our subsidiaries and the distribution, loaning or other payments
of funds by those subsidiaries to us. The payment of dividends and the making of
loans and advances to us by our subsidiaries would be subject to statutory or
contractual restrictions, would depend upon the earnings of those subsidiaries
and would be subject to various business considerations. Our right to receive
assets of any of our subsidiaries upon their liquidation or reorganization would
be effectively subordinated to the claims of our subsidiaries' creditors, except
to the extent that we are recognized as a creditor of such subsidiary, in which
case our claims would still be subordinate to any security interests in the
assets of such subsidiary and any senior indebtedness.
WE HAVE LIMITED MARKETING AND SALES EXPERIENCE.
We have limited experience marketing or selling our medical device products.
To successfully market and sell the GlucoWatch-Registered Trademark- monitor or
our other products under development, we must either develop a more extensive
marketing and sales force or enter into arrangements with third parties to
market and sell our products. We cannot assure you that we could successfully
develop a more extensive marketing and sales force or that we could enter into
acceptable marketing and sales agreements with third parties. If we maintain our
own marketing and sales capabilities, we will compete with other companies that
have experienced and well-funded marketing and sales operations. If we enter
into a marketing arrangement with a third party, any revenues we receive will
depend on the third party, and we will likely have to pay a sales commission or
similar amount.
WE MAY BE SUBJECT TO PRODUCT LIABILITY CLAIMS.
The design, development, manufacture and use of our products involve an
inherent risk of product liability claims and associated adverse publicity.
Producers of medical products may face substantial liability for damages in the
event of product failure or allegations that the product caused harm. We
currently maintain product liability insurance, but it is expensive and
difficult to obtain and may not be available in the future on acceptable terms.
We cannot assure you that we will not be subject to product liability claims,
that our current insurance would cover any claims, or that adequate insurance
will continue to be available on acceptable terms in the future. In the event we
are held liable for damages in excess of the limits of our insurance coverage,
or if any claim or product recall creates significant adverse publicity, our
business, financial condition and results of operations could be materially and
adversely affected.
WE MAY NOT BE ABLE TO RETAIN OR HIRE KEY PERSONNEL.
Our ability to operate successfully and manage our potential future growth
significantly depends upon retaining key scientific, technical, managerial and
financial personnel, and attracting and retaining additional highly qualified
scientific, technical, managerial and financial personnel. We face intense
competition for qualified personnel in these areas, and we cannot assure you
that we will be able to attract and retain qualified personnel. The loss of key
personnel or our inability to hire and retain additional qualified personnel in
the future could adversely affect our business, financial condition and
operating results.
10
<PAGE>
OUR STOCK PRICE IS VOLATILE.
The trading price of our common stock substantially fluctuates in response
to factors such as:
- announcements by us or our competitors of results of regulatory approval
filings or clinical trials or testing;
- developments or disputes governing proprietary rights;
- technological innovations or new commercial products, government
regulatory action, and general conditions in the medical technology
industry;
- changes in securities analysts' recommendations, or
- other events or factors, many of which are beyond our control.
In addition, the stock market in general has experienced extreme price and
volume fluctuations in recent years that have particularly affected the market
prices of many medical technology companies, unrelated to the operating
performance of these companies. Fluctuations or decreases in the trading price
of our common stock may adversely affect the market for our common stock. In the
past, following periods of volatility in the market price for a company's
securities, securities class action litigation often has been instituted. Such
litigation could result in substantial costs and a diversion of management
attention and resources, which could have a material adverse effect on our
business, financial condition and operating results.
WE DO NOT PAY DIVIDENDS.
We have never declared or paid cash dividends on our common stock. Our
current bank term loan precludes us from paying dividends to stockholders. We
currently intend to retain any earnings for use in our business and therefore do
not anticipate paying any dividends in the future.
PROCEEDS FROM THE OFFERING
We will not receive any proceeds from the sale of the shares by the selling
stockholders. All proceeds from the sale of the shares will be for the account
of the selling stockholders, as described below. See "Selling Stockholders" and
"Plan of Distribution" below.
11
<PAGE>
SELLING STOCKHOLDERS
The table below sets forth the following information:
- the name of each selling stockholder;
- the number of shares each selling stockholder beneficially owns;
- the number of shares the selling stockholder may resell under this
prospectus; and
- the number of shares each selling stockholder would own, assuming that
each selling stockholder sells all of the shares it may sell under this
prospectus.
Beneficial ownership is determined in accordance with rules promulgated by
the SEC, and the information is not necessarily indicative of beneficial
ownership for any other purpose. This table is based upon information supplied
to us by the selling stockholders. Except as otherwise indicated, we believe
that the persons named in the table have sole voting and investment power with
respect to all of the shares of our common stock listed as beneficially owned by
them, subject to community property laws where applicable.
