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UNITED STATES
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): May 23, 1997
CONNETICS CORPORATION
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(Exact name of registrant as specified in its charter)
(Formerly CONNECTIVE THERAPEUTICS, INC.)
Delaware
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(State or other jurisdiction of incorporation)
0-27406 94-3173928
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(Commission File Number) (IRS Employer Identification No.)
3400 West Bayshore Road, Palo Alto, CA 94303
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 843-2800
Connective Therapeutics, Inc.
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS
A. PRIVATE PLACEMENT
On May 15, 1997, Connetics Corporation (the "Company") and a
selling stockholder entered into an agreement with certain accredited investors,
including the Sprout Group, Domain Partners, Biotechnology Investments Limited,
and New York Life Insurance Company (the "Investors"), to sell an aggregate of
1,936,357 shares of the Company's Common Stock at a price of $6.05 per share.
The financing closed on May 16, 1997. The Company sold 1,810,000 shares, for an
aggregate purchase price of $10,950,000, and also issued to the Investors
warrants to purchase a total of 905,000 shares of the Company's Common Stock at
an exercise price of $9.08 per share. The warrants will expire in May 2001. The
Company has agreed to file within forty-five days of the closing a registration
statement on Form S-3 covering the resale of the shares of Common Stock sold
directly and the shares issuable upon exercise of the warrants.
B. CHANGE OF NAME
On May 14, 1997, the Company's stockholders approved an amendment to the
Company's Amended and Restated Certificate of Incorporation to change the
Company's name from Connective Therapeutics, Inc. to Connetics Corporation. This
amendment was filed with the Secretary of State of Delaware on May 15, 1997.
C. ADOPTION OF STOCKHOLDER RIGHTS PLAN
Effective as of April 29, 1997, the Company's Board of Directors
declared a dividend of one preferred share purchase right (a "Right") for each
outstanding share of Common Stock, $0.001 par value (the "Common Shares"), of
the Company. The dividend is payable on May 20, 1997 (the "Record Date") to
stockholders of record as of the close of business on that date. Each Right
entitles the registered holder to purchase from the Company one one-thousandth
of a share of Series B Participating Preferred Stock, $0.001 par value, of the
Company (the "Preferred Shares"), subject to adjustment, at a price of $49 per
one-thousandth of a preferred share, subject to adjustment (the "Purchase
Price"). The description and terms of the Rights are set forth in a Preferred
Shares Rights Agreement (the "Rights Agreement") dated as of May 20, 1997
between the Company and U.S. Stock Transfer Corporation, as Rights Agent (the
"Rights Agent").
The following is a general description only and is subject to the
detailed terms and conditions of the Rights Agreement. A copy of the Rights
Agreement, including the Certificate of Designation, the form of Rights
Certificate and the Summary of Rights to be provided to stockholders of the
Company, is included with this Report as Exhibit 4.2.
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Rights Evidenced by Common Share Certificates
The Rights will not be exercisable until the Distribution Date (defined
below). Accordingly, Common Share certificates outstanding on the Record Date
will evidence the Rights related thereto, and Common Share certificates issued
after the Record Date will contain a notation incorporating the Rights Agreement
by reference. Until the Distribution Date (or earlier redemption, exchange or
expiration of the Rights), the surrender or transfer of any certificates for
Common Shares, even without notation or a copy of the Summary of Rights being
attached thereto, will also constitute the transfer of the Rights associated
with the Common Shares represented by such certificate.
Distribution Date
The Rights will separate from the Common Shares, certificates for the
rights ("Rights Certificates") will be issued and the Rights will become
exercisable upon the earlier of: (i) the close of business on the tenth day (or
such later date as may be determined by a majority of the Board of Directors,
excluding directors affiliated with the Acquiring Person, as defined below (the
"Continuing Directors")) following a public announcement that a person or group
of affiliated or associated persons has acquired, or obtained the right to
acquire, beneficial ownership of 15% or more of the outstanding Common Shares
(an "Acquiring Person") or (ii) the close of business on the tenth day (or such
later date as may be determined by a majority of the Continuing Directors)
following the commencement of a tender offer or exchange offer, the consummation
of which would result in the beneficial ownership by a person or group of 15% or
more of the outstanding Common Shares. The earlier of such dates is referred to
as the "Distribution Date".
Issuance of Rights Certificates, Expiration of Rights
As soon as practicable following the Distribution Date, separate Rights
Certificates will be mailed to holders of record of the Common Shares as of the
close of business on the Distribution Date and such separate Rights Certificates
alone will evidence the Rights from and after the Distribution Date. Unless
otherwise determined by the Board of Directors, all Common Shares issued prior
to the Distribution Date will be issued with Rights. Common Shares issued after
the Distribution Date may be issued with Rights if such shares are issued (i)
upon the exercise, conversion or exchange of securities issued after adoption of
the Rights Agreement or (ii) pursuant to the exercise of stock options or under
any employee benefit plan or arrangement. Except as otherwise determined by the
Board of Directors, no other Common Shares issued after the Distribution Date
will be issued with Rights. In addition, no Common Shares issued after the
Distribution Date will be issued with Rights if such issuance would result in
(or create a significant risk) (i) of material adverse tax consequences to the
Company or the person to whom such Rights Certificate would be issued or (ii)
that such options or plans would not qualify for otherwise available special tax
treatment. The Rights will expire on April 29, 2007 (the "Final Expiration
Date"), unless the Final Expiration Date is extended or unless the Rights are
earlier redeemed or exchanged by the Company or expire upon consummation of
certain mergers, consolidations or sales of assets, as described below.
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Initial Exercise of the Rights
Following the Distribution Date, and until the occurrence of one of the
subsequent events described below, holders of the Rights will be entitled to
receive, upon exercise and the payment of $49 (the "Purchase Price") per Right,
one one-thousandth of a Preferred Share.
Exchange Provision
At any time after an Acquiring Person has become such and prior to the
Acquiring Person beneficially owning 50% or more of the outstanding Common
Shares, the Board of Directors of the Company may exchange the Rights (other
than Rights owned by the Acquiring Person or its affiliates), in whole or in
part, at an exchange ratio of one Common Share per Right (subject to
adjustment).
Right to Buy Common Shares at Half Price
Unless the Rights are earlier redeemed or exchanged, in the event that
an Acquiring Person becomes such, other than pursuant to a tender offer which is
made for all of the outstanding Common Shares and approved by a majority of the
Continuing Directors after determining that the offer is both adequate and
otherwise in the best interests of the Company and its stockholders (a
"Permitted Offer"), then proper provision will be made so that each holder of a
Right which has not theretofore been exercised (other than Rights beneficially
owned by the Acquiring Person, which will thereafter be void) will thereafter
have the right to receive, upon exercise of a Right, a number of Common Shares
having a then current value equal to two times the Purchase Price. In the event
that the Company does not have a sufficient number of Common Shares available,
or the Board decides that such action is necessary or appropriate and not
contrary to the interests of Rights holders, the Company may, among other
things, instead substitute cash, assets or other securities for the Common
Shares into which the Rights would have otherwise been exercisable.
Right to Buy Acquiring Company Stock at Half Price
Similarly, unless the Rights are earlier redeemed or exchanged, in the
event that, after the Shares Acquisition Date (as defined below), (i) the
Company consolidates with or merges into another entity, (ii) another entity
consolidates with or merges into the Company or (iii) the Company sells or
otherwise transfers 50% or more of its consolidated assets or earning power,
proper provision must be made so that each holder of a Right which has not
theretofore been exercised (other than Rights beneficially owned by the
Acquiring Person, which will thereafter be void) will thereafter have the right
to receive, upon exercise, a number of shares of common stock of the acquiring
company having a then current value equal to two times the Purchase Price
(unless the transaction satisfies certain conditions and is consummated with a
person who acquired shares pursuant to a Permitted Offer, in which case the
Rights will expire).
Adjustments to Prevent Dilution
The Purchase Price payable, the number of Rights and the number of
Preferred Shares, Common Shares or other securities or property issuable upon
exercise of the Rights are subject to
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adjustment from time to time to prevent dilution as set forth in the Rights
Agreement. With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price.
Rights and Preferences of the Preferred Shares
Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to an aggregate dividend of
1,000 times the dividend declared per Common Share. In the event of liquidation,
the holders of the Preferred Shares will be entitled to a preferential
liquidation payment equal to accrued but unpaid dividends plus the greater of
$1,000 per share or 1,000 times the aggregate per share amount to be distributed
to the holders of Common Shares. Each Preferred Share will have 1,000 votes,
voting together with the holders of Common Shares, except as required by law or
the Certificate of Determination of Rights, Preferences and Privileges of Series
B Participating Preferred Stock. In the event of any merger, consolidation or
other transaction in which Common Shares are changed or exchanged, each
Preferred Share will be entitled to receive 1,000 times the amount received per
Common Share. These rights are protected by customary anti-dilution provisions.
Because of the nature of the dividend, liquidation and voting rights of the
Preferred Shares, the value of the one one-thousandth interest in a Preferred
Share purchasable upon exercise of each Right should approximate the value of
one Common Share.
Redemption
At any time prior to the close of business on the earlier of (i) the
tenth day following the date (the "Shares Acquisition Date") of public
announcement that an Acquiring Person has become such or such later date as may
be determined by a majority of the Continuing Directors and publicly announced
by the Company or (ii) the Final Expiration Date of the Rights, the Company may
redeem the Rights in whole, but not in part, at a price of $0.01 per Right
("Redemption Price").
No Stockholders' Rights Prior to Exercise
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company (other than any rights resulting from
such holder's ownership of Common Shares), including, without limitation, the
right to vote or to receive dividends.
Amendment of Rights Agreement
The provisions of the Rights Agreement may be supplemented or amended by
the Board of Directors in any manner prior to the Distribution Date without the
approval of Rights holders. After the Distribution Date, the provisions of the
Rights Agreement may be supplemented or amended by the Board in order to (i)
cure any ambiguity, defect or inconsistency, (ii) to make changes which are
deemed necessary or advisable and do not adversely affect the interests of
holders of Rights (excluding the interests of any Acquiring Person), or (iii) to
shorten or lengthen any time period under the Rights Agreement; provided,
however, that no amendment to lengthen (A) the time period governing redemption
shall be made at such time as the Rights are not
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redeemable, or (B) any other period unless for the purpose of protecting,
enhancing or clarifying the rights of, and/or benefits to, the holders of
Rights.
