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CRIS > SEC Filings for CRIS > Form 8-K on 28-Nov-2012All Recent SEC Filings

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Form 8-K for CURIS INC


28-Nov-2012

Entry into a Material Definitive Agreement, Creation of a Direct Financial Obligation o


Item 1.01. Entry into a Material Definitive Agreement.

Royalty Financing Transaction

On November 27, 2012, Curis, Inc. ("Curis"), Curis Royalty LLC, a Delaware limited liability company and wholly-owned subsidiary of Curis ("Curis Royalty") and BioPharma Secured Debt Fund II Sub, S. r.l., a Luxembourg limited liability company managed by Pharmakon Advisors ("BioPharma-II"), entered into a credit agreement (the "Credit Agreement"). Upon the closing of the transaction contemplated by the Credit Agreement, which, subject to the satisfaction of specified closing conditions, is expected to occur within 10 business days (the "Closing Date"),

(i) Curis will transfer to Curis Royalty, pursuant to a purchase and sale agreement between Curis and Curis Royalty (the "Purchase Agreement"), the right to receive:

(a) royalty payments on the commercial sales of Erivedge owed by Genentech, Inc. ("Genentech") to Curis under that certain Collaborative Research, Development and License Agreement, dated as of June 11, 2003, by and between Curis and Genentech, as amended (the "License Agreement");

(b) certain other royalty-related payments, if any, including amounts owed by Genentech with respect to the underpayment of royalties and accrued interest on payments which are not timely made by Genentech pursuant to the License Agreement; and

(c) any payments made by Genentech to Curis pursuant to Genentech's indemnification obligations under the License Agreement (payments in clauses (a), (b) and (c) above are collectively referred to herein as the "Royalty Payments"); and

(ii) BioPharma-II will loan to Curis Royalty $30 million that, together with accrued interest, will be repaid by Curis Royalty from time to time from the proceeds of the Royalty Payments (the "Loan").

The following summarizes certain terms and conditions of the royalty financing transaction and the agreements entered into in connection therewith.

Credit Agreement

Pursuant to the terms of the Credit Agreement, on the Closing Date, and subject to the satisfaction of specified closing conditions, BioPharma-II will make the Loan to Curis Royalty. The Loan will bear interest at a rate per annum of 12.25%. The Loan and accrued interest will be repaid by Curis Royalty from the proceeds of the Royalty Payments that it receives from time to time from Genentech. Quarterly Royalty Payments from Genentech will first be applied to pay (i) escrow fees payable by Curis pursuant to the Escrow Agreement (as defined below), (ii) Curis' royalty obligations to academic institutions,
(iii) certain expenses incurred by BioPharma-II in connection with the Credit Agreement and related transaction documents, including enforcement of its rights in the case of an event of default under the Credit Agreement and (iv) expenses incurred by Curis enforcing its right to indemnification under the License Agreement. Remaining amounts, subject to caps of $1.0 million per quarter in 2013, $2.0 million per quarter in 2014 and $3.0 million per quarter in 2015, will be applied first, to pay interest and second, principal on the Loan. Curis Royalty will be entitled to receive and distribute to Curis remaining Royalty Amounts in excess of the foregoing caps, if any.


The final maturity date of the Loan will be, subject to earlier acceleration as further described below, the earlier of (i) the date when principal and interest is paid in full and (ii) the termination of Curis Royalty's right to receive royalties under the License Agreement. At any time after January 1, 2017, Curis Royalty may, subject to certain limitations, prepay the outstanding principal of the Loan in whole or in part, at a price equal to 105% of the outstanding principal on the Loan, plus accrued but unpaid interest.

