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EXHIBIT 10.3
SECURITIES PURCHASE AGREEMENT
BETWEEN
CONNECTIVE THERAPEUTICS, INC.
AND
EACH OF THE PURCHASERS EXECUTING A
COUNTERPART OF THE SIGNATURE PAGE HERETO
DATED AS OF
DECEMBER 4, 1996
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SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of December 4,
1996, between Connective Therapeutics, Inc., a Delaware corporation (the
"Company"), and each purchaser executing a counterpart of the signature page
hereto (each, a "Purchaser" and collectively, the "Purchasers").
W I T N E S S E T H :
WHEREAS, the Company proposes to issue and sell in accordance with
Regulation S (as hereinafter defined) under the Securities Act (as hereinafter
defined) to the Purchasers, and the Purchasers desire to purchase from the
Company (i) an aggregate of 200 shares of the Company's 7% Convertible Preferred
Stock Series A (the "Preferred Stock"), on the terms and subject to the
conditions set forth herein, and (ii) warrants to purchase up to an aggregate of
20,000 shares of the Company's Common Stock in the form attached as Exhibit A to
this Agreement (individually a "Warrant" and collectively the "Warrants").
NOW THEREFORE, in consideration of the premises, the representations,
warranties, covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms shall have the following meanings:
"Affiliate" of a Person means a Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned Person. The term "control" (including
the terms "controlling," "controlled by" and "under common control with") means
the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a person, whether through the
ownership of voting securities, by contract, or otherwise.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of corporate
stock, including each class of common stock and preferred stock of such Person.
"Certificate of Designations" means the Certificate of Designations
establishing the terms of the Preferred Stock.
"Closing" has the meaning set forth in Section 2.02.
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"Commission" means the United States Securities and Exchange Commission.
"Common Stock" means the common stock, $.001 par value per share, of the
Company.
"Conversion Shares" means the shares of Common Stock issuable upon
conversion of the Preferred Stock.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Governmental Authority" means any federal, state or other political
subdivision thereof and any agency or other entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Legend" has the meaning set forth in Section 5.02(a).
"Irrevocable Instructions" means the Irrevocable Instructions issued by
the Company to the Transfer Agent, executed by each of the Company and the
Transfer Agent, in the form of Exhibit C hereto.
"Material Adverse Effect" has the meaning set forth in Section 3.01.
"Non-U.S. Person" means a Person that is not a U.S. Person (as such term
is defined in Regulation S under the Securities Act).
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
Governmental Authority or other entity of any kind.
"Regulation S" means Regulation S under the Securities Act, as from time
to time amended.
"SEC Reports" means the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 and the Company's Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1996, June 30, 1996 and September 30, 1996.
"Securities Act" means the Securities Act of 1933, as amended.
"Transaction Documents" means, collectively, this Agreement, the Warrants,
the Irrevocable Instructions, the Certificate of Designations and the Preferred
Stock.
"Transfer Agent" means U.S. State Transfer Corporation.
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"United States" has the meaning ascribed to such term in Rule 902(p) of
Regulation S under the Securities Act.
"U.S. Person" has the meaning ascribed to such term in Rule 902(o) of
Regulation S under the Securities Act.
"Warrant Shares" means the shares of the Company's Common Stock issuable
upon exercise of Warrants.
ARTICLE II
SALE AND PURCHASE
SECTION 2.01. AGREEMENT TO SELL AND TO PURCHASE; PURCHASE PRICE. On the
terms and subject to the conditions set forth in this Agreement, the Company
hereby agrees to issue and sell to the Purchasers, and the Purchasers hereby
agree to purchase and accept from the Company (i) an aggregate of 200 shares of
Preferred Stock at a purchase price per share of $10,000, or an aggregate
purchase price of U.S. $2,000,000, and (ii) the Warrants at an aggregate
purchase price equal to 110% of the closing bid price of the Common Stock on
December 4, 1996, payable in immediately available funds (collectively, the
"Purchase Price"). A copy of the form of Certificate of Designations
establishing the terms of the Preferred Stock is attached as Exhibit B hereto
and the terms of the Preferred Stock are hereby expressly incorporated by
reference herein, and the form of certificate of Preferred Stock is attached as
Exhibit B-1.