Certain Anti-takeover Effects
The Rights approved by the Board are designed to protect and maximize
the value of the outstanding equity interests in the Company in the event of an
unsolicited attempt by an acquiror to take over the Company, in a manner or on
terms not approved by the Board of Directors. Takeover attempts frequently
include coercive tactics to deprive a corporation's Board of Directors and its
stockholders of any real opportunity to determine the destiny of the
corporation. The Rights have been declared by the Board in order to deter such
tactics, including a gradual accumulation of shares in the open market of a 15%
or greater position to be followed by a merger or a partial or two-tier tender
offer that does not treat all stockholders equally. The Company believes that
these tactics often unfairly pressure stockholders, squeeze them out of their
investment without giving them any real choice and deprive them of the full
value of their shares.
The Rights are not intended to prevent a takeover of the Company and will not do
so. The Rights are not exercisable in the event of a Permitted Offer, as
described above. The Rights may be redeemed by the Company at $0.01 per Right
within ten days (or such later date as may be determined by a majority of the
Continuing Directors) after the accumulation of 15% or more of the Company's
outstanding Common Shares by a single acquiror or group. Accordingly, the Rights
should not preclude any merger or business combination approved by the Board of
Directors. Issuance of the Rights does not in any way weaken the financial
strength of the Company or interfere with its business plans. The issuance of
the Rights has no immediate dilutive effect, will not affect reported earnings
per share, should not be taxable to the Company or to its stockholders and will
not change the way in which the Company's shares are presently traded. The
Company's Board of Directors believes that the Rights represent a sound and
reasonable means of addressing the complex issues of corporate policy created by
the current takeover environment. However, the Rights may have the effect of
rendering more difficult or discouraging an acquisition of the Company deemed
undesirable by the Board of Directors. The Rights may cause substantial dilution
to a person or group that attempts to acquire the Company on terms or in a
manner not approved by the Company's Board of Directors, except pursuant to an
offer conditioned upon the negation, purchase or redemption of the Rights.
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ITEM 7. FINANCIAL STATEMENT AND EXHIBITS.
(C)
Exhibit 3.7 Amendment to the Company's Amended and Restated
Certificate of Incorporation, as filed with the Delaware
Secretary of State on May 15, 1997, changing the
Company's name to Connetics Corporation.
Exhibit 3.8 Certificate of Designation of Rights, Preferences
and Privileges of Series B Participating Preferred
Stock, as filed with the Delaware Secretary of State on
May 15, 1997. Reference is made to Exhibit 4.2.
Exhibit 4.2(1) Preferred Shares Rights Agreement, dated as of
May 20, 1997, between Connetics Corporation and U.S.
Stock Transfer Corporation, including the Certificate of
Designation of Rights, Preferences and Privileges of
Series B Participating Preferred Stock, the form of
Rights Certificate and the Summary of Rights attached
thereto as Exhibits A, B and C, respectively.
Exhibit 10.1 Common Stock and Warrant Purchase Agreement, dated May
15, 1997 by and among the Company, Genentech, Inc. and
certain investors.
Exhibit 10.2 Registration Rights Agreement, dated May 15, 1997 by and
among the Company and certain investors.
Exhibit 10.3 Form of Common Stock Purchase Warrant issued to certain
investors on May 16, 1997.
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(1) Incorporated by reference from Exhibit 1 filed with the Company's
Registration Statement on Form 8-A filed on May 23, 1997 to register
Preferred Share Purchase Rights under the Company's stockholder rights
plan, adopted by the Company's board of directors on April 29, 1997.
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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 thereunto duly authorized.
CONNETICS CORPORATION
(Registrant)
Dated: May 23, 1997 By: /s/ Cynthia M. Butitta
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Cynthia M. Butitta
Vice President, Finance and
Administration and Chief Financial
Officer
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INDEX TO EXHIBITS
EXHIBITS
Exhibit 3.7 Amendment to the Company's Amended and Restated
Certificate of Incorporation, as filed with the Delaware
Secretary of State on May 15, 1997, changing the
Company's name to Connetics Corporation.
Exhibit 3.8 Certificate of Designation of Rights, Preferences
and Privileges of Series B Participating Preferred
Stock, as filed with the Delaware Secretary of State on
May 15, 1997. Reference is made to Exhibit 4.2.
Exhibit 4.2(1) Preferred Shares Rights Agreement, dated as of
May 20, 1997, between Connetics Corporation and U.S.
Stock Transfer Corporation, including the Certificate of
Designation of Rights, Preferences and Privileges of
Series B Participating Preferred Stock, the form of
Rights Certificate and the Summary of Rights attached
thereto as Exhibits A, B and C, respectively.
Exhibit 10.1 Common Stock and Warrant Purchase Agreement, dated May
15, 1997 by and among the Company, Genentech, Inc. and
certain investors.
Exhibit 10.2 Registration Rights Agreement, dated May 15, 1997 by and
among the Company and certain investors.
Exhibit 10.3 Form of Common Stock Purchase Warrant issued to certain
investors on May 16, 1997.
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(1) Incorporated by reference from Exhibit 1 filed with the Company's
Registration Statement on Form 8-A filed on May 23, 1997 to register
Preferred Share Purchase Rights under the Company's stockholder rights
plan, adopted by the Company's board of directors on April 29, 1997.
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EXHIBIT 3.7
CERTIFICATE OF AMENDMENT
OF THE AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
CONNECTIVE THERAPEUTICS, INC.
The undersigned, Thomas G. Wiggans and Joshua L. Green, hereby certify
that:
ONE: They are the duly elected and acting President and Secretary,
respectively, of said corporation.
TWO: Article I of the Amended and Restated Certificate of Incorporation
of said corporation is hereby amended in its entirety to read as follows:
"ARTICLE I
The name of this corporation is Connetics Corporation."
THREE: The foregoing amendment of the Amended and Restated Certificate
of Incorporation has been duly adopted in accordance with Section 242 of the
General Corporation Law of the State of Delaware by the Board of Directors and
the stockholders of the Corporation.
IN WITNESS WHEREOF, this Certificate of Amendment of the Amended and
Restated Certificate of Incorporation has been executed by its President and
attested by its Secretary this 14th day of May, 1997.
/s/ THOMAS G. WIGGANS
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Thomas G. Wiggans
President
/s/ JOSHUA L. GREEN
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Joshua L. Green
Secretary
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EXHIBIT 10.1
CONNECTIVE THERAPEUTICS, INC.
COMMON STOCK AND WARRANT PURCHASE AGREEMENT
MAY 15, 1997
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CONNECTIVE THERAPEUTICS, INC.
COMMON STOCK AND WARRANT PURCHASE AGREEMENT
This Common Stock and Warrant Purchase Agreement (the "Agreement") is
entered into as of this 15th day of May, 1997, among Connective Therapeutics,
Inc., a Delaware corporation (the "Company"), Genentech, Inc., a Delaware
corporation ("Genentech"), and the investors listed on Exhibit A attached hereto
(each a "Purchaser" and together the "Purchasers").
SECTION 1
SALE OF COMMON STOCK AND WARRANT
1.1 SALE OF COMMON STOCK. Subject to the terms and conditions hereof,
on the Closing Date, as defined below, the Company will issue and sell, and
Genentech will sell, to each Purchaser, and each Purchaser will severally
purchase from each of the Company and Genentech, the number of whole shares of
Common Stock, par value $0.001 per share, of the Company (the "Common Stock"),
calculated by dividing the dollar amount set forth opposite such Purchaser's
name on Exhibit A by the Purchase Price Per Share. The "Purchase Price Per
Share" shall be the lesser of (a) ninety percent (90%) of the average closing
bid price for the Common Stock as quoted on the Nasdaq National Market System
("NMS") for the twenty (20) trading days ending on the last trading day prior to
the Closing Date or (b) one hundred percent (100%) of the average closing bid
price of the Common Stock as quoted on the NMS for the five (5) trading days
ending on the last trading day prior to the Closing Date.
1.2 ISSUANCE OF WARRANT. Subject to the terms and conditions hereof, on
the Closing Date, as defined below, the Company will issue to each Purchaser,
and each Purchaser will severally acquire from the Company, a warrant
substantially in the form attached hereto as Exhibit B (individually, a
"Warrant" and collectively, the "Warrants") to purchase that number of shares of
the Company's Common Stock equal to fifty percent (50%) of the number of shares
of Common Stock being issued and sold to such Purchaser by the Company, at a per
share exercise price equal to one hundred fifty-percent (150%) of the Purchase
Price Per Share (the "Warrant Exercise Price").
1.3 CLOSING DATE. The closing (the "Closing") of the purchase and sale
of the Common Stock and the Warrants (collectively referred to herein as the
"Securities") shall be held at the offices of Venture Law Group, 2800 Sand Hill
Road, Menlo Park, California at 10:00 a.m. on May 16, 1997 or at such other time
and place upon which the Company and the Purchasers shall mutually agree (the
date of the Closing is hereinafter referred to as the "Closing Date").
1.4 DELIVERY. At the Closing, (a) each of the Company and Genentech,
respectively, will deliver to each Purchaser a certificate or certificates
representing the shares of Common Stock purchased by such Purchaser, against
payment of the purchase price therefor, by wire
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transfer or certified or cashier's check drawn on a United States ("U.S.") bank,
and (b) the Company will deliver the Warrant issued to such Purchaser.
1.5 LEGEND. The certificate or certificates for the Securities (or in
the case of the Warrants, any shares of Common Stock that may be acquired upon
exercise of such Warrants) shall be subject to a legend restricting transfer
under the Securities Act of 1933, as amended (the "Securities Act") and
referring to restrictions on transfer herein, such legend to be substantially as
follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (A) AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, OR (B) AN OPINION OF COUNSEL
FOR THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR (C) FULL COMPLIANCE WITH THE PROVISIONS OF
RULE 144 UNDER THE ACT."
SECTION 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchasers that:
2.1 ORGANIZATION. The Company is a corporation duly organized and
validly existing under the laws of the State of Delaware and is in good standing
under such laws. The Company has requisite corporate power and authority to own,
lease and operate its properties and assets, and to carry on its business as
presently conducted and as proposed to be conducted. The Company is qualified to
do business as a foreign corporation in each jurisdiction in which the ownership
of its property or the nature of its business requires such qualification,
except where failure to so qualify would not have a materially adverse effect on
the Company.
