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As filed with the Securities and Exchange Commission on March 18, 1997
Registration No. 333-22991
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
PENEDERM INCORPORATED
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
CALIFORNIA 2834 77-0146116
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. employer identification
incorporation or organization) Classification Code Number) number)
</TABLE>
320 LAKESIDE DRIVE, FOSTER CITY, CALIFORNIA 94404, (415) 358-0100
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
----------------
LLOYD H. MALCHOW
PRESIDENT AND CHIEF EXECUTIVE OFFICER
PENEDERM INCORPORATED
320 LAKESIDE DRIVE
FOSTER CITY, CALIFORNIA 94404
(415) 358-0100
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
----------------
Copies to:
RICHARD FRIEDMAN, ESQ.
Heller Ehrman White & McAuliffe
525 University Avenue
Palo Alto, California 94301
(415) 324-7000(phone)
(415) 324-0638 (fax)
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
----------------
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, please
check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.
[ ] ________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act of 1933, as amended, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] _____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MARCH 18, 1997
PROSPECTUS
PENEDERM INCORPORATED
752,000 Shares of Common Stock
___________________
All of the 752,000 shares (the "Shares") of common stock, no par value
(the "Common Stock"), of Penederm Incorporated ("Penederm" or the "Company")
covered by this Prospectus are being offered by the holders of the Shares
(collectively, the "Selling Shareholders") named in this Prospectus, each of
whom acquired such Shares pursuant to an exemption from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
provided by Section 4(2) thereof. The Shares are being registered by the
Company pursuant to the terms of that certain Stock Purchase Agreement, dated
March 3, 1997, by and between the Company and the individual Selling
Shareholders (the "Purchase Agreement"). See "Selling Shareholders."
Some or all of the Shares covered by this Prospectus may be offered
for sale from time to time by the Selling Shareholders at such prices and on
such terms as may then be obtainable, in negotiated transactions, or otherwise.
This Prospectus may be used by the Selling Shareholders or by any broker-dealer
who may participate in sales of the securities covered hereby. The Selling
Shareholders will pay all commissions, transfer taxes and other expenses
associated with the sales of securities by them. The Company has paid the
expenses of the preparation of this Prospectus. The Company has agreed to
indemnify the Selling Shareholders against certain liabilities, including
liabilities arising under the Securities Act. The Company will not receive any
of the proceeds from the sale of Shares by the Selling Shareholders.
The Shares are quoted on the Nasdaq National Market under the symbol
"DERM." On March 18, 1997, the closing price as reported on the Nasdaq
National Market was $13.50 per share.
Penederm has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the securities offered by this
Prospectus. As permitted by the rules and regulations of the Commission, this
Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to Penederm and the securities offered hereby,
reference is made to the Registration Statement and the exhibits thereto, which
may be examined without charge at the public reference facilities maintained by
the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and copies of which may be obtained from the Commission upon payment of
the prescribed fees.
_____________________
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 3.
_____________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
_____________________
THE DATE OF THIS PROSPECTUS IS _____________.
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No person is authorized to give any information or to make any
representations other than those contained or incorporated by reference in this
Prospectus and, if given or made, such information or representations must not
be relied upon as having been authorized. This Prospectus does not constitute
an offer of any securities other than those to which it relates or an offer to
any person in any jurisdiction where such offer would be unlawful. The
delivery of this Prospectus at any time does not imply that the information
herein is correct as of any time subsequent to the date hereof.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the Commission.
Reports, proxy and information statements and other information filed by the
Company with the Commission can be inspected and copied at the public reference
facilities maintained by the Commission at the following addresses: New York
Regional Office, Seven World Trade Center, New York, New York 10048 and Chicago
Regional Office, Northwestern Atrium Center, 500 West Madison Street, Chicago,
Illinois 60661-2511. Copies of such material can be obtained from the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. The Commission maintains a Web
site that contains reports, proxy and other information regarding issuers that
file electronically with the Commission. The address of such Web site is
http://www.sec.gov.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated in this Prospectus by reference:
(i) the Company's annual report on Form 10-K for the fiscal year
ended December 31, 1996; and
(ii) the description of the Company's Common Stock contained in its
Registration Statement on Form 8-A filed pursuant to Section 12 of the Exchange
Act on October 25, 1993 and of the Common Stock Purchase Rights contained in
its Registration Statement on Form 8-A filed pursuant to Section 12 of the
Exchange Act on November 27, 1996.
All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination of the
offering of securities thereunder shall be deemed to be incorporated herein by
reference and shall be a part hereof from the date of the filing of such
documents. Any statements contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or replaced for
purposes of this Prospectus to the extent that a statement contained herein or
in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or replaces such statement. Any such
statement so modified or replaced shall not be deemed, except as so modified or
replaced, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom a Prospectus is delivered, upon written or oral
request of such person, a copy of any document incorporated by reference in
this Prospectus, other than exhibits to such documents not specifically
incorporated by reference. Such requests should be directed to Penederm
Incorporated, 320 Lakeside Drive, Foster City, California 94404, Attention:
President, telephone (415) 358-0100.
_______________________________
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RISK FACTORS
In addition to the other information contained in this Prospectus or
incorporated herein by reference, the following risk factors should be
considered carefully in evaluating the Company and its business before
purchasing shares of the Common Stock offered hereby. These factors, among
others, may cause actual results, events or performance to differ materially
from those expressed in any forward-looking statements made by the Company in
this Prospectus.
Uncertainty of Commercial Launch and Market Acceptance of Prescription
Products. Although the FDA has notified the Company that certain Avita and
Mentax products have been cleared for marketing, these products will face
manufacturing, sales and marketing, market acceptance and other risks associated
with the market launch and commercialization of prescription pharmaceutical
products. The Company relies on third-party contract manufacturers for
commercial production of all of its products. There can be no assurance that the
Company will be able to obtain contract manufacturing of adequate quantities on
a timely basis or on commercially acceptable terms, if at all, for its products.
The Company has commenced marketing in the United States prescription products
through a pharmaceutical specialty contract sales force. The Company has no
experience using a contract sales force or promoting prescription products, and
there can be no assurance that the Company will be able to establish and
maintain a successful marketing and sales effort. A number of factors may limit
the market acceptance of the Company's products, including the timing of market
entry, the availability of alternative products, the price of the Company's
products relative to alternative products, the availability of third-party
reimbursement, acceptance by prescribing physicians, managed care providers and
patients, the nature of publicity regarding the products (if any), and the
extent of marketing efforts by the Company's collaborators or partners (if any).
The Company's products will be subject to continued post-market review which may
result in restrictions on marketing or withdrawal of any such products from the
market. There can be no assurance that prescribing physicians, managed care
providers or patients will demand the products in quantities consistent with
expectations of public market analysts and investors. The failure of such
products to receive regulatory approval or market acceptance could have a
material adverse effect on the Company's operating results or the market price
of the Company's Common Stock.
Competition and Technological Change. The Company faces significant
competition from, among others, large pharmaceutical companies with established
dermatology divisions. The Company expects that its principal competition with
respect to Mentax will be products marketed by Allergan Inc., Johnson & Johnson,
Novartis (formerly Sandoz Pharmaceuticals) and Glaxo Wellcome plc. The Company
expects that its principal competition with respect to Avita initially will be
the retinoic acid products marketed by Johnson & Johnson. Such Johnson &
Johnson products have been on the market for many years
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The following trademarks of Penederm are used in this Registration
Statement: TopiCare Delivery Compounds(R), Avita(TM), Mentax(TM), Penederm(R),
Vitinoin(R) and DuraScreen(R) (licensed to Pierre Fabre in the United States).
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and have substantially all of the market share for prescription acne
treatments. The Company is aware of other newly-approved novel acne treatments
that may present substantial competition for Avita, including another Johnson &
Johnson tretinoin gel product that has a reduced irritation claim. Most of the
Company's competitors have substantially greater financial, technical,
production, marketing and regulatory experience and resources, larger sales and
marketing forces and more experience than the Company in developing,
commercializing and marketing drug and skin care products. There can be no
assurance that the Company's existing and proposed products, including Avita
and Mentax, will compete successfully with the existing and proposed products
of the Company's competitors, and the failure of the Company's products to do
so would have a material adverse effect on the Company's operating results.
The Company's current products and those under development are based
on relatively new technologies. The Company expects technological developments
in its business to occur at a rapid rate and believes that competition may
intensify as technological advances in the field are made and become more
widely known. In recent years, several other companies have been formed and, in
certain instances, are collaborating with large pharmaceutical companies, to
develop specific drug delivery systems or drug or skin care products that might
compete directly with the Company's technologies and products. Delivery systems
and products developed by the Company's competitors may be superior to, or gain
greater or faster market acceptance than, the Company's drug delivery systems
and products. There can be no assurance that the Company's competitors will not
succeed in developing technologies and products that are more effective than
any which have been or are being developed by the Company or that would render
the Company's products and technologies obsolete or noncompetitive.
Dependence on Sole Suppliers and Third Party Manufacturers. The
Company is dependent on third parties for both the supply of raw materials used
to produce TopiCare Delivery Compounds and finished products and the
manufacturing of these compounds and products. One of the materials used in
TopiCare Delivery Compounds is currently available from only one supplier,
Bayer Corporation ("Bayer"). The Company currently obtains certain other raw
materials, including butenafine and retinoic acid, from other sole sources. The
Company currently secures many of these supplies pursuant to purchase orders or
contracts that are terminable on short notice. In the event of termination or
breach by a supplier or other failure to continue to supply materials, the
Company would be required to secure and qualify an alternate supplier. Although
the Company has not experienced difficulty acquiring raw materials, maintains
significant inventories of these materials and believes it could qualify
alternate suppliers for these materials, there can be no assurance that
interruptions in supplies will not occur in the future or that the Company
would be able to timely secure the materials necessary to produce its products
so as to not experience a disruption in manufacturing if a supplier breached or
terminated its contract and the Company experienced a disruption in supply. Any
significant interruption in the supply of raw materials could have a material
adverse effect on the Company's ability to produce its compounds and finished
products and its operating results.
The Company neither has nor plans to acquire the equipment and
facilities necessary to manufacture its current and future products and is and
will be dependent upon third-party contract manufacturers for commercial
production of all of its existing and proposed products. The Company currently
secures the manufacture of its products pursuant to contracts or purchase
orders. In the event of breach by a manufacturer or other failure to provide
manufacturing services, the Company would be required to secure and qualify an
alternate manufacturer, which could delay production and sale of the Company's
products. In addition, because the Company must contract for the manufacture of
its products, the Company has little control over the production of finished
products and the associated raw materials costs. There can be no assurance that
the Company will continue to be able to obtain contract manufacturing on
commercially acceptable terms, if at all, for its products in the quantities
required. Quality control and manufacturing problems have arisen
from time to time, and there can be no assurance that future manufacturing or
quality control problems will not arise at the plants of the Company's contract
manufacturers or that such manufacturers will be able to maintain the necessary
licenses from governmental authorities to continue or to commence manufacturing
the Company's products. For example, in 1994 one of the Company's contract
manufacturers had certain regulatory deficiencies which led to the Company
removing the manufacturer from its drug application and qualifying a new
manufacturing site. There can be no assurance that the Company will be able to
secure the timely and cost-efficient manufacture of its products in accordance
with FDA requirements from these independent parties, and the inability of the
Company to do so could have a material adverse effect on the Company's
operating results.
