-----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, COvDNtmRel57X3LSeCxrMkf9D2yDgxczSEmeOrMyILMnOvnhvWcw/xM9hBi4JzgR SORyRXwau+1TJHcK5Q2mUA== 0000891618-97-002445.txt : 19970526 0000891618-97-002445.hdr.sgml : 19970526 ACCESSION NUMBER: 0000891618-97-002445 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19970523 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970523 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONNETICS CORP 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: 97613631 BUSINESS ADDRESS: STREET 1: 3400 W BAYSHORE RD CITY: PALO ALTO STATE: CA ZIP: 94303 BUSINESS PHONE: 4158432800 FORMER COMPANY: FORMER CONFORMED NAME: CONNECTIVE THERAPEUTICS INC DATE OF NAME CHANGE: 19951214 8-K 1 FORM 8-K DATED MAY 23, 1997 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): May 23, 1997 CONNETICS CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) (Formerly CONNECTIVE THERAPEUTICS, INC.) 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 Connective Therapeutics, Inc. - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report) 2 ITEM 5. OTHER EVENTS A. PRIVATE PLACEMENT On May 15, 1997, Connetics Corporation (the "Company") and a selling stockholder entered into an agreement with certain accredited investors, including the Sprout Group, Domain Partners, Biotechnology Investments Limited, and New York Life Insurance Company (the "Investors"), to sell an aggregate of 1,936,357 shares of the Company's Common Stock at a price of $6.05 per share. The financing closed on May 16, 1997. The Company sold 1,810,000 shares, for an aggregate purchase price of $10,950,000, and also issued to the Investors warrants to purchase a total of 905,000 shares of the Company's Common Stock at an exercise price of $9.08 per share. The warrants will expire in May 2001. The Company has agreed to file within forty-five days of the closing a registration statement on Form S-3 covering the resale of the shares of Common Stock sold directly and the shares issuable upon exercise of the warrants. B. CHANGE OF NAME On May 14, 1997, the Company's stockholders approved an amendment to the Company's Amended and Restated Certificate of Incorporation to change the Company's name from Connective Therapeutics, Inc. to Connetics Corporation. This amendment was filed with the Secretary of State of Delaware on May 15, 1997. C. ADOPTION OF STOCKHOLDER RIGHTS PLAN Effective as of April 29, 1997, the Company's Board of Directors declared a dividend of one preferred share purchase right (a "Right") for each outstanding share of Common Stock, $0.001 par value (the "Common Shares"), of the Company. The dividend is payable on May 20, 1997 (the "Record Date") to stockholders of record as of the close of business on that date. Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series B Participating Preferred Stock, $0.001 par value, of the Company (the "Preferred Shares"), subject to adjustment, at a price of $49 per one-thousandth of a preferred share, subject to adjustment (the "Purchase Price"). The description and terms of the Rights are set forth in a Preferred Shares Rights Agreement (the "Rights Agreement") dated as of May 20, 1997 between the Company and U.S. Stock Transfer Corporation, as Rights Agent (the "Rights Agent"). The following is a general description only and is subject to the detailed terms and conditions of the Rights Agreement. A copy of the Rights Agreement, including the Certificate of Designation, the form of Rights Certificate and the Summary of Rights to be provided to stockholders of the Company, is included with this Report as Exhibit 4.2. -2- 3 Rights Evidenced by Common Share Certificates The Rights will not be exercisable until the Distribution Date (defined below). Accordingly, Common Share certificates outstanding on the Record Date will evidence the Rights related thereto, and Common Share certificates issued after the Record Date will contain a notation incorporating the Rights Agreement by reference. Until the Distribution Date (or earlier redemption, exchange or expiration of the Rights), the surrender or transfer of any certificates for Common Shares, even without notation or a copy of the Summary of Rights being attached thereto, will also constitute the transfer of the Rights associated with the Common Shares represented by such certificate. Distribution Date The Rights will separate from the Common Shares, certificates for the rights ("Rights Certificates") will be issued and the Rights will become exercisable upon the earlier of: (i) the close of business on the tenth day (or such later date as may be determined by a majority of the Board of Directors, excluding directors affiliated with the Acquiring Person, as defined below (the "Continuing Directors")) following a public announcement that a person or group of affiliated or associated persons has acquired, or obtained the right to acquire, beneficial ownership of 15% or more of the outstanding Common Shares (an "Acquiring Person") or (ii) the close of business on the tenth day (or such later date as may be determined by a majority of the Continuing Directors) following the commencement of a tender offer or exchange offer, the consummation of which would result in the beneficial ownership by a person or group of 15% or more of the outstanding Common Shares. The earlier of such dates is referred to as the "Distribution Date". Issuance of Rights Certificates, Expiration of Rights As soon as practicable following the Distribution Date, separate Rights Certificates will be mailed to holders of record of the Common Shares as of the close of business on the Distribution Date and such separate Rights Certificates alone will evidence the Rights from and after the Distribution Date. Unless otherwise determined by the Board of Directors, all Common Shares issued prior to the Distribution Date will be issued with Rights. Common Shares issued after the Distribution Date may be issued with Rights if such shares are issued (i) upon the exercise, conversion or exchange of securities issued after adoption of the Rights Agreement or (ii) pursuant to the exercise of stock options or under any employee benefit plan or arrangement. Except as otherwise determined by the Board of Directors, no other Common Shares issued after the Distribution Date will be issued with Rights. In addition, no Common Shares issued after the Distribution Date will be issued with Rights if such issuance would result in (or create a significant risk) (i) of material adverse tax consequences to the Company or the person to whom such Rights Certificate would be issued or (ii) that such options or plans would not qualify for otherwise available special tax treatment. The Rights will expire on April 29, 2007 (the "Final Expiration Date"), unless the Final Expiration Date is extended or unless the Rights are earlier redeemed or exchanged by the Company or expire upon consummation of certain mergers, consolidations or sales of assets, as described below. -3- 4 Initial Exercise of the Rights Following the Distribution Date, and until the occurrence of one of the subsequent events described below, holders of the Rights will be entitled to receive, upon exercise and the payment of $49 (the "Purchase Price") per Right, one one-thousandth of a Preferred Share. Exchange Provision At any time after an Acquiring Person has become such and prior to the Acquiring Person beneficially owning 50% or more of the outstanding Common Shares, the Board of Directors of the Company may exchange the Rights (other than Rights owned by the Acquiring Person or its affiliates), in whole or in part, at an exchange ratio of one Common Share per Right (subject to adjustment). Right to Buy Common Shares at Half Price Unless the Rights are earlier redeemed or exchanged, in the event that an Acquiring Person becomes such, other than pursuant to a tender offer which is made for all of the outstanding Common Shares and approved by a majority of the Continuing Directors after determining that the offer is both adequate and otherwise in the best interests of the Company and its stockholders (a "Permitted Offer"), then proper provision will be made so that each holder of a Right which has not theretofore been exercised (other than Rights beneficially owned by the Acquiring Person, which will thereafter be void) will thereafter have the right to receive, upon exercise of a Right, a number of Common Shares having a then current value equal to two times the Purchase Price. In the event that the Company does not have a sufficient number of Common Shares available, or the Board decides that such action is necessary or appropriate and not contrary to the interests of Rights holders, the Company may, among other things, instead substitute cash, assets or other securities for the Common Shares into which the Rights would have otherwise been exercisable. Right to Buy Acquiring Company Stock at Half Price Similarly, unless the Rights are earlier redeemed or exchanged, in the event that, after the Shares Acquisition Date (as defined below), (i) the Company consolidates with or merges into another entity, (ii) another entity consolidates with or merges into the Company or (iii) the Company sells or otherwise transfers 50% or more of its consolidated assets or earning power, proper provision must be made so that each holder of a Right which has not theretofore been exercised (other than Rights beneficially owned by the Acquiring Person, which will thereafter be void) will thereafter have the right to receive, upon exercise, a number of shares of common stock of the acquiring company having a then current value equal to two times the Purchase Price (unless the transaction satisfies certain conditions and is consummated with a person who acquired shares pursuant to a Permitted Offer, in which case the Rights will expire). Adjustments to Prevent Dilution The Purchase Price payable, the number of Rights and the number of Preferred Shares, Common Shares or other securities or property issuable upon exercise of the Rights are subject to -4- 5 adjustment from time to time to prevent dilution as set forth in the Rights Agreement. With certain exceptions, no adjustment in the Purchase Price will be required until cumulative adjustments require an adjustment of at least 1% in such Purchase Price. Rights and Preferences of the Preferred Shares Preferred Shares purchasable upon exercise of the Rights will not be redeemable. Each Preferred Share will be entitled to an aggregate dividend of 1,000 times the dividend declared per Common Share. In the event of liquidation, the holders of the Preferred Shares will be entitled to a preferential liquidation payment equal to accrued but unpaid dividends plus the greater of $1,000 per share or 1,000 times the aggregate per share amount to be distributed to the holders of Common Shares. Each Preferred Share will have 1,000 votes, voting together with the holders of Common Shares, except as required by law or the Certificate of Determination of Rights, Preferences and Privileges of Series B Participating Preferred Stock. In the event of any merger, consolidation or other transaction in which Common Shares are changed or exchanged, each Preferred Share will be entitled to receive 1,000 times the amount received per Common Share. These rights are protected by customary anti-dilution provisions. Because of the nature of the dividend, liquidation and voting rights of the Preferred Shares, the value of the one one-thousandth interest in a Preferred Share purchasable upon exercise of each Right should approximate the value of one Common Share. Redemption At any time prior to the close of business on the earlier of (i) the tenth day following the date (the "Shares Acquisition Date") of public announcement that an Acquiring Person has become such or such later date as may be determined by a majority of the Continuing Directors and publicly announced by the Company or (ii) the Final Expiration Date of the Rights, the Company may redeem the Rights in whole, but not in part, at a price of $0.01 per Right ("Redemption Price"). No Stockholders' Rights Prior to