2.2 CAPITALIZATION. The authorized capital stock of the Company
consists of 50,000,000 shares of Common Stock, $0.001 par value, of which at May
8, 1997, 9,091,763 shares were issued and outstanding, and 5,000,000 shares of
Preferred Stock, $0.001 par value, of which 200 shares of seven percent (7%)
Redeemable Preferred Stock, Series A, are issued and outstanding. The Company's
Board of Directors has also authorized the creation of 90,000 shares of Series B
Preferred Stock for potential issuance under the Company's stockholder rights
plan. Since May 8, 1997 no shares of the Company's Common or Preferred Stock
have been issued, except pursuant to the exercise of options or warrants
outstanding as of May 8, 1997. All such issued and outstanding shares have been
duly authorized and validly issued and are fully paid and nonassessable. In
addition to the foregoing, the Company has reserved and outstanding the
following warrants, rights, options and convertible securities: (i) warrants for
the purchase of 18,395 shares of Common Stock at an exercise
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price of $4.89 per share, which warrants expire in February 2001; (ii) warrants
for the purchase of 22,727 shares of Common Stock at an exercise price of $11.00
per share, which warrants expire in December 2000; (iii) warrants for the
purchase of 73,071 shares of Common Stock at an exercise price of $5.78, which
warrants expire in December 2002; (iv) warrants for the purchase of 20,000
shares of Common Stock at an exercise price of $7.43 per share, which warrants
expire in December, 2001; (v) warrants for the purchase of 250,000 shares of
Common Stock at an exercise price of $8.25 per share, which warrants expire in
January 2002; (vi) 2,000,000 shares reserved for issuance pursuant to the
Company's 1994 Stock Plan, of which, at March 31, 1997, options (net of
repurchases) to purchase 176,713 shares had been exercised, options to purchase
1,823,287 shares were outstanding and 452,511 shares remained available for
future grant; (vii) 88,126 shares reserved for issuance pursuant to the
Company's 1995 Employee Stock Purchase Plan, of which, at March 31, 1997, 11,874
shares had been issued; (viii) 150,000 shares reserved for issuance under the
Company's 1995 Directors' Stock Option Plan, of which, at March 31, 1997, 60,000
options had been granted; and (ix) a commitment from Kepler Capital LLC to
purchase up to $25 million of Common Stock over a three-year period beginning on
or before December 1, 1997. In addition, the Company may be obligated to issue
additional shares to SmithKline Beecham Corporation on December 31, 1997 as part
of the consideration paid for the Company's acquisition of rights to Ridaura in
December 1996. Except as described in this Section 2.2, there are no other
options, warrants, conversion privileges or other contractual rights presently
outstanding to purchase or otherwise acquire any authorized but unissued shares
of the Company's capital stock or other securities. All of the issued and
outstanding securities of the Company have been issued in compliance with all
applicable federal and state securities laws.
2.3 AUTHORIZATION. The Company has all corporate right, power and
authority to enter into this Agreement and the Registration Rights Agreement
substantially in the form attached hereto as Exhibit E (the "Registration Rights
Agreement") and to consummate the transaction contemplated hereby and thereby.
All corporate action on the part of the Company, its directors and stockholders
necessary for the authorization, execution, delivery and performance of this
Agreement and the Registration Rights Agreement by the Company, and the
authorization, sale, issuance and delivery of the Securities being sold
hereunder by the Company and the performance of the Company's obligations
hereunder and under the Warrants and Registration Rights Agreement has been
taken. This Agreement, the Warrants and the Registration Rights Agreement have
been duly executed and delivered by the Company and constitute legal, valid and
binding obligations of the Company enforceable in accordance with their
respective terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies, and to limitations
of public policy as they may apply to Section 1.8 of the Registration Rights
Agreement. Upon their issuance and delivery pursuant to this Agreement, all of
the Securities being sold by the Company hereunder will be duly and validly
issued, fully paid and nonassessable and free and clear of any liens and
encumbrances. There are no statutory, contractual or other preemptive rights or
rights of first refusal with respect to the issuance and sale of the Securities
or the shares of Common Stock issuable upon exercise of the Warrants.
2.4 VALIDITY OF SECURITIES. The Common Stock and Warrants, when issued,
sold and delivered by the Company in accordance with the terms of this
Agreement, will be duly and validly issued, fully-paid and nonassessable. Based
in part upon the representations of the
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Purchasers in this Agreement, the offer, sale and issuance of the Common Stock
and Warrants will be made in compliance with all applicable federal and state
securities laws. The shares of Common Stock issuable upon exercise of the
Warrants have been duly and validly reserved and, upon issuance in accordance
with the terms of the Warrants, will be duly and validly issued, fully-paid and
nonassessable, and will be issued in compliance with all applicable federal and
states securities laws.
2.5 NO CONFLICT. The execution and delivery of this Agreement, the
Warrants and the Registration Rights Agreement do not, and the consummation of
the transactions contemplated hereby and thereby will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of time,
or both), or give rise to a right of termination, cancellation or acceleration
of any obligation or to a loss of a material benefit, under, any provision of
the Certificate of Incorporation or Bylaws of the Company or any mortgage,
indenture, lease or other agreement or instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Company, its properties or assets, which conflict,
violation, default or right would have a material adverse effect on the
business, properties, prospects or financial condition of the Company.
2.6 ACCURACY OF REPORTS; FINANCIAL STATEMENTS. All reports required to
be filed with the Securities and Exchange Commission (the "SEC") by the Company
from February 1, 1996 (the date of the Company's initial public offering)
through the date of this Agreement under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), copies of which have been made available to each
Purchaser (the "SEC Documents"), have been duly and timely filed, were in
substantial compliance with the requirements of their respective forms when
filed, were complete and correct in all material respects as of the dates at
which the information was furnished, and contained (as of such dates) no untrue
statement of a material fact nor omitted to state a material fact necessary in
order to make the statements made therein in light of the circumstances in which
made not misleading. The financial statements of the Company included in the SEC
Documents (the "Financial Statements") comply as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto. The Financial Statements have
been prepared in accordance with generally accepted accounting principles
consistently applied and fairly present the consolidated financial position of
the Company and any subsidiaries at the dates thereof and the consolidated
results of operations and consolidated cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal, recurring
adjustments).
2.7 CHANGES. Since April 28, 1997, (the date on which Amendment No. 2
to the Company's Annual Report on Form 10-K for the year ended December 31, 1996
was filed with the SEC), there has not been (a) any incurrence by the Company of
any material liability, absolute or contingent, or (b) any event or condition of
any character that has materially and adversely affected or might materially and
adversely affect the business, properties, prospects or financial condition of
the Company (as such business is presently conducted and as it is proposed to be
conducted), except that on April 29, 1997 the Company's Board of Directors
adopted a stockholder rights plan. There is no material liability or contingency
of the Company that is not disclosed in the SEC Documents.
-4-
<PAGE> 6
2.8 GOVERNMENTAL CONSENTS, ETC. No consent, approval or authorization
of or designation, declaration or filing with any governmental authority on the
part of the Company is required in connection with the valid execution and
delivery of this Agreement, the Warrants or the Registration Rights Agreement,
or the consummation of any other transaction contemplated hereby and thereby,
except such filings as may be required to be made with the SEC, the National
Association of Securities Dealers, Inc. ("NASD") and with governmental
authorities for purposes of effecting compliance with the securities and blue
sky laws in the states in which Securities are offered and/or sold, which
compliance will be effected in accordance with such laws.
2.9 LITIGATION. There is no pending or, to the best of the Company's
knowledge, threatened lawsuit, administrative proceeding, arbitration, labor
dispute or governmental investigation ("Litigation") to which the Company is a
party or by which any material portion of its assets, taken as a whole, may be
bound, nor is the Company aware of any basis therefor, which Litigation, if
adversely determined, would have a material adverse effect on the business,
properties, prospects or financial condition of the Company.
2.10 PATENTS AND TRADEMARKS. To its knowledge, and except as disclosed
in the SEC Documents, the Company owns or possesses sufficient legal rights to
all patents, trademarks, service marks, tradenames, copyrights, trade secrets,
licenses, information and proprietary rights and processes necessary for its
business as now conducted and as proposed to be conducted, without infringment
of any rights of a third party. The Company has not received any communications
alleging that the Company has violated or, by conducting its business as
proposed, would violate any of the patents, trademarks, service marks,
tradenames, copyrights, trade secrets or other proprietary rights or processes
of any other person or entity, which violation would have a material adverse
effect on the business, properties, prospects or financial condition of the
Company. Except as disclosed in the SEC Documents, the Company has not granted
(nor has the Company licensed from a third party) any material rights to or
licenses to its patents, trademarks, service marks, tradenames, copyrights,
trade secrets or other proprietary rights or processes.
2.11 REGISTRATION RIGHTS. The Company is not presently under any
obligation and has not granted any rights to register its securities under the
Securities Act with respect to any of its presently outstanding securities,
which rights would be implicated with respect to the registration contemplated
by the Registration Rights Agreement and which rights have not been waived by
the holders thereof.
2.12 NO MATERIAL DEFAULT. The Company is not in violation of or default
under any provision of (a) its Certificate of Incorporation or Bylaws or (b) any
mortgage, indenture, lease or other agreement or instrument, permit, concession,
franchise or license to which it is a party or by which it is bound or (c) any
federal or state judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Company, except with respect to clauses (b) and (c)
above, such violations or defaults as would not have a material adverse effect
on the business, properties, prospects or financial condition of the Company.
-5-
<PAGE> 7
2.13 DISCLOSURE. No representation or warranty of the Company contained
in this Agreement or the exhibits attached hereto (when read together and taken
as a whole), contains any untrue statement of a material fact or omits to state
a material fact necessary in order to make the statements contained herein or
therein in light of the circumstances under which they were made not misleading.
2.14 SOLVENCY; NO DEFAULT. As of this date the Company has sufficient
funds and cash flow to pay its debts and other liabilities as they become due,
and the Company is not in default with respect to any material debt or
liability.
2.15 ORIGINAL ISSUANCE TO GENENTECH. With regard to the shares being
sold by Genentech to the Purchasers (the "Genentech Shares"), the Company issued
the Genentech Shares to Genentech in a transaction exempt from the registration
requirements of the Act and such shares were not subsequently registered under
the Act for resale. The Genentech Shares were duly and validly authorized,
issued and delivered by the Company and are fully paid. To the best of the
Company's knowledge after investigation, Genentech is not a person (either alone
or together with others) directly or indirectly controlling or controlled by the
Company or under direct or indirect common control with the Company within the
meaning of the Act.
2.16 RIGHTS OF COMMON STOCK. The shares of Common Stock sold to the
Purchasers hereunder, including the shares issuable upon exercise of the
Warrants, and the Genentech Shares shall have the rights, preferences,
privileges and restrictions provided in the Company's Amended and Restated
Certificate of Incorporation.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF GENENTECH
Genentech hereby represents and warrants to the Purchasers as follows:
3.1 AUTHORIZATION. Genentech has all corporate right, power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. All corporate action on the part of Genentech, its
directors and stockholders necessary for the authorization, execution, delivery
and performance of this Agreement by Genentech, and authorization, sale and
delivery of the Common Stock to be sold by Genentech hereunder, has been taken.
