<PAGE>
As filed with the Securities and Exchange Commission on February 10, 2000
Registration No. 333-91949
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
--------------------
CYGNUS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-2978092
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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
CHAIRMAN, CHIEF EXECUTIVE OFFICER & PRESIDENT
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 of process)
Copies to:
BLAIR W. WHITE
Pillsbury Madison & Sutro LLP
P.O. Box 7880
San Francisco, CA 94120
Approximate date of commencement of proposed sale to the public:
From time to time this Registration Statement becomes effective.
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. /_/
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=========================================================================================================================
Title of Each Amount To Proposed Proposed Amount of
Class of Securities Be Registered Maximum Offering Maximum Aggregate Registration Fee
To Be Registered Price Per Share Offering Price
- -------------------------- ------------------- ----------------------- ------------------------ -------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 par 391,868 shares(1) $9.4375(2) $3,698,254(2) $1,028.11(4)
value(3)
Common Stock, $.001 par 215,000 shares(5) $16.46875(6) $3,540,781(6) $984.34
value(3)
=========================================================================================================================
</TABLE>
(1) Includes (i) up to 252,818 shares of common stock to be issued upon
conversion of Cygnus' 8.5% Convertible Debentures due 2004 (the
"Debentures"), (ii) up to 139,050 shares of common stock to be issued upon
exercise of Common Stock Purchase Warrants issued in connection with the
Debentures (the "Debenture Warrants"), and (iii) an indeterminate number of
additional shares of common stock as may from time to time become issuable
upon conversion of the Debentures and Debenture 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 November 26,
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.
(4) Previously paid.
(5) Includes (i) up to 215,000 shares of Common Stock to be issued upon
exercise of Common Stock Purchase Warrants, and (ii) an indeterminate
number of additional shares of Common Stock as may from time to time
become issuable upon conversion of the Common Stock Purchase Warrants by
reason of stock splits, stock dividends and similar transactions, which
shares are registered hereunder pursuant to Rule 416 under the
Securities Act.
(6) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) based on the average of the high and low prices
of the Company's Common Stock on the Nasdaq National Market on
February 3, 2000.
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.
Subject to Completion, dated February 10, 2000
<PAGE>
PROSPECTUS
---------------------
606,868 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.
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 5.
---------------------
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 February __, 2000
<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," "CYGNUS" 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.
<PAGE>
OUR COMPANY
We are engaged in the development and manufacture of diagnostic medical
devices, utilizing proprietary technologies to satisfy unmet medical needs cost
effectively. Our current efforts are primarily focused on a frequent, automatic
and non-invasive glucose monitoring device (the GlucoWatch-Registered Trademark-
monitor).
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 glucose monitoring 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
and more frequent insulin injections 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
resulting in insufficient glucose information to make decisions that could
better control glucose fluctuations. This lack of information, we believe,
presents a significant unmet demand for a frequent, automatic and non-invasive
glucose monitoring device.
To address this unmet demand, we are developing the
GlucoWatch-Registered Trademark- monitor, which is expected to provide
additional glucose information to people with diabetes. 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 alerts indicating hypo- and hyperglycemic
conditions; event markers which record factors that affect glucose levels; and
the ability to download stored information to personal computers to analyze
glucose data and trends.
The GlucoWatch-Registered Trademark- monitor provides frequent,
automatic and non-invasive glucose measurements and is intended for detecting
trends and tracking patterns in glucose levels in adults, 18 years and older,
who have diabetes. The device is intended for use at home and in health care
facilities to supplement, not replace, information obtained from standard home
blood glucose monitoring devices. Following a three-hour warm-up period and
calibration from a finger stick blood measurement, the device is capable of
providing up to three non-invasive glucose measurements per hour for 12 hours.
In addition, the GlucoWatch-Registered Trademark- monitor has the capability to
alert users when glucose levels are too high or too low. These situations may be
hard to identify with regular glucose testing alone.
In July 1999, the FDA notified Cygnus that our PMA application was
deemed suitable for filing and was granted expedited review status. Our
5,000-page PMA application included analyses of clinical studies conducted on
more than 600 people with diabetes, who used the device for up to six weeks. The
studies, which were performed at more than 15 clinical sites across the United
States, involved over 25,000 hours of use of the GlucoWatch-Registered
Trademark- monitor. The participants consisted of a cross-section of racial and
age groups, diabetes types (both type 1 and type 2), and other defining
characteristics. Approximately 19,000 paired data points were generated from the
studies, comparing glucose measurements obtained by the GlucoWatch-Registered
Trademark- monitor to glucose measurements obtained with finger-stick monitors
using capillary blood.
On December 6, 1999, we announced that our premarket approval
application (PMA) for the GlucoWatch-Registered Trademark- monitor received an
unanimous recommendation for approval with conditions by the Food and Drug
Administration's (FDA) Clinical Chemistry and Clinical Toxicology Devices Panel
of the Medical Devices Advisory Committee. The Advisory Committee suggested
three conditions for approval. The first is an education program, about which we
have already been in discussion
<PAGE>
with the FDA. In order to satisfy the second condition, the labeling will be
revised in accordance with recommendations to be given to the FDA by the
Committee. Third, the Committee suggested post-market study of detection of
hypoglycemia and hyperglycemia. Although the FDA is not bound by the decisions
of the advisory committee, the agency typically follows its advisory committees'
advice.
