-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VoUCOeQPGOg/K11dvmPRHipv3qCCTVZYOSnS4SW0XU4XCcAW7UGi0eD3yEmRmh53 5uv60+M1kVzs3l2JjwOuXg== 0000891618-96-003119.txt : 19961220 0000891618-96-003119.hdr.sgml : 19961220 ACCESSION NUMBER: 0000891618-96-003119 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19961204 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits ITEM INFORMATION: FILED AS OF DATE: 19961219 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONNECTIVE THERAPEUTICS INC CENTRAL INDEX KEY: 0001004960 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 943173928 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-27406 FILM NUMBER: 96683137 BUSINESS ADDRESS: STREET 1: 3400 W BAYSHORE RD CITY: PALO ALTO STATE: CA ZIP: 94303 BUSINESS PHONE: 4158432800 8-K 1 FORM 8-K DATED DECEMBER 4, 1996 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): December 4, 1996 CONNECTIVE THERAPEUTICS, INC. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation) 0-27406 94-3173928 (Commission File Number) (IRS Employer Identification No.) 3400 West Bayshore Road, Palo Alto, CA 94303 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (415) 843-2800 N/A (Former name or former address, if changed since last report) 2 ITEM 5. OTHER EVENTS On December 4, 1996, the Company sold 972,224 shares of Common Stock (the "Shares"), at a price of $6.1714 per share for an aggregate purchase price of approximately $6,000,000. The Shares were sold under an exemption from registration pursuant to Regulation D of the Securities Act of 1933 to certain institutional investors named in the Common Stock Purchase Agreement attached as Exhibit 10.1. In connection with the transaction, the Company agreed to file on or about February 15, 1997 a registration statement on Form S-3 covering resale of the Shares and to maintain such registration statement in effect for up to three years. ITEM 7. FINANCIAL STATEMENT AND EXHIBITS. (c) Exhibits Exhibit 3.1 Certificate of Designation of 7% Convertible Preferred Stock, Series A of the Registrant, as filed with the Delaware Secretary of State on December 4, 1996 Exhibit 10.1 Common Stock Purchase Agreement, dated December 4, 1996, among the Registrant and certain investors. Exhibit 10.2 Registration Rights Agreement, dated December 4, 1996, among the Registrant and certain investors. Exhibit 10.3 Securities Purchase Agreement, dated December 4, 1996, between the Registrant and a purchaser. Exhibit 10.4 Warrant, dated December 4, 1996, between the Company and a purchaser. ITEM 9. SALE OF EQUITY SECURITIES PURSUANT TO REGULATION S. On December 4, 1996, Connective Therapeutics, Inc., a Delaware corporation (the "Company") issued 200 shares of 7% Convertible Preferred Stock, Series A (the "Convertible Preferred Stock"), at a price of $10,000 per share, for an aggregate purchase price of $2,000,000. The shares were sold to an offshore investor pursuant to the exemption from registration under Regulation S promulgated under the Securities Act of 1933. The Convertible Preferred Stock is convertible into Common Stock of the Company at a conversion price equal to 85% of the average closing bid price of the Company's Common Stock for the ten trading days immediately preceding the conversion date, subject to certain adjustments as set forth in the Certificate of Designation attached as Exhibit 3.1. The Convertible -2- 3 Preferred Stock will accrue dividends at the rate of 7% annually until converted, and is redeemable by the Company if not converted within three years. The Company also issued a warrant to the investor to purchase 20,000 shares of Common Stock at an exercise price equal to 110% of the closing price of the Company's Common Stock on December 4, 1996. -3- 4 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CONNECTIVE THERAPEUTICS, INC. (Registrant) Dated: December 19, 1996 By: /s/ Cynthia M. Butitta ------------------------------------------ Cynthia M. Butitta Vice President, Finance and Administration and Chief Financial Officer -4- 5 INDEX TO EXHIBITS Exhibits. --------- 3.1 Certificate of Designation of 7% Convertible Preferr Stock, Series A of the Registrant, as filed with the Delaware Secretary of State on December 4, 1996 10.1 Common Stock Purchase Agreement, dated December 4, 1996, among the Registrant and certain investors 10.2 Registration Rights Agreement, dated December 4, 1996, among the Registrant and certain investors 10.3 Securities Purchase Agreement, dated December 4, 1996, between the Registrant and a purchaser 10.4 Warrant, dated December 4, 1996, between the Registrant and a purchaser -5- EX-3.1 2 CERTIFICATE OF DESIGNATION OF 7% CONV. PREF. STOCK 1 EXHIBIT 3.1 CONNECTIVE THERAPEUTICS, INC. CERTIFICATE OF DESIGNATIONS OF 7% CONVERTIBLE PREFERRED STOCK, SERIES A Pursuant to Section 151 and Section 103 of the General Corporation Law of the State of Delaware, the undersigned, Cynthia Butitta, the Vice President of Finance and Administration and Chief Financial Officer of Connective Therapeutics, Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Company"), does hereby certify that pursuant to the authority conferred upon the Board of Directors by the Amended and Restated Certificate of Incorporation of the Company, said Board of Directors, on and effective as of December 3, 1996, adopted the following resolution: "RESOLVED, That the Board of Directors of the Company hereby determines that it is in the best interests of the Company and its stockholders to create a newly authorized series consisting of 200 shares of the Company's Preferred Stock, par value $.001 per share, to be designated "7% Convertible Preferred Stock, Series A" and does hereby fix and herein state and express such designations, powers, preferences and relative and other special rights and the qualifications, limitations and restrictions thereof, as follows: 1. DESIGNATION AND AMOUNT. There is hereby designated a series of preferred stock, par value $.001 per share, and shall be designated as 7% Convertible Preferred Stock, Series A (the "Series A Preferred Stock"). The number of shares constituting the Series A Preferred Stock shall be 200. The stated value per share of Series A Preferred Stock (the "Stated Value") shall be Ten Thousand Dollars ($10,000) per share. 2. RANK. The Series A Preferred Stock shall rank (i) senior to (a) the Company's Common Stock, par value $.001 per share (the "Common Stock") and (b) any class or series of capital stock of the Company hereafter created (collectively, the "Junior Securities") (unless, with the consent of the holders of a majority of the outstanding shares of Series A Preferred Stock, such class or series of capital stock specifically, by its terms ranks senior to or pari passu with the Series A Preferred Stock); (ii) pari passu with any class or series of capital stock of the Company hereafter created which class or series of capital stock, with the consent of the holders of a majority of the outstanding shares of Series A Preferred Stock, specifically, by its terms ranks pari passu with the Series A Preferred Stock (the "Parity Securities"); and (iii) junior to any class or series of capital stock of the Company hereafter created which class of series of capital stock, with the consent of 2 the holders of a majority of the outstanding shares of Series A Preferred Stock, specifically, by its terms ranks senior to the Series A Preferred Stock (the "Senior Securities"). 3. LIQUIDATION PREFERENCE. (a) If the Company shall commence a voluntary case under the Federal bankruptcy laws or any other applicable Federal or state bankruptcy, insolvency or similar law, or consent to the entry of an order for relief in an involuntary case under any law or to the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Company or of any substantial part of its property, or make an assignment of the benefit of its creditors, or admit in writing its inability to pay its debts generally as they become due, or if a decree or order for relief in respect of the Company shall be entered by a court having jurisdiction in the premises in an involuntary case under the Federal Bankruptcy laws or any other applicable Federal or State bankruptcy, insolvency or similar law resulting in the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and any such decree or order shall be unstayed and in effect for a period of sixty (60) consecutive days and, on account of any such event (a "Liquidation Event"), the Company shall liquidate, dissolve or wind up, or if the Company shall otherwise liquidate, dissolve or wind up, no distribution shall be made to the holders of any shares of capital stock of the Corporation (other than Senior Securities) upon liquidation, dissolution or winding up unless prior thereto, the holders of shares of Series A Preferred Stock, shall have received the Liquidation Preference (as defined below) with respect to each share. If upon the occurrence of a Liquidation Event, the assets and funds available for distribution among the holders of the Series A Preferred Stock and holders of Parity Securities shall be insufficient to permit the payment to such holders of the preferential amounts payable thereon, then the entire assets and funds of the Company legally available for distribution to the Series A Preferred Stock and the Parity Securities shall be distributed ratably among such shares in proportion to the ratio that the Liquidation Preference payable on each such share bears to the aggregate Liquidation Preference payable on each such share bears to the aggregate Liquidation Preference payable on all such shares. (b) For purposes hereof, the "Liquidation Preference" with respect to a share of the Series A Preferred Stock shall mean an amount equal to the sum of (i) the Stated Value thereof plus (ii) an amount equal to all accrued but unpaid dividends pursuant to Section 5 hereof ending on the final date of distribution to the holder thereof. -2- 3 4. MERGER, CONSOLIDATION, ETC. At the option of any holder of Series A Preferred Stock, upon (i) the sale, conveyance or disposition of all or substantially all of the assets of the Company, (ii) the effectuation by the Company of a transaction or series of related transactions in which more than 50% of the voting power of the Company is disposed of, or (iii) the consolidation, merger or other business combination of the Company with or into any other Person (as defined below) or Persons when the Company is not the survivor then such Holder may elect (a) to treat such event as an event triggering Mandatory Redemption, or (b) to convert all or any portion of its Series A Preferred Stock into Common Stock pursuant to the provisions hereof, provided that the Date of Conversion shall be deemed to be the business day immediately preceding the occurrence of such event. Such Holder shall have the right to elect any one of the options described in the preceding sentence at any time after it has received notice of the Company's intent to consummate any such transaction until three business days prior to consummation of the events listed in clauses (i) through (iii) above. In the event the Holder elects (a) above, and either prior to consummation by the Company of the events listed in clauses (i) through (iii) above or at the consummation of such events the Company fails to redeem the Holder's Series A Preferred Stock, then the Holder shall have the option to elect either (b) above or may elect to have future conversions of Series A Preferred Stock adjusted pursuant to Section 7(d) hereof. Nothing herein shall limit the Holder's right to pursue actual damages for the Company's failure to redeem the Holder's Series A Preferred Stock in accordance with the terms hereof. In the event that such Holder does not exercise any of the options available herein, or in the event conversion of the Series A Preferred Stock pursuant to clause (b) above is unavailable because the Holder did not make such election prior to the effective date of the event described in clause (iii) above, then such Holder shall be deemed to have elected to undertake the election set forth in clause (a) above as of such third business day. The Company shall notify the Holder at least ten business days prior to the date of effectiveness of the events listed in clauses (i) through (iii) above of its intent to consummate any such transaction. 5. DIVIDENDS. Dividends with respect to each share of Series A Preferred Stock will accrue at the rate of seven percent (7%) per annum of the Stated Value thereof only on shares outstanding at the end of each six-month period commencing December 4, 1996 until either conversion of the Series A Preferred Stock into shares of Common Stock as provided herein or upon payment of the Liquidation Preference as provided herein or redemption of the Series A Preferred Stock upon the maturity thereof and will be based on the actual number of days and months elapsed and computed on a 360-day year consisting of twelve 30-day months. Dividends shall be payable in arrears on the earlier to occur of (i) the date of conversion to Common Stock (as defined in Section 7 below) as provided herein of all or a portion of the Series A Preferred Stock (if the Series A Preferred Stock shall be converted in part, then dividends only with respect to the portion of the Series A Preferred Stock so converted shall be payable at such time) and (ii) -3- 4 December 4, 1999 (the "Scheduled Redemption Date"). Dividends payable with respect to the Series A Preferred Stock are payable to the holder of Series A Preferred Stock registered on the books of the Company (the "Holder") at the option of the Company in the form of either (i) such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts or (ii) the number of full shares of Common Stock which the amount of dividends payable would entitle the Holder to acquire based upon a price per share equal to the Conversion Price (as defined in Section 7 below). The Company shall notify the Holder in writing within two (2) business days of the date that Notice of Conversion by the Holder is received by the Company or three business days prior to the Scheduled Redemption Date, as applicable, of the form in which the Company elects to pay accrued dividends. In the event the Company fails to timely provide such notice, payments of interest shall be in Common Stock. 6. REDEMPTION. (a) Scheduled Redemption. On the Scheduled Redemption Date, upon surrender of Series A Preferred Stock by the Holder to the Company, the Company shall pay to such Holder the Stated Value thereof in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts, together with accrued and unpaid dividends through the Scheduled Redemption Date on such outstanding Series A Preferred Stock as set forth in Section 5 above. (b) Mandatory Redemption. The Series A Preferred Stock shall be subject to redemption (the "Mandatory Redemption") at a price equal to 120% of the Stated Value thereof plus accrued dividends payable thereon (the "Mandatory Redemption Price"), upon the occurrence of the events set forth below. In the event that, (i) upon giving effect to any conversion of Series A Preferred Stock in accordance with the provisions contained in this Certificate of Designations, the Company would be required to issue (when combined with shares of Common Stock issued in connection with all prior conversions of Series A Preferred Stock and shares of Common Stock issued in connection with all prior exercises of warrants issued to the original holders of Series A Preferred Stock) in excess of 20% of the outstanding Common Stock, the Company shall only be required to convert the portion of the Series A Preferred Stock sought to be converted such that the aggregate issuance of Common Stock by the Company (when combined with shares of Common Stock issued in connection with all prior conversions of Series A Preferred Stock and shares of Common Stock issued in connection with all prior exercises of warrants issued to the original holders of Series A Preferred Stock) does not exceed such amount and shall redeem in cash within five business days from the date upon which the Company would have otherwise been obligated to convert the Series A Preferred Stock sought to be converted but not converted, the remaining portion of the Series A Preferred Stock sought to be converted for the Mandatory Redemption -4- 5 Price; (ii) the holder elects to treat the failure of the Company to reserve and keep available shares of Common Stock solely for the purpose of effecting the conversion of the Series A Preferred Stock as provided by Section 7(c) herein, as an event triggering Mandatory Redemption, the Company shall redeem in cash, for the Mandatory Redemption Price, all the Series A Preferred Stock held by such holder, within five business days from the date of election by such holder; (iii) the holder elects to treat the delisting or the suspension of trading of the Common Stock for five consecutive days as provided by Section 9 herein, as an event triggering Mandatory Redemption, the Company shall redeem in cash, for the Mandatory Redemption Price, all Series A Preferred Stock held by such holder, within five business days from the date of election by such holder, and (iv) in the event that a Mandatory Redemption is triggered pursuant to Section 11(b), the Company shall redeem in cash, for the Mandatory Redemption Price, all the Series A Preferred Stock held by such holder, within five business days from the date of election by such holder or the date on which such Mandatory Redemption is automatic, as applicable, in each case subject to surrender of the Series A Preferred Stock by the Holder to the Company. 7. CONVERSION. (a) Conversion Price; Amount. Subject to Section 6(b) and this Section 7, the Holder of Series A Preferred Stock has the right to convert Series A Preferred Stock, in whole or from time to time in part, into shares of Common Stock of the Company. The price at which the Holder may convert Series A Preferred Stock (or any portion thereof) into shares of Common Stock (the "Conversion Price") shall be 85% of the Closing Price (as defined below) of the Common Stock on the Date of Conversion (as defined below). The "Closing Price" with respect to the per share price of Common Stock on any day means the average of the daily low trading prices during the ten consecutive trading days ending on the trading day immediately prior to the Date of Conversion on the Nasdaq National Market or on the principal national securities exchange on which the Common Stock is listed or admitted to trading or, if the Common Stock is not listed or admitted to trading on any national securities exchange or quoted on such national market system, the average of the daily low trading prices during such ten-day period in the over-the-counter market as furnished by any New York Stock Exchange member firm that is selected from time to time by the Company for that purpose. In lieu of any fractional share of Common Stock to which the Holder would otherwise be entitled upon conversion of Series A Preferred Stock (or portion thereof), the number of shares of Common Stock issuable upon conversion of Series A Preferred Stock shall be rounded up or down to the nearest whole number. In the case of a reasonable, good faith dispute between a Holder and the Company with respect to the calculation of the Conversion Price, then, at the option of either the Holder or the Company, the dispute shall be submitted to the American Arbitration Association for resolution according to the then applicable rules thereof. The cost of such proceeding shall be -5- 6 shared 50% by the Holder or Holders involved in the dispute and 50% by the Company, except that each party shall bear its own legal and other expenses. Each Holder of Series A Preferred Stock shall be entitled to convert all or a portion of its Series A Preferred Stock into Common Stock at any time, provided, however, that until 41 days following the date of original issuance of Series A Preferred Stock (or any predecessor security), the Common Stock shall bear the legend (the "Legend") provided in Section 5.02 of the Securities Purchase Agreement of even date herewith (the "Securities Purchase Agreement"). Following such 41 day period, the Common Stock shall be freely tradable, and the certificates representing such Common Stock shall no longer bear such Legend. The last date on which Series A Preferred Stock may be converted is three (3) business days prior to the Scheduled Redemption Date. A Holder may not convert fractional shares of Series A Preferred Stock into Common Stock at any time unless such fractional amount represents a Holder's entire position. Notwithstanding any other provision of this Section 7, as of any date prior to the Scheduled Redemption Date, the aggregate number of shares of Common Stock into which Series A Preferred Stock and all other securities convertible into Common Stock held by a Holder of Series A Preferred Stock and its affiliates shall be convertible, together with the shares of Common Stock then beneficially owned (as defined in the U.S. Securities Exchange Act of 1934, as amended) by such Holder and its affiliates, shall not exceed 4.9% of the total outstanding shares of the Company's Common Stock as of such date. (b) Mechanics of Conversion. To convert any or all of its shares of Series A Preferred Stock (but not a fraction thereof) a Holder must (i) complete and sign the Notice of Conversion set forth in the Securities Purchase Agreement entered into between the Company and the original purchasers of the Series A Preferred Stock (the "Notice of Conversion") and deliver the Notice of Conversion to the Company as herein provided and (ii) on or prior to the date on which delivery of Common Stock is required to be made hereunder, deliver certificates representing Series A Preferred Stock, duly endorsed, to the Company, or, in the case of lost, stolen or destroyed certificates, provide an affidavit satisfactory to the Company with respect to such lost, stolen or destroyed certificates (the "Affidavit"), together with an agreement satisfactory to the Company to indemnify the Company from any loss incurred by it in connection with the certificates representing the Series A Preferred Stock to be converted (the "Indemnity Agreement"). The Holder shall surrender the certificates representing the Series A Preferred Stock to be converted and the Notice of Conversion to the Company (with an advance copy by facsimile of the Notice of Conversion). The date on which Notice of Conversion is given (the "Date of Conversion") shall be deemed to be the date of receipt by the Company of the facsimile of the Notice of Conversion, provided that the certificates