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Marketing and Sales Uncertainties; Dependence on Collaborative
Partners for Product Distribution. The Company has commenced marketing in the
United States prescription products through a pharmaceutical specialty contract
sales force of approximately 47 sales representatives specializing in
pharmaceuticals and solely dedicated to Penederm products. Although the
pharmaceutical specialty contract sales force consists of personnel with
experience promoting dermatological or other pharmaceutical products, none of
the sales representatives has experience working under the direction of the
Company or promoting its products and some do not have experience promoting
dermatological products. Accordingly, the ongoing training and management of
the sales force will require significant management attention and cost. The
Company has no experience establishing, training or managing a contract sales
force or promoting prescription products. In addition, the sales
representatives are not directly employed by the Company, and the Company is
dependent upon third parties for some aspects of the management of the sales
force. There can be no assurance that the Company will be able to successfully
train and maintain a contract sales force or that such sales force will be able
to commercialize Avita, Mentax or any of the Company's other products
successfully. The inability to establish a successful sales effort would have a
material adverse effect on the Company's operating results.
The Company's strategy for the distribution of certain of its
products, including prescription products in certain geographic territories,
requires entering into various arrangements with corporate collaborators, such
as Schering-Plough HealthCare Products, Inc. ("Schering-Plough"), Warner
Wellcome Consumer Health Products, UCB Group of Belgium, Pharmascience Inc.,
and SmithKline Beecham. Revenues from these agreements constituted
substantially all of the Company's revenues in 1996. These agreements often are
of short duration, terminable with little or no notice and subject to periodic
amendment. Although the Company believes parties to any such arrangements would
have an economic motivation to succeed in performing their contractual
responsibilities, the amount and timing of resources to be devoted to these
activities are not within the control of the Company. There can be no assurance
that such parties will perform their obligations, that the agreements will not
be terminated or renegotiated or that the Company will derive any revenue from
such arrangements. Any such event could have a material adverse effect on the
Company's operating results. The Company intends to seek additional
collaborative arrangements to commercialize certain of its products. There can
be no assurance that the Company will be able to negotiate acceptable
collaborative arrangements in the future, or that current or future
collaborative arrangements will be successful.
In 1996, four unaffiliated customers accounted for approximately 28
percent ($816,000), 25 percent ($736,000), 18 percent ($519,000) and 15 percent
($430,000) of the Company's revenues.
Fluctuations in Quarterly Results; History of Operating Losses. The
Company's future operating results may be subject to significant quarterly
variations based on a wide variety of factors, including, but not limited to,
the timing of regulatory notifications and approvals, the timing of the
commercial introduction of Avita and Mentax in the United States, the timing of
the commercial introduction of other products both in the United States and
abroad, the timing and extent of marketing efforts by the Company and its
partners, the timing of contract payments to and from the Company, the
introduction of competing products by other companies, the pricing of existing
and future products by the Company's competitors, the publication of clinical
results from the Company's products under development, interruptions in the
supply of raw materials necessary to produce the Company's products, and
interruptions or delays in the manufacturing of such products. In addition,
sales of a product upon initial market introduction generally include a
significant amount of initial orders for inventory by wholesalers and
distributors and are not necessarily indicative of actual demand for the product
by patients and physicians. There can be no assurance that distributors or
wholesalers will be able to forecast demand for product accurately. Fluctuations
in operating results will occur to the extent that resales do not meet
distributors' or wholesalers' expectations. The Company's expense levels are
based, in part, on its expectations of future sales levels and have begun to
increase significantly as the Company expands its sales and marketing efforts in
preparation for the product launch of Avita and Mentax. The Company may be
unable to estimate accurately when revenues will be realized from the sales of
these and other products. If sales are below expectations or the release of
products is delayed, the Company's quarterly and annual operating results will
be adversely affected, which would have a material adverse effect on the market
price of the Company's Common Stock. In any event, it is likely that in future
quarters the Company's operating results may from time to time be below the
expectations of public market analysts and investors, which also could have a
material adverse effect on the price of the Company's Common Stock.
The Company is in the early stages of commercializing its products and
developing collaborative relationships. To date, the Company has generated only
limited revenues from the sale of its products and from licensing arrangements.
As of December 31, 1996 the Company had accumulated net losses of approximately
$38.4 million. To achieve profitable operations, the Company must, among other
things, successfully develop and market its products and may need to establish
significant long-term collaborative relationships with other pharmaceutical
companies. The Company's products under development will require significant
additional development, laboratory and clinical testing, regulatory approvals
and investment prior to commercialization. The Company may continue to incur
significant additional operating losses depending principally on the market
acceptance of the Company's products, the success of product development
efforts, the
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timing of potential FDA approvals and subsequent launch of the drug products,
the timing of expenditures and other related factors. There can be no assurance
that the Company will achieve profitability.
Government Regulation; No Assurance of Product Approvals. The
research, testing, manufacture and marketing of drug products is subject to
extensive regulation by numerous regulatory authorities in the United States
and other countries. Failure to comply with FDA or other applicable regulatory
requirements may subject a company to administrative or judicially-imposed
sanctions such as civil penalties, criminal prosecution, injunctions, product
seizure or detention, product recalls, total or partial suspension of
production and FDA refusal to approve pending premarket approval applications
or supplements to approved applications. The process of obtaining FDA and other
required regulatory approvals, including foreign approvals, often takes many
years and can vary substantially based upon the type, complexity and novelty of
the products involved. Furthermore, such approval process is extremely
expensive and uncertain. There can be no assurance that the Company will be
able to obtain the labeling claims necessary or desirable for the promotion of
those products. FDA requirements prohibit the marketing or promotion of a drug
for unapproved indications. Furthermore, regulatory marketing approval may
entail ongoing requirements for postmarketing studies. Even after regulatory
approval is obtained, whether for Avita or Mentax or potential future products
of the Company, a marketed product, its manufacture and its manufacturing
facilities are subject to continued regulatory review and periodic inspection
by the FDA. Later discovery of previously unknown problems or failure to comply
with applicable regulatory requirements may result in penalties such as
restrictions on a product's marketing or withdrawal of the product from the
market.
Prior to the submission of premarket approval applications, drugs
developed by the Company must undergo rigorous preclinical and clinical
testing, which may take several years and the expenditure of substantial
resources. Before commencing clinical trials in humans, the Company must submit
to the FDA and receive clearance of an investigational new drug application
("IND"). There can be no assurance that submission of an IND for future
clinical testing of any products under development or other future products of
the Company would result in FDA authorization to commence clinical trials or
that the Company will be able to obtain the necessary approvals for future
clinical testing in any foreign jurisdiction. Further, there can be no
assurance that if such testing of products under development is completed, any
such drug compounds will be accepted for formal review by the FDA or any
foreign regulatory body or approved by the FDA for marketing in the United
States or by any such foreign regulatory bodies for marketing in particular
foreign jurisdictions.
The Company's research and development involves the controlled use of
hazardous materials, including but not limited to chemicals, fungi and various
radioactive compounds. Although the Company believes that its safety procedures
for handling and disposing of such materials comply with the standards
prescribed by state and federal regulations, the risk of accidental
contamination or injury from these materials cannot be completely eliminated.
In the event of such an accident, the Company could be held liable for any
damages that result and any such liability could exceed the coverage limits of
or not be covered by the Company's insurance and could have a material adverse
effect on the Company's operating results
Uncertainty of Future Product Development. The future success of the
Company will be dependent upon development of new products that obtain
regulatory approval and market acceptance. Such development will require that
the Company successfully identify appropriate products, compounds or
technologies and that the Company obtain any necessary rights thereto. The
Company's strategy for the development of future products requires entering
into various arrangements with third party development partners, licensors and
licensees, such as Kaken Pharmaceutical Company Ltd. ("Kaken"),
Schering-Plough, the Wisconsin Alumni Research Foundation ("WARF") and
Renaissance Corporation
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("Renaissance"). The development of new pharmaceutical products is subject to a
number of significant risks and uncertainties. Potential products, compounds or
technologies that appear to be promising at various stages of development may
not receive regulatory approval, reach the market or achieve widespread use for
a number of reasons. In any event, development of new products will subject the
Company to significant product development costs for which the Company may
never receive revenue or for which revenue may be significantly delayed. In
addition, the Company may be required to pay royalties or other license
development or commercialization fees, which could have a material adverse
effect on the profitability of such products to the Company. There can be no
assurance that the Company will be able to in-license products, compounds or
technologies on terms financially acceptable to the Company, successfully
develop potential products, obtain regulatory approval for any such products,
obtain necessary support from third party collaborators, or successfully
commercialize such products, and the inability of the Company to do so could
have a material adverse affect on the Company's operating results.
Proprietary Technology; Patent Protection. The Company's success,
competitive position, revenue and profits, if any, will depend in part upon its
ability to obtain patent protection in various jurisdictions related to the
technologies and processes it possesses and the technologies and products it
develops. The University of California has obtained three United States and 17
foreign patents for the technology underlying the TopiCare Delivery Compounds
and has licensed these patents to the Company on a worldwide exclusive basis
for the life of the patents. These patents will expire in 2007 and 2008. Under
the license arrangement, the University of California is required to file,
prosecute and maintain foreign patent applications as requested by the Company
at the Company's expense. The Company has licensed rights to certain patented
compounds from Kaken, WARF, and Renaissance and in the future may license
patented compounds from other parties. Any failure by these parties properly to
file, prosecute or maintain any such patents licensed by the Company could
materially adversely affect the Company's operating results.
The Company has filed and intends to file additional patent
applications, when appropriate, relating to its technologies, improvements to
its technologies and specific products that it develops and to direct the
University of California to file any additional patent applications where
appropriate. The Company has filed one United States patent application and a
corresponding Patent Cooperation Treaty application and also has four foreign
patent applications pending. The scope and breadth of patent protection with
respect to pharmaceutical products is uncertain and involves complex legal,
scientific and factual questions. Accordingly, it is impossible to anticipate
the breadth or degree of protection that any such patents will afford.
Furthermore, there can be no assurance that litigation seeking to challenge
such patent protection will not be brought against the Company or the
University of California or that the Company's or the University of
California's patents will not be successfully challenged. The expenses involved
in any patent litigation can be significant and cannot be estimated by the
Company. In addition, there can be no assurance that the scope and validity of
the Company's or the University of California's existing or future patents, if
any, will prevent third parties from developing similar or competing products.
Third parties may hold or be issued patents which the Company's
technology may infringe. The Company could incur substantial costs in defending
itself and its collaborative partners against any resulting claims.
Furthermore, parties making such claims may be able to obtain injunctive or
other equitable relief which could effectively block the Company's ability to
further develop or commercialize its products in the United States and abroad,
and could result in the award of substantial damages. In the event of a claim
of infringement, the Company may be required to obtain one or more licenses
from third parties. There can be no assurance that the Company will be able to
obtain such licenses at a reasonable cost, if at all. Defense of any lawsuit or
failure to obtain any such license could have a material adverse effect on the
Company's operating results.
