-----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, HoukLJMhTQekKBJB9ma5XnrFD5nxBMnFbUiWnkOZ9KbnNSUGXiZxk6jys+UEnqvB El8lUN/xY2SK+opYbJlcTQ== 0000891618-98-005359.txt : 19981217 0000891618-98-005359.hdr.sgml : 19981217 ACCESSION NUMBER: 0000891618-98-005359 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19981216 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CELTRIX PHARMACEUTICALS INC CENTRAL INDEX KEY: 0000871395 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 943121462 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: S-3/A SEC ACT: SEC FILE NUMBER: 333-61873 FILM NUMBER: 98770649 BUSINESS ADDRESS: STREET 1: 3055 PATRICK HENRY DR CITY: SANTA CLARA STATE: CA ZIP: 95054 BUSINESS PHONE: 4089882500 MAIL ADDRESS: STREET 2: 3055 PATRICK HENRY DRIVE CITY: SANTA CLARA STATE: CA ZIP: 95054 FORMER COMPANY: FORMER CONFORMED NAME: CELTRIX LABORATORIES INC DATE OF NAME CHANGE: 19600201 S-3/A 1 AMENDMENT NO. 1 TO FORM S-3 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 16, 1998 REGISTRATION NO. 333-61873 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ AMENDMENT NO. 1 TO FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ CELTRIX PHARMACEUTICALS, INC. (Exact Name of Registrant as Specified in Its Charter) ------------------------
DELAWARE 2834 94-3121462 (State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer Incorporation or Organization) Classification Code Number) Identification Number)
3055 PATRICK HENRY DRIVE SANTA CLARA, CALIFORNIA 95054-1815 (408) 988-2500 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) ------------------------ ANDREAS SOMMER, PH.D. PRESIDENT AND CHIEF EXECUTIVE OFFICER 3055 PATRICK HENRY DRIVE SANTA CLARA, CALIFORNIA 95054-1815 (408) 988-2500 (Name, Address Including Zip Code, and Telephone Number Including Area Code, of Agent for Service) ------------------------ COPIES TO: Craig W. Johnson Edmund S. Ruffin, Jr. VENTURE LAW GROUP A Professional Corporation 2800 Sand Hill Road Menlo Park, CA 94025 ------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT. If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. |_| If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. |X| If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. |_| _______________ If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. |_| _______________ If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. |_| CALCULATION OF REGISTRATION FEE
==================================================================================================================================== TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM OFFERING PROPOSED MAXIMUM AGGREGATE AMOUNT OF SECURITIES TO BE REGISTERED REGISTERED PRICE PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE(2) - ------------------------------------------------------------------------------------------------------------------------------------ Common Stock, par value $0.01 10,075,000 $1.90625 $19,205,468.75 $569.69 ====================================================================================================================================
(1) Estimated solely for the purpose of computing the amount of the registration fee based on the average of the high and low closing price of the Common Stock as reported on the Nasdaq National Market on December 9, 1998 pursuant to Rule 457(c). (2) The registration fee applicable to this Amendment No. 1 has been computed for the registration of 1,075,000 additional shares based on the average of the high and low closing price of the Common Stock as reported on the Nasdaq National Market on December 9, 1998 pursuant to Rule 457(c). A registration fee of $3,899.54 for the registration of 9,000,000 shares on August 20, 1998 was previously paid based on the average of the high and low closing price of the Common Stock as reported on the Nasdaq National Market on August 17, 1998. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. 2 SUBJECT TO COMPLETION, DATED DECEMBER 16, 1998 CELTRIX PHARMACEUTICALS, INC. 10,075,000 SHARES COMMON STOCK --------------- THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" COMMENCING ON PAGE 4 OF THIS PROSPECTUS FOR INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS. --------------- All references herein to "Celtrix" or the "Company"or "Registrant" mean Celtrix Pharmaceuticals, Inc. unless otherwise indicated by the context. The 10,075,000 shares of Celtrix Pharmaceuticals, Inc. Common Stock, $.01 par value, covered by this Prospectus (the "Shares") are offered for the account of certain stockholders of the Company (the "Selling Stockholders"). The Shares were issued (or will be issuable upon exercise of warrants issued) to the Selling Stockholders in connection with a private placement (the "Private Placement") of Company Common Stock and warrants to purchase Common Stock (the "Warrants") on November 20, 1998. For additional information concerning this Private Placement, see "Issuance of Common Stock and Warrants to Selling Stockholders." The Selling Stockholders may sell the Shares from time to time on the Nasdaq National Market in regular brokerage transactions, in transactions directly with market makers or in certain privately negotiated transactions. See "Plan of Distribution." Each Selling Stockholder has advised the Company that no sale or distribution other than as disclosed herein will be effected until after this Prospectus shall have been appropriately amended or supplemented, if required, to set forth the terms thereof. The Company will not receive any proceeds from the sale of the Shares by the Selling Stockholders. Each of the Selling Stockholders may be deemed to be an "Underwriter," as such term is defined in the Securities Act of 1933, as amended (the "Securities Act"). On August 17, 1998, the last sale price of the Company's Common Stock on the Nasdaq National Market was $1.5625 per share and on December 9, 1998 the last sale price of the Company's Common Stock on the Nasdaq National Market was $1.9375 per share. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
==================================================================================================================================== PRICE TO UNDERWRITING PROCEEDS TO DISCOUNTS AND SELLING PUBLIC OMISSIONS(1) STOCKHOLDERS(1) - ----------------------------------------------------------------------------------------------------------------------------------- Per Share.................................. See Text Above See Text Above See Text Above Total...................................... ====================================================================================================================================
(1) All expenses of registration of the Shares, estimated to be approximately $115,000 shall be borne by the Company. Selling commissions, brokerage fees, any applicable stock transfer taxes and any fees and disbursements of counsel to the Selling Stockholders are payable individually by the Selling Stockholders. The date of this Prospectus is December __, 1998. 3 No person is authorized in connection with any offering made hereby to give any information or to make any representation not contained in this Prospectus, and, if given or made, such information or representation must not be relied upon as having been authorized by the Company or the Selling Stockholders. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any security other than the shares of Common Stock offered hereby, nor does it constitute an offer to sell or a solicitation of an offer to buy any of the shares offered hereby to any person in any jurisdiction in which it is unlawful to make such an offer or solicitation. Neither the delivery of this Prospectus nor any sale made hereunder shall under any circumstances create any implication that the information contained herein is correct as of any time subsequent to the date hereof. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and in accordance therewith files proxy statements, reports and other information with the Securities and Exchange Commission (the "Commission"). Reports, proxy and information statements, and other information filed by the Company with the Commission can be inspected and copied at the public reference facilities maintained by the Commission in Washington, D.C., and at its Regional Offices located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and 7 World Trade Center, Suite 1300, New York, New York 10048; and at the Public Reference Office of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such material can be obtained from the Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. In addition, the Company is an electronic filer and copies of such material may be retrieved from the Web site (http://www.sec/gov) maintained by the Commission. The Company's Common Stock is quoted on the Nasdaq National Market under the symbol "CTRX." Reports, proxy and information statements and other information about the Company may be inspected at the Nasdaq National Market, 1735 K Street, N.W., Washington, DC 20006-1506. INFORMATION INCORPORATED BY REFERENCE The following documents filed by the Company with the Commission are incorporated by reference in this Prospectus: 1. The Company's Current Reports on Form 8-K dated April 20, 1998, May 4, 1998, May 14, 1998, June 3, 1998, June 15, 1998, July 15, 1998, July 23, 1998, September 18, 1998, November 19, 1998, December 2, 1998 and December 10, 1998. 2. The Company's Annual Report on Form 10-K for the year ended March 31, 1998. 3. The Company's definitive Proxy Statement dated July 29, 1998, filed in connection with the Company's September 10, 1998 Annual Meeting of Stockholders. 4. The Company's Quarterly Reports on Form 10-Q for the quarters ended June 30, 1998 and September 30, 1998. 5. The description of the Company's Common Stock set forth in the Company's Registration Statement on Form 10 filed with the Commission on January 24, 1991. All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to the termination of the offering of the Common Stock offered hereby shall be deemed to be incorporated by reference in this Prospectus. Any statement 2 4 contained in a document incorporated by reference herein shall be deemed to be modified or superseded for purposes hereof to the extent that a statement contained herein (or in any other subsequently filed document which also is incorporated by reference herein) modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed to constitute a part hereof, except as so modified or superseded. The Company will furnish without charge to each person, including any beneficial owner, to whom this Prospectus is delivered, on the written or oral request of such person, a copy of any or all of the documents incorporated by reference, other than exhibits to such documents. Requests should be directed to the Chief Financial Officer, Celtrix Pharmaceuticals, Inc., 3055 Patrick Henry Drive, Santa Clara, California, 95054-1815, telephone: 408-988-2500. The "Celtrix Pharmaceuticals" logo (used alone or with the Company's name) and "Celtrix Pharmaceuticals" are trademarks of the Company; "SomatoKine" is a registered trademark of the Company. All other tradenames and trademarks appearing in this Prospectus are the property of their respective holders. THE COMPANY Celtrix Pharmaceuticals, Inc. ("Celtrix" or the "Company") is a biopharmaceutical company developing novel therapeutics for the treatment of seriously debilitating, degenerative conditions primarily associated with aging, chronic diseases and severe trauma. The Company's focus is on restoring lost tissues and metabolic processes essential for the patient's health and quality of life. Product development programs target severe osteoporosis, including hip fracture surgery in the elderly, diabetes, and acute traumatic injury as in severe burns. Other potential indications include protein wasting diseases associated with cancer, AIDS, advanced kidney failure, and other life-threatening conditions. The Company's leading drug candidate is SomatoKine, a naturally occurring complex comprised of the anabolic hormone insulin-like growth factor-I (IGF-I) and its primary binding protein, BP3. IGF-I is known to play a major role in diverse biological processes, including bone and muscle formation, tissue repair, and endocrine regulation. However, IGF-I does not naturally exist in quantity free of its binding proteins, and limitations associated with administering free IGF-I therapeutically have proven significant. When IGF-I is bound to BP3, as it is in nature, it does not display these acute limitations. The Company initiated a Phase II clinical feasibility study in January 1997 using SomatoKine to treat severely osteoporotic patients recovering from hip fracture surgery. Interim results from the Phase II study have suggested that short-term treatment with SomatoKine may help to minimize, or even prevent bone loss in such patients, substantially improving patient recovery. The Company plans to establish corporate partnership(s) for the continued global development of SomatoKine for severe osteoporosis, including recovery from hip fracture surgery. The Company began a Phase II feasibility study in patients with severe burns in July 1997. Preliminary data from the study suggest that SomatoKine has a normalizing effect on protein synthesis and immune function which offers the potential to provide critical protection from serious infection, speed recovery and reduce the patient's hospital stay. The Company initiated a Phase II feasibility study in Type I diabetes patients in July 1998 to evaluate SomatoKine as a potential therapeutic in managing glucose homeostasis in these patients. 3 5 The Company further believes that SomatoKine may prove efficacious for treatment of protein wasting in patients suffering from cancer, AIDS, advanced kidney failure, and other life-threatening conditions. SomatoKine's anabolic effects offer the potential to preserve and restore muscle strength and mobility important for these patients' survival and quality of life. In efforts to reduce the Company's cash burn rate and preserve value in the Company's core assets and technologies, in the second quarter of 1998, the Company restructured its operations to eliminate manufacturing and announced a reduction in work force of up to 90%. Accordingly, the Company expects to retain only 7 full-time employees as of January 1, 1999, and will require additional funding prior to initiating future clinical trials. Although such actions were designed to permit the Company to continue its clinical development of SomatoKine, there can be no assurance that such restructuring efforts will be successful or that the Company will be able to raise additional funding through collaborative arrangements or otherwise, or that the Company will be able to sustain its clinical development activities going forward. Prior to the Company's restructuring, the Company manufactured SomatoKine for clinical trials at its Santa Clara, California facility, but discontinued manufacturing operations in September 1998. The Company has a product development, license and marketing agreement with Genzyme Corporation ("Genzyme") for TGF-beta-2. Genzyme is currently developing TGF-beta-2 for tissue repair and the treatment of systemic indications. Celtrix is not currently pursuing an in-house TGF-beta-2 program. The Company was spun off from Collagen Corporation and was incorporated in Delaware in December 1990 as "Celtrix Laboratories, Inc." The Company changed its name to "Celtrix Pharmaceuticals, Inc." in December 1991. The Company's principal executive offices are located in Santa Clara, California. The mailing address and telephone number are: 3055 Patrick Henry Drive, Santa Clara, CA 95054-1815, telephone: (408) 988-2500. The Company plans to move to a new location prior to December 31, 1998, and its mail and telephone lines will be forwarded to the new address. RISK FACTORS PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS IN ADDITION TO THE OTHER INFORMATION APPEARING IN OR INCORPORATED BY REFERENCE INTO THIS PROSPECTUS. 4 6 RISK FACTORS Restructuring In efforts to reduce the Company's cash burn rate and preserve value in the Company's core assets and technologies, in the second quarter of 1998, the Company restructured its operations to eliminate manufacturing and announced a reduction in work force of up to 90%. Such actions were designed to permit the Company to continue its clinical development of SomatoKine. There can be no assurance that the restructuring efforts the Company has engaged in to date will be successful or that the Company will be able to sustain its clinical development activities going forward. In addition, there can be no assurance that the Company's management will not deem it appropriate to undertake other restructuring efforts in the future or to what degree any such efforts will result in improved performance or a reduction in the Company's cash burn rate. Future Capital Requirements and Uncertainty of Additional Funding After the completion of the November 1998 Private Placement and the sale of fixed assets as a result of discontinuing its manufacturing operations, the Company anticipates that sufficient funds will be available to fund the Company's operations into the third calendar quarter of 1999, not including further clinical trials beyond the fourth quarter of 1998. Accordingly, further development of the Company's products will require the commitment of substantial resources to conduct the time-consuming research and development, clinical studies and regulatory activities necessary to bring any potential therapeutic products to market and to establish production, marketing and sales capabilities. Such additional funding will need to be raised through collaborative arrangements or through public or private financings, including equity financing. Any additional equity financing may be dilutive to stockholders, and any debt financing, if available, may involve restrictions on the Company's ability to pay future dividends on its capital stock or the manner in which the Company conducts its business. Nasdaq Issues In October 1998, the Company's stock price dropped below $1.00, and due to the restructuring charge made in the quarter ending September 30, 1998, the Company's net tangible assets were below $4 million, both Nasdaq National Market Maintenance Standards for continued listing. In November 1998, the Company received notice from Nasdaq of its failure to meet these two maintenance standards and further advising that if the Company was unable to comply with the minimum bid price requirement for a ten (10) trading day period prior to February 1999, it would be subject to delisting. Subsequent to the notification from Nasdaq, the Company's stock price rose above the required minimum bid price of $1 per share for more than 10 consecutive trading days and the proceeds from the November 1998 Private Placement allowed the Company to meet the minimum net tangible asset requirement on a pro forma basis for the quarter ended September 30, 1998. Consequently, the Company believes that it is currently in compliance with Nasdaq continued listing requirements. However, if the Company is unable to continue to meet these standards, or any other Nasdaq requirements, it will be subject to delisting by Nasdaq. Such delisting may have a material adverse effect on the price of the Company's Common Stock and the levels of liquidity currently available to its stockholders. Although the Company is working to comply with all continued listing requirements of Nasdaq, there can be no assurance that it will be able to satisfy all such requirements on an ongoing basis. Early Stage of Development; No Developed or Approved Products The Company's potential products are in research and development and no material revenues have been generated to date from product sales. To achieve profitable operations, the Company, alone or with others, must successfully develop, obtain regulatory approval for, manufacture and market its potential products. Much of the clinical development work for the Company's potential products remains to be completed. No assurance can be given that the Company's product development effort will be successfully completed, that required regulatory approval will be obtained or that any products, if developed and introduced will be successfully marketed or achieve market acceptance. History of Operating Losses; Accumulated Deficit The Company has incurred net operating losses in every year of operation since its inception. As of September 30, 1998, the Company had an accumulated deficit of approximately $129.1 million. Losses have resulted principally from costs incurred in connection with the Company's research and development activities and from general and administrative costs associated with the Company's operations. The Company expects to incur substantial and increasing operating losses for at least the next several years. The Company's ability to achieve profitability will depend in part on completing the research and development of, and obtaining regulatory approvals for, its products and successfully commencing product commercialization. The Company's financial statements have been prepared assuming that the Company continues as a going concern. At September 30, 1998, the Company had negative working capital of $1.0 million, an accumulated deficit of $129.1 million, and incurred a net loss of $8.6 million for the quarter ended September 30, 1998 which included a $5.2 million restructuring charge. In November 1998, the Company completed the Private Placement pursuant to which the Shares are being registered hereunder, resulting in net proceeds to the Company of approximately $1.9 million, reversing the negative working capital position on a pro forma basis. Current cash, cash equivalents and short-term investments, including proceeds from this financing, and the sale of fixed assets as a result of discontinuing the Company's manufacturing operations in connection with the September 1998 restructuring, will be sufficient to fund ongoing operations into the third calendar quarter of 1999. Possible Volatility of Stock Price; Dividend Policy The market prices for securities of biopharmaceutical and biotechnology companies have historically been highly volatile, and the market has from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. Since the Company's Common Stock became listed for public trading, its market price has fluctuated over a wide range and the Company expects that it will continue to fluctuate. In addition, announcements concerning the Company or its competitors, the results of clinical trials, technological innovations or new commercial products, government regulations, developments concerning proprietary rights, litigation or public concern as to safety of the Company's potential products as well as changes in general market conditions may have a significant effect on the market price of Celtrix's common stock. The Company has never paid dividends on its capital stock and the Company does not anticipate paying any cash dividends in the foreseeable future. 