-----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, Nomq+ESkHw2opEGtF8vHJJ+Wr9HomnFqHMUeMdj5MsLHtXZDX5iLjOpCakn9oZj5 8d4irDfFFdmTZlWQsoXg7g== 0000891618-97-002377.txt : 19970520 0000891618-97-002377.hdr.sgml : 19970520 ACCESSION NUMBER: 0000891618-97-002377 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19970516 SROS: NASD 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 SEC ACT: 1933 Act SEC FILE NUMBER: 333-27263 FILM NUMBER: 97610399 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 1 FORM S-3 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 16, 1997 REGISTRATION NO. 333-_____ - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------- 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 OFFERING PRICE (1) REGISTRATION FEE - ------------------------------------------------------------------------------------------------------------------------------ Common Stock, par value $0.01 8,582,810 $2.31 $19,826,291 $6,008 ==============================================================================================================================
(1) Estimated solely for the purpose of computing the amount of the registration fee based on the average of the high and low price of the Common Stock as reported on the Nasdaq National Market on May 13, 1997 pursuant to Rule 457(c). 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 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION, DATED MAY 16, 1997 CELTRIX PHARMACEUTICALS, INC. 8,582,810 SHARES COMMON STOCK ----------------------- THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" ON PAGE 4 OF THIS PROSPECTUS FOR INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS. ----------------------- All references herein to "Celtrix" or the "Company" mean Celtrix Pharmaceuticals, Inc. unless otherwise indicated by the context. The 8,582,810 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 are issuable upon exercise of warrants issued) to the Selling Stockholders in connection with a private placement of Company Common Stock and warrants to purchase Common Stock (the "Warrants") on April 1, 1997 (the "Private Placement"). 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 May 15, 1997, the last sale price of the Company's Common Stock on the Nasdaq National Market was $2.25 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.
=================================================================================================================== UNDERWRITING PROCEEDS TO PRICE TO DISCOUNTS AND SELLING STOCKHOLDERS PUBLIC COMMISSIONS(1) SHAREHOLDERS(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 $611,008 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 May 16, 1997 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 May 14, 1997, May 21, 1996 and May 29, 1996. 2. The Company's Annual Report on Form 10-K for the year ended March 31, 1996. 3. The Company's definitive Proxy Statement dated July 17, 1996, filed in connection with the Company's August 27, 1996 Annual Meeting of Stockholders. 4. The Company's Quarterly Reports on Form 10-Q for the quarters ended June 30, 1996, September 30, 1996 and December 31, 1996. 4 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 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. -2- 5 THE COMPANY Celtrix Pharmaceuticals, Inc. is a biopharmaceutical company developing novel therapeutics for the treatment of seriously debilitating, degenerative conditions primarily associated with severe trauma, chronic diseases or aging. The Company's programs are focused on the use of SomatoKine(R), a novel IGF-BP3 complex, to treat destructive metabolic processes (catabolism) in acute indications such as major surgery and traumatic injury. Potential chronic indications could include osteoporosis and wasting conditions associated with cancer and AIDS. The Company's development focus is on SomatoKine, the recombinant equivalent of the naturally occurring complex formed by the anabolic hormone insulin-like growth factor-1 (IGF-I) and its major binding protein, BP3, which shows potential as a hormone replacement therapy for patients suffering from severe physical trauma and serious illness. IGF-I, a key anabolic hormone, is known to play a major role in diverse biological processes, including muscle and bone formation, and tissue repair. The Company initiated Phase II clinical feasibility studies in January 1997 for the treatment of hip fracture surgery among the elderly. Clinical findings will guide expansion into a full Phase II clinical study. Phase II clinical feasibility studies for the treatment of severe burns are expected to be initiated in mid-1997. Celtrix manufactures GMP clinical-grade quantities of SomatoKine for use in clinical studies at its Santa Clara, California facility. The Company has a license agreement with The Green Cross Corporation, a Japanese pharmaceutical company, covering the development and commercialization of SomatoKine for the treatment of osteoporosis in Japan. The Company also has a product development, license and marketing agreement with Genzyme Corporation ("Genzyme") for TGF-beta-2, a potential pharmaceutical based on a naturally occurring compound which appears to play an important role in regulating healthy cell functions. The Company is not currently pursuing an in-house TGF-beta-2 program, other than as related to the Genzyme 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. -3- 6 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. 