SECTION 2.02. CLOSING. The closing of the sale and purchase of the
Preferred Stock (the "Closing") shall be deemed to take place concurrently with
the execution and delivery of this Agreement by the parties hereto. At the
Closing, the following closing transactions shall take place, each of which
shall be deemed to occur simultaneously with the Closing: (i) the Company shall
execute, issue and deliver certificates representing the Preferred Stock to the
Purchasers; (ii) the Purchasers shall pay the Purchase Price by wire transfer to
the account designated by the Company in writing prior to the Closing; (iii) the
Company shall pay the expenses set forth in Section 6.02 hereof by wire transfer
to the account designated by the Purchasers in writing prior to the Closing;
provided that if the Purchasers so determine, such expenses may be netted
against the Purchase Price; (iv) the Company issues the Warrants to the
Purchasers; (v) the Company and the Transfer Agent shall execute and deliver the
Irrevocable Instructions; (vi) the Company shall deliver evidence of the filing
with, and acceptance by, the Secretary of State of the State of Delaware of the
Certificate of Designations; (vii) the Company shall deliver to the Purchasers a
certificate executed by the secretary of the Company, signing in such capacity,
dated the date of the Closing (A) certifying that attached thereto are true and
complete copies of (x) the Certificate of Incorporation of the Company, as
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amended to date, as filed in the office of the Secretary of State of the State
of Delaware and stating that no amendment or other action has been taken by the
Company, its shareholders, officers or directors in contemplation of the filing
of any such amendment or in contemplation of the liquidation or dissolution of
the Company, (y) the by-laws of the Company, as amended to date, and (z) the
resolutions duly adopted by the Board of Directors of the Company authorizing
the execution and delivery of the Transaction Documents and the consummation of
the transactions contemplated thereby (including, without limitation, the
issuance and sale of the Preferred Stock and the Warrants, the reservation and
issuance of the Conversion Shares upon conversion of the Preferred Stock, and
the reservation and issuance of the Warrant Shares upon exercise of the
Warrants), which authorization shall be in full force and effect on and as of
the date of such certificate, (B) confirming the continued good standing of the
Company since the date of a Certificate of Good Standing with respect to the
Company delivered by the Secretary of State of the State of Delaware, (C)
attesting as to the certificates representing the Company's Preferred Stock and
Common Stock, and (D) certifying and attesting to the office, incumbency, due
authority and specimen signatures of each Person who executed any Transaction
Document for or on behalf of the Company; and (viii) Venture Law Group, A
Professional Corporation, as counsel to the Company, shall deliver to the
Purchasers an opinion, dated the date of the Closing and addressed to the
Purchasers, in form and substance acceptable to the Purchasers.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As a material inducement to the Purchasers to purchase the Preferred
Stock, the Company hereby represents and warrants to the Purchasers on and as of
the date hereof, subject to and except as set forth in a document of even date
herewith (the "Disclosure Schedule") delivered by the Company to the Purchasers
prior to the execution and delivery of this Agreement and referring to the
representations and warranties set forth in this Article III as follows:
SECTION 3.01. ORGANIZATION AND STANDING. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority, and all
authorizations, licenses, permits and certifications necessary to own its
properties and assets and to carry on its business as it is now being conducted
and proposed to be conducted and no bankruptcy proceedings have been commenced
and no actions with respect to the liquidation, merger, consolidation or
dissolution of the Company or for the sale of all or substantially all of its
assets is pending or contemplated. The Company is duly qualified to transact
business and is in good standing in each jurisdiction in which the character of
the properties owned or leased by it or the
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nature of its businesses makes such qualification necessary, except where the
failure to so qualify or be in good standing would not have a material adverse
effect on the business, assets, operations, properties, condition (financial or
otherwise) or prospects of the Company (a "Material Adverse Effect").
SECTION 3.02. SECURITIES OF THE COMPANY. The authorized Capital Stock of
the Company consists of 50,000,000 shares of Common Stock, of which 7,435,519
shares were issued and outstanding as of December 2, 1996 and 5,000,000 shares
of preferred stock, par value $.001 per share, 200 of which have been designated
7% Convertible Preferred Stock, Series A, and none of which have been issued or
are outstanding prior to the Closing. Except as set forth in the SEC Reports,
the Company has no other authorized, issued or outstanding equity securities or
securities containing any equity features, or any other securities convertible
into, exchangeable for or entitling any person to otherwise acquire any other
securities of the Company containing any equity features, other than subsequent
issuances of securities, if any, pursuant to this Agreement, pursuant to
reservations, agreements or employee benefit plans or pursuant to the exercise
of outstanding convertible securities or options. All of the outstanding shares
of Capital Stock of the Company have been duly and validly authorized and
issued, and are fully paid and nonassessable. The Preferred Stock, the
Conversion Shares, the Warrants and the Warrant Shares have been duly and
validly authorized. When issued against payment therefor as provided in this
Agreement, the Preferred Stock will be validly issued, fully paid and
nonassessable and will entitle the holders thereof to the rights established in
the Certificate of Designations. The Conversion Shares, when issued upon
conversion of the Preferred Stock, and the Warrant Shares when issued in
accordance with the terms of the Warrants, will be validly issued, fully paid
and nonassessable, free and clear all preemptive rights, claims, liens, charges,
encumbrances and security interests of any nature whatsoever. A sufficient
number of shares of Common Stock has been duly reserved and will remain
available for issuance upon conversion of the Preferred Stock and upon the
exercise of the Warrants. Except as set forth in this Agreement and in the SEC
Reports, there are no outstanding options, warrants, agreements, conversion
rights, subscription rights, preemptive rights, rights of first refusal or other
rights or agreements of any nature outstanding to subscribe for or to purchase
any shares of Capital Stock of the Company or any other securities of the
Company of any kind. Except as otherwise required by law or as set forth in the
Certificates of Designations, there are no restrictions upon the voting or
transfer of any shares of the Company's Capital Stock pursuant to the Company's
organizational and other governing documents or any agreement or other
instruments to which the Company is a party or by which the Company or its
properties or assets are bound. The issuance of the Preferred Stock and the
Common Stock upon conversion thereof are not subject to any preemptive rights,
rights of first refusal or other similar limitation. There are no agreements or
other obligations (contingent or otherwise) that may require the Company to
repurchase or otherwise acquire any shares of its Capital Stock, other than
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agreements with officers, directors, employees or consultants of the Company
allowing the Company to repurchase at cost unvested shares upon the termination
of employment or consulting services to the Company.
SECTION 3.03. AUTHORIZATION; ENFORCEABILITY. The Company has the corporate
power and authority to execute, deliver and perform the terms and provisions of
each of the Transaction Documents, and has taken all necessary corporate action
to authorize the execution, delivery and performance by it of each of the
Transaction Documents and to consummate the transactions contemplated thereby.
