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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 AND EXCHANGE ACT OF 1934
April 6, 2000
Date of Report (Date of earliest event reported)
NEOTHERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 000-28782 93-0979187
(State or other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification Number)
157 TECHNOLOGY DRIVE 92618
IRVINE, CALIFORNIA (Zip Code)
(Address of principal executive offices)
(949) 788-6700
(Registrant's telephone number, including area code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS.
On April 6, 2000, NeoTherapeutics, Inc. (the "Company") entered into a
Convertible Debenture Purchase Agreement (the "Purchase Agreement") with two
institutional investors for the issuance and sale of 5% subordinated convertible
debentures (the "Debentures") in the aggregate principal amount of $10,000,000,
warrants to purchase up to 4,000,000 shares of common stock over two years (the
"Class B Warrants") and 5-year warrants to purchase up to 315,000 shares of
common stock (the "Class A Warrants"), and a registration rights agreement (the
"Registration Rights Agreement") and a letter agreement regarding the issuance
of two additional tranches of Debentures and warrants (the "Letter Agreement",
and together with the Purchase Agreement, Registration Rights Agreement,
Debentures, Class A Warrants and Class B Warrants, the "Transaction Documents").
The Debentures bear interest at the rate of 5% per annum, payable upon
conversion or maturity, in cash or shares of common stock, and are convertible
into common stock at the option of the holder at $20.25 per share for the first
90 days after the closing. Thereafter, they are convertible at the option of the
holder at the lesser of $20.25 per share or 101% of the average of the ten
lowest closing bid prices of the common stock during the thirty trading days
preceding the conversion. Subject to certain conditions, the Debentures
automatically convert on the fifth anniversary of issuance. In the event that
the conversion price of the Debentures on a conversion date would be less than
$14, the Company has the option upon such conversion to issue the number of
shares that would be issuable at a conversion price of $14 and pay cash for the
number of additional shares of common stock that would otherwise be issuable at
the actual conversion price. In such event, the price per share that we would be
required to pay in lieu of issuing the additional shares will be equal to the
market value of a share of common stock at that time. In addition, if the
conversion price of the Debentures is less than $14, the Company has the right
upon three days notice to prepay the outstanding principal amount of the
Debentures with a 6% premium, provided that a holder may elect to convert the
Debentures during the three day notice period. The Debentures are subject to
mandatory prepayment of the outstanding principal amount plus a premium of at
least 20% upon the occurrence of certain events of default set forth in the
Debentures.
The Class B Warrants are exercisable for two years after the effectiveness of a
registration statement covering the resale of the shares of common stock
issuable upon exercise of the Class B Warrants, and may be redeemed by the
Company at the redemption price of $.05 per underlying share redeemed. The Class
B Warrants may be exercised by the holder within one day of delivery of a
redemption notice at an exercise price equal to the lesser of $33.75 per share
(subject to adjustment for stock splits, reverse stock splits and combinations)
and 97% of the closing bid price of the Company's common stock on the trading
day after the redemption notice is delivered. The Company may specify a floor
exercise price in the redemption notice of not more than 90% of the closing bid
price for the common stock on the trading day before the redemption notice is
delivered, and if the exercise price would be lower than the specified floor
price, the holder may either exercise the Class B Warrants at the specified
floor price or treat the redemption notice as null and void. The Class B
Warrants may also be exercised at the sole option of the holder at an exercise
price of $33.75 per share (subject to adjustment for stock splits, reverse stock
splits and combinations). The Company may not issue redemption notices (i) for a
number of underlying shares exceeding 15% of the average daily trading volume of
the common stock for the two trading days preceding delivery of the redemption
notice, or (ii) before the expiration of time for the exercise of the Class B
Warrants in response to a previous redemption notice. The Company's right to
deliver a redemption notice is subject to certain conditions set forth in Class
B Warrants. In addition, the number of shares issuable upon conversion of the
Debentures and exercise of the Class B Warrants in response to a redemption
notice cannot exceed 1,907,121 without stockholder approval.
The Class A Warrants are exercisable for five years at the exercise price of
$19.672 per share. The Class A Warrants vest and become exercisable (i) for an
aggregate of 115,000 shares for all Class A Warrants upon issuance, (ii) for an
additional 1 share for each 20 shares issued upon exercise of the Class B
Warrants, up to a maximum of 150,000 shares for all Class A Warrants, (iii) for
a number of additional shares equal to the difference between 50,000 shares and
1/20th of the number of shares subject to redemption notices issued by the
Company under the Class B Warrants, if redemption notices covering fewer than
1,000,000 shares are issued prior to the expiration of the Class B Warrants, and
(iv) for an additional 50,000 shares if the Class B Warrants are canceled
pursuant to the terms of the Registration Rights Agreement. Consequently, if the
Company issues redemption notices under the Class B Warrants covering in
aggregate at least 1,000,000 shares, the maximum vesting under the Class A
Warrants is 265,000 shares. The exercise price of the Class A Warrants is
subject to adjustment in the event of stock splits, reverse stock splits or
consolidations affecting the Company's common stock or distributions of
evidences of indebtedness or assets of the Company.
