CUSIP No. 0002078541 Page 1 of 43 Pages
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
(Amendment No.1)
Connetics Corporation
(Name of Issuer)
Common Stock, $.001 par value
(Title of Class of Securities)
0002078541
(CUSIP Number)
Kathleen K. Schoemaker John C. MacMurray, Esq.
Domain Associates Reboul, MacMurray, Hewitt,
One Palmer Square Maynard & Kristol
Princeton, New Jersey 08542 45 Rockefeller Plaza
Tel. (609) 683-5656 New York, New York 10111
Tel. (212) 841-5700
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
November 19, 1998
(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following
box [ ].
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CUSIP No. 0002078541 Page 2 of 43 Pages
1) Name of Reporting Person Domain Partners III,
S.S. or I.R.S. Identification L.P.
No. of Above Person
2) Check the Appropriate Box (a) [x]
if a Member of a Group (b) [ ]
3) SEC Use Only
4) Source of Funds WC
5) Check if Disclosure of
Legal Proceedings is Not Applicable
Required Pursuant to
Items 2(d) or 2(e)
6) Citizenship or Place
of Organization Delaware
Number of 7) Sole Voting 1,461,839 shares of
Shares Beneficially Power Common Stock
Owned by Each (including 63,898
Reporting Person: issuable upon
exercise of
warrants)
8) Shared Voting
Power -0-
9) Sole Disposi- 1,461,839 shares of
tive Power Common Stock
(including 63,898
issuable upon
exercise of
warrants)
10) Shared Dis-
positive Power -0-
11) Aggregate Amount Beneficially 1,461,839 shares of
Owned by Each Reporting Person Common Stock
(including 63,898
issuable upon
exercise of
warrants)
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CUSIP No. 0002078541 Page 3 of 43 Pages
12) Check if the Aggregate
Amount in Row (11)
Excludes Certain Shares
13) Percent of Class
Represented by 8.4%
Amount in Row (11)
14) Type of Reporting
Person PN
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CUSIP No. 0002078541 Page 4 of 43 Pages
1) Name of Reporting Person DP III Associates,
S.S. or I.R.S. Identification L.P.
No. of Above Person
2) Check the Appropriate Box (a) [x]
if a Member of a Group (b) [ ]
3) SEC Use Only
4) Source of Funds WC
5) Check if Disclosure of
Legal Proceedings is Not Applicable
Required Pursuant to
Items 2(d) or 2(e)
6) Citizenship or Place
of Organization Delaware
Number of 7) Sole Voting 50,805 shares of
Shares Beneficially Power Common Stock
Owned by Each (including 2,209
Reporting Person: issuable upon
exercise of
warrants)
8) Shared Voting
Power -0-
9) Sole Disposi- 50,805 shares of
tive Power Common Stock
(including 2,209
issuable upon
exercise of
warrants)
10) Shared Dis-
positive Power -0-
11) Aggregate Amount Beneficially 50,805 shares of
Owned by Each Reporting Person Common Stock
(including 2,209
issuable upon
exercise of
warrants)
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CUSIP No. 0002078541 Page 5 of 43 Pages
12) Check if the Aggregate
Amount in Row (11)
Excludes Certain Shares
13) Percent of Class
Represented by 0.3%
Amount in Row (11)
14) Type of Reporting
Person PN
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CUSIP No. 0002078541 Page 6 of 43 Pages
1) Name of Reporting Person Domain Associates
S.S. or I.R.S. Identification
No. of Above Person
2) Check the Appropriate Box (a) [x]
if a Member of a Group (b) [ ]
3) SEC Use Only
4) Source of Funds Not Applicable
5) Check if Disclosure of
Legal Proceedings is Not Applicable
Required Pursuant to
Items 2(d) or 2(e)
6) Citizenship or Place
of Organization New Jersey
Number of 7) Sole Voting 4,215 shares of
Shares Beneficially Power Common Stock
Owned by Each
Reporting Person:
8) Shared Voting
Power -0-
9) Sole Disposi- 4,215 shares of
tive Power Common Stock
10) Shared Dis-
positive Power -0-
11) Aggregate Amount Beneficially 4,215 shares of
Owned by Each Reporting Person Common Stock
12) Check if the Aggregate
Amount in Row (11)
Excludes Certain Shares
13) Percent of Class
Represented by less than 0.1%
Amount in Row (11)
14) Type of Reporting
Person PN
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CUSIP No. 0002078541 Page 7 of 43 Pages
1) Name of Reporting Person Domain Partners
S.S. or I.R.S. Identification IV, L.P.
No. of Above Person
2) Check the Appropriate Box (a) [x]
if a Member of a Group (b) [ ]
3) SEC Use Only
4) Source of Funds WC
5) Check if Disclosure of
Legal Proceedings is Not Applicable
Required Pursuant to
Items 2(d) or 2(e)
6) Citizenship or Place
of Organization Delaware
Number of 7) Sole Voting 1,220,747 shares of
Shares Beneficially Power Common Stock
Owned by Each
Reporting Person:
8) Shared Voting
Power -0-
9) Sole Disposi- 1,220,747 shares of
tive Power Common Stock
10) Shared Dis-
positive Power -0-
11) Aggregate Amount Beneficially 1,220,747 shares of
Owned by Each Reporting Person Common Stock
12) Check if the Aggregate
Amount in Row (11)
Excludes Certain Shares
13) Percent of Class
Represented by 7.1%
Amount in Row (11)
14) Type of Reporting
Person PN
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CUSIP No. 0002078541 Page 8 of 43 Pages
1) Name of Reporting Person DP IV Associates,
S.S. or I.R.S. Identification L.P.
No. of Above Person
2) Check the Appropriate Box (a) [x]
if a Member of a Group (b) [ ]
3) SEC Use Only
4) Source of Funds WC
5) Check if Disclosure of
Legal Proceedings is Not Applicable
Required Pursuant to
Items 2(d) or 2(e)
6) Citizenship or Place
of Organization Delaware
Number of 7) Sole Voting 29,253 shares of
Shares Beneficially Power Common Stock
Owned by Each
Reporting Person:
8) Shared Voting
Power -0-
9) Sole Disposi- 29,253 shares of
tive Power Common Stock
10) Shared Dis-
positive Power -0-
11) Aggregate Amount Beneficially 29,253 shares of
Owned by Each Reporting Person Common Stock
12) Check if the Aggregate
Amount in Row (11)
Excludes Certain Shares
13) Percent of Class
Represented by 0.2%
Amount in Row (11)
14) Type of Reporting
Person PN
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CUSIP No. 0002078541 Page 9 of 43 Pages
Amendment No. 1 to Schedule 13D
Reference is hereby made to the statement on Schedule 13D originally
filed with the Securities and Exchange Commission (the "Commission") on January
20, 1998 (the "Schedule 13D"). Terms defined in the Schedule 13D are used herein
as so defined.
Item 2. Identity and Background.
Item 2 of the Schedule 13D is hereby amended and restated to read in
its entirety as follows:
(a) Pursuant to Rules 13d-1(k(1)-(2) of Regulation 13D-G of the
General Rules and Regulations under the Securities Act of 1934, as amended (the
"Act"), the undersigned hereby file this Schedule 13D on behalf of Domain
Partners III, L.P., a Delaware limited partnership ("DP III"), DP III
Associates, L.P., a Delaware limited partnership ("DP III A"), Domain Partners
IV, L.P., a Delaware limited partnership ("DP IV"), DP IV Associates, L.P., a
Delaware limited partnership ("DP IV A")and Domain Associates, a New Jersey
general partnership ("DA"). DP III, DP III A, DP IV, DP IV A and DA are
sometimes hereinafter referred to as the "Reporting Persons". The Reporting
Persons are making this single joint filing because they may be deemed to
constitute a "group" within the meaning of Section 13(d)(3) of the Act. The
agreement among the Reporting Persons to file as a group (the "Group Agreement")
is attached hereto as Exhibit A.