No other corporate proceedings on the part of the Company are necessary and no
consent of the shareholders of the Company is required for the valid execution
and delivery by the Company of the Transaction Documents and the performance and
consummation by the Company of the transactions contemplated thereby. The
Company has duly executed and delivered each of the Transaction Documents. The
Transaction Documents constitute the legal, valid and binding obligations of the
Company, (and in the case of the Irrevocable Instructions, the Transfer Agent),
enforceable against the Company (and in the case of the Irrevocable
Instructions, the Transfer Agent), in accordance with their respective terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity.
SECTION 3.04. NO VIOLATION; CONSENTS. (a) The Company is not in violation
of the applicable provisions of any law, statute, rule, regulation, order, writ,
injunction, judgment or decree of any court or Governmental Authority to or by
which the Company or any of its property or assets is bound and which could
reasonably be expected to have a Material Adverse Effect, nor has any event
occurred which (i) violates, results in a breach of or constitutes (with due
notice or lapse of time or both) a default or gives rise to an event of
acceleration under any contract, lease, loan or credit agreement, mortgage,
security agreement, trust indenture or other agreement or instrument to which
the Company is a party or by which it is bound or to which any of its properties
or assets is subject, nor results in the creation or imposition of any lien,
security interest, charge or encumbrance of any kind upon any of the properties,
assets or Capital Stock of the Company and which could reasonably be expected to
have a Material Adverse Effect or (ii) violates any provision of the
organizational and other governing documents of the Company. The execution,
delivery and performance by the Company of the Transaction Documents and the
consummation of the transactions contemplated thereby do not and will not (i)
contravene the applicable provisions of any law, statute, rule, regulation,
order, writ, injunction, judgment or decree of any court or Governmental
Authority to or by which the Company or any of its property or assets is bound,
(ii) violate, result in a breach of or constitute (with due notice or lapse of
time or both) a default or give rise to an event of acceleration under any
contract, lease, loan or credit agreement, mortgage, security agreement, trust
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indenture or other agreement or instrument to which the Company is a party or by
which it is bound or to which any of its properties or assets is subject, nor
result in the creation or imposition of any lien, security interest, charge or
encumbrance of any kind upon any of the properties, assets or Capital Stock of
the Company which could reasonably be expected to have a Material Adverse
Effect, or (iii) violate any provision of the organizational and other governing
documents of the Company.
(b) No consent, approval, authorization or order of, or filing or
registration with, any court or Governmental Authority or other Person within
the United States is required to be obtained or made by the Company for the
execution, delivery and performance of the Transaction Documents or the
consummation of any of the transactions contemplated thereby, except for those
consents or authorizations previously obtained and those filings previously
made.
SECTION 3.05. SECURITIES ACT REPRESENTATIONS. The Company is a "reporting
issuer" as that term is defined in Rule 902(l) of Regulation S under the
Securities Act. No form of general or public solicitation or advertising was
used by the Company or any Person acting on its behalf in connection with the
offer or sale of the Preferred Stock. Neither the Company nor any Person acting
on its behalf has (i) offered Preferred Stock to any Person (including
Purchaser) in the United States or offered or sold Preferred Stock to or for the
account or benefit of any U.S. Person or (ii) made any "directed selling
efforts" (as defined in Rule 902(b) of Regulation S under the Securities Act) in
the United States with respect to the Preferred Stock. The Company has not sold
and will not sell any Preferred Stock in this offering other than the Preferred
Stock being sold to the Purchasers hereunder. Assuming the accuracy of the
Purchasers' representations pursuant to Section 4.02 hereof, the sale of the
Preferred Stock hereunder is, and the issuance of the Conversion Shares upon
conversion of the Preferred Stock will be, exempt from the registration
requirements of the Securities Act.
SECTION 3.06. SOLVENCY; NO DEFAULT. (a) The Company is, as of the date
hereof, Solvent. "Solvent" means that (i) the fair saleable value of the assets
of the Company exceeds the total amount of its debts and other liabilities
(including any guarantees and other contingent, subordinated, unmatured or
unliquidated liabilities whether or not reduced to judgment, disputed or
undisputed, secured or unsecured), (ii) the Company has sufficient funds and
cash flow to pay its liability on its existing and anticipated debts as they
become absolute and matured, (iii) final judgments against the Company in
pending or threatened actions for money damages will not be rendered at a time
when, or in an amount such that the Company will be unable to satisfy any such
judgments promptly in accordance with their terms (taking into account the
maximum reasonable amount of such judgments in any such actions (other than
amounts that would be remote) and the earliest reasonable time at which such
judgments would be rendered), and (iv) the
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Company does not have unreasonably small capital with which to engage in its
present or anticipated business.
(b) The Company is not, and immediately after the consummation of the
transactions contemplated hereby will not be, in default under or with respect
to its organizational and other governing documents, or any provision of any
security issued by the Company, or of any agreement, instrument or other
undertaking to which the Company is a party or by which it or any of its
property or assets is bound which, either individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.
SECTION 3.07. NO BROKERS. No broker, finder, agent or similar intermediary
is entitled to any broker's, finder's, placement or similar fee or other
commission in connection with the transactions contemplated hereby based on any
agreement, arrangement or understanding with the Company, except for dealings
with AFO Capital Advisors LLC, whose fees will be paid by the Purchasers.