Exercise Until a Right is exercised, the holder thereof, as such, will have no rights as a stockholder of the Company (other than any rights resulting from such holder's ownership of Common Shares), including, without limitation, the right to vote or to receive dividends. Amendment of Rights Agreement The provisions of the Rights Agreement may be supplemented or amended by the Board of Directors in any manner prior to the Distribution Date without the approval of Rights holders. After the Distribution Date, the provisions of the Rights Agreement may be supplemented or amended by the Board in order to (i) cure any ambiguity, defect or inconsistency, (ii) to make changes which are deemed necessary or advisable and do not adversely affect the interests of holders of Rights (excluding the interests of any Acquiring Person), or (iii) to shorten or lengthen any time period under the Rights Agreement; provided, however, that no amendment to lengthen (A) the time period governing redemption shall be made at such time as the Rights are not -5- 6 redeemable, or (B) any other period unless for the purpose of protecting, enhancing or clarifying the rights of, and/or benefits to, the holders of Rights. Certain Anti-takeover Effects The Rights approved by the Board are designed to protect and maximize the value of the outstanding equity interests in the Company in the event of an unsolicited attempt by an acquiror to take over the Company, in a manner or on terms not approved by the Board of Directors. Takeover attempts frequently include coercive tactics to deprive a corporation's Board of Directors and its stockholders of any real opportunity to determine the destiny of the corporation. The Rights have been declared by the Board in order to deter such tactics, including a gradual accumulation of shares in the open market of a 15% or greater position to be followed by a merger or a partial or two-tier tender offer that does not treat all stockholders equally. The Company believes that these tactics often unfairly pressure stockholders, squeeze them out of their investment without giving them any real choice and deprive them of the full value of their shares. The Rights are not intended to prevent a takeover of the Company and will not do so. The Rights are not exercisable in the event of a Permitted Offer, as described above. The Rights may be redeemed by the Company at $0.01 per Right within ten days (or such later date as may be determined by a majority of the Continuing Directors) after the accumulation of 15% or more of the Company's outstanding Common Shares by a single acquiror or group. Accordingly, the Rights should not preclude any merger or business combination approved by the Board of Directors. Issuance of the Rights does not in any way weaken the financial strength of the Company or interfere with its business plans. The issuance of the Rights has no immediate dilutive effect, will not affect reported earnings per share, should not be taxable to the Company or to its stockholders and will not change the way in which the Company's shares are presently traded. The Company's Board of Directors believes that the Rights represent a sound and reasonable means of addressing the complex issues of corporate policy created by the current takeover environment. However, the Rights may have the effect of rendering more difficult or discouraging an acquisition of the Company deemed undesirable by the Board of Directors. The Rights may cause substantial dilution to a person or group that attempts to acquire the Company on terms or in a manner not approved by the Company's Board of Directors, except pursuant to an offer conditioned upon the negation, purchase or redemption of the Rights. -6- 7 ITEM 7. FINANCIAL STATEMENT AND EXHIBITS. (C) Exhibit 3.7 Amendment to the Company's Amended and Restated Certificate of Incorporation, as filed with the Delaware Secretary of State on May 15, 1997, changing the Company's name to Connetics Corporation. Exhibit 3.8 Certificate of Designation of Rights, Preferences and Privileges of Series B Participating Preferred Stock, as filed with the Delaware Secretary of State on May 15, 1997. Reference is made to Exhibit 4.2. Exhibit 4.2(1) Preferred Shares Rights Agreement, dated as of May 20, 1997, between Connetics Corporation and U.S. Stock Transfer Corporation, including the Certificate of Designation of Rights, Preferences and Privileges of Series B Participating Preferred Stock, the form of Rights Certificate and the Summary of Rights attached thereto as Exhibits A, B and C, respectively. Exhibit 10.1 Common Stock and Warrant Purchase Agreement, dated May 15, 1997 by and among the Company, Genentech, Inc. and certain investors. Exhibit 10.2 Registration Rights Agreement, dated May 15, 1997 by and among the Company and certain investors. Exhibit 10.3 Form of Common Stock Purchase Warrant issued to certain investors on May 16, 1997. - ---------- (1) Incorporated by reference from Exhibit 1 filed with the Company's Registration Statement on Form 8-A filed on May 23, 1997 to register Preferred Share Purchase Rights under the Company's stockholder rights plan, adopted by the Company's board of directors on April 29, 1997. -7- 8 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CONNETICS CORPORATION (Registrant) Dated: May 23, 1997 By: /s/ Cynthia M. Butitta ---------------------- Cynthia M. Butitta Vice President, Finance and Administration and Chief Financial Officer -8- 9 INDEX TO EXHIBITS EXHIBITS Exhibit 3.7 Amendment to the Company's Amended and Restated Certificate of Incorporation, as filed with the Delaware Secretary of State on May 15, 1997, changing the Company's name to Connetics Corporation. Exhibit 3.8 Certificate of Designation of Rights, Preferences and Privileges of Series B Participating Preferred Stock, as filed with the Delaware Secretary of State on May 15, 1997. Reference is made to Exhibit 4.2. Exhibit 4.2(1) Preferred Shares Rights Agreement, dated as of May 20, 1997, between Connetics Corporation and U.S. Stock Transfer Corporation, including the Certificate of Designation of Rights, Preferences and Privileges of Series B Participating Preferred Stock, the form of Rights Certificate and the Summary of Rights attached thereto as Exhibits A, B and C, respectively. Exhibit 10.1 Common Stock and Warrant Purchase Agreement, dated May 15, 1997 by and among the Company, Genentech, Inc. and certain investors. Exhibit 10.2 Registration Rights Agreement, dated May 15, 1997 by and among the Company and certain investors. Exhibit 10.3 Form of Common Stock Purchase Warrant issued to certain investors on May 16, 1997. - ---------- (1) Incorporated by reference from Exhibit 1 filed with the Company's Registration Statement on Form 8-A filed on May 23, 1997 to register Preferred Share Purchase Rights under the Company's stockholder rights plan, adopted by the Company's board of directors on April 29, 1997. EX-3.7 2 AMENDMENT TO THE COMPANY'S CERT. OF INCORPORATION 1 EXHIBIT 3.7 CERTIFICATE OF AMENDMENT OF THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF CONNECTIVE THERAPEUTICS, INC. The undersigned, Thomas G. Wiggans and Joshua L. Green, hereby certify that: ONE: They are the duly elected and acting President and Secretary, respectively, of said corporation. TWO: Article I of the Amended and Restated Certificate of Incorporation of said corporation is hereby amended in its entirety to read as follows: "ARTICLE I The name of this corporation is Connetics Corporation." THREE: The foregoing amendment of the Amended and Restated Certificate of Incorporation has been duly adopted in accordance with Section 242 of the General Corporation Law of the State of Delaware by the Board of Directors and the stockholders of the Corporation. IN WITNESS WHEREOF, this Certificate of Amendment of the Amended and Restated Certificate of Incorporation has been executed by its President and attested by its Secretary this 14th day of May, 1997. /s/ THOMAS G. WIGGANS -------------------------------- Thomas G. Wiggans President /s/ JOSHUA L. GREEN -------------------------------- Joshua L. Green Secretary EX-10.1 3 COMMON STOCK AND WARRANT PURCHASE AGREEMENT 1 EXHIBIT 10.1 CONNECTIVE THERAPEUTICS, INC. COMMON STOCK AND WARRANT PURCHASE AGREEMENT MAY 15, 1997 2 CONNECTIVE THERAPEUTICS, INC. COMMON STOCK AND WARRANT PURCHASE AGREEMENT This Common Stock and Warrant Purchase Agreement (the "Agreement") is entered into as of this 15th day of May, 1997, among Connective Therapeutics, Inc., a Delaware corporation (the "Company"), Genentech, Inc., a Delaware corporation ("Genentech"), and the investors listed on Exhibit A attached hereto (each a "Purchaser" and together the "Purchasers"). SECTION 1 SALE OF COMMON STOCK AND WARRANT 1.1 SALE OF COMMON STOCK. Subject to the terms and conditions hereof, on the Closing Date, as defined below, the Company will issue and sell, and Genentech will sell, to each Purchaser, and each Purchaser will severally purchase from each of the Company and Genentech, the number of whole shares of Common Stock, par value $0.001 per share, of the Company (the "Common Stock"), calculated by dividing the dollar amount set forth opposite such Purchaser's name on Exhibit A by the Purchase Price Per Share. The "Purchase Price Per Share" shall be the lesser of (a) ninety percent (90%) of the average closing bid price for the Common Stock as quoted on the Nasdaq National Market System ("NMS") for the twenty (20) trading days ending on the last trading day prior to the Closing Date or (b) one hundred percent (100%) of the average closing bid price of the Common Stock as quoted on the NMS for the five (5) trading days ending on the last trading day prior to the Closing Date. 1.2 ISSUANCE OF WARRANT. Subject to the terms and conditions hereof, on the Closing Date, as defined below, the Company will issue to each Purchaser, and each Purchaser will severally acquire from the Company, a warrant substantially in the form attached hereto as Exhibit B (individually, a "Warrant" and collectively, the "Warrants") to purchase that number of shares of the Company's Common Stock equal to fifty percent (50%) of the number of shares of Common Stock being issued and sold to such Purchaser by the Company, at a per share exercise price equal to one hundred fifty-percent (150%) of the Purchase Price Per Share (the "Warrant Exercise Price"). 1.3 CLOSING DATE. The closing (the "Closing") of the purchase and sale of the Common Stock and the Warrants (collectively referred to herein as the "Securities") shall be held at the offices of Venture Law Group, 2800 Sand Hill Road, Menlo Park, California at 10:00 a.m. on May 16, 1997 or at such other time and place upon which the Company and the Purchasers shall mutually agree (the date of the Closing is hereinafter referred to as the "Closing Date"). 1.4 DELIVERY. At the Closing, (a) each of the Company and Genentech, respectively, will deliver to each Purchaser a certificate or certificates representing the shares of Common Stock purchased by such Purchaser, against payment of the purchase price therefor, by wire 3 transfer or certified or cashier's check drawn on a United States ("U.S.") bank, and (b) the Company will deliver the Warrant issued to such Purchaser. 1.5 LEGEND. The certificate or certificates for the Securities (or in the case of the Warrants, any shares of Common Stock that may be acquired upon exercise of such Warrants) shall be subject to a legend restricting transfer under the Securities Act of 1933, as amended (the "Securities Act") and referring to restrictions on transfer herein, such legend to be substantially as follows: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (A) AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, OR (B) AN OPINION OF COUNSEL FOR THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR (C) FULL COMPLIANCE WITH THE PROVISIONS OF RULE 144 UNDER THE ACT." SECTION 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company hereby represents and warrants to the Purchasers that: 2.1 ORGANIZATION. The Company is a corporation duly organized and validly existing under the laws of the State of Delaware and is in good standing under such laws. The Company has requisite corporate power and authority to own, lease and operate its properties and assets, and to carry on its business as presently conducted and as proposed to be conducted. The Company is qualified to do business as a foreign corporation in each jurisdiction in which the ownership of its property or the nature of its business requires such qualification, except where failure to so qualify would not have a materially adverse effect on the Company. 