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. In March of
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. 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. On December 2, 1999, we announced the receipt of a CE Certificate
for the GlucoWatch-Registered Trademark- monitor, indicating that the product
has met the essential requirements and other criteria of the European Community
Directive 93/42/ECC, Annex V, Section 3.2. The CE Certificate is required for
selling products in the European Community. We demonstrate compliance to BS EN
ISO 9002 and EN 46002.
In 1998, we entered into long term agreements with E.I. du Pont de
Nemours & Company ("DuPont") for the development and supply of thick film
materials for our 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.
In September 1998, we were awarded a Phase I Small Business Innovative
Research Grant for "High Performance Biosensor Electrode Materials" from the
National Institute of Diabetes and Digestive and Kidney Diseases division of the
NIH. We plan to use funding to investigate advancements in biosensor materials
used for glucose detection and measurement, potentially to include in future
versions of the GlucoWatch-Registered Trademark- monitor.
On December 15, 1999, we announced that the sale of substantially
all of our drug delivery business assets to Ortho-McNeil Pharmaceutical,
Inc., a Johnson & Johnson company, was finalized upon receiving clearance
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. We had
announced on November 17, 1999 that we had entered into a definitive
agreement to sell most of the assets of our drug delivery business to
Ortho-McNeil Pharmaceutical, Inc. We sold all of the assets of our drug
delivery business to Ortho-McNeil except those relating to a nicotine patch
under development and one other early-stage project - both of which have
since been terminated. Cygnus products that were sold include certain assets
related to the Nicotrol-Registered Trademark-(Pharmacia AB, Stockholm,
Sweden) nicotine system that is being marketed by Pharmacia & Upjohn in
Europe and by McNeil Consumer Healthcare, a Johnson & Johnson company, in the
US; two hormone replacement transdermal products: a 7-day estrogen patch
recently approved by the U.S. Food and Drug Administration and an
estrogen/progestin combination product that completed Phase III clinical
trials; and the EVRA-TM- (Johnson & Johnson, New Brunswick, New Jersey)
contraceptive patch we were developing with the R.W. Johnson Pharmaceutical
Research Institute. Under the terms of the agreement, we received $20 million
in cash at closing, and Ortho-McNeil will pay up to an additional $55 million
in cash, contingent on the achievement of certain milestones. The remaining
contingent payments relate to the achievement of certain technical,
regulatory and commercialization milestones related to the EVRA-TM-
transdermal contraceptive patch. The primary reason for selling the drug
delivery business was to focus management attention and corporate resources
on our glucose monitoring business. We will use the proceeds to accelerate
commercialization activities for the GlucoWatch-Registered Trademark-
monitor.
<PAGE>
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 MAY NOT RECEIVE FDA APPROVAL.
Although the FDA's Clinical Chemistry and Toxicology Devices Panel of
the Medical Devices Advisory Committee has recommended the GlucoWatch-Registered
Trademark- monitor for approval for sale in the United States with three
conditions, there can be no assurance that we can meet these conditions or, if
we can, that the recommendation of the Committee will convince the FDA to
approve the product. There can be no assurance that the FDA will approve the
GlucoWatch-Registered Trademark- monitor on the same terms, if at all.
OUR PRODUCT PIPELINE IS SEVERELY LIMITED.
With the sale of the majority of the drug delivery business assets
to Ortho-McNeil Pharmaceutical, Inc., and the termination of the remaining
drug delivery projects, we are now exclusively focused on diagnostic medical
devices, predominantly a line of frequent, automatic and non-invasive glucose
monitoring devices. There is an inherent risk in not having a broad base of
products in development and we cannot assure you that we will be successful
with this narrow line of products.
WE CANNOT PREDICT THE MARKET ACCEPTANCE OF OUR PRODUCTS.
We are focusing our efforts predominantly on a line of frequent,
automatic, and non-invasive glucose monitoring devices. No one can predict
market acceptance or penetration of such products, given that they are entirely
different from any glucose diagnostic product currently on the market. There is
a risk in introducing a very new type of product in market of established
"finger stick" glucose monitors, and we cannot assure that our products will be
accepted or in what degree. Additionally, other new frequent, automatic, and
non-invasive glucose montoring devices may be in development by competitors, and
we cannot predict what impact introduction of competing products will have on
our market sales.
WE FACE INTENSE COMPETITION.
The medical device industry in general, and the market in which we
expect to offer the GlucoWatch-Registered Trademark- monitor in particular,
is intensely competitive. Even if we successfully develop the
GlucoWatch-Registered Trademark- monitor, we will compete with other
providers of personal glucose monitors. A number of our competitors are
currently marketing traditional glucose monitors. These monitors are widely
accepted in the health care industry and have long histories of accurate and
effective use. Furthermore, a number of companies have announced that they
are developing products that permit non-invasive and/or frequent and
automatic glucose monitoring. Accordingly, we expect competition to increase.