(b)-(c) DA is a New Jersey general partnership, whose principal
business is that of an investment manager. DP III, DP III A, DP IV and DP IV A
are Delaware limited partnerships, each of whose principal business is that of a
private investment partnership. The sole general partner of DP III and DP III A
is One Palmer Square Associates III, L.P., a Delaware limited partnership ("OPSA
III"), whose principal business is that of acting as the general partner of DP
III and DP III A. The sole general partner of DP IV and DP IV A is One Palmer
Square Associates IV, L.L.C., a Delaware limited liability company ("OPSA IV"),
whose principal business is that of acting as the general partner of DP IV and
DP IV A. The following individuals, who are citizens of the United States, are
the general partners of DA and of OPSA III and the managing members of OPSA IV:
(i) James C. Blair -- General Partner, DA and OPSA III; Managing
Member, OPSA IV
(ii) Brian H. Dovey -- General Partner, DA and OPSA III; Managing
Member, OPSA IV
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CUSIP No. 0002078541 Page 10 of 43 Pages
(iii) Jesse I. Treu -- General Partner, DA and OPSA III; Managing
Member, OPSA IV
(iv) Richard S. Schneider -- General Partner, OPSA III
(v) Kathleen K. Schoemaker -- General Partner, DA and OPSA III;
Managing Member, OPSA IV
(vi) Arthur Klausner -- General Partner, DA; Managing Member, OPSA IV
The principal business and principal office address of each entity and
individual named in this paragraph is One Palmer Square, Princeton, New Jersey
08542.
(d) None of the entities or persons identified in this Item 2 has,
during the last five years, been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors).
(e) None of the entities or persons identified in this Item 2 has,
during the last five years, been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
Item 3 of the Schedule 13D is hereby amended by adding the following
thereto:
This statement relates to the acquisition by DP III, DP III A, DP IV
and DP IV A of an aggregate 1,500,000 shares of Common Stock, at a purchase
price of $4.00 per share, pursuant to a Common Stock Purchase Agreement entered
into as of November 19, 1998, among the Issuer and the purchasers named therein,
including DP III, DP III A, DP IV and DP IV A (the "Purchase Agreement"). The
Purchase Agreement is attached hereto as Exhibit B, and any description thereof
is qualified in its entirety by reference thereto.
Item 5. Interest in Securities of the Issuer.
Item 5 of the Schedule 13D is hereby amended and restated to read in
its entirety as follows:
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CUSIP No. 0002078541 Page 11 of 43 Pages
The following information is based on a total of 17,276,793 shares of
Common Stock outstanding as of October 30, 1998, as reported in the Issuer's
report on Form 10-Q for the quarterly period ended September 30, 1998 filed with
the Commission on November 13, 1998. Calculations with respect to DP III give
effect to the exercise of presently-exercisable Warrants to purchase 63,898
shares of Common Stock and calculations with respect to DP III A give effect to
the exercise of presently-exercisable Warrants to purchase 2,209 shares of
Common Stock.
(a)
DP III
DP III owns an aggregate 1,461,839 shares of Common Stock, or
approximately 8.4% of the Common Stock outstanding. OPSA III, as the
general partner of DP III, may be deemed to beneficially own the shares of
Common Stock owned by DP III.
DP III A
DP III A owns an aggregate 50,805 shares of Common Stock, or
approximately 0.3% of the Common Stock outstanding. OPSA III, as the
general partner of DP III A, may be deemed to beneficially own the shares
of Common Stock owned by DP III A.
DP IV
DP IV owns 1,220,747 shares of Common Stock, or approximately 7.1% of
the Common Stock outstanding. OPSA IV, as the general partner of DP IV, may
be deemed to beneficially own the shares of Common Stock owned by DP IV.
DP IV A
DP IV A owns 29,253 shares of Common Stock, or approximately 0.2% of
the Common Stock outstanding. OPSA IV, as the general partner of DP IV A,
may be deemed to beneficially own the shares of Common Stock owned by DP IV
A.
DA
DA owns 4,215 shares of Common Stock, or less than 0.1% of the Common
Stock outstanding.
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CUSIP No. 0002078541 Page 12 of 43 Pages
(b) The general partners of OPSA III and DA and the managing members
of OPSA IV may be deemed to share the power to vote or direct the voting of and
to dispose or to direct the disposition of the shares of Common Stock owned by
DP III, DP III A, DP IV, DP IV A and DA. Each of the general partners of OPSA
III and DA and managing members of OPSA IV disclaims beneficial ownership of all
shares of Common Stock other than the shares of Common Stock he or she owns by
virtue of his or her indirect pro rata interest, as a general partner of OPSA
III and/or DA, and/or as a managing member of OPSA IV, in the Common Stock owned
by DP III, DP III A, DP IV, DP IV A and/or DA.
(c) Not applicable.
(d) Except as described in this statement, no person has the power to
direct the receipt of dividends on, or the proceeds from sales of, the shares of
Common Stock owned by DP III, DP III A, DP IV, DP IV A or DA.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings
or Relationships with Respect to
Securities of the Issuer.
Item 6 is hereby amended by adding the following thereto:
Pursuant to the Purchase Agreement, DP III, DP III A, DP IV and DP IV
A entered into a Registration Rights Agreement made as of November 19, 1998 with
the Issuer (the "Registration Rights Agreement") providing DP III, DP III A, DP
IV and DP IV A certain rights regarding the registration of the shares of Common
Stock they acquired pursuant to the Purchase Agreement. The Registration Rights
Agreement is attached hereto as Exhibit B to the Purchase Agreement, and any
description thereof is qualified in its entirety by reference thereto. Pursuant
to the Registration Rights Agreement, the Issuer agreed to prepare and file with
the Commission, within 20 days after the closing of the sale of Common Stock
under the Purchase Agreement, a Registration Statement on Form S-3 relating to
the resale of such shares.
Item 7. Material to be Filed as Exhibits.
Exhibit A - Group Agreement (Appears at Page 14)
Exhibit B - Purchase Agreement (Appears at Page 15)
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CUSIP No. 0002078541 Page 13 of 43 Pages
Signature
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: December 4, 1998
DOMAIN PARTNERS III, L.P.
By: One Palmer Square Associates
III L.P., General Partner
By /s/ Kathleen K. Schoemaker
General Partner
DP III ASSOCIATES, L.P.
By: One Palmer Square Associates
III L.P., General Partner
By /s/ Kathleen K. Schoemaker
General Partner
DOMAIN PARTNERS IV, L.P.
By: One Palmer Square Associates
IV L.L.C., General Partner
By /s/ Kathleen K. Schoemaker
Managing Member
DP IV ASSOCIATES, L.P.
By: One Palmer Square Associates
IV L.L.C., General Partner
By /s/ Kathleen K. Schoemaker
Managing Member
DOMAIN ASSOCIATES
By /s/ Kathleen K. Schoemaker
General Partner
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CUSIP No. 0002078541 Page 14 of 43 Pages
EXHIBIT A
AGREEMENT OF
DOMAIN PARTNERS III, L.P., DP III ASSOCIATES, L.P.,
DOMAIN PARTNERS IV, L.P., DP IV ASSOCIATES, L.P. AND
DOMAIN ASSOCIATES
PURSUANT TO RULE 13d-1(k)
The undersigned hereby agree that the Statement on Schedule 13D to
which this Agreement is annexed as Exhibit A is filed on behalf of each of them
in accordance with the provisions of 13d-1(k) under the Securities Exchange Act
of 1934, as amended.