In July 1996, Johnson & Johnson filed a complaint in federal district
court alleging that the Company's Avita gel formulation infringes a Johnson &
Johnson patent. The parties entered into a settlement agreement in December
1996 pursuant to which the Company agreed not to market the Avita gel
formulation before the expiration of the Johnson & Johnson patent in January
1998.
The Company also relies upon unpatented trade secrets and know-how.
There can be no assurance that others will not independently develop
substantially equivalent proprietary information and techniques or otherwise
gain access to the
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Company's trade secrets or disclose such technology or that the Company can
meaningfully protect its rights to its unpatented trade secrets.
The PTO has recently adopted changes to United States patent law which
changed the term of issued patents, subject to certain transition periods, to
20 years from the date of filing rather than 17 years from date of issuance.
For applications filed after June 7, 1995, the patent term will be 20 years
from the earliest effective filing date of the priority patent application.
Such change may reduce the effective term of protection for patents that are
pending for more than three years in the PTO. While the Company cannot predict
the effect that such changes will have on its business, the adoption of such
changes could have a material adverse effect on the Company's ability to
protect its proprietary information and sustain the commercial viability of its
products. Furthermore, the possibility of shorter terms of patent protection,
combined with the lengthy FDA review process and possibility of extensive
delays in such process, could effectively further reduce the term during which
a marketed product could be protected by patents.
Uncertainty of Pharmaceutical Pricing and Reimbursement. The
Company's business may be materially adversely affected by the continuing
efforts of governmental and third-party payors to contain or reduce the costs
of health care in general and drugs in particular. For example, in most
international markets, pricing of prescription pharmaceuticals is subject to
government price controls. In these markets, once marketing approval is
received, pricing negotiation could take another six to 12 months or longer.
In the United States there have been, and there may continue to be, federal and
state proposals to implement similar government price controls. In addition,
an increasing emphasis on managed care and consolidation of hospital purchasing
in the United States has and will continue to put pressure on pharmaceutical
pricing. Such proposals, if adopted, and such initiatives could decrease the
price that the Company receives for any current or future products and thereby
have a material adverse effect on the Company's business, financial condition
and results of operations. Further, to the extent that such proposals or
initiatives have a material adverse effect on pharmaceutical companies that are
collaborators or prospective collaborators for certain of the Company's
products, the Company's ability to commercialize its products may be materially
adversely affected. In addition, price competition may result from competing
product sales, attempts to gain market share or introductory pricing programs,
which would have a material adverse effect on the Company's business, financial
condition and results of operations.
The Company's ability to commercialize its products may depend in part
on the extent to which reimbursement for such products and related treatments
will be available from government health administration authorities, private
health insurers and other third-party payors. Significant uncertainty exists
as to the reimbursement status of newly approved health care products, and
third-party payors are increasingly challenging the prices charged for medical
products and services. There can be no assurance that any third-party
insurance coverage will be available to patients for any of the Company's
products. Government and other third-party payors are increasingly attempting
to contain health care costs by limiting the level of reimbursement for new
therapeutic products, and be refusing, in some cases, to provide coverage or
reimbursement for indications for which the FDA has not granted marketing
clearance. Moreover, reimbursement may be denied even for FDA-approved
indications. If adequate coverage and reimbursement levels are not provided by
the government and third-party payors for the Company's products, the Company's
business, financial condition and results of operations would be materially
adversely affected.
Dependence on Key Personnel. The success of the Company is dependent
upon its ability to retain and attract highly qualified scientific, management
and marketing personnel. The Company faces intense competition for personnel
from other companies, academic institutions, government entities and other
organizations. There can be no assurance that the Company will be successful in
attracting and retaining key personnel. The loss of key personnel, or the
inability to attract and retain the additional, highly-skilled employees
required for the expansion of the Company's activities, could adversely affect
its business.
Risk of Product Liability Claims; No Assurance of Adequate Insurance.
Testing, manufacturing and marketing of the Company's products entail a risk of
product liability. In addition, third-party manufacturers of certain drugs and
skin care agents used by the Company in its products have limited contractual
responsibility for product liability. Although the Company has obtained
aggregate product liability insurance coverage in the amount of $3,000,000,
there can be no assurance that the existing coverage is adequate for current
operations. Furthermore, this existing coverage may not be adequate as the
Company further develops products, and there can be no assurance that
additional insurance coverage will
8
<PAGE> 10
be available in the future at an acceptable cost, if at all. Failure of the
Company to prevail on a product liability claim could have a material adverse
effect on the Company's operating results. In addition, the Company could incur
substantial costs in defending a claim, even where that claim was ultimately
unsuccessful, and defense of any such claim could divert management's efforts
and attention from the Company's business and have a material adverse effect on
the Company's operating results.
Volatility of Stock Price. The Nasdaq National Market has from time
to time experienced significant price and volume fluctuations that may be
unrelated to the operating performance of particular companies. In addition,
the market price of the Common Stock, like the stock prices of many publicly
traded pharmaceutical and biotechnology companies, has been, and may continue
to be, highly volatile. Announcements of technological innovations or new
commercial products by the Company or its competitors, developments or disputes
concerning patent or proprietary rights, publicity regarding actual or
potential medical results relating to products under development by the Company
or its competitors, regulatory developments in both the United States and
foreign countries, public concern as to the safety of biotechnology and
pharmaceutical products and economic and other external factors, as well as
period-to-period fluctuations in financial results, among other factors, may
have a material adverse effect on the market price of the Common Stock.
Shares Eligible for Future Sale. Substantially all of the Company's
shares of Common Stock are eligible for sale in the public market without
restriction, unless such shares are held by "affiliates" within the meaning of
the Securities Act of 1933, as amended.
CAPITALIZATION
The following table sets forth the actual capitalization of the Company at
December 31, 1996 as adjusted for the sale by the Company of the Common Stock
pursuant to the Purchase Agreement at a price of $12.75 per share and the
application of the net proceeds therefrom (after deduction of estimated
commissions and estimated offering expenses).
<TABLE>
<CAPTION>
DECEMBER 31, 1996
------------------
ACTUAL AS ADJUSTED(1)
------ --------------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt, less current portion $ 28 $ 28
-------- --------
Shareholders' equity:
Preferred Stock, no par value, 10,000,000 shares authorized;
no shares issued and outstanding, actual and as adjusted -- --
Common Stock, no par value, 30,000,000 shares authorized; 7,315,697 shares
issued and outstanding, actual; 8,067,697 shares issued and outstanding,
as adjusted(1) 46,984 55,945
Accumulated deficit (38,393) (38,393)
-------- --------
Total shareholders' equity 8,591 17,552
-------- --------
Total capitalization $ 8,619 $ 17,580
======== ========
- ---------------------
</TABLE>
(1) Includes 752,000 shares to be issued pursuant to the Purchase Agreement.
Excludes (i) 1,147,537 shares reserved for issuance pursuant to the
Company's stock option plans and (ii) 47,877 shares reserved for issuance
pursuant to the Company's Employee Stock Purchase Plan.
9
<PAGE> 11
SELLING SHAREHOLDERS
The Shares covered by this Prospectus were acquired from the Company
pursuant to the Purchase Agreement for an aggregate purchase price of
$9,588,000 ($12.75 per share). The offer and sale by the Company of the
Common Stock to the Selling Shareholders pursuant to the Purchase Agreement was
made pursuant to an exemption from the registration requirements of the
Securities Act provided in Section 4(2) thereof. The Purchase Agreement
contains representations and warranties as to each Selling Shareholder's status
as an "accredited investor" as such term is defined in Rule 501 promulgated
under the Securities Act. Volpe, Welty & Company, L.L.C., the placement agent,
was paid a fee equal to 5.5% of the aggregate purchase price in connection with
the sale of the Shares by the Company to the Selling Shareholders pursuant to
the Purchase Agreement. In addition, the Company agreed to reimburse such
placement agent for its travel and out-of-pocket expenses incurred in
connection with the sale of the Shares by the Company to the Selling
Shareholders pursuant to the Purchase Agreement up to a maximum of $25,000.
Pursuant to the Purchase Agreement, each Selling Shareholder has
represented that it acquired the Shares for investment and with no present
intention of distributing the Shares. The Company agreed, in such Purchase
Agreement, to prepare and file a registration statement as soon as practicable
and to bear all expenses other than fees and expenses of counsel for the
Selling Shareholders and underwriting discounts and commissions and brokerage
commissions and fees. In addition, and in recognition of the fact that the
Selling Shareholders, even though purchasing the Shares without a view to
distribution, may wish to be legally permitted to sell the Shares when each
deems appropriate, the Company filed with the Commission a Registration
Statement on Form S-3, of which this Prospectus forms a part, with respect to,
among other things, the resale of the Shares from time to time at prevailing
prices in the over-the-counter market or in privately-negotiated transactions
and has agreed to prepare and file such amendments and supplements to the
Registration Statement as may be necessary to keep the Registration Statement
effective until the earliest of (A) the second anniversary date of the Closing,
(B) such date as all of the Shares have been resold or (C) such time as all of
the Shares held by the Purchasers can be sold within a given three-month period
pursuant to Rule 144 under the Securities Act.
None of the Selling Shareholders has had a material relationship with
the Company within the past three years except as a result of the ownership of
the Shares or other securities of the Company.
The following table sets forth the name of the Selling Shareholders,
the number of shares of Common Stock owned beneficially by the Selling
Shareholders as of February 26, 1997 (as adjusted to give effect to the
purchases under the Purchase Agreement) and the number of shares that may be
offered pursuant to this Prospectus. This information is based upon
information provided by the Selling Shareholders. There are currently no
agreements, arrangements or understandings with respect to the sale of any of
the Shares. The Shares are being registered to permit public secondary trading
of the Shares, and the Selling Shareholders may offer the Shares for resale
from time to time.
10
<PAGE> 12
<TABLE>
<CAPTION>
Common Stock Common Stock Common Stock
Beneficially Owned to be Beneficially Owned
Prior to Offering(1) Sold After Offering(1)
-------------------- ---- -----------------
Holder Number Percent Number Percent
- ------ ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Deerfield Partners, L.P. 291,200 3.6% 91,000 200,200 2.5%
Deerfield International Limited 28,800 * 9,000 19,800 *
MedCap I Corp. 17,100 * 17,100 -- --
ProMed Partners, L.P. 9,400 * 9,400 -- --
HPB Associates, L.P. 13,500 * 13,500 -- --
Franklin Global Health Care Fund 380,000 4.7% 141,500 238,500 3.0%
Franklin Small Cap Growth Fund 531,200 6.6% 283,400 247,800 3.1%
Franklin California Growth Fund 244,300 3.0% 94,300 150,000 1.9%
Franklin Asset Allocation Fund 10,800 * 10,800 -- --
RCM Growth Equity Fund, a series of
RCM Capital Funds, Inc. 94,700 1.2% 53,300 41,400 *
RCM Small Cap Fund, a series of RCM
Capital Funds, Inc.(2) 80,000 1.0% 26,700 53,300 *
RCM Global Healthcare Fund, a series
of RCM Equity Funds, Inc. 8,300 * 2,000 6,300 *
--------- ----- -------- --------- -----
TOTALS 1,709,300 21.2% 752,000 957,300 11.9%
========= ===== ======== ========= =====
</TABLE>
_________________
* Less than 1%
(1) Applicable percentage of ownership is based on 7,324,195 shares of
Common Stock outstanding as of February 28, 1997, and assumes the sale
and issuance of 752,000 shares of Common Stock pursuant to the
Purchase Agreement.