Many of our competitors have substantially greater resources than we
do and have greater name recognition and lengthier operating histories in the
health care industry. We cannot assure you that we will be able to compete
effectively against our competitors. Additionally, we cannot assure you that
the GlucoWatch-Registered Trademark- monitor or our other products under
development will replace any currently used devices or systems. Furthermore,
we cannot assure you that our competitors will not succeed in developing,
even before we develop and commercialize the GlucoWatch-Registered Trademark-
monitor or our other products under development, devices and technologies
that permit more efficient, less expensive non-invasive and/or frequent and
automatic glucose monitoring. Pharmaceutical or other health care companies
may also develop therapeutic drugs, treatments or other products that will
substantially reduce the prevalence of diabetes or otherwise render our
products obsolete. In addition, we cannot assure you that our collaborative
partners will not, for competitive reasons, reduce their support of their
collaborative arrangements with us or support, directly or indirectly, a
company or product that competes with us.
THIRD PARTIES MAY NOT REIMBURSE PATIENTS, HOSPITALS AND PHYSICIANS
FOR THE COSTS OF MEDICAL DEVICES.
In the United States, patients, hospitals and physicians who
purchase medical devices such as the GlucoWatch-Registered Trademark- monitor
generally rely on third-parties, principally federal Medicare, state Medicaid
and private health insurance plans, to reimburse them for all or a portion of
the costs of medical devices. Health care providers in the U.S. have
generally reimbursed costs of FDA-approved devices. However, some health
care providers are gradually adopting a managed care system, providing
comprehensive health care services for a fixed cost per person. We cannot
predict what changes governmental or private health care providers will make
in their reimbursement methods. Additionally, reimbursement and health care
payments in international markets vary significantly among counties. If
patients, hospitals, or physicians in the U.S. or abroad cannot obtain
sufficient reimbursement for our products, our business could be seriously
harmed.
WE HAVE INCURRED SUBSTANTIAL LOSSES, HAVE A HISTORY OF OPERATING
LOSSES, HAVE AN ACCUMULATED DEFICIT AND EXPECT CONTINUED OPERATING 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 industry.
We reported a net loss of $4.1 million for the quarter ended September 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. We cannot assure
you that we will generate significant revenues or achieve profitability. 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- (Warner-Lambert Co., Morris
Plains, New Jersey) system.
As a result of the sale of our drug delivery business, we will no
longer receive manufacturing revenue or royalty payments from the
Nicotrol-Registered Trademark- patch or the FemPatch-Registered Trademark-
system. 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.
<PAGE>
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 the end of the year 2000. The
amounts and timing of future expenditures will depend on:
* progress of ongoing research and development;
* 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;
* manufacturing scale-up for the GlucoWatch-Registered Trademark-
monitor;
* 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 North America and Europe.
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,
<PAGE>
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 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 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.
<PAGE>
WE ARE HIGHLY LEVERAGED AND MAY BE UNABLE TO SERVICE OUR DEBT.
As of September 30, 1999, we had indebtedness of approximately $51.6
million. 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
depends 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, we 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.
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, DISTRIBUTION, MANUFACTURING AND SALES
EXPERIENCE.
We have limited experience marketing, distributing, manufacturing
or selling medical device products. To successfully market, distribute,
manufacture and sell the GlucoWatch-Registered Trademark- monitor or our
other monitoring products under development, we must either develop a more
extensive marketing, distributing, manufacturing and sales force or enter
into arrangements with third parties to market, distribute, manufacture
and sell our products. We cannot assure you that we could successfully
develop a more extensive marketing, distributing, manufacturing and sales
force or that we could enter into acceptable marketing, distributing,
manufacturing and sales agreements with third parties. If we maintain our own
marketing, distributing, manufacturing and sales capabilities, we will
compete with other companies that have experienced and well-funded marketing,
distributing, manufacturing 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 unable successfully to commercialize our products.
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.
<PAGE>
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.
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.
<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
- upon conversion of the convertible debentures or adjustment
mechanisms in the convertible debentures; 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 the by this Owned After
Offering Prospectus the Offering
-------- ---------- ------------
<S> <C> <C> <C>
Conseco Direct Life Insurance Company 114,723 20,900 93,823
The Gleneagles Fund Company 191,647 35,268 156,379
Lancer Securities (Cayman) Limited 191,647 35,268 156,379
Palladin Partners I, L.P. 152,524 27,431 125,093
Palladin Overseas Fund Limited 114,723 20,900 93,823
PGEP III, L.L.C. 114,723 20,900 93,823
Halifax Fund, L.P. 1,263,273 231,201 1,032,072
Petkevich & Partners, LLC 120,000 120,000 0
Cripple Creek Securities, LLC 95,000 95,000 0
</TABLE>
<PAGE>
The shares being sold by the selling stockholders were issued in
connection with the exercise of warrants and conversion of convertible
debentures issued to the selling stockholders.
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
<PAGE>
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 their agreements with their brokers. Upon a
default by the selling stockholders, the broker may offer and sell the pledged
shares from time to time.
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 us by Pillsbury Madison &
Sutro LLP, San Francisco, California.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our financial
statements (and schedules) included in our Annual Report on Form 10-K for the
year ended December 31, 1998, as set forth in their report, which is
incorporated by reference in this prospectus and elsewhere in the registration
statement. Our financial statements (and schedules) are incorporated 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.