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, introduce and market its potential products. Much of the clinical development work for Celtrix's potential products remains to be completed. No assurance can be given that the Company's product development efforts will be successfully completed, that required regulatory approvals 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 March 31, 1997, the Company had an accumulated deficit of approximately $104 million, which includes non-recurring, non-cash charges of $17.3 million for acquired in-process research and development and licensing fees. 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. 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. Announcements concerning the Company or its competitors, including the results of testing (including 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. -4- 7 FUTURE CAPITAL REQUIREMENTS AND UNCERTAINTY OF FUTURE FUNDING The Company expects that its current cash, cash equivalents and short term investments, together with the proceeds of its recent private placement (approximately $13.3 million, net) will be sufficient to fund the Company's operations through mid-1998. The 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. The Company will need to raise substantial additional funds for these purposes. The Company may seek such additional funding through collaborative arrangements and through public or private financings, including equity financings. Any additional equity financing may be dilutive to shareholders, 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. The Company currently has no commitments for any additional financings, and there can be no assurance that any such financings will be available to the Company or that adequate funds for the Company's operations, whether from financial markets, collaborative or other arrangements with corporate partners or from other sources, will be available when needed or on terms attractive to the Company. The inability to obtain funds may require the Company to delay, scale back or eliminate some or all of its research and product development programs or to license third parties to commercialize products or technologies that the Company would otherwise seek to develop itself. 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, -5- 8 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-sale 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. 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. 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. -6- 9 Competitors may also develop new technologies or products which are considered 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 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 -7- 10 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 the 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. There can be no assurance that the company will not appeal such result or that any appeal will not be successful. In the case that the company does appeal, it is not possible to determine what, if any, claims will be reinstated or the breadth of such claims. In addition, this company has been issued a patent directed toward specific methods of subcutaneous administration of IGF-BP3. 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. Celtrix also does not believe that its sale or use of SomatoKine will infringe on other IGF or BP3 patents although there can be no assurance that a contrary position will not be asserted. 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. If any licenses are required, there can be no assurance that the 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. -8- 11 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. At present, the Company's manufacturing operations have been designed to address the Company's anticipated needs through the completion of Phase II clinical trials. In the future, the Company will either need to expand these operations or subcontract its manufacturing operations in anticipation of Phase III studies and commercialization. There can be no assurance that the Company will be able to manufacture any of its current or future products on a commercial scale, nor that such products can be manufactured by the Company or any other party at a cost or in quantities to make commercially viable products. Failure to obtain sufficient commercial quantities of SomatoKine on 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 or 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 dependent on the efforts of third parties and there can be no assurance that such efforts will be successful. -9- 12 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. In addition, the Company relies on consultants and advisors to assist the Company in formulating its research and development strategy. Retaining and attracting qualified scientific and management personnel, consultants and advisors is therefore critical to the Company's success. There can be no assurance that the Company will be able to hire sufficient qualified personnel on a timely basis or retain such personnel. The loss of key management or scientific personnel could adversely affect the Company's business. The Company's potential expansion into areas and activities requiring additional expertise, such as clinical trials, governmental approvals, 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 $1.0 million per incident and $2.0 million in the aggregate annually, and product liability insurance with coverage limits of $1.0 million per incident and $1.0 million in the aggregate annually. The Company's insurance policies provide coverage for product liability and general liability on a claims made 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 these 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. 