(2) Does not include 10,000 shares of Common Stock that were acquired
in March 1997.
PLAN OF DISTRIBUTION
All or a portion of the Shares offered hereby by the Selling
Shareholders may be delivered and/or sold in transactions from time to time on
the over-the-counter market, on the Nasdaq National Market, in negotiated
transactions, or a combination of such methods of sale, at market prices
prevailing at the time, at prices related to such prevailing prices or at
negotiated prices and/or may also be used to cover any short positions
previously established. The Selling Shareholders may effect such transactions
by selling to or through one or more broker-dealers, and such broker-dealers
may receive compensation in the form of underwriting discounts, concessions or
commissions from the Selling Shareholders. The Selling Shareholders and any
broker-dealers that participate in the distribution may under certain
11
<PAGE> 13
circumstances be deemed to be "underwriters" within the meaning of the
Securities Act, and any commissions received by such broker-dealers and any
profits realized on the resale of Shares by them may be deemed to be
underwriting discounts and commissions under the Securities Act. The Selling
Shareholders may agree to indemnify such broker-dealers against certain
liabilities, including liabilities under the Securities Act. In addition, the
Company has agreed to indemnify the Selling Shareholders with respect to the
Shares offered hereby against certain liabilities, including, without
limitation, certain liabilities under the Securities Act, or, if such indemnity
is unavailable, to contribute toward amounts required to be paid in respect of
such liabilities.
Any broker-dealer participating in such transactions as agent may
receive commissions from the Selling Shareholders (and, if they act as agent
for the purchaser of such Shares, from such purchaser). Broker-dealers may
agree with the Selling Shareholders to sell a specified number of Shares at a
stipulated price per share, and, to the extent such a broker-dealer is unable
to do so acting as agent for the Selling Shareholders, to purchase as principal
any unsold Shares at the price required to fulfill the broker-dealer commitment
to the Selling Shareholders. Broker-dealers who acquire Shares as principal
may thereafter resell such Shares from time to time in transactions (which may
involve crosses and block transactions and which may involve sales to and
through other broker-dealers, including transactions of the nature described
above) in the over-the-counter market, in negotiated transactions or otherwise
at market prices prevailing at the time of sale or at negotiated prices, and in
connection with such resales may pay to or receive from the purchasers of such
Shares commissions computed as described above. To the extent required under
the Securities Act, a supplemental prospectus will be filed, disclosing (a) the
name of any such broker-dealers, (b) the number of Shares involved, (c) the
price at which such Shares are to be sold, (d) the commissions paid or
discounts or concessions allowed to such broker-dealers, where applicable, (e)
that such broker-dealers did not conduct any investigation to verify the
information set out or incorporated by reference in this prospectus, as
supplemented, and (f) other facts material to the transaction.
Under applicable rules and regulations under the 1934 Act, any person
engaged in the distribution of the Resale of Shares may not simultaneously
engage in market making activities with respect to the Common Stock of the
Company for a period of two business days prior to the commencement of such
distribution. In addition and without limiting the foregoing, the Selling
Shareholders will be subject to applicable provisions of the Exchange Act, and
the rules and regulations thereunder, including, without limitation, Rules
10b-6 and 10b-7, which provisions may limit the timing of purchases and sales
of shares of the Company's Common Stock by the Selling Shareholders.
The Selling Shareholders will pay all commissions, transfer taxes, and
other expenses associated with the sale of securities by them. The Shares
offered hereby are being registered pursuant to contractual obligations of the
Company, and the Company has paid the expenses of the preparation of this
Prospectus. The Company has not made any underwriting arrangements with
respect to the sale of Shares offered hereby on exercise of the Warrants. Upon
exercise of the Warrants, the Shares will be issued by the Company directly to
the persons exercising the Warrants.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
shares by the Selling Shareholders.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for
the Company by Heller, Ehrman, White & McAuliffe, Palo Alto, California,
counsel to the Company in connection with the offering.
EXPERTS
The consolidated financial statements of Penederm appearing in
Penederm's Annual Report (Form 10-K) for the year ended December 31, 1995, have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon and included therein and incorporated herein by reference. Such
financial statements are incorporated herein by reference in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing. The financial statements of the Company incorporated herein by
reference at December 31, 1994 and for the years ended December 31, 1993 and
1994, have been
12
<PAGE> 14
audited by Coopers & Lybrand L.L.P., independent accountants, as set
forth in their report thereon incorporated herein by reference. Such financial
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
Coopers & Lybrand L.L.P. performed the audit of the Company's financial
statements from inception through the Company's fiscal year ended December 31,
1994. The Company informed Coopers & Lybrand L.L.P. on April 17, 1995 that the
Company would no longer engage Coopers & Lybrand L.L.P. as principal
accountants to audit the Company's financial statements. These actions were
taken with the approval of the Board on the recommendation of the Audit
Committee of the Board. In connection with the audit of the Company's
financial statements for the fiscal years ended December 31, 1993 and 1994, and
in the subsequent interim period, there were no disagreements between the
Company and Coopers & Lybrand L.L.P. regarding matters of accounting principles
or practices, financial statement disclosure or auditing scope or procedures
which if not resolved to the satisfaction of Coopers & Lybrand L.L.P. would
have caused Coopers & Lybrand L.L.P. to make reference to the matters in this
report. The report of Coopers & Lybrand L.L.P. on the Company's financial
statements for the fiscal years ended December 31, 1993 and 1994 contained no
adverse opinion or disclaimer of opinion, and was not qualified or modified as
to uncertainty, audit scope or accounting principle. The Company has not
consulted with Ernst & Young LLP during the two years ended December 31, 1994
or the subsequent interim period prior to April 17, 1995 on either the
application of accounting principles or type of opinion Ernst & Young LLP might
issue on the Company's financial statements.
13
<PAGE> 15
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses in connection with
the sale and distribution of the securities being registered. All of the
amounts shown are estimates except the Securities and Exchange Commission
registration fee.
<TABLE>
<S> <C>
Securities and Exchange Commission
Registration Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,963
Legal fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,000
Accounting fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,037
--------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $100,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to Sections 204(a) and 317 of the California Corporations
Code, as amended, the Company has included in its articles of incorporation and
by-laws provisions regarding the indemnification of officers and directors of
the Company. Article Fourth of the Company's Restated Articles of
Incorporation provides as follows:
"Fourth: The liability of the directors of this corporation for monetary
damages shall be eliminated to the fullest extent permissible under
California law. This corporation is also authorized, to the fullest extent
permissible under California law, to indemnify its agents (as defined in
Section 317 of the California Corporations Code), whether by by-law,
agreement or otherwise, in excess of the indemnification expressly
permitted by Section 317 and to advance defense expenses to its agents in
connection with such matters as they are incurred. If, after the effective
date of this Article, California law is amended in a manner which permits a
corporation to limit the monetary or other liability of its directors or to
authorize indemnification of, or advancement of such defense expense to,
its directors or other persons, in any such case to a greater extent than
is permitted on such effective date, the references in this Article to
`California law' shall to that extent be deemed to refer to California law
as so amended."
Section 29 of the Company's By-laws, as amended, provides as follows:
"29. Indemnification of Directors and Officers.
(a) Indemnification. To the fullest extent permissible under California
law, the corporation shall indemnify its directors and officers against all
expenses, judgments, fines, settlement and other amounts actually and
reasonably incurred by them in connection with any proceeding, including an
action by or in the right of the corporation, by reason of the fact that such
person is or was a director or officer of the corporation, or is or was serving
at the request of the corporation as a director, officer, trustee, employee or
agent of another corporation, or of a partnership, joint venture, trust or
other enterprise (including service with respect to employee benefit plans).
To the fullest extent permissible under California law, expenses incurred by a
director or officer seeking indemnification under this By-law in defending any
proceeding shall be advanced by the corporation as they are incurred upon
receipt by the corporation of an undertaking by or on behalf of the director or
officer to repay such amount if it shall ultimately be determined that the
director or officer is not entitled to be indemnified by the corporation for
those expenses. If, after the effective date of this By-law, California law is
amended in a manner which permits the corporation to authorize indemnification
of or advancement of expenses to its directors or officers, in any such case to
a greater extent than is permitted on such effective date, the references in
this By-law to `California law' shall to that extent be deemed to refer to
California law as so amended. The rights granted by this
II-1
<PAGE> 16
By-law are contractual in nature and, as such, may not be altered with respect
to any present or former director or officer without the written consent of
that person.
(b) Procedure. Upon written request to the Board of Directors by a person
seeking indemnification under this By-law, the Board shall promptly determine
in accordance with Section 317(e) of the California Corporations Code whether
the applicable standard of conduct has been met and, if so, the Board shall
authorize indemnification. If the Board cannot authorize indemnification
because the number of directors who are parties to the proceeding with respect
to which indemnification is sought prevents the formation of a quorum of
directors who are not parties to the proceeding, then, upon written request by
the person seeking indemnification, independent legal counsel (by means of a
written opinion obtained at the corporation's expense) or the corporation's
shareholders shall determine whether the applicable standard of conduct has
been met and, if so, shall authorize indemnification.
(c) Definitions. The term `proceeding' means any threatened, pending or
completed action or proceeding, whether civil, criminal, administrative or
investigative. The term `expenses' includes, without limitation, attorney's
fees and any expenses of establishing a right to indemnification."
The Company has obtained insurance to indemnify its officers and
directors for liability incurred in serving the Company up to a maximum amount
of $3,000,000, including the costs of defense with respect to any such alleged
liability.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description
------- ---------------------------------------------------------------------
<S> <C>
4.1(1) Rights Agreement between Registrant and ChaseMellon Shareholder
Services, L.L.C., dated November 20, 1996
4.2 Purchase Agreement between Registrant and the Selling Shareholders,
dated March 3, 1997
5 Opinion of Heller, Ehrman, White & McAuliffe*
23.1 Consent of Heller, Ehrman, White & McAuliffe*
(filed as part of Exhibit 5)
23.2 Consent of Ernst & Young LLP, Independent Auditors*
23.3 Consent of Coopers & Lybrand L.L.P., Independent Accountants*
24 Power of Attorney*
- --------------------
</TABLE>
* Previously filed as an Exhibit to this Registration Statement
(1) Incorporated by reference to Exhibit 1 to the Form 8-K filed by the
registrant on November 27, 1996.
ITEM 17. UNDERTAKINGS
A. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this registration statement;
II-2
<PAGE> 17
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change in
the information set forth in the registration statement;
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in the
registration statement or any material change to such information in
the registration statement;
provided, however, that paragraphs A(1)(i) and A(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
B. The undersigned registrant hereby undertakes that, for
purposes of determining liability under the Securities Act of 1933, each filing
of the registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
C. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-3
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment
No. 1 to Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the city of Foster City, State of California, on
March 18, 1997.