representing the Series A Preferred Stock or the Affidavit together with the Indemnity Agreement -6- 7 are received by the Company as promptly as practicable thereafter. The Company shall not be obligated to cause the transfer agent for the Common Stock (the "Transfer Agent") to issue certificates evidencing the shares of Common Stock issuable upon such conversion unless either the certificates representing the Series A Preferred Stock to be converted have been received by the Company or, if the certificates representing the Series A Preferred Stock to be converted have been lost, stolen or destroyed, the aforementioned Affidavit and Indemnity Agreement are received by the Company. The Company shall cause the Transfer Agent to issue and deliver within three (3) business days after delivery to the Company of the certificates representing the Series A Preferred Stock to be converted to the Holder of the certificates representing the Series A Preferred Stock to be converted at the address of the Holder on the books of the Company or as otherwise directed pursuant to the Notice of Conversion, a certificate or certificates for the number of shares of Common Stock to which such Holder shall be entitled as aforesaid. In the event the Transfer Agent shall not timely deliver a certificate or certificates for the number of shares of Common Stock to which such Holder shall be entitled, such Holder shall be entitled to the payments set forth in Section 8. The person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date. Following conversion a Holder's Series A Preferred Stock, or a portion thereof, such Series A Preferred Stock or portion thereof will no longer be outstanding. In the event less than all of a Holder's shares of Series A Preferred Stock are converted, the Company will issue to the Holder a new certificate representing the number of shares of Series A Preferred Stock not converted. (c) Reservation of Stock Issuable Upon Conversion. The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock or shares of Common Stock held in treasury, or both, solely for the purpose of effecting the conversion of Series A Preferred Stock, such number of shares of Common Stock as shall from time to time be sufficient to effect the conversion of Series A Preferred Stock and all other securities of the Company convertible or exchangeable into Common Stock. In the event the Company fails to comply with the foregoing sentence, within five business days of the date on which it becomes aware or should have become aware of such failure, it shall notify the holder of Series A Preferred Stock of such failure. The holder shall then have the option to (i) decrease the percentage of the Closing Price used to calculate the Conversion Price pursuant to Section 7(a), by 2% for the first thirty days following such failure, and by an additional 2% for each successive thirty day period during which such failure continues, or (ii) treat such failure as an event triggering Mandatory Redemption pursuant to Section 6(b). The holder shall have the right to -7- 8 make such an election within five business days of being notified of such failure, and in the event the holder shall not make an election within such time period, the holder shall be deemed to have elected to treat such failure as an event triggering Mandatory Redemption pursuant to Section 6(b) as of such fifth business day. (d) Adjustment to Conversion Price. (i) If, prior to the conversion of the entire outstanding Series A Preferred Stock, the number of outstanding shares of Common Stock is increased by a stock split, stock dividend of shares of Common Stock or other shares of capital stock, reclassification or other similar event, the Conversion Price shall be proportionately reduced, or if the number of outstanding shares of Common Stock is decreased by a combination or reclassification of shares or other similar event, the Conversion Price shall be proportionately increased, in each case, such that the Holder of Series A Preferred Stock will have the right to receive upon conversion of Series A Preferred Stock the number of shares of Common Stock (or other shares of Capital Stock) of the Company (notwithstanding the limitation set forth in the third paragraph of Section 7(a)) which such Holder would have been entitled to receive had the Holder converted Series A Preferred Stock immediately prior to such action. (ii) If, prior to the conversion of all shares of Series A Preferred Stock, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event (a "Conversion Reclassification Event"), as a result of which shares of Common Stock of the Company shall be changed into the same or a different number of shares of the Company or the same or another class or classes of stock or securities of the Company or another entity, then the Holder of Series A Preferred Stock shall thereafter have the right to receive upon conversion of Series A Preferred Stock, upon the basis and the terms and conditions specified herein, such shares of stock and/or securities as may be issued or payable with respect to or in exchange for the number of shares of Common Stock immediately theretofore receivable upon the conversion of Series A Preferred Stock (irrespective of the limitations set forth in Section 7(a)) had such Conversion Reclassification Event not taken place, and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of Series A Preferred Stock such that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of Series A Preferred Stock) shall thereafter be applicable, as nearly as may be practicable in relation to any shares of stock or securities thereafter deliverable upon the conversion of Series A Preferred Stock. The Company shall not effect any Conversion Reclassification Event unless the resulting successor or acquiring entity (if not the Company) assumes by written instrument the obligation to deliver to the Holder of Series A Preferred Stock such shares of stock and/or securities as the Holder of Series A Preferred Stock is entitled to receive upon conversion in accordance with the -8- 9 foregoing. (iii) In addition to the adjustments set forth above, if the Company distributes to all holders of its Common Stock any of its assets or debt securities or any rights or warrants to purchase securities other than Common Stock, then the Conversion Price shall be adjusted in such a manner as shall be agreed to by the Company and the Holder as shall fairly preserve the economic rights and benefits of the Holder as contemplated by the terms of the Series A Preferred Stock set forth herein. In the event that within 15 days of any such event, the Company and the Holder do not reach an agreement as to the appropriate adjustment, the Company shall retain, and pay for, a nationally recognized investment bank or accounting firm to determine the appropriate adjustment as soon as possible, but in any event not later than 45 days from the date of such event. No adjustment shall be required for cash dividends or distributions except to the extent that any such cash dividend or distribution made on any date would, upon payment, cause the aggregate fair market value (as determined in good faith by the Board of Directors, whose determinations shall be conclusive) of all such dividends and distributions which have occurred on such date and during the 365-day period immediately preceding such date (other than any dividends or distributions in respect of which an adjustment to the Conversion Price pursuant to this Section 6(d) had previously been made) exceed the product of (x) .20 times (y) the Closing Price on the record date for such most recent dividend or distribution times (z) the number of shares of Common Stock outstanding on such date. (iv) (A) In the event that the Company shall, at any time after the date of the issuance of Series A Preferred Stock until 180 days after such date, issue shares of Common Stock in a firmly underwritten public offering and the underwriters require the Holder to agree to restrict the sale or transfer of such Holder's shares of Series A Preferred Stock or Conversion Shares for a period of time (the "Blackout Period"), for the period of time commencing on the business day subsequent to the termination of the Blackout Period and terminating in the number of days equal to the number of days of the Blackout Period, the Conversion Price to be in effect shall be the lesser of (i) 110% of the price at which the Common Stock was issued in such firmly underwritten public offering and (ii) the Conversion Price determined in accordance with Section 7, as determined at the time of conversion of the Series A Preferred Stock. (B) In the event that the Company shall, at any time after the date of the issuance of Series A Preferred Stock until 180 days after such date, issue shares of Common Stock in a transaction not subject to the registration requirements the Securities Act of 1933, as amended, the Conversion Price to be in effect for the 30-day period commencing on the first day after such issuance shall be the lesser of (i) 110% of the price at which the Common Stock is issued in such transaction or (ii) the -9- 10 Conversion Price determined in accordance with Section 7, as determined at the time of conversion of the Series A Preferred Stock. (C) In the event that the Company shall at any time after the date of the issuance of Series A Preferred Stock (x) issue shares of Common Stock without consideration (other than in the form of a dividend) at a price per share less than the Closing Price on the date of issue, (y) issue options, rights or warrants to subscribe for or purchase Common Stock (or securities convertible into Common Stock) without consideration or at a price per share (or having a conversion price per share, if a security convertible into Common Stock) less than the Closing Price of the Common Stock on the date of issue or (z) in the case of securities convertible into Common Stock having a conversion price less than the Closing Price of the Common Stock on the date of conversion, then the Conversion Price shall be adjusted (if at all) as follows: for purposes to determining the Closing Price of the Common Stock pursuant to Section 7 in connection with the conversion of Series A Preferred Stock, the daily low trading price of the Common Stock on the day on which such issuance occurs and on all days prior thereto shall be adjusted by multiplying such daily low trading price by a fraction, of which the numerator shall be the number of shares of Common Stock outstanding on the date of such issuance plus the number of shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so to be issued (or the aggregate initial conversion price of the convertible securities so to be issued) would purchase at the Closing Price on the date of such issue and of which the denominator shall be the number of shares of Common Stock outstanding on the date of such issuance plus the number of additional shares of Common Stock to be issued (or into which the convertible securities so to be issued are initially convertible). (D) In the event the Company enters into transactions involving its securities, which transactions satisfy the conditions of subsection (A) or (B) as applicable, and also satisfy the provisions of subsection (C), the adjustment to the Conversion Price shall be as provided in subsection (A) or (B) as applicable, and not subsection (C). In case the subscription price for such securities may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board of Directors of the Company, whose determinations shall be conclusive. Such adjustment shall be made successively whenever the date of such issuance is fixed and, in the event that such shares or option, rights or warrants (or portions thereof) expire without being issued, the Conversion Price shall again be adjusted to reflect such occurrence. (v) If any adjustment under this Section 7(d) would create a fractional share of -10- 11 Common Stock or a right to acquire a fractional share of Common Stock, such fractional share shall be disregarded and the number of shares of Common Stock issuable upon conversion shall be the next higher number of shares. 8. PAYMENTS FOR LATE CONVERSION. The Company acknowledges that the Holder of the Series A Preferred Stock is entitled to assume that it will timely receive shares of Common Stock upon conversion thereof as provided in Section 7 and that the failure of the Transfer Agent to issue shares of Common Stock upon conversion of the Series A Preferred Stock may result in damages to the Holder. Accordingly, the Company agrees to pay to each Holder of Series A Preferred Stock who does not timely receive shares of Common Stock upon conversion thereof, notwithstanding that such Holder may not have actually suffered or has not established that it has suffered damage as a result of such failure to timely deliver shares of Common Stock, an amount in cash for each day that delivery of Common Stock is delinquent equal to $50 per share of Series A Preferred Stock sought to be converted until such delivery shall be seven (7) days delayed whereupon the amount payable in cash for each day thereafter that delivery of Common Stock is delinquent shall equal $200 per share of Series A Preferred Stock sought to be converted. Amounts payable pursuant to this Section 8 shall be paid on the earlier to occur of (i) the date of issuance of Common Stock upon conversion of the Series A Preferred Stock and (ii) each date which is seven days (or a multiple thereof) after the date on which Common Stock was required to be delivered upon conversion of Series A Preferred Stock. Such payments shall be in additional to any liability the Company may otherwise have for failure to timely convert shares of Series A Preferred Stock. 9. OBLIGATION TO MAINTAIN LISTING OF COMMON STOCK. The Company shall maintain the listing of the Common Stock on the Nasdaq National Market until the earlier to occur of (i) the Scheduled Redemption Date and (ii) the date on which no Series A Preferred Stock is outstanding. In the event the Company fails to comply with the foregoing sentence, within five business days of the date on which it becomes aware or should have become aware of such failure, it shall notify the holder of Series A Preferred Stock of such failure. If a holder of Series A Preferred Stock converts any shares of Series A Preferred Stock during such time as the Company's Common Stock is not listed on the Nasdaq National Market, the holder shall then have the option to (i) decrease the percentage of the Closing Price used to calculate the Conversion Price pursuant to Section 7(a), by (x) 2% following such failure, provided the Common Stock is trading on NASDAQ Small Capitalization Market, and by an additional 3% if such failure further results in the Common Stock being traded in the over-the-counter market, or (y) 5% if such failure results in the Common Stock being traded immediately in the over-the-counter market, or (ii) treat such failure as an event triggering Mandatory Redemption pursuant to Section 6(b). The holder shall have the right to make such -11- 12 an election within ten business days of being notified of such failure, and in the event the holder shall not make an election within such time period, the holder shall be deemed to have elected to treat such failure as an event triggering Mandatory Redemption pursuant to Section 6(b) as of such tenth business day. The Conversion Price adjustment described above shall become null and void upon the Company's relisting of its Common Stock on the Nasdaq National Market. 10. REGISTERED HOLDER. The Company may for all purposes treat the registered holders on its books and records of Series A Preferred Stock as the Holder. 11. EVENTS OF DEFAULT. (a) An "Event of Default" under Series A Preferred Stock occurs if: (1) the Company defaults in effecting a conversion of Series A Preferred Stock in accordance with the provisions hereof, or in issuing Common Stock upon exercise of warrants to purchase Common Stock, issued in accordance with the provisions of the Securities Purchase Agreement (the "Warrants"), and such default continues for a period of 10 days; (2) the Company defaults in the dividends on Series A Preferred Stock when the same becomes due and payable or in the payment of amounts due pursuant to Section 8 hereof and such default continues for 10 days; (3) the Company fails to comply in any material respect with any of its agreements in this Certificate of Designations establishing the Series A Preferred Stock, the provisions of the Securities Purchase Agreement, or the Warrants, each dated as of the date of the original issuance of Series A Preferred Stock between the Company and the original Holder of Series A Preferred Stock (other than those obligations referred to in clauses (1) and (2) above) and such failure continues for 30 days after the notice specified below; (4) any of the representations or warranties made by the Company herein, in the Securities Purchase Agreement, or in any certificate or financial or other statements heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Certificate of Designations or the Securities Purchase Agreement shall be false or misleading in any material respect at the time made; (5) indebtedness of the Company or any Significant Subsidiary (as such term is defined in Rule 1-02 of Regulation S-X), is not paid within any applicable grace period after maturity or is accelerated by the holders thereof because of a default, the total amount of such indebtedness unpaid or accelerated exceeds $1,000,000 and such default continues for 10 days after the notice -12- 13 specified below; (6) the Company or any Significant Subsidiary pursuant to or within the meaning of any federal or state bankruptcy, insolvency or other law for the relief of debtors ("Bankruptcy Law"): (A) commences a voluntary case or proceeding; (B) consents to the entry of an order for relief against it in an involuntary case or proceeding; (C) consents to the appointment of any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law (a "Custodian") of it or for any substantial part of its property; or (D) makes a general assignment for the benefit of its creditors; or takes any comparable action under any foreign laws relating to insolvency; (7) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company or any Significant Subsidiary in an involuntary case or proceeding; (B) appoints a Custodian of the Company or any Significant Subsidiary or for any substantial part of its property; or (C) orders the winding up or liquidation of the Company or any Significant Subsidiary; or similar relief is granted under any foreign laws and the order or decree remains unstayed and in effect for 60 days; or (8) any final judgment or decree for the payment of money in excess of $2,000,000 (to the extent not covered by insurance) is rendered against the Company or any Significant Subsidiary and is not discharged and either (A) an enforcement proceeding has been commenced by any creditor upon such judgment or decree or (B) there is a period of 60 days following such judgment during which such judgment or decree is not discharged, waived or the execution thereof stayed and, in the case of (B), such default continues for 10 days after the notice specified below. The foregoing will constitute Events of Default whatever the reason for any -13- 14 such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body. A default under clauses (3), (4), (5) or (8) above is not an Event of Default until the Holder of Series A Preferred Stock notifies the Company of such default and the Company does not cure such default within the time specified after receipt of such notice. Such notice must specify the default, demand that it be remedied and state that such notice is a "Notice of Default". The Company shall deliver to the Holder of Series A Preferred Stock, within 30 days after the occurrence thereof, written notice of any event which with the giving of notice, the lapse of time or both would become an Event of Default under clauses (3), (4), (5) or (8) above, its status and what action the Company is taking or proposes to take with respect thereto. (b) If an Event of Default (other than an Event of Default specified in clauses (5) or (6) above) occurs and is continuing, the Holder of Series A Preferred Stock may elect to treat such Event of Default as triggering Mandatory Redemption. If an Event of Default specified in clauses (5) or (6) above occurs, such Event of Default shall be treated as triggering a Mandatory Redemption without any election or other act on the part of the Holder of Series A Preferred Stock. 12. NO AMENDMENT. No provision of this Certificate of Designation establishing the Series A Preferred Stock may be amended, altered or modified without the written agreement of the Company and the holders in interest of a majority of the outstanding shares of Series A Preferred Stock, provided, however, that this Certificate of Designations may not be amended, altered or modified without the express written consent of 75% of the holders in interest of the shares of Preferred Stock, if any such action would adversely affect the rights of such holders of shares of Preferred Stock. 13. NO VOTING RIGHTS. Except as expressly provided by applicable law, Series A Preferred Stock shall not entitle the Holder hereof to any of the rights of a stockholder of the Company, including without limitation, the right to vote, to receive dividends and other distributions, or to attend any meetings of stockholders or any other proceedings of the Company. 14. BUSINESS DAY DEFINITION. For purposes hereof, the term "business day" shall mean any day on which banks are generally open for business in the City of New York. 15. NOTICE. Any notice or other communication required or permitted to be given hereunder shall be given as provided herein or delivered against receipt if to -14- 15 (i) the Company at Connective Therapeutics, Inc., 3400 West Bayshore Road, Palo Alto, CA 94303 Attention: CEO; Facsimile No.: (415) 843-2899, Attention: Chief Financial Officer and (ii) the Holder of Series A Preferred Stock, to such Holder at its last address as shown on the Series A Preferred Stock register (or to such other address as any such party shall have furnished to the Company in writing). Any notice or other communication mailed or otherwise delivered shall be deemed given at the time of receipt thereof. 