Dated: December 4, 1998
DOMAIN PARTNERS III, L.P.
By: One Palmer Square Associates
III L.P., General Partner
By /s/ Kathleen K. Schoemaker
General Partner
DP III ASSOCIATES, L.P.
By: One Palmer Square Associates
III L.P., General Partner
By /s/ Kathleen K. Schoemaker
General Partner
DOMAIN PARTNERS IV, L.P.
By: One Palmer Square Associates
IV L.L.C., General Partner
By /s/ Kathleen K. Schoemaker
Managing Member
DP IV ASSOCIATES, L.P.
By: One Palmer Square Associates
IV L.L.C., General Partner
By /s/ Kathleen K. Schoemaker
Managing Member
DOMAIN ASSOCIATES
By /s/ Kathleen K. Schoemaker
General Partner
<PAGE>
CUSIP No. 0002078541 Page 15 of 43 Pages
EXHIBIT B
CONNETICS CORPORATION
COMMON STOCK PURCHASE AGREEMENT
November 19, 1998
This Common Stock Purchase Agreement (the "Agreement") is entered into
as of this 19th day of November, 1998, among Connetics Corporation, a Delaware
corporation (the "Company") and each of the persons listed on Exhibit A to this
Agreement (each a "Purchaser" and together the "Purchasers").
SECTION 1
SALE OF COMMON STOCK
1.1 Sale of Common Stock. Subject to the terms and conditions hereof,
on the Closing Date, as defined below, the Company will issue and sell to the
Purchasers, and the Purchasers will purchase from the Company, an aggregate of,
1,500,000 shares of Common Stock, par value $0.001 per share, of the Company
(the "Common Stock"), at a price per share of $4.00 for an aggregate purchase
price of $6,000,000. The number of shares of Common Stock to be purchased and
the purchase price to be paid by each Purchaser are outlined on Exhibit A, which
is incorporated herein by this reference.
1.2 Closing Date. The closing (the "Closing") of the purchase and sale
of the Common Stock shall be held at the offices of the Company, 3400 West
Bayshore Road, Palo Alto, California at 10:00 a.m. on November 20, 1998 or at
such other time and place upon which the Company and the Purchasers shall
mutually agree (the date of the Closing is hereinafter referred to as the
"Closing Date").
1.3 Delivery. At the Closing, the Company will deliver to each
Purchaser a certificate or certificates representing the shares of Common Stock
purchased by such Purchaser, against payment of the purchase price therefor, by
wire transfer or certified or cashier's check drawn on a United States ("U.S.")
bank.
1.4 Legend. The certificate or certificates for the Common Stock shall
be subject to a legend restricting transfer under the Securities Act of 1933, as
amended (the "Securities Act") and referring to restrictions on transfer herein,
such legend to be substantially as follows:
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CUSIP No. 0002078541 Page 16 of 43 Pages
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (A) AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, OR (B) AN OPINION OF COUNSEL
FOR THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR (C) FULL COMPLIANCE WITH THE PROVISIONS OF
RULE 144 UNDER THE ACT."
1.5 Removal of Legends. Any legend endorsed on a certificate pursuant
to Section 1.4 hereof shall be removed (a) if the shares of the Common Stock
represented by such certificate shall have been effectively registered under the
Securities Act or otherwise lawfully sold in a public transaction, (b) if such
shares may be transferred in compliance with Rule 144(k) promulgated under the
Securities Act, or (c) if the holder of such shares shall have provided the
Company with an opinion of counsel, in form and substance acceptable to the
Company, stating that a public sale, transfer or assignment of such shares may
be made without registration.
SECTION 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchasers that:
2.1 Organization. The Company is a corporation duly organized and
validly existing under the laws of the State of Delaware and is in good standing
under such laws. The Company has requisite corporate power and authority to own,
lease and operate its properties and assets, and to carry on its business as
presently conducted and as proposed to be conducted. The Company is qualified to
do business as a foreign corporation in each jurisdiction in which the ownership
of its property or the nature of its business requires such qualification,
except where failure to so qualify would not have a materially adverse effect on
the Company.
2.2 Authorization. The Company has all corporate right, power and
authority to enter into this Agreement and the Registration Rights Agreement
substantially in the form attached hereto as Exhibit B (the "Registration Rights
Agreement") and to consummate the transactions contemplated hereby and thereby.
All corporate action on the part of the Company, its directors and stockholders
necessary for the authorization, execution, delivery and performance of this
Agreement and the Registration Rights Agreement by the Company, and the
authorization, sale, issuance and delivery of the Common Stock and the
performance of the Company's obligations hereunder and under the
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CUSIP No. 0002078541 Page 17 of 43 Pages
Registration Rights Agreement has been taken. This Agreement and the
Registration Rights Agreement have been duly executed and delivered by the
Company and constitute legal, valid and binding obligations of the Company
enforceable in accordance with their respective terms, subject to laws of
general application relating to bankruptcy, insolvency and the relief of debtors
and rules of law governing specific performance, injunctive relief or other
equitable remedies, and to limitations of public policy as they may apply to
Section 1.6 of the Registration Rights Agreement. Upon issuance and delivery
pursuant to this Agreement, all of the Common Stock will be duly and validly
issued, fully paid and nonassessable and free and clear of any liens and
encumbrances. There are no statutory, contractual or other preemptive rights or
rights of first refusal with respect to the issuance and sale of the Common
Stock.
2.3 Validity of Securities. The Common Stock, when issued, sold and
delivered by the Company in accordance with the terms of this Agreement, will be
duly and validly issued, fully-paid and nonassessable. The issuance, sale and
delivery of the Common Stock are not subject to preemptive or any similar rights
of the Stockholders of the Company or any liens or encumbrances arising through
the Company. Based in part upon the representations of the Purchasers in this
Agreement, the offer, sale and issuance of the Common Stock will be made in
compliance with all applicable federal and state securities laws.