The actual number of shares of common stock offered by this prospectus, and
included in the registration statement of which this prospectus is a part,
includes additional shares that may be issued or issuable:
- upon exercise of the warrants or adjustment mechanisms in the warrants; or
- by reason of any stock split, stock dividend or similar transaction
involving the common stock, in order to prevent dilution, in accordance
with Rule 416 under the Securities Act of 1933.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY SHARES OFFERED SHARES BENEFICIALLY
OWNED PRIOR TO BY THIS OWNED AFTER THE
THE OFFERING PROSPECTUS OFFERING
----------------- -------------- -----------------------
<S> <C> <C> <C>
Conseco Direct Life Insurance Company...................... 91,499 91,499 0
The Gleneagles Fund Company................................ 152,499 152,499 0
Lancer Securities (Cayman) Limited......................... 152,499 152,499 0
Palladin Partners I, L.P................................... 121,999 121,999 0
Palladin Overseas Fund Limited............................. 91,499 91,499 0
PGEP III, L.L.C............................................ 91,499 91,499 0
Halifax Fund, L.P.......................................... 1,006,494 1,006,494 0
Reedland Capital Partners.................................. 50,000 50,000 0
</TABLE>
The shares being sold by the selling stockholders were issued in connection
with the exercise of warrants and conversion of convertible debentures sold to
the selling stockholders pursuant to a Convertible Debenture and Warrant
Purchase Agreement, dated as of June 29, 1999, and in connection with the
exercise of warrants awarded to Reedland Capital Partners ("Reedland") for its
engagement as Placement Agent for Cygnus. In accordance with registration rights
granted to the selling stockholders, Cygnus has filed with the SEC, under the
Securities Act, a Registration Statement on Form S-3, of which this prospectus
forms a part, with respect to the resale of the shares from time to time on the
Nasdaq National Market, in privately-negotiated transactions or otherwise, and
has agreed to prepare and file such amendments and supplements to the
Registration Statement as may be necessary to keep such Registration Statement
effective until the shares are no longer required to be registered for the sale
thereof by the selling stockholders.
12
<PAGE>
PLAN OF DISTRIBUTION
The selling stockholders may, from time to time, sell all or a portion of
the shares:
- on the Nasdaq National Market, or such other exchange on which the common
stock may from time to time be trading;
- in privately negotiated transactions or otherwise;
- at fixed prices that may be changed;
- at market prices prevailing at the time of sale; or
- at prices related to such market prices or at negotiated prices.
The shares may be sold by the selling stockholders by one or more of the
following methods, without limitation:
- block trades in which the broker or dealer so engaged will attempt to sell
the shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
- purchases by a broker or dealer as principal;
- an exchange distribution in accordance with the rules of such exchange;
- ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
- privately negotiated transactions;
- short sales; and
- a combination of any of the above methods of sale.
In effecting sales, brokers and dealers engaged by the selling stockholders
may arrange for other brokers or dealers to participate. Brokers or dealers may
receive commissions or discounts from the selling stockholders, or, if any
broker-dealer acts as agent for the purchaser of the shares, from the purchaser,
in amounts to be negotiated which are not expected to exceed those customary in
the types of transactions involved. Broker-dealers may agree with the selling
stockholder to sell a specified number of shares at a stipulated price per
share. To the extent a broker-dealer is unable to sell a specified number of
shares acting as agent for selling stockholders, it will purchase as principal
any unsold shares at the price required to fulfill the broker-dealer commitment
to selling stockholders. Broker-dealers who acquire shares as principal may
resell the shares from time to time in transactions which may involve block
transactions of the nature described above, in the over-the-counter market or
otherwise at prices and on terms then prevailing at the time of sale, at prices
related to the then-current market price or in negotiated transactions. In
connection with resales, broker-dealers may pay to or receive from the
purchasers of the shares commissions as described above. The selling
stockholders may also sell the shares in accordance with Rule 144 under the
Securities Act, rather than under this prospectus.
From time to time the selling stockholders may engage in short sales, short
sales against the box, puts and calls and other transactions in Cygnus' common
stock, and may sell and deliver the shares in connection with these transactions
or to settle securities loans. If the selling stockholders engage in such
transactions, the price of our common stock may be affected. Under the
Convertible Debenture and Warrant Purchase Agreement, the selling stockholders
may not make any sales with the intention of reducing the price of our common
stock. From time to time the selling stockholders may pledge their shares
pursuant to the margin provisions of its agreements with its brokers. Upon a
default by the selling stockholders, the broker may offer and sell the pledged
shares from time to time.
13
<PAGE>
The selling stockholders and any other persons participating in the sale or
distribution of the shares will be subject to the Securities Exchange Act of
1934 and the related rules and regulations. The Exchange Act and related rules
may limit the timing of purchases and sales of any of the shares by the selling
stockholders or any other such person which may affect the marketability of the
shares. The selling stockholders also must comply with the applicable prospectus
delivery requirements under the Securities Act in connection with the sale or
distribution of the shares.