16. WAIVER. Any waiver by the Company or the Holder hereof of a breach of any provision of the this Certificate of Designations establishing the Series A Preferred Stock shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of the Certificate of Designations . The failure of the Company or the Holder hereof to insist upon strict adherence to any term of this Certificate of Designations establishing the Series A Preferred Stock on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Certificate of Designations. Any waiver must be in writing. 17. UNENFORCEABLE PROVISIONS. If any provision of this Certificate of Designations establishing the Series A Preferred Stock is invalid, illegal or unenforceable, the remaining provisions of Series A Preferred Stock shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances. IN WITNESS WHEREOF, the undersigned authorized officer of the Company does hereby execute and subscribe this Certificate and does affirm the foregoing as true under the penalties of perjury this 4th day of December, 1996. ______________________________________________ Cynthia Butitta Vice President of Finance and Administration and Chief Financial Officer -15- EX-10.1 3 COMMON STOCK PURCHASE AGREEMENT DATED DEC. 4, 1996 1 EXHIBIT 10.1 CONNECTIVE THERAPEUTICS, INC. COMMON STOCK PURCHASE AGREEMENT DECEMBER 4, 1996 2 TABLE OF CONTENTS Page ---- SECTION 1 - Sale of Common Stock.......................................1 1.1 Sale of Common Stock.........................................1 1.2 Closing Date.................................................1 1.3 Delivery.....................................................1 1.4 Legend.......................................................1 SECTION 2 - Representations and Warranties of the Company..............2 2.1 Organization.................................................2 2.2 Capitalization...............................................2 2.3 Authorization................................................2 2.4 No Conflict..................................................3 2.5 Accuracy of Reports; Financial Statements....................3 2.6 Changes......................................................3 2.7 Registration Rights..........................................4 2.8 Governmental Consents, etc...................................4 2.9 Litigation...................................................4 2.10 Disclosure..................................................4 2.11 Solvency; No Default........................................4 SECTION 3 - Representations and Warranties of the Purchasers...........4 3.1 Investment...................................................4 3.2 Accredited Investor..........................................5 3.3 Authority....................................................5 3.4 Government Consents, etc.....................................5 3.5 Investigation................................................5 SECTION 4 - Conditions to Obligations of the Purchasers................5 4.1 Representations and Warranties Correct.......................5 4.2 Covenants....................................................6 4.3 No Order Pending.............................................6 4.4 No Law Prohibiting or Restricting Such Sale..................6 4.5 Compliance Certificate.......................................6 4.6 Registration Rights Agreement................................6 4.7 Minimum Purchase.............................................6 4.8 Opinion of Company Counsel...................................6 SECTION 5 - Conditions to Obligations of the Company...................6 5.1 Representations and Warranties Correct.......................6 5.2 Performance..................................................6 5.3 No Order Pending.............................................7 5.4 No Law Prohibiting or Restricting Such Sale..................7 3 TABLE OF CONTENTS (Continued) Page ---- 5.5 Registration Rights Agreement................................7 5.6 Minimum Purchase.............................................7 SECTION 6 - Miscellaneous..............................................7 6.1 Governing Law................................................7 6.2 Survival.....................................................7 6.3 Successors and Assigns.......................................7 6.4 Entire Agreement; Amendment..................................7 6.5 Notices and Dates............................................7 6.6 Brokers......................................................8 6.7 Severability.................................................8 6.8 Costs and Expenses...........................................8 6.9 No Third Party Rights........................................8 6.10 Publicity...................................................9 6.11 Captions and Headings.......................................9 6.12 Counterparts................................................9 Exhibits A. Schedule of Purchasers B. Registration Rights Agreement C. Form of Compliance Certificate D. Form of Opinion of Company Counsel -ii- 4 CONNECTIVE THERAPEUTICS, INC. COMMON STOCK PURCHASE AGREEMENT This Common Stock Purchase Agreement (the "Agreement") is entered into as of this 4th day of December, 1996, by and between Connective Therapeutics, Inc., a Delaware corporation (the "Company"), and the investors listed on Exhibit A attached hereto (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 each Purchaser, and each Purchaser will severally purchase from the Company, that number of whole shares (the "Shares") of Common Stock, $0.01 par value, of the Company (the "Common Stock") calculated by dividing the dollar amount set forth opposite such Purchaser's name on Exhibit A by the Purchase Price Per Share. The Purchase Price Per Share shall be $6.1714, which is the lower of (a) an amount equal to eighty-five percent (85%) of the average closing price for the Common Stock on the NASDAQ National Market System ("NMS") for the thirty (30) trading days ending on and including December 3, 1996 or (b) the low bid price for the Company's Common Stock on December 3, 1996. 1.2 CLOSING DATE. The closing of the purchase and sale of the Shares (the "Closing") shall be held at the law offices of Venture Law Group, 2800 Sand Hill Road, Menlo Park, California at 10:00 a.m. on December 4, 1996 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 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 bank. 1.4 LEGEND. The certificate or certificates for the Shares 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 and rights of first refusal herein, such legend to be substantially as follows: "THE SHARES 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 5 EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933." SECTION 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY Except as otherwise set forth on the Schedule of Exceptions delivered to the Purchasers by the Company prior to the Closing Date, the Company hereby represents and warrants to the Purchasers as follows: 2.1 ORGANIZATION. The Company is a corporation duly organized and validly existing under the laws of the State of Delaware and is in good standing under such laws. The Company has requisite corporate power and authority to own, lease and operate its properties and assets, and to carry on its business as presently conducted and as proposed to be conducted. The Company is qualified to do business as a foreign corporation in each jurisdiction in which the ownership of its property or the nature of its business requires such qualification, except where failure to so qualify would not have a materially adverse effect on the Company. 2.2 CAPITALIZATION. The authorized capital stock of the Company consists of 50,000,000 shares of Common Stock, $0.001 par value, of which at December 2, 1996, 7,435,519 shares were issued and outstanding, and 5,000,000 shares of Preferred Stock, $0.001 par value, none of which are issued and outstanding. 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, 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 February 6, 2001; (ii) warrants for the purchase of 22,727 shares of Common Stock at an exercise price of $11.00 per share which warrants expire December 7, 2000; (iii) warrants for the purchase of 73,071 shares of Common Stock at an exercise price of $5.78 which warrants expire December 21, 2002; (iv) 1,500,000 shares reserved for issuance pursuant to the Company's 1994 Stock Plan, of which, at October 31, 1996, options to purchase 142,097 shares had been exercised, options to purchase 1,039,932 shares were outstanding and 317,971 shares remained available for future grant; (v) 100,000 shares reserved for issuance pursuant to the Company's 1995 Employee Stock Purchase Plan, of which, at October 31, 1996, 3,966 shares had been issued; and (vi) 150,000 shares reserved for issuance under the Company's 1995 Directors' Stock Option Plan, of which, at October 31, 1996 , no options had been granted. Except as described in this Section 2.2, there are no other options, warrants, conversion privileges or other contractual rights presently outstanding to purchase or otherwise acquire any authorized but unissued shares of the Company's capital stock or other securities. 2.3 AUTHORIZATION. The Company has all corporate rights, power and authority to enter into this Agreement and the Registration Rights Agreement in the form attached hereto as Exhibit B (the "Registration Rights Agreement") and to consummate the transaction contem- -2- 6 plated 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 Shares and the performance of the Company's obligations hereunder and under the 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 1.8 of the Registration Rights Agreement. Upon their issuance and delivery pursuant to this Agreement, the Shares will be validly issued, fully paid and nonassessable. Except as provided herein, the issuance and sale of the Shares will not give rise to any preemptive rights or rights of first refusal on behalf of any person in existence on the date hereof. 2.4 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 By-laws 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, the effect of which would have a material adverse effect on the Company or materially impair or restrict its power to perform its obligations as contemplated hereby. 2.5 ACCURACY OF REPORTS; FINANCIAL STATEMENTS. All reports required to be filed by the Company from February 1, 1996 (the date of the Company's initial public offering) through the date of this Agreement under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), copies of which have been furnished to each Purchaser (the "SEC Documents"), have been duly filed, were in substantial compliance with the requirements of their respective forms, were complete and correct in all material respects as of the dates at which the information was furnished, and contained (as of such dates) no untrue statement of a material fact nor omitted to state a material fact necessary in order to make the statements made therein in light of the circumstances in which made not misleading. The financial statements of the Company included in the SEC Documents (the "Financial Statements") comply as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto. The Financial Statements have been prepared in accordance with generally accepted accounting principles consistently applied and fairly present the consolidated financial position of the Company and any subsidiaries at the dates thereof and the consolidated results of operations and consolidated cash flows for the periods then ended (subject, in the case of unaudited statements, to normal, recurring adjustments). 2.6 CHANGES. Since September 30, 1996 (the date of the most recent Financial Statements), there has not been any event or condition of any character that might materially and -3- 7 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). 2.7 REGISTRATION RIGHTS. Except as set forth in the Registration Rights Agreement, and the Third Amended Investor Rights Agreement dated as of February 14, 1995, as amended through January 11, 1996 (the "Existing Rights Agreement"), the Company is not under any obligation to register any of its presently outstanding securities or any of its securities which may hereafter be issued. 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 offer, sale or issuance of the Shares, or the consummation of any other transaction contemplated hereby, except such filings as may be required to be made with the Securities and Exchange Commission ("SEC"), the National Association of Securities Dealers, Inc. ("NASD") and in compliance with the securities and blue sky laws in the states in which Shares are offered and/or sold, which compliance will be effected in accordance with such laws. 2.9 LITIGATION. There is no pending or, to the best of the Company's knowledge, threatened lawsuit, administrative proceeding, arbitration, labor dispute or governmental investigation ("Litigation") to which the Company is a party or by which any material portion of its assets, taken as a whole, may be bound and which Litigation, if adversely determined, would have a material adverse effect on the Company's assets, liabilities, financial condition or operations. 2.10 DISCLOSURE. No representation or warranty of the Company contained in this Agreement or the exhibits attached hereto (when read together and taken as a whole), contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein in light of the circumstances under which they were made not misleading. 2.11 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. SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS Each Purchaser hereby represents and warrants to the Company as follows: 3.1 INVESTMENT. Purchaser will acquire the Shares purchased from the Company pursuant to this Agreement for investment for its own account, not as a nominee or agent and not with a view to or for resale in connection with any distribution thereof. It understands that the Shares purchased by such Purchaser from the Company pursuant to this Agreement have not been -4- 8 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 in Rule 501(a) under the Securities Act of 1933, as amended (the "Securities Act"). Each Purchaser is aware of the Company's business affairs and financial condition and has had access to and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Shares. 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 Shares. 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 1.8 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 Shares, 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 and such Purchaser has received satisfactory responses from management of the Company to such Purchaser's inquiries. 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 -5- 9 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 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 Shares (except as otherwise provided in this Agreement). 4.5 COMPLIANCE CERTIFICATE. The Company shall have delivered to the Purchasers a certificate in the form of Exhibit C hereto, executed on behalf of the Company by a duly authorized officer of the Company, 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 parties shall have executed and delivered the Registration Rights Agreement in the form attached hereto as Exhibit B. 4.7 MINIMUM PURCHASE. The Company shall have received executed signature pages to this Agreement for the purchase of not less than $6,000,000. 4.8 OPINION OF COMPANY COUNSEL. The Purchasers shall have received from Venture Law Group, counsel for the Company, an opinion, dated as of the Closing, in substantially the form of Exhibit D. 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 Purchasers in Section 3 hereof shall be true and correct on and as of the Closing Date with the same effect 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. -6- 10 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 Shares (except as otherwise provided in this Agreement). 5.5 REGISTRATION RIGHTS AGREEMENT. On or before the Closing, the parties shall have executed and delivered the Registration Rights Agreement, in the form attached hereto as Exhibit B. 5.6 MINIMUM PURCHASE. The Company shall have received executed signature pages to this Agreement for the purchase of not less than $6,000,000. SECTION 6 MISCELLANEOUS. 6.1 GOVERNING LAW. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Delaware, 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, for a period of one (1) year following the Closing Date. 6.3 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. 6.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement, the Registration Rights Agreement and the other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the parties with regard to the subject matter hereof and thereof and supersede all prior agreements and understandings among the parties relating to the subject matter hereof. Neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the party against which enforcement of any such amendment, waiver, discharge or termination is sought. 6.5 NOTICES AND DATES. Any notice or other communication given under this Agreement shall be sufficient if in writing and sent by overnight courier (with a confirmation by fax) to a party at its address set forth below (or at such other address as shall be designated for such purpose by such party in a written notice to the other party hereto): -7- 11 (a) if to the Company, to: Connective Therapeutics, Inc. 3400 West Bayshore Road Palo Alto, California 94303 Attention: President with a copy to: Venture Law Group 2800 Sand Hill Road Menlo Park, California 94025 Attention: Joshua L. Green (b) if to the Purchasers, to the addresses set forth on Exhibit A. All such notices and communications shall be effective when received by the addressee. 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. 6.6 BROKERS. (a) 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 hereby 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. Each party hereto shall pay its own costs and expenses incurred in connection herewith, including the fees of its counsel, auditors and other representatives, whether or not the transactions contemplated herein are consummated. 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. -8- 12 6.10 PUBLICITY. The Purchasers and the Company shall not issue any public statement concerning the transactions contemplated by this Agreement without the other party's reasonable prior written consent; provided, however, that either party may disclose the transaction or the terms hereof or thereof from time to time without the other party's approval if (i) such approval has been requested and not received and such party concludes (after consulting with counsel) that it is required by law to disclose the transaction or the terms thereof or (ii) to the extent that similar disclosure has been previously approved pursuant to this Section 6.10. 6.11 CAPTIONS AND HEADINGS. The captions and headings used herein are for convenience and ease of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. 6.12 COUNTERPARTS. This Agreement may be executed in counterparts, and each such counterpart shall be deemed an original for all purposes. -9- 13 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective authorized officers as of the date aforesaid. CONNECTIVE THERAPEUTICS, INC. By:_________________________________________ Its:________________________________________ PURCHASERS: INTEGRAL CAPITAL PARTNERS III, L.P. by Integral Capital Management III, L.P. its General Partner By:_________________________________________ its General Partner INTEGRAL CAPITAL PARTNERS INTERNATIONAL III, L.P. by Integral Capital Management III, L.P. its Investment General Partner By:_________________________________________ its General Partner NEW YORK LIFE INSURANCE COMPANY By:_________________________________________ Its:________________________________________ -10- 14 WPG LIFE SCIENCES FUND, L.P. by Weiss, Peck & Greer, L.L.C. its General Partner By:_________________________________________ Its:________________________________________ WPG INSTITUTIONAL LIFE SCIENCES FUND, L.P. by Weiss, Peck & Greer, L.L.C. its General Partner By:_________________________________________ Its:________________________________________ INVESTMENT COMPANY FOR FLANDERS By:_________________________________________ Its:________________________________________ [signature page to Connective Therapeutics, Inc. Common Stock Purchase Agreement] -11- 15 EXHIBIT A SCHEDULE OF PURCHASERS
No. of Shares of Common Stock Purchase Price* --------------- --------------- Integral Capital Partners III, L.P. 261,820 $1,615,795.95 2750 Sand Hill Road Menlo Park, California 94025 Attn: John A. Powell Integral Capital Partners International 62,255 $ 384,200.51 III, L.P. 2750 Sand Hill Road Menlo Park, California 94025 Attn: John A. Powell New York Life Insurance Company 324,075 $1,999,996.46 51 Madison Avenue New York, NY 10010 Attn: Dominique O. Semon Venture Capital WPG Life Sciences Fund, L.P. 121,528 $ 749,997.90 One New York Plaza New York, NY 10004-1950 Attn: Elizabeth Greetham WPG Institutional Life Sciences 40,509 $ 249,997.24 Fund, L.P. One New York Plaza New York, NY 10004-1950 Attn: Elizabeth Greetham GIMV 162,037 $ 999,995.14 Karel Oornsstraat 37 2018 Antwerpen, Belgium Attn: Patrick Van Beneden Senior Investment Manager ------- ------------- TOTAL 972,224 $5,999,983.20