<PAGE>
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 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 Reports on Form 10-Q filed by Cygnus for the fiscal quarters
ended March 31, 1999 (Amendment No. 2), June 30, 1999 and September 30,
1999 (Amendment No.1);
3. Current Reports on Form 8-K dated June 7, 1999, July 2, 1999, July 20,
1999, July 28, 1999, October 20, 1999, November 4, 1999, November 22, 1999,
December 13, 1999 and December 30, 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
<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 $ 2,012.45
Accounting fees and expenses $ 5,000.00
Legal fees and expenses $ 3,000.00
Miscellaneous fees and expenses $ 17,500.00
Total $ 27,512.45
</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
------ -----------------------
<S> <C>
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.
II-1
<PAGE>
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.
4.5 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.
4.7 Common Stock Purchase Warrant issued by the Registrant
on February 23, 1999 to Petkevich & Partners, LLC.
4.8 Structured Equity Line Flexible Financing Agreement,
incorporated by reference to Exhibit 10.40 of the
Registrant's Quarterly Report on Form 10-Q filed
on August 16, 1999.
4.9 Registration Rights Agreement, incorporated by reference
to Exhibit 4.11 of the Registrant's Quarterly Report
Form 10-Q filed on August 16, 1999.
4.10 Form of Common Stock Purchase Warrant, incorporated by
reference to Exhibit 10.41 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.
1.2 Consent of Pillsbury Madison & Sutro LLP (included in its
opinion filed as Exhibit 5.1 to this Amendment No. 1 to
Registration Statement).
1.1 Power of Attorney*
</TABLE>
* Previously filed.
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;
II-2
<PAGE>
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.
(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 Amendment No. 1 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Redwood City, State of California, on
February 10, 2000.
CYGNUS, INC.
By /s/ JOHN C HODGMAN
------------------
John C Hodgman
Chairman, Chief Executive Officer & President
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
---- ----- ----
<S> <C> <C>
* Chairman, Chief Executive Officer & February 10, 2000
- President (Principal Executive
John C Hodgman Officer)
* Chief Financial Officer and Senior February 10, 2000
- Vice President, Finance (Principal
Craig W. Carlson Accounting Officer)
* Director February 10, 2000
-
Frank T. Cary
* Director; Chairman Emeritus of the February 10, 2000
- Board of Directors
Gary W. Cleary, Ph.D.
* Vice Chairman of the Board of February 10, 2000
- Directors
Andre T. Marion
* Director February 10, 2000
-
Richard G. Rogers
* Director February 10, 2000
-
Walter B. Wriston
*By: /s/ JOHN C HODGMAN
------------------
John C Hodgman Attorney-in-Fact February 10, 2000
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<S> <C>
4.7 Common Stock Purchase Warrant issued by Registrant
on February 23, 1999 to Petkevich & Partners, LLC.
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
Amendment No. 1 Registration Statement).
1.1 Power of Attorney*
</TABLE>
*Previously filed.
<PAGE>
EXHIBIT 4.7
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT
BE SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FILED UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT.
*****************************************
Cygnus, Inc.
COMMON STOCK PURCHASE WARRANT
*****************************************
This certifies that, for good and valuable consideration, Cygnus, Inc., a
Delaware corporation (the "Company"), grants to Petkevich & Partners, LLC
("P&P"), or its registered, permitted assigns (together with P&P, the
"Warrantholder"), the right to subscribe for and purchase from the Company a
total of 120,000 validly issued, fully paid and nonassessable shares (the
"Warrant Shares") of the Company's Common Stock, $0.001 par value (the
"Common Stock"). A total of 60,000 Warrant Shares (the "First Tranche") are
available at the purchase price per share of $.01 (the "First Tranche
Exercise Price"), exercisable at any time and from time to time during the
period (the "First Tranche Exercise Period") commencing on the Closing Date
and ending on March 1, 1999, all subject to the terms, conditions and
adjustments herein set forth. A total of 60,0000 additional Warrant Shares
(the "Second Tranche") are available at the purchase price per share of $3.25
(the "Second Tranche Exercise Price"), exercisable at any time and from time
to time during the period (the "Second Tranche Exercise Period") commencing
on the Closing Date and ending on October 31, 1999, all subject to the terms,
conditions and adjustments herein set forth.
1. DURATION AND EXERCISE OF WARRANT; LIMITATION ON EXERCISE;
PAYMENT OF TAXES.
1.1 DURATION AND EXERCISE OF WARRANT.
(a) CASH EXERCISE. This Warrant may be exercised by the Warrantholder by
(i) the surrender of this Warrant to the Company, with a duly executed
Exercise Form specifying the number of Warrant Shares to be purchased, during
normal business hours on any Business Day during the First Tranche Exercise
Period or the Second Tranche Exercise Period, as the case may be, and (ii)
the delivery of payment to the Company, for the account of the Company, by
cash, wire transfer of immediately available funds to a bank account
specified by the Company, or by certified or bank cashier's check, of the
First Tranche Exercise Price or the Second Tranche Exercise Price, as the
case may be, for the number of Warrant Shares specified in the Exercise Form
in lawful money of the United States of America. The Company agrees that such
Warrant Shares shall be deemed to be issued to the Warrantholder as the
record holder of such Warrant Shares as of the close of business on the date
on which this Warrant shall have been surrendered and payment made for the
Warrant Shares as aforesaid. A stock certificate or certificates for the
Warrant Shares specified in the Exercise Form shall be delivered to the
Warrantholder as promptly as practicable, and in any event within 10 days,
thereafter. The stock certificate or certificates so delivered shall be in
denominations of 100 shares each or such lesser or greater denominations as
may be reasonably specified by the Warrantholder in the Exercise Form. If
this Warrant shall have been exercised only in part, the Company shall, at
the time of delivery of the stock certificate or certificates, deliver to the
Warrantholder a new Warrant evidencing the rights to purchase the remaining
Warrant Shares, which new Warrant shall in all other respects be identical
with this Warrant. No adjustments shall be made on Warrant Shares issuable on
the exercise of this Warrant for any cash dividends paid or payable to
holders of record of Common Stock prior to the date as of which the
Warrantholder shall be deemed to be the record holder of such Warrant Shares.