We are required to pay certain fees and expenses incident to the
registration of the shares.
We have agreed to indemnify in certain circumstances the selling
stockholders against certain liabilities, including liabilities under the
Securities Act. The selling stockholders have agreed to indemnify us in certain
circumstances against certain liabilities, including liabilities under the
Securities Act.
We have agreed to use our best efforts to keep the registration statement,
of which this prospectus supplement and prospectus is a part, effective until
the shares may be or have been sold under Rule 144(k) of the Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the validity of common stock offered
by this prospectus are being passed upon for the Company by Pillsbury Madison &
Sutro LLP, San Francisco, California.
EXPERTS
Ernst & Young LLP, independent auditors, audited the financial statements of
Cygnus, Inc. at December 31, 1998, 1997 and 1996, included in Cygnus' Annual
Report on Form 10-K dated March 30, 1999 as set forth in Ernst & Young's report
included in that Form 10-K and incorporated by reference in this prospectus.
These financial statements are incorporated in this prospectus by reference in
reliance upon Ernst & Young's report, given on their authority as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements, and other
information with the Securities and Exchange Commission. You may read and copy
any materials we file with the Commission at the Commission's public reference
room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the
Commission at 1-800-SEC-0330 for more information on its public reference rooms.
The Commission also maintains an Internet Website at http://www.sec.gov that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the Commission.
We have filed with the Commission a registration statement (which contains
this prospectus) on Form S-3 under the Securities Act of 1933. The registration
statement relates to the common stock offered by the selling stockholders. This
prospectus does not contain all of the information set forth in the registration
statement and the exhibits and schedules to the registration statement. Please
refer to the registration statement and its exhibits and schedules for further
information with respect to Cygnus and the common stock. Statements contained in
this prospectus as to the contents of any contract or other document are not
necessarily complete and, in each instance, we refer you to the copy of that
contract or document filed as an exhibit to the registration statement. You may
read and obtain a copy of the registration statement and its exhibits and
schedules from the Commission, as described in the preceding paragraph.
IMPORTANT INFORMATION INCORPORATED BY REFERENCE
THE SECURITIES AND EXCHANGE COMMISSION ALLOWS CYGNUS TO "INCORPORATE BY
REFERENCE" THE INFORMATION CYGNUS FILES WITH THEM, WHICH MEANS THAT IT CAN
DISCLOSE IMPORTANT BUSINESS AND FINANCIAL
14
<PAGE>
INFORMATION ABOUT CYGNUS TO YOU THAT IS NOT INCLUDED IN OR DELIVERED WITH THIS
PROSPECTUS BY REFERRING YOU TO THOSE DOCUMENTS.
The information incorporated by reference is considered to be part of this
document. Information that we file later with the Securities and Exchange
Commission will automatically update and supersede this information. We
incorporate by reference the documents listed below and any filings we will make
with the Securities and Exchange Commission under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 following the date of this
prospectus:
1. Annual Report on Form 10-K of Cygnus for the fiscal year ended December 31,
1998;
2. Quarterly Report on Form 10-Q filed by Cygnus for the fiscal quarter ended
June 30, 1999;
3. Current Reports on Form 8-K dated June 7, 1999, July 2, 1999, July 20, 1999
and July 28, 1999;
4. The description of common stock contained in Cygnus' registration statement
on Form 8-A; and
5. The description of our Series A Junior Participating Preferred Stock
contained in the registration statement on Form 8-A12B/A filed December 14,
1988.
YOU MAY REQUEST A COPY OF THESE FILINGS, AT NO COST, BY WRITING OR
TELEPHONING US AT THE FOLLOWING ADDRESS:
CYGNUS, INC.
400 PENOBSCOT DRIVE
REDWOOD CITY, CALIFORNIA 94063
ATTENTION: CORPORATE COMMUNICATIONS
TELEPHONE REQUESTS MAY BE DIRECTED TO: (650) 369-4300
FACSIMILE REQUESTS MAY BE DIRECTED TO (650) 599-2503
15
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses payable by the
Registrant in connection with the sale and distribution of the securities being
registered hereby. Normal commission expenses and brokerage fees are payable
individually by the selling stockholders. All amounts are estimated except the
Commission registration fee.