PENEDERM INCORPORATED
/s/ Lloyd M. Malchow
-----------------------------------------
Lloyd H. Malchow
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Lloyd H. Malchow President, Chief Executive Officer and Director March 18, 1997
---------------------------------- (Principal Executive and Financial Officer)
Lloyd H. Malchow
/s/ Michael Bates Director of Finance and Administration (Principal March 18, 1997
---------------------------------- Accounting Officer)
Michael Bates
* Director March 18, 1997
----------------------------------
Robert F. Allnutt
* Director March 18, 1997
----------------------------------
William I. Bergman
* Chairman of the Board March 18, 1997
----------------------------------
David E. Collins
Director March 7, 1997
----------------------------------
Mark J. Gabrielson
* Director March 18, 1997
----------------------------------
Terry L. Opdendyk
* Director March 18, 1997
----------------------------------
Harvey S. Sadow, Ph.D.
* Director March 18, 1997
----------------------------------
Gerald D. Weinstein, M.D.
*By: /s/ Lloyd H. Malchow
----------------------------------
Lloyd H. Malchow
Attorney-in-Fact
</TABLE>
II-4
<PAGE> 19
PENEDERM INCORPORATED
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
4.1(1) Rights Agreement, between Registrant and ChaseMellon Shareholder
Services, L.L.C., dated November 20, 1996
4.2 Purchase Agreement between Registrant and the Selling Shareholders, dated
March 3, 1997
5 Opinion of Heller, Ehrman, White & McAuliffe*
23.1 Consent of Heller, Ehrman, White & McAuliffe (filed as part of Exhibit
5)*
23.2 Consent of Ernst & Young LLP, Independent Auditors*
23.3 Consent of Coopers & Lybrand L.L.P., Independent Accountants*
24.1 Power of Attorney*
</TABLE>
__________
* Previously filed as an exhibit to this registration statement.
(1) Incorporated by reference to Exhibit 1 to the Form 8-K filed by the
registrant on November 27, 1996.
<PAGE> 1
EXHIBIT 4.2
PENEDERM INCORPORATED
COMMON STOCK
PURCHASE AGREEMENT
MARCH 3, 1997
<PAGE> 2
NOTICE TO PURCHASERS IN ALL STATES:
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE
MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED
BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY.
FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY
OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
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TABLE OF CONTENTS
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SECTION 1. AUTHORIZATION OF SALE OF THE SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . 1.
SECTION 2. AGREEMENT TO SELL AND PURCHASE THE SECURITIES . . . . . . . . . . . . . . . . . . . . . . 1.
2.1 Sale of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.
2.2 Separate Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.
SECTION 3. CLOSING AND DELIVERY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.
3.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.
3.2 Delivery of the Shares at the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 2.
SECTION 4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY . . . . . . . . . . . . . . . . . 2.
4.1 Organization and Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.
4.2 Corporate Power; Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.
4.3 Issuance and Delivery of the Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.
4.4 Confidential Offering Memorandum; SEC Documents; Financial Statements . . . . . . . . . . 3.
4.5 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.
4.6 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.
4.7 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.
4.8 Governmental Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.
4.9 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.
4.10 Listing; Maintenance of Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.
SECTION 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS . . . . . . . . . . . . . . . 4.
SECTION 6. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS . . . . . . . . . . . . . . . . . . 6.
SECTION 7. CONDITIONS TO COMPANY'S OBLIGATIONS AT THE CLOSING . . . . . . . . . . . . . . . . . . . . 6.
7.1 Receipt of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.
7.2 Registration Statement Effective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.
7.3 Representations and Warranties Correct . . . . . . . . . . . . . . . . . . . . . . . . . . 7.
SECTION 8. CONDITIONS TO PURCHASERS' OBLIGATIONS AT THE CLOSING . . . . . . . . . . . . . . . . . . . 7.
8.1 Registration Statement Effective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.
8.2 Representations and Warranties Correct . . . . . . . . . . . . . . . . . . . . . . . . . . 7.
8.3 Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.
SECTION 9. REGISTRATION OF THE SHARES; COMPLIANCE WITH THE SECURITIES ACT . . . . . . . . . . . . . . 7.
9.1 Registration Procedures and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.
9.2 Transfer of Securities After Registration . . . . . . . . . . . . . . . . . . . . . . . . 9.
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i.
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TABLE OF CONTENTS
(CONTINUED)
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9.3 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.
9.4 Termination of Conditions and Obligations . . . . . . . . . . . . . . . . . . . . . . . . 11.
9.5 Information Available . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.
9.6 Changes in Purchaser Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.
SECTION 10. BROKER'S FEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.
SECTION 11. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.
SECTION 12. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.
12.1 Waivers and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.
12.2 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.
12.3 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.
12.4 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.
12.5 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.
12.6 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.
12.7 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.
12.8 Payment of Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.
ATTACHMENTS:
Exhibit A - Schedule of Purchasers
Exhibit B - Schedule of Exceptions
Exhibit C - Form of Legal Opinion
Appendix I - Stock Certificate Questionnaire
Appendix II - Registration Statement Questionnaire
Appendix III - Purchaser's Certificate of Subsequent Sale
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ii.
<PAGE> 5
COMMON STOCK
PURCHASE AGREEMENT
THIS AGREEMENT ("Agreement") is made as of March 3, 1997 (the
"Effective Date"), by and among PENEDERM INCORPORATED, a California corporation
with its principal place of business at 320 Lakeside Drive, Suite A, Foster
City, California 94404 (the "Company"), and each of those persons and entities,
severally and not jointly, listed as a Purchaser on the Schedule of Purchasers
attached as Exhibit A hereto. Such persons and entities are hereinafter
collectively referred to herein as "Purchasers" and each individually as a
"Purchaser."
AGREEMENT
In consideration of the mutual covenants contained in this Agreement,
and for other good and valuable consideration, the receipt of which is hereby
acknowledged, the Company and each Purchaser (severally and not jointly) hereby
agree as follows:
SECTION 1. AUTHORIZATION OF SALE OF THE SECURITIES. Subject to
the terms and conditions of this Agreement, the Company has, or before the
Closing (as defined below) will have, authorized the sale and issuance of up to
752,000 shares of its Common Stock (the "Common Stock"). The shares of Common
Stock sold hereunder shall be referred to herein as the "Shares" or the
"Securities."
SECTION 2. AGREEMENT TO SELL AND PURCHASE THE SECURITIES.
2.1 SALE OF SHARES.
(a) At the Closing (as defined in Section 3), the Company
will sell to each Purchaser, and each Purchaser will purchase from the Company,
at a purchase price of Twelve dollars and seventy-five cents ($12.75) per
Share, the number of Shares set forth next to such Purchaser's name on the
Schedule of Purchasers attached hereto as Exhibit A (the "Schedule of
Purchasers").
2.2 SEPARATE AGREEMENT. Each Purchaser shall severally, and not
jointly, be liable for only the purchase of the Shares that appear on Exhibit A
hereto and that relate to such Purchaser. The Company's agreement with each of
the Purchasers is a separate agreement, and the sale of Shares to each of the
Purchasers is a separate sale. The obligations of each Purchaser hereunder are
expressly not conditioned on the purchase by any or all of the other Purchasers
of the Shares such other Purchasers have agreed to purchase.
SECTION 3. CLOSING AND DELIVERY.
3.1 CLOSING. The Closing of the purchase and sale of the Shares
pursuant to this Agreement (the "Closing") shall be held as soon as practicable
after the effectiveness of the
1.
<PAGE> 6
Registration Statement, as set forth in Section 9.1(a) hereof, to be filed with
the Securities and Exchange Commission (the "SEC" or the "Commission"), and
satisfaction or waiver of all other conditions to Closing set forth in Sections
7 and 8 hereof, at the offices of Heller Ehrman White & McAuliffe, 525
University Avenue, Palo Alto, California 94301, or on such other date and place
as may be agreed to by the Company and the Purchasers.
The Company shall give at least five (5) business days prior written
notice to the Purchasers, in a manner provided for in Section 11 hereof, of the
date, time and location of the Closing. At or prior to the Closing, each
Purchaser shall execute any related agreements or other documents required to
be executed hereunder, dated as of the date of the Closing (the "Closing
Date").
3.2 DELIVERY OF THE SHARES AT THE CLOSING. At the Closing, the
Company shall deliver to each Purchaser stock certificates registered in the
name of such Purchaser, or in such nominee name(s) as designated by such
Purchaser, representing the number of shares of Common Stock to be purchased by
such Purchaser at the Closing as set forth in the Schedule of Purchasers
against payment of the purchase price for such shares. The name(s) in which
the stock certificates are to be issued to each Purchaser are set forth in the
Stock Certificate Questionnaire in the form attached hereto as Appendix I, as
completed by each Purchaser.
SECTION 4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
COMPANY.
Except as set forth on the Schedule of Exceptions attached hereto as
Exhibit B, the Company hereby represents and warrants as of the date hereof to,
and covenants with, the Purchasers as follows:
4.1 ORGANIZATION AND STANDING. The Company has been duly
incorporated and is validly existing as a corporation in good standing under
the laws of California, has full corporate power and authority to own or lease
its properties and conduct its business as presently conducted and as described
in the Confidential Offering Memorandum, dated March 3, 1997 (the
"Memorandum"), and is duly qualified as a foreign corporation and in good
standing in all jurisdictions in which the character of the property owned or
leased or the nature of the business transacted by it makes qualification
necessary (except where the failure to be so qualified would not have a
material adverse effect on the business, properties, financial condition or
results or operations of the Company). The Company has no subsidiaries or
equity interest in any other entity.
4.2 CORPORATE POWER; AUTHORIZATION. The Company has all requisite
corporate power, and has taken all requisite corporate action, to execute and
deliver this Agreement, sell and issue the Shares and carry out and perform all
of its obligations under this Agreement. This Agreement constitutes the legal,
valid and binding obligation of the Company, enforceable in accordance with its
terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting the
enforcement of creditors' rights generally, (ii) as limited by equitable
principles generally, including any specific performance, and (iii) as to those
provisions of Section 9.3 relating to indemnity or contribution.
2.
<PAGE> 7
The execution and delivery of this Agreement does not, and the performance of
this Agreement and the compliance with the provisions hereof and the issuance,
sale and delivery of the Shares by the Company will not conflict with, or
result in a breach or violation of the terms, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of any lien
pursuant to the terms of, the Articles of Incorporation or Bylaws of the
Company or any statute, law, rule applicable to the Company or regulation or
any state or federal order, judgment or decree applicable to the Company or any
indenture, mortgage, lease or other agreement or instrument to which the
Company or any of its properties is subject, where such conflict, breach or
violation would have a material adverse effect on the Company.
4.3 ISSUANCE AND DELIVERY OF THE SHARES. The Shares, when issued
and paid for in compliance with the provisions of this Agreement, will be
validly issued, fully paid and nonassessable. The issuance and delivery of the
Shares is not subject to preemptive, co- sale, right of first refusal or any
other similar rights of the shareholders of the Company or any liens or
encumbrances. The Company has not granted any registration rights with respect
to its securities other than the registration rights set forth herein.
4.4 CONFIDENTIAL OFFERING MEMORANDUM; SEC DOCUMENTS; FINANCIAL
STATEMENTS. Each complete or partial statement, report, or proxy statement
included as an Exhibit to the Memorandum is a true and complete copy of or
excerpt from such document as filed by the Company with the SEC. The Company
has filed in a timely manner all documents that the Company was required to
file with the SEC under Sections 13, 14(a) and 15(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), during the twelve (12) months
preceding the date of this Agreement. As of their respective filing dates (or,
if amended, when amended), all documents filed by the Company with the SEC (the
"SEC Documents") complied in all material respects with the requirements of the
Exchange Act. Neither the Memorandum nor any of the SEC Documents as of their
respective dates contained any untrue statement of material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the
SEC Documents and the Memorandum (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 financial position of
the Company at the dates thereof and the results of its operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal, recurring adjustments).