SECTION 3.08. FINANCIAL CONDITION; NO ADVERSE CHANGES. (a) The audited
financial statements of the Company and the related Preferred Stock thereto as
at December 31, 1995 reported on by Ernst & Young LLP, independent auditors,
copies of which have heretofore been furnished to the Purchasers, present fairly
the financial condition, results of operations and cash flows of the Company at
such date and for the periods set forth therein. The unaudited balance sheets,
statements of operations and statements of cash flows at and for the period
ended September 30, 1996 (such audited and unaudited financial statements,
collectively, the "Financial Statements"), copies of which have heretofore been
furnished to the Purchasers, present fairly the financial condition, results of
operations and cash flows of the Company at such date and for the periods set
forth therein. The Financial Statements, including the related schedules and
notes thereto (if any), have been prepared in accordance with generally accepted
accounting principles as set forth in the opinions and pronouncements of the
Accounting Principles Board of American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board as in effect on the date of the Closing, applied on a consistent
basis (except for changes concurred in by the Company's independent public
accountants) unless otherwise expressly stated therein. During the period from
September 30, 1996 to and including the date hereof, there has been no sale,
transfer or other disposition by the Company of any material part of the
business, property or securities of the Company and no purchase or other
acquisition of any business, property or securities by the Company material in
relation to the financial condition of the Company.
(b) Except as are fully reflected or reserved against in the Financial
Statements and the notes thereto, there are no liabilities or obligations with
respect to the Company of any nature whatsoever (whether absolute, accrued,
contingent or
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otherwise and whether or not due) which, either individually or in the
aggregate, are reasonably expected to have a Material Adverse Effect.
(c) Since September 30, 1996, there has been no development or event, nor
any prospective development or event known to the Company, or any litigation,
proceeding or other action seeking an injunction or other restraining order,
damages or other relief from a court or administrative agency of competent
jurisdiction pending or, to the best knowledge of the Company, threatened, or
any action of any Governmental Authority, which has had or could reasonably be
expected to have a Material Adverse Effect.
SECTION 3.09. DISCLOSURE. The representations and warranties of the
Company in this Agreement and the statements contained in the SEC Reports and
the schedules, certificates and exhibits furnished to the Purchasers by or on
behalf of the Company in connection herewith do not contain any untrue statement
of a material fact and do not omit to state any material fact necessary to make
the statements herein or therein not misleading. The Company hereby acknowledges
that the Purchasers are and will be relying on the SEC Reports and the Company's
representations, warranties and covenants contained herein in making an
investment decision with respect to the Preferred Stock and Conversion Shares
and will be relying thereon (together with future reports filed with the
Commission) in connection with any transfer of Preferred Stock and Conversion
Shares.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby acknowledges, represents and warrants to the Company
as follows:
SECTION 4.01. AUTHORIZATION; ENFORCEABILITY; NO VIOLATIONS. (a) If such
Purchaser is a corporation, limited partnership, or limited liability company,
it is duly organized, formed or incorporated (as the case may be), validly
existing and in good standing under the laws of the jurisdiction of its
organization, formation or incorporation, and has all requisite power and
authority to execute, deliver and perform the terms and provisions of this
Agreement and has taken all necessary action to authorize the execution,
delivery and performance by it of this Agreement and to consummate the
transactions contemplated hereby.
(b) The execution, delivery and performance by such Purchaser of this
Agreement and of the Transaction Documents, and the consummation by such
Purchaser of the transactions contemplated hereby and thereby do not and will
not violate any provision of (i) such Purchaser's organizational documents, if
any, and (ii) any law, statute, rule, regulation, order, writ, injunction,
judgment or decree of any court of Governmental Authority to or by which the
Purchaser or any of its property or assets is bound, to which such Purchaser is
subject, or (iii) violate, result in a breach of or constitute (with due notice
or lapse of time or both) a default or give rise to an event of acceleration
under any contract, lease, loan or credit agreement, mortgage, security
agreement, trust indenture or other agreement or instrument to which the
Purchaser is a party or by which it is bound or to which any of its properties
or assets is subject, nor result in the creation or imposition of any lien,
security interest, charge or encumbrance of any kind upon any of the properties
or assets of the Purchaser which could reasonably be expected to have a Material
Adverse Effect; nor has any event occurred which (i) violates, results in a
breach of or constitutes (with due notice or lapse of time or both) a default or
gives rise to an event of acceleration under any contract, lease, loan or credit
agreement, mortgage, security agreement, trust indenture or other agreement or
instrument to which the Purchaser is a party or by which it is bound or to which
any of its properties or assets is subject, nor results in the creation or
imposition of any lien, security interest, charge or encumbrance of any kind
upon any of the properties or assets of the Purchaser and which could reasonably
be expected to have a Material Adverse Effect or (ii) violates any provision of
the organizational and other governing documents of the Purchaser. Such
Purchaser has duly executed and delivered this Agreement. Assuming the due
execution hereof by the Company, this Agreement constitutes the legal, valid and
binding obligation of such Purchaser, enforceable against such Purchaser in
accordance with its terms, except as enforceability may be limited by
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applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
SECTION 4.02. SECURITIES ACT REPRESENTATIONS; LEGENDS. (a) Such Purchaser
understands that (i) the offering and sale of the Preferred Stock and the
Warrants to be issued and sold hereunder is intended to be exempt from the
registration requirements of the Securities Act; (ii) neither the Preferred
Stock, the Conversion Shares, the Warrants nor the Warrant Shares have been
registered under the Securities Act or any other applicable securities laws and
such securities may be resold only if registered under the Securities Act or if
an exemption from such registration requirements is available; and (iii) the
Company is not required to register any resale of the Preferred Stock, the
Conversion Shares, the Warrants or the Warrant Shares under the Securities Act;
provided, however, the resale of the the Conversion Shares and the Warrant
Shares will be subject to registration under the Securities Act (unless an
appropriate exemption therefrom is available), if at any time the Company
determines, based on advise of counsel that there has been a change under the
Securities Act or any other applicable securities law or in the interpretation
of the provisions thereof, such that (x) the Preferred Stock will no longer be
convertible into freely tradeable Conversion Shares or (y) the Warrants will no
longer be exchangeable into freely tradeable Warrant Shares at any time
beginning 41 days following the date of original issuance of the Preferred Stock
and the Warrants.