<TABLE>
<CAPTION>
AMOUNT
---------
<S> <C>
SEC registration fee............................................................... $ 4,979
Accounting fees and expenses....................................................... 5,000
Legal fees and expenses............................................................ 3,000
Miscellaneous fees and expenses.................................................... 17,500
---------
Total.......................................................................... $ 30,479
---------
---------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law ("Section 145")
authorizes a court to award or a corporation's Board of Directors to grant
indemnification to directors and officers in terms sufficiently broad to permit
such indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act. The
Registrant's Certificate of Incorporation and Bylaws provide for mandatory
indemnification by the Registrant of all persons the Registrant may indemnify
under Section 145 to the maximum extent permitted by the Delaware General
Corporation Law. The Registrant's Certificate of Incorporation further provides
that the liability of its directors is eliminated to the fullest extent
permitted by the Delaware General Corporation Law. These provisions in the
Certificate of Incorporation do not eliminate the directors' fiduciary duty, and
in appropriate circumstances equitable remedies such as injunctive or other
forms of non-monetary relief will remain available under Delaware law. In
addition, each director will continue to be subject to liability 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 actions leading to improper personal benefit to the director, and for
payment of dividends or approval of stock repurchases or redemptions that are
unlawful under Delaware law. The provision also does not affect a director's
responsibilities under any other law, such as the federal securities laws or
state or federal environmental laws. The Registrant has entered into
indemnification agreements with all of its officers and directors.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
4.1 Specimen of Common Stock certificate of the Registrant, incorporated by reference to Exhibit 4.1 of the
Registrant's Registration Statement Form S-1 No. 33-38363.
4.2 Convertible Debenture and Warrant Purchase Agreement, incorporated by reference to Exhibit 10.41 of the
Registrant's Quarterly Report on Form 10-Q filed on August 16, 1999.
4.3 Registration Rights Agreement, incorporated by reference to Exhibit 4.12 of the Registrant's Quarterly
Report Form 10-Q filed on August 16, 1999.
4.4 Common Stock Purchase Warrant issued by Registrant to Reedland Capital Partners.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
4.5 Form of 8.5% Convertible Debenture due 2001, incorporated by reference to Exhibit 10.42 of the
Registrant's Quarterly Report Form 10-Q filed on August 16, 1999.
4.6 Form of Common Stock Purchase Warrant, incorporated by reference to Exhibit 10.43 of the Registrant's
Quarterly Report Form 10-Q filed on August 16, 1999.
5.1 Opinion of Pillsbury Madison & Sutro LLP.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Pillsbury Madison & Sutro LLP (included in its opinion filed as Exhibit 5.1 to this
Registration Statement).
24.1 Power of Attorney (see page II-4).
</TABLE>
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the 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, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to the Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the Registration Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
provided, however, that paragraphs (i) and (ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant
to Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-2
<PAGE>
(4) That, for purposes of determining any liability under the Securities
Act, each filing of the Registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Exchange Act 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.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, 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 Redwood City, State of California, on August 24, 1999.
<TABLE>
<S> <C> <C>
CYGNUS, INC.
By /s/ JOHN C. HODGMAN
------------------------------------------
John C. Hodgman
PRESIDENT, CHIEF EXECUTIVE OFFICER &
CHAIRMAN
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John C. Hodgman as his or her true and lawful
attorneys-in-fact and agents, each with full power of substitution and
resubstitution, for him or her and in his or her 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 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, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
each of said attorneys-in-fact and agents or their substitute or substitutes may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ GARY W. CLEARY Director; Chairman
- ------------------------------ Emeritus of the Board of August 24, 1999
Gary W. Cleary, Ph.D. Directors
President, Chief Executive
/s/ JOHN C. HODGMAN Officer (Principal
- ------------------------------ Executive Officer) and August 24, 1999
John C. Hodgman Chairman of the Board of
Directors
Chief Financial Officer
/s/ CRAIG W. CARLSON and Senior Vice
- ------------------------------ President, Finance August 24, 1999
Craig W. Carlson (Principal Accounting
Officer)
/s/ FRANK T. CARY
- ------------------------------ Director August 24, 1999
Frank T. Cary
/s/ ANDRE T. MARION
- ------------------------------ Vice Chairman of the Board August 24, 1999
Andre T. Marion of Directors
/s/ RICHARD G. ROGERS
- ------------------------------ Director August 24, 1999
Richard G. Rogers
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ WALTER B. WRISTON
- ------------------------------ Director August 24, 1999
Walter B. Wriston
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
4.4 Common Stock Purchase Warrant Issued by Registrant to Reedland Capital Partners.
5.1 Opinion of Pillsbury Madison & Sutro LLP.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Pillsbury Madison & Sutro LLP (included in its opinion filed as Exhibit 5.1 to this
Registration Statement).
24.1 Power of Attorney (see page II-4).
</TABLE>
<PAGE>
EXHIBIT 4.4
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES
UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE
EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
CYGNUS, INC.
Common Stock Purchase Warrant
Cygnus, Inc., a Delaware corporation (the "Company"), hereby certifies
that for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Reedland Capital Partners, a California
corporation having an address at 21 Tamal Vista Boulevard, Suite 201, Corte
Madera, California 94925, ("Purchaser") or any other Warrant Holder
(hereinafter defined) is entitled, on the terms and conditions set forth
below, to purchase from the Company at any time after the date hereof
(subject to the provisions of Section 2 hereof) and ending sixty (60) months
after the date hereof, that number of fully paid and nonassessable shares of
the common stock, par value $.001 per share, of the Company (the "Common
Stock") up to fifty thousand (50,000), at the Purchase Price (hereinafter
defined) per share, as the same may be adjusted pursuant to Section 5 herein.