5 7 There can be no assurance that any such financing will be available to the Company or on terms attractive to the Company, or that the Company can enter into a collaborative relationship with a corporate partner for the continuation of the clinical trials in any of its current indications. The inability to obtain funds, or to enter into additional corporate collaborations, may require the Company, ultimately, to liquidate its assets or to cease operations. Stringent Government Regulation; Need for Product Approvals The preclinical testing and clinical trials of any compounds developed by the Company or its collaborative partners and the manufacturing and marketing of any drugs resulting therefrom are subject to regulation by numerous federal, state and local governmental authorities in the United States, the principal one of which is the United States Food and Drug Administration (the "FDA"), and by similar agencies in other countries in which drugs developed by the Company or its collaborative partners may be tested and marketed (each of such federal, state, local and other authorities and agencies, a "Regulatory Agency"). Any compound developed by the Company or its collaborative partners must receive Regulatory Agency approval before it may be marketed as a drug in a particular country. The regulatory process, which includes preclinical testing and clinical trials of each compound in order to establish its safety and efficacy, can take many years and requires the expenditure of substantial resources. Data obtained from preclinical and clinical activities are susceptible to varying interpretations which could delay, limit or prevent Regulatory Agency approval. In addition, delays or rejections may be encountered based upon changes in Regulatory Agency policy during the period of drug development and/or the period of review of any application for Regulatory Agency approval for a compound. Delays in obtaining Regulatory Agency approvals could adversely affect the marketing of any drugs developed by the Company or its collaborative partners, impose costly procedures upon the Company's and its collaborative partners' activities, diminish any competitive advantages that the Company or its collaborative partners may attain and adversely affect the Company's ability to receive royalties, any of which could have a material adverse effect on the Company's business, financial condition and results of operations. There can be no assurance that, even after such time and expenditures, Regulatory Agency approvals will be obtained for any compounds developed by or in collaboration with the Company. Moreover, if Regulatory Agency approval for a drug is granted, such approval may entail limitations on the indicated uses for which it may be marketed that could limit the potential market for any such drug. Furthermore, if and when such approval is obtained, the marketing and manufacture of the Company's products would remain subject to extensive regulatory requirements, and discovery of previously unknown problems with a drug or its manufacturer may result in restrictions on such drug or manufacturer, including withdrawal of the drug from the market. Failure to comply with regulatory requirements could, among other things, result in fines, suspension of regulatory approvals, operating restrictions and criminal prosecution. In addition, Regulatory Agency approval of prices is required in many countries and may be required for the marketing of any drug developed by the Company or its collaborative partners in such countries. Uncertainties Related to Clinical Trials Before obtaining regulatory approvals for the commercial sale of any of its products under development, the Company must demonstrate through preclinical studies and clinical trials that the product is safe and efficacious for use in each target indication. The results from preclinical studies and early clinical trials may not be predictive of results that will be obtained in large-scale testing, and there can be no assurance that the Company's clinical trials will demonstrate the safety and efficacy of any products or will result in marketable products. 6 8 A number of companies in the biotechnology industry have suffered significant setbacks in advanced clinical trials, even after promising results in earlier trials. For example, in fiscal year 1995, Celtrix discontinued its in-house TGF-beta-2 program for the treatment of ophthalmic conditions as a result of disappointing clinical study results. The rate of completion of the Company's clinical trials is dependent upon, among other factors, the rate of patient enrollment. Patient enrollment is a function of many factors, including the size of the patient population, the nature of the protocol, the proximity of patients to clinical sites and the eligibility criteria for the study. Delays in planned patient enrollment may result in increased costs and delays, which could have a material adverse effect on the Company's business, financial condition and results of operations. No Assurance of Market Acceptance There can be no assurance that any products successfully developed by the Company, if approved for marketing, will achieve market acceptance. The products and therapies which the Company is attempting to develop will compete with a number of well-established traditional drugs and therapies manufactured and marketed by major pharmaceutical companies. The degree of market acceptance of any products developed by the Company will depend on a number of factors, including the establishment and demonstration in the medical community of the clinical efficacy and safety of the Company's product candidates, their potential advantage over existing treatment methods, and reimbursement policies of government and third-party payors. Competitors may also develop new technologies or products which are more effective or less costly than SomatoKine or perceived to be more cost-effective. There is no assurance that physicians, patients or the medical community in general will accept and utilize any products that may be developed by the Company. The Company's business, financial condition and results of operations may be materially adversely affected if SomatoKine does not receive market acceptance for any reason. Substantial Competition In each of the Company's potential product areas, competition from large pharmaceutical companies, biotechnology companies and other companies, universities and research institutions is substantial. At least three large biotechnology and pharmaceutical companies with substantial financial and legal resources have patent applications on file in the United States and abroad directed at the production of recombinant IGF-I by various methods. Relative to the Company, most of these entities have substantially greater capital resources, research and development staffs, facilities and experience in conducting clinical trials and obtaining regulatory approvals, as well as in manufacturing and marketing pharmaceutical products. Furthermore, the Company believes that competitors have used, and may continue to use, litigation to gain competitive advantage. In addition, these and other entities may have or develop new technologies or use existing technologies that are, or may in the future be, the basis for competitive products. Any potential products that the Company succeeds in developing and for which it gains regulatory approval will have to compete for market acceptance and market share. For certain of the Company's potential products, an important factor in such competition may be the timing of market introduction of competitive products. Accordingly, the relative speed with which the Company can develop products, complete the clinical testing and regulatory approval processes and supply commercial quantities of the product to the market are expected to be important competitive factors. The Company expects that competition will be based, among other things, on product efficacy, safety, reliability, availability, timing and scope of regulatory approval and price. There can be no assurance that the Company's competitors will not succeed in developing technologies and products that are more effective than any that are being developed by the Company or that would render the Company's technology and products obsolete or 7 9 noncompetitive. In addition, many of the Company's competitors may achieve product commercialization or patent protection earlier than the Company. The failure of the Company to compete effectively would have a material adverse effect on the Company's business, financial condition and results of operations. Dependence on Proprietary Technology; Uncertainty of Patent Protection The Company's success will depend in part on its ability to obtain patents, maintain trade secrets and operate without infringing on the proprietary rights of others, both in the United States and in other countries. The patent positions of pharmaceutical, biopharmaceutical and biotechnology companies, including the Company, are highly uncertain and involve complex legal and factual questions. Patent law relating to the scope of claims in the technology fields in which the Company operates is still evolving. The degree of future protection for the Company's proprietary rights is therefore uncertain. No consistent policy has emerged regarding the permissible breadth of coverage of claims in biotechnology patents. Therefore, no assurance can be given that any of the Company's or its licensors' patent applications will issue as patents or that any such issued patents will provide competitive advantages for the Company's products or will not be successfully challenged or circumvented by its competitors. In addition, there can be no assurance that others will not independently develop substantially equivalent proprietary technology that is not covered by the Company's patents or that others will not be issued patents that may prevent the sale of the Company's proposed products or require licensing and the payment of significant fees or royalties by the Company. At least three large biotechnology and pharmaceutical companies with substantial financial and legal resources have issued patents and/or patent applications on file in the United States and abroad directed at the production and/or use of recombinant IGF-I by various methods. The earliest date of filing of these patent applications is April 25, 1983. Unless and until all of these applications issue, it is not possible to determine the breadth of these claims regarding a process for IGF-I production or for the use of IGF-I for any particular indication. Furthermore, a large biotechnology and pharmaceutical company with substantial financial and legal resources has a patent issued in the United States directed towards certain DNA molecules encoding BP3 and the corresponding BP3 protein. This same patent was previously granted in Europe and was successfully opposed by Celtrix. However, this large biotechnology and pharmaceutical company has recently appealed the decision and there can be no assurance that the appeal will not be successful, and it is not possible to determine what, if any, claims will be reinstated or the breadth of such claims. In addition, this large biotechnology company has been issued a patent directed toward the subcutaneous bolus administration of IGF-BP3 for certain limited areas of use. Each of the referenced companies can be expected to defend its patent position vigorously. Celtrix has developed a new process for the production of IGF and BP3 which it does not believe will infringe on other patents relating to recombinant protein production in general or on other patents relating to the production of IGF and BP3 in particular, although there can be no assurance that a contrary position will not be asserted. A large number of other companies have pending patent applications and/or issued patents which claim certain methods of use of IGF. There can be no assurance that third parties will not claim the Company's technology, current or future products or manufacturing processes infringe the proprietary rights of others. If other companies were to successfully bring legal actions against the Company claiming patent or other intellectual property infringements, in addition to any potential liability for damages, then the Company could be required to obtain a license in order to continue to use the affected process or to manufacture or use the affected products or cease using such products or process if enjoined by a court. Any such claim, with or without merit, could result in costly litigation or might require the Company to enter into royalty or licensing agreements, all of which could delay or otherwise adversely impact the Company's potential products for commercial use. If any licenses are required, there can be no assurance that the 8 10 Company will be able to obtain any such license on commercially favorable terms, if at all, and if these licenses are not obtained, the Company might be prevented from pursuing the development of certain of its potential products. The Company's breach of an existing license or failure to obtain or delay in obtaining a license to any technology that it may require to commercialize its products may have a material adverse impact on the Company. Litigation, which could result in substantial costs to the Company, may also be necessary to enforce any patents issued or licensed to the Company or to determine the scope and validity of another party's proprietary rights. There can be no assurance that the Company's issued or licensed patents would be held valid by a court of competent jurisdiction. An adverse outcome in litigation or an interference or other proceeding in a court or patent office could subject the Company to significant liabilities to other parties, require disputed rights to be licensed from other parties or require the Company to cease using such technology, any of which could have a material adverse effect on the Company. Celtrix also relies on trade secrets to protect technology, especially where patent protection is not believed to be appropriate or obtainable. Celtrix attempts to protect its proprietary technology and processes in part by confidentiality agreements with its employees, consultants and certain contractors. There can be no assurance that these agreements will not be breached, that the Company would have adequate remedies for any breach, or that the Company's trade secrets will not otherwise become known or be independently discovered by competitors in such a manner that the Company has no practical recourse. To the extent that the Company or its consultants or research collaborators use intellectual property owned by others in their work for the Company, disputes may also arise as to the rights in related or resulting know-how and inventions. Limited Manufacturing Experience and Capacity The Company's products must be manufactured in compliance with regulatory requirements and at acceptable costs. In September 1998, the Company implemented a restructuring plan to focus its operation on the clinical development of its lead drug compound, SomatoKine(R), and to reduce its cash burn rate. With sufficient clinical grade SomatoKine to support the conduct of clinical trials over the next two years, the Company discontinued its in-house manufacturing operations. In the future, the Company will need to contract its manufacturing operations or enter into corporate partnering arrangements that will support manufacturing of drug material to support additional clinical drug needs and eventual commercial scale manufacturing. There can be no assurance that the Company will be able to successfully identify and contract a third party manufacturer, to manufacture any of its current or future products on a commercial scale, nor that such products can be manufactured at a cost or in quantities to make commercially viable products. Failure to obtain sufficient commercial quantities of SomatoKine at acceptable terms will have an adverse impact on the Company's attempts to seek approval for this product, or to commercialize this product. Limited Sales and Marketing Experience If the Company is permitted to commence commercial sales of products, it will face commercial competition with respect to sales, marketing and distribution, areas in which it has no experience. To market any of its products directly, the Company must develop a marketing and sales force with technical expertise and with supporting distribution capability. Alternatively, the Company may obtain the assistance of a pharmaceutical company with a large distribution system and a large direct sales force. There can be no assurance that the Company will be able to establish sales and distribution capabilities or be successful in gaining market acceptance for its proprietary products. To the extent the Company enters into co-promotion or other licensing arrangements, any revenues received by the Company will be 9 11 dependent on the efforts of third parties and there can be no assurance that such efforts will be successful. Reliance on Qualified and Key Personnel