(b) The Preferred Stock and the Warrants to be acquired by such Purchaser
pursuant to this Agreement are being acquired for its own account, for
investment purposes, and not with a view to, or for sale in connection with, any
distribution thereof or of Conversion Shares issuable upon conversion of the
Preferred Stock or of Warrant Shares issuable upon exercise of the Warrants, in
violation of the Securities Act or any other securities laws which may be
applicable.
(c) Such Purchaser is not an affiliate of the Company (as such term is
defined in the Securities Act).
(d) Such Purchaser is a Non-U.S. Person.
(e) Such Purchaser (i) has sufficient knowledge and experience in
financial and business matters so as to be capable of evaluating the merits and
risks of its investment in the Preferred Stock and the Warrants and Purchaser is
capable of bearing the economic risks of such investment, including a complete
loss of its investment in the Preferred Stock and the Warrants; (ii) believes
that its investment in the Preferred Stock is suitable for it based upon its
objectives and financial needs, and such Purchaser has adequate means for
providing for its current financial needs
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and business contingencies and has no present need for liquidity of investment
with respect to the Preferred Stock and the Warrants; (iii) has no present plan,
intention or understanding and has made no arrangement to sell the Preferred
Stock, the Conversion Shares, the Warrants or the Warrant Shares at any
predetermined time or for any predetermined price; (iv) has not purchased, sold
or entered into, and has no present intention to and will not, until expiration
of the Restricted Period, purchase, sell or enter into, any put option, short
position or similar arrangement with respect to the Common Stock, or any
intention to settle any such option, position or understanding with any
Conversion Shares or any Warrant Shares.
(f) No oral or written representations have been made to such Purchaser by
or on behalf of the Company in connection with the offering and sale of the
Preferred Stock or the Warrants hereunder other than those set forth in the SEC
Reports, the Preferred Stock, the Warrants or as set forth herein, and such
Purchaser is not subscribing for the Preferred Stock or the Warrants as a result
of, or in response to, any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast over
television or radio, or presented at any seminar or meeting.
(g) At the time the buy order for the Preferred Stock and the Warrants
being purchased hereunder was originated, such Purchaser was outside of the
United States.
(h) Such Purchaser acknowledges that Regulation S under the Securities Act
restricts the transferability in the United States of securities, such as the
Preferred Stock, the Conversion Shares, the Warrants and the Warrant Shares
issued in reliance upon the exemption from the registration requirements of the
Securities Act provided by Regulation S thereunder.
(i) Such Purchaser acknowledges that Rule 144A under the Securities Act
may not be available with respect to resales of the Preferred Stock, the
Conversion Shares, the Warrants or the Warrant Shares.
SECTION 4.03. NO BROKERS. No broker, finder, agent or similar intermediary
is entitled to any broker's, finder's, placement or similar fee or other
commission in connection with the transactions contemplated hereby based on any
agreement, arrangement or understanding with such Purchaser, except for dealings
with AFO Capital Advisors LLC, whose fees will be paid by the Purchasers.
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ARTICLE V
COVENANTS OF THE COMPANY
SECTION 5.01. (a) EXEMPTION FROM REGISTRATION. The Company will not make
any offer to sell, solicit any offer to buy, agree to sell or sell any security
or right to acquire any security, except at such time and in such manner so as
not to cause the loss of any of the exemptions for the offer and sale of the
Preferred Stock hereunder and for the issuance of Conversion Shares upon
conversion of the Preferred Stock from the registration requirements under the
Securities Act or under the securities or "blue sky" laws of any jurisdiction in
which such offer, sale or issuance is made.
(b) LIMITATIONS ON SALE OR TRANSFER OF THE COMPANY'S
SECURITIES. The Company will not, without the prior written consent of a
majority in interest of the Preferred Stock then outstanding, make any offer to
sell, solicit any offer to buy, agree to sell or sell any shares of Preferred
Stock, any shares of Common Stock, any other shares of capital stock of the
Company, or any other securities convertible into or exercisable or exchangeable
for Preferred Stock, Common Stock or any such capital stock, or grant any
options, rights or warrants to purchase Preferred Stock, Common Stock or any
other shares of capital stock of the Company, or any other securities
convertible into or exercisable or exchangeable for Preferred Stock, Common
Stock or any such capital stock during the period commencing the date of the
Closing and ending one hundred and eighty (180) days thereafter, except for (i)
the shares Preferred Stock and warrants issued in accordance with this
Agreement, or of Common Stock issuable upon conversion of the Preferred Stock,
(ii) any shares of Preferred Stock or Common Stock issuable upon the exercise of
an option, right or warrant or the conversion of a security outstanding on the
date hereof, or (iii) any shares of the Company's capital stock issued pursuant
to the Company's stock option or other benefit or incentive plans maintained for
its officers, directors, employees or consultants, (iv) shares of the Company's
Common Stock issued pursuant to a firmly underwritten public offering, (v)
shares of the Company's Common Stock issued pursuant to an exemption from
registration under the Securities Act; provided, however, that such shares may
not subsequently be registered for resale or, in the case of an offering
pursuant to Regulation S, may not be resold into the United States, prior to the
expiration of such 180 day period; and (vi) shares of the Company's Common Stock
issued and issuable pursuant to the transactions described in the Disclosure
Schedule; provided further, that the Company shall not engage in any
transactions described in this Section 5.01(b), if in the reasonable opinion of
Company counsel such transactions would cause the Company to lose the
availability of an exemption from the registration requirements of the
Securities Act with respect to the sale of Series A Preferred Stock contemplated
by this Agreement.