2.2 CAPITALIZATION. The authorized capital stock of the Company consists of 50,000,000 shares of Common Stock, $0.001 par value, of which at May 8, 1997, 9,091,763 shares were issued and outstanding, and 5,000,000 shares of Preferred Stock, $0.001 par value, of which 200 shares of seven percent (7%) Redeemable Preferred Stock, Series A, are issued and outstanding. The Company's Board of Directors has also authorized the creation of 90,000 shares of Series B Preferred Stock for potential issuance under the Company's stockholder rights plan. Since May 8, 1997 no shares of the Company's Common or Preferred Stock have been issued, except pursuant to the exercise of options or warrants outstanding as of May 8, 1997. All such issued and outstanding shares have been duly authorized and validly issued and are fully paid and nonassessable. In addition to the foregoing, the Company has reserved and outstanding the following warrants, rights, options and convertible securities: (i) warrants for the purchase of 18,395 shares of Common Stock at an exercise -2- 4 price of $4.89 per share, which warrants expire in February 2001; (ii) warrants for the purchase of 22,727 shares of Common Stock at an exercise price of $11.00 per share, which warrants expire in December 2000; (iii) warrants for the purchase of 73,071 shares of Common Stock at an exercise price of $5.78, which warrants expire in December 2002; (iv) warrants for the purchase of 20,000 shares of Common Stock at an exercise price of $7.43 per share, which warrants expire in December, 2001; (v) warrants for the purchase of 250,000 shares of Common Stock at an exercise price of $8.25 per share, which warrants expire in January 2002; (vi) 2,000,000 shares reserved for issuance pursuant to the Company's 1994 Stock Plan, of which, at March 31, 1997, options (net of repurchases) to purchase 176,713 shares had been exercised, options to purchase 1,823,287 shares were outstanding and 452,511 shares remained available for future grant; (vii) 88,126 shares reserved for issuance pursuant to the Company's 1995 Employee Stock Purchase Plan, of which, at March 31, 1997, 11,874 shares had been issued; (viii) 150,000 shares reserved for issuance under the Company's 1995 Directors' Stock Option Plan, of which, at March 31, 1997, 60,000 options had been granted; and (ix) a commitment from Kepler Capital LLC to purchase up to $25 million of Common Stock over a three-year period beginning on or before December 1, 1997. In addition, the Company may be obligated to issue additional shares to SmithKline Beecham Corporation on December 31, 1997 as part of the consideration paid for the Company's acquisition of rights to Ridaura in December 1996. Except as described in this Section 2.2, there are no other options, warrants, conversion privileges or other contractual rights presently outstanding to purchase or otherwise acquire any authorized but unissued shares of the Company's capital stock or other securities. All of the issued and outstanding securities of the Company have been issued in compliance with all applicable federal and state securities laws. 2.3 AUTHORIZATION. The Company has all corporate right, power and authority to enter into this Agreement and the Registration Rights Agreement substantially in the form attached hereto as Exhibit E (the "Registration Rights Agreement") and to consummate the transaction contemplated hereby and thereby. All corporate action on the part of the Company, its directors and stockholders necessary for the authorization, execution, delivery and performance of this Agreement and the Registration Rights Agreement by the Company, and the authorization, sale, issuance and delivery of the Securities being sold hereunder by the Company and the performance of the Company's obligations hereunder and under the Warrants and Registration Rights Agreement has been taken. This Agreement, the Warrants and the Registration Rights Agreement have been duly executed and delivered by the Company and constitute legal, valid and binding obligations of the Company enforceable in accordance with their respective terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies, and to limitations of public policy as they may apply to Section 1.8 of the Registration Rights Agreement. Upon their issuance and delivery pursuant to this Agreement, all of the Securities being sold by the Company hereunder will be duly and validly issued, fully paid and nonassessable and free and clear of any liens and encumbrances. There are no statutory, contractual or other preemptive rights or rights of first refusal with respect to the issuance and sale of the Securities or the shares of Common Stock issuable upon exercise of the Warrants. 2.4 VALIDITY OF SECURITIES. The Common Stock and Warrants, when issued, sold and delivered by the Company in accordance with the terms of this Agreement, will be duly and validly issued, fully-paid and nonassessable. Based in part upon the representations of the -3- 5 Purchasers in this Agreement, the offer, sale and issuance of the Common Stock and Warrants will be made in compliance with all applicable federal and state securities laws. The shares of Common Stock issuable upon exercise of the Warrants have been duly and validly reserved and, upon issuance in accordance with the terms of the Warrants, will be duly and validly issued, fully-paid and nonassessable, and will be issued in compliance with all applicable federal and states securities laws. 2.5 NO CONFLICT. The execution and delivery of this Agreement, the Warrants and the Registration Rights Agreement do not, and the consummation of the transactions contemplated hereby and thereby will not, conflict with, or result in any violation of, or default (with or without notice or lapse of time, or both), or give rise to a right of termination, cancellation or acceleration of any obligation or to a loss of a material benefit, under, any provision of the Certificate of Incorporation or Bylaws of the Company or any mortgage, indenture, lease or other agreement or instrument, permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to the Company, its properties or assets, which conflict, violation, default or right would have a material adverse effect on the business, properties, prospects or financial condition of the Company. 2.6 ACCURACY OF REPORTS; FINANCIAL STATEMENTS. All reports required to be filed with the Securities and Exchange Commission (the "SEC") by the Company from February 1, 1996 (the date of the Company's initial public offering) through the date of this Agreement under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), copies of which have been made available to each Purchaser (the "SEC Documents"), have been duly and timely filed, were in substantial compliance with the requirements of their respective forms when filed, were complete and correct in all material respects as of the dates at which the information was furnished, and contained (as of such dates) no untrue statement of a material fact nor omitted to state a material fact necessary in order to make the statements made therein in light of the circumstances in which made not misleading. The financial statements of the Company included in the SEC Documents (the "Financial Statements") comply as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto. The Financial Statements have been prepared in accordance with generally accepted accounting principles consistently applied and fairly present the consolidated financial position of the Company and any subsidiaries at the dates thereof and the consolidated results of operations and consolidated cash flows for the periods then ended (subject, in the case of unaudited statements, to normal, recurring adjustments). 2.7 CHANGES. Since April 28, 1997, (the date on which Amendment No. 2 to the Company's Annual Report on Form 10-K for the year ended December 31, 1996 was filed with the SEC), there has not been (a) any incurrence by the Company of any material liability, absolute or contingent, or (b) any event or condition of any character that has materially and adversely affected or might materially and adversely affect the business, properties, prospects or financial condition of the Company (as such business is presently conducted and as it is proposed to be conducted), except that on April 29, 1997 the Company's Board of Directors adopted a stockholder rights plan. There is no material liability or contingency of the Company that is not disclosed in the SEC Documents. -4- 6 2.8 GOVERNMENTAL CONSENTS, ETC. No consent, approval or authorization of or designation, declaration or filing with any governmental authority on the part of the Company is required in connection with the valid execution and delivery of this Agreement, the Warrants or the Registration Rights Agreement, or the consummation of any other transaction contemplated hereby and thereby, except such filings as may be required to be made with the SEC, the National Association of Securities Dealers, Inc. ("NASD") and with governmental authorities for purposes of effecting compliance with the securities and blue sky laws in the states in which Securities are offered and/or sold, which compliance will be effected in accordance with such laws. 2.9 LITIGATION. There is no pending or, to the best of the Company's knowledge, threatened lawsuit, administrative proceeding, arbitration, labor dispute or governmental investigation ("Litigation") to which the Company is a party or by which any material portion of its assets, taken as a whole, may be bound, nor is the Company aware of any basis therefor, which Litigation, if adversely determined, would have a material adverse effect on the business, properties, prospects or financial condition of the Company. 2.10 PATENTS AND TRADEMARKS. To its knowledge, and except as disclosed in the SEC Documents, the Company owns or possesses sufficient legal rights to all patents, trademarks, service marks, tradenames, copyrights, trade secrets, licenses, information and proprietary rights and processes necessary for its business as now conducted and as proposed to be conducted, without infringment of any rights of a third party. The Company has not received any communications alleging that the Company has violated or, by conducting its business as proposed, would violate any of the patents, trademarks, service marks, tradenames, copyrights, trade secrets or other proprietary rights or processes of any other person or entity, which violation would have a material adverse effect on the business, properties, prospects or financial condition of the Company. Except as disclosed in the SEC Documents, the Company has not granted (nor has the Company licensed from a third party) any material rights to or licenses to its patents, trademarks, service marks, tradenames, copyrights, trade secrets or other proprietary rights or processes. 2.11 REGISTRATION RIGHTS. The Company is not presently under any obligation and has not granted any rights to register its securities under the Securities Act with respect to any of its presently outstanding securities, which rights would be implicated with respect to the registration contemplated by the Registration Rights Agreement and which rights have not been waived by the holders thereof. 