This Agreement has been duly executed and delivered by Genentech and constitutes
a legal, valid and binding obligation of Genentech, enforceable in accordance
with its terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies.
3.2 NO CONFLICT. The execution and delivery of this Agreement by
Genentech does not, and, the consummation of the transactions contemplated
hereby will not, conflict with, or result in any violation of, or default (with
or without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or to a loss of a
material benefit, under, any provision of the Certificate of Incorporation or
Bylaws of Genentech or any mortgage, indenture, lease or other agreement or
instrument, permit, concession,
-6-
<PAGE> 8
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Genentech, its properties or assets, the effect of
which would have a material adverse effect on Genentech or materially impair or
restrict its power to perform its obligations as contemplated hereby.
3.3 OWNERSHIP. Genentech is the record and beneficial owner and holder
of the Common Stock being sold by it hereunder, free and clear of all
liabilities, liens, encumbrances, voting trusts, conditional sale or title
retention agreements, shareholders agreements, equities, charges, option, or
other burdens (collectively, "Encumbrances"), and upon transfer to the
Purchasers hereunder on the completion of the transactions contemplated by this
Agreement, the Common Stock being sold by Genentech will be owned by the
Purchasers, free and clear of all of Encumbrances, other than Encumbrances
arising as a result of Purchasers' ownership thereof.
3.4 SELLING FOR OWN ACCOUNT. Genentech is acting solely on its own
behalf and for its own account in selling the Common Stock to the Purchasers.
3.5 ORIGINAL ACQUISITION OF SHARES. Genentech acquired the Genentech
Shares on July 11, 1994 in connection with the grant of a license to certain
technology to the Company. Genentech has held the Genentech Shares for
investment purposes only and has made no prior offer (other than under this
Agreement) to sell the Genentech Shares.
3.6 RULE 144. Genentech has held the Genentech Shares for a sufficient
period of time to allow the Genentech Shares to be resold under Rule 144(k) of
the Act. Genentech is not an "affiliate" of the Company as defined under Rule
144(a)(1) of the Act.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby represents and warrants to the Company and
Genentech as follows:
4.1 INVESTMENT. Purchaser will acquire the Securities purchased from
the Company and Genentech pursuant to this Agreement for investment for its own
account, not as a nominee or agent and not with a view to or for resale in
connection with any distribution thereof. Purchaser understands that the
Securities purchased by such Purchaser from the Company and Genentech pursuant
to this Agreement have not been registered under the Securities Act by reason of
a specific exemption from the registration provisions of the Securities Act
which depends upon, among other things, the bona fide nature of such Purchaser's
investment intent and the accuracy of such Purchaser's representations as
expressed herein.
4.2 ACCREDITED INVESTOR. Each Purchaser is an "accredited investor" as
defined by Rule 501(a) of the Securities Act of 1933, as amended (the
"Securities Act"). The SEC documents have been made available to each Purchaser,
and each Purchaser has received all the information it has requested regarding
the Company. Each Purchaser has such business and
-7-
<PAGE> 9
financial experience as is required to give it the capacity to protect its own
interests in connection with the purchase of the Securities.
4.3 AUTHORITY. This Agreement and the Registration Rights Agreement
have been duly executed and delivered by each Purchaser and constitute legal,
valid and binding obligations of the Purchasers, enforceable in accordance with
their respective terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies, and to
limitations of public policy as they may apply to Section 1.7 of the
Registration Rights Agreement. The execution and delivery of this Agreement and
the Registration Rights Agreement do not, and the consummation of the
transactions contemplated hereby and thereby will not, conflict with or result
in any violation of any obligation under any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to the Purchasers.
4.4 GOVERNMENT CONSENTS, ETC. No consent, approval or authorization of
or designation, declaration or filing with any governmental authority on the
part of the Purchasers is required in connection with the valid execution and
delivery of this Agreement, or the offer, sale or issuance of the Securities, or
the consummation of any other transaction contemplated hereby.
4.5 INVESTIGATION. Each Purchaser has had a reasonable opportunity to
discuss the Company's business, management and financial affairs with the
Company's management.
SECTION 5
CONDITIONS TO OBLIGATIONS OF THE PURCHASERS
The obligations of each Purchaser to the Company and Genentech under
this Agreement are subject to the fulfillment, on or before the Closing, of each
of the following conditions, unless otherwise waived:
5.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties made by the Company in Section 2 and Genentech in Section 3 shall be
true and correct in all material respects on the Closing Date with the same
effect as though such representations and warranties had been made on and as of
the Closing Date.
5.2 COVENANTS. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company and Genentech on or prior to the
Closing Date shall have been performed or complied with in all material
respects.
5.3 NO ORDER PENDING. There shall not then be in effect any order
enjoining or restraining the transactions contemplated by this Agreement.
5.4 NO LAW PROHIBITING OR RESTRICTING SALE. There shall not be in
effect any law, rule or regulation prohibiting or restricting such sale, or
requiring any consent or approval of any person which shall not have been
obtained to issue the Securities (except as otherwise referenced in this
Agreement).
-8-
<PAGE> 10
5.5 COMPLIANCE CERTIFICATE. Each of the Company and Genentech shall
have delivered to the Purchasers a certificate substantially in the form
attached hereto as Exhibit C and Exhibit D, hereto, respectively executed by a
duly authorized officer, dated the Closing Date, and certifying to the
fulfillment of the conditions specified in Sections 5.1 and 5.2.
5.6 REGISTRATION RIGHTS AGREEMENT. On or before the Closing, the
Company and the Purchasers shall have executed and delivered a counterpart of
the Registration Rights Agreement.
5.7 OPINION OF COMPANY COUNSEL. The Purchasers shall have received from
Venture Law Group, counsel for the Company, an opinion, dated as of the Closing,
substantially in the form attached hereto as Exhibit F.
SECTION 6
CONDITIONS TO OBLIGATIONS OF THE COMPANY AND GENENTECH
The obligations of the Company and Genentech under this Agreement are
subject to the fulfillment on or prior to the Closing of each of the following
conditions, unless otherwise waived:
6.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties made by the Purchasers in Section 4 hereof shall be true and correct
in all material respects on and as of the Closing Date with the same effect as
though such representations and warranties had been made on and as of the
Closing Date.
6.2 PERFORMANCE. All covenants, agreements and conditions contained in
this Agreement to be performed by the Purchasers on or prior to the Closing Date
shall have been performed or complied with in all material respects.
6.3 NO ORDER PENDING. There shall not then be in effect any order
enjoining or restraining the transactions contemplated by this Agreement.
6.4 NO LAW PROHIBITING OR RESTRICTING SUCH SALE. There shall not be in
effect any law, rule or regulation prohibiting or restricting such sale, or
requiring any consent or approval of any person which shall not have been
obtained to issue the Securities (except as otherwise provided in this
Agreement).
SECTION 7
MISCELLANEOUS
7.1 GOVERNING LAW. This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
-9-
<PAGE> 11
7.2 SURVIVAL. Unless otherwise set forth in this Agreement, the
warranties, representations and covenants of the Company, Genentech and the
Purchasers contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing.
7.3 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns.
7.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement, the Warrants, the
Registration Rights Agreement and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subject matter hereof and thereof and supersede all prior
agreements and understandings among the parties relating to the subject matter
hereof. Neither this Agreement nor any term hereof may be amended, waived,
discharged or terminated other than by a written instrument signed by the party
against which enforcement of any such amendment, waiver, discharge or
termination is sought.
7.5 NOTICES AND DATES. Unless otherwise provided herein, any notice
required or permitted by this Agreement shall be in writing and shall be deemed
sufficient upon delivery, when delivered personally or by overnight courier and
addressed to the party to be notified at such party's address as set forth on
Exhibit A hereto or as subsequently modified by written notice. In the event
that any date provided for in this Agreement falls on a Saturday, Sunday or
legal holiday, such date shall be deemed extended to the next business day.
7.6 BROKERS.
(a) Neither the Company nor Genentech has engaged, consented
to or authorized any broker, finder or intermediary to act on its behalf,
directly or indirectly, as a broker, finder or intermediary in connection with
the transactions contemplated by this Agreement. The Company and Genentech
hereby agree to, on a pro-rata basis, indemnify and hold harmless the Purchasers
from and against all fees, commissions or other payments owing to any party
acting on behalf of the Company and/or Genentech hereunder.
(b) No Purchaser has engaged, consented to or authorized any
broker, finder or intermediary to act on its behalf, directly or indirectly, as
a broker, finder or intermediary in connection with the transactions
contemplated by this Agreement. Each Purchaser hereby agrees to indemnify and
hold harmless the Company and Genentech from and against all fees, commissions
or other payments owing to any party acting on behalf of such Purchaser
hereunder.
7.7 SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
-10-
<PAGE> 12
7.8 COSTS AND EXPENSES. Each party hereto shall pay its own costs and
expenses incurred in connection herewith, including the fees of its counsel,
auditors and other representatives, whether or not the transactions contemplated
herein are consummated.
7.9 NO THIRD PARTY RIGHTS. Nothing in this Agreement shall create or be
deemed to create any rights in any person or entity not a party to this
Agreement.
7.10 PUBLICITY. The Purchasers, Genentech and the Company shall not
issue any public statement concerning the transactions contemplated by this
Agreement without the reasonable prior written consent of the parties named in
such public statement; provided, however, that the parties may disclose the
transaction or the terms hereof or thereof from time to time without the
approval of the party whose name is disclosed if (i) such approval has been
requested and not received and such party concludes (after consulting with
counsel) that it is required by law to disclose the transaction or the terms
thereof or (ii) to the extent that similar disclosure has been previously
approved pursuant to this Section 7.10.
7.11 CAPTIONS AND HEADINGS. The captions and headings used herein are
for convenience and ease of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
7.12 COUNTERPARTS. This Agreement may be executed in counterparts, and
each such counterpart shall be deemed an original for all purposes.
7.13 EXPENSES. Upon Closing, the Company shall reimburse the reasonable
fees and expenses of special counsel to the Purchasers, excluding New York Life
Insurance Company (not to exceed $10,000). Irrespective of whether the Closing
is effected, the Company shall pay all costs and expenses that it incurs with
respect to the negotiation, execution, delivery and performance of the
Agreement.
[SIGNATURE PAGE FOLLOWS]
-11-
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective authorized officers as of the date aforesaid.
CONNECTIVE THERAPEUTICS, INC.
By: /s/ Thomas G. Wiggans
---------------------------------------
Its: President and Chief Executive Officer
--------------------------------------
GENENTECH, INC.
By: /s/ Genentech, Inc.
