- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO
SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): AUGUST 13, 1997
--------------------
CYTOTHERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-19871 94-3078125
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification Number)
2 RICHMOND SQUARE
PROVIDENCE, RHODE ISLAND 02906
(Address, of principal executive offices, including zip code)
(401) 272-3310
(Registrant's Telephone number including area code)
--------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PAGE 1 OF 3 PAGES.
<PAGE>
Item 5. Other Event
On August 13, 1997 CytoTherapeutics, Inc. ("CTI"), StemCells, Inc. ("SCI") and a
wholly subsidiary of CTI ("Merger Sub") entered into an Agreement and Plan of
Merger (the "Merger Agreement"), pursuant to which CTI will acquire all of the
outstanding shares of capital stock of SCI. Pursuant to the terms of the Merger
Agreement, Merger Sub will merge with and into SCI (the "Merger"), resulting in
SCI becoming a wholly owned subsidiary of CTI. Each outstanding share of capital
stock of SCI, other than shares owned by persons who properly perfect their
appraisal rights under the California Corporation Code, will be converted into
the right to receive the number of shares of CTI Common Stock, $.01 par value
("CTI Common Stock") equal to the result of dividing (i) the result of
$7,900,000 less the expenses of SCI incurred in connection with the Merger in
excess of $75,000 (the "Excess Expenses") divided by $5.00, by (ii) the number
of shares of capital stock of SCI outstanding on the date of the closing, plus
the maximum number of shares of capital stock of SCI issuable upon the
conversion or exercise of all options, warrants, preferred stock and other
securities of SCI convertible into or exercisable for shares of SCI Capital
Stock (whether or not such securities are then exercisable in full), plus 18,503
shares (the "Exchange Ratio"). Consummation of the Merger is conditioned upon
the satisfaction of a number of conditions, including, without limitation,
approval of the transaction by the stockholders of SCI.
Upon the closing of the Merger, it is anticipated that Richard M. Rose, M.D.,
President and Chief Executive Officer of SCI, will be named President and Chief
Executive Officer of CytoTherapeutics; Seth A. Rudnick, M.D., CTI's current
Chairman and Chief Executive Officer, will continue to serve as Chairman of its
Board of Directors.
Upon the consummation of the Merger, it is anticipated that CTI will enter into
consulting arrangements with the principal scientific founders of SCI including,
without limitation, Irving Weissman, M.D., of Stanford University and Fred Gage,
Ph.D., of Salk Institute. Under the terms of the proposed consulting
arrangements, Dr. Weissman will also serve as a member of CTI's Board of
Directors and as Chairman of CTI's Scientific Advisory Board and Dr. Gage will
join CTI's Scientific Advisory Board.
To attract and retain Drs. Rose, Weissman, Gage and other employees and
consultants necessary to move CTI's expanded stem cell program forward, CTI
expects to award performance-based options to acquire a total of approximately
two million shares of CTI common stock, at an exercise price equal to the price
of CTI common stock at the time of grant; substantially all of these options
will vest and become exercisable only on the achievement of specified milestones
related to the stem cell program, such as corporate partnering events, the
initiation of clinical trials and regulatory filings and approvals.
Conduct of the stem cells research following completion of the merger is
expected to be conducted pursuant to the provisions of an agreement between CTI
and the scientific founders of SCI providing for a two year research plan. If
the goals of the research plan are accomplished, the stem cells research will
continue to be conducted under an extension of such Plan approved by a Research
Committee consisting of two persons chosen by the founders, two persons chosen
by CTI and a fifth member appointed by the founders, subject to the reasonable
approval of CTI. Increases in stem cells research funding of not more than 25% a
year approved by the Committee will be funded by CTI as long as the goals of the
Research
-2-
<PAGE>
Plan are being met, provided, however, that CTI will retain the option of
ceasing or reducing neural stem cell research even if all Plan goals are being
met by accelerating the vesting of all all still-achievable performance-based
options and ceasing or reducing non-neural stem cell research even if all
Plan goals are being met by affording the scientific founders the opportunity to
continue development of the non-neural stem cell research by licensing the
technology related to such research to the founders in exchange for a payment to
CTI equal to all funding for such research, plus royalty payments.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CYTOTHERAPEUTICS, INC.
By /s/ Frederic A. Eustis
Title: Executive Vice President
Date: August 15, 1997
-3-
<PAGE>