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 used in its operations. There can be no assurance that the Company will not be required to incur significant costs to comply with environmental laws and regulations as its research -10- 13 activities are increased, or that the operations, business and future profitability of the Company will not be adversely affected by current or future environmental laws and regulations. CONCENTRATION OF STOCK OWNERSHIP The Company's directors and officers and their affiliates beneficially own approximately 30% of the outstanding Common Stock. As a result, these stockholders will be 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. -11- 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 small business issuer 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 April 1, 1997, the Company privately placed 5,721,876 shares of its Common Stock and warrants to purchase 2,860,934 shares of its Common Stock to the Selling Stockholders pursuant to the terms of Common Stock and Warrant Purchase Agreements dated as of April 1, 1997 by and between the Company and the Selling Stockholders. This Prospectus covers the 8,582,810 shares of the Company's Common Stock issued (or issuable upon exercise of the Warrants issued) in 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 -12- 15 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. If any Selling Stockholder sells Shares prior to April 1, 1998, then the Warrants, which were issued to such Selling Stockholder in the Private Placement, underlying that number of Shares sold shall be cancelled, unless the Warrants are otherwise called by the Company prior to such sale. 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 March 31, 1999. 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. -13- 16 SELLING STOCKHOLDERS The following table sets forth certain information as of May 7, 1997 with respect to the Selling Stockholders:
SHARES BENEFICIALLY SHARES BENEFICIALLY OWNED PRIOR SHARES OF OWNED AFTER TO THE OFFERING COMMON STOCK THE OFFERING(1)(2) -------------------- OFFERED -------------------- NAME OF SELLING STOCKHOLDER NUMBER PERCENT HEREBY NUMBER PERCENT --------- ------- --------- --------- ---- Dawson-Samberg Capital Management, Inc.(3) 2,576,032 10.8% 2,461,032 115,000 * 354 Pequot Ave Southport, CT 06490 Warburg, Pincus Partners, L.P. (4) 4,330,330 18.2% 1,384,330 2,946,000 12.4% Warburg, Pincus & Co., Inc. 466 Lexington Ave., 10th Floor New York, NY 10017 Biotechnology Development Fund, L.P. 1,845,774 7.7% 1,845,774 0 * 1055 Lemon Street Menlo Park, CA 94025 Veron International Limited 922,887 3.9% 922,887 0 * Chinachem Golden Plaza 77 Moody Road Tsin Sha Tsui East Kowloon, Hong Kong Fu Sheng Industrial Co., Ltd. 615,247 2.6% 615,247 0 * 172 Nanking East Road, Sec 2 Taipei 104, Taiwan R.O.C Lippo Securities Ltd. 307,629 1.3% 307,629 0 * 2302 Lippo Tower Lippo Centre 89 Queensway, Central Hong Kong Sim Yim Au 153,814 * 153,814 0 * c/o Primasia Investment Management Ltd. Suite 441, 44F, China Resources Building 26 Harbour Road Wanchai, Hong Kong Hong Siu Ho 30,762 * 30,762 0 * c/o Primasia Investment Management Ltd. Suite 441, 44F, China Resources Building 26 Harbour Road Wanchai, Hong Kong
-14- 17
Tsun Woon Lee 30,762 * 30,762 0 * c/o Primasia Investment Management Ltd. Suite 441, 44F, China Resources Building 26 Harbour Road Wanchai, Hong Kong Sheldon Pacific Inc. 30,762 * 30,762 0 * c/o Primasia Investment Management Ltd. Suite 441, 44F, China Resources Building 26 Harbour Road Wanchai, Hong Kong Nai-Ping Leung 61,518 * 61,518 0 * 95A, Hill Road 1/F Western District Hong Kong Anthony Ng and Cindy Ng 184,576 * 184,576 0 * Kowloon Development Co. Ltd. 23/F Pioneer Centre 750 Nathan Road Kowloon, Hong Kong Connie Wanpyng Chuang & Jesse Jin-Chu Chen 92,287 * 92,287 0 * JTWROS 1608 Pebble Beach Court Milpitas, CA 95305 Peter Lie Ming Yuan 123,051 * 123,051 0 * 1757 Tower 9 88 Tai Tam Reservoir Road Hong Kong Ho Fung Holding Co. Ltd. 92,287 * 92,287 0 * 20 F East Town Bldg 41 Lockhard Road Wanchai, Hong Kong Eng-Soon Tan 123,042 * 123,042 0 * Tan Chong Motor Center, 4th Floor 911 Bukit Timau Road Singapore Li-Mam Kuo 61,525 * 61,525 0 * 28080 Storyhill Lane Los Altos, CA 94022 A-Jen Lin 61,525 * 61,525 0 * 6F No. 17, Chu-Chuan 3rd Road Science Based Industrial Park Hsin-Chu, Taiwan R.O.C
-15- 18 TOTAL 11,643,810 48.8% 8,582,810 3,061,000 12.8%