(b) NET ISSUE EXERCISE. In lieu of exercising this Warrant pursuant to
Section 1.1(a), this Warrant may be exercised by the Warrantholder by the
surrender of this Warrant to the Company, with a duly executed Exercise Form
marked to reflect Net Issue Exercise and specifying the number of Warrant
Shares to be purchased from the First Tranche and/or the Second Tranche,
during normal business hours on any Business Day during either the First
Tranche Exercise Period or the Second Tranche Exercise Period, as the case
may be. The Company agrees that such Warrant Shares shall be deemed to be
issued to the Warrantholder as the record holder of such Warrant Shares as of
the close of business on the date on which this Warrant shall have been
surrendered as aforesaid. Upon such exercise, the Warrantholder shall be
entitled to receive shares equal to the value of the First Tranche and the
Second Tranche of this Warrant (or the portion thereof being canceled) by
surrender of this Warrant to the Company together with notice of such
election in which event the Company shall issue to Warrantholder a number of
shares of the Company's Common Stock computed as of the date of surrender of
this Warrant to the Company using the following formula:
X = Y x (A-B)
----------
A
Where X = the number of shares of Common Stock to be issued to
Warrantholder under this Section 1.1(b) from the First
Tranche or the Second Tranche, as applicable;
Y = the number of shares of Common Stock otherwise purchasable
under this Warrant (at the date of such calculation) from the
First Tranche or the Second Tranche, as applicable;
A = the fair market value of one share of the Company's Common
Stock (at the date of such calculation);
B = the First Tranche Exercise Price or the Second Tranche
Exercise Price, as applicable (as adjusted to the date of such
calculation).
(c) FAIR MARKET VALUE. For purposes of Section 1.1(b) fair market value
of one share of the Company's Common Stock shall mean:
(i) the closing price per share of the Company's Common Stock
on the principal national securities exchange on which the Common
Stock is listed or admitted to trading or,
(ii) if not listed or traded on any such exchange, the last
reported sales price per share on the Nasdaq National Market or the
Nasdaq Small-Cap Market (collectively, "Nasdaq") or,
(iii) if not listed or traded on any such exchange or Nasdaq,
the average of the bid and asked price per share as reported in the
"pink sheets" published by the National Quotation Bureau, Inc. (the
"pink sheets") or,
(iv) if such quotations are not available, the fair market
value per share of the Company's Common Stock on the date such notice
was received by the Company as determined by the Board of Directors of
the Company.
1.2 PAYMENT OF TAXES. The issuance of certificates for Warrant Shares
shall be made without charge to the Warrantholder for any stock transfer or
other issuance tax in respect thereto; PROVIDED, HOWEVER, that the
Warrantholder shall be required to pay any and all taxes which may be payable
in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the then Warrantholder as reflected
upon the books of the Company.
2. RESTRICTIONS ON TRANSFER; RESTRICTIVE LEGENDS.
<PAGE>
2.1 RESTRICTIONS ON TRANSFER; COMPLIANCE WITH SECURITIES LAWS. This
Warrant and the Warrant Shares issued upon the exercise of the Warrant may
not be transferred or assigned in whole or in part without compliance with
all applicable federal and state securities laws by the transferor and
transferee (including the delivery of investment representation letters and
legal opinions reasonably satisfactory to the Company, if such are requested
by the Company). The Warrantholder, by acceptance hereof, acknowledges that
this Warrant and the Warrant Shares to be issued upon exercise hereof are
being acquired solely for the Warrantholder's own account and not as a
nominee for any other party, and for investment, and that the Warrantholder
will not offer, sell or otherwise dispose of this Warrant or any Warrant
Shares to be issued upon exercise hereof except under circumstances that will
not result in a violation of the Securities Act or any state securities laws.
Upon exercise of this Warrant, the Warrantholder shall, if requested by the
Company, confirm in writing, in a form satisfactory to the Company, that the
Warrant Shares so purchased are being acquired solely for the Warrantholder's
own account and not as a nominee for any other party, for investment, and not
with a view toward distribution or resale.
2.2 RESTRICTIVE LEGENDS. Except as otherwise permitted by this Section
2, each Warrant shall (and each Warrant issued upon direct or indirect
transfer or in substitution for any Warrant issued pursuant to Section 4
shall) be stamped or otherwise imprinted with a legend in substantially the
following form:
"THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER
SUCH ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH
ACT."