4.5 INTELLECTUAL PROPERTY. Except as set forth in the Memorandum,
the Company owns or possesses adequate rights to use all material patents,
patent rights, inventions, trade secrets and know-how described or referred to
in the Memorandum as owned or used by it or that are necessary for the conduct
of its business as presently conducted and as described in the Memorandum.
Except as set forth in the Memorandum, the Company has not received any notice
of, nor has any knowledge of, any infringement of or conflict with asserted
rights of others with respect to any patent, patent right, invention, trade
secret or know-how that, individually or in the aggregate, if the subject of an
unfavorable decision, ruling or finding,
3.
<PAGE> 8
would have a material adverse effect on the business, properties, financial
condition or results or operations of the Company.
4.6 CAPITALIZATION. All of the Company s outstanding shares of
capital stock have been duly authorized and validly issued and are fully paid
and nonassessable, have been issued in compliance with all federal and state
securities laws, and were not issued in violation of or subject to any
preemptive right or other rights to subscribe for or purchase securities. The
actual authorized and outstanding capital stock of the Company as of the date
hereof is as set forth in Section 4.6 of Exhibit B. Except as set forth in
Exhibit B, there are no outstanding options to purchase, or any preemptive
rights or other rights to subscribe for or to purchase, any securities or
obligations convertible into, or any contracts or commitments to issue or sell
shares of the Company s capital stock or any such options, rights, convertible
securities or obligations.
4.7 LITIGATION. Except as set forth in the Memorandum, there is
no pending or, to the Company s knowledge, threatened, action, suit or other
proceeding to which the Company is a party or to which its property or assets
are subject.
4.8 GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state, or local governmental authority on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement except for (a) compliance with the securities
and blue sky laws in the states and other jurisdictions in which shares of
Common Stock are offered and/or sold, which compliance will be effected in
accordance with such laws, and (b) the filing of a registration statement and
all amendments thereto with the SEC as contemplated by Section 9.1 of this
Agreement.
4.9 NO MATERIAL ADVERSE CHANGE. Except as otherwise disclosed
herein or in the Memorandum, since September 30, 1996, there have not been any
changes in the assets, liabilities, financial condition or operations of the
Company from that reflected in the Financial Statements except changes in the
ordinary course of business or which have not been, either individually or in
the aggregate, materially adverse.
4.10 LISTING; MAINTENANCE OF LISTING. The Company s Common Stock
is traded on the Nasdaq National Market. For so long as the Company is
obligated to keep in effect the Registration Statements provided under Section
9 hereof, the Company will use its reasonable best efforts to maintain its
listing on The Nasdaq National Market or a national securities exchange, as
defined in the Exchange Act.
SECTION 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
PURCHASERS.
5.1 Each Purchaser, severally and not jointly, represents and
warrants to and covenants with the Company that:
4.
<PAGE> 9
(a) Purchaser, taking into account the personnel and
resources it can practically bring to bear on the purchase of the Securities
contemplated hereby, either alone or together with the advice of such
Purchaser's purchaser representative, is knowledgeable, sophisticated and
experienced in making, and is qualified to make, decisions with respect to
investments in shares presenting an investment decision like that involved in
the purchase of the Securities, including investments in securities issued by
the Company, and has requested, received, reviewed and considered, either alone
or with such Purchaser's purchaser representative, all information Purchaser
deems relevant (including the SEC documents and the Memorandum) in making an
informed decision to purchase the Securities.
(b) Purchaser is acquiring the Securities being acquired
by Purchaser pursuant to this Agreement in the ordinary course of its business
and for its own account for investment only and with no present intention of
distributing any of such Securities or any arrangement or understanding with
any other persons regarding the distribution of such Securities, except in
compliance with Section 5(c).
(c) Purchaser will not, directly or indirectly, offer,
sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy,
purchase or otherwise acquire or take a pledge of) any of the securities
purchased hereunder except in compliance with the Securities Act of 1933, as
amended (the "Securities Act"), applicable blue sky laws, and the rules and
regulations promulgated thereunder.
(d) Purchaser has completed or caused to be completed the
Stock Certificate Questionnaire and the Registration Questionnaire, attached
hereto as Appendix I and Appendix II, respectively, for use in preparation of
the Registration Statements to be filed by the Company, and the answers thereto
are true and correct as of the date hereof and will be true and correct as of
the effective date of the applicable Registration Statement (provided that
Purchaser shall be entitled to update such information by providing notice
thereof to the Company prior to the effective date of such Registration
Statement).
(e) Purchaser has, in connection with its decision to
purchase the Securities, relied with respect to the Company and its affairs
solely upon the SEC Documents and the other information delivered to Purchaser
by the Company as described in Sections 4.4 and 5(a) above and the
representations and warranties of the Company contained herein.
(f) Purchaser is an "accredited investor" within the
meaning of Rule 501 of Regulation D promulgated under the Securities Act or a
Qualified Institutional Buyer within the meaning of Rule 144A promulgated under
the Securities Act.
(g) Purchaser has full right, power, authority and
capacity to enter into this Agreement and to consummate the transactions
contemplated hereby and has taken all necessary action to authorize the
execution, delivery and performance of this Agreement. Upon the execution and
delivery of this Agreement by Purchaser, this Agreement shall constitute a
valid and binding obligation of Purchaser, enforceable in accordance with its
terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws relating
5.
<PAGE> 10
to or affecting the enforcement of creditors' rights generally, (ii) as limited
by equitable principles generally, including any specific performance, and
(iii) as to those provisions of Section 9.3 relating to indemnity or
contribution.
(h) Purchaser, together with Purchaser's Affiliates and
Associates (as defined in Rule 12b-2 of the General Rules and Regulations
promulgated under the Exchange Act), is not, and will not by virtue of the
transactions contemplated by this Agreement be, a Beneficial Owner (as defined
in the Rights Agreement dated as of November 20, 1996 between the Company and
ChaseMellon Shareholder Services, L.L.C.) of 20% or more of the outstanding
shares of Common Stock of the Company.
(i) Purchaser (A) is an "institutional investor" within
the meaning of Section 802.64(a) of the rules of the Federal Trade Commission
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR
Rules") by virtue of being an insurance company or an investment company
registered with the SEC under the Investment Company Act of 1940, and (B) is
purchasing the Shares in the ordinary course of business and for its own
account solely for the purpose of investment within the meaning of Section
802.64(b) of the HSR Rules, and (C) as a result of the acquisition of the
Shares, will not control the Company (as defined in the HSR Rules) and will not
hold voting securities of the Company valued in excess of $25 million (as
defined in the HSR Rules).
5.2 Purchaser represents and warrants to and covenants with the
Company that Purchaser has not engaged and will not engage in any short sales
of the Company's Common Stock prior to the effectiveness of the Registration
Statement, except to the extent that any such short sale is fully covered by
shares of Common Stock of the Company other than the Shares.
5.3 Purchaser understands that nothing in the Memorandum, this
Agreement or any other materials presented to Purchaser in connection with the
purchase and sale of the Shares constitutes legal, tax or investment advice and
that no independent legal counsel has reviewed these documents and materials on
Purchaser's behalf. Purchaser has consulted such legal, tax and investment
advisors as it, in its sole discretion, has deemed necessary or appropriate in
connection with its purchase of the Shares.
SECTION 6. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. Notwithstanding any investigation made by any party to this
Agreement, all covenants, agreements, representations and warranties made by
the Company and each Purchaser herein and in the certificates for the
securities delivered pursuant hereto shall survive the execution of this
Agreement, the delivery to the Purchasers of the securities being purchased and
the payment therefor.
SECTION 7. CONDITIONS TO COMPANY'S OBLIGATIONS AT THE CLOSING.
The Company's obligation to complete the sale and issuance of the Securities
and deliver shares of Common Stock to each Purchaser, individually, as set
forth in the Schedule of Purchasers shall be subject to the following
conditions to the extent not waived by the Company:
6.
<PAGE> 11
7.1 RECEIPT OF PAYMENT. The Company shall have received payment,
by check or wire transfer of immediately available funds, in the full amount of
the purchase price for the number of Shares being purchased by such Purchaser
at the Closing as set forth in the Schedule of Purchasers.
7.2 REGISTRATION STATEMENT EFFECTIVE. The Registration Statement
filed by the Company pursuant to Section 9 shall have become effective, and no
stop order suspending the effectiveness thereof shall have been issued and no
proceedings therefor shall be pending or threatened by the Commission.
7.3 REPRESENTATIONS AND WARRANTIES CORRECT. The representations
and warranties made by such Purchaser in Section 5 hereof shall be true and
correct when made, and shall be true and correct on the Closing Date.
SECTION 8. CONDITIONS TO PURCHASERS' OBLIGATIONS AT THE CLOSING.
Each Purchaser's obligation to accept delivery of the Shares and to pay for the
Shares shall be subject to the following conditions to the extent not waived by
such Purchaser:
8.1 REGISTRATION STATEMENT EFFECTIVE. The Registration Statement
required pursuant to Section 9 shall have become effective, and no stop order
suspending the effectiveness thereof shall have been issued and no proceedings
therefor shall be pending or threatened by the Commission.
8.2 REPRESENTATIONS AND WARRANTIES CORRECT. The representations
and warranties made by the Company in Section 4 hereof shall be true and
correct when made.
8.3 LEGAL OPINION. Purchasers shall have received from Heller
Ehrman White & McAuliffe, counsel to the Company, an opinion letter addressed
to the Purchasers, dated as of the Closing Date, covering the matters set forth
in Exhibit C hereto, subject to customary assumptions and qualifications.
This Agreement may be terminated by any Purchaser with respect to such
Purchaser only if the Closing has not transpired by April 30, 1997.
SECTION 9. REGISTRATION OF THE SHARES; COMPLIANCE WITH THE
SECURITIES ACT.
9.1 REGISTRATION PROCEDURES AND EXPENSES. The Company is
obligated to do the following:
(a) As soon as practicable following the Effective Date
and in any event no later than ten (10) days following the Effective Date, the
Company shall prepare and file with the Commission one or more registration
statements in order to register with the Commission the resale by the
Purchasers, from time to time, of the Shares through Nasdaq or the facilities
of any national securities exchange on which the Company's Common Stock is then
traded, or
7.
<PAGE> 12
in privately-negotiated transactions (a "Registration Statement"). The Company
shall use its best efforts to cause such Registration Statement to be declared
effective as soon thereafter as reasonably possible.
(b) The Company shall prepare and file with the
Commission (i) such amendments and supplements to the Registration Statement
and the prospectus used in connection therewith, (ii) such SEC Reports and
(iii) such other filings required by the Commission, in each case as may be
necessary to keep the Registration Statement continuously effective and not
misleading until the earliest of (A) the second anniversary date of the
Closing, (B) such date as all of the Shares have been resold or (C) such time
as all of the Shares held by the Purchasers can be sold within a given
three-month period pursuant to Rule 144 under the Securities Act.