---------------------------------------
Its: Executive Vice President and CFO
-------------------------------------
PURCHASERS:
DOMAIN PARTNERS III, L.P.
By: One Palmer Square Associates III, L.P.
By: /s/ Kathleen K. Schoemaker
---------------------------------------
General Partner
DP III ASSOCIATES, L.P.
By: One Palmer Square Associates III, L.P.
By: /s/ Kathleen K. Schoemaker
---------------------------------------
General Partner
NEW YORK LIFE INSURANCE COMPANY
By: /s/ Dominique Semon
---------------------------------------
Its: Director, Private Finance
--------------------------------------
<PAGE> 14
/s/ Brian Seed
------------------------------------------
Brian Seed
DLJ CAPITAL CORPORATION
By: /s/ Kathleen D. LaPorte
------------------------------------------
Kathleen D. La Porte
Attorney-In-Fact
SPROUT CAPITAL VII, L.P.
By: DLJ Capital Corporation
Managing General Partner
By: /s/ Kathleen D. LaPorte
------------------------------------------
Kathleen D. La Porte
Attorney-In-Fact
THE SPROUT CEO FUND, L.P.
By: DLJ Capital Corporation
its General Partner
By: /s/ Kathleen D. LaPorte
------------------------------------------
Kathleen D. La Porte
Attorney-In-Fact
DLJ FIRST ESC L.L.C.
By: DLJ LBO Plans Management
Corporation
Its: Manager
By: /s/ Kathleen D. LaPorte
------------------------------------------
Kathleen D. La Porte
Attorney-In-Fact
<PAGE> 15
SPROUT GROWTH II, L.P.
By: DLJ Capital Corporation
Managing General Partner
By: /s/ Kathleen D. LaPorte
------------------------------------------
Kathleen D. La Porte
Attorney-In-Fact
/s/ Alexander E. Barkas and Lynda L. Wijcik
-------------------------------------------
Alexander E. Barkas and Lynda L. Wijcik
BIOTECHNOLOGY INVESTMENTS LIMITED
By: Old Court Limited
By: /s/ Alison Gallienne
------------------------------------------
Secretary
Rothchild Asset Management
(CI) Limited
Attorney-in-Fact
<PAGE> 16
EXHIBIT A
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
Number of Securities Warrants to Purchase
of Common Stock* Common Stock**
-------------------- --------------------
<S> <C> <C>
DLJ Capital Corporation 26,524 12,396
Sprout Capital VII, L.P. 638,037 298,201
The Sprout CEO Fund, L.P. 7,412 3,464
Sprout Growth II, L.P. 521,618 243,790
DLJ First ESC L.L.C. 132,621 61,984
3000 Sand Hill Road
Building 4, Suite 270
Menlo Park, CA 94025
Biotechnology Investments Limited 133,353 62,326
c/o Domain Associates
One Palmer Square, Suite 515
Princeton, NJ 08542
Domain Partners III, L.P. 128,899 60,244
One Palmer Square, Suite 515
Princeton, NJ 08542
DP III Associates, L.P. 4,454 2,081
One Palmer Square, Suite 515
Princeton, NJ 08542
New York Life Insurance Company 266,706 124,651
51 Madison Avenue
New York, NY 10010
Attn: Dominique O. Semon
Investment Department
Venture Capital
Room 207
Fax: (212) 576-8080
cc: Attn: Office of General Counsel
Investment Section,
Room 1104
Fax: (212) 576-8340
</TABLE>
<PAGE> 17
<TABLE>
<S> <C> <C>
Brian Seed, M.D. 51,368 24,008
c/o Massachusetts General Hospital
Molecular Biology, Wellman 9
50 Blossom Street
Boston, MA 02114
Alexander E. Barkas and 25,365 11,855
Lynda L. Wijcik
c/o Kleiner Perkins Caufield & Byers
2750 Sand Hill Road
Menlo Park, CA 94025-7020
--------- -------
TOTAL 1,936,357 905,000
</TABLE>
- ----------
* Purchase price per share of Common Stock is $6.05
** Exercise price of Warrants is $9.08
<PAGE> 1
EXHIBIT 10.2
CONNECTIVE THERAPEUTICS, INC.
REGISTRATION RIGHTS AGREEMENT
MAY 15, 1997
<PAGE> 2
CONNECTIVE THERAPEUTICS, INC.
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made as of the
15th day of May, 1997, by and among Connective Therapeutics, Inc., a Delaware
corporation (the "Company") and the investors listed on Attachment A hereto,
each of which is herein referred to as an "Investor."
RECITALS
The Company, Genentech, Inc. ("Genentech") and the Investors have
entered into a Common Stock and Warrant Purchase Agreement (the "Purchase
Agreement") of even date herewith pursuant to which (a) the Company and
Genentech have agreed to sell to the Investors and the Investors have agreed to
purchase from the Company and Genentech shares of the Company's Common Stock and
(b) the Company has agreed to sell to the Investors and the Investors have
agreed to purchase from the Company Warrants to purchase the Company's Common
Stock.
ALL TERMS NOT OTHERWISE DEFINED HEREIN SHALL HAVE THE MEANINGS ASCRIBED
IN THE PURCHASE AGREEMENT.
A condition to the Investors' obligations under the Purchase Agreement
is that the Company and the Investors enter into this Agreement in order to
provide the Investors with certain rights to register the Securities acquired by
the Investors subject to the Purchase Agreement. The Company and the Investors
each desire to induce the Investors to purchase the Securities pursuant to the
Purchase Agreement by agreeing to the terms and conditions set forth herein.
AGREEMENT
The parties hereby agree as follows:
1. REGISTRATION RIGHTS. The Company and the Investors
covenant and agree as follows:
1.1 DEFINITIONS. For purposes of this Section 1:
(a) The terms "register," "registered,"
and "registration" refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the Securities Act
of 1933, as amended (the "Act"), and the declaration or ordering of
effectiveness of such registration statement or document;
(b) The term "Registrable Securities"
means (i) the shares of Common Stock issued or sold in connection with the
Purchase Agreement, including shares sold to the Investors by Genentech (such
shares of Common Stock are collectively referred to hereinafter as the "Shares"
or "Stock"), (ii) all shares of Common Stock that may be issued upon
<PAGE> 3
exercise of the Warrants (the "Warrant Shares"), and (iii) any other shares of
Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of,
the Stock or the Warrant Shares, provided, that the foregoing definition shall
exclude in all cases any Registrable Securities sold by a person in a
transaction in which his or her rights under this Agreement are not assigned.
Notwithstanding the foregoing, Common Stock, the Warrant Shares or other
securities shall only be treated as Registrable Securities if and so long as
they have not been (A) sold to or through a broker or dealer or underwriter in a
public distribution or a public securities transaction, or (B) sold in a
transaction exempt from the registration and prospectus delivery requirements of
the Act under Section 4(1) thereof so that all transfer restrictions, and
restrictive legends with respect thereto, if any, are removed upon the
consummation of such sale;
(c) The number of shares of "Registrable
Securities then outstanding" shall be determined by the number of shares of
Common Stock outstanding which are, and the number of shares of Common Stock and
Warrant Shares issuable pursuant to then exercisable or convertible securities
which are, Registrable Securities;
(d) The term "Holder" means any person
owning or having the right to acquire Registrable Securities or any assignee
thereof in accordance with this Agreement;
(e) The term "Form S-3" means such form
under the Act as in effect on the date hereof or any successor form under the
Act; and
(f) The term "SEC" means the Securities
and Exchange Commission.
1.2 FORM S-3 REGISTRATION. Subject to the terms
and conditions of this Agreement, within forty-five (45) days of the Closing
(the "S-3 Date") the Company will file with the SEC and use its best efforts to
effect a registration statement on Form S-3 and any related qualification or
compliance with respect to all or a part of the Registrable Securities owned by
the Holders. Accordingly, the Company will:
(a) promptly give written notice of the
registration, and any related qualification or compliance, to all Holders; and
(b) as soon as practicable, effect such
registration and all such qualifications and compliances as may be necessary and
as would permit or facilitate the sale and distribution of all of the Holders'
Registrable Securities; provided, however, that the Company shall not be
obligated to effect any such registration, qualification or compliance, pursuant
to this Section 1.2 if the Company shall furnish to the Holders a certificate
signed by the President of the Company stating that in the good faith judgment
of the Board of Directors of the Company, it would be seriously detrimental to
the Company and its stockholders for such Form S-3 Registration to be effected
at such time, in which event the Company shall have the right to defer the
filing of the Form S-3 registration statement for a reasonable period of time,
which shall not exceed twenty (20) days after the S-3 Date under this Section
1.2.
2
<PAGE> 4
(c) Expenses incurred in connection with
a registration requested pursuant to this Section 1.2 shall be borne by the
Company, including all registration, filing, qualification, printers' and
accounting fees but excluding any underwriters' discounts or commissions and any
fees and disbursements of any counsel for the selling Holders (such fees or
discounts, if any, to be borne pro rata by the Holders participating in the
registration).
1.3 OBLIGATIONS OF THE COMPANY. Whenever required
under this Section 1 to effect the registration of any Registrable Securities,
the Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a
registration statement with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become effective and to
keep such registration statement effective until two (2) years after the date on
which the registration statement is declared effective; provided, however, that
the Company shall extend the effectiveness of the registration statement for an
additional one (1) year period following the expiration of the initial two (2)
year period, if requested in a writing signed by the holders of a majority of
the Registrable Securities and delivered to the Company within sixty (60)
calendar days prior to the expiration of such initial two (2) year period;
provided further, however, that if the counsel to the Company provides an
opinion to the requesting holders, based on factual representations provided by
the requesting holders or information filed with the SEC, that such requesting
holders are not, at the time of such request, "affiliates" of the Company within
the meaning of Rule 144 of the Act ("Rule 144"), then the Company shall not be
obligated to effect such extension of effectiveness.
(b) Prepare and file with the SEC such
amendments and supplements to such registration statement and the prospectus
used in connection with such registration statement as may be necessary to
comply with the provisions of the Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holders such numbers
of copies of a prospectus, including a preliminary prospectus, in conformity
with the requirements of the Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(d) Use its best efforts to register and
qualify the securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as shall be reasonably
requested by the Holders, provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions.
(e) Notify each Holder of Registrable
Securities covered by such registration statement at any time when a prospectus
relating thereto is required to be delivered under the Act of the happening of
any event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing. In such
3
<PAGE> 5
circumstance, the Company will use its best efforts to promptly update such
prospectus to correct such untrue statement or disclose the necessary material
facts within the period of time the Company may delay sales under Section
1.4(a)(iii) below.
1.4 RESTRICTIONS ON AND PROCEDURE FOR SALES
PURSUANT TO A REGISTRATION STATEMENT.