2.12 NO MATERIAL DEFAULT. The Company is not in violation of or default under any provision of (a) its Certificate of Incorporation or Bylaws or (b) any mortgage, indenture, lease or other agreement or instrument, permit, concession, franchise or license to which it is a party or by which it is bound or (c) any federal or state judgment, order, decree, statute, law, ordinance, rule or regulation applicable to the Company, except with respect to clauses (b) and (c) above, such violations or defaults as would not have a material adverse effect on the business, properties, prospects or financial condition of the Company. -5- 7 2.13 DISCLOSURE. No representation or warranty of the Company contained in this Agreement or the exhibits attached hereto (when read together and taken as a whole), contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein in light of the circumstances under which they were made not misleading. 2.14 SOLVENCY; NO DEFAULT. As of this date the Company has sufficient funds and cash flow to pay its debts and other liabilities as they become due, and the Company is not in default with respect to any material debt or liability. 2.15 ORIGINAL ISSUANCE TO GENENTECH. With regard to the shares being sold by Genentech to the Purchasers (the "Genentech Shares"), the Company issued the Genentech Shares to Genentech in a transaction exempt from the registration requirements of the Act and such shares were not subsequently registered under the Act for resale. The Genentech Shares were duly and validly authorized, issued and delivered by the Company and are fully paid. To the best of the Company's knowledge after investigation, Genentech is not a person (either alone or together with others) directly or indirectly controlling or controlled by the Company or under direct or indirect common control with the Company within the meaning of the Act. 2.16 RIGHTS OF COMMON STOCK. The shares of Common Stock sold to the Purchasers hereunder, including the shares issuable upon exercise of the Warrants, and the Genentech Shares shall have the rights, preferences, privileges and restrictions provided in the Company's Amended and Restated Certificate of Incorporation. SECTION 3 REPRESENTATIONS AND WARRANTIES OF GENENTECH Genentech hereby represents and warrants to the Purchasers as follows: 3.1 AUTHORIZATION. Genentech has all corporate right, power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. All corporate action on the part of Genentech, its directors and stockholders necessary for the authorization, execution, delivery and performance of this Agreement by Genentech, and authorization, sale and delivery of the Common Stock to be sold by Genentech hereunder, has been taken. This Agreement has been duly executed and delivered by Genentech and constitutes a legal, valid and binding obligation of Genentech, enforceable in accordance with its terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies. 3.2 NO CONFLICT. The execution and delivery of this Agreement by Genentech does not, and, the consummation of the transactions contemplated hereby will not, conflict with, or result in any violation of, or default (with or without notice or lapse of time, or both), or give rise to a right of termination, cancellation or acceleration of any obligation or to a loss of a material benefit, under, any provision of the Certificate of Incorporation or Bylaws of Genentech or any mortgage, indenture, lease or other agreement or instrument, permit, concession, -6- 8 franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Genentech, its properties or assets, the effect of which would have a material adverse effect on Genentech or materially impair or restrict its power to perform its obligations as contemplated hereby. 3.3 OWNERSHIP. Genentech is the record and beneficial owner and holder of the Common Stock being sold by it hereunder, free and clear of all liabilities, liens, encumbrances, voting trusts, conditional sale or title retention agreements, shareholders agreements, equities, charges, option, or other burdens (collectively, "Encumbrances"), and upon transfer to the Purchasers hereunder on the completion of the transactions contemplated by this Agreement, the Common Stock being sold by Genentech will be owned by the Purchasers, free and clear of all of Encumbrances, other than Encumbrances arising as a result of Purchasers' ownership thereof. 3.4 SELLING FOR OWN ACCOUNT. Genentech is acting solely on its own behalf and for its own account in selling the Common Stock to the Purchasers. 3.5 ORIGINAL ACQUISITION OF SHARES. Genentech acquired the Genentech Shares on July 11, 1994 in connection with the grant of a license to certain technology to the Company. Genentech has held the Genentech Shares for investment purposes only and has made no prior offer (other than under this Agreement) to sell the Genentech Shares. 3.6 RULE 144. Genentech has held the Genentech Shares for a sufficient period of time to allow the Genentech Shares to be resold under Rule 144(k) of the Act. Genentech is not an "affiliate" of the Company as defined under Rule 144(a)(1) of the Act. SECTION 4 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS Each Purchaser hereby represents and warrants to the Company and Genentech as follows: 4.1 INVESTMENT. Purchaser will acquire the Securities purchased from the Company and Genentech pursuant to this Agreement for investment for its own account, not as a nominee or agent and not with a view to or for resale in connection with any distribution thereof. Purchaser understands that the Securities purchased by such Purchaser from the Company and Genentech pursuant to this Agreement have not been registered under the Securities Act by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of such Purchaser's investment intent and the accuracy of such Purchaser's representations as expressed herein. 4.2 ACCREDITED INVESTOR. Each Purchaser is an "accredited investor" as defined by Rule 501(a) of the Securities Act of 1933, as amended (the "Securities Act"). The SEC documents have been made available to each Purchaser, and each Purchaser has received all the information it has requested regarding the Company. Each Purchaser has such business and -7- 9 financial experience as is required to give it the capacity to protect its own interests in connection with the purchase of the Securities. 4.3 AUTHORITY. This Agreement and the Registration Rights Agreement have been duly executed and delivered by each Purchaser and constitute legal, valid and binding obligations of the Purchasers, enforceable in accordance with their respective terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies, and to limitations of public policy as they may apply to Section 1.7 of the Registration Rights Agreement. The execution and delivery of this Agreement and the Registration Rights Agreement do not, and the consummation of the transactions contemplated hereby and thereby will not, conflict with or result in any violation of any obligation under any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to the Purchasers. 4.4 GOVERNMENT CONSENTS, ETC. No consent, approval or authorization of or designation, declaration or filing with any governmental authority on the part of the Purchasers is required in connection with the valid execution and delivery of this Agreement, or the offer, sale or issuance of the Securities, or the consummation of any other transaction contemplated hereby. 4.5 INVESTIGATION. Each Purchaser has had a reasonable opportunity to discuss the Company's business, management and financial affairs with the Company's management. SECTION 5 CONDITIONS TO OBLIGATIONS OF THE PURCHASERS The obligations of each Purchaser to the Company and Genentech under this Agreement are subject to the fulfillment, on or before the Closing, of each of the following conditions, unless otherwise waived: 5.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and warranties made by the Company in Section 2 and Genentech in Section 3 shall be true and correct in all material respects on the Closing Date with the same effect as though such representations and warranties had been made on and as of the Closing Date. 5.2 COVENANTS. All covenants, agreements and conditions contained in this Agreement to be performed by the Company and Genentech on or prior to the Closing Date shall have been performed or complied with in all material respects. 5.3 NO ORDER PENDING. There shall not then be in effect any order enjoining or restraining the transactions contemplated by this Agreement. 5.4 NO LAW PROHIBITING OR RESTRICTING SALE. There shall not be in effect any law, rule or regulation prohibiting or restricting such sale, or requiring any consent or approval of any person which shall not have been obtained to issue the Securities (except as otherwise referenced in this Agreement). -8- 10 5.5 COMPLIANCE CERTIFICATE. Each of the Company and Genentech shall have delivered to the Purchasers a certificate substantially in the form attached hereto as Exhibit C and Exhibit D, hereto, respectively executed by a duly authorized officer, dated the Closing Date, and certifying to the fulfillment of the conditions specified in Sections 5.1 and 5.2. 5.6 REGISTRATION RIGHTS AGREEMENT. On or before the Closing, the Company and the Purchasers shall have executed and delivered a counterpart of the Registration Rights Agreement. 5.7 OPINION OF COMPANY COUNSEL. The Purchasers shall have received from Venture Law Group, counsel for the Company, an opinion, dated as of the Closing, substantially in the form attached hereto as Exhibit F. SECTION 6 CONDITIONS TO OBLIGATIONS OF THE COMPANY AND GENENTECH The obligations of the Company and Genentech under this Agreement are subject to the fulfillment on or prior to the Closing of each of the following conditions, unless otherwise waived: 6.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and warranties made by the Purchasers in Section 4 hereof shall be true and correct in all material respects on and as of the Closing Date with the same effect as though such representations and warranties had been made on and as of the Closing Date. 6.2 PERFORMANCE. All covenants, agreements and conditions contained in this Agreement to be performed by the Purchasers on or prior to the Closing Date shall have been performed or complied with in all material respects. 6.3 NO ORDER PENDING. There shall not then be in effect any order enjoining or restraining the transactions contemplated by this Agreement. 6.4 NO LAW PROHIBITING OR RESTRICTING SUCH SALE. There shall not be in effect any law, rule or regulation prohibiting or restricting such sale, or requiring any consent or approval of any person which shall not have been obtained to issue the Securities (except as otherwise provided in this Agreement). SECTION 7 MISCELLANEOUS 7.1 GOVERNING LAW. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of law. -9- 11 7.2 SURVIVAL. Unless otherwise set forth in this Agreement, the warranties, representations and covenants of the Company, Genentech and the Purchasers contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and the Closing. 7.3 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. 7.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement, the Warrants, the Registration Rights Agreement and the other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the parties with regard to the subject matter hereof and thereof and supersede all prior agreements and understandings among the parties relating to the subject matter hereof. Neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the party against which enforcement of any such amendment, waiver, discharge or termination is sought. 