Except as otherwise permitted by this Section 2, each stock certificate for
Warrant Shares issued upon the exercise of any Warrant and each stock
certificate issued upon the direct or indirect transfer of any such Warrant
Shares shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT
BE SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT FILED UNDER SUCH ACT OR PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT."
Notwithstanding the foregoing, the Warrantholder may require the Company to
issue a Warrant or a stock certificate for Warrant Shares, in each case
without a legend, if (i) such Warrant or such Warrant Shares, as the case may
be, have been registered for resale under the Securities Act or sold pursuant
to Rule 144 under the Securities Act (or a successor rule thereto) or (ii)
the Warrantholder has received an opinion of counsel reasonably satisfactory
to the Company that such registration is not required with respect to such
Warrant or such Warrant Shares, as the case may be.
3. RESERVATION AND REGISTRATION OF SHARES, ETC.
The Company covenants and agrees that all Warrant Shares which are issued
upon the exercise of this Warrant will, upon issuance, be validly issued,
fully paid and nonassessable and free from all taxes, liens, security
interests, charges and other encumbrances with respect to the issue thereof,
other than taxes in respect of any transfer occurring contemporaneously with
such issue. The Company further covenants and agrees that, during the First
Tranche Exercise Period and the Second Tranche Exercise Period, as the case
may be, the Company will at all times have authorized and reserved, and keep
available free from preemptive rights, a sufficient number of shares of
Common Stock to provide for the exercise of the rights represented by this
Warrant and will, at its expense, upon each such reservation of shares,
procure such listing of such shares of Common Stock (subject to issuance or
notice of issuance) as then may be required on all stock exchanges on which
the Common Stock is then listed or on Nasdaq.
4. EXCHANGE, LOSS OR DESTRUCTION OF WARRANT.
<PAGE>
Subject to the terms and conditions hereof, including the restrictions on
transfer in Section 2, upon surrender of this Warrant to the Company with a
duly executed Assignment Form and funds sufficient to pay any transfer tax,
the Company shall, without charge, execute and deliver a new Warrant or
Warrants of like tenor in the name of the assignee named in such Assignment
Form and this Warrant shall promptly be canceled. Upon receipt by the Company
of evidence satisfactory to it of the loss, theft, destruction or mutilation
of this Warrant and, in the case of loss, theft or destruction, of such bond
or indemnification as the Company may require, and, in the case of such
mutilation, upon surrender and cancellation of this Warrant, the Company will
execute and deliver a new Warrant of like tenor. The term "Warrant" as used
in this Agreement shall be deemed to include any Warrants issued in
substitution or exchange for this Warrant.
5. OWNERSHIP OF WARRANT.
The Company may deem and treat the person in whose name this Warrant is
registered as the holder and owner hereof (notwithstanding any notations of
ownership or writing hereon made by anyone other than the Company) for all
purposes and shall not be affected by any notice to the contrary, until
presentation of this Warrant for registration of transfer as provided in
Section 4.
6. CERTAIN ADJUSTMENTS.
6.1 The number of Warrant Shares purchasable upon the exercise of this
Warrant and the First Tranche Exercise Price and the Second Tranche Exercise
Price shall be subject to adjustment as follows:
(a) STOCK DIVIDENDS. If at any time prior to the exercise of this
Warrant in full (i) the Company shall fix a record date for the issuance of
any stock dividend payable in shares of Common Stock or (ii) the number of
shares of Common Stock shall have been increased by a subdivision or split-up
of shares of Common Stock, then, on the record date fixed for the
determination of holders of Common Stock entitled to receive such dividend or
immediately after the effective date of subdivision or split-up, as the case
may be, the number of shares of Common Stock to be delivered upon exercise of
this Warrant will increased so that the Warrantholder will be entitled to
receive the number of shares of Common Stock that such Warrantholder would
have owned immediately following such action had this Warrant been exercised
immediately prior thereto, and the Exercise Price will be adjusted as
provided below in paragraph (f).
(b) COMBINATION OF STOCK. If at any time prior to the exercise of this
Warrant in full the number of shares of Common Stock outstanding shall have
been decreased by a combination of the outstanding shares of Common Stock,
then, immediately after the effective date of such combination, the number of
shares of Common Stock to be delivered upon exercise of this Warrant will be
decreased so that the Warrantholder thereafter will be entitled to receive
the number of shares of Common Stock that such Warrantholder would have owned
immediately following such action had this Warrant been exercised immediately
prior thereto, and the Exercise Price will be adjusted as provided below in
paragraph (f).
(c) REORGANIZATION, ETC. If at any time prior to the exercise of this
Warrant in full any capital reorganization of the Company, or any
reclassification of the Common Stock, or any consolidation of the Company
with or merger of the Company with or into any other person or any sale,
lease or other transfer of all or substantially all of the assets of the
Company to any other person, shall be effected in such a way that the holders
of Common Stock shall be entitled to receive stock, other securities or
assets (whether such stock, other securities or assets are issued or
distributed by the Company or another person) with respect to or in exchange
for Common Stock, then, upon exercise of this Warrant the Warrantholder shall
have the right to receive the kind and amount of stock, other securities or
assets receivable upon such reorganization, reclassification, consolidation,
merger or sale, lease or other transfer by a holder of the number of shares
of Common Stock that such Warrantholder would have been entitled to receive
upon exercise of this Warrant had this Warrant been exercised immediately
before such reorganization, reclassification, consolidation, merger or sale,
lease or other transfer, subject to adjustments that shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Section 6.