(a) Each Holder agrees to the following:
(i) Notice to Company. If any Holder
shall propose to sell any Shares and/or Warrant Shares, the Holder shall notify
the Company of its intent to do so on or before one (1) business day prior to
the date of such sale (the "Notice of Sale"), and the provision of the Notice of
Sale to the Company shall conclusively be deemed to establish an agreement by
such Holder to comply with the registration provisions herein described. The
Notice of Sale shall be deemed to constitute a representation that any
information previously supplied by such Holder is accurate as of the date of
such Notice of Sale.
(ii) Notice of Sale. The Notice of
Sale in substantially the form attached as Attachment B shall be given in
accordance with the provisions of Section 2.5 hereof. However, the Holder may
give the Notice of Sale orally by telephoning Cynthia M. Butitta or the then
current Chief Financial Officer at the Company at (415) 843-2800. An oral Notice
of Sale shall be deemed to have been received only at such time as the Selling
Holder speaks directly with Cynthia M. Butitta (or such then current Chief
Financial Officer). In addition, an oral Notice of Sale shall only be deemed
effective if it is followed by a written Notice of Sale received by the Company
by personal delivery or facsimile within twenty-four (24) hours after giving the
oral Notice of Sale.
(iii) Delay of Sale. The Company may
refuse to permit the Holder to resell any Shares and/or Warrant Shares for a
specified period of time; provided, however, that (a) in order to exercise this
right, the Company must deliver a certificate in writing to the Holder to the
effect that the registration statement in its then current form contains an
untrue statement of material fact or omits to state a material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading, and (b) in no event shall such delay
exceed twenty-five (25) days, and (c) in no event shall this right of delay be
exercised on more than two (2) occasions in any twelve (12) month period. During
any suspension as contemplated by this Section 1.4 (a)(iii), the Company will
not allow any of its officers or directors to buy or sell shares of the
Company's securities.
(b) Representations of Holders. Each
Holder hereby represents to and covenants with the Company that, during the
period in which any registration statement effected pursuant to Section 1.2
remains effective, such Holder will:
(i) not engage in any stabilization
activity in connection with any of the Company's securities;
4
<PAGE> 6
(ii) cause to be furnished to any
purchaser of the Shares and/or Warrant Shares and to the broker-dealer, if any,
through whom Shares may be offered, a copy of the Prospectus; and
(iii) not bid for or purchase any
securities of the Company or any rights to acquire the Company's securities, or
attempt to induce any person to purchase any of the Company's securities or any
rights to acquire the Company's securities other than as permitted under the
Securities Exchange Act of 1934, as amended ("Exchange Act").
(c) Information for Use in Registration
Statement. Each Holder represents and warrants to the Company that such Holder
has completed the information requested by the Selling Holder's Questionnaire
attached as Attachment B hereto (the "Questionnaire"), and further represents
and warrants to the Company that all information provided by such Holder in the
Questionnaire is true, accurate and complete. Each Holder understands that the
written information in the Questionnaire and all written representations made in
this Agreement are being provided to the Company specifically for use in, or in
connection with, the registration statement and the Prospectus, and has executed
this Agreement with such knowledge.
1.5 FURNISH INFORMATION. It shall be a condition
precedent to the obligations of the Company to take any action pursuant to this
Section 1 with respect to the Registrable Securities of any selling Holder that
such Holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such Holder's
Registrable Securities.
1.6 DELAY OF REGISTRATION. No Holder shall have
any right to obtain or seek an injunction restraining or otherwise delaying any
such registration as the result of any dispute that might arise with respect to
the interpretation or implementation of this Section 1.
1.7 INDEMNIFICATION. In the event any Registrable
Securities are included in a registration statement under this Section 1:
(a) To the extent permitted by law, the
Company will indemnify and hold harmless each Holder, any underwriter (as
defined in the Act) for such Holder and each person, if any, who controls such
Holder or underwriter within the meaning of the Act or the Exchange Act, against
any losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company of the Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Act, the
5
<PAGE> 7
Exchange Act or any state securities law; and the Company will pay to each such
Holder, underwriter or controlling person, as incurred, any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this subsection 1.7(a) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability, or
action if such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld), nor shall the Company be liable in
any such case for any such loss, claim, damage, liability, or action to the
extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by any such Holder, underwriter or
controlling person.
(b) To the extent permitted by law, each
selling Holder will indemnify and hold harmless the Company, each of its
directors, each of its officers who has signed the registration statement, each
person, if any, who controls the Company within the meaning of the Act, any
underwriter, any other Holder selling securities in such registration statement
and any controlling person of any such underwriter or other Holder, against any
losses, claims, damages, or liabilities (joint or several) to which any of the
foregoing persons may become subject, under the Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration; and each such
Holder will pay, as incurred, any legal or other expenses reasonably incurred by
any person intended to be indemnified pursuant to this subsection 1.7(b), in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this subsection 1.7(b) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld; provided, that, in no event shall any indemnity under this subsection
1.7(b) exceed the net proceeds from the offering received by such Holder, except
in the case of willful fraud by such Holder.
(c) Promptly after receipt by an
indemnified party under this Section 1.7 of notice of the commencement of any
action (including any governmental action), such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party under this
Section 1.7, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume the defense
thereof with counsel mutually satisfactory to the parties; provided, however,
that an indemnified party (together with all other indemnified parties which may
be represented without conflict by one counsel) shall have the right to retain
one separate counsel, with the reasonable fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action, if
6
<PAGE> 8
prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.7, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 1.7.
(d) If the indemnification provided for
in this Section 1.7 is held by a court of competent jurisdiction to be
unavailable to an indemnified party with respect to any loss, liability, claim,
damage, or expense referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such loss, liability,
claim, damage, or expense in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the statements or omissions that resulted
in such loss, liability, claim, damage, or expense as well as any other relevant
equitable considerations; provided, that, in no event shall any contribution by
a Holder under this Subsection 1.7(d) exceed the net proceeds from the offering
received by such Holder, except in the case of willful fraud by such Holder. The
relative fault of the indemnifying party and of the indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the indemnified
party and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.
(e) The obligations of the Company and
Holders under this Section 1.7 shall survive the completion of any offering of
Registrable Securities in a registration statement under this Section 1.
1.8 REPORTS UNDER SECURITIES EXCHANGE ACT OF
1934. With a view to making available to the Holders the benefits of Rule 144
and any other rule or regulation of the SEC that may at any time permit a Holder
to sell securities of the Company to the public without registration or pursuant
to a registration on Form S-3, the Company agrees to:
(a) make and keep public information
available, as those terms are understood and defined in Rule 144, so long as the
Company remains subject to the periodic reporting requirements under Sections 13
or 15(d) of the Exchange Act;
(b) take such action, including the
voluntary registration of its Common Stock under Section 12 of the Exchange Act,
as is necessary to enable the Holders to utilize Form S-3 for the sale of their
Registrable Securities, such action to be taken as soon as practicable after the
end of the fiscal year in which the first registration statement filed by the
Company for the offering of its securities to the general public is declared
effective;
(c) file with the SEC in a timely manner
all reports and other documents required of the Company under the Act and the
Exchange Act; and
(d) furnish to any Holder, so long as the
Holder owns any Registrable Securities, forthwith upon request (i) a written
statement by the Company that it has
7
<PAGE> 9
complied with the reporting requirements of the Exchange Act and the rules and
regulations promulgated thereunder, or that it qualifies as a registrant whose
securities may be resold pursuant to Form S-3, (ii) a copy of the most recent
annual or quarterly report of the Company and such other reports and documents
so filed by the Company, and (iii) such other information as may be reasonably
requested in availing any Holder of any rule or regulation of the SEC which
permits the selling of any such securities without registration or pursuant to
such form.
1.9 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause
the Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of at least 50,000 shares of such securities, provided the Company is,
within a reasonable time after such transfer, furnished with written notice of
the name and address of such transferee or assignee and the securities with
respect to which such registration rights are being assigned; and provided,
further, that such assignment shall be effective only if immediately following
such transfer the further disposition of such securities by the transferee or
assignee is restricted under the Act. For the purposes of determining the number
of shares of Registrable Securities held by a transferee or assignee, the
holdings of transferees and assignees of a partnership who are partners or
retired partners of such partnership (including spouses and ancestors, lineal
descendants and siblings of such partners or spouses who acquire Registrable
Securities by gift, will or intestate succession) shall be aggregated together
and with the partnership; provided that all assignees and transferees who would
not qualify individually for assignment of registration rights shall have a
single attorney-in-fact for the purpose of exercising any rights, receiving
notices or taking any action under Section 1.
2. MISCELLANEOUS.
2.1 SUCCESSORS AND ASSIGNS. Except as otherwise
provided herein, the terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective successors and assigns of the
parties (including transferees of any of the Shares or Warrant Shares). Nothing
in this Agreement, express or implied, is intended to confer upon any party
other than the parties hereto or their respective successors and assigns any
rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
2.2 GOVERNING LAW. This Agreement and all acts
and transactions pursuant hereto shall be governed, construed and interpreted in
accordance with the laws of the State of California, without giving effect to
principles of conflicts of laws.
2.3 COUNTERPARTS. This Agreement may be executed
in two (2) or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
2.4 TITLES AND SUBTITLES. The titles and
subtitles used in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.
8
<PAGE> 10
2.5 NOTICES. Unless otherwise provided herein,
any notice required or permitted by this Agreement shall be in writing and shall
be deemed sufficient upon delivery, when delivered personally or by overnight
courier and addressed to the party to be notified at such party's address as set
forth on Attachment A hereto or as subsequently modified by written notice. In
the event that any date provided for in this Agreement falls on a Saturday,
Sunday or legal holiday, such date shall be deemed extended to the next business
day. Notwithstanding the foregoing, any notice delivered pursuant to Section
1.3(e) or Section 1.4 hereto must be made by personal delivery or confirmed
facsimile transmission.
2.6 EXPENSES. If any action at law or in equity
is necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
2.7 AMENDMENTS AND WAIVERS. Any term of this
Agreement may be amended and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Registrable Securities then outstanding. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any Registrable Securities then outstanding, each future holder of all
such Registrable Securities, and the Company.
2.8 SEVERABILITY. If one or more provisions of
this Agreement are held to be unenforceable under applicable law, the parties
agree to renegotiate such provision in good faith. In the event that the parties
cannot reach a mutually agreeable and enforceable replacement for such
provision, then (x) such provision shall be excluded from this Agreement, (y)
the balance of the Agreement shall be interpreted as if such provision were so
excluded and (z) the balance of the Agreement shall be enforceable in accordance
with its terms.