2.4 Capitalization. The authorized capital stock of the Company
consists of 50,000,000 shares of Common Stock, $0.001 par value, of which at
September 30, 1998, 17,251,289 shares were issued and outstanding, and 5,000,000
shares of Preferred Stock, $0.001 par value, of which at September 30, 1998,
zero shares were issued and outstanding. The Company's Board of Directors has
authorized the creation of 90,000 shares of Series B Preferred Stock for
potential issuance under the Company's stockholder rights plan. Since September
30, 1998 no shares of the Company's Common or Preferred Stock have been issued,
except pursuant to the exercise of options or warrants outstanding as of
September 30, 1998. All such issued and outstanding shares have been duly
authorized and validly issued and are fully paid and nonassessable. In addition
to the foregoing, the Company has reserved and outstanding the following
warrants, rights, options and convertible securities:
(i) warrants for the purchase of 18,395 shares of Common Stock at
an exercise price of $4.89 per share, which warrants expire in
February 2001;
(ii) warrants for the purchase of 22,728 shares of Common Stock at
an exercise price of $11.00 per share, which warrants expire
in December 2000;
(iii) warrants for the purchase of 73,071 shares of Common Stock at
an exercise price of $5.78, which warrants expire in December
2002;
(iv) warrants for the purchase of 20,000 shares of Common Stock at
an exercise price of $7.43 per share, which warrants expire in
December, 2001;
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CUSIP No. 0002078541 Page 18 of 43 Pages
(v) warrants for the purchase of 250,000 shares of Common Stock at
an exercise price of $8.25 per share, which warrants expire in
January 2002;
(vi) warrants for the purchase of 905,000 shares of Common Stock at
an exercise price of $9.08 per share, which warrants expire in
May, 2001;
(vii) warrants for the purchase of 6,000 shares of Common Stock at
an exercise price of $6.00 per share, which warrants expire in
January, 2003;
(viii) 2,600,000 shares reserved for issuance pursuant to the
Company's 1994 Stock Plan, of which, at September 30, 1998,
options (net of repurchases) to purchase 373,015 shares had
been exercised, options to purchase 1,894,430 shares were
outstanding and 332,555 shares remained available for future
grant;
(ix) 500,000 shares reserved for issuance pursuant to the Company's
1995 Employee Stock Purchase Plan, of which, at September 30,
1998, 138,132 shares had been issued;
(x) 250,000 shares reserved for issuance under the Company's 1995
Directors' Stock Option Plan, of which, at September 30, 1998,
165,000 options had been granted;
In addition, the Company has an equity line that is potentially available for a
three-year period beginning June 26, 1998. If, during the period from June 1998
through June 2001, the Stock meets certain volume restrictions and trades above
$10.00, then up to $500,000 would be drawn down from the equity line
approximately every three months. The Company may also be obligated to issue
additional shares to Genentech, Inc. before December 31, 1998, as part of the
consideration paid for the Company's acquisition of rights to gamma interferon
in 1998. Except as described in this Section 2.4, there are no other options,
warrants, conversion privileges or other contractual rights presently
outstanding to purchase or otherwise acquire any authorized but unissued shares
of the Company's capital stock or other securities. All of the issued and
outstanding securities of the Company have been issued in compliance with all
applicable federal and state securities laws.
2.5 No Conflict. The execution and delivery of this Agreement and the
Registration Rights Agreement do not, and the consummation of the transactions
contemplated hereby and thereby will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both), or
give rise to a right of termination, cancellation or acceleration of any
obligation or to a loss of a material benefit, under, any provision of the
Certificate of Incorporation or Bylaws of the Company or any mortgage,
indenture, lease or other agreement or instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Company, its properties or assets, which conflict,
violation, default or right would have a material adverse effect on the
business, properties, prospects or financial condition of the Company.
2.6 Accuracy of Reports; Financial Statements. All reports required to
be filed with the Securities and Exchange Commission (the "SEC") by the Company
from February 1, 1996 (the date
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CUSIP No. 0002078541 Page 19 of 43 Pages
of the Company's initial public offering) through the date of this Agreement
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
copies of which have been made available to each Purchaser (the "SEC
Documents"), have been duly and timely filed, were in substantial compliance
with the requirements of their respective forms when filed, were complete and
correct in all material respects as of the dates at which the information was
furnished, and contained (as of such dates) no untrue statement of a material
fact nor omitted to state a material fact necessary in order to make the
statements made therein in light of the circumstances in which made not
misleading. The Company's financial statements included in the SEC Documents
(the "Financial Statements") comply as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto. The Financial Statements have been prepared in
accordance with generally accepted accounting principles consistently applied
and fairly present the consolidated financial position of the Company and any
subsidiaries at the dates thereof and the consolidated results of operations and
consolidated cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal, recurring adjustments).
2.7 Changes. Since November 13, 1998 (the date on which the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1998
was filed with the SEC), there has not been (a) any incurrence by the Company of
any material liability, absolute or contingent, or (b) any event or condition of
any character that has materially and adversely affected or might materially and
adversely affect the business, properties, prospects or financial condition of
the Company (as such business is presently conducted and as it is proposed to be
conducted). There is no material liability or contingency of the Company that is
not disclosed in the SEC Documents.
2.8 Governmental Consents, Etc. No consent, approval or authorization
of or designation, declaration or filing with any governmental authority on the
part of the Company is required in connection with the valid execution and
delivery of this Agreement or the Registration Rights Agreement, or the
consummation of any other transaction contemplated hereby and thereby, except
such filings as may be required to be made with the SEC, the National
Association of Securities Dealers, Inc. ("NASD") and with governmental
authorities for purposes of effecting compliance with the securities and Blue
Sky laws in the states in which Common Stock is offered and/or sold, which
compliance will be effected in accordance with such laws.
2.9 Litigation. There is no pending or, to the best of the Company's
knowledge, threatened lawsuit, administrative proceeding, arbitration, labor
dispute or governmental investigation ("Litigation") to which the Company is a
party or by which any material portion of its assets, taken as a whole, may be
bound, nor is the Company aware of any basis therefor, which Litigation, if
adversely determined, would have a material adverse effect on the business,
properties, prospects or financial condition of the Company.
<PAGE>
CUSIP No. 0002078541 Page 20 of 43 Pages
2.10 Intellectual Property. To its knowledge, and except as disclosed
in the SEC Documents, the Company owns or possesses sufficient legal rights to
all patents, trademarks, service marks, tradenames, copyrights, trade secrets,
licenses, information and proprietary rights and processes necessary for its
business as now conducted and as proposed to be conducted, without infringement
of any rights of a third party. The Company has not received any communications
alleging that the Company has violated or, by conducting its business as
proposed, would violate any of the patents, trademarks, service marks,
tradenames, copyrights, trade secrets or other proprietary rights or processes
of any other person or entity, which violation would have a material adverse
effect on the business, properties, prospects or financial condition of the
Company. Except as disclosed in the SEC Documents, the Company has not granted
(nor has the Company licensed from a third party) any material rights to or
licenses to its patents, trademarks, service marks, tradenames, copyrights,
trade secrets or other proprietary rights or processes.
2.11 Registration Rights. Except as provided in the Registration
Rights Agreement and as disclosed in the SEC Documents, the Company has not
granted or agreed to grant any rights to register its securities under the
Securities Act, including piggy-back rights, to any person or entity.
2.12 No Material Default. The Company is not in violation of or
default under any provision of (a) its Certificate of Incorporation or Bylaws or
(b) any mortgage, indenture, lease or other agreement or instrument, permit,
concession, franchise or license to which it is a party or by which it is bound
or (c) any federal or state judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to the Company, except with respect to clauses (b)
and (c) above, such violations or defaults as would not have a material adverse
effect on the business, properties, prospects or financial condition of the
Company.
2.13 Disclosure. No representation or warranty of the Company
contained in this Agreement or the exhibits attached to this Agreement (when
read together and taken as a whole), contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein or therein in light of the circumstances under which they were
made not misleading.
2.14 Solvency; No Default. As of this date the Company has sufficient
funds and cash flow to pay its debts and other liabilities as they become due,
and the Company is not in default with respect to any material debt or
liability.
2.15 Rights of Common Stock. The Common Stock shall have the rights,
preferences, privileges and restrictions provided in the Company's Amended and
Restated Certificate of Incorporation.
<PAGE>
CUSIP No. 0002078541 Page 21 of 43 Pages
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby represents and warrants to the Company as
follows:
3.1 Investment. Purchaser is acquiring the Common Stock for investment
for its own account, not as a nominee or agent and not with a view to or for
resale in connection with any distribution thereof. Purchaser understands that
the Common Stock purchased by such Purchaser from the Company pursuant to this
Agreement has not been registered under the Securities Act by reason of a
specific exemption from the registration provisions of the Securities Act which
depends upon, among other things, the bona fide nature of such Purchaser's
investment intent and the accuracy of such Purchaser's representations as
expressed herein.