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(c) REGISTRATION RIGHTS. If at any time the Company
determines, as provided in Section 4.02, that registration of the resale the
Conversion Shares or the Warrant Shares is required, the Company shall
immediately notify the Purchaser, and the Purchaser shall have (i) the right to
demand that the Company register the Conversion Shares and the Warrant Shares
for resale on Form S-3 (or such other applicable Form) under the Securities Act
and (ii) the right to have the Conversion Shares and the Warrant Shares included
in any registration statement filed by the Company to register the issuance or
the resale of its securities, in each case on conventional terms including
standard representations and warranties, covenants, conditions, agreements,
indemnification and contribution provisions and allocation of costs provisions
and rights. In the event the Purchaser shall demand registration of the
Conversion Shares and the Warrant Shares pursuant to clause (i) above, the
Company shall file a registration statement within 45 days of receipt by the
Company from the Purchaser of such demand and shall use its best efforts to have
such registration statement declared effective promptly thereafter. The Company
shall keep the registration statement filed pursuant to either of clause (i) or
clause (ii) above effective until the Scheduled Redemption Date in the case of
the Conversion Shares or the expiration date in the case of the Warrant Shares
or until the Purchaser shall have sold all of its Conversion Shares and Warrant
Shares.
SECTION 5.02 LEGEND. (a) The certificates representing the Preferred Stock
will bear a legend in substantially the following form by which such Purchaser
and each subsequent holder of such securities will be bound (the "Legend"):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE
UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND SUCH SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
REGISTRATION UNDER THE SECURITIES ACT OR UNLESS SUCH TRANSACTION IS EXEMPT
FROM, OR NOT SUBJECT TO, SUCH REGISTRATION."
(b) Following termination of the Restricted Period, upon conversion of the
Preferred Stock, the Conversion Shares shall be issued and transferable without
the Legend provided for in subsection (a) above, except as provided by Section
4.02(a) above.
SECTION 5.03. DOCUMENTATION REQUIRED TO EFFECT CONVERSION OF PREFERRED
STOCK. In order for Purchaser to effect the conversion of Preferred Stock into
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unlegended Conversion Shares, the Purchaser shall be required only to deliver a
Notice of Conversion substantially in the form of Exhibit B hereto. The Company
agrees that it will not require the delivery of additional documentation, the
provision of any additional representations or warranties by the Purchaser or
impose any limitations on the conversion of the Preferred Stock into unlegended
Conversion Shares. The Irrevocable Instructions shall direct the Transfer Agent
to issue unlegended Conversion Shares without requesting any additional
documentation or representations or warranties from the Purchaser.
Notwithstanding the foregoing, if at any time the Company determines,
based on advice of counsel that there has been a change under the Securities Act
or any other applicable securities law or in the interpretation of the
provisions thereof, such that the Preferred Stock will no longer be convertible
into freely tradeable Conversion Shares at any time beginning 41 days following
the date of original issue of the Preferred Stock, the Purchaser hereby agrees
to deliver to the Company, upon their reasonable request, such additional
documentation as reasonably necessary in order to allow the Company to issue
unlegended Conversion Shares in compliance with any such changes under or
interpretations of the provisions of the Securities Act or other applicable
securities laws.
SECTION 5.04. RULE 144; CURRENT INFORMATION. For so long as any Preferred
Stock or Conversion Shares are outstanding, the Company will (i) file all
reports required to be filed by it under the Securities Act and the Exchange Act
and will take such further actions as any Purchaser may reasonably request, all
to the extent required from time to time to enable such Purchaser to sell
Preferred Stock and Conversion Shares without registration under the Securities
Act pursuant to the safe harbors and exemptions provided by Rule 144, under the
Securities Act, as such rules may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission, and (ii) furnish each
Purchaser with all reports, proxy statements and registration statements which
the Company files with the Commission or distributes to its securityholders
pursuant to the Securities Act and the Exchange Act at the times of such filings
and distributions. Upon the request of any Purchaser, the Company will deliver
to such Purchaser a written statement as to whether it has complied with the
foregoing requirements.
SECTION 5.05. RESERVATION OF CONVERSION SHARES. The Company shall at all
times reserve and keep available, free from preemptive rights, out of its
authorized but unissued shares of Common Stock or its issued shares of Common
Stock held in its treasury, or both, sufficient shares of Common Stock to
provide for the issuance of the Conversion Shares from time to time as the
Preferred Stock become convertible pursuant to their terms.
SECTION 5.06. STOCK LISTING. The Company shall endeavor to have the
Conversion Shares approved for quotation, prior to issuance, upon the Nasdaq
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National Market or any similar system of automated dissemination of securities
prices upon which the Common Stock is listed or traded at the time of issuance
of such Conversion Shares.
SECTION 5.07. IRREVOCABLE INSTRUCTIONS; NO ADDITIONAL CONVERSION
REQUIREMENTS. The Company shall take no action to cause the Transfer Agent to
act in contravention to the terms of the Irrevocable Instructions and shall take
all additional actions necessary, if any, to cause the Transfer Agent to issue
shares of Common Stock upon conversion of the Preferred Stock as contemplated
herein and in the Certificate of Designations. The Company further agrees that
it shall not terminate its relationship with the Transfer Agent unless a
successor transfer agent shall be appointed and the Company and such successor
transfer agent shall have executed the Irrevocable Instructions. The Company
agrees that it shall not, and shall not cause to Transfer Agent to, require any
additional documentation, representation or additional agreement from the
Purchaser as a condition to the Purchaser's being allowed to acquire Common
Stock without a Legend upon conversion of Preferred Stock in accordance with the
terms hereof.