2.9 ENTIRE AGREEMENT. This Agreement, and the
documents referred to herein (with the exception of the registration statement)
constitute the entire agreement between the parties hereto pertaining to the
subject matter hereof, and any and all other written or oral agreements existing
between the parties hereto are expressly canceled.
[SIGNATURE PAGE FOLLOWS]
9
<PAGE> 11
The parties have executed this Registration Rights Agreement as of the
date first above written.
CONNECTIVE THERAPEUTICS, INC.
By: /s/ Thomas G. Wiggans
---------------------------------------
Its: President and Chief Executive Officer
--------------------------------------
INVESTORS:
DOMAIN PARTNERS III, L.P.
By: One Palmer Square Associates III, L.P.
By: /s/ Kathleen K. Schoemaker
--------------------------------------
General Partner
DP III ASSOCIATES, L.P.
By: One Palmer Square Associates III, L.P.
By: /s/ Kathleen K. Schoemaker
---------------------------------------
General Partner
NEW YORK LIFE INSURANCE COMPANY
By: /s/ Dominique Semon
---------------------------------------
Its: Director, Private Finance
--------------------------------------
<PAGE> 12
/s/ Brian Seed
-------------------------------------
Brian Seed
DLJ CAPITAL CORPORATION
By: /s/ Kathleen D. LaPorte
---------------------------------
Kathleen D. La Porte
Attorney-In-Fact
SPROUT CAPITAL VII, L.P.
By: DLJ Capital Corporation
Managing General Partner
By: /s/ Kathleen D. LaPorte
---------------------------------
Kathleen D. La Porte
Attorney-In-Fact
THE SPROUT CEO FUND, L.P.
By: DLJ Capital Corporation
its General Partner
By: /s/ Kathleen D. LaPorte
---------------------------------
Kathleen D. La Porte
Attorney-In-Fact
DLJ FIRST ESC L.L.C.
By: DLJ LBO Plans Management
Corporation
Its: Manager
By: /s/ Kathleen D. LaPorte
---------------------------------
Kathleen D. La Porte
Attorney-In-Fact
2
<PAGE> 13
SPROUT GROWTH II, L.P.
By: DLJ Capital Corporation
Managing General Partner
By: /s/ Kathleen D. LaPorte
---------------------------------
Kathleen D. La Porte
Attorney-In-Fact
/s/ Alexander E. Barkas and Lynda L. Wijcik
----------------------------------------
Alexander E. Barkas and Lynda L. Wijcik
BIOTECHNOLOGY INVESTMENTS LIMITED
By: Old Court Limited
By: /s/ Alison Gallienne
---------------------------------
Secretary
Rothchild Asset Management
(CI) Limited
Attorney-in-Fact
3
<PAGE> 14
ATTACHMENT A
INVESTORS
<TABLE>
<CAPTION>
No. of Shares
Name/Address of Common Stock
------------ ---------------
<S> <C>
DLJ Capital Corporation
Sprout Capital VII, L.P.
The Sprout CEO Fund, L.P.
Sprout Growth II, L.P.
DLJ First ESC L.L.C.
3000 Sand Hill Road
Building 4, Suite 270
Menlo Park, CA 94025
Biotechnology Investments Limited
c/o Domain Associates
One Palmer Square, Suite 515
Princeton, NJ 08542
Domain Partners III, L.P.
One Palmer Square, Suite 515
Princeton, NJ 08542
DP III Associates, L.P.
One Palmer Square, Suite 515
Princeton, NJ 08542
New York Life Insurance Company
51 Madison Avenue
New York, NY 10010
Attn: Dominique O. Semon
Investment Department
Venture Capital
Room 207
Fax: (212) 576-8080
Attn: Office of General Counsel
Investment Section, Room 1104
Fax: (212) 576-8340
</TABLE>
<PAGE> 15
Brian Seed, M.D.
c/o Massachusetts General Hospital
Molecular Biology, Wellman 9
50 Blossom Street
Boston, MA 02114
Alexander E. Barkas and
Lynda L. Wijcik
c/o Kleiner Perkins Caufield & Byers
2750 Sand Hill Road
Menlo Park, CA 94025-7020
2
<PAGE> 16
ATTACHMENT B
CONNECTIVE THERAPEUTICS, INC.
NOTICE OF SALE
Pursuant to the Registration Rights Agreement dated as of May 15, 1997
among Connective Therapeutics, Inc. (the "Company"), the undersigned and certain
stockholders of the Company, the undersigned hereby gives notice to the Company
of the undersigned's intent to sell _______ shares of the Company's Common Stock
registered pursuant to the registration statement on (File No. ).
Dated: ______________, 199__ By:_________________________________
(signature)
Name:_______________________________
(print)
Title:______________________________
(if applicable)
[NOTE: THIS NOTICE OF SALE MUST BE COMPLETED AND DELIVERED (VIA PERSONAL
DELIVERY OR FACSIMILE) TO THE CHIEF FINANCIAL OFFICER OF THE COMPANY ON OR ONE
(1) BUSINESS DAY BEFORE THE DATE OF SALE OF THE SHARES OF THE COMPANY'S COMMON
STOCK REGISTERED PURSUANT TO THE REGISTRATION STATEMENT.]
<PAGE> 17
ATTACHMENT C
CONNECTIVE THERAPEUTICS, INC.
SELLING STOCKHOLDER'S QUESTIONNAIRE
In connection with the Connective Therapeutics, Inc. (the "Company")
Registration Statement (File No. ) registering certain shares of the Company's
Common Stock, the undersigned represents and warrants that the information set
forth below is true, accurate and complete:
1. As of the date hereof, the undersigned beneficially owns ______
shares of the Company's Common Stock and Warrants to purchase _______ shares of
the Company's Common Stock.
2. Except as described below, the undersigned has not had a material
relationship with the Company or any of its predecessors or affiliates within
the last three years.
The term "material relationship" has not been defined by the Securities
and Exchange Commission (the "SEC"). However, the SEC has indicated that it will
probably construe as a "material relationship" any relationship which tends to
prevent arms length bargaining in dealings with a company, whether arising from
a close business connection or family relationship, a relationship of control or
otherwise. It seems prudent, therefore, to consider that the undersigned would
have such a relationship, for example, with any organization of which the
undersigned is an officer, director, trustee or partner or in which the
undersigned owns, directly or indirectly, ten percent (10%) or more of the
outstanding voting stock, or in which the undersigned has some other substantial
interest, and with any person or organization with whom the undersigned has, or
with whom any relative or spouse (or any other person or organization as to
which the undersigned has any of the foregoing other relationships) has, a
contractual relationship.
If applicable, please describe the material relationship with the
Company:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 10.3
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A
VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE
OR DISPOSITION MAY BE EFFECTED WITHOUT (A) AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR (B) AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT") OR (C) FULL COMPLIANCE WITH THE PROVISIONS OF RULE 144
UNDER THE ACT.
Warrant No. WC (WarrantNo) Number of Shares: (Noshares)
date of issuance: May 16, 1997 (subject to adjustment)
CONNETICS CORPORATION
(FORMERLY CONNECTIVE THERAPEUTICS, INC.)
COMMON STOCK PURCHASE WARRANT
This Warrant is one of a number of warrants being issued pursuant to a
Common Stock and Warrant Purchase Agreement (the "Purchase Agreement") dated as
of May 15, 1997 among Connective Therapeutics, Inc., which has changed its name
to Connetics Corporation (the "Company"), Genentech, Inc. and the Purchasers.
This Warrant is subject to the terms and conditions of the Purchase Agreement.
ANY TERM NOT OTHERWISE DEFINED HEREIN SHALL HAVE THE MEANING ASCRIBED TO
IT IN THE PURCHASE AGREEMENT.
The Company, for value received, hereby certifies that Holder, or its
registered assigns (the "Registered Holder"), is entitled, subject to the terms
set forth below, to purchase from the Company, at any time after the date hereof
and on or before the Expiration Date (as defined in Section 5 below), up to
NoShares fully paid and nonassessable shares (as adjusted from time to time
pursuant to the provisions of this Warrant) of the Common Stock of the Company,
at $9.08 per share (the "Warrant Exercise Price"). The shares purchasable upon
exercise of this Warrant and the Warrant Exercise Price shall be adjusted from
time to time pursuant to the provisions of this Warrant and are hereinafter
referred to as the "Warrant Stock" and the "Purchase Price," respectively.
1. EXERCISE.
(a) MANNER OF EXERCISE. This Warrant may be exercised by the
Registered Holder, in whole or in part, by surrendering this Warrant, with the
purchase form appended hereto as Exhibit A duly executed by such Registered
Holder or by such Registered Holder's duly authorized attorney, at the principal
office of the Company, or at such other office or agency as the Company may
designate, accompanied by payment in full of the Purchase Price payable in
respect of the number of shares of Warrant Stock purchased upon such exercise in
accordance
<PAGE> 2
with Section 1(c) below. In the event that the Registered Holder wishes to pay
the Purchase Price for the Warrant Stock in a manner other than pursuant to
Section 1(c) below, it shall first obtain the prior written consent of the
Company.
(b) EFFECTIVE TIME OF EXERCISE. Each exercise of this Warrant
shall be deemed to have been effected immediately prior to the close of business
on the day on which this Warrant shall have been surrendered to the Company as
provided in Section 1(a) above. At such time, the person or persons in whose
name or names any certificates for Warrant Stock shall be issuable upon such
exercise as provided in Section 1(d) below shall be deemed to have become the
holder or holders of record of the Warrant Stock represented by such
certificates.
(c) NET ISSUE EXERCISE.
(i) The Registered Holder may receive shares equal to the
value of this Warrant (or the portion thereof being exercised) by surrender of
this Warrant at the principal office of the Company together with notice of such
election in which event the Company shall issue to holder a number of shares of
Warrant Stock computed using the following formula:
X = Y (A - B)
---------
A
Where X = The number of shares of Warrant Stock to be issued to the
Registered Holder.
Y = The number of shares of Warrant Stock elected to be exercised
under this Warrant (at the date of such calculation).
A = The fair market value of one share of Warrant Stock (at the
date of such calculation).
B = The Warrant Exercise Price (as adjusted to the date of such
calculation).
(ii) For purposes of this Section 1(c), the fair market
value of Warrant Stock shall equal the closing price per share of the Company's
Common Stock as quoted on the NMS on the trading day prior to the date on which
notice of the Warrant being exercised is received by the Company.