The Company is highly dependent on the principal members of its scientific and management staff, the loss of whose services might significantly delay or prevent the achievement of research, development, or business objectives. Although the Company believes it has retained sufficient employees to achieve its near-term business objectives after its reduction in force in September 1998, there can be no assurance that the loss of service of such employees would not impede the Company's objectives. Furthermore, there can be no assurance that the reduction in force will not adversely affect the Company's ability to retain its remaining employees. The loss of key management or scientific personnel could adversely affect the Company's continued business. The Company's potential expansion into areas and activities requiring additional expertise, such as clinical trials, governmental approvals, contract manufacturing and marketing, are expected to place a significant strain on the Company's management, operational and financial resources. These demands are expected to require a substantial increase in management and scientific personnel and the development of additional expertise by existing management personnel. The failure to attract and retain such personnel or to develop such expertise could materially adversely affect prospects for the Company's success. Product Liability; Availability of Insurance The Company currently has in force general liability insurance, with coverage limits of $2.0 million per incident and $4.0 million in the aggregate annually, and product liability insurance with coverage limits of $1.0 million per incident and $3.0 million in the aggregate annually. The Company's insurance policies provide coverage for product liability on a claims made basis and general liability on occurrence basis. These policies are subject to annual renewal. Such insurance may not be available in the future on acceptable terms or at all. There can be no assurance that the Company's insurance coverage will be adequate or that a product liability claim or recall would not materially adversely affect the business or financial condition of the Company. The use of the Company's potential products or technology in clinical trials and the sale of such products may expose the Company to liability claims. Such risks exist even with respect to those potential products, if any, that receive regulatory approval for commercial sale. Although Celtrix has taken and will continue to take what it believes are appropriate precautions, there can be no assurance that it will avoid significant product liability exposure. There also can be no assurance that the Company's insurance coverage will be adequate or that a product liability claim or recall would not materially adversely affect the business or financial condition of the Company. Concentration of Stock Ownership As of September 30, 1998 the Company's directors and officers and their affiliates beneficially owned approximately 30% of the outstanding Common Stock. As a result, these stockholders have been able to exercise significant influence over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. Such concentration of ownership may have the effect of delaying or preventing a change in control of the Company. In November 1998, the Company completed the Private Placement of 4,000,000 shares of newly issued common stock pursuant to a Common Stock and Warrant Purchase Agreement dated October 12, 1998 which had a dilutive impact on the foregoing stock ownership percentage. However, it is anticipated that the Company's 10 12 directors and officers and their affiliates collectively will continue to be able to exercise influence in matters requiring stockholder approval in the future. Impact of Year 2000 Many computer systems experience problems handling dates beyond the year 1999. Therefore, some computer hardware and software will need to be upgraded or modified prior to the Year 2000 in order to remain functional. The Company is currently assessing the impact of Year 2000 on its existing software and systems. The Company expects to implement successfully the systems and software changes necessary to address the Year 2000 issues, and does not believe that the costs of such actions will have a material effect on the Company's results of operations or financial condition. However, it is unknown the extent, if any, of the impact of the Year 2000 on other systems and equipment of third parties with which the Company does business. There can be no assurance that third parties will address the Year 2000 issue in a timely fashion, or at all. Any Year 2000 compliance problem or delay of either the Company, its suppliers, its clinical research organizations, or its collaborative partners could have a material adverse effect on the Company's business, operating results and financial conditions. Dilutive and Potential Dilutive Effect to Stockholders 11 13 The November 1998 Private Placement issuance of shares of the Company's common stock and warrants exercisable for common stock will dilute the beneficial ownership of existing Company stockholders, and any future issuances are likely to be of a similar dilutive nature. Environmental Liability The Company is subject to federal, state and local laws and regulations governing the use, generation, manufacture, storage, discharge, handling and disposal of certain materials and wastes that have been used in its operations. There can be no assurance that the Company will not be required to incur significant costs in connection with its compliance with environmental laws and regulations for its current research activities and prior manufacturing activities. 12 14 USE OF PROCEEDS The Company will not receive any proceeds from the sale of Common Stock by the Selling Stockholders in the Offering. INDEMNIFICATION OF OFFICERS AND DIRECTORS Section 145 of the Delaware General Corporation Law authorizes a court to award, or a corporation's Board of Directors to grant, indemnity to directors and officers in terms sufficiently broad to permit such indemnification under certain circumstances for liabilities (including reimbursement for expenses incurred) arising under the Securities Act of 1933, as amended (the "Securities Act"). Section 10 of the Company's Amended and Restated Certificate of Incorporation and Article VI of the Company's Bylaws provide for indemnification of its directors, officers, employees and other agents to the maximum extent permitted by law. In addition, the Company has entered into Indemnification Agreements with its officers and directors and maintains director and officer liability insurance. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Company of expenses incurred or paid by a director, officer or controlling person of the Company in the successful defense of any action, suit or proceeding) is asserted against the Company by such director, officer or controlling person in connection with the securities being registered hereunder, the Company will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. ISSUANCE OF COMMON STOCK AND WARRANTS TO SELLING STOCKHOLDERS On November 20, 1998, the Company privately placed 4,000,000 shares of its Common Stock and Warrants to purchase 6,000,000 shares of its Common Stock to the Selling Stockholders pursuant to the terms of a Common Stock and Warrant Purchase Agreements dated as of October 12, 1998 by and between the Company and the Selling Stockholders. In connection with such Private Placement, the Company also issued a Warrant exercisable for up to 75,000 shares of Common Stock to its placement agent, Credit Suisse First Boston Corporation ("CSFB"). This Prospectus covers the 10,075,000 shares of the Company's Common Stock issued (or issuable upon exercise of the Warrants issued) in connection with the Private Placement to the Selling Stockholders. PLAN OF DISTRIBUTION The Selling Stockholders may sell the Shares in whole or in part, from time to time on the over-the-counter market at prices and on terms prevailing at the time of any such sale. Any such sale may be made in broker's transactions through broker-dealers acting as agents, in transactions directly with market makers or in privately negotiated transactions where no broker or other third party (other than the purchaser) is involved. The Selling Stockholders will pay selling commissions or brokerage fees, if any, with respect to the sale of the Shares in amounts customary for the type of transaction effected. Each Selling Stockholder will also pay all applicable transfer taxes and all fees and disbursements of counsel for such Selling Stockholder incurred in connection with the sale of shares. The Warrants issued to the Selling Stockholders are not exercisable by such holders prior to February 20, 1999, provided however, that the Warrant issued to CSFB is not exercisable by such holder prior to November 20, 1999. 13 15 Each Selling Stockholder has advised the Company that before or during such time as such Selling Stockholder may be engaged in the attempt to sell Shares registered hereunder, such person will: (i) notify the Company of its intent to sell any Shares at least three (3) full business days prior to such sale; and (ii) cause to be furnished to each person to whom Shares included herein may be offered, and to each broker-dealer, if any, through whom Shares are offered, such copies of this Prospectus, as supplemented or amended, as may be required by such person. The Selling Stockholders, and any other persons who participate in the sale of the Shares, may be deemed to be "Underwriters" as defined in the Securities Act. Any commissions paid or any discounts or concessions allowed to any such persons, and any profits received on resale of the Shares, may be deemed to be underwriting discounts and commissions under the Securities Act. The Company has agreed to maintain the effectiveness of this Registration Statement until the earlier of the sale of all the Shares registered pursuant to this Prospectus or such date as the Company shall be satisfied that each holder of Shares can sell all of the Shares it holds in any three-month period in compliance with Rule 144 promulgated under the Securities Act, but in no event after November 20, 2000. No sales may be made pursuant to this Prospectus after such date unless the Company amends or supplements this Prospectus to indicate that it has agreed to extend such period of effectiveness. The Company has agreed to indemnify the Selling Stockholders against certain liabilities, including liabilities under the Securities Act. 14 16 The following table sets forth certain information with respect to the Selling Stockholders as of December 3, 1998 (as of which date 25,061,053 shares of the Company's Common Stock were issued and outstanding):
SHARES BENEFICIALLY SHARES OF SHARES BENEFICIALLY OWNED PRIOR COMMON STOCK OWNED AFTER TO THE OFFERING(1) THE OFFERING(1)(2) ------------------------ OFFERED ------------------------ NAME OF SELLING STOCKHOLDER NUMBER PERCENT HEREBY NUMBER PERCENT - -------------------------------------------- ------ ------- ------- ------ ------- Biotechnology Development Fund, L.P. 3,095,774 11.7% 1,250,000 1,845,774 7.2% Frank Kung, General Partner 575 Hight Street Suite 201 Palo Alto, CA 94301 Biotechnology Development Fund, III L.P. 2,500,000 9.4% 2,500,000 0 * Frank Kung, General Partner 575 Hight Street Suite 201 Palo Alto, CA 94301 Veron International, Ltd. 3,272,887 12.2% 2,350,000 922,887 3.6% Chinachem Golden Plaza 77 Mody Road Tsin Sha Tsui East Kowloon, Hong Kong Attn: W.K. Leung Lee Wei Chen 2,350,000 8.9% 2,350,000 0 * c/o Fu Sheng Industrial Co., Ltd. 172 Nanking East Road, Sec. 2 Taipei 104, Taiwan R.O.C. Attn: Shubbin King Hofung Holdings Limited 1,042,287 4.1% 950,000 92,287 * 20 F East Town Bldg. 41 Lockard Rd. Wanchai, Hong Kong Attn: Robert Ho Wanpyng Chuang and Jesse Chen 342,287 1.4% 250,000 92,287 * 1608 Pebble Beach Ct. Milpitas, CA 95035 Nai-Ping Leung 211,518 * 150,000 61,518 * 95A, Hill Road 1/F Western District Hong Kong Wen-Chen Yuan 200,000 * 200,000 0 * 8/F 33 One hundred fifty first Avenue Fourth District Ren-ai Street Taipei, R.O.C. Credit Suisse First Boston Corporation 75,000 * 75,000 0 * Eleven Madison Avenue New York, NY 10010-3629
- ------------ * Less than 1% (1) Information with respect to beneficial ownership is based upon information contained in filings made by certain Selling Stockholders with the Securities and Exchange Commission, and information obtained from the Company's transfer agent and certain of the Selling Stockholders. Includes with respect to the following individuals and entities warrants exercisable for the following number of shares of the Company's Common Stock: Biotechnology Development Fund, L.P. -- 1,365,258; Biotechnology Development Fund, III L.P. -- 1,500,000; Veron International, Ltd. -- 1,717,629; Lee Wei Chen -- 1,410,000; Hofung Holdings Limited -- 600,762; Wanpying Chuang and Jesse Chen -- 180,762; Nai-Ping Leung -- 110,506; Wen-Chen Yuan -- 120,000; Credit Suisse First Boston Corporation -- 75,000. (2) Assumes sale of all Shares, including shares issuable upon exercise of Warrants hereto, offered hereby and no other purchases or sales of the Company's Common Stock. See "Plan of Distribution." No Selling Stockholder has had any material relationship with the Company or any of its predecessors or affiliates within the last three years. 15 17 LEGAL MATTERS Certain legal matters with respect to the legality of the issuance of the Common Stock offered hereby will be passed upon for the Company by Venture Law Group, A Professional Corporation, 2800 Sand Hill Road, Menlo Park, California 94025. Craig W. Johnson, a director of Venture Law Group, is Secretary of the Company. As of the date of this Prospectus, certain partners of Venture Law Group beneficially own 19,500 shares of the Company's Common Stock. EXPERTS The consolidated financial statements of Celtrix Pharmaceuticals, Inc. appearing in the Company's Annual Report (Form 10-K) for the year ended March 31, 1998 have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon included therein (which contains an explanatory paragraph with respect to the Company's ability to continue as a going concern mentioned in Note 1 to the consolidated financial statements) and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. ADDITIONAL INFORMATION This Prospectus constitutes a part of the Registration Statement on Form S-3 (herein, together with all amendments and exhibits, referred to as the "Registration Statement") filed by the Company with the Securities and Exchange Commission (the "Commission") under the Securities Act. This Prospectus does not contain all of the information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission. For further information with respect to the Company and the shares of Common Stock offered hereby, reference is hereby made to the Registration Statement. Statements contained herein concerning the provisions of any document are not necessarily complete, and each such statement is qualified in its entirety by reference to the copy of such document filed with the Commission. 16 18 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following table sets forth the costs and expenses payable by the Registrant in connection with the sale and distribution of the Common Stock being registered. Selling commissions and brokerage fees and any applicable transfer taxes and fees and disbursements of counsel for the Selling Stockholders are payable individually by the Selling Stockholders. All amounts are estimates except the registration fee.
AMOUNT TO BE PAID ---------- Registration Fee..................................... $ 4,500 Legal Fees and Expenses.............................. 15,000 Accounting Fees and Expenses......................... 7,000 Finders Fee (in connection with private placement)... 82,500 -------- Miscellaneous...................................... 6,000 -------- Total....................................... $ 115,000 ========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 145 of the Delaware General Corporation Law ("DGCL") provides a detailed statutory framework covering indemnification of officers and directors against liabilities and expenses arising out of legal proceedings brought against them by reason of their being or having been directors or officers. Section 145 generally provides that a director or officer of a corporation (i) shall be indemnified by the corporation for all expenses of such legal proceedings when he is successful on the merits, (ii) may be indemnified by the corporation for the expenses, judgments, fines and amounts paid in settlement of such proceedings (other than a derivative suit), even if he is not successful on the merits, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful, and (iii) may be indemnified by the corporation for the expenses of a derivative suit (a suit by a stockholder alleging a breach by a director or officer of a duty owed to the corporation), even if he is not successful on the merits, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation. No indemnification may be made under clause (iii) above, however, if the director or officer is adjudged liable for negligence or misconduct in the performance of his duties to the corporation, unless a corporation determines that, despite such adjudication, but in view of all the circumstances, he is entitled to indemnification. The indemnification described in clauses (ii) and (iii) above may be made only upon a determination that indemnification is proper because the applicable standard of conduct has been met. Such determination may be made by a majority of a quorum of disinterested directors, independent legal counsel, the stockholders or a court of competent jurisdiction. Section 102(b)(7) of the DGCL permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from which the director derived an improper personal benefit. Section 10 of the Registrant's Amended and Restated Certificate of Incorporation and Article IV of the Registrant's Bylaws provide for indemnification of its directors, officers, employees and other agents to II-1 19 the maximum extent permitted by law. In addition, the Registrant has entered into Indemnification Agreements with its officers and directors pursuant to which the Company has agreed to indemnify such individuals to the fullest extent permitted by Delaware law, and maintains director and officer liability insurance. ITEM 16. EXHIBITS
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ------------------------------------------------ 4.5 Form of Warrant of Registrant dated November 20, 1998. 5.1 Opinion of Venture Law Group, A Professional Corporation 10.50 Common Stock and Warrant Purchase Agreement dated as of October 12, 1998 by and among the Company and each Selling Stockholder 23.1 Consent of Ernst & Young LLP, Independent Auditors 23.2 Consent of Counsel (included in Exhibit 5.1)
- ------------ ITEM 17. UNDERTAKINGS The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement to include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (4) That, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions referred to in Item II-2 20 15 above or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted against the Registrant by such director, officer or controlling person in connection with the securities being registered hereunder, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. II-3 21 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has caused this Amendment to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Santa Clara, State of California, on the 14th day of December 1998. CELTRIX PHARMACEUTICALS, INC. By: /s/ Andreas Sommer ------------------------------------- Andreas Sommer, President and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:
SIGNATURE TITLE DATE --------- ----- ---- /s/ Andreas Sommer* President, Chief Executive Officer and December 14, 1998 - ---------------------------------------- Director (Andreas Sommer) (Principal Executive Officer) /s/ Donald D. Huffman Vice President, Finance and Administration December 14, 1998 - ---------------------------------------- and (Donald D. Huffman) Chief Financial Officer (Principal Financial and Accounting Officer) /s/ Henry E. Blair* Director December 14, 1998 - ---------------------------------------- (Henry E. Blair) /s/ Barry M. Sherman* Director December 14, 1998 - ---------------------------------------- (Barry M. Sherman) /s/ James E. Thomas* Chairman of the Board of Directors December 14, 1998 - ---------------------------------------- (James E. Thomas) * By /s/ Donald D. Huffman December 14, 1998 - ---------------------------------------- Attorney-in-Fact
II-4 22 CELTRIX PHARMACEUTICALS, INC. INDEX TO EXHIBITS
EXHIBIT NUMBER ------- 4.5 Form of Warrant of Registrant dated November 20, 1998 5.1 Opinion of Venture Law Group, A Professional Corporation 10.55 Common Stock and Warrant Purchase Agreement dated as of October 12, 1998 between the Company and each of the Selling Stockholders 23.1 Consent of Ernst & Young LLP, Independent Auditors 23.2 Consent of Counsel (included in Exhibit 5.1)
EX-4.5 2 FORM OF WARRANT OF REGISTRATION 1 EXHIBIT 4.5 THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY BE SOLD, OFFERED FOR SALE OR TRANSFERRED ONLY IN ACCORDANCE WITH THE PROVISIONS OF THIS WARRANT AND PURSUANT TO A REGISTRATION STATEMENT OR AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION AS TO THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION. C.S. NO. [WRNT] [WRNTS] Shares WARRANT TO PURCHASE SHARES OF COMMON STOCK OF CELTRIX PHARMACEUTICALS, INC. 1. COMMON STOCK AND WARRANT PURCHASE AGREEMENT. This Warrant is issued to [NAME] ("Purchaser") pursuant to the Common Stock and Warrant Purchase Agreement dated as of October 12, 1998 (with a closing date of November 20, 1998) between Celtrix Pharmaceuticals, Inc., a Delaware company ("Celtrix"), and Purchaser ("Purchase Agreement") in which Celtrix issued [UNITS] Units to Purchaser. Each "Unit" is composed of one share of Celtrix Common Stock ("Share") and a warrant to purchase one and one half shares of Celtrix Common Stock. This Warrant is part of the Unit. 2. NUMBER AND PRICE OF SHARES SUBJECT TO WARRANT. Subject to the terms and conditions herein set forth Purchaser is entitled to purchase from Celtrix, at any time in whole or from time to time in part commencing on February 20, 1999 (the "Vesting Date") and until November 20, 2002, [WARRANTSPELLED] ([WRNTS]) shares (which number of shares is subject to adjustment as described below) of fully paid and nonassessable Common Stock, $.01 par value, of Celtrix ("Warrant Shares"), upon surrender of this Warrant at the principal office of Celtrix and upon payment of the purchase price by wire transfer to Celtrix or cashiers check drawn on a United States bank made to the order of Celtrix. Subject to adjustment as hereinafter provided, the purchase price of one Warrant Share (or such securities as may be substituted for one Warrant Share pursuant to the provisions hereinafter set forth) shall be $0.55. The purchase price of one Warrant Share (or such securities as may be substituted for one Warrant Share pursuant to the provisions hereinafter set forth) payable from time to time upon the exercise of this Warrant (whether such price be the price specified above or an adjusted price determined as hereinafter provided) is referred to herein as the "Warrant Price." (a) ACCELERATION. In the event that a Corporate Transaction (as defined in Section 13 below) is consummated by Celtrix prior to the Vesting Date, this Warrant shall become immediately exercisable by the Registered Holder (as defined in Section 9(c) below) for the full number of Warrant Shares set forth above in this Section 2. 2 3. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The number and kind of securities issuable upon the exercise of this Warrant shall be subject to adjustment from time to time upon the happening of certain events as follows: (a) ADJUSTMENT FOR DIVIDENDS IN STOCK OR OTHER SECURITIES OR PROPERTY. In case at any time or from time to time on or after the date hereof the holders of the Common Stock of Celtrix (or any shares of other stock or other securities at the time issued and outstanding) shall have received, or, on or after the record date fixed for the determination of eligible stockholders, shall have become entitled to receive, without payment therefor, (i) other or additional stock or other securities or property (other than cash in connection with regular or ordinary dividends) of Celtrix by way of dividend, (ii) any cash paid or payable (including, without limitation, by way of dividend), except out of earned surplus of Celtrix, or (iii) other or additional stock or other securities or property (including cash) by way of spin-off, split-up, reclassification, recapitalization, combination of shares, or similar corporate rearrangement, then and in each case, the holder of this Warrant shall, upon the exercise hereof, be entitled to receive, in addition to the number of shares of Common Stock receivable thereupon, and without payment of any additional consideration therefor, the amount of such other or additional stock or other securities or property (including cash in the cases referred to in clauses (ii) and (iii) above) of Celtrix which such holder would hold on the date of such exercise had it been the holder of record of such Common Stock on the date hereof and had thereafter, during the period from the date hereof to and including the date of such exercise, retained such shares and/or all other additional stock available by it as aforesaid during such period, giving effect to all adjustments called for during such period by paragraphs (b), (c) and (d) of this Section 3. (b) ADJUSTMENT FOR RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any reclassification or change of the outstanding securities of Celtrix or of any reorganization of Celtrix (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, or any merger or consolidation of Celtrix, or any transfer of all or substantially all of Celtrix's properties or assets to any other person or entity under any plan or arrangement contemplating the dissolution of Celtrix within 6 months from the date of such transfer, 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, merger 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 paragraphs (a) and (c); and in each such case, the terms of this Section 3 shall be applicable to the shares of stock or other securities properly receivable upon the exercise of this Warrant after such consummation. (c) STOCK SPLITS AND REVERSE STOCK SPLITS. If at any time on or after the date hereof Celtrix shall subdivide its outstanding shares of Common Stock into a greater number of shares, the Warrant Price in effect immediately prior to such subdivision shall thereby be proportionately reduced and the number of shares receivable upon exercise of the Warrant shall thereby be proportionately increased; and, conversely, if at any time on or after the date hereof -2- 3 the outstanding number of shares of Common Stock shall be combined into a smaller number of shares, the Warrant Price in effect immediately prior to such combination shall thereby be proportionately increased and the number of shares receivable upon exercise of Warrant shall thereby be proportionately decreased. (d) OTHER ADJUSTMENTS. (i) IN GENERAL. In case Celtrix shall issue or sell shares of its Common Stock after the date hereof without consideration or for a consideration per share less than $0.4375 per share, except where such shares are issued or sold pursuant to the circumstances set forth in subsection (iii) below, then the Warrant Price in effect hereunder shall simultaneously with such issuance or sale be reduced to a price determined by multiplying the Warrant Price by a fraction (i) the numerator of which shall be the total number of shares of Common Stock outstanding immediately prior to such issuance or sale plus the number of shares of Common Stock that the aggregate consideration, if any, received by Celtrix upon such issuance or sale would purchase at the Warrant Price; and (2) the denominator of which shall be the total number of shares of Common Stock outstanding immediately after issuance or sale of such additional shares. (ii) CONVERTIBLE SECURITIES. Subject to subsection (iii) below, in case Celtrix shall issue or sell any securities convertible into Common Stock of Celtrix ("Convertible Securities") after the date hereof, there shall be determined the price per share for which Common Stock is issuable upon the conversion or exchange thereof, such determination to be made by dividing (a) the sum of the total amount received or receivable by Celtrix as consideration, if any, for the issue or sale of all such Convertible Securities and such additional consideration, if any, payable to Celtrix upon the conversion or exchange thereof, by (b) the maximum number of shares of Common Stock of Celtrix issuable upon the conversion or exchange of all of such Convertible Securities. If the price per share so determined shall be less than $0.4375 per share, then at such time as any of such Convertible Securities are actually converted into shares of Common Stock, the Warrant Price shall be adjusted pursuant to the formula set forth in Section 3(d)(i) above taking into consideration only those Convertible Securities actually converted. The foregoing adjustment(s) shall also reflect any increase or increases, with the passage of time, in the amount of additional consideration, if any, payable to Celtrix for such Convertible Securities, or any change to the rate of exchange that may be applicable upon the conversion or exchange of such Convertible Securities. (iii) NONDILUTIVE ISSUANCES. The terms of Section 3(d)(i) and (ii) shall not apply to any of the following: (1) Common Stock issued pursuant to a transaction described in Section 3(c) hereof, (2) Shares of Common Stock issuable or issued to employees, consultants or directors of Celtrix directly or pursuant to a stock option plan or restricted stock plan approved by the Board of Directors of Celtrix, -3- 4 (3) Capital stock, or options or warrants to purchase capital stock, issued to financial institutions or lessors in connection with commercial credit arrangements, equipment financings or similar transactions, (4) Shares of Common Stock or Preferred Stock issuable upon exercise of warrants outstanding as of the date of this Warrant, (5) Capital stock or warrants or options to purchase capital stock issued in connection with bona fide acquisitions, mergers or similar transactions, the terms of which are approved by the Board of Directors of Celtrix. 4. NO FRACTIONAL SHARES. No fractional shares of Warrant Shares will be issued in connection with any exercise of this Warrant. In lieu of any fractional shares which would otherwise be issuable, Celtrix shall pay cash equal to the product of such fraction multiplied by the closing price of one Warrant Share as reported on the Nasdaq National Market on the date of exercise. 5. NO STOCKHOLDER RIGHTS. This Warrant shall not entitle its holder to any of the rights of a stockholder of Celtrix. 6. RESERVATION OF STOCK. Celtrix covenants that during the period this Warrant is exercisable, Celtrix will reserve from its authorized and unissued Common Stock a sufficient number of shares of Common Stock (or other securities, if applicable) to provide for the issuance of Warrant Shares (or other securities) upon the exercise of this Warrant. Celtrix agrees that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of this Warrant. 7. EXERCISE OF WARRANT. This Warrant may be exercised by the holder hereof, in whole or in part, by the surrender of this Warrant and the Notice of Exercise attached hereto as Exhibit A duly completed and executed on behalf of the holder hereof, at the principal office of Celtrix together with payment in full of the Warrant Price then in effect with respect to the number of Warrant Shares as to which the Warrant is being exercised. The Warrant Price shall by wire transfer to Celtrix or cashiers check drawn on a United States bank made to the order of Celtrix. This Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above, and the person entitled to receive the Warrant Shares issuable upon such exercise shall be treated for all purposes as the holder of such shares of record as of the close of business on such date. As promptly as practicable on or after such date and in any event within ten (10) days thereafter, Celtrix at its expense shall cause to be issued and delivered to the person or persons entitled to receive the same a certificate or certificates for the number of full Warrant Shares issuable upon such exercise, together with cash in lieu of any fraction of a share as provided above. The Warrant Shares issuable upon exercise hereof shall, upon their issuance, be fully paid and nonassessable. In the event that this Warrant is exercised in part, Celtrix at its expense will execute and deliver a new Warrant of like tenor exercisable for the number of shares for which this Warrant may then be exercised. -4- 5 8. CERTIFICATE OF ADJUSTMENT. Whenever the Warrant Price or number or type of securities issuable upon exercise of this Warrant is adjusted, as herein provided, Celtrix shall, at its expense, promptly deliver to the record holder of this Warrant a certificate of an officer of Celtrix setting forth the nature of such adjustment and showing in detail the facts upon which such adjustment is based. 9. TRANSFERABILITY. (a) UNREGISTERED SECURITY. Each holder of this Warrant acknowledges that this Warrant and the Warrant Shares have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), and agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of this Warrant or any Warrant Shares issued upon its exercise in the absence of (i) an effective registration statement under the Securities Act as to this Warrant or such Warrant Shares and registration or qualification of this Warrant or such Warrant Shares under any applicable U.S. federal or state securities law then in effect or (ii) an opinion of counsel, satisfactory to Celtrix, that such registration and qualification are not required. Each certificate or other instrument for Warrant Shares issued upon the exercise of this Warrant shall bear a legend substantially to the foregoing effect. (b) TRANSFERABILITY. Subject to the provisions of Section 9(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 Celtrix, provided, however, that this Warrant may not be transferred in part unless the transferee and any subsequent transferee acquires the right to purchase at least 100,000 shares (as adjusted pursuant to Section 3) of Warrant Shares hereunder. (c) WARRANT REGISTER. Celtrix will maintain a register containing the name and address of Purchaser or its registered assign (the "Registered Holder") of this Warrant. Until any transfer of this Warrant is made in the warrant register, Celtrix 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, Celtrix 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 Celtrix requesting such change. 10. NOTICES OF RECORD DATE. In the event of: (a) any taking by Celtrix of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend payable out of earned surplus of Celtrix) or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right; or (b) any capital reorganization of Celtrix, any reclassification or recapitalization of the capital stock of Celtrix or any transfer of all or substantially all the assets of Celtrix to or consolidation or merger of Celtrix with or into any other person; or -5- 6 (c) any voluntary or involuntary dissolution, liquidation or winding-up of Celtrix, then and in each such event Celtrix will mail or cause to be mailed to each holder of a Warrant a notice specifying (i) the date on which any such 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, and (ii) the date on which any such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding-up is to take place, and the time, if any, as of which the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for securities or other property deliverable upon such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding-up. Such notice shall be mailed at least 10 days prior to the date therein specified. 11. REPLACEMENT OF WARRANTS. On receipt of evidence reasonably satisfactory to Celtrix of the loss, theft, destruction or mutilation of any Warrant and, in the case of any such loss, theft, destruction or mutilation of any Warrant, on delivery of an indemnity agreement or security reasonably satisfactory in form and amount to Celtrix or, in the case of any such mutilation, on surrender and cancellation of such Warrant, Celtrix at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor. 12. MISCELLANEOUS. This Warrant shall be governed by the laws of the State of California. The headings in this Warrant are for purposes of convenience and reference only, and shall not be deemed to constitute a part hereof. Neither this Warrant nor any term hereof may be changed, waived, discharged or terminated orally but only by an instrument in writing signed by Celtrix and the registered holder of warrants covering a majority of the Warrant Shares reserved for issuance upon exercise of this Warrant. All notices and other communications from Celtrix to the holder of this Warrant shall be sufficient if in writing and sent by registered or certified mail, domestic or international courier, or facsimile, return receipt requested, postage or courier charges prepaid, to the address furnished to Celtrix in writing by Purchaser. All such notices and communications shall be effective one (1) trading day after being sent by courier or by facsimile with confirmation of receipt or five (5) trading days after being sent by the other approved methods. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provisions. 13. TERMINATION. This Warrant (and the right to purchase securities upon exercise hereof) shall terminate on the earlier of (i) November 20, 2002, (ii) the sale, conveyance, disposal, or encumbrance of all or substantially all of Celtrix's property or business or Celtrix's merger into or consolidation with any other corporation (other than a wholly-owned subsidiary corporation) or any other transaction or series of related transactions in which more than fifty percent (50%) of the voting power of Celtrix is disposed of (a "Corporate Transaction"), provided that this Section 13(ii) shall not apply to a merger effected exclusively for the purpose of changing the domicile of Celtrix, or (iii) such earlier time as provided in Section 2 above. In the event that termination of this Warrant shall occur pursuant to subsection (ii) above, then and only then shall the following subsection 13(a) be applicable. -6- 7 (a) NET ISSUE EXERCISE. (i) In lieu of exercising this Warrant in the manner provided above in Section 2, the Registered Holder may elect to receive shares equal to the value of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of Celtrix together with notice of such election in which event Celtrix shall issue to holder a number of shares of Common Stock computed using the following formula: X = Y (A - B) --------- A Where X = The number of shares of Common Stock to be issued to the Registered Holder. Y = The number of shares of Common Stock purchasable under this Warrant (at the date of such calculation). A = The fair market value of one share of Common Stock (at the date of such calculation). B = The Warrant Price (as adjusted to the date of such calculation). (ii) For purposes of this Section 13(a), the fair market value of one share of Common Stock on the date of calculation shall mean: (A) if this Warrant is exercised at a time when Celtrix Common Stock is traded on a securities exchange or The Nasdaq Stock Market, The Nasdaq SmallCap Market or is actively traded over-the-counter, the closing sale price of Celtrix Common Stock on the day prior to the date the Warrant is submitted for exercise, but if no such closing sale price is available, then: (1) if Celtrix Common Stock is traded on a securities exchange, The Nasdaq Stock Market, or The Nasdaq SmallCap Market, the fair market value shall be deemed to be the average of the closing prices over a thirty (30) day period ending three days before the date of calculation; or (2) if Celtrix Common Stock is actively traded over-the-counter, the fair market value shall be deemed to be the average of the closing bid or sales price (whichever is applicable) over the thirty (30) day period ending three days before the date of calculation; or (B) if (A) is not applicable, the fair market value shall be at the highest price per share which Celtrix could obtain on the date of calculation from a willing buyer (not a current employee or director or an affiliate thereof) for shares of Common Stock sold by Celtrix, from authorized but unissued shares, as determined in good faith by the Board of Directors, unless Celtrix is at such time subject to a Corporate Transaction described in subsection 13(ii) above, in which case the fair market value per share of Common Stock shall be -7- 8 deemed to be the value of the consideration per share received by the holders of such stock pursuant to such Corporate Transaction. 