Notwithstanding the foregoing, following the effectiveness of the Registration
Statement, the Company may, at any time, suspend the effectiveness of the
Registration Statement for up to no longer than 30 days, as appropriate (a
"Suspension Period"), by giving notice to the Purchasers, if the Company shall
have determined that the Company may be required to disclose any material
corporate development. The Company will use its best efforts to minimize the
length of any Suspension Period. Notwithstanding the foregoing, no more than
two Suspension Periods may occur in any twelve (12) month period. Each
Purchaser agrees that, upon receipt of any notice from the Company of a
Suspension Period, such Purchaser will not sell any Shares pursuant to the
Registration Statement until (i) such Purchaser is advised in writing by the
Company that the use of the applicable prospectus may be resumed, (ii) such
Purchaser has received copies of any additional or supplemental or amended
prospectus, if applicable, and (iii) such Purchaser has received copies of any
additional or supplemental filings which are incorporated or deemed to be
incorporated by reference in such prospectus.
(c) In order to facilitate the public sale or other
disposition of all or any of the shares by each Purchaser, the Company shall
furnish to each Purchaser with respect to the Shares registered under the
Registration Statement such number of copies of prospectuses, prospectus
supplements and preliminary prospectuses as such Purchaser reasonably requests
in conformity with the requirements of the Securities Act.
(d) The Company shall file any documents required of the
Company for normal blue sky clearance in states specified in writing by each
Purchaser; provided, however, that the Company shall not be required to qualify
to do business or consent to service of process in any jurisdiction in which it
is not now so qualified or has not so consented.
(e) Other than fees and expenses, if any, of counsel or
other advisers to the Purchasers, which fees and expenses shall be borne by the
Purchasers except as referred to in Section 12.8 below, the Company shall bear
all expenses (exclusive of any brokerage fees, underwriting discounts and
commissions) in connection with the procedures in paragraphs (a) through (d) of
this Section 9.1.
(f) With a view to making available to the Purchasers the
benefits of Rule 144 promulgated under the Securities Act ("Rule 144") and any
other rule or regulation of the SEC that may at any time permit a Purchaser to
sell Shares to the public without registration or
8.
<PAGE> 13
pursuant to registration, the Company covenants and agrees to: (i) make and
keep public information available, as those terms are understood and defined in
Rule 144, until the earlier of (A) the second anniversary of the Closing Date
or (B) such date as all of the Shares shall have been resold; (ii) file with
the SEC in a timely manner all reports and other documents required of the
Company under the Exchange Act; and (iii) furnish to any Purchaser upon
request, as long as the Purchaser owns any Shares, (A) a written statement by
the Company that it has complied with the reporting requirements of the
Exchange Act, (B) a copy of the most recent annual or quarterly report of the
Company, and (C) such other information as may be reasonably requested in order
to avail any Purchaser of any rule or regulation of the SEC that permits the
selling of any such Shares without registration under the Securities Act.
9.2 TRANSFER OF SECURITIES AFTER REGISTRATION. Each Purchaser
agrees that such Purchaser will not effect any disposition of the Shares that
would constitute a sale within the meaning of the Securities Act, except:
(i) pursuant to the Registration Statement, in
which case such Purchaser shall submit the certificates evidencing the Shares
to the Company's transfer agent, accompanied by a separate "Purchaser's
Certificate" (A) in the form of Appendix III attached hereto, (B) executed by
such Purchaser or by an officer of, or other authorized person designated by,
such Purchaser, and (C) to the effect that (1) the Shares have been sold in
accordance with the Registration Statement and (2) the requirement of
delivering a current prospectus has been satisfied; or
(ii) in a transaction exempt from registration
under the Securities Act, in which case such Purchaser shall, prior to
effecting such disposition, submit to the Company an opinion of counsel in form
and substance reasonably satisfactory to the Company to the effect that the
proposed transaction is in compliance with the Securities Act.
9.3 INDEMNIFICATION. As used in this Section 9.3 the following
terms shall have the following respective meanings:
(a) "Selling Shareholder" shall mean a Purchaser of
Securities under this Agreement and any transferee of such a Purchaser who is
entitled to resell Shares pursuant to the Registration Statement;
(b) "Registration Statement" shall include any final
prospectus, exhibit, supplement or amendment included in or relating to the
Registration Statement referred to in Section 9.1; and
(c) "Untrue Statement" shall include any untrue statement
or alleged untrue statement, or any omission or alleged omission to state in
the Registration Statement a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
9.
<PAGE> 14
The Company agrees to indemnify and hold harmless each Selling
Shareholder from and against any losses, claims, damages or liabilities to
which such Selling Shareholder may become subject (under the Securities Act or
otherwise) insofar as such losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) arise out of, or are based upon, any Untrue
Statement on or after the effective date of the Registration Statement, or on
or after the date of any prospectus or prospectus supplement or the date of any
sale by Purchaser thereunder, or arise out of any failure by the Company to
fulfill any undertaking included in the Registration Statement and the Company
will reimburse such Selling Shareholder for any reasonable legal or other
expenses reasonably incurred in investigating, defending or preparing to defend
any such action, proceeding or claim; provided, however, that the Company shall
not be liable to such Selling Shareholder in any such case to the extent that
such loss, claim, damage or liability arises out of, or is based upon, an
Untrue Statement made in such Registration Statement in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
such Selling Shareholder specifically for use in preparation of the
Registration Statement, or the failure of such Selling Shareholder to comply
with the covenants and agreements contained in Section 9.1 or 9.2 hereof
respecting sale of the Shares or any statement or omission in any Prospectus
that is corrected in any subsequent prospectus that was delivered to the
Selling Shareholder prior to the pertinent sale or sales by the Selling
Shareholder.
Each Purchaser, severally and not jointly, agrees to indemnify and
hold harmless the Company (and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act, each officer of the
Company who signs the Registration Statement and each director of the Company)
from and against any losses, claims, damages or liabilities to which the
Company (or any such officer, director or controlling person) may become
subject (under the Securities Act or otherwise), insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of, or are based upon, any failure to comply with the covenants and
agreements contained in Section 9.1 or 9.2 hereof respecting sale of the
Shares, or any Untrue Statement contained in the Registration Statement on or
after the effective date thereof, or in any prospectus supplement as of its
issue date or date of any sale by Purchaser thereunder, if such Untrue
Statement was made in reliance upon and in conformity with written information
furnished by or on behalf of such Purchaser specifically for use in preparation
of the Registration Statement, and such Purchaser will reimburse the Company
(or such officer, director or controlling person), as the case may be, for any
legal or other expenses reasonably incurred in investigating, defending or
preparing to defend any such action, proceeding or claim; provided that in no
event shall any indemnity by a Purchaser under this Section 9.3 exceed the
gross proceeds received by such Purchaser from the sale of Shares covered by
such Registration Statement.
Promptly after receipt by any indemnified person of a notice of a
claim or the beginning of any action in respect of which indemnity is to be
sought against an indemnifying person pursuant to this Section 9.3, such
indemnified person shall notify the indemnifying person in writing of such
claim or of the commencement of such action, and, subject to the provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and such indemnifying person shall have been notified
thereof, such indemnifying person shall be entitled to participate therein,
and, to the extent it shall wish, to assume the defense thereof, with
10.
<PAGE> 15
counsel reasonably satisfactory to such indemnified person. After notice from
the indemnifying person to such indemnified person of its election to assume
the defense thereof, such indemnifying person shall not be liable to such
indemnified person for any legal expenses subsequently incurred by such
indemnified person in connection with the defense thereof; provided, however,
that if there exists or shall exist a conflict of interest that would make it
inappropriate, in the opinion of counsel to the indemnified person, for the
same counsel to represent both the indemnified person and such indemnifying
person or any affiliate or associate thereof, the indemnified person shall be
entitled to retain its own counsel at the expense of such indemnifying person;
provided, however, that no indemnifying person shall be responsible for the
fees and expenses of more than one separate counsel for all indemnified
parties.
9.4 TERMINATION OF CONDITIONS AND OBLIGATIONS. The conditions
precedent imposed by Section 4, Section 5 or this Section 9 upon the
transferability of the Shares shall cease and terminate as to any particular
number of the Shares when such Shares shall have been sold or otherwise
disposed of in accordance with the intended method of disposition set forth in
the Registration Statement covering such Shares or at such time as an opinion
of counsel satisfactory to the Company shall have been rendered to the effect
that such conditions are not necessary in order to comply with the Securities
Act.
9.5 INFORMATION AVAILABLE. So long as the Registration Statement
is effective covering the resale of Shares owned by the Purchasers, the Company
will furnish to the Purchasers:
(a) as soon as practicable after available (but in the
case of the Company's Annual Report to Shareholders, within 150 days after the
end of each fiscal year of the Company), one copy of (i) its Annual Report to
Shareholders (which Annual Report shall contain financial statements audited in
accordance with generally accepted auditing standards certified by a national
firm of certified public accountants); (ii) its Annual Report on Form 10-K;
(iii) its quarterly reports on Form 10-Q (the foregoing, in each case,
excluding exhibits); (iv) its Proxy Statement; and (v) its current reports on
Form 8-K, if any;
(b) upon the request of any Purchaser, all exhibits
excluded by the parenthetical to subparagraph (a)(iii) of this Section 9.5, in
the form generally available to the public; and
(c) upon the reasonable request of any Purchaser, an
adequate number of copies of the prospectuses and supplements to supply to any
other party requiring such prospectuses.
9.6 CHANGES IN PURCHASER INFORMATION. Each Purchaser agrees to
promptly notify the Company of any changes in the information set forth in the
Registration Statement regarding Purchaser or such Purchaser's plan of
distribution set forth in such Registration Statement.
SECTION 10. BROKER'S FEE. The Company and each Purchaser
(severally and not jointly) hereby represent that, except for amounts to be
paid to the Placement Agent by the
11.
<PAGE> 16
Company as described in Section 12.8 hereof, there are no brokers or finders
entitled to compensation in connection with the sale of the Shares, and shall
indemnify each other for any such fees for which they are responsible.
SECTION 11. NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing, shall be sent by confirmed
facsimile or mailed by first-class registered or certified airmail, or
nationally recognized overnight express courier, postage prepaid, and shall be
deemed given when so sent in the case of facsimile transmission, or when so
received in the case of mail or courier, and addressed as follows:
(a) if to the Company, to:
Penederm Incorporated
320 Lakeside Drive, Suite A
Foster City, California 94404
Attention: President
with a copy so mailed to:
Heller, Ehrman, White & McAuliffe
525 University Avenue
Palo Alto, California 94301
Attention: Richard Friedman
or to such other person at such other place as the Company
shall designate to the Purchasers in writing; and
(b) if to the Purchasers, at the address as set forth at
the end of this Agreement, or at such other address or addresses as may have
been furnished to the Company in writing.
SECTION 12. MISCELLANEOUS.
12.1 WAIVERS AND AMENDMENTS. Neither this Agreement nor any
provision hereof may be changed, waived, discharged, terminated, modified or
amended except upon the written consent of the Company and holders of at least
a majority of the Shares.
12.2 HEADINGS. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
12.3 SEVERABILITY. In case any provision contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
12.
<PAGE> 17
12.4 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California as applied to
contracts entered into and performed entirely in California by California
residents, without regard to conflicts of law principles.