- ------------------ * Purchase price rounded to nearest whole cent based upon price per share of $6.1714. 16 EXHIBIT B REGISTRATION RIGHTS AGREEMENT PLEASE SEE EXHIBIT 10.2 TO THE FORM 8-K 17 EXHIBIT C CONNECTIVE THERAPEUTICS, INC. COMPLIANCE CERTIFICATE The undersigned, Thomas G. Wiggans, hereby certifies as follows: 1. The undersigned is the duly elected President and Chief Executive Officer of Connective Therapeutics, Inc., 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 December 4, 1996 are true and correct in all material respects as though made on and as of the date hereof. 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 4th day of December, 1996. ___________________________________ Thomas G. Wiggans, President and Chief Executive Officer 18 EXHIBIT D OPINION OF COMPANY COUNSEL 19 December 4, 1996 To the Purchasers of Common Stock of Connective Therapeutics, Inc. Listed on Exhibit A to the Common Stock Purchase Agreement Ladies and Gentlemen: We have acted as counsel for Connective Therapeutics, Inc., a Delaware corporation (the "Company"), in connection with the sale by the Company to you of shares of the Company's Common Stock (the "Stock") pursuant to the Common Stock Purchase Agreement (the "Purchase Agreement") dated December 4, 1996 among the Company and the persons listed on Exhibit A attached thereto (the "Purchasers"), and the negotiation, execution and delivery by the Company of the Registration Rights Agreement dated December 4, 1996 (the "Registration Rights Agreement"). This opinion is given to you in compliance with Section 4.8 of the Purchase Agreement. The Purchase Agreement and the Registration Rights Agreement are referred to herein collectively as the "Agreements." Unless defined herein, capitalized terms have the meaning given them in the Agreements. In rendering this opinion, we have made such legal and factual examinations and inquiries as we have deemed advisable or necessary for the purpose of rendering this opinion. In addition, we have examined originals or copies of documents, corporate records and other writings which we consider relevant for the purposes of this opinion. In such examination, we have assumed the genuineness of all signatures on original documents, the conformity to original documents of all copies submitted to us and the due execution and delivery of all documents where due execution and delivery are a prerequisite to the effectiveness thereof. In making our examination of documents executed by entities other than the Company, we have assumed that each other entity had the power to enter into and perform all its obligations thereunder and we also have assumed the due authorization by each such other entity of all requisite actions and the due execution and delivery of such documents by each such other entity. Whenever our opinion herein with respect to the existence or absence of facts is indicated to be based on our knowledge or belief, it is intended to signify that in the course of our representation of the Company in connection with the transactions referred to in the first paragraph hereof, no information has come to the attention of Joshua L. Green, 20 December 4, 1996 Page 2 Stanley F. Pierson or Charles L. Moore (the only lawyers at Venture Law Group working on this transaction) that would give them actual knowledge of the existence or absence of such facts. We have not undertaken any independent investigation to determine the existence or absence of such facts, and no inference as to our knowledge of the existence or absence of such facts should be drawn from the fact of our representation of the Company. In rendering the opinion set forth in paragraph (a) below as to the existence and good standing of the Company in Delaware, we have relied exclusively on a certificate of a recent date of public officials of the State of Delaware. In rendering the opinion expressed in paragraph (g) below, we have assumed and express no opinion with respect to the following: (i) that the representations and warranties of the Purchasers set forth in the Agreements are true and complete; and (ii) the accuracy and completeness of the information provided by the Company to the Purchasers in connection with such offer and sale. We have also assumed the accuracy of, and have relied upon, the Company's representations to us that the Company has made no offer to sell the Shares by means of any "general solicitation," as defined in Regulation D under the Securities Act or the "publication of any advertisement" (as defined under the California Corporate Securities Act of 1968, as amended, and the regulations thereunder). The opinions hereinafter expressed are subject to the following further qualifications: (i) Our opinions are qualified by the effect of bankruptcy, insolvency, reorganization, arrangement, moratorium or other similar laws relating to or affecting the rights of creditors generally, including, without limitation, laws relating to fraudulent transfers or conveyances, preferences and equitable subordination; (ii) Our opinions are qualified by the limitations imposed by general principles of equity upon the availability of equitable remedies or the enforcement of provisions of the Agreements; and the effect of judicial decisions which have held that certain provisions are unenforceable when their enforcement would violate the implied covenant of good faith and fair dealing, or would be commercially unreasonable, or where their breach is not material; (iii) A requirement that provisions of the Agreements may only be waived in writing will not be enforced to the extent an oral agreement has been executed modifying provisions of the Agreements; 21 December 4, 1996 Page 3 (iv) Our opinion is based upon current statutes, rules, regulations, cases and official interpretive opinions, and it covers certain items that are not directly or definitively addressed by such authorities; (v) We express no opinion as to the effect of judicial decisions which may permit the introduction of extrinsic evidence to modify the terms or the interpretation of the Agreements; (vi) We express no opinion as to the enforceability of provisions of the Agreements which purport to establish evidentiary standards or to make determinations conclusive; (vii) We express no opinion as to the enforceability of provisions of the Agreements expressly or by implication waiving broadly or vaguely stated rights, or waiving rights granted by law where such waivers are against public policy; (viii) We express no opinion as to the enforceability of provisions of the Agreements providing that rights or remedies are not exclusive, that every right or remedy is cumulative, or that the election of a particular remedy or remedies does not preclude recourse to one or more other remedies. (ix) We express no opinion as to compliance with applicable antifraud statutes, rules or regulations of applicable state and federal laws concerning the issuance or sale of securities; and (x) Provisions in the Registration Rights Agreement purporting to provide for indemnification and contribution under certain circumstances may be unenforceable. Based upon and subject to the foregoing, and except as set forth in the Schedule of Exceptions, we are of the opinion that: (a) The Company is a corporation duly organized and existing under the laws of the State of Delaware, and is in good standing under such laws. The Company has the requisite corporate power to own and operate its properties and assets, and to carry on its business as presently conducted. (b) The Company has the requisite corporate power to execute and deliver the Agreements, to sell and issue the Shares thereunder and to carry out and perform its obligations under the terms of the Agreements. 22 December 4, 1996 Page 4 (c) All corporate action on the part of the Company, its directors and shareholders necessary for the authorization, execution, delivery and performance of the Agreements by the Company, the authorization, sale, issuance and delivery of the Shares and the performance of all of the Company's obligations under the Agreements has been taken. The Agreements constitute valid and binding obligations of the Company enforceable in accordance with their terms. The Shares have been validly issued, and are fully paid and nonassessable. (d) The execution, delivery and performance of and compliance with the Agreements, and the issuance of the Shares, have not resulted and will not result in any material violation of, or conflict with, or constitute a material default under, (i) the Company's Certificate of Incorporation or Bylaws or (ii) any statute, rule or regulation or any judgment or order known to us of Federal or California law to which the Company is a party, or by which the Company is bound. (e) To our knowledge, there are no actions, suits, proceedings or investigations pending against the Company, or its properties before any court or governmental agency that, either in any case or in the aggregate, might result in any materially adverse change in the business or financial condition of the Company or in any material liability on the part of the Company, and none that questions the validity of the Agreements or any action taken or to be taken in connection therewith. (f) 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 the Agreements, or the offer, sale or issuance of the Shares, or the consummation of any other transaction contemplated by the Agreements, except the filings that may be required under state securities law. (g) The offer, sale and issuance of the Shares to be issued in conformity with the terms of the Purchase Agreement, constitute transactions exempt from the registration requirements of Section 5 of the Securities Act. We express no opinion as to matters governed by any laws other than the laws of the State of California the General Corporation Law of the State of Delaware and the federal law of the United States of America. We express no opinion as to whether the laws of any particular jurisdiction apply, and no opinion to the extent that the laws of any jurisdiction other than those identified above are applicable to the Agreements or the transactions contemplated thereby. 23 December 4, 1996 Page 5 This opinion is furnished to you pursuant to Section 4.8 of the Purchase Agreement and is solely for your benefit and may not be relied on by, nor may copies be delivered to, any other person without our prior written consent. We assume no obligation to inform you of any facts, circumstances, events or changes in the law that may hereafter be brought to our attention that may alter, affect or modify the opinion expressed herein. Sincerely, VENTURE LAW GROUP, A Professional Corporation jlg EX-10.2 4 REGISTRATION RIGHTS AGREEMENT DATED DEC. 4, 1996 1 EXHIBIT 10.2 CONNECTIVE THERAPEUTICS, INC. REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (the "Agreement") is made as of the 4th day of December, 1996, by and among Connective Therapeutics, Inc., a Delaware corporation (the "Company") and the investors listed on Attachment A hereto, each of which is herein referred to as an "Investor." RECITALS The Company and the Investors have entered into a Common Stock Purchase Agreement (the "Purchase Agreement") of even date herewith pursuant to which the Company desires to sell to the Investors and the Investors desire to purchase from the Company shares of the Company's Common Stock. 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 shares of the Company's Common Stock acquired by the Investors subject to the Purchase Agreement. The Company and the Investors each desire to induce the Investors to purchase shares of Common Stock pursuant to the Purchase Agreement by agreeing to the terms and conditions set forth herein. AGREEMENT The parties hereby agree as follows: 1. REGISTRATION RIGHTS. The Company and the Investors covenant and agree as follows: 1.1 DEFINITIONS. For purposes of this Section 1: (a) The terms "register," "registered," and "registration" refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act of 1933, as amended (the "Act"), and the declaration or ordering of effectiveness of such registration statement or document; (b) The term "Registrable Securities" means (i) the shares of Common Stock issuable or issued in connection with the Purchase Agreement (such shares of Common Stock are collectively referred to hereinafter 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, Common Stock or other securities shall only be treated as Registrable Securities if and so long as they have not been (A) sold to or through a broker or dealer or underwriter in a public 2 distribution or a public securities transaction, or (B) sold in a transaction exempt from the registration and prospectus delivery requirements of the Act under Section 4(1) thereof so that all transfer restrictions, and restrictive legends with respect thereto, if any, are removed upon the consummation of such sale; (c) The number of shares of "Registrable Securities then outstanding" shall be determined by the number of shares of Common Stock outstanding which are, and the number of shares of Common Stock issuable pursuant to then exercisable or convertible securities which are, Registrable Securities; (d) The term "Holder" means any person owning or having the right to acquire Registrable Securities or any assignee thereof in accordance with this Agreement (e) The term "Form S-3" means such form under the Act as in effect on the date hereof or any successor form under the Act; and (f) The term "SEC" means the Securities and Exchange Commission. 1.2 FORM S-3 REGISTRATION. Subject to the terms and conditions of this Agreement, on February 15, 1997 (the "S-3 Date") the Company will file with the SEC and use its best efforts to effect a registration on Form S-3 and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by the Holders. Accordingly, the Company will: (a) promptly give written notice of the registration, and any related qualification or compliance, to all Holders; and (b) as soon as practicable, effect such registration and all such qualifications and compliances as may be necessary and as would permit or facilitate the sale and distribution of all of the Holders' Registrable Securities; provided, however, that the Company shall not be obligated to effect any such registration, qualification or compliance, pursuant to this Section 1.2: if the Company shall furnish to the Holders a certificate signed by the President of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such Form S-3 Registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Form S-3 registration statement for a reasonable period of time, which shall not exceed 60 days after the S-3 Date under this Section 1.2. Provided however, that the Company shall not defer the filing of the Form S-3 contemplated in this Section 1.2 (b) on more than one (1) occasion. (c) Subject to the foregoing, the Company shall file a registration statement covering the Registrable Securities on the S-3 Date. 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 -2- 3 excluding any underwriters' discounts or commissions and any fees and disbursements of any counsel for the selling Holders (such fees or discounts, if any, to be borne pro rata by the Holders participating in the registration). 1.3 OBLIGATIONS OF THE COMPANY. Whenever required under this Section 1 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible: (a) Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective and to keep such registration statement effective until December 4, 1999. (b) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Act with respect to the disposition of all securities covered by such registration statement until December 4, 1999. (c) Furnish to the Holders such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them. (d) Use its best efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. (e) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering. Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement. (f) Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, such obligation to continue until December 4, 1999. (g) Cause all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange on which similar securities issued by the Company are then listed. -3- 4 (h) Provide a transfer agent and registrar for all Registrable Securities registered pursuant hereunder and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration. 1.4 RESTRICTIONS ON AND PROCEDURE FOR SALES. (a) Each Holder agrees to the following: (i) Notice to Company. If any Holder shall propose to sell any Shares, the Holder shall notify the Company of its intent to do so [ON OR BEFORE THE DATE OF SUCH SALE] (the "Notice of Sale"), and the provision of the Notice of Sale to the Company shall conclusively be deemed to establish an agreement by such Holder to comply with the registration provisions herein described. The Notice of Sale shall be deemed to constitute a representation that any information previously supplied by such Holder is accurate as of the date of such Notice of Sale. (ii) Notice of Sale. The Notice of Sale in substantially the form attached as Attachment B shall be given in accordance with the provisions of Section 2.5 hereof. However, the Holder may give the Notice of Sale orally by telephoning Cynthia M. Butitta or the then current Chief Financial Officer at the Company at (415) 843-2800. An oral Notice of Sale shall be deemed to have been received only at such time as the Selling Holder speaks directly with Cynthia M. Butitta (or such then current Chief Financial Officer). In addition, an oral Notice of Sale shall only be deemed effective if it is followed by a written Notice of Sale received by the Company by personal delivery or facsimile within twenty-four (24) hours after giving the oral Notice of Sale. (iii) Delay of Sale. The Company may refuse to permit the Holder to resell any Shares for a specified period of time; provided, however, that in order to exercise this right, the Company must deliver a certificate in writing to the Holder to the effect that a delay in such sale is necessary because a sale pursuant to the Registration Statement in its then current form could constitute a violation of the federal securities laws, and provided further that in no event shall such delay exceed thirty (30) trading days. During any suspension as contemplated by this Section 1.4 (a)(iii), the Company will not allow any of its officers or directors to buy or sell shares of the Company's securities. (b) Documents Required for Transfer. Each Holder making a sale of Shares shall be required to submit the following documents to the transfer agent (either directly or indirectly), with copies to the Company, in order to effect the transfer: (i) Original stock certificate representing the Shares to be sold; (ii) Originally executed stock power in substantially the form of Attachment C hereto, with signature guaranteed; and -4- 5 (iii) Originally executed Seller's Representation Certificate in the form of Attachment D hereto. (c) Representations of Holders. Each Holder hereby represents to and covenants with the Company that, during the period in which any registration statement effected pursuant to Section 1.2 remains effective, such Holder will: (i) not engage in any stabilization activity in connection with any of the Company's securities; (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"). (d) Information for Use in Registration Statement. Each Holder represents and warrants to the Company that such Holder has completed the information requested by the Selling Holder's Questionnaire attached as Attachment E hereto (the "Questionnaire"), and further represents and warrants to the Company that all information provided by such Holder in the Questionnaire is true, accurate and complete. Each Holder understands that the written information in the Questionnaire and all written representations made in this Agreement are being provided to the Company specifically for use in, or in connection with, the Registration Statement and the Prospectus, and has executed this Agreement with such knowledge. 1.5 FURNISH INFORMATION. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 1 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Holder's Registrable Securities. 1.6 UNDERWRITING REQUIREMENTS. In connection with any offering involving an underwriting of shares of the Company's capital stock, the Company shall not be required to include any of the Holders' securities in such underwriting unless they accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by it (or by other persons entitled to select the underwriters), and then only in such quantity as the underwriters determine in their sole discretion will not jeopardize the success of the offering by the Company. If the total amount of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the amount of securities sold other than by the Company that the underwriters determine in their sole discretion is compatible with the success of the offering, then the Company shall be required to include in the offering only that -5- 6 number of such securities, including Registrable Securities, which the underwriters determine in their sole discretion will not jeopardize the success of the offering (the securities so included to be apportioned pro rata among the selling stockholders according to the total amount of securities entitled to be included therein owned by each selling stockholder or in such other proportions as shall mutually be agreed to by such selling stockholders). 1.7 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 controversy that might arise with respect to the interpretation or implementation of this Section 1. 1.8 INDEMNIFICATION. In the event any Registrable Securities are included in a registration statement under this Section 1: (a) To the extent permitted by law, the Company will indemnify and hold harmless each Holder, any underwriter (as defined in the Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Act or the Exchange Act, against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a "Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Act, the 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 1.8(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability, or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by any such Holder, underwriter or controlling person. (b) To the extent permitted by law, each selling Holder will indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the registration statement, each person, if any, who controls the Company within the meaning of the Act, any underwriter, any other Holder selling securities in such registration statement and any controlling person of any such underwriter or other Holder, against any losses, claims, damages, or liabilities (joint or several) to which any of the foregoing persons may become subject, under the Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance -6- 7 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 1.8(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 1.8(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 1.8(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 1.8 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 1.8, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties which may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the reasonable fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 1.8, 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 1.8. (d) If the indemnification provided for in this Section 1.8 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 1.8(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. -7- 8 (e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control. In no event shall any contribution by a Holder for indemnification exceed the net proceeds from the offering received by such Holder, except in the case of willful fraud by such Holder. (f) The obligations of the Company and Holders under this Section 1.8 shall survive the completion of any offering of Registrable Securities in a registration statement under this Section 1. 