14. REMEDIES. Celtrix stipulates that the remedies at law of the holder of this Warrant in the event of any default or threatened default by Celtrix in the performance of or compliance with any of the terms of this Warrant are not and will not be adequate, and that such terms may be specifically enforced by a decreed for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise. 15. NEGOTIABILITY. This Warrant is issued upon the following terms, to all of which each holder or owner hereof by the taking hereof consents and agrees: (a) title to this Warrant may be transferred only in accordance with the provisions of Section 9 hereunder; and (b) subject to the terms of Section 9, any person in possession of this Warrant properly endorsed is authorized to represent himself as absolute owner hereof and is empowered to transfer absolute title hereto by endorsement and delivery hereof to a bona fide purchaser hereof for value; each prior taker or owner waives and renounces all of his right, title and interest in this Warrant in favor of each such bona fide purchaser and each such bona fide purchaser shall acquire absolute title hereto and to all rights represented hereby. 16. EXTENDED EXPIRATION. The right to exercise this Warrant shall expire at 5:00 P.M., PST, on November 20, 2002; provided, however, that if a registration statement covering the Warrant Shares has not become effective prior to the expiration date of the right to exercise this Warrant, then the right to exercise this Warrant shall be extended and shall expire 30 days after the effective date of such registration statement. 17. ASSIGNABILITY. This Warrant may be assigned only in accordance with the provisions set forth in Section 9. ISSUED this 20th day of November, 1998. CELTRIX PHARMACEUTICALS, INC. ------------------------------------ Andreas Sommer Chief Executive Officer -8 9 EXHIBIT A NOTICE OF INTENT TO EXERCISE (To be signed only upon exercise of Warrant) To: CELTRIX PHARMACEUTICALS, INC. The undersigned, the Holder of the within Warrant, hereby irrevocably elects to exercise the purchase right represented by such Warrant for, and to purchase thereunder, _____________ ____________________________ (_____________) shares of Common Stock of Celtrix Pharmaceuticals, Inc. and herewith makes payment of ____________________ Dollars ($__________) thereof and requests that the certificates for such shares be issued in the name of, and delivered to ________________________________, whose address is _____________________________ ________________________________________________________________________________ _______________________________________________________________________________. DATED: ______________ ------------------------------------------------ (Signature must conform in all respects to name of Holder as specified on the face of the Warrant) ------------------------------------------------ ------------------------------------------------ (Address) 10 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/FAX NUMBER NO. OF SHARES
Dated:_________________ Signature: --------------------------------- --------------------------------- Witness: --------------------------------- EX-5.1 3 OPINION OF VENTURE LAW GROUP 1 EXHIBIT 5.1 VENTURE LAW GROUP a Professional Corporation 2800 Sand Hill Road Menlo Park, CA 94025 December 14, 1998 Celtrix Pharmaceuticals, Inc. 3055 Patrick Henry Drive Santa Clara, California 95054 REGISTRATION STATEMENT ON FORM S-3 Ladies and Gentlemen: We have examined the Registration Statement on Form S-3 (as amended by Amendment No. 1) to be filed by you with the Securities and Exchange Commission on or about December 14, 1998 (the "Registration Statement") in connection with the registration under the Securities Act of 1933, as amended, of a total of 10,075,000 shares of your Common Stock (the "Shares"), 4,000,000 of which Shares were issued to certain individuals and entities (the "Stockholders") in a private placement on November 20, 1998, and 6,075,000 of which Shares are issuable upon the exercise of warrants (the "Warrants") issued to such Stockholders in connection with such private placement. As your legal counsel, we have examined the proceedings taken in connection with the sale of the Shares and the Warrants to the Stockholders and are familiar with the proceedings proposed to be taken by you, and the Stockholders in connection with the sale of the Shares under the Registration Statement. It is our opinion that the Shares are legally and validly issued, fully paid and nonassessable (or in the case of the Shares issuable upon exercise of the Warrants, will be legally and validly issued, fully paid and nonassessable upon exercise of the Warrants in accordance with their terms) and when resold in the manner referred to in the Registration Statement, the Shares will be legally and validly issued, fully paid and nonassessable. We consent to the use of this opinion as an exhibit to the Registration Statement and further consent to the use of our name wherever it appears in the Registration Statement and any amendments to it. Sincerely, VENTURE LAW GROUP A Professional Corporation /s/ Venture Law Group --------------------------- ESR EX-10.55 4 COMMON STOCK AND WARRANT PURCHASE AGREEMENT 1 EXHIBIT 10.55 COMMON STOCK AND WARRANT PURCHASE AGREEMENT DATED AS OF OCTOBER 12, 1998 BETWEEN CELTRIX PHARMACEUTICALS, INC. AND THE PURCHASERS LISTED ON EXHIBIT A 2
TABLE OF CONTENTS Page ---- SECTION 1 - Sale of Common Stock and Warrants.........................................1 1.1 Sale of Common Stock and Warrants.........................................1 1.2 Closing Date..............................................................1 1.3 Delivery..................................................................1 SECTION 2 - Representations and Warranties of Celtrix.................................1 2.1 Organization and Standing.................................................2 2.2 Corporate Power; Authorization............................................2 2.3 Shares; Warrant Shares....................................................2 2.4 Capitalization............................................................3 2.5 SEC Documents; Financial Statements.......................................3 2.6 Governmental Consents.....................................................4 2.7 No Material Adverse Change................................................4 2.8 Intellectual Property.....................................................5 2.9 Litigation................................................................6 2.10 Consistent Terms.........................................................6 2.11 Subsidiaries.............................................................7 2.12 Undisclosed Liabilities..................................................7 2.13 Title to Properties......................................................7 2.14 Employee Matters.........................................................7 2.15 Taxes....................................................................8 2.16 Brokers..................................................................8 2.17 Environmental Matters....................................................8 2.18 Use of Proceeds..........................................................9 2.19 Compliance with Applicable Laws..........................................9 2.20 Disclosure...............................................................9 2.21 Year 2000 Compliance.....................................................9 SECTION 3 - Representations and Warranties of Purchasers.............................10 3.1 Investment Experience....................................................10 3.2 Investment Intent........................................................10 3.3 Registration or Exemption Requirements...................................10 3.4 No Legal, Tax or Investment Advice.......................................10 SECTION 4 - Conditions to Obligations of Purchasers..................................11 4.1 Representations and Warranties Correct...................................11 4.2 Covenants................................................................11 4.3 Opinion of Company's Counsel.............................................11 4.4 No Order Pending.........................................................11 4.5 No Law Prohibiting or Restricting Such Sale..............................11 4.6 Compliance Certificate...................................................11 4.7 No Material Adverse Change...............................................11 4.8 Governmental Approvals...................................................11 4.9 Closing Bid Price of Celtrix Stock.......................................12 i
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TABLE OF CONTENTS (CONTINUED) Page ---- 4.10 Deliveries..............................................................12 SECTION 5 - Conditions to Obligations of Celtrix.....................................12 5.1 Representations and Warranties Correct...................................12 5.2 Covenants................................................................12 5.3 No Order Pending.........................................................12 5.4 No Law Prohibiting or Restricting Such Sale..............................12 5.5 Governmental Approvals...................................................13 SECTION 6 - Covenants of Celtrix.....................................................13 6.1 Warrants.................................................................13 6.2 Registration Requirements................................................13 6.3 Financial Information....................................................17 6.4 Budget...................................................................17 6.5 Access...................................................................17 6.6 Board of Directors.......................................................17 6.7 Proceedings..............................................................17 6.8 Insurance................................................................17 6.9 Proprietary Information Agreements.......................................18 6.10 Taxes and Other Liabilities.............................................18 6.11 Corporate Existence.....................................................18 6.12 Business................................................................18 6.13 Compliance with Laws....................................................18 6.14 Indemnification.........................................................18 6.15 Material Events.........................................................20 6.16 Stockholder Ratification................................................20 SECTION 7 - Covenants of Purchasers..................................................20 7.1 Notice to Company of Proposed Sale and Right of Company to Suspend Use of Registration Statement....................................................20 7.2 Restrictions on Short-Sales..............................................21 SECTION 8 - Restrictions on Transferability of Shares; Compliance With Securities Act..................................................................................21 8.1 Restrictions on Transferability..........................................21 8.2 Restrictive Legend.......................................................21 SECTION 9 - Miscellaneous............................................................22 9.1 Termination of Agreement.................................................22 9.2 Best Efforts.............................................................22 9.3 Governing Law............................................................22 9.4 Survival.................................................................22 9.5 Successors and Assigns...................................................22 9.6 Entire Agreement; Amendment..............................................22 9.7 Notices and Dates........................................................23 -ii-
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TABLE OF CONTENTS (CONTINUED) Page ---- 9.8 Severability.............................................................23 9.9 No Third Party Rights....................................................24 9.10 Counterparts............................................................24 9.11 Expenses................................................................24 Exhibits A. Schedule of Purchasers B. Warrant C. Schedule of Exceptions D. Budget -iii-
5 COMMON STOCK AND WARRANT PURCHASE AGREEMENT THIS COMMON STOCK AND WARRANT PURCHASE AGREEMENT ("Agreement") is entered into as of this 12th day of October, 1998 (the "Effective Date") between Celtrix Pharmaceuticals, Inc., a Delaware corporation ("Celtrix"), and the purchasers listed on the attached Exhibit A (each a "Purchaser" and together the "Purchasers"). SECTION 1 SALE OF COMMON STOCK AND WARRANTS 1.1 SALE OF COMMON STOCK AND WARRANTS. Subject to the terms and conditions hereof, Celtrix will issue and sell to each Purchaser, and each Purchaser will purchase from Celtrix, at the Closing (as defined below) the number of Units set forth opposite each Purchaser's name on Exhibit A. A "Unit" shall be composed of one share ("Share") of common stock, $0.01 par value, of Celtrix ("Common Stock") and a warrant to purchase one and one half shares of Common Stock (each single share, a "Warrant Share"). A form of the warrant is attached as Exhibit B ("Warrant"). The purchase price per Unit ("Unit Purchase Price") shall be $0.50. The exercise price per Warrant Share shall be equal to 110% of the Unit Purchase Price (or $0.55 per Warrant Share). Units shall be purchased hereunder in even increments. 1.2 CLOSING DATE. The closing of the purchase and sale of the Units ("Closing") shall be held at the law offices of Venture Law Group, 2800 Sand Hill Road, Menlo Park, California not later than thirty (30) days after the Effective Date, or at such other time and place upon which Celtrix and the Purchasers purchasing a majority of the Units shall mutually agree (the date of the Closing is hereinafter referred to as the "Closing Date"). 1.3 DELIVERY. At the Closing, Celtrix will deliver to each Purchaser certificates representing the Shares and Warrants purchased by such Purchaser, against payment of the aggregate Unit Purchase Price therefor, by wire transfer to Celtrix or certified or cashier's check drawn on a United States bank made to the order of Celtrix. SECTION 2 REPRESENTATIONS AND WARRANTIES OF CELTRIX Celtrix hereby represents and warrants to the Purchasers as of the Closing Date that, except as set forth on the Schedule of Exceptions attached hereto as Exhibit C, which exceptions shall be deemed to be representations and warranties as if made hereunder: 2.1 ORGANIZATION AND STANDING. Celtrix is a corporation duly organized and validly existing under, and by virtue of, the laws of the State of Delaware and is in good standing as a domestic corporation under the laws of said state and is qualified as a foreign corporation in California and in all other jurisdictions in which such qualification is required; provided, however, that Celtrix need not be qualified in a jurisdiction in which its failure to qualify would 6 not have a material adverse effect on the business, properties, prospects or financial condition of Celtrix. 2.2 CORPORATE POWER; AUTHORIZATION. Celtrix has all requisite legal and corporate power and has taken all requisite corporate action to execute and deliver this Agreement and the Warrants, to sell and issue the Shares, the Warrants and the Warrant Shares and to carry out and perform all of its obligations under this Agreement and the Warrants. This Agreement and the Warrants constitute the legal, valid and binding obligation of Celtrix, enforceable in accordance with their terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors' rights generally and (ii) as limited by equitable principles generally. The execution and delivery of this Agreement and the Warrants does not, and the performance of this Agreement and the Warrants and the compliance with the provisions hereof and thereof and the issuance, sale and delivery of the Shares, the Warrants and the Warrant Shares by Celtrix will not materially conflict with, or result in a breach or violation of the terms, conditions or provisions of, or constitute a default under, or result in the creation or imposition of any lien pursuant to the terms of, the Certificate of Incorporation or Bylaws of Celtrix or any statute, law, rule or regulation or any state or federal order, judgment or decree or any note, bond, indenture, mortgage, lease, license, permit, franchise or other agreement, obligation or instrument to which Celtrix, or any of its properties, is subject. The execution and delivery of this Agreement and the Warrant and the consummation of the transactions contemplated herein and therein have been duly and validly authorized and approved by Celtrix's Board of Directors, and no other corporate or stockholder approval or proceedings are necessary to authorize or approve this Agreement, the Warrant, or to consummate the transactions contemplated hereby and thereby. True and complete copies of the respective minutes of all meetings or consent actions of the Board of Directors and stockholders of Celtrix have been delivered to or made available to Purchasers and accurately reflect all actions taken by the Board of Directors and stockholders of Celtrix. As of the date hereof Celtrix is not subject to any bankruptcy or reorganization proceedings or arrangement or moratorium affecting the enforcement of creditors rights generally. 2.3 SHARES; WARRANT SHARES. The Shares and the Warrants (and the Warrant Shares issuable upon exercise of the Warrants) when issued in compliance with the provisions of this Agreement or the Warrants, as the case may be, will be duly and validly authorized, issued, fully paid and nonassessable. Based on the representations and warranties of the Purchasers contained herein, the Shares and the Warrants (and the Warrant Shares) when issued in compliance with the provisions of this Agreement or the Warrants, as the case may be, will be issued in compliance with federal and state securities laws. The issuance and delivery of the Shares and the Warrants (and the Warrant Shares upon exercise of the Warrants) is not subject to preemptive or any other similar rights of the stockholders of Celtrix or any liens or encumbrances. Celtrix has reserved such number of shares of its Common Stock necessary for issuance of the Warrant Shares. 