3.2 Accredited Investor. Each Purchaser is an "accredited investor" as
defined by Rule 501(a) under the Securities Act of 1933, as amended (the
"Securities Act"). The SEC documents have been made available to each Purchaser,
and each Purchaser has received all the information it has requested regarding
the Company. Each Purchaser has such business and financial experience as is
required to give it the capacity to protect its own interests in connection with
the purchase of the Common Stock.
3.3 Authority. This Agreement and the Registration Rights Agreement
have been duly executed and delivered by each Purchaser and constitute legal,
valid and binding obligations of the Purchasers, enforceable in accordance with
their respective terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies, and to
limitations of public policy as they may apply to Section 1.6 of the
Registration Rights Agreement. The execution and delivery of this Agreement and
the Registration Rights Agreement do not, and the consummation of the
transactions contemplated hereby and thereby will not, conflict with or result
in any violation of any obligation under any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to the Purchasers.
3.4 Government Consents, Etc. No consent, approval or authorization of
or designation, declaration or filing with any governmental authority on the
part of the Purchasers is required in connection with the valid execution and
delivery of this Agreement, or the offer, sale or issuance of the Common Stock,
or the consummation of any other transaction contemplated hereby.
3.5 Investigation. Each Purchaser has had a reasonable opportunity to
discuss the Company's business, management and financial affairs with the
Company's management.
<PAGE>
CUSIP No. 0002078541 Page 22 of 43 Pages
SECTION 4
CONDITIONS TO OBLIGATIONS OF THE PURCHASERS
The obligations of each Purchaser to the Company under this Agreement
are subject to the fulfillment, on or before the Closing, of each of the
following conditions, unless otherwise waived:
4.1 Representations and Warranties Correct. The representations and
warranties made by the Company in Section 2 shall be true and correct in all
material respects on the Closing Date with the same effect as though such
representations and warranties had been made on and as of the Closing Date.
4.2 Covenants. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company on or prior to the Closing Date
shall have been performed or complied with in all material respects.
4.3 No Order Pending. There shall not then be in effect any order
enjoining or restraining the transactions contemplated by this Agreement.
4.4 No Law Prohibiting or Restricting Sale. There shall not be in
effect any law, rule or regulation prohibiting or restricting such sale, or
requiring any consent or approval of any person which shall not have been
obtained to issue the Common Stock (except as otherwise referenced in this
Agreement).
4.5 Compliance Certificate. The Company shall have delivered to the
Purchasers a certificate substantially in the form attached as Exhibit C to this
Agreement, executed by a duly authorized officer, dated the Closing Date, and
certifying to the fulfillment of the conditions specified in Sections 4.1 and
4.2.
4.6 Registration Rights Agreement. On or before the Closing, the
Company and the Purchasers shall have executed and delivered a counterpart of
the Registration Rights Agreement attached as Exhibit B.
4.7 Legal Opinion. The Purchasers shall have received from Wilson
Sonsini Goodrich & Rosati, Professional Corporation, counsel for the Company, an
opinion addressed to the Purchasers, dated the Closing Date, in substantially
the form attached as Exhibit D to this Agreement.
<PAGE>
CUSIP No. 0002078541 Page 23 of 43 Pages
SECTION 5
CONDITIONS TO OBLIGATIONS OF THE COMPANY
The obligations of the Company under this Agreement are subject to the
fulfillment on or prior to the Closing of each of the following conditions,
unless otherwise waived:
5.1 Representations and Warranties Correct. The representations and
warranties made by the Purchaser(s) in Section 3 hereof shall be true and
correct in all material respects on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
the Closing Date.
5.2 Performance. All covenants, agreements and conditions contained in
this Agreement to be performed by the Purchasers on or prior to the Closing Date
shall have been performed or complied with in all material respects.
5.3 No Order Pending. There shall not then be in effect any order
enjoining or restraining the transactions contemplated by this Agreement.
5.4 No Law Prohibiting or Restricting Such Sale. There shall not be in
effect any law, rule or regulation prohibiting or restricting such sale, or
requiring any consent or approval of any person which shall not have been
obtained to issue the Common Stock (except as otherwise provided in this
Agreement).
SECTION 6
MISCELLANEOUS
6.1 Governing Law. This Agreement and all acts and transactions
pursuant to this Agreement and the rights and obligations of the parties to this
Agreement shall be governed, construed and interpreted in accordance with the
laws of the State of California, without giving effect to principles of
conflicts of law.
6.2 Survival. Unless otherwise set forth in this Agreement, the
warranties, representations and covenants of the Company and the Purchasers
contained in or made pursuant to this Agreement shall survive the execution and
delivery of this Agreement and the Closing.
6.3 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties to this Agreement and their respective
successors and assigns.
6.4 Entire Agreement; Amendment. This Agreement, the Registration
Rights Agreement and the other documents delivered pursuant to this Agreement
constitute the full and entire understanding and agreement between the parties
with regard to the subject matter hereof and thereof
<PAGE>
CUSIP No. 0002078541 Page 24 of 43 Pages
and supersede all prior agreements and understandings among the parties relating
to the subject matter hereof. Neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument
signed by the party against which enforcement of any such amendment, waiver,
discharge or termination is sought.
6.5 Notices and Dates. Unless otherwise provided in this Agreement,
any notice required or permitted by this Agreement shall be in writing and shall
be deemed sufficient upon delivery, when delivered personally or by overnight
courier and addressed to the party to be notified at such party's address as set
forth on the signature page to this Agreement or as subsequently modified by
written notice. If any date provided for in this Agreement falls on a Saturday,
Sunday or legal holiday, such date shall be deemed extended to the next business
day.
6.6 Brokers.
(a) Except as disclosed to the Purchasers, the Company has not
engaged, consented to or authorized any broker, finder or intermediary to act on
its behalf, directly or indirectly, as a broker, finder or intermediary in
connection with the transactions contemplated by this Agreement. The Company
agrees to indemnify and hold harmless the Purchasers from and against all fees,
commissions or other payments owing to any party acting on behalf of the Company
hereunder.
(b) No Purchaser has engaged, consented to or authorized any
broker, finder or intermediary to act on its behalf, directly or indirectly, as
a broker, finder or intermediary in connection with the transactions
contemplated by this Agreement. Each Purchaser hereby agrees to indemnify and
hold harmless the Company from and against all fees, commissions or other
payments owing to any party acting on behalf of such Purchaser hereunder.
6.7 Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
6.8 Costs and Expenses. Irrespective of whether the Closing is
effected, the Company shall pay all costs and expenses that it incurs with
respect to the negotiation, execution, delivery and performance of this
Agreement.
6.9 No Third Party Rights. Nothing in this Agreement shall create or
be deemed to create any rights in any person or entity not a party to this
Agreement.
<PAGE>
CUSIP No. 0002078541 Page 25 of 43 Pages
6.10 Captions and Headings. The captions and headings used herein are
for convenience and ease of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
6.11 Counterparts. This Agreement may be executed in counterparts, and
each such counterpart shall be deemed an original for all purposes.
<PAGE>
CUSIP No. 0002078541 Page 26 of 43 Pages
IN WITNESS WHEREOF, the parties to this Agreement have executed or
caused their respective authorized officers to execute this Agreement as of the
first date written above.