1. DEFINITIONS.
(a) The term "Fair Market Value" shall mean the closing sale price per
share of the Common Stock on the Principal Market on the day prior to the
date of exercise of this Warrant.
(b) The term "Principal Market" shall mean the New York Stock Exchange,
the American Stock Exchange or the Nasdaq National Market, whichever is the
principal trading exchange or market for the Common Stock.
(c) The term "Purchase Price" shall mean thirteen and eighty-six
hundredths dollars ($13.86).
(d) The term "Warrant Holder" shall mean the Purchaser or any permitted
assignee of all or any portion of this Warrant.
(e) The term "Warrant Shares" shall mean the shares of Common Stock or
other securities issuable upon exercise of this Warrant.
2. EXERCISE OF WARRANT.
This Warrant may be exercised by Warrant Holder, in whole or in part, at
any time and from time to time, on or prior to the date sixty (60) months
from the date hereof, by either of the following methods:
<PAGE>
(a) The Warrant Holder may surrender this Warrant, together with cash,
a certified check payable to the Company or wire transfer of immediately
available funds to an account designated by the Company representing the
aggregate Purchase Price of the number of Warrant Shares for which the
Warrant is being surrendered and the form of subscription attached hereto as
EXHIBIT A, duly executed by Warrant Holder ("Subscription Notice"), at the
offices of the Company; or
(b) The Warrant Holder may also exercise this Warrant, in whole or in
part, on a "cashless" or "net-issue" basis by delivering to the offices of
the Company this Warrant, together with a Subscription Notice specifying the
number of Warrant Shares to be delivered to the Warrant Holder and the number
of Warrant Shares to be surrendered in payment of the aggregate Purchase
Price according to the following formula:
D = FMV - PP multiplied by SS
--------
FMV
Where
"D" means the number of Warrant Shares to be delivered on exercise of the
Warrant,
"FMV" means the Fair Market Value, and
"SS" means the number of Warrant Shares to be delivered in payment of the
Purchase Price
"PP" means Purchase Price
(c) such that, without the exchange of any funds, the Warrant Holder
will receive that number of Warrant Shares (and such other consideration
otherwise issuable, or payable, upon exercise of this Warrant) less that
number of Warrant Shares having an aggregate Fair Market Value on the date
prior to the date of exercise equal to the aggregate Purchase Price that
would otherwise have been paid by the Warrant Holder as specified in the
Subscription Notice.
In the event that the Warrant is not exercised in full, the number of
Warrant Shares shall be reduced by the number of such Warrant Shares for
which this Warrant is exercised, and the Company, at its expense, shall
forthwith issue and deliver or upon the order of Warrant Holder a new Warrant
of like tenor in the name of Warrant Holder or as Warrant Holder (upon
payment by Warrant Holder of any applicable transfer taxes) may request,
reflecting such adjusted Warrant Shares.
3. DELIVERY OF CERTIFICATES.
(a) Subject to the terms and conditions of this Warrant, as soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within three (3) Trading Days thereafter, the Company shall transmit
the certificates (together with any other stock or other securities or
property to which Warrant Holder is entitled upon exercise) by messenger or
overnight delivery service to reach the address designated by such holder
within three (3) trading days after the receipt of the Warrant, the
Subscription Notice and payment of the aggregate Purchase Price in Section
2(a) or 2(b), as appropriate ("T+3"). In lieu of delivering physical
certificates representing the Common Stock issuable upon exercise, provided
the Company's transfer agent is participating in the Depository Trust Company
("DTC") Fast Automated
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<PAGE>
Securities Transfer ("FAST") program, upon request of the Warrant Holder, the
Company shall use its best efforts to cause its transfer agent to
electronically transmit the Common Stock issuable upon exercise to the
Warrant Holder by crediting the account of Warrant Holder's prime broker with
DTC through its Deposit Withdrawal Agent Commission ("DWAC") system. The time
periods for delivery described in the immediately preceding paragraph shall
apply to the electronic transmittals described herein.
(b) This Warrant may not be exercised as to fractional shares of Common
Stock. In the event that the exercise of this Warrant, in full or in part,
would result in the issuance of any fractional share of Common Stock, then in
such event Warrant Holder shall be entitled to cash equal to the Fair Market
Value of such fractional share.
4. REPRESENTATIONS AND COVENANTS.
(a) REPRESENTATIONS AND COVENANTS OF THE COMPANY. From the date hereof
through the last date on which this Warrant is exercisable, the Company shall
take all steps reasonably necessary and within its control to insure that the
Common Stock remains listed on a Principal Market so long as it is publicly
traded and shall not amend its Certificate of Incorporation or Bylaws so as
to adversely affect any rights of the Warrant Holder under this Warrant in
any 7
(b) material respect.