1.9 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to making available to the Holders the benefits of Rule 144 promulgated under the Act 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 SEC Rule 144, so long as the Company remains subject to the periodic reporting requirements under Sections 13 or 15(d) of the Exchange Act; (b) take such action, including the voluntary registration of its Common Stock under Section 12 of the Exchange Act, as is necessary to enable the Holders to utilize Form S-3 for the sale of their Registrable Securities, such action to be taken as soon as practicable after the end of the fiscal year in which the first registration statement filed by the Company for the offering of its securities to the general public is declared effective; (c) file with the SEC in a timely manner all reports and other documents required of the Company under the Act and the Exchange Act; and (d) furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144, the Act and the Exchange Act, or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such form. 1.10 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company to register Registrable Securities pursuant to this Section 1 may be assigned (but only with all related obligations) by a Holder to a transferee or assignee of at least 10,000 shares of such securities, provided the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned; and provided, further, that such assignment shall be effective only if immediately following such transfer the further disposition of such securities -8- 9 by the transferee or assignee is restricted under the Act. For the purposes of determining the number of shares of Registrable Securities held by a transferee or assignee, the holdings of transferees and assignees of a partnership who are partners or retired partners of such partnership (including spouses and ancestors, lineal descendants and siblings of such partners or spouses who acquire Registrable Securities by gift, will or intestate succession) shall be aggregated together and with the partnership; provided that all assignees and transferees who would not qualify individually for assignment of registration rights shall have a single attorney-in-fact for the purpose of exercising any rights, receiving notices or taking any action under Section 1. 2. MISCELLANEOUS. 2.1 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties (including transferees of any of the Stock). 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 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, 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 or sent by telegram or fax, or forty-eight (48) hours after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, and addressed to the party to be notified at such party's address as set forth below or on Attachment A hereto or as subsequently modified by written notice. 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 -9- 10 amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of any Registrable Securities then outstanding, each future holder of all such Registrable Securities, and the Company. 2.8 SEVERABILITY. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (x) such provision shall be excluded from this Agreement, (y) the balance of the Agreement shall be interpreted as if such provision were so excluded and (z) the balance of the Agreement shall be enforceable in accordance with its terms. [Signature Page Follows] -10- 11 The parties have executed this Registration Rights Agreement as of the date first above written. COMPANY: INVESTORS: CONNECTIVE THERAPEUTICS, INC. INTEGRAL CAPITAL PARTNERS III, L.P. by Integral Capital Management III, L.P. By:_________________________________ its General Partner Title:______________________________ By:_____________________________________ its General Partner INTEGRAL CAPITAL PARTNERS INTERNATIONAL III, L.P. by Integral Capital Management III, L.P. its Investment General Partner By______________________________________ its General Partner NEW YORK LIFE INSURANCE COMPANY By:_____________________________________ Its:____________________________________ WPG LIFE SCIENCES FUND, L.P. by Weiss, Peck & Greer, L.L.C. its General Partner By:_____________________________________ Its:____________________________________ -11- 12 WPG INSTITUTIONAL LIFE SCIENCES FUND, L.P. by Weiss, Peck & Greer, L.L.C. its General Partner By:_____________________________________ Its:____________________________________ INVESTMENT COMPANY FOR FLANDERS By:_____________________________________ Its:____________________________________ [signature page to Connective Therapeutics, Inc. Registration Rights Agreement] -12- 13 ATTACHMENT A INVESTORS
No. of Shares Name/Address of Common Stock - ------------ --------------- Integral Capital Partners III, L.P. 261,820 2750 Sand Hill Road Menlo Park, California 94025 Attn: John A. Powell Integral Capital Partners International 62,255 III, L.P. 2750 Sand Hill Road Menlo Park, California 94025 Attn: John A. Powell New York Life Insurance Company 324,075 51 Madison Avenue New York, NY 10010 Attn: Dominique O. Semon Venture Capital WPG Life Sciences Fund, L.P. 121,528 One New York Plaza New York, NY 10004-1950 Attn: Elizabeth Greetham WPG Institutional Life Sciences 40,509 Fund, L.P. One New York Plaza New York, NY 10004-1950 Attn: Elizabeth Greetham GIMV 162,037 Karel Oornsstraat 37 2018 Antwerpen, Belgium Attn: Patrick Van Beneden Senior Investment Manager
14 ATTACHMENT B CONNECTIVE THERAPEUTICS, INC. NOTICE OF SALE Pursuant to the Registration Rights Agreement dated as of December 4, 1996 among Connective Therapeutics, Inc. (the "Company"), the undersigned and certain stockholders of the Company, the undersigned hereby gives notice to the Company of the undersigned's intent to sell _______ shares of the Company's Common Stock registered pursuant to the Registration Statement on (File No. __________). Dated: ______________, 199__ By:___________________________________ (signature) Name:_________________________________ (print) Title:________________________________ (if applicable) [NOTE: THIS NOTICE OF SALE MUST BE COMPLETED AND DELIVERED (VIA PERSONAL DELIVERY OR FACSIMILE) TO THE CHIEF FINANCIAL OFFICER OF THE COMPANY ON OR BEFORE THE DATE OF SALE OF THE SHARES OF THE COMPANY'S COMMON STOCK REGISTERED PURSUANT TO THE REGISTRATION STATEMENT.] 15 ATTACHMENT C CONNECTIVE THERAPEUTICS, INC. STOCK POWER FOR VALUE RECEIVED, and pursuant to that certain Registration Rights Agreement dated as of December 4, 1996 among the undersigned ("Seller"), Connective Therapeutics, Inc., a Delaware corporation (the "Company") and the stockholders named therein, and in accordance with the Notice of Sale dated ___________, 199__ from the Seller to the Company, Seller hereby sells, assigns and transfers unto _______________________________________________________, ______________________________________________________________ (________) shares of the Company's Common Stock, standing in Seller's name on the books of the Company represented by Certificate No. ___, herewith and does hereby irrevocably constitute and appoint the transfer agent of the Company to transfer said stock on the books of the Company with full power of substitution in the premises. Dated: ____________________, 199__ By: _____________________________ (signature) Name: ___________________________ (print) Title: __________________________ (if applicable) THE SIGNATURE(S) ON THIS STOCK POWER MUST CORRESPOND WITH THE NAME(S) ON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE. TRUSTEES, OFFICERS AND OTHER FIDUCIARIES OR AGENTS SHOULD INDICATE THEIR TITLE OR CAPACITY. [NOTE: THIS STOCK POWER MUST BE COMPLETED AND DELIVERED (TOGETHER WITH YOUR STOCK CERTIFICATE AND SELLER'S REPRESENTATION CERTIFICATE) TO THE TRANSFER AGENT (WITH COPIES TO THE COMPANY) PRIOR TO ANY SALE.] 16 ATTACHMENT D CONNECTIVE THERAPEUTICS, INC. SELLER'S REPRESENTATION CERTIFICATE Pursuant to the Registration Rights Agreement dated as of December 4, 1996 among Connective Therapeutics, Inc. (the "Company"), the undersigned and certain stockholders of the Company (the "Agreement"), the undersigned hereby represents and warrants to the Company and _________________, as the Company's Transfer Agent, that the undersigned has complied with all terms and conditions of the Agreement relating to the sale of the shares of the Company's Common Stock registered pursuant to the Registration Statement (File No. ___________________) and described in the Prospectus contained in the Registration Statement, as amended and supplemented (the "Prospectus"), and that all information relating to the undersigned contained in the Prospectus is true, accurate and complete as of the date hereof. Dated: _______________, 199__ By:___________________________________ (signature) Name:_________________________________ (print) Title:________________________________ (if applicable) [NOTE: THIS SELLER'S REPRESENTATION CERTIFICATE MUST BE COMPLETED AND DELIVERED (TOGETHER WITH YOUR STOCK CERTIFICATE AND STOCK POWER) TO THE TRANSFER AGENT (WITH COPIES TO THE COMPANY) PRIOR TO ANY SALE.] 17 ATTACHMENT E CONNECTIVE THERAPEUTICS, INC. SELLING STOCKHOLDER'S QUESTIONNAIRE In connection with the Connective Therapeutics, Inc. (the "Company") Registration Statement (File No. ___________) registering certain outstanding 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, 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: ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ EX-10.3 5 SECURITIES PURCHASE AGREEMENT DATED DEC. 4, 1996 1 EXHIBIT 10.3 SECURITIES PURCHASE AGREEMENT BETWEEN CONNECTIVE THERAPEUTICS, INC. AND EACH OF THE PURCHASERS EXECUTING A COUNTERPART OF THE SIGNATURE PAGE HERETO DATED AS OF DECEMBER 4, 1996 2 SECURITIES PURCHASE AGREEMENT SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of December 4, 1996, between Connective Therapeutics, Inc., a Delaware corporation (the "Company"), and each purchaser executing a counterpart of the signature page hereto (each, a "Purchaser" and collectively, the "Purchasers"). W I T N E S S E T H : WHEREAS, the Company proposes to issue and sell in accordance with Regulation S (as hereinafter defined) under the Securities Act (as hereinafter defined) to the Purchasers, and the Purchasers desire to purchase from the Company (i) an aggregate of 200 shares of the Company's 7% Convertible Preferred Stock Series A (the "Preferred Stock"), on the terms and subject to the conditions set forth herein, and (ii) warrants to purchase up to an aggregate of 20,000 shares of the Company's Common Stock in the form attached as Exhibit A to this Agreement (individually a "Warrant" and collectively the "Warrants"). NOW THEREFORE, in consideration of the premises, the representations, warranties, covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. CERTAIN DEFINITIONS. For purposes of this Agreement, the following terms shall have the following meanings: "Affiliate" of a Person means a Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the first mentioned Person. The term "control" (including the terms "controlling," "controlled by" and "under common control with") means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise. "Capital Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated) of corporate stock, including each class of common stock and preferred stock of such Person. "Certificate of Designations" means the Certificate of Designations establishing the terms of the Preferred Stock. "Closing" has the meaning set forth in Section 2.02. 3 "Commission" means the United States Securities and Exchange Commission. "Common Stock" means the common stock, $.001 par value per share, of the Company. "Conversion Shares" means the shares of Common Stock issuable upon conversion of the Preferred Stock. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Governmental Authority" means any federal, state or other political subdivision thereof and any agency or other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Legend" has the meaning set forth in Section 5.02(a). "Irrevocable Instructions" means the Irrevocable Instructions issued by the Company to the Transfer Agent, executed by each of the Company and the Transfer Agent, in the form of Exhibit C hereto. "Material Adverse Effect" has the meaning set forth in Section 3.01. "Non-U.S. Person" means a Person that is not a U.S. Person (as such term is defined in Regulation S under the Securities Act). "Person" means an individual or a corporation, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, Governmental Authority or other entity of any kind. "Regulation S" means Regulation S under the Securities Act, as from time to time amended. "SEC Reports" means the Company's Annual Report on Form 10-K for the year ended December 31, 1995 and the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1996, June 30, 1996 and September 30, 1996. "Securities Act" means the Securities Act of 1933, as amended. "Transaction Documents" means, collectively, this Agreement, the Warrants, the Irrevocable Instructions, the Certificate of Designations and the Preferred Stock. "Transfer Agent" means U.S. State Transfer Corporation. 2 4 "United States" has the meaning ascribed to such term in Rule 902(p) of Regulation S under the Securities Act. "U.S. Person" has the meaning ascribed to such term in Rule 902(o) of Regulation S under the Securities Act. "Warrant Shares" means the shares of the Company's Common Stock issuable upon exercise of Warrants. ARTICLE II SALE AND PURCHASE SECTION 2.01. AGREEMENT TO SELL AND TO PURCHASE; PURCHASE PRICE. On the terms and subject to the conditions set forth in this Agreement, the Company hereby agrees to issue and sell to the Purchasers, and the Purchasers hereby agree to purchase and accept from the Company (i) an aggregate of 200 shares of Preferred Stock at a purchase price per share of $10,000, or an aggregate purchase price of U.S. $2,000,000, and (ii) the Warrants at an aggregate purchase price equal to 110% of the closing bid price of the Common Stock on December 4, 1996, payable in immediately available funds (collectively, the "Purchase Price"). A copy of the form of Certificate of Designations establishing the terms of the Preferred Stock is attached as Exhibit B hereto and the terms of the Preferred Stock are hereby expressly incorporated by reference herein, and the form of certificate of Preferred Stock is attached as Exhibit B-1. SECTION 2.02. CLOSING. The closing of the sale and purchase of the Preferred Stock (the "Closing") shall be deemed to take place concurrently with the execution and delivery of this Agreement by the parties hereto. At the Closing, the following closing transactions shall take place, each of which shall be deemed to occur simultaneously with the Closing: (i) the Company shall execute, issue and deliver certificates representing the Preferred Stock to the Purchasers; (ii) the Purchasers shall pay the Purchase Price by wire transfer to the account designated by the Company in writing prior to the Closing; (iii) the Company shall pay the expenses set forth in Section 6.02 hereof by wire transfer to the account designated by the Purchasers in writing prior to the Closing; provided that if the Purchasers so determine, such expenses may be netted against the Purchase Price; (iv) the Company issues the Warrants to the Purchasers; (v) the Company and the Transfer Agent shall execute and deliver the Irrevocable Instructions; (vi) the Company shall deliver evidence of the filing with, and acceptance by, the Secretary of State of the State of Delaware of the Certificate of Designations; (vii) the Company shall deliver to the Purchasers a certificate executed by the secretary of the Company, signing in such capacity, dated the date of the Closing (A) certifying that attached thereto are true and complete copies of (x) the Certificate of Incorporation of the Company, as 3 5 amended to date, as filed in the office of the Secretary of State of the State of Delaware and stating that no amendment or other action has been taken by the Company, its shareholders, officers or directors in contemplation of the filing of any such amendment or in contemplation of the liquidation or dissolution of the Company, (y) the by-laws of the Company, as amended to date, and (z) the resolutions duly adopted by the Board of Directors of the Company authorizing the execution and delivery of the Transaction Documents and the consummation of the transactions contemplated thereby (including, without limitation, the issuance and sale of the Preferred Stock and the Warrants, the reservation and issuance of the Conversion Shares upon conversion of the Preferred Stock, and the reservation and issuance of the Warrant Shares upon exercise of the Warrants), which authorization shall be in full force and effect on and as of the date of such certificate, (B) confirming the continued good standing of the Company since the date of a Certificate of Good Standing with respect to the Company delivered by the Secretary of State of the State of Delaware, (C) attesting as to the certificates representing the Company's Preferred Stock and Common Stock, and (D) certifying and attesting to the office, incumbency, due authority and specimen signatures of each Person who executed any Transaction Document for or on behalf of the Company; and (viii) Venture Law Group, A Professional Corporation, as counsel to the Company, shall deliver to the Purchasers an opinion, dated the date of the Closing and addressed to the Purchasers, in form and substance acceptable to the Purchasers. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY As a material inducement to the Purchasers to purchase the Preferred Stock, the Company hereby represents and warrants to the Purchasers on and as of the date hereof, subject to and except as set forth in a document of even date herewith (the "Disclosure Schedule") delivered by the Company to the Purchasers prior to the execution and delivery of this Agreement and referring to the representations and warranties set forth in this Article III as follows: SECTION 3.01. ORGANIZATION AND STANDING. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority, and all authorizations, licenses, permits and certifications necessary to own its properties and assets and to carry on its business as it is now being conducted and proposed to be conducted and no bankruptcy proceedings have been commenced and no actions with respect to the liquidation, merger, consolidation or dissolution of the Company or for the sale of all or substantially all of its assets is pending or contemplated. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the character of the properties owned or leased by it or the 4 6 nature of its businesses makes such qualification necessary, except where the failure to so qualify or be in good standing would not have a material adverse effect on the business, assets, operations, properties, condition (financial or otherwise) or prospects of the Company (a "Material Adverse Effect"). SECTION 3.02. SECURITIES OF THE COMPANY. The authorized Capital Stock of the Company consists of 50,000,000 shares of Common Stock, of which 7,435,519 shares were issued and outstanding as of December 2, 1996 and 5,000,000 shares of preferred stock, par value $.001 per share, 200 of which have been designated 7% Convertible Preferred Stock, Series A, and none of which have been issued or are outstanding prior to the Closing. Except as set forth in the SEC Reports, the Company has no other authorized, issued or outstanding equity securities or securities containing any equity features, or any other securities convertible into, exchangeable for or entitling any person to otherwise acquire any other securities of the Company containing any equity features, other than subsequent issuances of securities, if any, pursuant to this Agreement, pursuant to reservations, agreements or employee benefit plans or pursuant to the exercise of outstanding convertible securities or options. All of the outstanding shares of Capital Stock of the Company have been duly and validly authorized and issued, and are fully paid and nonassessable. The Preferred Stock, the Conversion Shares, the Warrants and the Warrant Shares have been duly and validly authorized. When issued against payment therefor as provided in this Agreement, the Preferred Stock will be validly issued, fully paid and nonassessable and will entitle the holders thereof to the rights established in the Certificate of Designations. The Conversion Shares, when issued upon conversion of the Preferred Stock, and the Warrant Shares when issued in accordance with the terms of the Warrants, will be validly issued, fully paid and nonassessable, free and clear all preemptive rights, claims, liens, charges, encumbrances and security interests of any nature whatsoever. A sufficient number of shares of Common Stock has been duly reserved and will remain available for issuance upon conversion of the Preferred Stock and upon the exercise of the Warrants. Except as set forth in this Agreement and in the SEC Reports, there are no outstanding options, warrants, agreements, conversion rights, subscription rights, preemptive rights, rights of first refusal or other rights or agreements of any nature outstanding to subscribe for or to purchase any shares of Capital Stock of the Company or any other securities of the Company of any kind. Except as otherwise required by law or as set forth in the Certificates of Designations, there are no restrictions upon the voting or transfer of any shares of the Company's Capital Stock pursuant to the Company's organizational and other governing documents or any agreement or other instruments to which the Company is a party or by which the Company or its properties or assets are bound. The issuance of the Preferred Stock and the Common Stock upon conversion thereof are not subject to any preemptive rights, rights of first refusal or other similar limitation. There are no agreements or other obligations (contingent or otherwise) that may require the Company to repurchase or otherwise acquire any shares of its Capital Stock, other than 5 7 agreements with officers, directors, employees or consultants of the Company allowing the Company to repurchase at cost unvested shares upon the termination of employment or consulting services to the Company. SECTION 3.03. AUTHORIZATION; ENFORCEABILITY. The Company has the corporate power and authority to execute, deliver and perform the terms and provisions of each of the Transaction Documents, and has taken all necessary corporate action to authorize the execution, delivery and performance by it of each of the Transaction Documents and to consummate the transactions contemplated thereby. No other corporate proceedings on the