"COMPANY"
Connetics Corporation Address:
3400 West Bayshore Road
Palo Alto, California 94303
By: ____________________________ Facsimile: (650) 843-2899
Thomas G. Wiggans
President and Chief Executive Officer
PURCHASER(S)
Shares Amount
Domain Partners IV, L.P. 1,220,747 $4,882,988.00
By: One Palmer Square Associates IV, L.L.C
its General Partner
By: ____________________________
Managing Member
Domain Associates, L.P. 29,253 $ 117,012.00
By: One Palmer Square Associates IV, L.L.C
its General Partner
By: ____________________________
Managing Member
Domain Partners III, L.P. 241,640 $ 966,560.00
By: One Palmer Square Associates III, L.P
its General Partner
By: ____________________________
General Partner
DP III Associates, L.P. 8,360 $ 33,440.00
By: One Palmer Square Associates III, L.P
its General Partner
By: ____________________________
General Partner
<PAGE>
CUSIP No. 0002078541 Page 27 of 43 Pages
EXHIBIT A TO COMMON STOCK PURCHASE AGREEMENT
LIST OF PURCHASERS
Name Number of Shares Purchase Price
1) Alexander E. Barkas 50,000 $ 200,000.00
2) John C. Kane 12,500 $ 50,000.00
3) Kiley Family Partnership 10,000 $ 40,000.00
4) Alta BioPharma Partners, L.P. 155,397 $ 621,588.00
5) Alta Embarcadero BioPharma, LLC 5,857 $ 23,428.00
6) Connetics Partners (Alta Bio), LLC 88,746 $ 354,984.00
7) Domain Partners III, L.P. 241,640 $ 966,560.00
8) DP III Associates, L.P. 8,360 $ 33,440.00
9) Domain Partners IV, L.P. 1,220,747 $ 4,882,988.00
10) DP IV Associates, L.P. 29,253 $ 117,012.00
11) Jalaa Equities 25,000 $ 100,000.00
12) New Enterprise Associates VIII,
Limited Partnership 1,233,750 $ 4,935,000.00
13) NEA Presidents Fund, L.P. 15,000 $ 60,000.00
<PAGE>
CUSIP No. 0002078541 Page 28 of 43 Pages
14) NEA Ventures 1998, Limited Partnership 1,250 $ 5,000.00
15) Merlin BioMed Asset Management 45,000 $ 180,000.00
16) Snowdon L.P. 25,000 $ 100,000.00
Total 3,167,500 $ 12,670,000.00
shares
issued:
<PAGE>
CUSIP No. 0002078541 Page 29 of 43 Pages
EXHIBIT B TO COMMON STOCK PURCHASE AGREEMENT
CONNETICS CORPORATION
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made as of the
19th day of November, 1998, by and among Connetics Corporation, a Delaware
corporation (the "Company") and each of the persons listed on Exhibit A to this
Agreement (each an "Investor" and together the "Investors").
R E C I T A L S
A. Effective as of the same date as this Agreement, the Company and
the Investors have entered into a Common Stock Purchase Agreement (the "Purchase
Agreement") pursuant to which the Company has agreed to sell to the Investors
and the Investors have agreed to purchase from the Company shares of the
Company's Common Stock (all terms not otherwise defined herein shall have the
meanings ascribed in the Purchase Agreement).
B. A condition to the Investors' obligations under the Purchase
Agreement is that the Company and the Investors enter into this Agreement in
order to provide the Investors with certain rights to register the Common Stock
acquired by the Investors pursuant to the Purchase Agreement. The Company
desires to induce the Investors to purchase the Common Stock pursuant to the
Purchase Agreement by agreeing to the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, the parties hereby agree as follows:
AGREEMENT
1. Registration Rights. The Company and the Investors covenant and
agree as follows:
1.1 Definitions. For purposes of this Section 1:
(a) The terms "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act of 1933, as amended (the
"Securities Act"), and the declaration or ordering of effectiveness of such
registration statement or document;
(b) The term "Registrable Securities" means (i) the shares of Common
Stock issued or sold in connection with the Purchase Agreement (such shares of
Common Stock are collectively referred to as the "Shares" or "Stock") and (ii)
any other shares of common stock of the Company issued as (or issuable upon the
conversion or exercise of any warrant, right or other security which is issued
as) a dividend or other distribution with respect to, or in exchange for or in
replacement of, the Stock; provided, that the foregoing definition shall exclude
in all cases any Registrable Securities sold by a person in a transaction in
which his or her rights under this Agreement are not assigned. Notwithstanding
the foregoing, shares of common stock shall only be treated as Registrable
Securities if and so long as they have not been (x) sold to or through a
<PAGE>
CUSIP No. 0002078541 Page 30 of 43 Pages
broker or dealer or underwriter in a public distribution or a public securities
transaction, or (y) sold in a transaction exempt from the registration and
prospectus delivery requirements under Section 4(1) of the Securities Act so
that all transfer restrictions, and restrictive legends with respect thereto, if
any, are removed upon the consummation of such sale;
(c) The number of shares of "Registrable Securities then outstanding"
shall be determined by the number of shares of Common Stock then outstanding
which are Registrable Securities, plus the number of shares of common stock
issuable pursuant to then exercisable or convertible securities which are
Registrable Securities;
(d) The term "Holder" means any person owning or having the right to
acquire Registrable Securities or any assignee thereof in accordance with this
Agreement;
(e) The term "Form S-3" means such form under the Securities Act as in
effect on the date hereof or any successor form under the Securities Act; and
(f) The term "SEC" means the Securities and Exchange Commission.
1.2 Registration. The Company will use its reasonable best efforts to
effect a registration to permit the sale of the Registrable Securities as
described below, and pursuant thereto the Company will:
(a) prepare and file within 20 days and use its reasonable best
efforts to have declared effective by the SEC within 45 days after the Closing,
a registration statement on Form S-3 relating to resale of all of the shares of
the Registrable Securities and use its reasonable best efforts to cause such
registration statement to remain continuously effective for a period which will
terminate when all Registrable Securities covered by such registration
statement, as amended from time to time, have been sold or when the Registrable
Securities may be sold under Rule 144(k) under the Securities Act;
(b) prepare and file with the SEC such amendments and post-effective
amendments to the registration statement and any prospectus as may be necessary
to keep such registration statement effective for the period specified in
Section 1.2(a) and to comply with the provisions of the Securities Act and the
Exchange Act with respect to the distribution of all Registrable Securities;
(c) notify each Investor promptly and confirm such notice in writing
(i) when the prospectus or any supplement or post-effective amendment has been
filed and, with respect to the registration statement or any post-effective
amendment, when the same has become effective, (ii) of any request by the SEC
for amendments or supplements to the registration statement or prospectus or for
additional information, (iii) of the issuance by the SEC of any stop order
suspending the effectiveness of the registration statement or the initiation of
any proceedings for that purpose, and (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose;
(d) make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of the registration statement at the earliest
possible moment;
(e) furnish to each Investor, without charge, at least one copy of the
registration statement and any post-effective amendment thereto, including
financial statements and schedules, and upon
<PAGE>
CUSIP No. 0002078541 Page 31 of 43 Pages
an Investor's request, all documents incorporated therein by reference and all
exhibits thereto (including those incorporated by reference);
(f) deliver to each Investor, without charge, as many copies of the
prospectus (including each preliminary prospectus) and any amendment or
supplement thereto as such Investor may reasonably request in order to
facilitate the disposition of the Registrable Securities;
(g) cause all Registrable Securities covered by the registration
statement to be listed on each securities exchange or market on which similar
securities issued by the Company are then listed, and if the securities are not
so listed to use its reasonable best efforts promptly to cause all such
securities to be listed on either the New York Stock Exchange, the American
Stock Exchange or the Nasdaq Stock Market;
(h) use reasonable best efforts to qualify or register the Registrable
Securities for sale under (or obtain exemptions from the application of) the
Blue Sky laws of such jurisdictions as are applicable. The Company shall not be
required to qualify as a foreign corporation or to file a general consent to
service of process in any such jurisdiction where it is not presently qualified
or where it would be subject to general service of process or taxation as a
foreign corporation in any jurisdiction where it is not now so subject;
(i) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the SEC under the Securities Act and the
Exchange Act and take such other actions as may be reasonably necessary to
facilitate the registration of the Registrable Securities hereunder; and
(j) expenses incurred in connection with a registration requested
pursuant to this Section 1.2 shall be borne by the Company, including all
registration, filing, qualification, printers' and accounting fees but excluding
any underwriters' discounts or commissions and any fees and disbursements of any
counsel for the selling Holders (such fees or discounts, if any, to be borne pro
rata by the Holders participating in the registration).