7.5 NOTICES AND DATES. Unless otherwise provided herein, any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient upon delivery, when delivered personally or by overnight courier and addressed to the party to be notified at such party's address as set forth on Exhibit A hereto or as subsequently modified by written notice. In the event that any date provided for in this Agreement falls on a Saturday, Sunday or legal holiday, such date shall be deemed extended to the next business day. 7.6 BROKERS. (a) Neither the Company nor Genentech has engaged, consented to or authorized any broker, finder or intermediary to act on its behalf, directly or indirectly, as a broker, finder or intermediary in connection with the transactions contemplated by this Agreement. The Company and Genentech hereby agree to, on a pro-rata basis, indemnify and hold harmless the Purchasers from and against all fees, commissions or other payments owing to any party acting on behalf of the Company and/or Genentech hereunder. (b) No Purchaser has engaged, consented to or authorized any broker, finder or intermediary to act on its behalf, directly or indirectly, as a broker, finder or intermediary in connection with the transactions contemplated by this Agreement. Each Purchaser hereby agrees to indemnify and hold harmless the Company and Genentech from and against all fees, commissions or other payments owing to any party acting on behalf of such Purchaser hereunder. 7.7 SEVERABILITY. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. -10- 12 7.8 COSTS AND EXPENSES. Each party hereto shall pay its own costs and expenses incurred in connection herewith, including the fees of its counsel, auditors and other representatives, whether or not the transactions contemplated herein are consummated. 7.9 NO THIRD PARTY RIGHTS. Nothing in this Agreement shall create or be deemed to create any rights in any person or entity not a party to this Agreement. 7.10 PUBLICITY. The Purchasers, Genentech and the Company shall not issue any public statement concerning the transactions contemplated by this Agreement without the reasonable prior written consent of the parties named in such public statement; provided, however, that the parties may disclose the transaction or the terms hereof or thereof from time to time without the approval of the party whose name is disclosed if (i) such approval has been requested and not received and such party concludes (after consulting with counsel) that it is required by law to disclose the transaction or the terms thereof or (ii) to the extent that similar disclosure has been previously approved pursuant to this Section 7.10. 7.11 CAPTIONS AND HEADINGS. The captions and headings used herein are for convenience and ease of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. 7.12 COUNTERPARTS. This Agreement may be executed in counterparts, and each such counterpart shall be deemed an original for all purposes. 7.13 EXPENSES. Upon Closing, the Company shall reimburse the reasonable fees and expenses of special counsel to the Purchasers, excluding New York Life Insurance Company (not to exceed $10,000). Irrespective of whether the Closing is effected, the Company shall pay all costs and expenses that it incurs with respect to the negotiation, execution, delivery and performance of the Agreement. [SIGNATURE PAGE FOLLOWS] -11- 13 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective authorized officers as of the date aforesaid. CONNECTIVE THERAPEUTICS, INC. By: /s/ Thomas G. Wiggans --------------------------------------- Its: President and Chief Executive Officer -------------------------------------- GENENTECH, INC. By: /s/ Genentech, Inc. --------------------------------------- Its: Executive Vice President and CFO ------------------------------------- PURCHASERS: DOMAIN PARTNERS III, L.P. By: One Palmer Square Associates III, L.P. By: /s/ Kathleen K. Schoemaker --------------------------------------- General Partner DP III ASSOCIATES, L.P. By: One Palmer Square Associates III, L.P. By: /s/ Kathleen K. Schoemaker --------------------------------------- General Partner NEW YORK LIFE INSURANCE COMPANY By: /s/ Dominique Semon --------------------------------------- Its: Director, Private Finance -------------------------------------- 14 /s/ Brian Seed ------------------------------------------ Brian Seed DLJ CAPITAL CORPORATION By: /s/ Kathleen D. LaPorte ------------------------------------------ Kathleen D. La Porte Attorney-In-Fact SPROUT CAPITAL VII, L.P. By: DLJ Capital Corporation Managing General Partner By: /s/ Kathleen D. LaPorte ------------------------------------------ Kathleen D. La Porte Attorney-In-Fact THE SPROUT CEO FUND, L.P. By: DLJ Capital Corporation its General Partner By: /s/ Kathleen D. LaPorte ------------------------------------------ Kathleen D. La Porte Attorney-In-Fact DLJ FIRST ESC L.L.C. By: DLJ LBO Plans Management Corporation Its: Manager By: /s/ Kathleen D. LaPorte ------------------------------------------ Kathleen D. La Porte Attorney-In-Fact 15 SPROUT GROWTH II, L.P. By: DLJ Capital Corporation Managing General Partner By: /s/ Kathleen D. LaPorte ------------------------------------------ Kathleen D. La Porte Attorney-In-Fact /s/ Alexander E. Barkas and Lynda L. Wijcik ------------------------------------------- Alexander E. Barkas and Lynda L. Wijcik BIOTECHNOLOGY INVESTMENTS LIMITED By: Old Court Limited By: /s/ Alison Gallienne ------------------------------------------ Secretary Rothchild Asset Management (CI) Limited Attorney-in-Fact 16 EXHIBIT A SCHEDULE OF PURCHASERS
Number of Securities Warrants to Purchase of Common Stock* Common Stock** -------------------- -------------------- DLJ Capital Corporation 26,524 12,396 Sprout Capital VII, L.P. 638,037 298,201 The Sprout CEO Fund, L.P. 7,412 3,464 Sprout Growth II, L.P. 521,618 243,790 DLJ First ESC L.L.C. 132,621 61,984 3000 Sand Hill Road Building 4, Suite 270 Menlo Park, CA 94025 Biotechnology Investments Limited 133,353 62,326 c/o Domain Associates One Palmer Square, Suite 515 Princeton, NJ 08542 Domain Partners III, L.P. 128,899 60,244 One Palmer Square, Suite 515 Princeton, NJ 08542 DP III Associates, L.P. 4,454 2,081 One Palmer Square, Suite 515 Princeton, NJ 08542 New York Life Insurance Company 266,706 124,651 51 Madison Avenue New York, NY 10010 Attn: Dominique O. Semon Investment Department Venture Capital Room 207 Fax: (212) 576-8080 cc: Attn: Office of General Counsel Investment Section, Room 1104 Fax: (212) 576-8340
17 Brian Seed, M.D. 51,368 24,008 c/o Massachusetts General Hospital Molecular Biology, Wellman 9 50 Blossom Street Boston, MA 02114 Alexander E. Barkas and 25,365 11,855 Lynda L. Wijcik c/o Kleiner Perkins Caufield & Byers 2750 Sand Hill Road Menlo Park, CA 94025-7020 --------- ------- TOTAL 1,936,357 905,000
- ---------- * Purchase price per share of Common Stock is $6.05 ** Exercise price of Warrants is $9.08 EX-10.2 4 REGISTRATION RIGHTS AGREEMENT DATED 5/15/97 1 EXHIBIT 10.2 CONNECTIVE THERAPEUTICS, INC. REGISTRATION RIGHTS AGREEMENT MAY 15, 1997 2 CONNECTIVE THERAPEUTICS, INC. REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (the "Agreement") is made as of the 15th day of May, 1997, by and among Connective Therapeutics, Inc., a Delaware corporation (the "Company") and the investors listed on Attachment A hereto, each of which is herein referred to as an "Investor." RECITALS The Company, Genentech, Inc. ("Genentech") and the Investors have entered into a Common Stock and Warrant Purchase Agreement (the "Purchase Agreement") of even date herewith pursuant to which (a) the Company and Genentech have agreed to sell to the Investors and the Investors have agreed to purchase from the Company and Genentech shares of the Company's Common Stock and (b) the Company has agreed to sell to the Investors and the Investors have agreed to purchase from the Company Warrants to purchase the Company's Common Stock. ALL TERMS NOT OTHERWISE DEFINED HEREIN SHALL HAVE THE MEANINGS ASCRIBED IN THE PURCHASE AGREEMENT. A condition to the Investors' obligations under the Purchase Agreement is that the Company and the Investors enter into this Agreement in order to provide the Investors with certain rights to register the Securities acquired by the Investors subject to the Purchase Agreement. The Company and the Investors each desire to induce the Investors to purchase the Securities pursuant to the Purchase Agreement by agreeing to the terms and conditions set forth herein. AGREEMENT The parties hereby agree as follows: 1. REGISTRATION RIGHTS. The Company and the Investors covenant and agree as follows: 1.1 DEFINITIONS. For purposes of this Section 1: (a) The terms "register," "registered," and "registration" refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act of 1933, as amended (the "Act"), and the declaration or ordering of effectiveness of such registration statement or document; (b) The term "Registrable Securities" means (i) the shares of Common Stock issued or sold in connection with the Purchase Agreement, including shares sold to the Investors by Genentech (such shares of Common Stock are collectively referred to hereinafter as the "Shares" or "Stock"), (ii) all shares of Common Stock that may be issued upon 3 exercise of the Warrants (the "Warrant Shares"), and (iii) any other shares of Common Stock of the Company issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the Stock or the Warrant Shares, provided, that the foregoing definition shall exclude in all cases any Registrable Securities sold by a person in a transaction in which his or her rights under this Agreement are not assigned. Notwithstanding the foregoing, Common Stock, the Warrant Shares or other securities shall only be treated as Registrable Securities if and so long as they have not been (A) sold to or through a broker or dealer or underwriter in a public distribution or a public securities transaction, or (B) sold in a transaction exempt from the registration and prospectus delivery requirements of the Act under Section 4(1) thereof so that all transfer restrictions, and restrictive legends with respect thereto, if any, are removed upon the consummation of such sale; (c) The number of shares of "Registrable Securities then outstanding" shall be determined by the number of shares of Common Stock outstanding which are, and the number of shares of Common Stock and Warrant Shares issuable pursuant to then exercisable or convertible securities which are, Registrable Securities; (d) The term "Holder" means any person owning or having the right to acquire Registrable Securities or any assignee thereof in accordance with this Agreement; (e) The term "Form S-3" means such form under the Act as in effect on the date hereof or any successor form under the Act; and (f) The term "SEC" means the Securities and Exchange Commission. 1.2 FORM S-3 REGISTRATION. Subject to the terms and conditions of this Agreement, within forty-five (45) days of the Closing (the "S-3 Date") the Company will file with the SEC and use its best efforts to effect a registration statement on Form S-3 and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by the Holders. Accordingly, the Company will: (a) promptly give written notice of the registration, and any related qualification or compliance, to all Holders; and (b) as soon as practicable, effect such registration and all such qualifications and compliances as may be necessary and as would permit or facilitate the sale and distribution of all of the Holders' Registrable Securities; provided, however, that the Company shall not be obligated to effect any such registration, qualification or compliance, pursuant to this Section 1.2 if the Company shall furnish to the Holders a certificate signed by the President of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such Form S-3 Registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Form S-3 registration statement for a reasonable period of time, which shall not exceed twenty (20) days after the S-3 Date under this Section 1.2. 2 4 (c) Expenses incurred in connection with a registration requested pursuant to this Section 1.2 shall be borne by the Company, including all registration, filing, qualification, printers' and accounting fees but excluding any underwriters' discounts or commissions and any fees and disbursements of any counsel for the selling Holders (such fees or discounts, if any, to be borne pro rata by the Holders participating in the registration). 