ARTICLE VI
MISCELLANEOUS
SECTION 6.01. BLACKOUT PERIOD. Each Purchaser hereby agrees that in the
event that at any time after the date hereof until 180 days after such date, the
Company shall issue shares of Common Stock in a firmly underwritten public
offering, the Purchaser shall, at the underwriters' request, agree to restrict
the sale or transfer of such Purchaser's shares of Preferred Stock, Conversion
Shares, Warrants or Warrant Shares for a period of time (the "Blackout Period"),
provided that the Company, its officers, directors, consultants and all
shareholders and persons holding securities convertible or exercisable for
Common Stock in an amount equal to or greater than the number of shares of
Common Stock held by Purchaser (for purposes of calculating the number of shares
of Common Stock held by Purchaser, the Purchaser shall be deemed to hold such
number of shares of Common Stock as it would be entitled to, had Purchaser
converted all of its Preferred Stock at the Conversion Price in effect on the
date the Blackout Period begins together with Warrant Shares issuable upon
exercise of outstanding Warrants, and for purposes of determining the number of
shares of Common Stock held by persons holding securities convertible or
exchangeable for Common Stock, the number of shares of Common Stock shall be
similarly calculated) are also subject to such restriction on sale or transfer
of the securities held by them, respectively, for the Blackout Period.
SECTION 6.02. PRESS RELEASES AND DISCLOSURE. No party hereto shall issue
any press release or make any other public disclosure (pursuant to filing of
Exchange Act
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reports with the Commission or otherwise) related to this Agreement or any of
the transactions contemplated hereby without the prior written approval of the
other party hereto, except as may be necessary or appropriate in the opinion of
the party seeking to make disclosure to comply with the requirements of
applicable law or stock exchange rules (provided that, unless otherwise required
by applicable law, regulation, order or the like, or agreed to between the
parties, (i) no Exchange Act filing shall disclose more than the title and
amount of securities issued, the conversion formula, the amount of proceeds and
the intended use of proceeds, and (ii) no press release shall disclose more than
the title and amount of securities issued, a general description of the
conversion formula, the amount of proceeds and the intended use of proceeds, and
provided further that in no event shall the identity of a Purchaser be disclosed
without such Purchaser's prior written consent unless such disclosure is
required by applicable law, regulation, order or the like, in which event the
Company shall, prior to complying with such law, regulation, order or the like,
give written notice to Purchaser so as to allow Purchaser to contest such
disclosure). If any such press release or public disclosure is so required, the
party making such disclosure shall consult with the other party prior to making
such disclosure, and the parties shall use all reasonable efforts, acting in
good faith, to agree upon a text for such disclosure which is satisfactory to
all parties.
SECTION 6.03. EXPENSES. Except as otherwise expressly provided for herein,
and subject to the consummation of the transactions contemplated herein, the
Company will pay all of its and all of the Purchasers' expenses (including
attorneys' fees and expenses) in connection with the negotiation of the
Transaction Documents, the performance of the obligations of each thereunder,
and the consummation of the transactions contemplated thereby (whether
consummated or not). Such Purchasers' expenses shall be payable at the Closing
and may be netted against the Purchase Price otherwise payable by the
Purchasers.
SECTION 6.04. NOTICES. All notices, demands, requests, consents, approvals
or other communications required or permitted to be given hereunder or which are
given with respect to this Agreement shall be in writing and shall be personally
served or deposited in the mail, registered or certified, return receipt
requested, postage prepaid, or delivered by reputable air courier service with
charges prepaid, or transmitted by hand delivery, telegram, telex or facsimile,
addressed as set forth below, or to such other address as such party shall have
specified most recently by written notice: (i) if to the Company, to: Connective
Therapeutics, Inc., 0000 Xxxx Xxxxxxxx Xxxx, Xxxx Xxxx, XX 00000 Attention: CFO,
Facsimile No.: (000) 000-0000; with a copy to Xxxxxx X. Xxxxxx, Esq. at Venture
Law Group; Facsimile No.: (000) 000-0000 and (ii) if to a Purchaser, to such
Purchaser's address set forth on its counterpart signature page hereto. Notice
shall be deemed given on the date of service or transmission if personally
served or transmitted by telegram, telex or facsimile. Notice otherwise sent as
provided herein shall be deemed given on the
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third business day following the date mailed or on the next business day
following delivery of such notice to a reputable air courier service.
SECTION 6.05. ENTIRE AGREEMENT. This Agreement (together with the other
Transaction Documents and all other documents delivered pursuant hereto and
thereto) constitutes the entire agreement of the parties with respect to the
subject matter hereof and supersedes all prior and contemporaneous agreements,
representations, understandings, negotiations and discussions between the
parties, whether oral or written, with respect to the subject matter hereof.
SECTION 6.06. AMENDMENT AND WAIVER. This Agreement may not be amended,
modified, supplemented, restated or waived except by a writing executed by the
Company and the majority holders in interest of each of the shares of Preferred
Stock and the Warrants; provided, however, that this Agreement may not be
amended, modified, supplement, restated or waived without the express written
consent of all the holders in interest of the shares of Preferred Stock and
Warrants, if any such action would adversely affect the rights of such holders
of shares of Preferred Stock or Warrants. Waivers may be made in advance or
after the right waived has arisen or the breach or default waived has occurred.
Any waiver may be conditional. No waiver of any breach of any agreement or
provision herein contained shall be deemed a waiver of any preceding or
succeeding breach thereof nor of any other agreement or provision herein
contained. No waiver or extension of time for performance of any obligations or
acts shall be deemed a waiver or extension of the time for performance of any
other obligations or acts.