2.4 CAPITALIZATION. The authorized capital stock of Celtrix consists of 60,000,000 shares of Common Stock, $0.01 par value, of which at September 30, 1998, 21,061,053 shares were issued and outstanding, and 10,000,000 shares of Preferred Stock, $0.01 par value per share, no shares of which are issued and outstanding. All such issued and outstanding shares -2- 7 have been duly authorized and validly issued and are fully paid and nonassessable. All offers and sales of securities by Celtrix have been duly and properly made pursuant to registrations conducted under applicable federal and state securities laws or pursuant to exemptions from the registration requirements thereof. In addition to the foregoing, Celtrix has reserved and outstanding the following warrants, options and convertible securities: (i) warrants for the purchase of 687,155 shares of Common Stock at an exercise price of $9.00 per share, which warrants expire November 17, 1998; (ii) warrants for the purchase of 2,860,934 shares of Common Stock at an exercise price of $2.6818 per share, which warrants expire April 1, 2000; (iii) an option for the purchase of 75,000 shares of Common Stock at an exercise price of $2.438 per share, which option expires April 1, 2000; (iv) 3,000,000 shares reserved for issuance pursuant to Celtrix's 1991 Stock Option Plan, of which, at September 30, 1998 options to purchase 32,174 shares had been exercised, options to purchase 1,714,358 shares were outstanding and 1,253,468 shares remained available for future grant; (v) 500,000 shares reserved for issuance pursuant to Celtrix's 1991 Employee Stock Purchase Plan, of which, at September 30, 1998, 176,880 shares had been issued and 323,120 shares remained available for future issuance; and (vi) 200,000 shares reserved for issuance under Celtrix's 1991 Directors' Stock Option Plan, of which, at September 30, 1998, options to purchase 29,999 shares were outstanding and 170,001 shares remained available for future grant. Except for securities issued in the ordinary course of business under Celtrix's stock plans, no additional securities of Celtrix will be issued and outstanding as of the Closing. Except as described in this Section 2.4 and except for E.M. Warburg, Pincus and Company's right to purchase such amount of newly issued securities of Celtrix in order to maintain their respective percentage ownership of Celtrix Common Stock (which rights have been waived by E.M. Warburg, Pincus and Company in connection with the transactions contemplated by this Agreement), there are no other options, warrants, conversion privileges or other contractual rights currently outstanding that would obligate Celtrix to sell or otherwise issue any authorized but unissued shares of Celtrix's capital stock or other securities or to grant or enter into any such option, warrant, conversion privilege or other contractual right to purchase or otherwise acquire Celtrix securities. In addition to the foregoing, as of the date hereof, Celtrix has no bonds, debentures, notes or other indebtedness outstanding that have voting rights in Celtrix, and Celtrix is not subject to any agreement, understanding or commitment which would require it to issue any such bonds, debentures, notes or other indebtedness. Except as set forth in the Schedule of Exceptions, Celtrix is not presently under any contractual obligation to register any of its presently outstanding securities or any of its securities that may be hereafter issued. 2.5 SEC DOCUMENTS; FINANCIAL STATEMENTS. Each complete or partial statement, report, prospectus and other document filed by Celtrix under the Securities Act of 1933, as amended ("Securities Act") and the Securities Exchange Act of 1934, as amended ("Exchange Act"), is a true and complete copy of or excerpt from such document as filed by Celtrix with the SEC ("SEC Documents"). Celtrix has filed all the documents that Celtrix was required to file with the SEC under Sections 13 or 14(a) of the Exchange Act since the date on which its Registration Statement filed in connection with its initial public offering of securities was declared effective. As of their respective filing dates, the SEC Documents complied in all material respects with the requirements of the Exchange Act or the Securities Act, as applicable. None of the SEC Documents as of their respective dates contained any untrue statement of a -3- 8 material fact or omitted to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading. The financial statements of Celtrix included in the SEC Documents ("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. Except as may be indicated in the notes to the Financial Statements or, in the case of unaudited statements, as permitted by Form 10-Q of the SEC, the Financial Statements have been prepared in accordance with generally accepted accounting principles consistently applied and fairly present the consolidated financial position of Celtrix and any subsidiaries at the dates thereof and the consolidated results of their operations and consolidated cash flows for the periods then ended (subject, in the case of unaudited statements, to normal, recurring adjustments). To the knowledge of Celtrix, no holder of any securities of Celtrix has any bona fide claim against Celtrix pursuant to any federal or state law, including, but not limited to Section 10(b)(5) of the Exchange Act. 2.6 GOVERNMENTAL CONSENTS. No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state, or local governmental authority, including without limitation the U.S. Food and Drug Administration, on the part of Celtrix is required in connection with the consummation of the transactions contemplated by this Agreement except for (a) compliance with foreign securities laws, federal securities laws and state "blue sky" laws in the jurisdictions in which Units are offered and/or sold, which compliance will be effected in accordance with such laws, (b) filing the Nasdaq National Market Notification Form for listing of additional shares, which filing will be effected in accordance with the rules thereunder or an appropriate waiver will be obtained, and (c) filing with the SEC and NASD either a Current Report on Form 8-K or a Quarterly or Annual Report on Form 10-Q or 10-K disclosing the terms of the transaction contemplated by this Agreement. The business of Celtrix is not being conducted in violation of any law, ordinance or regulation of any governmental entity, including but not limited to the U.S. Food and Drug Administration, except for violations which either singly or in the aggregate would not be reasonably likely to have a material adverse effect on Celtrix's business, financial condition or results of operations. 2.7 NO MATERIAL ADVERSE CHANGE. Except as otherwise disclosed herein or in the Financial Statements, since June 30, 1998, there has not been: (a) any changes in the assets, liabilities, financial condition or operations of Celtrix from that reflected in the Financial Statements except changes in the ordinary course of business which have not been, either in any individual case or in the aggregate, materially adverse; (b) any material change in the contingent obligations of Celtrix, whether by way of guarantee, endorsement, indemnity, warranty or otherwise; (c) any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting the properties or business of Celtrix; -4- 9 (d) any declaration or payment of any dividend or other distribution of the assets of Celtrix; (e) any labor organization activity; (f) any purchase or redemption of the capital stock of Celtrix; (g) any declaration, payment, or commitment for the payment by Celtrix of a bonus or other additional salary, compensation or benefit to any employee of Celtrix that was not in the ordinary course of business; (h) any release, compromise, waiver or cancellation of any debts to or claims by Celtrix, or waiver of any rights of Celtrix; (i) any capital expenditure in excess of $10,000 for a single item or $25,000 in the aggregate; (j) any change in accounting methods or practices or revaluation of assets of Celtrix; (k) any loans by Celtrix or guarantees by Celtrix of any loans; (l) any termination of any material contract, or any amendment of a material contract to which Celtrix is a party; (m) any resignation by or termination of key employees of Celtrix; (n) any failure by Celtrix to satisfy any debts, obligations or liabilities as the same come due; or (o) any agreement or commitment to any of the foregoing, or any other event or condition of any character which has materially and adversely affected Celtrix's assets, liabilities, financial condition or operations or prospects. 2.8 INTELLECTUAL PROPERTY. Celtrix has sufficient title and ownership of all patents, patent applications, copyrights, trade secrets, trademarks, proprietary information, proprietary rights, and processes necessary for its business as now conducted and as now proposed to be conducted without any conflict with or infringement of the rights of others except as disclosed in the documents filed with the SEC, to the knowledge of Celtrix. The research, development, manufacture, sale, and use of products presently made, used, or sold by, or contemplated for future manufacture, sale or use by Celtrix, do not and would not constitute or involve a significant risk of infringement of any patent or misappropriation of any trade secret of any third party, except as disclosed in the SEC Documents. Except as disclosed in the documents filed with the SEC, there are no outstanding options, licenses, or agreements of any kind relating to any material use of the foregoing, nor is Celtrix bound by or a party to any options, licenses, encumbrances or liens, or any outstanding orders, judgments, decrees, stipulations, or agreements of any kind with respect to the patents, trademarks, service marks, trade names, copyrights, trade -5- 10 secrets, licenses, information, proprietary rights and processes of any other person or entity that are material to Celtrix's business as currently conducted or as now proposed to be conducted. Except as disclosed in the documents filed with the SEC, Celtrix has not received any communications alleging, nor does Celtrix have any reason to believe, that Celtrix, by conducting its business as proposed, would violate any of the patents, trademarks, service marks, trade names, copyrights, or trade secrets or other proprietary rights of any other person or entity. Celtrix is not aware that any of its employees or consultants is obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that is violated by or would materially interfere with the current or prospective services provided to Celtrix by the employee or consultant or the use of his best efforts to promote the interests of Celtrix or that would materially conflict with Celtrix's business as now proposed to be conducted. Neither the execution nor delivery of this Agreement, nor the carrying on of Celtrix's business as proposed, will, to Celtrix's knowledge, conflict with or result in a material breach of the terms, conditions or provisions of, or constitute a material default under, any contract, covenant or instrument under which any of such employees is now obligated. To Celtrix's knowledge, no third party is conducting or planning to conduct any activity that would constitute an infringement of Celtrix's intellectual property rights. 2.9 LITIGATION. Celtrix is not engaged in, or a party to, or threatened with, any claim or legal action or other proceeding before any court, any arbitrator of any kind or any administrative agency, or any governmental investigation, which could have a material adverse effect on Celtrix's business, financial condition or results of operations, nor to Celtrix's knowledge does any basis for any claim or legal action or other proceeding or governmental investigation exist. There are no orders, rulings, decrees, judgments or stipulations to which Celtrix is a party by or with any court, arbitrator or administrative agency and to Celtrix's knowledge, there are no other such orders, rulings, decrees, judgments or stipulations affecting Celtrix's business, financial condition or results of operations. 2.10 CONSISTENT TERMS. No Units are being issued and sold at the Closing other than pursuant to the Agreement and if Celtrix shall enter into any other agreement, side letter or other understanding with any Purchaser listed on Exhibit A or any other purchaser containing additional or contrary undertakings or terms to those contained herein in connection with the issuance and sale of Units at the Closing, Celtrix shall make such undertakings or terms available to each other Purchaser. 2.11 SUBSIDIARIES. Celtrix has no subsidiaries and does not otherwise own or control, directly or indirectly, any equity interest in, or any security convertible into an equity interest in, any corporation, partnership, limited liability company, joint venture, association or other business entity. 2.12 UNDISCLOSED LIABILITIES. Celtrix does not have any debt, liability or obligation of any kind, whether accrued, absolute or otherwise, including, without limitation, any liability or obligation on account of taxes or any governmental charges or penalty, interest or fines, except -6- 11 liabilities reflected on the Financial Statements and liabilities incurred as a result of the transactions contemplated by this Agreement, including the costs associated with this transaction. 2.13 TITLE TO PROPERTIES. Celtrix has good and marketable title to all tangible property and assets set forth in its June 30, 1998 balance sheet and good title to all of its leasehold interests, in each case, free and clear of any and all liens, claims and encumbrances. 2.14 EMPLOYEE MATTERS. (a) Celtrix is not a party to any collective bargaining agreement, no collective bargaining agent has been certified as a representative of any of the employees of Celtrix, no representation campaign or election is now in progress with respect to any employee of Celtrix and there are no labor disputes, grievances, controversies, strikes or requests for union representation pending, or, to the knowledge of Celtrix, threatened, relating to or affecting the Business. To the knowledge of Celtrix, no event has occurred that could give rise to any such dispute, controversy, strike or request for representation. (b) Except as disclosed in the SEC Documents, there are no employee benefit plans, agreements or arrangements maintained by Celtrix, including, without limitation, (i) "employee benefit plans," within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"); (ii) affirmative action plans; (iii) current or deferred compensation, pension, profit sharing, vacation or severance plans or programs; or (iv) medical, hospital, accident, disability or death benefit plans (collectively, "Benefit Plans"). All the Benefit Plans are administered in accordance with, and are in material compliance with, all applicable laws and regulations. No default exists with respect to the obligations of Celtrix under any Benefit Plans. (c) All the Benefit Plans that are subject to ERISA have been administered in accordance with, and are in compliance with, the applicable provisions of ERISA. Each of Celtrix's Benefit Plans that is intended to meet the requirements of Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code") has been determined by the Internal Revenue Service to meet such requirements within the meaning of such provision. No Celtrix Benefit Plan is subject to Title IV of ERISA or Section 412 of the Code. Celtrix has not engaged in any nonexempt "prohibited transactions," as such term is defined in Section 4975 of the Code or Section 406 of ERISA, involving Celtrix Benefit Plans that would subject Celtrix to the penalty or tax imposed under Section 502(i) of ERISA or Section 4975 of the Code. Celtrix has not engaged in any transaction described in Section 4069 of ERISA within the last five years. Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) result in any payment (including, without limitation, severance, unemployment compensation or golden parachute) becoming due to any director or other employee of Celtrix, (ii) increase any benefits otherwise payable under any Benefit Plan or (iii) result in the acceleration of the time of payment or vesting of any such benefits to any extent. (d) No notice of a "reportable event," within the meaning of Section 4043 of ERISA for which the 30-day reporting requirement has not been waived, has been required to be -7- 12 filed for any Benefit Plan that is an "employee pension benefit plan" within the meaning of Section 3(2) of ERISA and that is intended to meet the requirements of Section 401(a) of the Code, or by any entity that is considered one employer with Celtrix under Section 4001 of ERISA or Section 414 of the Code (an "ERISA Affiliate"), within the 12-month period ending on the date hereof. Celtrix has not incurred any liability to the Pension Benefit Guaranty Corporation in respect of any Benefit Plan that remains unpaid. 2.15 TAXES. (a) As of the date hereof, Celtrix has filed all federal, state and local tax returns required to be filed by it, all of such returns were correct and complete as of the time of filing, and Celtrix has paid all taxes required to be paid by it. Celtrix has provided or made available to Purchasers copies of all federal, state and local income, franchise, excise, real and personal property and other tax returns and reports, including extensions, filed by Celtrix on or prior to the date hereof. As of the date hereof, Celtrix has not been subject to any tax audit. (b) Celtrix is not a party to, or bound by, or otherwise in any way obligated under, any tax sharing or similar agreement. 2.16 BROKERS. Except for the agreement with BioAsia dated _______, 1998, no broker or finder is entitled to any broker's or finder's fee or other commission in connection with the transactions contemplated by this Agreement as a result of arrangements made by or on behalf of Celtrix. 2.17 ENVIRONMENTAL MATTERS. (a) To the knowledge of Celtrix, no real property currently or formerly owned or operated by Celtrix is contaminated with any Hazardous Substances (as hereinafter defined). (b) Celtrix is not a party to any litigation or administrative proceeding nor, to the knowledge of Celtrix, is any litigation or administrative proceeding threatened against it, that, in either case, asserts or alleges that Celtrix (i) violated any Environmental Laws (as hereinafter defined); (ii) is required to clean up, remove or take remedial or other response action due to the disposal, deposit, discharge, leak or other release of any Hazardous Substances; or (iii) is required to pay all or a portion of the cost of any past, present or future cleanup, removal or remedial or other action that arises out of or is related to the disposal, deposit, discharge, leak or other release of any Hazardous Substances. (c) To the knowledge of Celtrix, there are not now nor have there previously been tanks or other facilities on, under, or at any real property owned, leased, used or occupied by Celtrix containing materials that, if known to be present in soils or ground water, would require cleanup, removal or other remedial action under Environmental Laws. (d) To the knowledge of Celtrix, Celtrix is not subject to any judgment, order or citation related to or arising out of any Environmental Laws and has not been named or listed -8- 13 as a potentially responsible party by any governmental agency in a matter related to or arising out of any Environmental Laws. (e) For purposes of this Agreement, (i) the term "Environmental Law" means any federal, state or local law (including statutes, regulations, ordinances, codes, rules, judicial opinions and other governmental restrictions and requirements), relating to the discharge of air pollutants, water pollutants, noise, odors or process waste water, or otherwise relating to the environment or hazardous or toxic substances; and (ii) the term "Hazardous Substance" means any toxic or hazardous substance that is regulated by or under authority of any Environmental Law, including, without limitation, any petroleum products, asbestos or polychlorinated biphenyls. 2.18 USE OF PROCEEDS. The proceeds of the transactions contemplated by this Agreement will be used in accordance with Schedule 2.18 hereto. 2.19 COMPLIANCE WITH APPLICABLE LAWS. Celtrix holds all material permits, licenses, variances, exemptions, orders and approvals necessary to own, lease or operate all of the assets and properties of Celtrix, as appropriate, and to carry on its business as now conducted and contemplated (the "Permits"). Celtrix is in material compliance with all applicable laws, ordinances and regulations and the terms of the Permits. 