1.3 OBLIGATIONS OF THE COMPANY. Whenever required under this Section 1 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible: (a) Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective and to keep such registration statement effective until two (2) years after the date on which the registration statement is declared effective; provided, however, that the Company shall extend the effectiveness of the registration statement for an additional one (1) year period following the expiration of the initial two (2) year period, if requested in a writing signed by the holders of a majority of the Registrable Securities and delivered to the Company within sixty (60) calendar days prior to the expiration of such initial two (2) year period; provided further, however, that if the counsel to the Company provides an opinion to the requesting holders, based on factual representations provided by the requesting holders or information filed with the SEC, that such requesting holders are not, at the time of such request, "affiliates" of the Company within the meaning of Rule 144 of the Act ("Rule 144"), then the Company shall not be obligated to effect such extension of effectiveness. (b) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Act with respect to the disposition of all securities covered by such registration statement. (c) Furnish to the Holders such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them. (d) Use its best efforts to register and qualify the securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions as shall be reasonably requested by the Holders, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. (e) Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. In such 3 5 circumstance, the Company will use its best efforts to promptly update such prospectus to correct such untrue statement or disclose the necessary material facts within the period of time the Company may delay sales under Section 1.4(a)(iii) below. 1.4 RESTRICTIONS ON AND PROCEDURE FOR SALES PURSUANT TO A REGISTRATION STATEMENT. (a) Each Holder agrees to the following: (i) Notice to Company. If any Holder shall propose to sell any Shares and/or Warrant Shares, the Holder shall notify the Company of its intent to do so on or before one (1) business day prior to the date of such sale (the "Notice of Sale"), and the provision of the Notice of Sale to the Company shall conclusively be deemed to establish an agreement by such Holder to comply with the registration provisions herein described. The Notice of Sale shall be deemed to constitute a representation that any information previously supplied by such Holder is accurate as of the date of such Notice of Sale. (ii) Notice of Sale. The Notice of Sale in substantially the form attached as Attachment B shall be given in accordance with the provisions of Section 2.5 hereof. However, the Holder may give the Notice of Sale orally by telephoning Cynthia M. Butitta or the then current Chief Financial Officer at the Company at (415) 843-2800. An oral Notice of Sale shall be deemed to have been received only at such time as the Selling Holder speaks directly with Cynthia M. Butitta (or such then current Chief Financial Officer). In addition, an oral Notice of Sale shall only be deemed effective if it is followed by a written Notice of Sale received by the Company by personal delivery or facsimile within twenty-four (24) hours after giving the oral Notice of Sale. (iii) Delay of Sale. The Company may refuse to permit the Holder to resell any Shares and/or Warrant Shares for a specified period of time; provided, however, that (a) in order to exercise this right, the Company must deliver a certificate in writing to the Holder to the effect that the registration statement in its then current form contains an untrue statement of material fact or omits to state a material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading, and (b) in no event shall such delay exceed twenty-five (25) days, and (c) in no event shall this right of delay be exercised on more than two (2) occasions in any twelve (12) month period. During any suspension as contemplated by this Section 1.4 (a)(iii), the Company will not allow any of its officers or directors to buy or sell shares of the Company's securities. (b) Representations of Holders. Each Holder hereby represents to and covenants with the Company that, during the period in which any registration statement effected pursuant to Section 1.2 remains effective, such Holder will: (i) not engage in any stabilization activity in connection with any of the Company's securities; 4 6 (ii) cause to be furnished to any purchaser of the Shares and/or Warrant Shares and to the broker-dealer, if any, through whom Shares may be offered, a copy of the Prospectus; and (iii) not bid for or purchase any securities of the Company or any rights to acquire the Company's securities, or attempt to induce any person to purchase any of the Company's securities or any rights to acquire the Company's securities other than as permitted under the Securities Exchange Act of 1934, as amended ("Exchange Act"). (c) Information for Use in Registration Statement. Each Holder represents and warrants to the Company that such Holder has completed the information requested by the Selling Holder's Questionnaire attached as Attachment B hereto (the "Questionnaire"), and further represents and warrants to the Company that all information provided by such Holder in the Questionnaire is true, accurate and complete. Each Holder understands that the written information in the Questionnaire and all written representations made in this Agreement are being provided to the Company specifically for use in, or in connection with, the registration statement and the Prospectus, and has executed this Agreement with such knowledge. 1.5 FURNISH INFORMATION. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 1 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Holder's Registrable Securities. 1.6 DELAY OF REGISTRATION. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any dispute that might arise with respect to the interpretation or implementation of this Section 1. 1.7 INDEMNIFICATION. In the event any Registrable Securities are included in a registration statement under this Section 1: (a) To the extent permitted by law, the Company will indemnify and hold harmless each Holder, any underwriter (as defined in the Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Act or the Exchange Act, against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a "Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Act, the 5 7 Exchange Act or any state securities law; and the Company will pay to each such Holder, underwriter or controlling person, as incurred, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this subsection 1.7(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability, or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by any such Holder, underwriter or controlling person. (b) To the extent permitted by law, each selling Holder will indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the registration statement, each person, if any, who controls the Company within the meaning of the Act, any underwriter, any other Holder selling securities in such registration statement and any controlling person of any such underwriter or other Holder, against any losses, claims, damages, or liabilities (joint or several) to which any of the foregoing persons may become subject, under the Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use in connection with such registration; and each such Holder will pay, as incurred, any legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to this subsection 1.7(b), in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this subsection 1.7(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided, that, in no event shall any indemnity under this subsection 1.7(b) exceed the net proceeds from the offering received by such Holder, except in the case of willful fraud by such Holder. (c) Promptly after receipt by an indemnified party under this Section 1.7 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 1.7, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties which may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the reasonable fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if 6 8 prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 1.7, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 1.7. (d) If the indemnification provided for in this Section 1.7 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage, or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage, or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage, or expense as well as any other relevant equitable considerations; provided, that, in no event shall any contribution by a Holder under this Subsection 1.7(d) exceed the net proceeds from the offering received by such Holder, except in the case of willful fraud by such Holder. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission. (e) The obligations of the Company and Holders under this Section 1.7 shall survive the completion of any offering of Registrable Securities in a registration statement under this Section 1. 1.8 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to making available to the Holders the benefits of Rule 144 and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to: (a) make and keep public information available, as those terms are understood and defined in Rule 144, so long as the Company remains subject to the periodic reporting requirements under Sections 13 or 15(d) of the Exchange Act; (b) take such action, including the voluntary registration of its Common Stock under Section 12 of the Exchange Act, as is necessary to enable the Holders to utilize Form S-3 for the sale of their Registrable Securities, such action to be taken as soon as practicable after the end of the fiscal year in which the first registration statement filed by the Company for the offering of its securities to the general public is declared effective; (c) file with the SEC in a timely manner all reports and other documents required of the Company under the Act and the Exchange Act; and (d) furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) a written statement by the Company that it has 7 9 complied with the reporting requirements of the Exchange Act and the rules and regulations promulgated thereunder, or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such form. 1.9 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company to register Registrable Securities pursuant to this Section 1 may be assigned (but only with all related obligations) by a Holder to a transferee or assignee of at least 50,000 shares of such securities, provided the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned; and provided, further, that such assignment shall be effective only if immediately following such transfer the further disposition of such securities by the transferee or assignee is restricted under the Act. For the purposes of determining the number of shares of Registrable Securities held by a transferee or assignee, the holdings of transferees and assignees of a partnership who are partners or retired partners of such partnership (including spouses and ancestors, lineal descendants and siblings of such partners or spouses who acquire Registrable Securities by gift, will or intestate succession) shall be aggregated together and with the partnership; provided that all assignees and transferees who would not qualify individually for assignment of registration rights shall have a single attorney-in-fact for the purpose of exercising any rights, receiving notices or taking any action under Section 1. 2. MISCELLANEOUS. 2.1 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties (including transferees of any of the Shares or Warrant Shares). Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. 2.2 GOVERNING LAW. This Agreement and all acts and transactions pursuant hereto shall be governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of laws. 2.3 COUNTERPARTS. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 2.4 TITLES AND SUBTITLES. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. 