- ------------------------------ * 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. (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." (3) Includes 2,184,456 shares held by Pequot Private Equity Fund, L.P., 276,576 shares held by Pequot Offshore Private Equity Fund, Inc., and 115,000 shares held by Pequot Scout Fund, L.P. (4) Includes a warrant for the purchase of 687,155 shares of Common Stock at an exercise price of $9.00. The warrant expires on November 17, 1998. James E. Thomas is a director and Chairman of the Board of the Company, and is a general partner of Warburg, Pincus Investors, L.P., A Limited Partnership and a stockholder of the Company. Except as described in footnote (4) to the foregoing table, no Selling Stockholder has had any material relationship with the Company or any of its predecessors or affiliates within the last three years. 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 17,762 share 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, 1996 have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon included therein 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 -16- 19 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. -17- 20 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 ................................................... $ 6,008 Legal Fees and Expenses ............................................ 50,000 Accounting Fees and Expenses ....................................... 15,000 Finders Fee (in connection with private placement) ................. 520,000 Miscellaneous ...................................................... 20,000 --------- Total ..................................................... $611,008
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 proceeedings (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. II-1 21 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 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 ------- ---------------------- 4.4 Form of Warrant of Registrant dated April 1, 1997. 5.1 Opinion of Venture Law Group, A Professional Corporation 10.50 Common Stock and Warrant Stock Purchase Agreement dated as of April 1, 1997 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) 24.1 Power of Attorney (see page II-4) - --------------------- 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. II-2 22 (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 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 23 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Santa Clara, State of California, on the 13th day of May 1997. CELTRIX PHARMACEUTICALS, INC. By: /s/ Andreas Sommer ------------------------------------- Andreas Sommer, President and Chief Executive Officer II-4 24 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints, Andreas Sommer and Mary Anne Ribi, and each of them acting individually, as his attorney-in-fact, each with full power of substitution, for him in any and all capacities, to sign any and all amendments to this Registration Statement (including post-effective amendments), and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming our signatures as they may be signed by our said attorney to any and all amendments to said Registration Statement. 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 Director May 13, 1997 - -------------------------------------------- (Principal Executive Officer) (Andreas Sommer) /s/ Mary Anne Ribi Vice President, Finance and Administration and May 13, 1997 - -------------------------------------------- Chief Financial Officer (Mary Anne Ribi ) (Principal Financial and Accounting Officer) /s/ Henry E. Blair - -------------------------------------------- Director May 13, 1997 (Henry E. Blair) /s/ James E. Thomas - -------------------------------------------- Chairman of the Board of Directors May 13, 1997 (James E. Thomas)
II-5 25 Celtrix Pharmaceuticals, Inc. INDEX TO EXHIBITS Exhibit Number ------- 4.4 Form of Warrant of Registrant dated April 1, 1997 5.1 Opinion of Venture Law Group, A Professional Corporation 10.50 Common Stock and Purchase Agreement as of April 1, 1997 between the Company and each of the Selling Stockholders. 23.1 Consent of Ernst & Young, Independent Auditors 23.2 Consent of Counsel (included in Exhibit 5.1) 24.1 Power of Attorney (see page II-4) EX-4.4 2 FORM OF WARRANT DATED APRIL 1, 1997 1 EXHIBIT 4.4 THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE OR TRANSFERRED EXCEPT 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 April 1, 1997 between Celtrix Pharmaceuticals, Inc., a Delaware company ("Celtrix"), and Purchaser ("Purchase Agreement") in which Celtrix issued WRNTS Units to Purchaser. Each "Unit" is composed of two shares of Celtrix Common Stock ("Shares") and a warrant to purchase one share of Celtrix Common Stock. This Warrant is part of the Unit. 2. NUMBER AND PRICE OF SHARES SUBJECT TO WARRANT. (a) GENERAL TERMS. 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 the earlier of (i) the effective date of a Call Notice (as defined below) or (ii) April 1, 1998 and until April 1, 2000, 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 $2.6818. 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." 2 (b) REDUCTION IN WARRANT SHARES. Notwithstanding the foregoing, the number of Warrant Shares issuable upon exercise of this Warrant shall be reduced by an amount equal to 0.5 multiplied by the number of Shares that are sold, transferred, assigned, encumbered, pledged, contracted to be sold, the subject of a grant of an option to purchase or otherwise dispose of, or the subject of a swap or similar transfer, in whole or in part of the economic risk of ownership of the shares, or otherwise disposed of by Purchaser at any time between April 1, 1997 through and including April 1, 1998. (c) EARLY TERMINATION OF WARRANT. Notwithstanding the foregoing, in the event that the average of the daily high and low bid price per share price of Celtrix's Common Stock as reported on the Nasdaq National Market (or such other equivalent market or exchange) exceeds $4.876 for a period of thirty (30) consecutive trading days (a "Callable Event"), then Celtrix may, on or before the tenth (10th) trading day