2.20 DISCLOSURE. To Celtrix's knowledge, it has disclosed to Purchasers all material information regarding Celtrix requested by Purchasers. 2.21 YEAR 2000 COMPLIANCE. All software utilized by Celtrix in its business and all equipment and all systems utilized by Celtrix having embedded microchips will properly execute across and within multiple century dates so that when the years 2000 and beyond are introduced, such software and systems will neither fail nor produce incorrect results relating to date or any other processing. Celtrix has undertaken efforts to confirm that all third parties with whom it has material relationships, including but not limited to vendors and customers, will not have material disruptions in their software or systems related to the year 2000. SECTION 3 REPRESENTATIONS AND WARRANTIES OF PURCHASERS Each Purchaser hereby separately represents and warrants, severally and not jointly, to Celtrix as of the Closing date as follows: 3.1 INVESTMENT EXPERIENCE. Such Purchaser is an "accredited investor" as defined in Rule 501(a) under the Securities Act. Purchaser is aware of Celtrix's business affairs and financial condition and has had access to and has acquired sufficient information about Celtrix to reach an informed and knowledgeable decision to acquire the Units (and the Warrant Shares issuable upon exercise of the Warrants). Purchaser has such business and financial experience as is required to give it the capacity to protect its own interests in connection with the purchase of the Units. -9- 14 3.2 INVESTMENT INTENT. Purchaser is purchasing the Units (and the Warrant Shares upon exercise of the Warrants) for investment for its own account only and not with a view to, or for resale in connection with, any "distribution" thereof within the meaning of the Securities Act. Purchaser understands that the Shares, the Warrants and the Warrant Shares have not been registered under the Securities Act or registered or qualified under any state securities law in reliance on specific exemptions therefrom, which exemptions may depend upon, among other things, the bona fide nature of Purchaser's investment intent as expressed herein. 3.3 REGISTRATION OR EXEMPTION REQUIREMENTS. Purchaser further acknowledges and understands that the Shares, the Warrants and the Warrant Shares must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Purchaser understands that the certificate(s) evidencing the Shares will be imprinted with a legend that prohibits the transfer of the Shares unless (i) they are registered or such registration is not required, and (ii) if the transfer is pursuant to an exemption from registration other than Rule 144 under the Securities Act, and, if Celtrix shall so request in writing, an opinion of counsel satisfactory to Celtrix is obtained to the effect that the transaction is so exempt. In addition, Purchaser will refrain from selling, transferring or otherwise disposing of any Shares, the Warrants or the Warrant Shares, or any interest therein, unless the same are registered under the Securities Act or applicable state securities or blue sky laws, or an exemption therefrom is applicable. 3.4 NO LEGAL, TAX OR INVESTMENT ADVICE. Purchaser understands that nothing in this Agreement or any other materials presented to Purchaser in connection with the purchase and sale of the Units (and the Warrant Shares issuable upon exercise of the Warrants) constitutes legal, tax or investment advice. Purchaser has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with its purchase of the Units (and the Warrant Shares issuable upon exercise of the Warrants). SECTION 4 CONDITIONS TO OBLIGATIONS OF PURCHASERS Each Purchaser's obligation to purchase the Units at the Closing is subject to the fulfillment on or prior to the Closing Date of the following conditions, unless otherwise waived by such Purchaser: 4.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and warranties made by Celtrix in Section 2 hereof shall be true and correct when made, and shall be true and correct on the Closing Date with the same force and effect as if they had been made on and as of said date. 4.2 COVENANTS. All covenants, agreements and conditions contained in this Agreement to be performed by Celtrix on or prior to the Closing Date shall have been performed or complied with in all material respects. -10- 15 4.3 OPINION OF COMPANY'S COUNSEL. Purchaser shall have received from Venture Law Group, counsel to Celtrix, an opinion addressed to it, dated the Closing Date, in form and substance satisfactory to Purchaser. 4.4 NO ORDER PENDING. There shall not then be in effect any order enjoining or restraining the transactions contemplated by this Agreement. 4.5 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 Units (except as otherwise provided in this Agreement). 4.6 COMPLIANCE CERTIFICATE. Celtrix shall have delivered to Purchasers a certificate executed on behalf of Celtrix by a duly authorized officer of Celtrix, dated the Closing Date, and certifying to the fulfillment of the conditions specified in Sections 4.1 and 4.2. Notwithstanding the preceding sentence, Celtrix shall not be required to deliver such a certificate if the Closing Date and the execution date of this Agreement are the same. 4.7 NO MATERIAL ADVERSE CHANGE. There shall have been no material adverse change between the date of this Agreement and the Closing Date in the financial condition, business or affairs of Celtrix. 4.8 GOVERNMENTAL APPROVALS. All consents from governmental agencies required to consummate the transaction contemplated hereby shall have been obtained. 4.9 CLOSING BID PRICE OF CELTRIX COMMON STOCK. The closing bid price of Celtrix Common Stock as reported on the Nasdaq National Market on the trading day preceding the Closing Date shall not be less than $0.4375 per share. Any Purchaser who elects not to proceed with the transaction due to such condition not being complied with will have no further obligation or liability to Celtrix arising from or related to this Agreement. 4.10 DELIVERIES. Purchasers shall receive from Celtrix (i) certificates of Good Standing for Celtrix issued by the Secretaries of State of the States of Delaware, California, and all other jurisdictions in which Celtrix is required to be authorized to conduct business as a foreign corporation; (ii) a copy of the resolutions of the Board of Directors of Celtrix authorizing the execution, delivery and performance of this Agreement, the Warrant and the transactions contemplated hereby and thereby certified by the Secretary of Celtrix as being true and correct copies of such resolutions and in full force and effect as of the date of the Closing; (iii) stock certificates evidencing the shares of Celtrix Common Stock purchased hereunder and (iv) the Warrant. -11- 16 SECTION 5 CONDITIONS TO OBLIGATIONS OF CELTRIX Celtrix's obligation to sell and issue the Units at the Closing is subject to the fulfillment on or prior to the Closing Date of the following conditions by each of the Purchasers, unless otherwise waived by Celtrix: 5.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and warranties made by each Purchaser in Section 3 hereof shall be true and correct in all material respects when made, and shall be true and correct in all material respects on the Closing Date with the same force and effect as if they had been made on and as of said date. 5.2 COVENANTS. All covenants, agreements and conditions contained in this Agreement to be performed by each Purchaser on or prior to the Closing Date shall have been performed or complied with in all material respects. 5.3 NO ORDER PENDING. There shall not then be in effect any order enjoining or restraining the transactions contemplated by this Agreement. 5.4 NO LAW PROHIBITING OR RESTRICTING SUCH SALE. There shall not be in effect any law, rule or regulation prohibiting or restricting such sale, or requiring any consent or approval of any person which shall not have been obtained to issue the Units (except as otherwise provided in this Agreement). 5.5 GOVERNMENTAL APPROVALS. All consents from governmental agencies required to consummate the transaction contemplated hereby shall have been obtained. SECTION 6 COVENANTS OF CELTRIX Until the termination of this Agreement in accordance with Section 9.1 hereof or the particular covenant, as the case may be: 6.1 WARRANTS. Celtrix will comply with the provisions of the Warrants contained in the Form of Warrant attached as Exhibit B hereto. 6.2 REGISTRATION REQUIREMENTS. (a) As soon as reasonably practicable and in any event no later than 30 days after the Closing, Celtrix shall prepare and file a registration statement ("Registration Statement") with the SEC under the Securities Act to register the resale of the Shares and the Warrant Shares ( "Registrable Securities") and thereafter shall use its best efforts to secure the effectiveness of such registration statement, such effectiveness to be declared no later than 90 days after the Closing. In the event that Celtrix fails to file the Registration Statement with the SEC within 30 days after the Closing or the SEC does not declare the Registration Statement -12- 17 effective within 90 days after the Closing, then Celtrix will pay to the Purchasers by wire transfer or certified check or cashier's check sent to the Purchasers' designated account or representative, as the case may be, an amount equal to 2% of the aggregate Purchase Price hereunder for each month that the effectiveness of the Registration Statement is delayed. Such amount, however, shall be pro-rated for any month in which the Registration Statement is declared effective. (b) Celtrix shall pay all Registration Expenses (as defined below) in connection with any registration, qualification or compliance hereunder, and each holder of Registrable Securities ("Holder") shall pay all Selling Expenses (as defined below) and other expenses that are not Registration Expenses relating to the Registrable Securities resold by such Holder. "Registration Expenses" shall mean all expenses, except for Selling Expenses, incurred by Celtrix in complying with the registration provisions herein described, including, without limitation, all registration, qualification and filing fees, printing expenses, escrow fees, fees and disbursements of counsel for Celtrix, blue sky fees and expenses and the expense of any special audits incident to or required by any such registration. "Selling Expenses" shall mean all selling commissions, underwriting fees and stock transfer taxes applicable to the Registrable Securities and all fees and disbursements of counsel for any Holder. (c) In the case of any registration effected by Celtrix pursuant to these registration provisions, Celtrix will use its best efforts to: (i) keep such registration effective until the earlier of (A) two (2) years after the Closing Date or (B) such date as Celtrix shall be satisfied that the then-current Holders may sell all of their Registrable Securities then outstanding within a three (3) month period; (ii) 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 Securities Act with respect to the disposition of all securities covered by such Registration Statement; (iii) furnish such number of prospectuses and other documents incident thereto, including any amendment of or supplement to the prospectus, as a Holder from time to time may reasonably request; (iv) 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 Celtrix 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; (v) cause all such Registrable Securities registered as described herein to be listed on each securities exchange and quoted on each quotation service on which similar securities issued by Celtrix are then listed or quoted; (vi) provide a transfer agent and registrar for all Registrable Securities registered pursuant to such Registration Statement and a CUSIP number for all Registrable Securities; and (vii) otherwise use its best efforts to comply with all applicable rules and regulations of the SEC, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months, but not more than eighteen months, beginning with the first month after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act. (d) When a Holder is entitled to sell and gives notice of its intent to sell pursuant to the Registration Statement, Celtrix shall, within three (3) trading days (subject to -13- 18 Section 7.1), furnish to such Holder a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the Holders of such shares, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading or incomplete in the light of the circumstances then existing. (e) The right to sell Registrable Securities pursuant to the Registration Statement described herein will automatically be assigned to each transferee of Registrable Securities. In the event that it is necessary, in order to permit a Holder to sell Registrable Securities pursuant to Celtrix's Registration Statement, to amend the Registration Statement to name such Holder, such Holder shall, upon written notice to Celtrix, be entitled to have Celtrix make such amendment as soon as reasonably practicable. Notwithstanding the above provisions relating to Registration Expenses, in the event that such an amendment is requested, the Holder shall, at the request of Celtrix, be obligated to reimburse Celtrix for reasonable Registration Expenses incurred by it in connection with such amendment. (f) With a view to making available to the holders the benefits of Rule 144 promulgated under the Securities Act and any other rule or regulation of the SEC that may at any time permit a Holder to sell Registrable Securities to the public without registration or pursuant to a registration on Form S-3, Celtrix hereby covenants and agrees to: (i) make and keep public information available, as those terms are understood and defined in Rule 144, at all times after the closing; (ii) file with the SEC in a timely manner all reports and other documents required of Celtrix under the Securities Act and Exchange Act; and (iii) furnish to any Holder, as long as the Holder owns any Registrable Securities forthwith upon request, (A) a written statement by Celtrix that it has complied with the reporting requirements of Rule 144, the Securities Act and the Exchange Act, (B) a copy of the most recent annual or quarterly report of Celtrix, and (C) such other information as may be reasonably requested in order to avail any Holder of any rule or regulation of the SEC that permits the selling of any such Registrable Securities without registration or pursuant to such Form S-3. (g) INDEMNIFICATION. (i) To the extent permitted by law, Celtrix will indemnify and hold harmless each Holder, any underwriter (as defined in the Act) for such Holder, its officers, directors, shareholders or partners and each person, if any, who controls such Holder or underwriter within the meaning of the Act or the Securities Exchange Act of 1934, as amended (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"): (A) 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, (B) 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 (C) any violation or alleged violation by Celtrix of the Act, the Exchange Act, -14- 19 any state securities law or any rule or regulation promulgated under the Act, the Exchange Act or any state securities law; and Celtrix 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 Section 6.2(g)(i) 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 Celtrix (which consent shall not be unreasonably withheld), nor shall Celtrix 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. (ii) To the extent permitted by law, each selling Holder will indemnify and hold harmless Celtrix, each of its directors, each of its officers who has signed the Registration Statement, each person, if any, who controls Celtrix 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 6.2(g)(ii), in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this subsection 6.2(g)(ii) 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 6.2(g)(ii) exceed the net proceeds from the offering received by such Holder, except in the case of willful fraud by such Holder. (iii) Promptly after receipt by an indemnified party under this Section 6.2(g) 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 6.2(g), 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 -15- 20 written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 6.2(g), 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 6.2(g). (iv) If the indemnification provided for in this Section 6.2(g) 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 6.2(g)(iv) 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. (v) The obligations of Celtrix and Holders under this Section 6.2(g) shall survive the completion of any offering of Registrable Securities in a Registration Statement under this Section 6.2(g), and otherwise. 6.3 FINANCIAL INFORMATION. Until such time as the Purchasers hold collectively less than 10% of the outstanding voting stock of Celtrix, Celtrix shall deliver to the Purchasers' designated representative, BioAsia Investments, LLC (Frank Kung, General Partner) (the "Purchasers' Representative" or "BioAsia") within thirty (30) days after the end of each month, (a) a balance sheet of Celtrix as of the end of such month and (b) a statement of income of the Company as of the end of such month. All such financial statements to be delivered under this Section shall be in accordance with the books and records of Celtrix and shall have been prepared in accordance with generally accepted accounting principles, except that such monthly financial statements may be subject to normally recurring year-end adjustments and may delete any notes. 6.4 BUDGET. Attached hereto as Exhibit D is a copy of Celtrix's Operating Plan for its current fiscal year as previously provided to Purchaser, including its budget for the year. Celtrix agrees that it will not materially deviate from the terms outlined in such Operating Plan unless approved by unanimous consent of its Board of Directors. Furthermore, Celtrix shall afford Purchasers' Representative the opportunity to discuss its views on such proposed deviation with the Celtrix Board of Directors prior to implementing the proposed deviation. Additionally, before the end of each fiscal year of Celtrix, Celtrix shall deliver to Purchasers' Representative a -16- 21 budget for such fiscal year, including projected balance sheets and statements of income of Celtrix for each quarter of such fiscal year. 6.5 ACCESS. Celtrix shall allow Purchasers' Representative, upon reasonable prior notice and during regular business hours no more than once per quarter (a) full and free access to all books, records and properties of Celtrix, for any reasonable purpose relating to Purchasers investment in Celtrix and (b) the opportunity to interview the directors, officers and key employees of Celtrix regarding the affairs of Celtrix. 6.6 BOARD OF DIRECTORS. Celtrix shall deliver to Purchasers' Representative prior written notice of all meetings of the Board of Directors at the same time such notices are distributed to the Directors and a copy of the package distributed to the Directors in connection with the meeting. Purchasers may designate a single representative to attend meetings of Celtrix's Board of Directors as a non-voting observer. 6.7 PROCEEDINGS. Promptly after obtaining knowledge thereof, Celtrix shall notify each Purchaser of (a) the commencement of any material action, suit, claim, investigation or other proceeding by or before any court, governmental authority or arbitrator against Celtrix, (b) any material judgment, decree, injunction, or order of any court, governmental authority or arbitrator entered against, or any settlement agreement entered into by, Celtrix. 6.8 INSURANCE. Celtrix shall maintain such insurance with coverage and in amounts as shall be customary for Celtrix's industry and reasonable in light of the Celtrix's financial condition and stage of business development, including without limitation liability and extended coverage insurance and workers' compensation insurance. 