1.3 Restrictions; Procedure For Sales Pursuant To A Registration
Statement.
(a) Each Holder agrees to the following restrictions on and procedures
for sales made pursuant to a registration statement:
(i) Notice to Company. If any Holder proposes to sell any Shares, the
Holder shall notify the Company of its intent to do so at least three (3)
business days prior to the date of such sale (the "Notice of Sale"), by
tendering a Notice of Sale in substantially the form attached as Exhibit B.
Alternatively, the Holder may give the Notice of Sale verbally by telephoning
and speaking directly with John L. Higgins or the then current Chief Financial
Officer at the Company at (650) 843-2800, and following up by immediately
sending a written Notice of Sale. Providing the Notice of Sale to the Company
shall conclusively be deemed to establish an agreement by such Holder to comply
with the registration provisions herein described, and the Notice of Sale shall
be deemed to constitute a representation that any information previously
supplied by such Holder is accurate as of the date of such Notice of Sale.
(ii) Delay of Sale. The Company may refuse to permit the Holder to
resell any Shares for a specified period of time; provided, however, that (a) in
order to exercise this right, the Company must deliver a certificate in writing
to the Holder to the effect that the registration statement in its then
<PAGE>
CUSIP No. 0002078541 Page 32 of 43 Pages
current form contains an untrue statement of material fact or omits to state a
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading, (b) in no event
shall such delay exceed twenty (20) days, (c) in no event shall this right of
delay be exercised on more than two (2) occasions in any twelve (12) month
period, and (d) during any suspension as contemplated by this Section 1.4
(a)(ii), the Company will not allow any of its officers or directors to buy or
sell shares of the Company's securities.
(b) Representations of Holders. Each Holder hereby represents to and
covenants with the Company that, during the period in which a registration
statement effected pursuant to Section 1.2 remains effective, such Holder will:
(i) not engage in any stabilization activity in connection with any of
the Company's securities;
(ii) cause to be furnished to any purchaser of the Shares and to the
broker-dealer, if any, through whom Shares may be offered, a copy of the
Prospectus; and
(iii) not bid for or purchase any securities of the Company or any
rights to acquire the Company's securities, or attempt to induce any person to
purchase any of the Company's securities or any rights to acquire the Company's
securities other than as permitted under the Securities Exchange Act of 1934, as
amended ("Exchange Act").
(c) Information for Use in Registration Statement. Each Holder
represents and warrants to the Company that such Holder has completed the
information requested by the Selling Holder's Questionnaire attached as Exhibit
C to this Agreement (the "Questionnaire"), and further represents and warrants
to the Company that all information provided by such Holder in the Questionnaire
is true, accurate and complete. Each Holder understands that the written
information in the Questionnaire and all written representations made in this
Agreement are being provided to the Company specifically for use in, or in
connection with, the registration statement and the Prospectus, and has executed
this Agreement with such knowledge.
1.4 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 1 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities.
1.5 Delay of Registration. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any dispute that might arise with respect to the interpretation or
implementation of this Section 1.
1.6 Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, any underwriter (as defined in the Securities) for
<PAGE>
CUSIP No. 0002078541 Page 33 of 43 Pages
such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Securities or the Exchange Act, against any losses,
claims, damages, or liabilities (joint or several) to which they may become
subject under the Securities, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company of the Securities, the Exchange Act, any
state securities law or any rule or regulation promulgated under the Securities,
the Exchange Act or any state securities law; and the Company will pay to each
such Holder, underwriter or controlling person, as incurred, any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this subsection 1.6(a) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability, or
action if such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld), nor shall the Company be liable in
any such case for any such loss, claim, damage, liability, or action to the
extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by any such Holder, underwriter or
controlling person.
(b) To the extent permitted by law, each selling Holder will indemnify
and hold harmless the Company, each of its directors, each of its officers who
has signed the registration statement, each person, if any, who controls the
Company within the meaning of the Securities, any underwriter, any other Holder
selling securities in such registration statement and any controlling person of
any such underwriter or other Holder, against any losses, claims, damages, or
liabilities (joint or several) to which any of the foregoing persons may become
subject, under the Securities, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by such Holder expressly for
use in connection with such registration; and each such Holder will pay, as
incurred, any legal or other expenses reasonably incurred by any person intended
to be indemnified pursuant to this subsection 1.6(b), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this subsection
1.6(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Holder, which consent shall not be unreasonably withheld; provided, that,
in no event shall any indemnity under this subsection 1.6(b) exceed the net
proceeds from the offering received by such Holder, except in the case of
willful fraud by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
1.6 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 1.6, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
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CUSIP No. 0002078541 Page 34 of 43 Pages
with the reasonable fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.6, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 1.6.
(d) If the indemnification provided for in this Section 1.6 is held by
a court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, liability, claim, damage, or expense referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such loss, liability, claim, damage, or expense in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions that resulted in such loss, liability, claim,
damage, or expense as well as any other relevant equitable considerations;
provided that, in no event shall any contribution by a Holder under this
Subsection 1.6(d) exceed the net proceeds from the offering received by such
Holder, except in the case of willful fraud by such Holder. The relative fault
of the indemnifying party and of the indemnified party shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information, and opportunity
to correct or prevent such statement or omission.
(e) The obligations of the Company and Holders under this Section 1.6
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1.
1.7 Reports Under Securities Exchange Act Of 1934. With a view to
making available to the Holders the benefits of Rule 144 and any other rule or
regulation of the SEC that may at any time permit a Holder to sell securities of
the Company to the public without registration or pursuant to a registration on
Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144, so long as the Company remains subject to
the periodic reporting requirements under Sections 13 or 15(d) of the Exchange
Act;
(b) take such action, including the voluntary registration of its
Common Stock under Section 12 of the Exchange Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities and the Exchange Act; and
(d) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company that
it has complied with the reporting requirements of the Exchange Act and the
rules and regulations promulgated thereunder, or that it qualifies as a
<PAGE>
CUSIP No. 0002078541 Page 35 of 43 Pages
registrant whose securities may be resold pursuant to Form S-3, (ii) a copy
of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii) such other information
as may be reasonably requested in availing any Holder of any rule or regulation
of the SEC which permits the selling of any such securities without registration
or pursuant to such form.
2. MISCELLANEOUS.
2.1 Successors and Assigns. Except as otherwise provided in this
Agreement, the terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the respective successors and assigns of the parties
(including transferees of any of the Shares). Nothing in this Agreement, express
or implied, is intended to confer upon any party other than the parties hereto
or their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
2.2 Governing Law. This Agreement and all acts and transactions
pursuant hereto shall be governed, construed and interpreted in accordance with
the laws of the State of California, without giving effect to principles of
conflicts of laws.