after such Callable Event has occurred, send a written notice (a "Call Notice") to Purchaser that a Callable Event has occurred and that the Warrant shall terminate on the thirtieth (30th) day after the date the Call Notice became effective pursuant to Section 11 below. Purchaser shall have thirty (30) days after the date such Call Notice became effective to exercise this Warrant in accordance with the terms and conditions of this Warrant. In the event Purchaser does not exercise this Warrant within such thirty (30) day period, this Warrant shall automatically terminate. Notwithstanding the foregoing thirty (30) day period with which Purchaser may exercise the Warrant after a Call Notice has been delivered, if during such time period, (i) the registration statement described in the Purchase Agreement covering such Warrant Shares (the "Registration Statement") shall not be effective, or (ii) if Celtrix shall have delayed Purchaser's ability to sell securities covered by the Registration Statement, then, in either case, the time period that Purchaser has to exercise the Warrant after a Call Notice becomes effective shall be extended until the Registration Statement covering the Warrant Shares shall have been permitted for a consecutive period of thirty (30) days after the date the Call Notice shall have been delivered; provided, however, there shall be no extension of time if the time period required to keep the Registration Statement effective pursuant to the Purchase Agreement shall have lapsed. 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 stock or other securities at the time receivable upon the exercise of this Warrant) 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, 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, 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 (other than cash in connection with regular or ordinary dividends) of Celtrix which such 3 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) and (c) 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, 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 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. 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. The Company covenants that during the period this Warrant is exercisable, Celtrix will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of Warrant Shares upon the exercise of this Warrant. The Company 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. 4 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 Purchase 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. 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 promptly deliver to the record holder of this Warrant a certificate of an officer of Celtrix setting forth the nature of such adjustment and a brief statement of the facts requiring such adjustment. 9. TRANSFERABILITY. This Warrant is not transferable. 10. 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 or destruction 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. 11. MISCELLANEOUS. This Warrant shall be governed by the laws of the State of Delaware. 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 5 methods. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provisions. 12. TERMINATION. This Warrant (and the right to purchase securities upon exercise hereof) shall terminate on April 1, 2000 or such earlier time as provided in Section 2 above. ISSUED this 1st day of April, 1997. CELTRIX PHARMACEUTICALS, INC. --------------------------------- Andreas Sommer Chief Executive Officer 6 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) 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 May 14, 1997 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 to be filed by you with the Securities and Exchange Commission on or about May 15, 1997 (the "Registration Statement") in connection with the registration under the Securities Act of 1933, as amended, of a total of 8,582,810 shares of your Common Stock (the "Shares"), 5,721,876 of which Shares were issued to several institutional stockholders (the "Stockholders") in a private placement on April 1, 1997, and 2,860,934 of which Shares are issuable upon the exercise of warrants (the "Warrants") issued to such Stockholders in 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 CWJ EX-10.50 4 COMMON STOCK AND WARRANT PURCHASE AGREEMENT 1 EXHIBIT 10.50 COMMON STOCK AND WARRANT PURCHASE AGREEMENT DATED AS OF APRIL 1, 1997 BETWEEN CELTRIX PHARMACEUTICALS, INC. AND THE PURCHASERS LISTED ON EXHIBIT A 2 COMMON STOCK AND WARRANT PURCHASE AGREEMENT THIS COMMON STOCK AND WARRANT PURCHASE AGREEMENT ("Agreement") is entered into as of this 1st day of April, 1997 between Celtrix Pharmaceuticals, Inc., a Delaware corporation ("Celtrix"), and the purchasers listed on the attached Exhibit A ("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 two shares ("Shares") of common stock, $0.01 par value, of Celtrix ("Common Stock") and a warrant to purchase one share of Common Stock ("Warrant Share"). A form of the warrant is attached as Exhibit B ("Warrant"). The purchase price per Unit ("Unit Purchase Price") shall be equal to two (2) multiplied by the lower of: (i) the closing bid price of the Common Stock as reported on the Nasdaq National Market on the day preceding the Closing Date (as defined below), or (ii) the average of the closing bid prices of the Common Stock as reported on the Nasdaq National Market for the 5 trading days prior to the Closing Date. The exercise price per Warrant Share shall be equal to 110% multiplied by 50% of the Unit Purchase Price. 