(d) DELIVERY TO HOLDER. As soon as practicable after the
exercise of this Warrant in whole or in part, and in any event within ten (10)
days thereafter, the Company at its expense will cause to be issued in the name
of, and delivered to, the Registered Holder, or as such Holder (upon payment by
such Holder of any applicable transfer taxes) may direct:
(i) a certificate or certificates for the number of shares
of Warrant Stock to which such Registered Holder shall be entitled, and
(ii) in case such exercise is in part only, a new warrant
or warrants (dated the date hereof) of like tenor, calling in the aggregate on
the face or faces thereof for the number of shares of Warrant Stock equal
(without giving effect to any adjustment therein) to the
-2-
<PAGE> 3
number of such shares called for on the face of this Warrant minus the number of
such shares purchased by the Registered Holder upon such exercise as provided in
Section 1(a) above.
2. ADJUSTMENTS.
(a) STOCK SPLITS AND DIVIDENDS. If outstanding shares of the
Company's Common Stock shall be subdivided into a greater number of shares or a
dividend in Common Stock shall be paid in respect of Common Stock, the Purchase
Price in effect immediately prior to such subdivision or at the record date of
such dividend shall simultaneously with the effectiveness of such subdivision or
immediately after the record date of such dividend be proportionately reduced.
If outstanding shares of Common Stock shall be combined into a smaller number of
shares, the Purchase Price in effect immediately prior to such combination
shall, simultaneously with the effectiveness of such combination, be
proportionately increased. When any adjustment is required to be made in the
Purchase Price, the number of shares of Warrant Stock purchasable upon the
exercise of this Warrant shall be changed to the number determined by dividing
(i) an amount equal to the number of shares issuable upon the exercise of this
Warrant immediately prior to such adjustment, multiplied by the Purchase Price
in effect immediately prior to such adjustment, by (ii) the Purchase Price in
effect immediately after such adjustment.
(b) RECLASSIFICATION, ETC. In case of any reclassification or
change of the outstanding securities of the Company or of any reorganization of
the Company (or any other corporation the stock or securities of which are at
the time receivable upon the exercise of this Warrant) or any similar corporate
reorganization on or after the date hereof, then and in each such case the
holder of this Warrant, upon the exercise hereof at any time after the
consummation of such reclassification, change, reorganization or conveyance,
shall be entitled to receive, in lieu of the stock or other securities and
property receivable upon the exercise hereof prior to such consummation, the
stock or other securities or property to which such holder would have been
entitled upon such consummation if such holder had exercised this Warrant
immediately prior thereto, all subject to further adjustment as provided in
Section 2(a); and in each such case, the terms of this Section 2 shall be
applicable to the shares of stock or other securities properly receivable upon
the exercise of this Warrant after such consummation.
(c) ADJUSTMENT CERTIFICATE. When any adjustment is required to be
made in the Purchase Price, the Company shall promptly mail to the Registered
Holder a certificate setting forth the Purchase Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment. Such
certificate shall also set forth the kind and amount of stock or other
securities or property into which this Warrant shall be exercisable following
the occurrence of any of the events specified in Section 2(a) or 2(b) above.
3. TRANSFERS.
(a) UNREGISTERED SECURITY. Each holder of this Warrant
acknowledges that this Warrant and the Warrant Stock have not been registered
under the Securities Act, and agrees not to sell, pledge, distribute, offer for
sale, transfer or otherwise dispose of this Warrant or any Warrant Stock issued
upon its exercise in the absence of (i) an effective registration statement
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under the Act as to this Warrant or such Warrant Stock and registration or
qualification of this Warrant or such Warrant Stock under any applicable U.S.
federal or state securities law then in effect or (ii) an opinion of counsel,
satisfactory to the Company, that such registration and qualification are not
required or (iii) full compliance with the provisions of Rule 144 of the
Securities Act. Each certificate or other instrument for Warrant Stock issued
upon the exercise of this Warrant shall bear a legend substantially to the
foregoing effect.
(b) TRANSFERABILITY. Subject to the provisions of Section 3(a)
hereof, this Warrant and all rights hereunder are transferable, in whole or in
part, upon surrender of the Warrant with a properly executed assignment (in the
form of Exhibit B hereto) at the principal office of the Company.
(c) WARRANT REGISTER. The Company will maintain a register
containing the names and addresses of the Registered Holders of this Warrant.
Until any transfer of this Warrant is made in the warrant register, the Company
may treat the Registered Holder of this Warrant as the absolute owner hereof for
all purposes; provided, however, that if this Warrant is properly assigned in
blank, the Company may (but shall not be required to) treat the bearer hereof as
the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary. Any Registered Holder may change such Registered Holder's address as
shown on the warrant register by written notice to the Company requesting such
change.
4. NO IMPAIRMENT. The Company will not, by amendment of its charter
or through reorganization, consolidation, merger, dissolution, sale of assets or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will (subject to Section 13 below) at
all times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the holder of this Warrant against impairment.
5. TERMINATION. This Warrant (and the right to purchase securities
upon exercise hereof) shall terminate upon the earliest to occur of the
following (the "Expiration Date"): (i) May 15, 2001 or (ii) the closing of the
Company's sale of all or substantially all of its assets or the acquisition of
the Company by another entity by means of merger or other transaction as a
result of which shareholders of the Company immediately prior to such
acquisition possess a minority of the voting power of the acquiring entity
immediately following such acquisition.
6. NOTICES OF CERTAIN TRANSACTIONS. In the event:
(a) that the Company shall take a record of the holders of its
Common Stock (or other stock or securities at the time deliverable upon the
exercise of this Warrant) for the purpose of entitling or enabling them to
receive any dividend or other distribution, or to receive any right to subscribe
for or purchase any shares of stock of any class or any other securities, or to
receive any other right, to subscribe for or purchase any shares of stock of any
class or any other securities, or to receive any other right, or
(b) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation or
merger of the Company with or into another
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<PAGE> 5
corporation (other than a consolidation or merger in which the Company is the
surviving entity), or any transfer of all or substantially all of the assets of
the Company, or
(c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then, and in each such case, the Company will mail by overnight courier or cause
to be mailed by overnight courier to the Registered Holder of this Warrant a
notice specifying, as the case may be, (i) the date on which a record is to be
taken for the purpose of such dividend, distribution or right, and stating the
amount and character of such dividend, distribution or right, or (ii) the
effective date on which such reorganization, reclassification, consolidation,
merger, transfer, dissolution, liquidation or winding-up is to take place, and
the time, if any is to be fixed, as of which the holders of record of Common
Stock (or such other stock or securities at the time deliverable upon such
reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation or winding-up) are to be determined. Such notice shall be mailed by
overnight courier at least twenty (20) days prior to the record date or
effective date for the event specified in such notice.
7. RESERVATION OF STOCK. The Company will at all times reserve and
keep available, solely for the issuance and delivery upon the exercise of this
Warrant, such shares of Warrant Stock and other stock, securities and property,
as from time to time shall be issuable upon the exercise of this Warrant.
8. EXCHANGE OF WARRANTS. Upon the surrender by the Registered Holder
of any Warrant or Warrants, properly endorsed, to the Company at the principal
office of the Company, the Company will, subject to the provisions of Section 3
hereof, issue and deliver to or upon the order of such Holder, at the Company's
expense, a new Warrant or Warrants of like tenor, in the name of such Registered
Holder or as such Registered Holder (upon payment by such Registered Holder of
any applicable transfer taxes) may direct, calling in the aggregate on the face
or faces thereof for the number of shares of Common Stock called for on the face
or faces of the Warrant or Warrants so surrendered.
9. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
10. NOTICES. Any notice required or permitted by this Warrant shall
be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by overnight courier (a) if to the Registered Holder, to the
address of the Registered Holder most recently furnished in writing to the
Company and (b) if to the Company, to the address set forth below or
subsequently modified by written notice to the Registered Holder. In the event
that any date provided for in this Warrant falls on a Saturday, Sunday or legal
holiday, such date shall be deemed extended to the next business day.
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11. NO RIGHTS AS SHAREHOLDER. Until the exercise of this Warrant, the
Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a shareholder of the Company.
12. NO FRACTIONAL SHARES. No fractional shares of Common Stock will be
issued in connection with any exercise hereunder. In lieu of any fractional
shares which would otherwise be issuable, the Company shall pay cash equal to
the product of such fraction multiplied by the fair market value of one share of
Common Stock on the date of exercise, as determined by the closing price on the
NMS or in good faith by the Company's Board of Directors.
13. AMENDMENT OR WAIVER. Any term of this Warrant may be amended or
waived upon written consent of the Company and the holders of at least fifty-one
percent (51%) of the Common Stock issuable upon exercise of outstanding warrants
purchased pursuant to the Purchase Agreement. By acceptance hereof, the
Registered Holder acknowledges that in the event the required consent is
obtained, any term of this Warrant may be amended or waived with or without the
consent of the Registered Holder; provided, however, that any amendment hereof
that would materially adversely affect the Registered Holder in a manner
different from the holders of the remaining warrants issued pursuant to the
Purchase Agreement shall also require the consent of Registered Holder.
14. HEADINGS. The headings in this Warrant are for purposes of
reference only and shall not limit or otherwise affect the meaning of any
provision of this Warrant.
15. GOVERNING LAW. This Warrant shall be governed, construed and
interpreted in accordance with the laws of the State of California, without
giving effect to principles of conflicts of law.
CONNETICS CORPORATION
By:______________________________
Title:___________________________
Address: 3400 West Bayshore Road
Palo Alto, California 94303
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EXHIBIT A
PURCHASE FORM
To: Connetics Corporation Dated:
The undersigned, pursuant to the provisions set forth in the attached
Warrant, hereby irrevocably elects to purchase _______ shares of the Common
Stock covered by such Warrant and herewith
(choose one)
___ makes payments by wire transfer to an account designated by the
Company or delivery of cash or check payable to the Company in
the amount of the Purchase Price; or
___ surrenders the Warrant in satisfaction of the net issue exercise
provisions set forth in Section 1(c) thereof;
representing the full purchase price for such shares at the price per share
provided for in such Warrant.
The undersigned further acknowledges that it has reviewed the
representations and warranties contained in Section 3 of the Purchase Agreement
(as defined in the Warrant) and by its signature below hereby makes such
representations and warranties to the Company. Defined terms contained in such
representations and warranties shall have the meanings assigned to them in the
Purchase Agreement, provided that the term "Purchaser" shall refer to the
undersigned and the term "Securities" shall refer to the Warrant Stock.
Signature:____________________
Address:_____________________
<PAGE> 8
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED, _________________________________________ hereby
sells, assigns and transfers all of the rights of the undersigned under the
attached Warrant with respect to the number of shares of Common Stock covered
thereby set forth below, unto:
NAME OF ASSIGNEE ADDRESS NO. OF SHARES
Dated:_________________ Signature:____________________________
____________________________
Witness:______________________________