12.5 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which,
when taken together, shall constitute but one instrument, and shall become
effective when one or more counterparts have been signed by each party hereto
and delivered to the other parties.
12.6 SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto.
12.7 ENTIRE AGREEMENT. This Agreement and other documents
delivered pursuant hereto, including the exhibits, constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof.
12.8 PAYMENT OF FEES AND EXPENSES. Each of the Company and the
Purchasers shall bear its own expenses and legal fees incurred on its behalf
with respect to this Agreement and the transactions contemplated hereby (the
"Offering"); provided, that the Company shall reimburse the Placement Agent for
certain fees and expenses incurred by the Placement Agent in connection with
the Offering as described in the Memorandum. Purchasers acknowledge that the
Placement Agent will receive a commission in the amount described in the
Memorandum. 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 attorney's fees, costs and necessary disbursements in addition to
any other relief to which such party may be entitled.
13.
<PAGE> 18
IN WITNESS WHEREO, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
PENEDERM INCORPORATED
By: /s/ Lloyd H. Malchow
----------------------------------
Name: Lloyd H. Malchow
--------------------------------
Title: President & CEO
-------------------------------
PURCHASER
Purchaser Name: Franklin Resources
----------------------
By: /s/ Kurt von Emster
----------------------------------
Name: Kurt von Emster
--------------------------------
Title: Portfolio Manager Franklin
-------------------------------
Address: 777 Mariners Boulevard
-----------------------------
San Mateo, CA 94404
-----------------------------
Facsimile: 415 312-5660
---------------------------
COMMON STOCK PURCHASE AGREEMENT
<PAGE> 19
IN WITNESS WHEREO, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
PENEDERM INCORPORATED
By: /s/ Lloyd H. Malchow
----------------------------------
Name: Lloyd H. Malchow
--------------------------------
Title: President & CEO
-------------------------------
PURCHASER
Purchaser Name:Deerfield Management
By: /s/ Arnold H. Sneider
----------------------------------
Name: Arnold H. Sneider
--------------------------------
Title: General Partner
-------------------------------
Address: 450 Lexington Avenue
-----------------------------
Suite 1930
-----------------------------
New York, NY 10012
-----------------------------
Facsimile: 212-599-3075
---------------------------
COMMON STOCK PURCHASE AGREEMENT
<PAGE> 20
IN WITNESS WHEREO, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
PENEDERM INCORPORATED
By: /s/ Lloyd H. Malchow
----------------------------------
Name: Lloyd H. Malchow
--------------------------------
Title: President & CEO
-------------------------------
PURCHASER
Purchaser Name: RCM Capital Management,
-------------------------
L.L.C. on behalf of such investment
----------------------------------------
companies as set forth in Appendix I
----------------------------------------
By: /s/ John D. Leland
-------------------------------------
Name: John D. Leland
-----------------------------------
Title: Principal
----------------------------------
Address: 4 Embarcadero Center, Ste. 2900
--------------------------------
San Francisco, CA 94111
--------------------------------
Facsimile:
------------------------------
COMMON STOCK PURCHASE AGREEMENT
<PAGE> 21
IN WITNESS WHEREO, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
PENEDERM INCORPORATED
By: /s/ Lloyd H. Malchow
----------------------------------
Name: Lloyd H. Malchow
--------------------------------
Title: President & CEO
-------------------------------
PURCHASER
Purchaser Name: ProMed Management, L.L.C.
--------------------------
By: /s/ Barry Kurokawa
--------------------------------------
Name: Barry Kurokawa
------------------------------------
Title: Managing Member
-----------------------------------
Address: 200 Park Avenue, Suite 3900
---------------------------------
New York, NY 10166
---------------------------------
---------------------------------
Facsimile: (212) 692-3627
---------------------------------
COMMON STOCK PURCHASE AGREEMENT
<PAGE> 22
EXHIBIT A
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
PURCHASER NAME AND ADDRESS NUMBER OF SHARES PURCHASED
- -------------------------------------------------------------------------------------------------------
<S> <C>
Deerfield Partners, L.P. 91,000
c/o Deerfield Management
Attn: Arnold H. Sneider
450 Lexington Avenue, Suite 1930
New York, NY 10017
Telephone: (212) 551-1600
- -------------------------------------------------------------------------------------------------------
Deerfield International Limited 9,000
c/o Deerfield Management
Attn: Arnold H. Sneider
450 Lexington Avenue, Suite 1930
New York, NY 10017
Telephone: (212) 551-1600
- -------------------------------------------------------------------------------------------------------
ProMed Partners, L.P. 9,400
c/o ProMed Management
Attn: Barry Kurokawa
200 Park Avenue, Suite 3900
New York, NY 10166
Telephone: (212) 692-3626
- -------------------------------------------------------------------------------------------------------
MedCap I Corp. 17,100
c/o ProMed Management
Attn: Barry Kurokawa
200 Park Avenue, Suite 3900
New York, NY 10166
Telephone: (212) 692-3626
- -------------------------------------------------------------------------------------------------------
HPB Associates, LP 13,500
c/o ProMed Management
Attn: Barry Kurokawa
200 Park Avenue, Suite 3900
New York, NY 10166
Telephone: (212) 692-3626
- -------------------------------------------------------------------------------------------------------
RCM Global Healthcare Fund, a series of RCM 2,000
Equity Funds, Inc.
Attn: Jeff Wiggins
Four Embarcadero Center, Suite 3000
San Francisco, CA 94111
Telephone: (415) 954-5474
- -------------------------------------------------------------------------------------------------------
RCM Small Cap Fund, a series of RCM Capital 26,700
Funds, Inc.
Attn: Jeff Wiggins
Four Embarcadero Center, Suite 3000
San Francisco, CA 94111
Telephone: (415) 954-5474
- -------------------------------------------------------------------------------------------------------
RCM Growth Equity Fund, a series of RCM Capital 53,300
Funds, Inc.
Attn: Jeff Wiggins
Four Embarcadero Center, Suite 3000
San Francisco, CA 94111
Telephone: (415) 954-5474
- -------------------------------------------------------------------------------------------------------
Franklin Global Health Care Fund 141,500
c/o Franklin Resources
Attn: Kurt von Emster
777 Mariners Boulevard
San Mateo, CA 94404
Telephone: (415) 312-2837
- -------------------------------------------------------------------------------------------------------
Franklin Small Cap Growth Fund 283,400
c/o Franklin Resources
Attn: Kurt von Emster
777 Mariners Boulevard
San Mateo, CA 94404
Telephone: (415) 312-2837
- -------------------------------------------------------------------------------------------------------
Franklin California Growth Fund 94,300
c/o Franklin Resources
Attn: Kurt von Emster
777 Mariners Boulevard
San Mateo, CA 94404
Telephone: (415) 312-2837
- -------------------------------------------------------------------------------------------------------
Franklin Asset Allocation Fund 10,800
c/o Franklin Resources
Attn: Kurt von Emster
777 Mariners Boulevard
San Mateo, CA 94404
Telephone: (415) 312-2837
- -------------------------------------------------------------------------------------------------------
TOTAL SHARES SOLD: 752,000
- -------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 23
SUMMARY INSTRUCTION SHEET FOR PURCHASER
(TO BE READ IN CONJUNCTION WITH THE ENTIRE
PURCHASE AGREEMENT WHICH FOLLOWS)
A. Complete the following items on the Purchase Agreement, copies of
which are attached hereto for your convenience:
1. Signature Page.
2. Appendix I - Stock Certificate Questionnaire:
Provide the information requested by the Stock Certificate
Questionnaire.
3. Appendix II - Registration Statement Questionnaire:
Provide the information requested by the Registration
Statement Questionnaire.
4. Return the properly completed and signed Purchase Agreement
including the properly completed and signed Appendix I and
Appendix II to:
Volpe, Welty & Company
One Maritime Plaza, 11th Floor
San Francisco, CA 94111
Facsimile: (415) 274-4468
Attention: Ted Ridgeway
PLEASE RETURN THE COMPLETED AND SIGNED PURCHASE AGREEMENT BY
FACSIMILE WITH ALL OF THE ORIGINAL DOCUMENTS FOLLOWING BY
OVERNIGHT COURIER OR MAIL.
B. Instructions regarding the transfer of funds for the purchase of
Securities will be sent separately.
C. Upon the resale of the Shares by the Purchasers after the Registration
Statement covering the Shares is effective as described in the
Purchase Agreement, each Purchaser:
(i) must deliver a current prospectus to the buyer; and
(ii) must send a letter in the form of Appendix III to the
Company so that the Shares may be properly transferred.
<PAGE> 24
APPENDIX I
PENEDERM INCORPORATED
STOCK CERTIFICATE QUESTIONNAIRE
Pursuant to Section 3 of the Agreement, please provide us with the
following information:
1. The exact name that your Shares are to be registered
in (this is the name that will appear on your stock
certificate(s)). You may use a nominee name if
appropriate:
_________________________________________
2. The relationship between the Purchaser of the
Securities and the Registered
Holder listed in response to item 1 above:
_________________________________________
3. The mailing address and facsimile number of the
Registered Holder listed in response to item 1 above:
________________________________________
________________________________________
________________________________________
________________________________________
Facsimile:______________________________
4. The Social Security Number or Tax Identification
Number of the Registered Holder listed in the response
to item 1 above:
________________________________________
Signature:______________________________
Print Name:_____________________________
Title:__________________________________
<PAGE> 25
APPENDIX II
PENEDERM INCORPORATED
REGISTRATION STATEMENT QUESTIONNAIRE
In connection with the preparation of the Registration Statement,
please provide us with the following information:
1. Please state your or your organization's name exactly as it
should appear in the Registration Statement:
2. Please provide the following information, as of February 26,
1997:
Number of shares of Common Stock that
you already beneficially own or
Number of Shares that you are that you are purchasing and do
purchasing and seek to include in NOT seek to include in the
the Registration Statement Registration Statement
3. Have you or your organization had any position, office or
other material relationship within the past three years with the Company or its
affiliates other than as disclosed in the Proxy Statement in connection with
the Company's 1996 Annual Meeting of Shareholders?
Yes ____ No ____
If yes, please indicate the nature of any such
relationships:__________________________________________________________________
Signature:______________________________
Print Name:_____________________________
Title:__________________________________
<PAGE> 26
APPENDIX III
PURCHASER'S CERTIFICATE OF RESALE OF THE SHARES
The undersigned, an officer of, or other person duly authorized by
__________________________________________________ hereby certifies that he/she
[fill in official name of individual or institution]
[said institution] is the Purchaser of the Shares evidenced by the attached
stock certificate(s) and as such, sold such Shares on _________________________
[date]
in accordance with registration statement number
______________________________________________________________________ and the
[fill in the number of or otherwise identify registration statement]
requirement of delivering a current prospectus and current annual, quarterly
and reports (Forms 10-K, 10-Q, and 8-K) by the Company has been complied with
in connection with such sale.
Print or Type:
Name of Purchaser (Individual or Institution): ________________________________
Name of Individual representing Purchaser
(if an Institution):___________________________________________________________
Title of Individual representing Purchaser
(if an Institution):___________________________________________________________
Signature by:
Individual Purchaser or Individual
representing Purchaser:________________________________________________________