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 on April 1, 1997, 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 as follows: 3 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 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, judgement or decree or any indenture, mortgage, lease or other agreement or instrument to which Celtrix, or any of its properties, is subject. 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 30,000,000 shares of Common Stock, $0.01 par value, of which at December 31, 1996, 15,263,429 shares were issued and outstanding, and 2,000,000 shares of Preferred Stock, $0.01 par value per share, no shares of which are issued and outstanding. All such issued and outstanding shares have been duly authorized and validly issued and are fully paid and nonassessable. 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 warrant expires November 17,1998; (ii) 1,500,000 shares reserved for issuance pursuant to Celtrix's 1991 Stock Option Plan, of which, at December 31, 1996 options 2 4 to purchase 32,174 shares had been exercised, options to purchase 975,125 shares were outstanding and 492,701 shares remained available for future grant; (iii) 250,000 shares reserved for issuance pursuant to Celtrix's 1991 Employee Stock Purchase Plan, of which, at December 31, 1996, 101,132 shares had been issued and 148,868 shares remained available for future issuance; and (iv) 200,000 shares reserved for issuance under Celtrix's 1991 Directors' Stock Option Plan, of which, at December 31, 1996, options to purchase 39,998 shares were outstanding and 160,002 shares remained available for future grant. Except for an option to purchase 75,000 shares of Common Stock to be granted in connection with this transaction and 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, there are no other options, warrants, conversion privileges or other contractual rights currently outstanding to purchase or otherwise acquire any authorized but unissued shares of Celtrix's capital stock or other securities. 2.5 PRIVATE PLACEMENT OFFERING MEMORANDUM; SEC DOCUMENTS; FINANCIAL STATEMENTS. Each complete or partial statement, report, prospectus filed under the Securities Act of 1933, as amended ("Securities Act"), or proxy statement included in or referred to in the Private Placement Offering Memorandum of Celtrix dated March 17, 1997 ("Memorandum") is a true and complete copy of or excerpt from such document as filed by Celtrix with the Securities and Exchange Commission ("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 Securities Exchange Act of 1934, as amended ("Exchange Act"), since the date on which its last report on Form 10-K was filed. 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. Neither the Memorandum nor any of the SEC Documents as of their respective dates contained any untrue statement of a 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 or the Memorandum ("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). 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 3 5 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 December 31, 1996, 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; (d) any declaration or payment of any dividend or other distribution of the assets of Celtrix; (e) any labor organization activity; or (f) 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 in the Memorandum without any conflict with or infringement of the rights of others except as disclosed in the documents filed with the SEC and appended to the Memorandum, 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, as disclosed in the Memorandum, 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 Memorandum. Except as disclosed in the documents filed with the SEC and appended to the Memorandum, 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 4 6 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 secrets, licenses, information, proprietary rights and processes of any other person or entity that are material to Celtrix's business as currently conducted or proposed to be conducted in the Memorandum. Celtrix has not received any communications alleging 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 judgement, 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 proposed to be conducted in the Memorandum. 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. 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. 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: 5 7 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. 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, in such manner as to cause Celtrix to be in violation of the registration requirements of the Securities Act or applicable state securities or blue sky laws. 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: 6 8 4.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and warranties made by Celtrix in Section 2 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. 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. 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 substantially the form that is customary for similar financial transactions. 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. 