(c) REPRESENTATIONS AND COVENANTS OF THE PURCHASER. The Purchaser
shall not resell Warrant Shares, unless such resale is pursuant to an
effective registration statement under the Act or pursuant to an applicable
exemption from such registration requirements and such sale otherwise
complies with state and federal securities laws.
5. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES.
The number and kind of securities purchasable upon exercise of this
Warrant and the Purchase Price shall be subject to adjustment from time to
time as follows:
(a) SUBDIVISIONS, COMBINATIONS AND OTHER ISSUANCES. If the Company
shall at any time after the date hereof but prior to the expiration of this
Warrant subdivide its outstanding securities as to which purchase rights
under this Warrant exist, by split-up, or otherwise, or combine its
outstanding securities as to which purchase rights under this Warrant exist,
the number of Warrant Shares as to which this Warrant is exercisable as of
the date of such split-up or combination shall forthwith be proportionately
increased in the case of a split-up, or proportionately decreased in the case
of a combination. Appropriate adjustments shall also be made to the Purchase
Price payable per share, so that the aggregate Purchase Price payable for the
total number of Warrant Shares purchasable under this Warrant as of such date
shall remain the same.
(b) STOCK DIVIDEND. If at any time after the date hereof but prior to
the expiration of this Warrant, the Company declares a dividend or other
distribution on Common Stock payable in Common Stock or other securities or
rights convertible into Common Stock ("Common Stock
-3-
<PAGE>
Equivalents") without payment of any consideration by holders of Common Stock
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon exercise or
conversion thereof), then the number of shares of Common Stock for which this
Warrant may be exercised shall be increased as of the record date (or the
date of such dividend distribution if no record date is set) for determining
which holders of Common Stock shall be entitled to receive such dividends, in
proportion to the increase in the number of outstanding shares (and shares of
Common Stock issuable upon conversion of all such securities convertible into
Common Stock) of Common Stock as a result of such dividend, and the Purchase
Price per share shall be adjusted so that the aggregate Purchase Price for
the Warrant Shares issuable hereunder immediately after the record date (or
on the date of such distribution, if applicable), for such dividend shall
equal the aggregate Purchase Price immediately before such record date (or on
the date of such distribution, if applicable).
(c) OTHER DISTRIBUTIONS. If at any time after the date hereof but
prior to the expiration of this Warrant, the Company distributes to holders
of its Common Stock, other than as part of its dissolution, liquidation or
the winding up of its affairs, any shares of its capital stock, any evidence
of indebtedness or any of its assets (other than cash, Common Stock or
securities convertible into or exchangeable for Common Stock), then the
number of Warrant Shares for which this Warrant is exercisable shall be
increased to equal: (i) the number of Warrant Shares for which this Warrant
is exercisable immediately prior to such event, (ii) multiplied by a
fraction, (A) the numerator of which shall be the Fair Market Value per share
of Common Stock on the record date for the dividend or distribution, and (B)
the denominator of which shall be the Fair Market Value per share of Common
Stock on the record date for the dividend or distribution minus the amount
allocable to one share of Common Stock of the value (as determined in good
faith by the Board of Directors of the Company) of any and all such evidences
of indebtedness, shares of capital stock, other securities or property, so
distributed. The Purchase Price shall be reduced to equal: (i) the Purchase
Price in effect immediately before the occurrence of any such event (ii)
multiplied by a fraction, (A) the numerator of which is the number of Warrant
Shares for which this Warrant is exercisable immediately before the
adjustment, and (B) the denominator of which is the number of Warrant Shares
for which this Warrant is exercisable immediately after the adjustment.
(d) MERGER, ETC. If at any time after the date hereof there shall be a
merger or consolidation of the Company with or into or a transfer of all or
substantially all of the assets of the Company to another entity, then the
Warrant Holder shall be entitled to receive upon payment of the aggregate
Purchase Price then in effect, the number of shares or other securities or
property of the Company or of the successor corporation resulting from such
merger or consolidation, which would have been received by Warrant Holder for
the shares of stock subject to this Warrant had this Warrant been exercised
just prior to such transfer, merger or consolidation becoming effective or to
the applicable record date thereof, as the case may be. The Company will not
merge into or consolidate with or into any other corporation, or sell or
otherwise transfer its property, assets and business substantially as an
entirety to another corporation, unless the corporation resulting from such
merger or consolidation (if not the Company), or such transferee corporation,
as the case may be, shall expressly assume, by supplemental agreement
reasonably
-4-
<PAGE>
satisfactory in form and substance to the Warrant Holder, the due and
punctual performance and observance of each and every covenant and condition
of this Warrant to be performed and observed by the Company.
