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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: July 27, 2001
(Date of earliest event reported)
MICROCIDE PHARMACEUTICALS, INC.
(exact name of registrant as specified in its charter)
Delaware Commission File: 94-3186021
(State or other jurisdiction 0-28006 (I.R.S. Employer
of incorporation or Identification No.)
organization)
850 Maude Avenue
Mountain View, California 94043
(Address of Principal executive offices, including zip code)
(650) 428-1550
(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS
The Althexis Company Merger Transaction
On July 27, 2001, Microcide Pharmaceuticals, Inc., a Delaware corporation
("Microcide"), California MP Acquisition, Inc., a Delaware corporation and
wholly-owned subsidiary of Microcide ("Sub"), and The Althexis Company, Inc., a
Delaware corporation ("Althexis"), entered into an Agreement and Plan of Merger
(the "Merger Agreement"), which is attached hereto as Exhibit 99.1 and
incorporated by reference herein. Pursuant to the terms of the Merger Agreement,
and subject to certain conditions being satisfied or waived, Sub will merge (the
"Merger") with and into Althexis with Althexis surviving the Merger as a wholly-
owned subsidiary of Microcide. Under the terms of the Merger Agreement, Mark
Skaletsky, the current Chairman and CEO of Althexis, will become the Chairman,
CEO and President of Microcide following the Merger.
At the effective time of the Merger, each share of Althexis common stock,
par value $0.01 per share ("Althexis Common Stock"), and each share of Althexis
preferred stock, par value $0.01 per share ("Althexis Preferred Stock"),
outstanding immediately prior to the effective time will be converted into the
right to receive a number of shares of common stock, par value $0.001 per share
("Microcide Common Stock"), of Microcide equal to the exchange ratio. The
exchange ratio will be calculated by dividing 5,550,000 shares of Microcide
Common Stock by the number of shares of Althexis Common Stock outstanding
(assuming the issuance of shares issuable upon exercise of outstanding options
and warrants and conversion of outstanding Althexis Preferred Stock) immediately
prior to the closing (the "Exchange Ratio"). Upon closing, each warrant to
purchase shares of Althexis Common Stock or Althexis Preferred Stock outstanding
and unexercised immediately prior to the effective time of the Merger will be
assumed by Microcide and will have the same terms and conditions as were
applicable prior to the Merger, except that each warrant will become exercisable
for a number of shares of Microcide Common Stock as determined by the Exchange
Ratio, with a corresponding change in the exercise price of the warrant. In
addition, each option to purchase shares of Althexis Common Stock outstanding
under the Althexis 1999 Stock Option Plan and unexercised immediately prior to
the effective time of the Merger will be assumed by Microcide and have the same
terms and conditions as were applicable prior to the Merger, except that each
option will become exercisable for a number of shares of Microcide Common Stock
as determined by the Exchange Ratio, with a corresponding change in the exercise
price of the option.
The shares of Microcide Common Stock issued in connection with the Merger
will be issued in a transaction exempt from registration under the Securities
Act of 1933, as amended (the "Act"). Under the terms of the Merger Agreement,
Microcide will file a registration statement on Form S-3 covering the resale by
the holders of the Microcide Common Stock issued in connection with the Merger.
At the closing of the Merger, certain stockholders of Althexis will enter into
stockholders agreements providing for certain resale restrictions for one and
two year periods after the closing of the Merger. Microcide will also file a
registration statement on Form S-8 relating to the issuance of the shares of
Microcide Common Stock upon the exercise of the Althexis stock options assumed
in the Merger.
In connection with the Merger Agreement, Microcide and Althexis have
entered into reciprocal stock option agreements (the "Option Agreements")
pursuant to which Microcide has granted to Althexis, and Althexis has granted to
Microcide, an option to acquire up to 19.9% of
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the common stock of Microcide and Althexis, respectively. The options are
exercisable only under certain circumstances related to the termination of the
Merger Agreement and are subject to a limitation on the total profit that may be
realized. The Option Agreements are attached hereto as Exhibits 99.2 and 99.3
and are incorporated by reference herein. Microcide and Althexis have also
agreed that, in the event the Merger Agreement is terminated under certain
circumstances, one party may be obligated to pay the other's out-of-pocket
expenses and to pay certain termination fees.
Also in connection with the execution of the Merger Agreement, certain
officers of Althexis have entered into severance agreements with Microcide which
will become effective at the closing of the Merger.
Series B Preferred Stock Financing Transaction
Concurrent with the execution of the Merger Agreement, Microcide entered
into Subscription Agreements (collectively, the "Subscription Agreements") to
sell shares of Series B convertible redeemable preferred stock, par value $0.001
per share (the "Preferred Stock"), of Microcide to certain investors (the
"Investors") for an aggregate purchase price equal to $60,000,000 in a private
placement transaction exempt from registration under the Act (the "Financing").
The Preferred Stock will be convertible into shares of Microcide Common Stock at
a fixed exchange ratio of $3.00 per share, subject to adjustment for stock
dividends, stock splits and similar events. The holders of shares of Preferred
Stock will be entitled to receive dividends when, as, and if declared by the
Board of Directors out of funds legally available for such purpose and will also
be entitled to participate in any dividends declared and paid on shares of
Microcide Common Stock, on an as-if converted basis. The forms of Subscription
Agreement and Certificate of Designations for the Preferred Stock are attached
hereto as Exhibits 99.4 and 4.1 and are incorporated by reference herein.