(d) FRACTIONAL SHARES. No fractional shares of Common Stock or scrip
shall be issued to any Warrantholder in
<PAGE>
connection with the exercise of this Warrant. Instead of any fractional
shares of Common Stock that would otherwise be issuable to such
Warrantholder, the Company will pay to such Warrantholder a cash adjustment
in respect of such fractional interest in an amount equal to that fractional
interest of the then current closing price per share of Common Stock.
(e) CARRYOVER. Notwithstanding any other provision of this Section 6, no
adjustment shall be made to the number of shares of Common Stock to be
delivered to the Warrantholder (or to the First Tranche Exercise Price or the
Second Tranche Exercise Price, as the case may be) if such adjustment
represents less than 1% of the number of shares to be so delivered, but any
lesser adjustment shall be carried forward and shall be made at the time and
together with the next subsequent adjustment which together with any
adjustments so carried forward shall amount to 1% or more of the number of
shares to be so delivered.
(f) EXERCISE PRICE ADJUSTMENT. Whenever the number of Warrant Shares
purchasable upon the exercise of the Warrant is adjusted, as herein provided,
the First Tranche Exercise Price and the Second Tranche Exercise Price
payable upon the exercise of this Warrant shall be adjusted by multiplying
such First Tranche Exercise Price and Second Tranche Exercise Price, as
applicable, immediately prior to such adjustment by a fraction, of which the
numerator shall be the number of Warrant Shares purchasable upon the exercise
of the First Tranche and Second Tranche, respectively, of this Warrant
immediately prior to such adjustment, and of which the denominator shall be
the number of Warrant Shares purchasable upon exercise of the First Tranche
and Second Tranche, respectively, of this Warrant immediately thereafter.
(g) NO DUPLICATE ADJUSTMENTS. Notwithstanding anything else to the
contrary contained herein, in no event will an adjustment be made under the
provisions of this Section 6 to the number of Warrant Shares issuable upon
exercise of this Warrant or the Exercise Price for any event if an adjustment
having substantially the same effect to the Warrantholder as any adjustment
that otherwise would be made under the provisions of this Section 6 is made
by the Company for any such event to the number of shares of Common Stock (or
other securities) issuable upon exercise of this Warrant.
6.2 NO ADJUSTMENT FOR DIVIDENDS. Except as provided in Section 6.1, no
adjustment in respect of any dividends shall be made during the term of the
Warrant or upon the exercise of this Warrant.
6.3 NOTICE OF ADJUSTMENT. Whenever the number of Warrant Shares or the
Exercise Price of such Warrant Shares is adjusted, as herein provided, the
Company shall promptly mail by first class, postage prepaid, to the
Warrantholder, notice of such adjustment or adjustments and a certificate of
the chief financial officer of the Company setting forth the number of
Warrant Shares and the Exercise Price of such Warrant Shares after such
adjustment for the First Tranche and Second Tranche of this Warrant, setting
forth a brief statement of the facts requiring such adjustment and setting
forth the computation by which such adjustment was made.
7. NOTICES OF CORPORATE ACTION.
In the event of
(a) 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, or 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, or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any consolidation or
merger involving the Company and any other party, or
(c) any voluntary or involuntary dissolution, liquidation or winding-up
of the Company,
the Company will mail to the Warrantholder a notice specifying (i) the date
or expected 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 any such
<PAGE>
dividend, distribution or right, and (ii) the date or expected date on which
any such reorganization, reclassification, recapitalization, consolidation,
merger, dissolution, liquidation or winding-up is to take place and the time,
if any such time is to be fixed, as of which the holders of record of Common
Stock (or other securities) shall be entitled to exchange their shares of
Common Stock (or other securities) for the securities or other property
deliverable upon such reorganization, reclassification, recapitalization,
consolidation, merger, dissolution, liquidation or winding-up. Such notice
shall be mailed at least 10 days prior to the date therein specified, in the
case of any date referred to in the foregoing subdivision (i), and at least
10 days prior to the date therein specified, in the case of the date referred
to in the foregoing subdivision (ii).
8. DEFINITIONS.
As used herein, unless the context otherwise requires, the following terms
have the following respective meanings:
ASSIGNMENT FORM: an Assignment Form in the form annexed hereto as Exhibit B.
BUSINESS DAY: any day other than a Saturday, Sunday or a day on which
national banks are authorized by law to close in the City of New York, State
of New York.
COMPANY: Cygnus, Inc., a Delaware corporation.
EXCHANGE ACT: the Securities Exchange Act of 1934, as amended, or any
successor federal statute, and the rules and regulations of the SEC
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Exchange Act of 1934, as amended, shall
include a reference to a comparable section, if any, of any successor federal
statute.
EXERCISE FORM: an Exercise Form in the form annexed hereto as Exhibit A.
FIRST TRANCHE: the meaning specified on the cover of this Warrant.
SECOND TRANCHE: the meaning specified on the cover of this Warrant.
FIRST TRANCHE EXERCISE PERIOD: the meaning specified on the cover of this
Warrant.