part of the Company are necessary and no consent of the shareholders of the Company is required for the valid execution and delivery by the Company of the Transaction Documents and the performance and consummation by the Company of the transactions contemplated thereby. The Company has duly executed and delivered each of the Transaction Documents. The Transaction Documents constitute the legal, valid and binding obligations of the Company, (and in the case of the Irrevocable Instructions, the Transfer Agent), enforceable against the Company (and in the case of the Irrevocable Instructions, the Transfer Agent), in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general principles of equity. SECTION 3.04. NO VIOLATION; CONSENTS. (a) The Company is not in violation of the applicable provisions of any law, statute, rule, regulation, order, writ, injunction, judgment or decree of any court or Governmental Authority to or by which the Company or any of its property or assets is bound and which could reasonably be expected to have a Material Adverse Effect, nor has any event occurred which (i) violates, results in a breach of or constitutes (with due notice or lapse of time or both) a default or gives rise to an event of acceleration under any contract, lease, loan or credit agreement, mortgage, security agreement, trust indenture or other agreement or instrument to which the Company is a party or by which it is bound or to which any of its properties or assets is subject, nor results in the creation or imposition of any lien, security interest, charge or encumbrance of any kind upon any of the properties, assets or Capital Stock of the Company and which could reasonably be expected to have a Material Adverse Effect or (ii) violates any provision of the organizational and other governing documents of the Company. The execution, delivery and performance by the Company of the Transaction Documents and the consummation of the transactions contemplated thereby do not and will not (i) contravene the applicable provisions of any law, statute, rule, regulation, order, writ, injunction, judgment or decree of any court or Governmental Authority to or by which the Company or any of its property or assets is bound, (ii) violate, result in a breach of or constitute (with due notice or lapse of time or both) a default or give rise to an event of acceleration under any contract, lease, loan or credit agreement, mortgage, security agreement, trust 6 8 indenture or other agreement or instrument to which the Company is a party or by which it is bound or to which any of its properties or assets is subject, nor result in the creation or imposition of any lien, security interest, charge or encumbrance of any kind upon any of the properties, assets or Capital Stock of the Company which could reasonably be expected to have a Material Adverse Effect, or (iii) violate any provision of the organizational and other governing documents of the Company. (b) No consent, approval, authorization or order of, or filing or registration with, any court or Governmental Authority or other Person within the United States is required to be obtained or made by the Company for the execution, delivery and performance of the Transaction Documents or the consummation of any of the transactions contemplated thereby, except for those consents or authorizations previously obtained and those filings previously made. SECTION 3.05. SECURITIES ACT REPRESENTATIONS. The Company is a "reporting issuer" as that term is defined in Rule 902(l) of Regulation S under the Securities Act. No form of general or public solicitation or advertising was used by the Company or any Person acting on its behalf in connection with the offer or sale of the Preferred Stock. Neither the Company nor any Person acting on its behalf has (i) offered Preferred Stock to any Person (including Purchaser) in the United States or offered or sold Preferred Stock to or for the account or benefit of any U.S. Person or (ii) made any "directed selling efforts" (as defined in Rule 902(b) of Regulation S under the Securities Act) in the United States with respect to the Preferred Stock. The Company has not sold and will not sell any Preferred Stock in this offering other than the Preferred Stock being sold to the Purchasers hereunder. Assuming the accuracy of the Purchasers' representations pursuant to Section 4.02 hereof, the sale of the Preferred Stock hereunder is, and the issuance of the Conversion Shares upon conversion of the Preferred Stock will be, exempt from the registration requirements of the Securities Act. SECTION 3.06. SOLVENCY; NO DEFAULT. (a) The Company is, as of the date hereof, Solvent. "Solvent" means that (i) the fair saleable value of the assets of the Company exceeds the total amount of its debts and other liabilities (including any guarantees and other contingent, subordinated, unmatured or unliquidated liabilities whether or not reduced to judgment, disputed or undisputed, secured or unsecured), (ii) the Company has sufficient funds and cash flow to pay its liability on its existing and anticipated debts as they become absolute and matured, (iii) final judgments against the Company in pending or threatened actions for money damages will not be rendered at a time when, or in an amount such that the Company will be unable to satisfy any such judgments promptly in accordance with their terms (taking into account the maximum reasonable amount of such judgments in any such actions (other than amounts that would be remote) and the earliest reasonable time at which such judgments would be rendered), and (iv) the 7 9 Company does not have unreasonably small capital with which to engage in its present or anticipated business. (b) The Company is not, and immediately after the consummation of the transactions contemplated hereby will not be, in default under or with respect to its organizational and other governing documents, or any provision of any security issued by the Company, or of any agreement, instrument or other undertaking to which the Company is a party or by which it or any of its property or assets is bound which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. SECTION 3.07. NO BROKERS. No broker, finder, agent or similar intermediary is entitled to any broker's, finder's, placement or similar fee or other commission in connection with the transactions contemplated hereby based on any agreement, arrangement or understanding with the Company, except for dealings with AFO Capital Advisors LLC, whose fees will be paid by the Purchasers. SECTION 3.08. FINANCIAL CONDITION; NO ADVERSE CHANGES. (a) The audited financial statements of the Company and the related Preferred Stock thereto as at December 31, 1995 reported on by Ernst & Young LLP, independent auditors, copies of which have heretofore been furnished to the Purchasers, present fairly the financial condition, results of operations and cash flows of the Company at such date and for the periods set forth therein. The unaudited balance sheets, statements of operations and statements of cash flows at and for the period ended September 30, 1996 (such audited and unaudited financial statements, collectively, the "Financial Statements"), copies of which have heretofore been furnished to the Purchasers, present fairly the financial condition, results of operations and cash flows of the Company at such date and for the periods set forth therein. The Financial Statements, including the related schedules and notes thereto (if any), have been prepared in accordance with generally accepted accounting principles as set forth in the opinions and pronouncements of the Accounting Principles Board of American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board as in effect on the date of the Closing, applied on a consistent basis (except for changes concurred in by the Company's independent public accountants) unless otherwise expressly stated therein. During the period from September 30, 1996 to and including the date hereof, there has been no sale, transfer or other disposition by the Company of any material part of the business, property or securities of the Company and no purchase or other acquisition of any business, property or securities by the Company material in relation to the financial condition of the Company. (b) Except as are fully reflected or reserved against in the Financial Statements and the notes thereto, there are no liabilities or obligations with respect to the Company of any nature whatsoever (whether absolute, accrued, contingent or 8 10 otherwise and whether or not due) which, either individually or in the aggregate, are reasonably expected to have a Material Adverse Effect. (c) Since September 30, 1996, there has been no development or event, nor any prospective development or event known to the Company, or any litigation, proceeding or other action seeking an injunction or other restraining order, damages or other relief from a court or administrative agency of competent jurisdiction pending or, to the best knowledge of the Company, threatened, or any action of any Governmental Authority, which has had or could reasonably be expected to have a Material Adverse Effect. SECTION 3.09. DISCLOSURE. The representations and warranties of the Company in this Agreement and the statements contained in the SEC Reports and the schedules, certificates and exhibits furnished to the Purchasers by or on behalf of the Company in connection herewith do not contain any untrue statement of a material fact and do not omit to state any material fact necessary to make the statements herein or therein not misleading. The Company hereby acknowledges that the Purchasers are and will be relying on the SEC Reports and the Company's representations, warranties and covenants contained herein in making an investment decision with respect to the Preferred Stock and Conversion Shares and will be relying thereon (together with future reports filed with the Commission) in connection with any transfer of Preferred Stock and Conversion Shares. 9 11 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS Each Purchaser hereby acknowledges, represents and warrants to the Company as follows: SECTION 4.01. AUTHORIZATION; ENFORCEABILITY; NO VIOLATIONS. (a) If such Purchaser is a corporation, limited partnership, or limited liability company, it is duly organized, formed or incorporated (as the case may be), validly existing and in good standing under the laws of the jurisdiction of its organization, formation or incorporation, and has all requisite power and authority to execute, deliver and perform the terms and provisions of this Agreement and has taken all necessary action to authorize the execution, delivery and performance by it of this Agreement and to consummate the transactions contemplated hereby. (b) The execution, delivery and performance by such Purchaser of this Agreement and of the Transaction Documents, and the consummation by such Purchaser of the transactions contemplated hereby and thereby do not and will not violate any provision of (i) such Purchaser's organizational documents, if any, and (ii) any law, statute, rule, regulation, order, writ, injunction, judgment or decree of any court of Governmental Authority to or by which the Purchaser or any of its property or assets is bound, to which such Purchaser is subject, or (iii) violate, result in a breach of or constitute (with due notice or lapse of time or both) a default or give rise to an event of acceleration under any contract, lease, loan or credit agreement, mortgage, security agreement, trust indenture or other agreement or instrument to which the Purchaser is a party or by which it is bound or to which any of its properties or assets is subject, nor result in the creation or imposition of any lien, security interest, charge or encumbrance of any kind upon any of the properties or assets of the Purchaser which could reasonably be expected to have a Material Adverse Effect; nor has any event occurred which (i) violates, results in a breach of or constitutes (with due notice or lapse of time or both) a default or gives rise to an event of acceleration under any contract, lease, loan or credit agreement, mortgage, security agreement, trust indenture or other agreement or instrument to which the Purchaser is a party or by which it is bound or to which any of its properties or assets is subject, nor results in the creation or imposition of any lien, security interest, charge or encumbrance of any kind upon any of the properties or assets of the Purchaser and which could reasonably be expected to have a Material Adverse Effect or (ii) violates any provision of the organizational and other governing documents of the Purchaser. Such Purchaser has duly executed and delivered this Agreement. Assuming the due execution hereof by the Company, this Agreement constitutes the legal, valid and binding obligation of such Purchaser, enforceable against such Purchaser in accordance with its terms, except as enforceability may be limited by 10 12 applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). SECTION 4.02. SECURITIES ACT REPRESENTATIONS; LEGENDS. (a) Such Purchaser understands that (i) the offering and sale of the Preferred Stock and the Warrants to be issued and sold hereunder is intended to be exempt from the registration requirements of the Securities Act; (ii) neither the Preferred Stock, the Conversion Shares, the Warrants nor the Warrant Shares have been registered under the Securities Act or any other applicable securities laws and such securities may be resold only if registered under the Securities Act or if an exemption from such registration requirements is available; and (iii) the Company is not required to register any resale of the Preferred Stock, the Conversion Shares, the Warrants or the Warrant Shares under the Securities Act; provided, however, the resale of the the Conversion Shares and the Warrant Shares will be subject to registration under the Securities Act (unless an appropriate exemption therefrom is available), if at any time the Company determines, based on advise of counsel that there has been a change under the Securities Act or any other applicable securities law or in the interpretation of the provisions thereof, such that (x) the Preferred Stock will no longer be convertible into freely tradeable Conversion Shares or (y) the Warrants will no longer be exchangeable into freely tradeable Warrant Shares at any time beginning 41 days following the date of original issuance of the Preferred Stock and the Warrants. (b) The Preferred Stock and the Warrants to be acquired by such Purchaser pursuant to this Agreement are being acquired for its own account, for investment purposes, and not with a view to, or for sale in connection with, any distribution thereof or of Conversion Shares issuable upon conversion of the Preferred Stock or of Warrant Shares issuable upon exercise of the Warrants, in violation of the Securities Act or any other securities laws which may be applicable. (c) Such Purchaser is not an affiliate of the Company (as such term is defined in the Securities Act). (d) Such Purchaser is a Non-U.S. Person. (e) Such Purchaser (i) has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of its investment in the Preferred Stock and the Warrants and Purchaser is capable of bearing the economic risks of such investment, including a complete loss of its investment in the Preferred Stock and the Warrants; (ii) believes that its investment in the Preferred Stock is suitable for it based upon its objectives and financial needs, and such Purchaser has adequate means for providing for its current financial needs 11 13 and business contingencies and has no present need for liquidity of investment with respect to the Preferred Stock and the Warrants; (iii) has no present plan, intention or understanding and has made no arrangement to sell the Preferred Stock, the Conversion Shares, the Warrants or the Warrant Shares at any predetermined time or for any predetermined price; (iv) has not purchased, sold or entered into, and has no present intention to and will not, until expiration of the Restricted Period, purchase, sell or enter into, any put option, short position or similar arrangement with respect to the Common Stock, or any intention to settle any such option, position or understanding with any Conversion Shares or any Warrant Shares. (f) No oral or written representations have been made to such Purchaser by or on behalf of the Company in connection with the offering and sale of the Preferred Stock or the Warrants hereunder other than those set forth in the SEC Reports, the Preferred Stock, the Warrants or as set forth herein, and such Purchaser is not subscribing for the Preferred Stock or the Warrants as a result of, or in response to, any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, or presented at any seminar or meeting. (g) At the time the buy order for the Preferred Stock and the Warrants being purchased hereunder was originated, such Purchaser was outside of the United States. (h) Such Purchaser acknowledges that Regulation S under the Securities Act restricts the transferability in the United States of securities, such as the Preferred Stock, the Conversion Shares, the Warrants and the Warrant Shares issued in reliance upon the exemption from the registration requirements of the Securities Act provided by Regulation S thereunder. (i) Such Purchaser acknowledges that Rule 144A under the Securities Act may not be available with respect to resales of the Preferred Stock, the Conversion Shares, the Warrants or the Warrant Shares. SECTION 4.03. NO BROKERS. No broker, finder, agent or similar intermediary is entitled to any broker's, finder's, placement or similar fee or other commission in connection with the transactions contemplated hereby based on any agreement, arrangement or understanding with such Purchaser, except for dealings with AFO Capital Advisors LLC, whose fees will be paid by the Purchasers. 12 14 ARTICLE V COVENANTS OF THE COMPANY SECTION 5.01. (a) EXEMPTION FROM REGISTRATION. The Company will not make any offer to sell, solicit any offer to buy, agree to sell or sell any security or right to acquire any security, except at such time and in such manner so as not to cause the loss of any of the exemptions for the offer and sale of the Preferred Stock hereunder and for the issuance of Conversion Shares upon conversion of the Preferred Stock from the registration requirements under the Securities Act or under the securities or "blue sky" laws of any jurisdiction in which such offer, sale or issuance is made. (b) LIMITATIONS ON SALE OR TRANSFER OF THE COMPANY'S SECURITIES. The Company will not, without the prior written consent of a majority in interest of the Preferred Stock then outstanding, make any offer to sell, solicit any offer to buy, agree to sell or sell any shares of Preferred Stock, any shares of Common Stock, any other shares of capital stock of the Company, or any other securities convertible into or exercisable or exchangeable for Preferred Stock, Common Stock or any such capital stock, or grant any options, rights or warrants to purchase Preferred Stock, Common Stock or any other shares of capital stock of the Company, or any other securities convertible into or exercisable or exchangeable for Preferred Stock, Common Stock or any such capital stock during the period commencing the date of the Closing and ending one hundred and eighty (180) days thereafter, except for (i) the shares Preferred Stock and warrants issued in accordance with this Agreement, or of Common Stock issuable upon conversion of the Preferred Stock, (ii) any shares of Preferred Stock or Common Stock issuable upon the exercise of an option, right or warrant or the conversion of a security outstanding on the date hereof, or (iii) any shares of the Company's capital stock issued pursuant to the Company's stock option or other benefit or incentive plans maintained for its officers, directors, employees or consultants, (iv) shares of the Company's Common Stock issued pursuant to a firmly underwritten public offering, (v) shares of the Company's Common Stock issued pursuant to an exemption from registration under the Securities Act; provided, however, that such shares may not subsequently be registered for resale or, in the case of an offering pursuant to Regulation S, may not be resold into the United States, prior to the expiration of such 180 day period; and (vi) shares of the Company's Common Stock issued and issuable pursuant to the transactions described in the Disclosure Schedule; provided further, that the Company shall not engage in any transactions described in this Section 5.01(b), if in the reasonable opinion of Company counsel such transactions would cause the Company to lose the availability of an exemption from the registration requirements of the Securities Act with respect to the sale of Series A Preferred Stock contemplated by this Agreement. 