8 10 2.5 NOTICES. Unless otherwise provided herein, any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient upon delivery, when delivered personally or by overnight courier and addressed to the party to be notified at such party's address as set forth on Attachment A hereto or as subsequently modified by written notice. In the event that any date provided for in this Agreement falls on a Saturday, Sunday or legal holiday, such date shall be deemed extended to the next business day. Notwithstanding the foregoing, any notice delivered pursuant to Section 1.3(e) or Section 1.4 hereto must be made by personal delivery or confirmed facsimile transmission. 2.6 EXPENSES. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled. 2.7 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the holders of a majority of the Registrable Securities then outstanding. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of any Registrable Securities then outstanding, each future holder of all such Registrable Securities, and the Company. 2.8 SEVERABILITY. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (x) such provision shall be excluded from this Agreement, (y) the balance of the Agreement shall be interpreted as if such provision were so excluded and (z) the balance of the Agreement shall be enforceable in accordance with its terms. 2.9 ENTIRE AGREEMENT. This Agreement, and the documents referred to herein (with the exception of the registration statement) constitute the entire agreement between the parties hereto pertaining to the subject matter hereof, and any and all other written or oral agreements existing between the parties hereto are expressly canceled. [SIGNATURE PAGE FOLLOWS] 9 11 The parties have executed this Registration Rights Agreement as of the date first above written. CONNECTIVE THERAPEUTICS, INC. By: /s/ Thomas G. Wiggans --------------------------------------- Its: President and Chief Executive Officer -------------------------------------- INVESTORS: DOMAIN PARTNERS III, L.P. By: One Palmer Square Associates III, L.P. By: /s/ Kathleen K. Schoemaker -------------------------------------- General Partner DP III ASSOCIATES, L.P. By: One Palmer Square Associates III, L.P. By: /s/ Kathleen K. Schoemaker --------------------------------------- General Partner NEW YORK LIFE INSURANCE COMPANY By: /s/ Dominique Semon --------------------------------------- Its: Director, Private Finance -------------------------------------- 12 /s/ Brian Seed ------------------------------------- Brian Seed DLJ CAPITAL CORPORATION By: /s/ Kathleen D. LaPorte --------------------------------- Kathleen D. La Porte Attorney-In-Fact SPROUT CAPITAL VII, L.P. By: DLJ Capital Corporation Managing General Partner By: /s/ Kathleen D. LaPorte --------------------------------- Kathleen D. La Porte Attorney-In-Fact THE SPROUT CEO FUND, L.P. By: DLJ Capital Corporation its General Partner By: /s/ Kathleen D. LaPorte --------------------------------- Kathleen D. La Porte Attorney-In-Fact DLJ FIRST ESC L.L.C. By: DLJ LBO Plans Management Corporation Its: Manager By: /s/ Kathleen D. LaPorte --------------------------------- Kathleen D. La Porte Attorney-In-Fact 2 13 SPROUT GROWTH II, L.P. By: DLJ Capital Corporation Managing General Partner By: /s/ Kathleen D. LaPorte --------------------------------- Kathleen D. La Porte Attorney-In-Fact /s/ Alexander E. Barkas and Lynda L. Wijcik ---------------------------------------- Alexander E. Barkas and Lynda L. Wijcik BIOTECHNOLOGY INVESTMENTS LIMITED By: Old Court Limited By: /s/ Alison Gallienne --------------------------------- Secretary Rothchild Asset Management (CI) Limited Attorney-in-Fact 3 14 ATTACHMENT A INVESTORS
No. of Shares Name/Address of Common Stock ------------ --------------- DLJ Capital Corporation Sprout Capital VII, L.P. The Sprout CEO Fund, L.P. Sprout Growth II, L.P. DLJ First ESC L.L.C. 3000 Sand Hill Road Building 4, Suite 270 Menlo Park, CA 94025 Biotechnology Investments Limited c/o Domain Associates One Palmer Square, Suite 515 Princeton, NJ 08542 Domain Partners III, L.P. One Palmer Square, Suite 515 Princeton, NJ 08542 DP III Associates, L.P. One Palmer Square, Suite 515 Princeton, NJ 08542 New York Life Insurance Company 51 Madison Avenue New York, NY 10010 Attn: Dominique O. Semon Investment Department Venture Capital Room 207 Fax: (212) 576-8080 Attn: Office of General Counsel Investment Section, Room 1104 Fax: (212) 576-8340
15 Brian Seed, M.D. c/o Massachusetts General Hospital Molecular Biology, Wellman 9 50 Blossom Street Boston, MA 02114 Alexander E. Barkas and Lynda L. Wijcik c/o Kleiner Perkins Caufield & Byers 2750 Sand Hill Road Menlo Park, CA 94025-7020 2 16 ATTACHMENT B CONNECTIVE THERAPEUTICS, INC. NOTICE OF SALE Pursuant to the Registration Rights Agreement dated as of May 15, 1997 among Connective Therapeutics, Inc. (the "Company"), the undersigned and certain stockholders of the Company, the undersigned hereby gives notice to the Company of the undersigned's intent to sell _______ shares of the Company's Common Stock registered pursuant to the registration statement on (File No. ). Dated: ______________, 199__ By:_________________________________ (signature) Name:_______________________________ (print) Title:______________________________ (if applicable) [NOTE: THIS NOTICE OF SALE MUST BE COMPLETED AND DELIVERED (VIA PERSONAL DELIVERY OR FACSIMILE) TO THE CHIEF FINANCIAL OFFICER OF THE COMPANY ON OR ONE (1) BUSINESS DAY BEFORE THE DATE OF SALE OF THE SHARES OF THE COMPANY'S COMMON STOCK REGISTERED PURSUANT TO THE REGISTRATION STATEMENT.] 17 ATTACHMENT C CONNECTIVE THERAPEUTICS, INC. SELLING STOCKHOLDER'S QUESTIONNAIRE In connection with the Connective Therapeutics, Inc. (the "Company") Registration Statement (File No. ) registering certain shares of the Company's Common Stock, the undersigned represents and warrants that the information set forth below is true, accurate and complete: 1. As of the date hereof, the undersigned beneficially owns ______ shares of the Company's Common Stock and Warrants to purchase _______ shares of the Company's Common Stock. 2. Except as described below, the undersigned has not had a material relationship with the Company or any of its predecessors or affiliates within the last three years. The term "material relationship" has not been defined by the Securities and Exchange Commission (the "SEC"). However, the SEC has indicated that it will probably construe as a "material relationship" any relationship which tends to prevent arms length bargaining in dealings with a company, whether arising from a close business connection or family relationship, a relationship of control or otherwise. It seems prudent, therefore, to consider that the undersigned would have such a relationship, for example, with any organization of which the undersigned is an officer, director, trustee or partner or in which the undersigned owns, directly or indirectly, ten percent (10%) or more of the outstanding voting stock, or in which the undersigned has some other substantial interest, and with any person or organization with whom the undersigned has, or with whom any relative or spouse (or any other person or organization as to which the undersigned has any of the foregoing other relationships) has, a contractual relationship. If applicable, please describe the material relationship with the Company: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- EX-10.3 5 FORM OF COMMON STOCK PURCHASE WARRANT 1 EXHIBIT 10.3 THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (A) AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR (B) AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR (C) FULL COMPLIANCE WITH THE PROVISIONS OF RULE 144 UNDER THE ACT. Warrant No. WC (WarrantNo) Number of Shares: (Noshares) date of issuance: May 16, 1997 (subject to adjustment) CONNETICS CORPORATION (FORMERLY CONNECTIVE THERAPEUTICS, INC.) COMMON STOCK PURCHASE WARRANT This Warrant is one of a number of warrants being issued pursuant to a Common Stock and Warrant Purchase Agreement (the "Purchase Agreement") dated as of May 15, 1997 among Connective Therapeutics, Inc., which has changed its name to Connetics Corporation (the "Company"), Genentech, Inc. and the Purchasers. This Warrant is subject to the terms and conditions of the Purchase Agreement. ANY TERM NOT OTHERWISE DEFINED HEREIN SHALL HAVE THE MEANING ASCRIBED TO IT IN THE PURCHASE AGREEMENT. The Company, for value received, hereby certifies that Holder, or its registered assigns (the "Registered Holder"), is entitled, subject to the terms set forth below, to purchase from the Company, at any time after the date hereof and on or before the Expiration Date (as defined in Section 5 below), up to NoShares fully paid and nonassessable shares (as adjusted from time to time pursuant to the provisions of this Warrant) of the Common Stock of the Company, at $9.08 per share (the "Warrant Exercise Price"). The shares purchasable upon exercise of this Warrant and the Warrant Exercise Price shall be adjusted from time to time pursuant to the provisions of this Warrant and are hereinafter referred to as the "Warrant Stock" and the "Purchase Price," respectively. 1. EXERCISE. (a) MANNER OF EXERCISE. This Warrant may be exercised by the Registered Holder, in whole or in part, by surrendering this Warrant, with the purchase form appended hereto as Exhibit A duly executed by such Registered Holder or by such Registered Holder's duly authorized attorney, at the principal office of the Company, or at such other office or agency as the Company may designate, accompanied by payment in full of the Purchase Price payable in respect of the number of shares of Warrant Stock purchased upon such exercise in accordance 2 with Section 1(c) below. In the event that the Registered Holder wishes to pay the Purchase Price for the Warrant Stock in a manner other than pursuant to Section 1(c) below, it shall first obtain the prior written consent of the Company. (b) EFFECTIVE TIME OF EXERCISE. Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the day on which this Warrant shall have been surrendered to the Company as provided in Section 1(a) above. At such time, the person or persons in whose name or names any certificates for Warrant Stock shall be issuable upon such exercise as provided in Section 1(d) below shall be deemed to have become the holder or holders of record of the Warrant Stock represented by such certificates. (c) NET ISSUE EXERCISE. (i) The Registered Holder may receive shares equal to the value of this Warrant (or the portion thereof being exercised) by surrender of this Warrant at the principal office of the Company together with notice of such election in which event the Company shall issue to holder a number of shares of Warrant Stock computed using the following formula: X = Y (A - B) --------- A Where X = The number of shares of Warrant Stock to be issued to the Registered Holder. Y = The number of shares of Warrant Stock elected to be exercised under this Warrant (at the date of such calculation). A = The fair market value of one share of Warrant Stock (at the date of such calculation). B = The Warrant Exercise Price (as adjusted to the date of such calculation). (ii) For purposes of this Section 1(c), the fair market value of Warrant Stock shall equal the closing price per share of the Company's Common Stock as quoted on the NMS on the trading day prior to the date on which notice of the Warrant being exercised is received by the Company. (d) DELIVERY TO HOLDER. As soon as practicable after the exercise of this Warrant in whole or in part, and in any event within ten (10) days thereafter, the Company at its expense will cause to be issued in the name of, and delivered to, the Registered Holder, or as such Holder (upon payment by such Holder of any applicable transfer taxes) may direct: (i) a certificate or certificates for the number of shares of Warrant Stock to which such Registered Holder shall be entitled, and (ii) in case such exercise is in part only, a new warrant or warrants (dated the date hereof) of like tenor, calling in the aggregate on the face or faces thereof for the number of shares of Warrant Stock equal (without giving effect to any adjustment therein) to the -2- 3 number of such shares called for on the face of this Warrant minus the number of such shares purchased by the Registered Holder upon such exercise as provided in Section 1(a) above. 