SECOND TRANCHE EXERCISE PERIOD: the meaning specified on the cover of this
Warrant.
FIRST TRANCHE EXERCISE PRICE: the meaning specified on the cover of this
Warrant, as such price may be adjusted pursuant to Section 6 hereof.
SECOND TRANCHE EXERCISE PRICE: the meaning specified on the cover of this
Warrant, as such period may be adjusted pursuant to Section 6 hereof.
NASDAQ: the meaning specified in Section 1.1(c)(ii).
SEC: the Securities and Exchange Commission or any other federal agency at
the time administering the Securities Act or the Exchange Act, whichever is
the relevant statute for the particular purpose.
SECURITIES ACT: the Securities Act of 1933, as amended, or any successor
federal statute, and the rules and regulations of the Commission thereunder,
all as the same shall be in effect at the time. Reference to a particular
section of the Securities Act of 1933, as amended, shall include a reference
to the comparable section, if any, of any successor federal statute.
WARRANTHOLDER: the meaning specified on the cover of this Warrant.
WARRANT SHARES: the meaning specified on the cover of this Warrant, subject
to the provisions of Section 6.
9. MISCELLANEOUS.
9.1 ENTIRE AGREEMENT. This Warrant constitutes the entire agreement
between the Company and the Warrantholder with respect to this Warrant.
9.2 BINDING EFFECTS; BENEFITS. This Warrant shall inure to the benefit
of and shall be binding upon the Company and the Warrantholder and their
respective heirs, legal representatives, successors and permitted assigns.
Nothing in
<PAGE>
this Warrant, expressed or implied, is intended to or shall confer on any
person other than the Company and the Warrantholder, or their respective
heirs, legal representatives, successors or permitted assigns, any rights,
remedies, obligations or liabilities under or by reason of this Warrant.
9.3 AMENDMENTS AND WAIVERS. This Warrant may not be modified or amended
except by an instrument or instruments in writing signed by the Company and
the Warrantholder. Either the Company or the Warrantholder may, by an
instrument in writing, waive compliance by the other party with any term or
provision of this Warrant on the part of such other party hereto to be
performed or complied with. The waiver by any such party of a breach of any
term or provision of this Warrant shall not be construed as a waiver of any
subsequent breach.
9.4 SECTION AND OTHER HEADINGS. The section and other headings contained
in this Warrant are for reference purposes only and shall not be deemed to be
a part of this Warrant or to affect the meaning or interpretation of this
Warrant.
9.5 FURTHER ASSURANCES. Each of the Company and the Warrantholder shall
do and perform all such further acts and things and execute and deliver all
such other certificates, instruments and documents as the Company or the
Warrantholder may, at any time and from time to time, reasonably request in
connection with the performance of any of the provisions of this Agreement.
9.6 NOTICES. All notices and other communications required or permitted
to be given under this Warrant shall be in writing and shall be deemed to
have been duly given if delivered personally or sent by United States mail,
postage prepaid, to the parties hereto at the following addresses or to such
other address as any party hereto shall hereafter specify by notice to the
other party hereto:
(a) if to the Company, addressed to:
Cygnus, Inc.
400 Penobscot Drive
Redwood City, California 94061
Attention: President
Telecopier: (650) 367-5060
with a copy to:
Pillsbury Madison & Sutro
235 Montgomery Street
San Francisco, California 94104
Telecopier: (415) 983-1200
Attention: Blair W. White, Esq.
(b) if to the Warrantholder, addressed to the address of such
Warrantholder appearing on the books of the Company.
Except as otherwise provided herein, all such notices and communications
shall be deemed to have been received on the date of delivery thereof, if
delivered personally, or on the third Business Day after the mailing thereof.
9.7 SEPARABILITY. Any term or provision of this Warrant which is invalid
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the terms and provisions of this Warrant
or affecting the validity or enforceability of any of the terms or provisions
of this Warrant in any other jurisdiction.
9.8 GOVERNING LAW. This Warrant shall be deemed to be a contract made
under the laws of the State of Delaware and for all purposes shall be
governed by and construed in accordance with the laws of such State
applicable to agreements made and to be performed entirely within such State.
<PAGE>
9.9 NO RIGHTS OR LIABILITIES AS STOCKHOLDER. Nothing contained in this
Warrant shall be determined as conferring upon the Warrantholder any rights
as a stockholder of the Company or as imposing any liabilities on the
Warrantholder to purchase any securities whether such liabilities are
asserted by the Company or by creditors or stockholders of the Company or
otherwise.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
Dated: February 23, 1999.
CYGNUS, INC.
By: /s/ JOHN C HODGMAN
Title: CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
EXHIBIT 5.1
[LETTERHEAD]
February 10, 2000
Cygnus, Inc.
400 Penobscot Drive
Redwood City, CA 94063-4719
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 606,868 shares of Common Stock, $.001 par value (the
"Common Stock"), of the Company issuable upon the exercise of certain
warrants (the "Warrants") and the conversion of certain convertible
debentures (the "Debentures"), 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 606,868 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 issuable upon the exercise of the Warrants
and the conversion of the Debentures will be duly and validly authorized,
and, upon delivery thereof and payment therefor in accordance with the terms
of the Warrants or the Debentures, as the case may be, will be duly and
validly issued and will be 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 606,868 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
February 10, 2000