13 15 (c) REGISTRATION RIGHTS. If at any time the Company determines, as provided in Section 4.02, that registration of the resale the Conversion Shares or the Warrant Shares is required, the Company shall immediately notify the Purchaser, and the Purchaser shall have (i) the right to demand that the Company register the Conversion Shares and the Warrant Shares for resale on Form S-3 (or such other applicable Form) under the Securities Act and (ii) the right to have the Conversion Shares and the Warrant Shares included in any registration statement filed by the Company to register the issuance or the resale of its securities, in each case on conventional terms including standard representations and warranties, covenants, conditions, agreements, indemnification and contribution provisions and allocation of costs provisions and rights. In the event the Purchaser shall demand registration of the Conversion Shares and the Warrant Shares pursuant to clause (i) above, the Company shall file a registration statement within 45 days of receipt by the Company from the Purchaser of such demand and shall use its best efforts to have such registration statement declared effective promptly thereafter. The Company shall keep the registration statement filed pursuant to either of clause (i) or clause (ii) above effective until the Scheduled Redemption Date in the case of the Conversion Shares or the expiration date in the case of the Warrant Shares or until the Purchaser shall have sold all of its Conversion Shares and Warrant Shares. SECTION 5.02 LEGEND. (a) The certificates representing the Preferred Stock will bear a legend in substantially the following form by which such Purchaser and each subsequent holder of such securities will be bound (the "Legend"): "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER THE SECURITIES ACT OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION." (b) Following termination of the Restricted Period, upon conversion of the Preferred Stock, the Conversion Shares shall be issued and transferable without the Legend provided for in subsection (a) above, except as provided by Section 4.02(a) above. SECTION 5.03. DOCUMENTATION REQUIRED TO EFFECT CONVERSION OF PREFERRED STOCK. In order for Purchaser to effect the conversion of Preferred Stock into 14 16 unlegended Conversion Shares, the Purchaser shall be required only to deliver a Notice of Conversion substantially in the form of Exhibit B hereto. The Company agrees that it will not require the delivery of additional documentation, the provision of any additional representations or warranties by the Purchaser or impose any limitations on the conversion of the Preferred Stock into unlegended Conversion Shares. The Irrevocable Instructions shall direct the Transfer Agent to issue unlegended Conversion Shares without requesting any additional documentation or representations or warranties from the Purchaser. Notwithstanding the foregoing, if at any time the Company determines, based on advice of counsel that there has been a change under the Securities Act or any other applicable securities law or in the interpretation of the provisions thereof, such that the Preferred Stock will no longer be convertible into freely tradeable Conversion Shares at any time beginning 41 days following the date of original issue of the Preferred Stock, the Purchaser hereby agrees to deliver to the Company, upon their reasonable request, such additional documentation as reasonably necessary in order to allow the Company to issue unlegended Conversion Shares in compliance with any such changes under or interpretations of the provisions of the Securities Act or other applicable securities laws. SECTION 5.04. RULE 144; CURRENT INFORMATION. For so long as any Preferred Stock or Conversion Shares are outstanding, the Company will (i) file all reports required to be filed by it under the Securities Act and the Exchange Act and will take such further actions as any Purchaser may reasonably request, all to the extent required from time to time to enable such Purchaser to sell Preferred Stock and Conversion Shares without registration under the Securities Act pursuant to the safe harbors and exemptions provided by Rule 144, under the Securities Act, as such rules may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission, and (ii) furnish each Purchaser with all reports, proxy statements and registration statements which the Company files with the Commission or distributes to its securityholders pursuant to the Securities Act and the Exchange Act at the times of such filings and distributions. Upon the request of any Purchaser, the Company will deliver to such Purchaser a written statement as to whether it has complied with the foregoing requirements. SECTION 5.05. RESERVATION OF CONVERSION SHARES. The Company shall at all times reserve and keep available, free from preemptive rights, out of its authorized but unissued shares of Common Stock or its issued shares of Common Stock held in its treasury, or both, sufficient shares of Common Stock to provide for the issuance of the Conversion Shares from time to time as the Preferred Stock become convertible pursuant to their terms. SECTION 5.06. STOCK LISTING. The Company shall endeavor to have the Conversion Shares approved for quotation, prior to issuance, upon the Nasdaq 15 17 National Market or any similar system of automated dissemination of securities prices upon which the Common Stock is listed or traded at the time of issuance of such Conversion Shares. SECTION 5.07. IRREVOCABLE INSTRUCTIONS; NO ADDITIONAL CONVERSION REQUIREMENTS. The Company shall take no action to cause the Transfer Agent to act in contravention to the terms of the Irrevocable Instructions and shall take all additional actions necessary, if any, to cause the Transfer Agent to issue shares of Common Stock upon conversion of the Preferred Stock as contemplated herein and in the Certificate of Designations. The Company further agrees that it shall not terminate its relationship with the Transfer Agent unless a successor transfer agent shall be appointed and the Company and such successor transfer agent shall have executed the Irrevocable Instructions. The Company agrees that it shall not, and shall not cause to Transfer Agent to, require any additional documentation, representation or additional agreement from the Purchaser as a condition to the Purchaser's being allowed to acquire Common Stock without a Legend upon conversion of Preferred Stock in accordance with the terms hereof. ARTICLE VI MISCELLANEOUS SECTION 6.01. BLACKOUT PERIOD. Each Purchaser hereby agrees that in the event that at any time after the date hereof until 180 days after such date, the Company shall issue shares of Common Stock in a firmly underwritten public offering, the Purchaser shall, at the underwriters' request, agree to restrict the sale or transfer of such Purchaser's shares of Preferred Stock, Conversion Shares, Warrants or Warrant Shares for a period of time (the "Blackout Period"), provided that the Company, its officers, directors, consultants and all shareholders and persons holding securities convertible or exercisable for Common Stock in an amount equal to or greater than the number of shares of Common Stock held by Purchaser (for purposes of calculating the number of shares of Common Stock held by Purchaser, the Purchaser shall be deemed to hold such number of shares of Common Stock as it would be entitled to, had Purchaser converted all of its Preferred Stock at the Conversion Price in effect on the date the Blackout Period begins together with Warrant Shares issuable upon exercise of outstanding Warrants, and for purposes of determining the number of shares of Common Stock held by persons holding securities convertible or exchangeable for Common Stock, the number of shares of Common Stock shall be similarly calculated) are also subject to such restriction on sale or transfer of the securities held by them, respectively, for the Blackout Period. SECTION 6.02. PRESS RELEASES AND DISCLOSURE. No party hereto shall issue any press release or make any other public disclosure (pursuant to filing of Exchange Act 16 18 reports with the Commission or otherwise) related to this Agreement or any of the transactions contemplated hereby without the prior written approval of the other party hereto, except as may be necessary or appropriate in the opinion of the party seeking to make disclosure to comply with the requirements of applicable law or stock exchange rules (provided that, unless otherwise required by applicable law, regulation, order or the like, or agreed to between the parties, (i) no Exchange Act filing shall disclose more than the title and amount of securities issued, the conversion formula, the amount of proceeds and the intended use of proceeds, and (ii) no press release shall disclose more than the title and amount of securities issued, a general description of the conversion formula, the amount of proceeds and the intended use of proceeds, and provided further that in no event shall the identity of a Purchaser be disclosed without such Purchaser's prior written consent unless such disclosure is required by applicable law, regulation, order or the like, in which event the Company shall, prior to complying with such law, regulation, order or the like, give written notice to Purchaser so as to allow Purchaser to contest such disclosure). If any such press release or public disclosure is so required, the party making such disclosure shall consult with the other party prior to making such disclosure, and the parties shall use all reasonable efforts, acting in good faith, to agree upon a text for such disclosure which is satisfactory to all parties. SECTION 6.03. EXPENSES. Except as otherwise expressly provided for herein, and subject to the consummation of the transactions contemplated herein, the Company will pay all of its and all of the Purchasers' expenses (including attorneys' fees and expenses) in connection with the negotiation of the Transaction Documents, the performance of the obligations of each thereunder, and the consummation of the transactions contemplated thereby (whether consummated or not). Such Purchasers' expenses shall be payable at the Closing and may be netted against the Purchase Price otherwise payable by the Purchasers. SECTION 6.04. NOTICES. All notices, demands, requests, consents, approvals or other communications required or permitted to be given hereunder or which are given with respect to this Agreement shall be in writing and shall be personally served or deposited in the mail, registered or certified, return receipt requested, postage prepaid, or delivered by reputable air courier service with charges prepaid, or transmitted by hand delivery, telegram, telex or facsimile, addressed as set forth below, or to such other address as such party shall have specified most recently by written notice: (i) if to the Company, to: Connective Therapeutics, Inc., 3400 West Bayshore Road, Palo Alto, CA 94303 Attention: CFO, Facsimile No.: (415) 843-2899; with a copy to Joshua L. Greene, Esq. at Venture Law Group; Facsimile No.: (415) 233-8386 and (ii) if to a Purchaser, to such Purchaser's address set forth on its counterpart signature page hereto. Notice shall be deemed given on the date of service or transmission if personally served or transmitted by telegram, telex or facsimile. Notice otherwise sent as provided herein shall be deemed given on the 17 19 third business day following the date mailed or on the next business day following delivery of such notice to a reputable air courier service. SECTION 6.05. ENTIRE AGREEMENT. This Agreement (together with the other Transaction Documents and all other documents delivered pursuant hereto and thereto) constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, representations, understandings, negotiations and discussions between the parties, whether oral or written, with respect to the subject matter hereof. SECTION 6.06. AMENDMENT AND WAIVER. This Agreement may not be amended, modified, supplemented, restated or waived except by a writing executed by the Company and the majority holders in interest of each of the shares of Preferred Stock and the Warrants; provided, however, that this Agreement may not be amended, modified, supplement, restated or waived without the express written consent of all the holders in interest of the shares of Preferred Stock and Warrants, if any such action would adversely affect the rights of such holders of shares of Preferred Stock or Warrants. Waivers may be made in advance or after the right waived has arisen or the breach or default waived has occurred. Any waiver may be conditional. No waiver of any breach of any agreement or provision herein contained shall be deemed a waiver of any preceding or succeeding breach thereof nor of any other agreement or provision herein contained. No waiver or extension of time for performance of any obligations or acts shall be deemed a waiver or extension of the time for performance of any other obligations or acts. SECTION 6.07. ASSIGNMENT; NO THIRD PARTY BENEFICIARIES. This Agreement and the rights, duties and obligations hereunder may not be assigned or delegated by either the Company, on the one hand, or a Purchaser, on the other hand, without the prior written consent of the other parties hereto; provided that the rights, duties and obligations hereunder of the Purchaser shall be assigned in connection with any transfer of Series A Preferred Stock to any third party. Except as provided in the preceding sentence, any purported assignment or delegation of rights, duties or obligations hereunder made without the prior written consent of the other parties hereto shall be void and of no effect. This Agreement and the provisions hereof shall be binding upon and shall inure to the benefit of each of the parties and their respective successors and permitted assigns. This Agreement is not intended to confer any rights or benefits on any Persons other than as set forth above. SECTION 6.08. SEVERABILITY. This Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Agreement or of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Agreement a provision as similar in terms to such invalid or unenforceable provision as may be possible and be valid and enforceable. 18 20 SECTION 6.09. FURTHER ASSURANCES. Each party hereto, upon the request of any other party hereto, shall do all such further acts and execute, acknowledge and deliver all such further instruments and documents as may be necessary or desirable to carry out the transactions contemplated by this Agreement. SECTION 6.10. TITLES AND HEADINGS. Titles, captions and headings of the sections of this Agreement are for convenience of reference only and shall not affect the construction of any provision of this Agreement. SECTION 6.11. GOVERNING LAW; SUBMISSION TO JURISDICTION. (a) THIS AGREEMENT SHALL BE GOVERNED BY, INTERPRETED UNDER, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF DELAWARE APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED WITHIN THE STATE OF DELAWARE WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS-OF-LAW THEREOF. (b) EACH OF THE PARTIES TO THIS AGREEMENT IRREVOCABLY SUBMIT TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK IN ANY ACTION, SUIT OR PROCEEDING BROUGHT AGAINST IT IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREUNDER OR FOR RECOGNITION OR ENFORCEMENT OR ENFORCEMENT OF ANY JUDGMENT, AND THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREE THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD OR DETERMINED IN SUCH FEDERAL COURT; PROVIDED HOWEVER, THAT IF FOR WHATEVER REASON THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK WILL NOT OR CANNOT HEAR SUCH ACTION, SUIT OR PROCEEDING, SUCH ACTION, SUIT OR PROCEEDING MAY BE HEARD OR DETERMINED IN ANY NEW YORK STATE COURT LOCATED IN THE CITY AND COUNTY OF NEW YORK AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF SUCH COURTS IN RESPECT OF ANY SUCH ACTION, SUIT OR PROCEEDING. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HERETO HEREBY WAIVE AND AGREE NOT TO ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, IN ANY SUCH SUIT, ACTION OR PROCEEDING, THAT SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT IN ANY INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER, OR THAT THE RELATED DOCUMENTS OR THE SUBJECT MATTER THEREOF MAY NOT BE LITIGATED IN OR BY SUCH COURTS. SECTION 6.12. COUNTERPARTS. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, all of which taken together shall constitute one and the same instrument. 19 21 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by the undersigned, thereunto duly authorized, as of the date first set forth above. CONNECTIVE THERAPEUTICS, INC. By:_________________________________________ Name: Title: [NAME OF PURCHASER] By:_________________________________________ Name: Purchaser's Address for Notices Pursuant to Section 6.03: Attention: Facsimile No.: 20 22 EXHIBIT A FORM OF WARRANT Please see Exhibit 10.4 to Form 8-K 23 EXHIBIT B CONNECTIVE THERAPEUTICS, INC. - NOTICE OF CONVERSION 7% CONVERTIBLE PREFERRED STOCK, SERIES A (To be executed by the Holder in order to convert the Series A Preferred Stock or portion thereof) The undersigned hereby irrevocably elects to convert [the entire amount] [______ shares] of the Series A Preferred Stock represented by Certificate No. _________ into shares of Common Stock, $___ par value (the "Common Stock"), of Connective Therapeutics Inc. (the "Company") as of the Date of Conversion (which shall be the date of receipt by facsimile by the Company of this Notice of Conversion). If shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates as reasonably requested by the Company or its Transfer Agent. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any. The undersigned represents and warrants that the number of shares of Common Stock to be received upon conversion, together with the shares of Common Stock beneficially owned by the undersigned (and its affiliates) on the Date of Conversion, do not exceed 4.9% of the outstanding shares of Common Stock of the Company (as set forth in the Company's most recent filing with the Securities and Exchange Commission unless the Company shall notify the Holder that a lesser number of shares is outstanding). If the stock certificate is to be made out in another person's name, fill in the form below: ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Print or type other person's name, address and zip code) ________________________________________________________________________________ (Insert assignee's U.S. social security or tax identification number, if any) Conversion calculations: _________________________________ Date of Conversion _________________________________ Applicable Conversion Price ______________________________ Total number of shares $________________________________ (assuming dividends payable Accrued Dividend in shares) [Name of Holder] By:______________________________ Name: Title: B-1 EX-10.4 6 WARRANT, DATED DECEMBER 4, 1996 1 EXHIBIT 10.4 THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF, NOR MAY SUCH SECURITIES BE EXERCISED BY OR ON BEHALF OF A U.S. PERSON (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) IN THE ABSENCE OF REGISTRATION UNDER THE SECURITIES ACT OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. December 4, 1996 Warrant to Purchase up to 20,000 Shares of Common Stock of Connective Therapeutics, Inc. Connective Therapeutics, Inc., a Delaware corporation (the "Company"), hereby certifies that in consideration of the Purchasers' (as defined below) acquisition of shares of 7% Convertible Preferred Stock, Series A of the Company, pursuant to the Securities Purchase Agreement, dated as of December 4, 1996 (the "Agreement"), the receipt and sufficiency of which are hereby acknowledged, __________________ (the "Purchaser") or any other Warrant Holder is entitled, on the terms and conditions set forth below, to purchase from the Company at any time after the date hereof and ending on December 4, 2001 (sixty (60) months after the original issuance of this Warrant) up to 20,000 fully paid and nonassessable shares of Common Stock, $.001 par value, of the Company (the "Common Stock"), as the same my be adjusted pursuant to Section 5 herein, at the Purchase Price (hereinafter defined), as the same may be adjusted pursuant to Section 5 herein. 1. Definitions. (a) the term "Warrant Holder" shall mean the Purchaser or any assignee of all or any portion of this Warrant. 2 (b) the term "Warrant Shares" shall mean the shares of Common Stock or other securities issuable upon exercise of this Warrant. (c) the term "Purchase Price" shall initially mean 110% of the closing bid price for the Common Stock on December 4, 1996, as may be adjusted pursuant to Section 5 herein. (d) other capitalized terms used herein which are defined in the Agreement, or in the Certificate of Designations (the "Certificate of Designations") establishing the terms of the 7% Convertible Preferred Stock, Series A issued by the Company to the Purchaser pursuant to the Agreement (the "Series A Preferred Stock", collectively, the Certificate of Designations and the Series A Preferred Stock shall hereinafter be referred to as the "Preferred Stock"), shall have the same meanings herein as therein. 2. Exercise or Exchange of Warrant. (a) This Warrant may be exercised by the Warrant Holder, in whole or in part, at any time and from time to time by surrender of this Warrant, together with the form of subscription at the end hereof duly executed by Warrant Holder, together with the full Purchase Price (as defined in Section 1) for each share of Common Stock as to which this Warrant is exercised to the Company at the address set forth in Section 13 hereof. In the event that the Warrant is not exercised in full, the number of Warrant Shares shall be reduced by the number of such Warrant Shares for which this Warrant is exercised, and the Company, at its expense, shall forthwith issue and deliver to or upon the order of Warrant Holder a new Warrant of like tenor in the name of Warrant Holder or as Warrant Holder may request, reflecting such adjusted Warrant Shares. The Warrants are exchangeable for their value in Common Stock based upon the closing bid price of such Common Stock as quoted on the Principal Market (as herein defined) on the date prior to the date of exchange. In the event Warrants are exchanged for shares, the value of the Warrants so exchanged shall equal the Closing Price on the date of delivery of notice of exercise minus the Purchase Price. 2 3 (b) The "Date of Exercise" of the Warrant shall be the date that the advance copy of the form of exercise attached hereto as Exhibit A (the "Exercise Form"), is sent by facsimile to the Company, provided that the original Warrant and Exercise Form are received by the Company within reasonable time thereafter. If Warrant Holder has not sent advance notice by facsimile, the Date of Exercise shall be the date the original Exercise Form is received by the Company. 3. Delivery of Stock Certificates. (a) Subject to the terms and conditions of this Warrant, as soon as practicable after the exercise of this Warrant in full or in part, and in any event within two (2) days thereafter, the Company at its expense (including, without limitation, the payment by it of any applicable issue taxes) will cause to be issued in the name of and delivered to the Warrant Holder, or as the Warrant Holder may lawfully direct, a certificate or certificates for the number of fully paid and non-assessable shares of Common Stock to which the Warrant Holder shall be entitled on such exercise, together with any other stock or other securities or property (including cash, where applicable) to which the Warrant Holder is entitled upon such exercise in accordance with the provisions hereof. (b) This Warrant may not be exercised as to fractional shares of Common Stock. In the event that the exercise of this Warrant, in full or in part, would result in the issuance of any fractional share of Common Stock, then in such event the Warrant Holder shall be entitled to cash equal to the fair market value of such fractional share. For purposes of this Warrant, "fair market value" shall equal the closing bid price of the Common Stock on the Nasdaq National Market or Small-Cap Market, the American Stock Exchange or the New York Stock Exchange, whichever is the principal trading exchange or market for the Common Stock (the "Principal Market") on the date of determination or, if the Common Stock is not listed or admitted to trading on any national securities exchange or quoted on the Nasdaq National Market or Small-Cap Market, the closing bid price on the over-the-counter market as furnished by any New York Stock Exchange member firm reasonably selected from time to time by the Company for that purpose, or, if the Common Stock is not listed or admitted to trading on any national securities exchange or quoted on the 3 4 Nasdaq National Marketor Small-Cap Market or traded over-the-counter and the average price cannot be determined as contemplated above, the fair market value of the Common Stock shall be as reasonably determined in good faith by the Company's Board of Directors. 