2.3 Counterparts. This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
2.4 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
2.5 Notices. Unless otherwise provided herein, any notice required or
permitted by this Agreement shall be in writing and shall be deemed sufficient
upon delivery, when delivered personally or by overnight courier and addressed
to the party to be notified at such party's address as set forth on the
signature page hereto or as subsequently modified by written notice. In the
event that any date provided for in this Agreement falls on a Saturday, Sunday
or legal holiday, such date shall be deemed extended to the next business day.
Notwithstanding the foregoing, any notice delivered pursuant to Section 1.3(e)
or Section 1.4 hereto must be made by personal delivery or confirmed facsimile
transmission.
2.6 Expenses. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
2.7 Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the holders of a majority of the
Registrable Securities then outstanding. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of any
Registrable Securities then outstanding, each future holder of all such
Registrable Securities, and the Company.
2.8 Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, the parties agree to renegotiate such
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CUSIP No. 0002078541 Page 36 of 43 Pages
provision in good faith. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement for such provision, then (a) such
provision shall be excluded from this Agreement, (b) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (c) the
balance of the Agreement shall be enforceable in accordance with its terms.
2.9 Entire Agreement. This Agreement, and the documents referred to in
this Agreement (with the exception of the registration statement) constitute the
entire agreement between the parties hereto pertaining to the subject matter
hereof, and any and all other written or oral agreements existing between the
parties hereto are expressly canceled.
<PAGE>
CUSIP No. 0002078541 Page 37 of 43 Pages
IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement
as of the date first written above.
"COMPANY"
Connetics Corporation Address:
3400 West Bayshore Road
Palo Alto, California 94303
By: ____________________________ Facsimile: (650) 843-2899
Thomas G. Wiggans
President and Chief Executive Officer
INVESTOR(S)
Domain Partners IV, L.P.
By: One Palmer Square Associates IV, L.L.C.
its General Partner
By: ____________________________
General Partner
DP IV Associates, L.P.
By: One Palmer Square Associates IV, L.L.C.
its General Partner
By: ____________________________
Managing Member
Domain Partners III, L.P
By: One Palmer Square Associates III, L.P
Its General Partner
By: ____________________________
General Partner
DP III Associates, L.P
By: One Palmer Square Associates III, L.P
Its General Partner
By: ____________________________
General Partner
<PAGE>
CUSIP No. 0002078541 Page 38 of 43 Pages
EXHIBIT A TO REGISTRATION RIGHTS AGREEMENT
LIST OF INVESTORS
Name Number of Shares
1) Alexander E. Barkas 50,000
2) John C. Kane 12,500
3) Kiley Family Partnership 10,000
4) Alta BioPharma Partners, L.P. 155,397
5) Alta Embarcadero BioPharma, LLC 5,857
6) Connetics Partners (Alta Bio), LLC 88,746
7) Domain Partners III, L.P. 241,640
8) DP III Associates, L.P. 8,360
9) Domain Partners IV, L.P. 1,220,747
10) DP IV Associates, L.P. 29,253
11) Jalaa Equities 25,000
12) New Enterprise Associates VIII, Limited Partnership 1,233,750
13) NEA Presidents Fund, L.P. 15,000
14) NEA Ventures 1998, Limited Partnership 1,250
<PAGE>
CUSIP No. 0002078541 Page 39 of 43 Pages
15) Merlin BioMed Asset Management 45,000
16) Snowdon L.P. 25,000
Total 3,167,500
shares
issued:
<PAGE>
CUSIP No. 0002078541 Page 40 of 43 Pages
EXHIBIT B TO REGISTRATION RIGHTS AGREEMENT
CONNETICS CORPORATION
NOTICE OF SALE
Pursuant to the Registration Rights Agreement dated as of
_______________, 1998 among Connetics Corporation (the "Company"), the
undersigned and certain stockholders of the Company, the undersigned hereby
gives notice to the Company of the undersigned's intent to sell _______ shares
of the Company's Common Stock registered pursuant to the registration statement
(File No. _______) filed pursuant to such Agreement.
Dated: ___________________ By:____________________________________
(signature)
Name:___________________________________
(print)
Title:__________________________________
(if applicable)
[NOTE: THIS NOTICE OF SALE MUST BE COMPLETED AND DELIVERED (BY
PERSONAL DELIVERY OR FACSIMILE) TO THE CHIEF FINANCIAL OFFICER OF THE
COMPANY ON _____________________. 19__, OR THREE (3) BUSINESS DAY BEFORE THE
DATE OF SALE OF THE SHARES OF THE COMPANY'S COMMON STOCK REGISTERED
PURSUANT TO THE REGISTRATION STATEMENT.]
<PAGE>
CUSIP No. 0002078541 Page 41 of 43 Pages
EXHIBIT C TO REGISTRATION RIGHTS AGREEMENT
CONNETICS CORPORATION
SELLING STOCKHOLDER'S QUESTIONNAIRE
In connection with the Connetics Corporation (the "Company")
Registration Statement (File No. _______________) registering certain shares of
the Company's Common Stock, the undersigned represents and warrants that the
information set forth below is true, accurate and complete:
1. As of the date hereof, the undersigned beneficially owns ______
shares of the Company's Common Stock.
2. Except as described below, the undersigned has not had a material
relationship with the Company or any of its predecessors or affiliates within
the last three years.
The term "material relationship" has not been defined by the
Securities and Exchange Commission (the "SEC"). However, the SEC has indicated
that it will probably construe as a "material relationship" any relationship
which tends to prevent arms length bargaining in dealings with a company,
whether arising from a close business connection or family relationship, a
relationship of control or otherwise. It seems prudent, therefore, to consider
that the undersigned would have such a relationship, for example, with any
organization of which the undersigned is an officer, director, trustee or
partner or in which the undersigned owns, directly or indirectly, ten percent
(10%) or more of the outstanding voting stock, or in which the undersigned has
some other substantial interest, and with any person or organization with whom
the undersigned has, or with whom any relative or spouse (or any other person or
organization as to which the undersigned has any of the foregoing other
relationships) has, a contractual relationship.
If applicable, please describe the material relationship with the
Company:
Dated: ___________________ By:______________________________________
(signature)
Name:____________________________________
(print)
Title:___________________________________
(if applicable)
<PAGE>
CUSIP No. 0002078541 Page 42 of 43 Pages
EXHIBIT C TO COMMON STOCK PURCHASE AGREEMENT
CONNETICS CORPORATION
COMPLIANCE CERTIFICATE
The undersigned, Thomas G. Wiggans, hereby certifies as follows:
1. He is the duly elected President and Chief Executive Officer of
Connetics Corporation, a Delaware corporation (the "Company").
2. The representations and warranties of the Company set forth in
Section 2 of the Common Stock Purchase Agreement (the "Agreement") dated
_________________, 1998 are true and correct in all material respects as though
made on and as of the date of this Certificate.
3. The Company has performed and complied with all covenants,
agreements, obligations and conditions contained in the Agreement to be
performed by the Company on or prior to the Closing Date.
The undersigned has executed this Certificate this _______ day of
_______________, 1998.
------------------------------
Thomas G. Wiggans,
President and Chief Executive Officer
<PAGE>
CUSIP No. 0002078541 Page 43 of 43 Pages
EXHIBIT D TO COMMON STOCK PURCHASE AGREEMENT
Opinion of Wilson Sonsini Goodrich & Rosati