Under the terms of the Subscription Agreements, Microcide will file a
registration statement on Form S-3 covering the resale by the Investors of the
Microcide Common Stock issuable upon conversion of the Preferred Stock. At the
closing of the Financing, the Investors will enter into lock-up agreements
providing for certain resale restrictions for nine months after the closing of
the Financing. The Investors will be entitled to certain rights of first refusal
in connection with certain future equity offerings of Microcide, subject to
applicable federal and state securities laws.
The Preferred Stock will be mandatorily redeemable on the fifth anniversary
of the date of issuance at a price equal to the original purchase price, plus
any declared and unpaid dividends, subject to the holders' right to delay
redemption for one year. In addition, the Preferred Stock will be redeemable at
the holder's option at a price equal to the original purchase price, plus any
declared and unpaid dividends, upon the occurrence of certain events, including,
among others, a change of control transaction, the delisting of Microcide's
Common Stock from the Nasdaq National Market or upon Microcide's default on any
indebtedness individually in excess of $1,000,000 or in excess of $2,000,000 in
the aggregate. The Preferred Stock will also be redeemable at Microcide's
option, beginning any time at least two years after the closing of the
Financing, in the event that the closing price of Microcide Common Stock exceeds
$20 for 40 consecutive trading days, provided that the registration statement
covering the resale of the Microcide Common Stock issuable upon conversion of
the Preferred Stock has been effective for that entire 40-day period.
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The Preferred Stock will be entitled to vote together with the Microcide
Common Stock on an as-if converted basis. Microcide's Board will continue to
consist of eight directors. The Preferred Stock, voting together as a separate
class, will be entitled to elect three members of Microcide's Board of Directors
(the "Series B Directors") and will vote together with the Microcide Common
Stock to elect the remaining members of the Board of Directors, which will be
nominated by Microcide's Board of Directors. In connection with the closing of
the Financing, the Investors will enter into voting agreements irrevocably
granting a power of attorney to the Chairman of Microcide for the election of
directors (other than the Series B Directors) after the completion of the Merger
and Financing.
In the event of a liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, after the payment of any
liquidation preference payments on any shares of capital stock of Microcide
ranking senior in liquidation preference rights to the Preferred Stock, the
holders of Preferred Stock shall be entitled to receive out of Microcide's
assets a liquidation preference payment on each share of Preferred Stock equal
to the original purchase price, plus any declared and unpaid dividends, before
any payment shall be made or any assets distributed to the holders of Microcide
Common Stock. After payment in full of the liquidation preference on the
Preferred Stock, the holders of Preferred Stock shall not be entitled to any
further participation in any distribution of assets by Microcide.
By the terms of the Merger Agreement and the Subscription Agreements, the
Merger and the Financing are contingent upon each other and are anticipated to
close concurrently. Completion of the Merger and Financing is subject to
approval of Microcide and Althexis stockholders, regulatory approvals, the sale
and issuance of at least $55,000,000 of Preferred Stock and customary closing
conditions. Stockholders holding over 93% of the voting power of Althexis's
outstanding common stock have entered into agreements to vote their shares in
favor of the Merger.
On July 30, 2001, Microcide and Althexis issued a joint press release
announcing the Merger and the Financing, which press release is attached hereto
as Exhibit 99.5 and incorporated herein by reference.
The foregoing summaries of the Merger, the Financing and the associated
agreements are qualified in their entirety by reference to the full text of the
documents that are attached hereto as exhibits.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits
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4.1 Form of Certificate of Designations of Series B Convertible
Redeemable Preferred Stock.
99.1 Agreement and Plan of Merger, dated as of July 27, 2001, by
and among Microcide Pharmaceuticals, Inc., California MP
Acquisition, Inc. and The Althexis Company.
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99.2 Option Agreement, dated as of July 27, 2001, by and between
Microcide Pharmaceuticals, Inc. and The Althexis Company
with regard to shares of Althexis common stock.
99.3 Option Agreement, dated as of July 27, 2001, by and between
Microcide Pharmaceuticals, Inc. and The Althexis Company
with regard to shares of Microcide common stock.
99.4 Form of Subscription Agreement, dated as of July 27, 2001,
by and between Microcide Pharmaceuticals, Inc. and each of
the Investors.
99.5 Joint Press Release, dated July 30, 2001.
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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,
MICROCIDE PHARMACEUTICALS, INC.
Date: August 3, 2001 By /s/ James E. Rurka
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Name: James E. Rurka
Title: President and Chief Executive Officer
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EXHIBIT INDEX
Exhibit
No. Description
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4.1 Form of Certificate of Designations of Series B Convertible
Redeemable Preferred Stock.
99.1 Agreement and Plan of Merger, dated as of July 27, 2001, by and
among Microcide Pharmaceuticals, Inc., California MP Acquisition,
Inc. and The Althexis Company.
99.2 Option Agreement, dated as of July 27, 2001, by and between
Microcide Pharmaceuticals, Inc. and The Althexis Company with
regard to shares of Althexis common stock.
99.3 Option Agreement, dated as of July 27, 2001, by and between
Microcide Pharmaceuticals, Inc. and The Althexis Company with
regard to shares of Microcide common stock.
99.4 Form of Subscription Agreement, dated as of July 27, 2001, by and
between Microcide Pharmaceuticals, Inc. and each of the
Investors.
99.5 Joint Press Release, dated as of July 30, 2001.
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