4. Covenants of the Company. (a) The Company shall use its reasonable best efforts to insure that a Registration Statement under the Act covering the issuance of the Warrant Shares and the resale or other disposition thereof by the Warrant Holder is effective to the extent provided in Section 4.02(a) of the Securities Purchase Agreement. (b) The Company shall take all necessary action and proceedings as may be required and permitted by applicable law, rule and regulation, including, without limitation the notification of the Nasdaq National Market, for the legal and valid issuance of this Warrant and the Warrant Shares to the Warrant Holder. (c) From the date hereof through the last date on which this Warrant is exercisable, the Company shall take all steps reasonably necessary and within its control to insure that the Common Stock remains listed or quoted on the Principal Market and shall not amend its Certificate of Incorporation or Bylaws so as to adversely affect any rights of the Warrant Holder under this Warrant. (d) The Company shall at all times reserve and keep available, solely for issuance and delivery as Warrant Shares hereunder, such shares of Common Stock as shall from time to time be issuable as Warrant Shares. (e) The Warrant Shares, when issued in accordance with the terms hereof; will be duly authorized and, when paid for or issued in accordance with the terms hereof, shall be validly issued, fully paid and non-assessable. The Company has authorized and reserved for issuance to Warrant Holder the requisite number of shares of Common Stock to be issued pursuant to this Warrant. 4 5 (f) With a view to making available to Warrant Holder the benefits of Rule 144 promulgated under the Securities Act ("Rule 144") and any other rule or regulation of the Commission that may at any time permit Warrant Holder to sell securities of the Company to the public without registration, the Company agrees to use its reasonable best efforts to: (i) make and keep public information available, as those terms are understood and defined in Rule 144, at all times; and (ii) file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act. 5. Adjustment of Purchase Price and Number of Shares. The number of and kind of securities purchasable upon exercise of this Warrant and the Purchase Price shall be subject to adjustment from time to time as follows: (a) Subdivisions, Combinations and Other Issuances. If the Company shall at any time after the date hereof but prior to the expiration of this Warrant subdivide its outstanding securities as to which purchase rights under this Warrant exist, by split-up, spin-off, or otherwise, or combine its outstanding securities as to which purchase rights under this Warrant exist, the number of Warrant Shares as to which this Warrant is exercisable as of the date of such subdivision, split-up, spin-off or combination shall forthwith be proportionately increased in the case of a subdivision, or proportionately decreased in the case of a combination. Appropriate adjustments shall also be made to the Purchase Price, but the aggregate purchase price payable for the total number of Warrant Shares purchasable under this Warrant as of such date shall remain the same. (b) Stock Dividend. If at any time after the date hereof the Company declares a dividend or other distribution on Common Stock payable in Common Stock or other securities or rights convertible into or exchangeable for Common Stock ("Common Stock Equivalents"), without payment of any consideration by holders of Common Stock for the 5 6 additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon exercise or conversion thereof), then the number of shares of Common Stock for which this Warrant may be exercised shall be increased as of the record date (or the date of such dividend distribution if no record date is set) for determining which holders of Common Stock shall be entitled to receive such dividends, in proportion to the increase in the number of outstanding shares (and shares of Common Stock issuable upon conversion of all such securities convertible into Common Stock) of Common Stock as a result of such dividend, and the Purchase Price shall be adjusted so that the aggregate amount payable for the purchase of all the Warrant Shares issuable hereunder immediately after the record date (or on the date of such distribution, if applicable), for such dividend shall equal the aggregate amount so payable immediately before such record date (or on the date of such distribution, if applicable). (c) Other Distributions. If at any time after the date hereof the Company distributes to holders of its Common Stock, other than as part of a dissolution or liquidation or the winding up of its affairs, any shares of its capital stock, any evidence of indebtedness or any of its assets (other than cash, Common Stock or securities convertible into or exchangeable for Common Stock), then, in any such case, the Warrant Holder shall be entitled to receive, upon exercise of this Warrant, with respect to each share of Common Stock issuable upon such exercise, the amount of cash or evidences of indebtedness or other securities or assets which such Warrant Holder would have been entitled to receive with respect to each such share of Common Stock as a result of the happening of such event had this Warrant been exercised immediately prior to the record date or other date determining the shareholders entitled to participate in such distribution (the "Determination Date") or, in lieu thereof, if the Board of Directors of the Company should so determine at the time of such distribution, a reduced Purchase Price determined by multiplying the Purchase Price on the Determination Date by a fraction, the numerator of which is the result of such Purchase Price reduced by the value of such distribution applicable to one share of Common Stock (such value to be determined in good faith by the Company's Board of Directors) and the denominator of which is such Purchase Price. 6 7 (d) Merger, Consolidation, etc. If at any time after the date hereof there shall be a merger or consolidation of the Company with or into, or a transfer of all or substantially all of the assets of the Company to, another entity (a "Consolidation Event"), then the Warrant Holder shall be entitled to receive upon such transfer, merger or consolidation becoming effective, and upon payment of the aggregate Purchase Price then in effect, the number of shares or other securities or property of the Company or of the successor corporation resulting from such merger or consolidation, which would have been received by Warrant Holder for the shares of stock subject to this Warrant had this Warrant been exercised immediately prior to such transfer, merger or consolidation becoming effective or to the applicable record date thereof, as the case may be. The Company shall not effect any Consolidation Event unless the resulting successor or acquiring entity (if not the Company) assumes by written instrument the obligation to deliver to the Warrant Holder such shares of stock and/or securities as the Warrant Holder is entitled to receive had this Warrant been exercised in accordance with the foregoing; provided, however, that if as of the third business day prior to the consummation of the Consolidation Event the closing bid price of the Common Stock shall be equal to at least 200% of the Purchase Price, then the Warrant shall be automatically exchanged on the date of consummation of the Consolidation Event, as provided in Section 2 hereof. (e) Reclassification, Etc. If at any time after the date hereof there shall be a reclassification of any securities as to which purchase rights under this Warrant exist, into the same or a different number of securities of any other class or classes, then the Warrant Holder shall thereafter be entitled to receive upon exercise of this Warrant, during the period specified herein and upon payment of the Purchase Price then in effect, the number of shares or other securities or property resulting from such reorganization or reclassification, which would have been received by the Warrant Holder for the shares of stock subject to this Warrant had this Warrant at such time been exercised. (f) Purchase Price Adjustment. In the event that the Company issues or sells any Common Stock or securities which are convertible into or exchangeable for its Common Stock or any convertible securities, or any warrants or other rights to subscribe for or to purchase 7 8 or any options for the purchase of its Common Stock or any such convertible securities (other than issuance of Preferred Stock or of shares of Common Stock upon conversion thereof, shares or options issued or which may be issued pursuant to the Company's employee or director option plans or shares issued upon exercise of options, warrants or rights outstanding on the date of the Agreement and listed in the SEC Reports) at an effective purchase price per share which is less than the lesser of (a) the Purchase Price then in effect or (b) the fair market value (as hereinabove defined) of the Common Stock on the trading day next preceding such issue or sale, then in each such case, the Purchase Price in effect immediately prior to such issue or sale shall be reduced effective concurrently with such issue or sale to an amount determined by multiplying the Purchase Price then in effect by a fraction, (x) the numerator of which shall be the sum of (1) the number of shares of Common Stock outstanding immediately prior to such issue or sale, including, without duplication, those deemed to have been issued under any provision of the Preferred Stock and the Warrants plus (2) the number of shares of Common Stock which the aggregate consideration received by the Company for such additional shares would purchase at such fair market value or Purchase Price, as the case may be, then in effect; and (y) the denominator of which shall be the number of shares of Common Stock of the Company outstanding immediately after such issue or sale including, without duplication, those deemed to have been issued under any provision of the Preferred Stock and Warrants. For purposes of the foregoing fraction, Common Stock outstanding shall include, without limitation, any equity offerings then outstanding, whether or not they are exercisable or convertible when such fraction is to be determined. The number of shares which may be purchased hereunder shall be increased proportionately to any reduction in Purchase Price pursuant to this paragraph 5(f), so that after such adjustments the aggregate Purchase Price payable hereunder for the increased number of shares of Common Stock shall be the same as the aggregate Purchase Price in effect immediately prior to such adjustments. Notwithstanding anything else contained in this Warrant to the contrary, there shall be no adjustment of the Purchase Price or the number of shares of Common Stock issuable pursuant to the exercise of this 8 9 Warrant in the event that during the term of this Warrant, the Company issues shares of Common Stock, or securities convertible into Common Stock to the Purchaser. (g) Adjustments: Additional Shares, Securities or Assets. In the event that at any time, as a result of an adjustment made pursuant to this Section 5, Warrant Holder shall, upon exercise of this Warrant, become entitled to receive shares and/or other securities or assets (other than Common Stock) then, wherever appropriate, all references herein to shares of Common Stock shall be deemed to refer to and include such shares and/or other securities or assets; and thereafter the number of such shares and/or other securities or assets shall be subject to adjustment from time to time in a manner and upon terms as nearly equivalent as practicable to the provisions of this Section 5. 6. No Impairment. The Company will not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Warrant Holder against impairment. Without limiting the generality of the foregoing, the Company (a) will not increase the par value of any Warrant Shares above the amount payable therefor on such exercise, and (b) will take all such action as may be reasonably necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares on the exercise of this Warrant. 7. Notice of Adjustments; Notices. Whenever the Purchase Price or number of Warrant Shares purchasable hereunder shall be adjusted pursuant to Section 5 hereof, the Company shall execute and deliver to the Warrant Holder a certificate setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated and the Purchase Price and number of shares purchasable hereunder after giving effect to such adjustment, and shall cause a copy of such certificate to be mailed 9 10 (by first class mail, postage prepaid) to the Warrant Holder. 8. Rights As Stockholder. Prior to exercise of this Warrant, the Warrant Holder shall not be entitled to any rights as a stockholder of the Company with respect to the Warrant Shares, including (without limitation) the right to vote such shares, receive dividends or other distributions thereon or be notified of stockholder meetings. However, in the event of any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, the Company shall mail to each Warrant Holder, at least 10 days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right. 9. Replacement of Warrant. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of the Warrant and, in the case of any such loss, theft or destruction of the Warrant, upon delivery of an indemnity agreement or security reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, on surrender and cancellation of such Warrant, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor. 10. Consent to Jurisdiction. Each of the Company and the Warrant Holder (i) hereby irrevocably submits to the non-exclusive jurisdiction of the United States District Court for the Southern District of New York for the purposes of any suit, action or proceeding arising out of or relating to this Warrant and (ii) hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper. Each of the Company and the Warrant Holder consents to 10 11 process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address in effect for notices to it under this Warrant and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing in this paragraph shall affect or limit any right to serve process in any other manner permitted by law. 11. Entire Agreement; Amendments. This Warrant, the Agreement, and the Certificate of Designations contain the entire understanding of the parties with respect to the matters covered hereby and thereby. No provision of this Warrant may be waived or amended other than by a written instrument signed by the party against whom enforcement of any such amendment or waiver is sought. 12. Restricted Securities. (a) Registration or Exemption Required. This Warrant has been issued in a transaction exempt from the registration requirements of the Act by virtue of Regulation S. This Warrant and the Warrant Shares issuable upon exercise of this Warrant may not be resold into the United States, or to a U.S. person (as defined in Regulation S) for a period of forty (40) days from the date of original issuance of this Warrant; and thereafter, may not be sold into the United States or to a U.S. person (as defined in Regulation S) except pursuant to an effective registration statement or an exemption to the registration requirements of the Act and applicable state laws. Prior to the expiration of such 40-day period, this Warrant may not be exercised in the United States nor may the Warrant Shares be delivered to an account within the United States (except to the extent such Warrant may be exercised by, and such Warrant Shares delivered to, certain professional fiduciaries as provided by Regulation S). (b) Legend. For a period of forty (40) days from the date of original issuance of this Warrant, the Warrant and any Warrant Shares issued upon exercise thereof shall bear the following legend: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY OTHER APPLICABLE 11 12 SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF, NOR MAY SUCH SECURITIES BE EXERCISED BY OR ON BEHALF OF A U.S. PERSON (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) IN THE ABSENCE OF REGISTRATION UNDER THE SECURITIES ACT OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION." After the expiration of such 40-day period, the Warrant and any Warrant Shares (whether issued prior to or subsequent to such 40-day period shall be freely tradable and shall no longer be required to bear the legend. The Warrant Holder shall not be required to make any representation or warranty, or submit any documentation or legal opinion in order to have the legend removed from its Warrant or Warrant Shares or to have Warrant Shares issued to it without the legend after the expiration of such 40-day period. (c) Assignment. Assuming the conditions of (a) above regarding registration or exemption have been satisfied, the Warrant Holder may sell, transfer, assign, pledge or otherwise dispose of this Warrant, in whole or in part. The Warrant Holder shall deliver a written notice to Company, substantially in the form of the Assignment attached hereto as Exhibit B, indicating the person or persons to whom the Warrant shall be assigned and the respective number of warrants to be assigned to each assignee. The Company shall effect the assignment within ten (10) days, and shall deliver to the assignee(s) designated by Warrant Holder a Warrant or Warrants of like tenor and terms for the appropriate number of shares. 13. Notices. Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be effective (a) upon hand delivery or delivery by facsimile at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day 12 13 following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be: to the Company: Connective Therapeutics, Inc. 3400 West Bayshore Road Palo Alto, California 94303 Attn: Ms. Cynthia Butitta Fax: (415) 843 2899 to the Warrant Holder: --------------------------------- --------------------------------- --------------------------------- Either party hereto may from time to time change its address or facsimile number for notices under this Section 13 by giving at least 10 days prior written notice of such changed address or facsimile number to the other party hereto. 14. Miscellaneous. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. This Warrant shall be construed and enforced in accordance with and governed by the laws of the State of Delaware. The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms 13 14 hereof. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision. [Signatures on next page.] 14 15 CONNECTIVE THERAPEUTICS, INC. By ________________________________________________ Title: [CORPORATE SEAL] Attest: By _____________________________________________ Its: 15 16 EXHIBIT A EXERCISE FORM CONNECTIVE THERAPEUTICS, INC. The undersigned hereby irrevocably exercises the right to purchase __________________ shares of Common Stock of CONNECTIVE THERAPEUTICS, INC., a _________________ corporation, evidenced by the attached Warrant, and herewith makes payment of the Purchase Price with respect to such shares in full in the form of [cash or check in the amount of $___] {Warrant Shares in an amount equal to the amount set forth in the attached Warrant to be cancelled in connection with such exercise], all in accordance with the conditions and provisions of said Warrant. [The undersigned represents that it is not a U.S. Person (as such term is defined in Regulation S under the Securities Act of 1933, as amended) nor is this Warrant being exercised on behalf of a U.S. Person.] [The undersigned represents that it is a U.S. Person (as such term is defined in Regulation S under the Securities Act of 1933, as amended) or that this Warrant is being exercised on behalf of a U.S. Person, and is herewith providing the Company with an opinion of counsel that an exemption from the registration requirements of the Securities Act is available with respect to such exercise.] The undersigned requests that stock certificates for such Warrant Shares be issued, and a Warrant representing any unexercised portion hereof be issued, pursuant to this Warrant in the name of the registered Holder and delivered to the undersigned at the address set forth below. Dated:____________________ ________________________________________________________________________________ Signature of Registered Holder Name of Registered Holder (Print) ________________________________________________________________________________ Address 16 17 EXHIBIT B ASSIGNMENT (To be executed by the registered Warrant Holder desiring to transfer the Warrant) FOR VALUED RECEIVED, the undersigned Warrant Holder of the attached Warrant hereby sells, assigns and transfers unto the persons below named the right to purchase _____________ shares of the Common Stock of CONNECTIVE THERAPEUTICS, INC. evidenced by the attached Warrant and does hereby irrevocably constitute and appoint ________________________ attorney to transfer the said Warrant on the books of the Company, with full power of substitution in the premises. Dated: ________________________________________ Signature Fill in for new Registration of Warrant: __________________________________________________ Name __________________________________________________ Address __________________________________________________ Please print name and address of assignee (including zip code number) ________________________________________________________________________________ NOTICE The signature to the foregoing Exercise Form or Assignment must correspond to the name as written upon the face of the attached Warrant in every particular, without alteration or enlargement or any change whatsoever. 17 -----END PRIVACY-ENHANCED MESSAGE-----