(e) RECLASSIFICATION, ETC. If at any time after the date hereof there
shall be a reorganization or reclassification of the securities as to which
purchase rights under this Warrant exist into the same or a different number
of securities of any other class or classes, then the Warrant Holder shall
thereafter be entitled to receive upon exercise of this Warrant, during the
period specified herein and upon payment of the Purchase Price then in
effect, the number of shares or other securities or property resulting from
such reorganization or reclassification, which would have been received by
the Warrant Holder for the shares of stock subject to this Warrant had this
Warrant at such time been exercised.
6. NO IMPAIRMENT.
The Company will not, by amendment of its Certificate of Incorporation
or through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out all
of such terms and in the taking of all such action as may be reasonably
necessary or appropriate in order to protect the rights of the Warrant Holder
against impairment. Without limiting the generality of the foregoing, the
Company (a) will not increase the par value of any Warrant Shares above the
amount payable therefor on such exercise, and (b) will take all such action
as may be reasonably necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable Warrant Shares on the
exercise of this Warrant.
7. NOTICE OF ADJUSTMENTS.
Whenever the Purchase Price or number of Warrant Shares purchasable
hereunder shall be adjusted pursuant to Section 5 hereof, the Company shall
execute and deliver to the Warrant Holder (by first class mail, postage
prepaid) a certificate setting forth, in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the method by which
such adjustment was calculated and the Purchase Price and number of shares
purchasable hereunder after giving effect to such adjustment.
8. RIGHTS AS SHAREHOLDER.
Prior to exercise of this Warrant, the Warrant Holder shall not be
entitled to any rights as a stockholder of the Company with respect to the
Warrant Shares, including (without limitation) the right to vote such shares,
receive dividends or other distributions thereon or be notified of
stockholder meetings. However, in the event of any taking by the Company of a
record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution (other than a cash dividend), any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right (other than the right
to vote), the Company
-5-
<PAGE>
shall provide notice pursuant to Section 13 below to each Warrant Holder, at
least 10 days prior to the date of such record, therein, a notice specifying
the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, and the amount and character of such
dividend, distribution or right.
9. REPLACEMENT OF WARRANT.
On receipt of evidence reasonably satisfactory to the Company of the
loss, theft, destruction or mutilation of the Warrant and, in the case of any
such loss, theft or destruction of the Warrant, on delivery of an indemnity
agreement or security reasonably satisfactory in form and amount to the
Company or, in the case of any such mutilation, on surrender and cancellation
of such Warrant, the Company, at the Warrant Holder's expense will execute
and deliver, in lieu thereof, a new Warrant of like tenor.
10. SPECIFIC ENFORCEMENT; CONSENT TO JURISDICTION AND CHOICE OF LAW.
(a) The Company and the Warrant Holder acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of
this Warrant were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent or cure breaches of the
provisions of this Warrant and to enforce specifically the terms and
provisions hereof, this being in addition to any other remedy to which either
of them may be entitled by law or equity.
(b) EACH OF THE COMPANY AND THE WARRANT HOLDER (I) HEREBY IRREVOCABLY
SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURT LOCATED
IN SAN FRANCISCO COUNTY, CALIFORNIA FOR THE PURPOSES OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS WARRANT AND (II) HEREBY WAIVES,
AND AGREES NOT TO ASSERT IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM
THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT, THAT THE
SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE
VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH OF THE COMPANY AND
THE WARRANT HOLDER CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION
OR PROCEEDING BY MAILING A COPY THEREOF TO SUCH PARTY AT THE ADDRESS IN
EFFECT FOR NOTICES TO IT UNDER THIS WARRANT AND AGREES THAT SUCH SERVICE
SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF.
NOTHING IN THIS PARAGRAPH SHALL AFFECT OR LIMIT ANY RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW.
(c) THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD
TO SUCH STATE'S PRINCIPLES OF CONFLICT OF LAWS.
11. ENTIRE AGREEMENT; AMENDMENTS.
-6-
<PAGE>
This Warrant contains the entire understanding of the parties with
respect to the matters covered hereby and thereby and except as specifically
set forth herein and therein, neither the Company nor the Warrant Holder
makes any representation, warranty, covenant or undertaking with respect to
such matters. This Warrant and any term thereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
12. NOTICES.
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be effective (a) upon hand delivery
or delivery by telex (with correct answer back received), telecopy or
facsimile at the address or number designated below (if delivered on a
business day during normal business hours where such notice is to be
received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice
is to be received) or (b) on the second business day following the date of
mailing by express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be:
to the Company:
Cygnus, Inc.
400 Penobscot Drive
Redwood City, CA 94063
Attn: Chief Executive Officer
Fax: (650) 367-5060
with copies to:
Cygnus, Inc.