The obligations of Curis Royalty under the Credit Agreement to repay the Loan may be accelerated upon the occurrence of an event of default under the Credit Agreement, including:

if any payment of principal is not made within three days of when such payment is due and payable or otherwise made in accordance with the terms of the Credit Agreement;

if any representations or warranties made in the Credit Agreement or any other transaction document proves to be incorrect or misleading in any material respect when made;

if there occurs a default in the performance of affirmative and negative covenants set forth in the Credit Agreement or any other transaction document;

the failure by Genentech to pay material amounts owed under the License Agreement because of an actual breach or default by Curis under the License Agreement;

a material breach or default by Curis Royalty under the Escrow Agreement or by Curis under the Purchase Agreement, in each case, which breach or default is not cured within 30 days after written demand thereof by BioPharma-II;

the voluntary or involuntary commencement of bankruptcy proceedings by either Curis or Curis Royalty and other insolvency related defaults;

any materially adverse effect on the binding nature of any of the transaction documents or the License Agreement;

any person shall be designated as an independent director of Curis Royalty other than in accordance with its limited liability company operating agreement; or

Curis shall at any time cease to own, of record and beneficially, 100% of the equity interests in Curis Royalty.

The Credit Agreement contains covenants applicable to Curis and Curis Royalty, including certain visitation, information and audits rights granted to BioPharma-II and restrictions on the conduct of business, including as it relates to continued compliance with the License Agreement and specified affirmative actions regarding the escrow account set up through the Escrow Agreement. The Credit Agreement also contains further covenants solely applicable to Curis Royalty, including restrictions on incurring indebtedness, creating or granting liens, making acquisitions and making specified restricted payments.

In connection with the Loan, Curis Royalty will grant a first priority lien and security interest (subject only to permitted liens) in all of its assets and all real, intangible and personal property, including all of its right, title and interest in and to the Royalty Payments. The Loan constitutes an obligation of Curis Royalty, and is intended to be non-recourse to Curis.

The foregoing is a summary of the Credit Agreement, does not purport to be complete and is qualified in its entirety by reference to the full text of the Credit Agreement, which Curis intends to file as an exhibit to its annual report on Form 10-K for the fiscal year ending December 31, 2012.

Purchase Agreement

On the Closing Date, Curis and Curis Royalty will enter into the Purchase Agreement pursuant to which Curis will agree to sell, convey, transfer and . . .



Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information set forth in Item 1.01 of this Current Report on Form 8-K under the caption "Royalty Financing Transaction" is incorporated herein by reference.



Item 8.01. Other Events.

On November 28, 2012, Curis issued a press release announcing entry into the Credit Agreement and the transactions contemplated thereby. The full text of the press release issued in connection with this announcement is attached as Exhibit 99.1 to this Current Report on Form 8-K and incorporated herein by reference.

On November 28, 2012, Curis issued a press release announcing entry into the IAP License Agreement and the transactions contemplated thereby, as well as providing an update on its CUDC-101, CUDC-907 and Debio 0932 programs. The full text of the press release issued in connection with this announcement is attached as Exhibit 99.2 to this Current Report on Form 8-K and incorporated herein by reference.

* * *

SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS

This Current Report on Form 8-K may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including without limitation statements regarding the expected timetable for closing the transaction contemplated by the Credit Agreement and other statements regarding Curis' plans, prospects, goals, objectives and strategies for its business. Forward-looking statements used in this Current Report on Form 8-K may contain the words "believes", "expects", "anticipates", "plans", "seeks", "estimates", "assumes", "will", "may," "could," "would" or similar expressions. These forward-looking statements are not guarantees of future performance and involve risks, uncertainties, assumptions and other important factors that may cause actual results to be materially different from those indicated by such forward-looking statements, including without limitation the important risks that are discussed in Curis' Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 and other filings that it periodically makes with the Securities and Exchange Commission.

In addition, the statements in this Current Report on Form 8-K reflect Curis' expectations and beliefs as of the date of this Current Report on Form 8-K. Curis anticipates that subsequent events and developments will cause its expectations and beliefs to change. However, while it may elect to update these forward-looking statements publicly at some point in the future, it specifically disclaims any obligation to do so, whether as a result of new information, future events or otherwise. These forward-looking statements should not be relied upon as representing Curis' views as of any date after the date of this Current Report on Form 8-K.



Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

See Exhibit Index attached hereto.


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