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The Letter Agreement provides for the issuance and sale of two additional
tranches of Debentures and warrants 5 and 10 months after April 6, 2000, each at
the option of either the Company or the investors. With respect to each tranche
there is a ten day period which the option can be exercised. The investors may
exercise their right to require the Company to sell the additional Debentures
and warrants only on the first day of each option period, and the Company may
exercise its right to require the investors to purchase the additional
Debentures and warrants only during the remaining nine days of the relevant
option period. Each additional tranche will consist of additional Debentures in
a principal amount of up to the lesser of $10,000,000 or 10% of the market
capitalization of the common stock on the date of issuance of the additional
debentures, and additional warrants to purchase up to 115,000 shares of
Company's common stock. The maximum principal amount of the additional
Debentures issued in each tranche will be reduced by the sum of (i) the
aggregate exercise prices paid upon exercise of Class B Warrants prior to the
issuance of the additional Debentures and (ii) the maximum aggregate exercise
price that would have been paid upon the exercise of any portion of the Class B
Warrants that has been redeemed prior to the issuance of the additional
Debentures. For the second tranche, no reduction will be made for exercises or
redemptions counted towards the reduction of the first tranche. In addition, if
the Class B Warrants are canceled in accordance with the Registration Rights
Agreement, the investors may only require the Company to sell up to $5,000,000
principal amount of additional Debentures in each tranche.
The additional Debentures will be identical in form to the original Debentures,
except that if the Company exercises the option to sell the additional
debentures, the maximum conversion price will be equal to 120% of the closing
bid price of the Company's common stock on the day the additional Debentures are
issued, and if the investors exercise the option to purchase the additional
debentures, the conversion price will be fixed at $20 per share, and will not
vary with the market value of the Company's common stock. The additional
warrants will be identical in form to the Class A Warrants, except that they
will have an exercise price equal to 125% of the closing bid price of the
Company's common stock on the day the additional warrants are issued, and the
additional warrants will be fully vested upon issuance. The obligation of the
investors to purchase the additional Debentures is subject to certain additional
conditions set forth in the Letter Agreement, including conditions relating to
the representations of the Company, compliance with prior agreement, the absence
of material adverse changes, the listing and tradability of the Company's common
stock and stockholder approval.
In connection with this financing, the Company paid a finder's fee to an
unrelated third party consisting of cash and warrants to purchase common stock
of the Company.
ITEM 7. EXHIBITS.
Exhibits
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4.1 Convertible Debenture Purchase Agreement dated as of April
6, 2000, by and among Registrant, Strong River Investments,
Inc. and Montrose Investments Ltd.
4.2 Registration Rights Agreement dated as of April 6, 2000, by
and among Registrant, Strong River Investments, Inc. and
Montrose Investments Ltd.
4.3 Form of 5% Subordinated Convertible Debenture issued by
Registrant, dated as of April 6, 2000
4.4 Class A Warrant issued by Registrant to Montrose Investments
Ltd., dated as of April 6, 2000.
4.5 Class A Warrant issued by Registrant to Strong River
Investments, Inc., dated as of April 6, 2000.
4.6 Class B Warrant issued by Registrant to Montrose Investments
Ltd., dated as of April 6, 2000.
4.7 Class B Warrant issued by Registrant to Strong River
Investments, Inc., dated as of April 6, 2000.
4.8 Letter Agreement dated as of April 6, 2000, by and among
Registrant, Strong River Investments, Inc. and Montrose
Investments Ltd.
99.1 Press Release dated April 10, 2000.
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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.
NEOTHERAPEUTICS, INC.
Date: April 21, 2000 By: /s/Samuel Gulko
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Name: Samuel Gulko
Title: Chief Financial Officer
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EXHIBIT INDEX
Exhibits Description
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4.1 Convertible Debenture Purchase Agreement dated as of April
6, 2000, by and among Registrant, Strong River Investments,
Inc. and Montrose Investments Ltd.
4.2 Registration Rights Agreement dated as of April 6, 2000, by
and among Registrant, Strong River Investments, Inc. and
Montrose Investments Ltd.
4.3 Form of 5% Subordinated Convertible Debenture issued by
Registrant, dated as of April 6, 2000
4.4 Class A Warrant issued by Registrant to Montrose Investments
Ltd., dated as of April 6, 2000.
4.5 Class A Warrant issued by Registrant to Strong River
Investments, Inc., dated as of April 6, 2000.
4.6 Class B Warrant issued by Registrant to Montrose Investments
Ltd., dated as of April 6, 2000.
4.7 Class B Warrant issued by Registrant to Strong River
Investments, Inc., dated as of April 6, 2000.
4.8 Letter Agreement dated as of April 6, 2000, by and among
Registrant, Strong River Investments, Inc. and Montrose
Investments Ltd.
99.1 Press Release dated April 10, 2000.