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 7 9 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 45 days after the Closing, Celtrix shall prepare and file a 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. (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 8 10 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 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. 9 11 (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, 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 10 12 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 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 11 13 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. 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 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. 12 14 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 HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM. UNTIL __________, 1998 THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD OR TRANSFERRED UNLESS PRIOR NOTICE SHALL HAVE BEEN GIVEN TO CELTRIX. 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. 13 15 (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 Delaware 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 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 14 16 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: Carla Newell Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP 155 Constitution Drive Menlo Park, CA 94025 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. 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 COSTS AND EXPENSES. Each party hereto shall pay its own costs and expenses incurred in connection herewith, including the fees of its counsel, auditors and other representatives, whether or not the transactions contemplated herein are consummated. 9.10 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. 9.11 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. 15 17 EXHIBIT A SCHEDULE OF PURCHASERS
# SHARES PURCHASER COMMON STOCK # WARRANT SHARES PURCHASE PRICE --------- ------------ ---------------- -------------- NAME SHARES WRNTS~ $AMOUNT
18 SCHEDULE A SCHEDULE OF PURCHASERS
# SHARES # WARRANT PURCHASER COMMON STOCK SHARES PURCHASE PRICE --------- ------------ --------- -------------- Pequot Private Equity Fund, L.P. 1,456,304 728,152 $3,550,470.00 Dawson-Samberg Capital Management, Inc. 354 Pequot Avenue Southport, CT 06490 Attn: Amiel Peretz, Investment Advisor Pequot Offshore Private Equity Fund, Inc. 184,384 92,192 449,530.00 Dawson-Samberg Capital Management, Inc. 354 Pequot Avenue Southport, CT 06490 Attn: Amiel Peretz, Investment Advisor Warburg, Pincus Partners, L.P. 922,887 461,443 2,250,000.00 Warburg, Pincus & Co., Inc. 466 Lexington Avenue, 10th Floor New York, NY 10017 Attn: James E. Thomas, Partner Biotechnology Development Fund, L.P. 1,230,516 615,258 3,000,000.00 Attn: Frank Kung, General Partner 1055 Lemon Street Menlo Park, CA 94025 Veron International Limited 615,258 307,629 1,500,000.00 Chinachem Group Chinachem Golden Plaza, Top Floor 77 Mody Road Tsin Sha Tsui East Kowloon, Hong Kong Attn: Joseph W.K. Leung, Director Fu Sheng Industrial Co., Ltd. 410,165 205,082 999,982.60 172 Nanking East Road, Sec. 2 Taipei 104, Taiwan R.O.C. Attn: Shuhbin King
19 Lippo Securities Ltd. 205,086 102,543 500,000.00 2302 Lippo Tower Lippo Centre 89 Queensway, Central Hong Kong Attn: Peter P. Woo Siu Yim Au 102,543 51,271 250,000.00 c/o Primasia Investment Management Ltd. Suite 4411, 44F, China Resources Building 26 Harbour Road Wanchai, Hong Kong Attn: Wilson Tam Hong Siu Ho 20,508 10,254 50,000.00 c/o Primasia Investment Management Ltd. Suite 4411, 44F, China Resources Building 26 Harbour Road Wanchai, Hong Kong Attn: Wilson Tam Tsun Woon Lee 20,508 10,254 50,000.00 c/o Primasia Investment Management Ltd. Suite 4411, 44F, China Resources Building 26 Harbour Road Wanchai, Hong Kong Attn: Wilson Tam Sheldon Pacific, Inc. 20,508 10,254 50,000.00 c/o Primasia Investment Management Ltd. Suite 4411, 44F, China Resources Building 26 Harbour Road Wanchai, Hong Kong Attn: Wilson Tam Nai-Ping Leung 41,012 20,506 99,988.00 95A, Hill Road 1/F Western District Hong Kong Anthony Ng and Cindy Ng 123,051 61,525 300,000.00 Kowloon Development Co. Ltd. 23/F Pioneer Centre 750 Nathan Road Kowloon, Hong Kong
20 20 Connie Wanpyng Chuang & Jesse Jin-Chu 61,525 30,762 150,000.00 Chen JTWROS 1608 Pebble Beach Ct. Milpitas, CA 95035 Peter Lie Ming Yuan 82,034 41,017 200,000.00 1757 Tower 9 88 Tai Tam Reservoir Road Hong Kong Ho Fung Holding Co. Ltd. 61,525 30,762 150,000.00 20 F East Town Bldg. 41 Lockhard Rd. Wanchai, Hong Kong Attn: Mr. Robert Ho Eng-Soon Tan 82,028 41,014 199,985.00 Tan Chong Motor Center, 4th Floor c/o Tan Chong Motor Co. Ltd. 911 Bukit Timan Road Singapore 2158 Li-Mam Kuo 41,017 20,508 100,000.00 28080 Storyhill Lane Los Altos, CA 94022 A-Jen Lin 41,017 20,508 100,000.00 6F No. 17, Chu-Chuan 3rd Road Science Based Industrial Park Hsin-Chu, Taiwan TOTAL 5,721,876 2,860,934 $13,949,955.60
21 EX-23.1 5 CONSENT OF ERNST & YOUNG 1 EXHIBIT 23.1 CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" in the Registration Statement (Form S-3) and related Prospectus of Celtrix Pharmaceuticals, Inc. for the registration of 8,582,810 shares of its common stock and to the incorporation by reference therein of our report dated April 26, 1996, with respect to the financial statements of Celtrix Pharmaceuticals, Inc. included in its Annual Report (Form 10-K) for the year-ended March 31, 1996, filed with the Securities and Exchange Commission. /s/ Ernst & Young Palo Alto, California May 14, 1997 -----END PRIVACY-ENHANCED MESSAGE-----