400 Penobscot Drive
Redwood City, CA 94063
Attn: General Counsel
Fax: (650) 367-5060
to the Purchaser:
Reedland Capital Partners
21 Tamal Vista Boulevard
Suite 201
Corte Madera, California 94925
Attention: Managing Director
Fax: (415) 927-2178
Either party hereto may from time to time change its address for notices
under this Section 12 by
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<PAGE>
giving at least 10 days prior written notice of such changed address to the
other party hereto.
13. MISCELLANEOUS.
This Warrant and any term hereof may be changed, waived, discharged or
terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought. The
headings in this Warrant are for purposes of reference only, and shall not
limit otherwise affect any of the terms hereof. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity
or enforceability of any other provisions.
14. ASSIGNMENT.
This Warrant may not be assigned, by the Warrant Holder, in whole or in
part, without the prior written consent of the Company; PROVIDED, HOWEVER,
that upon written notice to the Company, the Warrant Holder may assign this
Warrant, in whole or in part, to an Affiliate of the Warrant Holder without
the Company's consent. In either case, to effect a transfer of this Warrant,
the Warrant Holder shall submit this Warrant to the Company together with a
duly executed Assignment in substantially the form and substance of the Form
of Assignment which accompanies this Warrant and, upon the Company's receipt
hereof, and in any event, within three (3) business days thereafter, the
Company shall issue a Warrant to the Warrant Holder to evidence that portion
of this Warrant, if any as shall not have been so transferred or assigned.
-8-
<PAGE>
Dated: June 29, 1999
CYGNUS, INC.
By:
----------------------------------
John C. Hodgman
President, Chief Executive Officer
and Chairman
Attest:
------------------
By:
----------------------
Its:
---------------------
[SIGNATURE PAGE TO WARRANT]
<PAGE>
SUBSCRIPTION NOTICE
(FORM OF WARRANT EXERCISE)
(TO BE SIGNED ONLY ON EXERCISE OF WARRANT)
TO
----------------
The undersigned, the holder of the within Warrant, hereby
irrevocably elects to exercise this Warrant:
_____(A) for, and to purchase thereunder, _______________ shares of Common
Stock of Cygnus, Inc., a Delaware corporation (the "Common
Stock"), and herewith, or by wire transfer, makes payment of
$_____therefor; or
_____(B) in a "cashless" or "net-issue exercise" for, and to purchase
thereunder ______________________ shares of Common Stock.
The undersigned requests that the certificates for such shares be
issued in the name of, and
_____(A) delivered to ___________________, whose address is
_____________________; or
_____(B) electronically transmitted and credited to the account of
______________ undersigned's prime broker (Account No.
_______________) with Depository Trust Company through its
Deposit Withdrawal Agent Commission system.
Dated: _______________
______________
_______________________________
(Signature must conform to name of holder as
specified on the face of the Warrant)
__________________________
(Address)
Tax Identification Number: _____________
______________
<PAGE>
FORM OF ASSIGNMENT
(TO BE SIGNED ONLY ON TRANSFER OF WARRANT)
For value received, the undersigned hereby sells, assigns, and transfers
unto ______________ the right represented by the within Warrant to purchase
____ shares of Common Stock of Cygnus, Inc., a Delaware corporation, to which
the within Warrant relates, and appoints _________ Attorney to transfer such
right on the books of Cygnus, Inc., a Delaware corporation, with full power
of substitution of premises.
Dated: _______________
__________________________________
(Signature must conform to name of holder
as specified on the face of the Warrant)
__________________________________
(Address)
Signed in the presence of:
__________________________
<PAGE>
EXHIBIT 5.1
[PILLSBURY MADISON & SUTRO LLP LETTERHEAD]
August 24, 1999
Cygnus, Inc.
400 Penobscot Drive
Redwood City, CA 94063
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
We are acting as counsel for Cygnus, Inc., a Delaware corporation (the
"Company"), in connection with the registration under the Securities Act of
1933, as amended, of 1,757,989 shares of Common Stock, $.001 par value (the
"Common Stock"), of the Company, to be offered and sold by certain stockholders
of the Company (the "Selling Stockholders"). In this regard we have participated
in the preparation of a Registration Statement on Form S-3 relating to such
1,757,989 shares of Common Stock. (Such Registration Statement, as amended, is
herein referred to as the "Registration Statement.")
We are of the opinion that the shares of Common Stock to be offered and sold
by the Selling Stockholders have been duly authorized and legally issued and are
fully paid and nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the use of our name under the caption "Legal
Matters" in the Registration Statement and in the Prospectus included therein.
Very truly yours,
Pillsbury Madison & Sutro LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Cygnus, Inc. for the
registration of 1,757,989 shares of its common stock and to the incorporation by
reference therein of our report dated January 19, 1999, except for the Note 14,
as to which the date is February 23, 1999, with respect to the consolidated
financial statements and schedules of Cygnus, Inc. included in its Annual Report
(Form 10-K) for the year ended December 31, 1998, filed with the Securities and
Exchange Commission.
Palo Alto, California
August 19, 1999