2. ADJUSTMENTS. (a) STOCK SPLITS AND DIVIDENDS. If outstanding shares of the Company's Common Stock shall be subdivided into a greater number of shares or a dividend in Common Stock shall be paid in respect of Common Stock, the Purchase Price in effect immediately prior to such subdivision or at the record date of such dividend shall simultaneously with the effectiveness of such subdivision or immediately after the record date of such dividend be proportionately reduced. If outstanding shares of Common Stock shall be combined into a smaller number of shares, the Purchase Price in effect immediately prior to such combination shall, simultaneously with the effectiveness of such combination, be proportionately increased. When any adjustment is required to be made in the Purchase Price, the number of shares of Warrant Stock purchasable upon the exercise of this Warrant shall be changed to the number determined by dividing (i) an amount equal to the number of shares issuable upon the exercise of this Warrant immediately prior to such adjustment, multiplied by the Purchase Price in effect immediately prior to such adjustment, by (ii) the Purchase Price in effect immediately after such adjustment. (b) RECLASSIFICATION, ETC. In case of any reclassification or change of the outstanding securities of the Company or of any reorganization of the Company (or any other corporation the stock or securities of which are at the time receivable upon the exercise of this Warrant) or any similar corporate reorganization on or after the date hereof, then and in each such case the holder of this Warrant, upon the exercise hereof at any time after the consummation of such reclassification, change, reorganization or conveyance, shall be entitled to receive, in lieu of the stock or other securities and property receivable upon the exercise hereof prior to such consummation, the stock or other securities or property to which such holder would have been entitled upon such consummation if such holder had exercised this Warrant immediately prior thereto, all subject to further adjustment as provided in Section 2(a); and in each such case, the terms of this Section 2 shall be applicable to the shares of stock or other securities properly receivable upon the exercise of this Warrant after such consummation. (c) ADJUSTMENT CERTIFICATE. When any adjustment is required to be made in the Purchase Price, the Company shall promptly mail to the Registered Holder a certificate setting forth the Purchase Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. Such certificate shall also set forth the kind and amount of stock or other securities or property into which this Warrant shall be exercisable following the occurrence of any of the events specified in Section 2(a) or 2(b) above. 3. TRANSFERS. (a) UNREGISTERED SECURITY. Each holder of this Warrant acknowledges that this Warrant and the Warrant Stock have not been registered under the Securities Act, and agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of this Warrant or any Warrant Stock issued upon its exercise in the absence of (i) an effective registration statement -3- 4 under the Act as to this Warrant or such Warrant Stock and registration or qualification of this Warrant or such Warrant Stock under any applicable U.S. federal or state securities law then in effect or (ii) an opinion of counsel, satisfactory to the Company, that such registration and qualification are not required or (iii) full compliance with the provisions of Rule 144 of the Securities Act. Each certificate or other instrument for Warrant Stock issued upon the exercise of this Warrant shall bear a legend substantially to the foregoing effect. (b) TRANSFERABILITY. Subject to the provisions of Section 3(a) hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of the Warrant with a properly executed assignment (in the form of Exhibit B hereto) at the principal office of the Company. (c) WARRANT REGISTER. The Company will maintain a register containing the names and addresses of the Registered Holders of this Warrant. Until any transfer of this Warrant is made in the warrant register, the Company may treat the Registered Holder of this Warrant as the absolute owner hereof for all purposes; provided, however, that if this Warrant is properly assigned in blank, the Company may (but shall not be required to) treat the bearer hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary. Any Registered Holder may change such Registered Holder's address as shown on the warrant register by written notice to the Company requesting such change. 4. NO IMPAIRMENT. The Company will not, by amendment of its charter or through reorganization, consolidation, merger, dissolution, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will (subject to Section 13 below) at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against impairment. 5. TERMINATION. This Warrant (and the right to purchase securities upon exercise hereof) shall terminate upon the earliest to occur of the following (the "Expiration Date"): (i) May 15, 2001 or (ii) the closing of the Company's sale of all or substantially all of its assets or the acquisition of the Company by another entity by means of merger or other transaction as a result of which shareholders of the Company immediately prior to such acquisition possess a minority of the voting power of the acquiring entity immediately following such acquisition. 6. NOTICES OF CERTAIN TRANSACTIONS. In the event: (a) that the Company shall take a record of the holders of its Common Stock (or other stock or securities at the time deliverable upon the exercise of this Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right, to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right, or (b) of any capital reorganization of the Company, any reclassification of the capital stock of the Company, any consolidation or merger of the Company with or into another -4- 5 corporation (other than a consolidation or merger in which the Company is the surviving entity), or any transfer of all or substantially all of the assets of the Company, or (c) of the voluntary or involuntary dissolution, liquidation or winding-up of the Company, then, and in each such case, the Company will mail by overnight courier or cause to be mailed by overnight courier to the Registered Holder of this Warrant a notice specifying, as the case may be, (i) the date on which a record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other stock or securities at the time deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up) are to be determined. Such notice shall be mailed by overnight courier at least twenty (20) days prior to the record date or effective date for the event specified in such notice. 7. RESERVATION OF STOCK. The Company will at all times reserve and keep available, solely for the issuance and delivery upon the exercise of this Warrant, such shares of Warrant Stock and other stock, securities and property, as from time to time shall be issuable upon the exercise of this Warrant. 8. EXCHANGE OF WARRANTS. Upon the surrender by the Registered Holder of any Warrant or Warrants, properly endorsed, to the Company at the principal office of the Company, the Company will, subject to the provisions of Section 3 hereof, issue and deliver to or upon the order of such Holder, at the Company's expense, a new Warrant or Warrants of like tenor, in the name of such Registered Holder or as such Registered Holder (upon payment by such Registered Holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of Common Stock called for on the face or faces of the Warrant or Warrants so surrendered. 9. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement (with surety if reasonably required) in an amount reasonably satisfactory to the Company, or (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will issue, in lieu thereof, a new Warrant of like tenor. 10. NOTICES. Any notice required or permitted by this Warrant shall be in writing and shall be deemed sufficient upon receipt, when delivered personally or by overnight courier (a) if to the Registered Holder, to the address of the Registered Holder most recently furnished in writing to the Company and (b) if to the Company, to the address set forth below or subsequently modified by written notice to the Registered Holder. In the event that any date provided for in this Warrant falls on a Saturday, Sunday or legal holiday, such date shall be deemed extended to the next business day. -5- 6 11. NO RIGHTS AS SHAREHOLDER. Until the exercise of this Warrant, the Registered Holder of this Warrant shall not have or exercise any rights by virtue hereof as a shareholder of the Company. 12. NO FRACTIONAL SHARES. No fractional shares of Common Stock will be issued in connection with any exercise hereunder. In lieu of any fractional shares which would otherwise be issuable, the Company shall pay cash equal to the product of such fraction multiplied by the fair market value of one share of Common Stock on the date of exercise, as determined by the closing price on the NMS or in good faith by the Company's Board of Directors. 13. AMENDMENT OR WAIVER. Any term of this Warrant may be amended or waived upon written consent of the Company and the holders of at least fifty-one percent (51%) of the Common Stock issuable upon exercise of outstanding warrants purchased pursuant to the Purchase Agreement. By acceptance hereof, the Registered Holder acknowledges that in the event the required consent is obtained, any term of this Warrant may be amended or waived with or without the consent of the Registered Holder; provided, however, that any amendment hereof that would materially adversely affect the Registered Holder in a manner different from the holders of the remaining warrants issued pursuant to the Purchase Agreement shall also require the consent of Registered Holder. 14. HEADINGS. The headings in this Warrant are for purposes of reference only and shall not limit or otherwise affect the meaning of any provision of this Warrant. 15. GOVERNING LAW. This Warrant shall be governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of law. CONNETICS CORPORATION By:______________________________ Title:___________________________ Address: 3400 West Bayshore Road Palo Alto, California 94303 -6- 7 EXHIBIT A PURCHASE FORM To: Connetics Corporation Dated: The undersigned, pursuant to the provisions set forth in the attached Warrant, hereby irrevocably elects to purchase _______ shares of the Common Stock covered by such Warrant and herewith (choose one) ___ makes payments by wire transfer to an account designated by the Company or delivery of cash or check payable to the Company in the amount of the Purchase Price; or ___ surrenders the Warrant in satisfaction of the net issue exercise provisions set forth in Section 1(c) thereof; representing the full purchase price for such shares at the price per share provided for in such Warrant. The undersigned further acknowledges that it has reviewed the representations and warranties contained in Section 3 of the Purchase Agreement (as defined in the Warrant) and by its signature below hereby makes such representations and warranties to the Company. Defined terms contained in such representations and warranties shall have the meanings assigned to them in the Purchase Agreement, provided that the term "Purchaser" shall refer to the undersigned and the term "Securities" shall refer to the Warrant Stock. Signature:____________________ Address:_____________________ 8 EXHIBIT B ASSIGNMENT FORM FOR VALUE RECEIVED, _________________________________________ hereby sells, assigns and transfers all of the rights of the undersigned under the attached Warrant with respect to the number of shares of Common Stock covered thereby set forth below, unto: NAME OF ASSIGNEE ADDRESS NO. OF SHARES Dated:_________________ Signature:____________________________ ____________________________ Witness:______________________________ -----END PRIVACY-ENHANCED MESSAGE-----