SECTION 6.07. ASSIGNMENT; NO THIRD PARTY BENEFICIARIES. This Agreement and
the rights, duties and obligations hereunder may not be assigned or delegated by
either the Company, on the one hand, or a Purchaser, on the other hand, without
the prior written consent of the other parties hereto; provided that the rights,
duties and obligations hereunder of the Purchaser shall be assigned in
connection with any transfer of Series A Preferred Stock to any third party.
Except as provided in the preceding sentence, any purported assignment or
delegation of rights, duties or obligations hereunder made without the prior
written consent of the other parties hereto shall be void and of no effect. This
Agreement and the provisions hereof shall be binding upon and shall inure to the
benefit of each of the parties and their respective successors and permitted
assigns. This Agreement is not intended to confer any rights or benefits on any
Persons other than as set forth above.
SECTION 6.08. SEVERABILITY. This Agreement shall be deemed severable, and
the invalidity or unenforceability of any term or provision hereof shall not
affect the validity or enforceability of this Agreement or of any other term or
provision hereof. Furthermore, in lieu of any such invalid or unenforceable term
or provision, the parties hereto intend that there shall be added as a part of
this Agreement a provision as similar in terms to such invalid or unenforceable
provision as may be possible and be valid and enforceable.
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SECTION 6.09. FURTHER ASSURANCES. Each party hereto, upon the request of
any other party hereto, shall do all such further acts and execute, acknowledge
and deliver all such further instruments and documents as may be necessary or
desirable to carry out the transactions contemplated by this Agreement.
SECTION 6.10. TITLES AND HEADINGS. Titles, captions and headings of the
sections of this Agreement are for convenience of reference only and shall not
affect the construction of any provision of this Agreement.
SECTION 6.11. GOVERNING LAW; SUBMISSION TO JURISDICTION.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, INTERPRETED UNDER,
AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF DELAWARE
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED WITHIN THE STATE OF DELAWARE
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS-OF-LAW
THEREOF.
(b) EACH OF THE PARTIES TO THIS AGREEMENT IRREVOCABLY SUBMIT
TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK IN ANY ACTION, SUIT OR PROCEEDING BROUGHT AGAINST
IT IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREUNDER OR FOR RECOGNITION OR ENFORCEMENT OR ENFORCEMENT OF ANY JUDGMENT, AND
THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREE THAT ALL CLAIMS IN
RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD OR DETERMINED IN SUCH
FEDERAL COURT; PROVIDED HOWEVER, THAT IF FOR WHATEVER REASON THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK WILL NOT OR CANNOT HEAR
SUCH ACTION, SUIT OR PROCEEDING, SUCH ACTION, SUIT OR PROCEEDING MAY BE HEARD OR
DETERMINED IN ANY NEW YORK STATE COURT LOCATED IN THE CITY AND COUNTY OF NEW
YORK AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF SUCH COURTS IN RESPECT OF ANY SUCH ACTION, SUIT OR PROCEEDING.
TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HERETO HEREBY WAIVE AND
AGREE NOT TO ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, IN ANY SUCH
SUIT, ACTION OR PROCEEDING, THAT SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT IN
ANY INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS
IMPROPER, OR THAT THE RELATED DOCUMENTS OR THE SUBJECT MATTER THEREOF MAY NOT BE
LITIGATED IN OR BY SUCH COURTS.
SECTION 6.12. COUNTERPARTS. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, all of which
taken together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by the undersigned, thereunto duly authorized, as of
the date first set forth above.
CONNECTIVE THERAPEUTICS, INC.
By:_________________________________________
Name:
Title:
[NAME OF PURCHASER]
By:_________________________________________
Name:
Purchaser's Address for Notices
Pursuant to Section 6.03:
Attention:
Facsimile No.:
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EXHIBIT A
FORM OF WARRANT
Please see Exhibit 10.4 to Form 8-K
23
EXHIBIT B
CONNECTIVE THERAPEUTICS, INC. - NOTICE OF CONVERSION
7% CONVERTIBLE PREFERRED STOCK, SERIES A
(To be executed by the Holder in order to convert the Series A Preferred Stock
or portion thereof)
The undersigned hereby irrevocably elects to convert [the entire amount] [______
shares] of the Series A Preferred Stock represented by Certificate No. _________
into shares of Common Stock, $___ par value (the "Common Stock"), of Connective
Therapeutics Inc. (the "Company") as of the Date of Conversion (which shall be
the date of receipt by facsimile by the Company of this Notice of Conversion).
If shares are to be issued in the name of a person other than the undersigned,
the undersigned will pay all transfer taxes payable with respect thereto and is
delivering herewith such certificates as reasonably requested by the Company or
its Transfer Agent. No fee will be charged to the Holder for any conversion,
except for transfer taxes, if any.
The undersigned represents and warrants that the number of shares of Common
Stock to be received upon conversion, together with the shares of Common Stock
beneficially owned by the undersigned (and its affiliates) on the Date of
Conversion, do not exceed 4.9% of the outstanding shares of Common Stock of the
Company (as set forth in the Company's most recent filing with the Securities
and Exchange Commission unless the Company shall notify the Holder that a lesser
number of shares is outstanding).
If the stock certificate is to be made out in another person's name, fill in the
form below:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type other person's name, address and zip code)
________________________________________________________________________________
(Insert assignee's U.S. social security or tax identification number, if any)
Conversion calculations: _________________________________
Date of Conversion
_________________________________
Applicable Conversion Price
______________________________
Total number of shares $________________________________
(assuming dividends payable Accrued Dividend
in shares)
[Name of Holder]
By:______________________________
Name:
Title:
B-1