6.9 PROPRIETARY INFORMATION AGREEMENTS. All employees and consultants of Celtrix who have access to confidential information as part of their employment or engagement have already executed or shall be required to execute and deliver a Proprietary Information Agreement in such form as may be approved by the Board of Directors of the Company. 6.10 TAXES AND OTHER LIABILITIES. Celtrix shall make reasonable efforts to pay and discharge, before the same become delinquent and before penalties accrue thereon (all subject to the disclosures concerning taxes contained elsewhere in this Agreement), all taxes, assessments and governmental charges upon or against it or any of its properties, and all its other material liabilities at any time existing, except to the extent and so long as (a) the same are being contested in good faith and by appropriate proceedings in such manner as not to cause any materially adverse effect upon the financial condition of Celtrix or the loss of any right of redemption from any sale thereunder; and (b) Celtrix shall have set aside on its books adequate reserves (segregated to the extent required by generally accepted accounting principles) with respect thereto, all subject to decisions of the Board of Directors otherwise and/or to the financial condition of Celtrix and the business judgment of management at the relevant point in time. 6.11 CORPORATE EXISTENCE. Celtrix shall use best efforts to maintain its corporate existence, assets and foreign qualifications in all necessary jurisdictions at all necessary points in time. -17- 22 6.12 BUSINESS. Celtrix shall not change its current line of business, or enter into any line of business other than its current line of business, or make any material change in its current line of business, except as shall be approved by its Board of Directors. Furthermore, Celtrix shall afford Purchaser's Representative the opportunity to discuss its views on such proposed change with the Celtrix Board of Directors prior to implementing the proposed change. 6.13 COMPLIANCE WITH LAWS. Celtrix shall comply with all material laws and regulations applicable to it in all material respects. 6.14 INDEMNIFICATION. (a) Celtrix shall indemnify and hold Purchasers and their respective partners, stockholders, directors, officers and employees (collectively, the "Indemnified Parties") harmless from and against, and agree to promptly defend each of the Indemnified Parties from and reimburse each of the Indemnified Parties for, any and all losses, damages, costs, expenses, liabilities, obligations and claims of any kind (including, without limitation, reasonable attorney fees (collectively, a "Loss") that any of the Indemnified Parties may at any time suffer or incur, or become subject to, as a result or in connection with: (i) any breach or inaccuracy of any representations and warranties made by Celtrix in this Agreement, or in any certificate or affidavit delivered by Celtrix at the Closing in accordance with the provisions hereof; (ii) any failure by Celtrix to fulfill its obligations hereunder or under the Warrant; and (iii) any suit, action or other proceeding arising out of, or in any way related to, any of the matters referred to in this Section 6.14. (b) An Indemnified Party shall notify Celtrix in writing of any claim or demand (a "Claim") that the Indemnified Party has determined has given or could give rise to a right of indemnification under this Agreement. Subject to Celtrix's right to defend in good faith third party claims as hereinafter provided, Celtrix shall satisfy its obligations under this Section 6.14 within 60 days after the receipt of written notice thereof from the Indemnified Party. (c) If the Indemnified Party shall notify Celtrix of any Claim pursuant to Section 6.14(a) hereof, and if such Claim relates to a Claim asserted by a third party against the Indemnified Party that Celtrix acknowledges is a Claim for which it must indemnify or hold harmless the Indemnified Party under Section 6.14(a), Celtrix shall have the right, at its sole cost and expense, to employ counsel of its own choosing reasonably satisfactory to the Indemnified Party to defend any such Claim asserted against the Indemnified Party; provided, however, that if the Indemnified Party (i) reasonably believes that its interests with respect to a Claim (or any material portion thereof) are in conflict with the interests of Celtrix with respect to such Claim (or portion thereof), and (ii) promptly notifies Celtrix, in writing, of the nature of such conflict, then, subject to the provisions of the following sentence, the Indemnified Party shall be entitled to choose, at the sole cost and expense of Celtrix, independent counsel to defend such Claim. In -18- 23 the event that Celtrix does not agree that the Indemnified Party's interests with respect to any such Claim are in conflict with the interests of Celtrix, Celtrix shall so notify the Indemnified Party and the parties agree that they shall each appoint a representative to meet within ten (10) business days after Celtrix's notification to the Indemnified Party and such representatives will discuss the issue and diligently work to resolve their differing views. The Indemnified Party shall have the right to participate in the defense of any such Claim at its own expense (except to the extent provided in the foregoing sentence), but Celtrix shall retain control over such litigation (except as provided in the foregoing sentence). Celtrix shall notify the Indemnified Party in writing, as promptly as possible (but in any case before the due date for the answer or response to a claim) after the date of the notice of claim given by the Indemnified Party to Celtrix under section 6.14(b) hereof of its election to defend in good faith any such third party Claim. So long as Celtrix is defending in good faith any such Claim asserted by a third party against the Indemnified Party, the Indemnified Party shall not settle or compromise such Claim without the prior written consent of Celtrix. The Indemnified Party shall cooperate with Celtrix in connection with any such defense and shall make available to Celtrix or its agents all records and other materials in the Indemnified Party's possession reasonably required by it for its use in contesting any third party Claim; provided, however, that Celtrix shall have agreed, in writing, to keep such records and other materials confidential except to the extent required for defense of the relevant Claim. Whether or not Celtrix elects to defend any such Claim, the Indemnified Party shall have no obligation to do so. 6.15 MATERIAL EVENTS. If the Purchasers' Representative is absent from any meeting of the Board of Directors at which any of the following events is announced, discussed or approved, Celtrix shall promptly notify Purchaser's Representative of the same: (a) the execution of any material agreement to which Celtrix is a party, (b) the termination of any material agreement to which Celtrix is a party, (c) the resignation, termination or hiring of any key employee or any material restructuring of Celtrix's labor force, (d) any material labor dispute, (e) any material developments related to Celtrix's intellectual property, (f) the occurrence of any other event that would have a material effect upon Celtrix and/or its business, operations, prospects or financial condition, and (g) any issuance of Celtrix Common Stock, Preferred Stock, securities convertible into Celtrix Common Stock or Preferred Stock, or the granting of any rights to acquire the same. 6.16 STOCKHOLDER RATIFICATION. Celtrix agrees that in connection with its next annual meeting of stockholders (or in connection with any special meeting of stockholders that may occur prior to such annual meeting date), it shall solicit stockholder ratification of this Agreement and of the transactions contemplated hereunder. SECTION 7 COVENANTS OF PURCHASERS 7.1 NOTICE TO COMPANY OF PROPOSED SALE AND RIGHT OF COMPANY TO SUSPEND USE OF REGISTRATION STATEMENT. If any Purchaser (as defined in Section 6.2 above) shall propose to sell any Registrable Securities pursuant to the Registration Statement, it shall notify Celtrix of its intent to do so at least three (3) full trading days prior to such sale, and the provision of such -19- 24 notice to Celtrix shall conclusively be deemed to establish an agreement by such Purchaser to comply with the registration provisions herein described. Unless otherwise specified in such notice, such notice shall be deemed to constitute a representation that any information previously supplied by such Purchaser is accurate as of the date of such notice. At any time within such three (3) trading-day period, Celtrix may refuse to permit the Purchaser to resell any Registrable Securities pursuant to the Registration Statement; provided, however, that in order to exercise this right, Celtrix must deliver a certificate in writing to the Purchaser to the effect that a delay in such sale is necessary because a sale pursuant to such Registration Statement in its then-current form could constitute a violation of the federal securities laws. In no event shall such delay exceed ten (10) trading days; provided, however, that if, prior to the expiration of such ten (10) trading day period, Celtrix delivers a certificate in writing to the Purchaser to the effect that a further delay in such sale beyond such ten (10) trading day period is necessary because the disclosures required to be made for a sale pursuant to such Registration Statement to be in compliance with federal securities laws would be seriously detrimental to Celtrix and its stockholders, Celtrix may refuse to permit such Purchaser to resell any Registrable Securities pursuant to the registration statement for an additional period not to exceed ten (10) trading days. Celtrix may not utilize this right more than once in any three (3) month period. 7.2 RESTRICTIONS ON SHORT-SALES. No Purchaser shall engage in any short-sales of Celtrix's Common Stock prior to the effectiveness of the Registration Statement, except to the extent that any such short-sale is fully covered by freely tradable shares of Common Stock of Celtrix. SECTION 8 RESTRICTIONS ON TRANSFERABILITY OF SHARES; COMPLIANCE WITH SECURITIES ACT 8.1 RESTRICTIONS ON TRANSFERABILITY. The Shares, Warrants and Warrant Shares shall not be transferable in the absence of a registration under the Securities Act or an exemption therefrom or in the absence of compliance with any term of this Agreement. Celtrix shall be entitled to give stop transfer instructions to the transfer agent with respect to the Shares in order to enforce the foregoing restrictions. 8.2 RESTRICTIVE LEGEND. Each certificate representing Shares, Warrants and Warrant Shares shall bear substantially the following legends (in addition to any legends required under applicable securities laws): THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF REGISTRATION UNDER THE SECURITIES ACT OF 1933 OR AN EXEMPTION THEREFROM. UNTIL __________, 2000 THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD OR TRANSFERRED UNLESS PRIOR NOTICE SHALL HAVE BEEN GIVEN TO CELTRIX. -20- 25 The legend contained in this Section 8.2 will be removed from a certificate if (i) Celtrix receives an opinion of counsel reasonably satisfactory to Celtrix that the Shares or Warrant Shares represented by such certificates are available for resale pursuant to Rule 144 under the Securities Act, or (ii) in Celtrix's opinion the Shares or Warrant Shares represented by such certificates are available for resale pursuant to Rule 144(k) under the Securities Act, or (iii) such Shares or Warrant Shares are sold pursuant to an effective registration statement with the SEC. SECTION 9 MISCELLANEOUS 9.1 TERMINATION OF AGREEMENT. (a) This Agreement may be terminated at any time prior to the Effective Time by Celtrix or any Purchaser if there has been a material breach of any representation, warranty, covenant or agreement on the part of the other party set forth in this agreement, which breach shall not have been cured, in the case of a representation or warranty, prior to the Closing or, in the case of a covenant or agreement, within thirty (30) calendar days following receipt by the breaching party of written notice of such breach from the other party. (b) From and after the termination of this Agreement, the covenants, obligations and agreements of the parties set forth herein shall be of no further force or effect and the parties shall be under no further obligation with respect thereto. 9.2 BEST EFFORTS. Celtrix and each Purchaser shall use its best efforts to take all actions required under any law, rule or regulation adopted subsequent to the date hereof in order that Celtrix may sell the Units to Purchasers and Purchasers may purchase the Units, and to ensure that the conditions to a Closing set forth herein are satisfied on or before the scheduled date of such Closing. 9.3 GOVERNING LAW. This Agreement shall be governed in all respects by the laws of the State of California as applied to contracts entered into solely between residents of, and to be performed entirely within, such state. 9.4 SURVIVAL. The representations and warranties, in Sections 2 and 3 of this Agreement shall survive any investigation made by any Purchaser or Celtrix and the Closing; provided that such representations and warranties shall not be construed so as to constitute representations and warranties concerning circumstances existing after the date of this Agreement. 9.5 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. This Agreement may not be assigned by a party without the prior written consent of the other party. 9.6 ENTIRE AGREEMENT; AMENDMENT. This Agreement, the Warrants and the other documents delivered pursuant hereto constitute the full and entire understanding and agreement -21- 26 between the parties with regard to the subject matter hereof and thereof and supersedes all prior agreements and understandings among the parties relating to the subject matter hereof. With the exception of Section 6 hereof, the terms of this Agreement may be waived or amended with the written consent of Celtrix and each Purchaser. With respect to Section 6 hereof, with the written consent of Celtrix and the record holders of more than fifty percent (50%) of the Registrable Securities then outstanding the terms of this Agreement may be waived and amended and any such amendment or waiver shall be binding upon Celtrix and all holders of Shares. 9.7 NOTICES AND DATES. Any notice or other communication given under this Agreement shall be sufficient if in writing and sent by registered or certified mail, domestic or international courier, or facsimile, return receipt requested, postage or courier charges prepaid, to a party at its address set forth below (or at such other address as shall be designated for such purpose by such party in a written notice to the other party hereto): (a) if to Celtrix, to: Celtrix Pharmaceuticals, Inc. 3055 Patrick Henry Drive Santa Clara, CA 95052-8203 Attention: Chief Financial Officer with a copy to: Edmund S. Ruffin, Jr. Venture Law Group 2800 Sand Hill Road Menlo Park, CA 94025 (b) if to Purchasers, to the respective address set forth on the attached Schedule of Purchasers with a copy to: Ira S. Nordlicht Nordlicht & Hand Olympic Tower 645 Fifth Avenue New York, NY 10022 All such notices and communications shall be effective one (1) trading day after being sent by courier or by facsimile with confirmation of receipt or five (5) trading days after being sent by the other approved methods. -22- 27 9.8 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 restriction of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. 9.9 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. 9.10 COUNTERPARTS. This Agreement may be executed in counterparts, and each such counterpart shall be deemed an original for all purposes, but such counterparts shall together constitute one and the same instrument. 9.11 EXPENSES. Celtrix and each Purchaser shall bear its own expenses incurred on its behalf with respect to this Agreement and the transactions contemplated hereby, except that if the Closing occurs, the Company shall reimburse the Purchasers for documented, itemized and reasonable fees and expenses incurred by them not to exceed $50,000 in the aggregate. [SIGNATURE PAGE FOLLOWS] -23- 28 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective authorized officers as of the date first above mentioned. CELTRIX PHARMACEUTICALS, INC. By: /s/ Andreas Sommer ----------------------------- Title: President & CEO ----------------------------- PURCHASERS Name: /s/ Frank Kung ----------------------------- By: Frank Kung ----------------------------- Title: General Partner ----------------------------- Biotechnology Development Fund, L.P. ----------------------------- Name: /s/ Frank Kung ----------------------------- By: Frank Kung ----------------------------- Title: General Partner ----------------------------- Biotechnology Development Fund, III L.P. ----------------------------- Name: /s/ Joseph W K Leung ----------------------------- By: For and on behalf of Veron International Limited (Incorporated in BVI) ----------------------------- Title: Director ----------------------------- Name: LEE WEI CHEN ----------------------------- By: /s/ Wei-Chen Lee ----------------------------- Title: ----------------------------- Name: For and on behalf of Lion International Management Limited as sole Director of Hofung Holdings Limited ----------------------------- By: /s/ [R] Boswell ----------------------------- Title: Authorized Signatory ----------------------------- Name: /s/ Jesse Chen ----------------------------- /s/ Wanpyag Chuang ----------------------------- By: Jesse Chen & Wanpyag Chuang ----------------------------- Title: ----------------------------- 29 Name: /s/ [J] Leung ----------------------------- By: Nai-ping Leung ----------------------------- Title: ----------------------------- Name: WEN-CHEN YUAN ----------------------------- By: /s/ Wen-Chen Yuan ----------------------------- Title: ----------------------------- 30 EXHIBIT A SCHEDULE OF PURCHASERS
# SHARES # WARRANT PURCHASER COMMON STOCK SHARES PURCHASE PRICE --------- ------------ ----------- -------------- Biotechnology Development Fund, L.P. 500,000 750,000 $250,000 Frank Kung, General Partner 575 High Street Suite 201 Palo Alto, CA 94301 Biotechnology Development Fund, III 1,000,000 1,500,000 $500,000 L.P. Frank Kung, General Partner 575 Hight Street Suite 201 Palo Alto, CA 94301 Veron International, Ltd. 940,000 1,410,000 $470,000 Chinachem Golden Plaza 77 Mody Road Tsin Sha Tsui East Kowloon, Hong Kong Attn: W.K. Leung Lee Wei Chen 940,000 1,410,000 $470,000 c/o Fu Sheng Industrial Co., Ltd. 172 Nanking East Road, Sec. 2 Taipei 104, Taiwan R.O.C. Attn: Shubbin King Hofung Holdings Limited. 380,000 570,000 $190,000 20 F East Town Bldg. 41 Lockard Rd. Wanchai, Hong Kong Attn: Robert Ho Wanpyng Chuang and Jesse Chen 100,000 150,000 $50,000 1608 Pebble Beach Ct. Milpitas, CA 95035 Nai-Ping Leung 60,000 90,000 $30,000 95A, Hill Road 1/F Western District Hong Kong
31
Wen-Chen Yuan 80,000 120,000 $40,000 8/F 33 One hundred fifty first Avenue Fourth District Ren-ai Street Taipei, R.O.C. ----------- ----------- ---------- Total 4,000,000 6,000,000 $2,000,000
EX-23.1 5 CONSENT OF ERNST & YOUNG, INDEPENDENT AUDITORS 1 EXHIBIT 23.1 CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" in Amendment No. 1 to the Registration Statement (Form S-3, No. 333-61873) and the related Prospectus of Celtrix Pharmaceuticals, Inc. for the registration of 10,075,000 shares of its common stock and to the incorporation by reference therein of our report dated April 24, 1998, with respect to the consolidated financial statements of Celtrix Pharmaceuticals, Inc. included in the Annual Report (Form 10-K) for the year ended March 31, 1998, filed with the Securities and Exchange Commission. /s/ Ernst & Young LLP Palo Alto, California December 11, 1998 -----END PRIVACY-ENHANCED MESSAGE-----