OMNIBUS AMENDMENT
This OMNIBUS AMENDMENT dated as of December 18, 1997 is between
SmithKline Xxxxxxx Corporation, a Pennsylvania corporation ("SBC"), SmithKline
Xxxxxxx Inc., a Canadian corporation (successor by merger to SmithKline Xxxxxxx
Pharma Inc., a Canadian corporation) ("SBI"), SmithKline Xxxxxxx Properties,
Inc., a Delaware corporation ("SB Properties") and SmithKline Xxxxxxx
Inter-American Corporation, a Delaware corporation ("IAC") (collectively SBC,
SBI, SB Properties and IAC are referred to herein as the "Vendor") and Connetics
Corporation (formerly Connective Therapeutics, Inc.), a Delaware corporation
(the "Company").
RECITALS
A. The Company and Vendor entered into an Asset Purchase Agreement
dated December 2, 1996 (the "Asset Purchase Agreement") pursuant to which the
Company acquired from Vendor on December 31, 1996 all rights to Ridaura(R), a
pharmaceutical product;
B. In connection with such transaction, the Company and SB Properties
entered into a Stock Issuance Agreement dated December 31, 1996 (the "Equity
Agreement") and the Company issued to SBC a Secured Promissory Note dated
December 31, 1996, which was amended on November 11, 1997 (the "Note"); and
C. The Company and Vendor wish to make certain changes to the
obligations contained in the Equity Agreement and the Note.
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE 1
AMENDMENTS TO EQUITY AGREEMENT
AND ASSET PURCHASE AGREEMENT
1.1 Second Closing Date for Share Issuance. Pursuant to Section 2.2(b)
of the Equity Agreement, the Company and SB Properties hereby agree that the
Second Closing Date (as defined in the Equity Agreement) shall be April 1, 1998,
or such other date as the Company and SB Properties may agree in writing.
1.2 Value of SB Properties' Investment in the Company. Section 2.1(b)
and Section 2.1(c) of the Equity Agreement are hereby amended in their entirety
to read as follows:
(b) Adjustments on Second Closing Date.
(i) Second Issuance. If on the Second Closing Date,
the aggregate market value of the Initial Issuance Shares is
less than $8,000,000 (based upon the average daily closing
price per share for the Company's Common Stock for the twenty
(20) trading days immediately
preceding (but not including) the third trading day before the
Second Closing Date, as reported on the NASDAQ Stock Market),
then the Company shall issue that number of additional shares
of its Common Stock (the "Second Issuance Shares") sufficient
to bring such aggregate market value of the Shares to
$8,000,000. Such issuance shall be referred to hereinafter as
the "Second Issuance."
(ii) Redemption of Shares. If on the Second Closing
Date, the aggregate market value of the Initial Issuance
Shares is greater than $8,000,000 (based upon the average
daily closing price per share for the Company's Common Stock
for the twenty (20) trading days immediately preceding (but
not including) the third trading day before the Second Closing
Date, as reported on the NASDAQ Stock Market), then the
Company shall have the right, but not the obligation, to
redeem from SB at a price of $0.01 per share that number of
the Initial Issuance Shares sufficient to reduce such
aggregate market value of the remaining Initial Issuance
Shares to $8,000,000. If the Company exercises such right, the
Company shall deliver to SB at the Second Closing by check or
wire transfer the aggregate redemption price for the excess
portion of the Initial Issuance Shares, and SB will deliver
for cancellation the stock certificate representing the
original Initial Issuance Shares (which the Company will
replace as soon as practicable thereafter with a stock
certificate representing the remaining portion of the Initial
Issuance Shares after the redemption set forth above).
(iii) Other Valuations. In the event that neither
Section 2.1(b)(i) nor Section 2.1(b)(ii) is applicable, then
there shall be no Second Issuance nor any redemption of the
Initial Issuance Shares at the Second Closing.
(c) Limitation on Second Issuance Shares. In all events the
sum of the Initial Issuance Shares and the Second Issuance
Shares (if any) shall be not greater than 1,675,512 shares,
which the Company represents and warrants is 19.9% of the
outstanding Common Stock of the Company on December 31, 1996
(prior to the issuance of the Initial Issuance Shares). In the
event that such sum of the Shares would otherwise be greater
than 1,675,512 shares, then the Second Issuance Shares shall
be reduced until such sum of the Shares is equal to 1,675,512
shares. The dollar value of the excess portion of the Second
Issuance Shares that could not be issued on the Second Closing
Date due to this subsection (based upon the average daily
closing price per share for Purchaser's Common Stock for the
twenty (20) trading days immediately preceding (but not
including) the third trading day before the Second Closing
Date, as reported on the NASDAQ Stock Market) shall be defined
as the "Excess Amount".
1.3 Amendment to Deferred Purchase Price. In the event that Section
2.1(c) of the Equity Agreement (as amended by this Omnibus Amendment) results in
a reduction in the
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number of shares otherwise issuable to SB Properties, then Section 4.2 of the
Asset Purchase Agreement shall automatically be amended in its entirety to read
as follows:
4.2 Deferred Purchase Price. From and after the Time
of Closing, Purchaser shall pay to SB Properties an amount
equal to 8% of net sales of the Products (or any other product
in which auranofin is an active ingredient) by Purchaser or
its Affiliates or any successor, assignee, licensee or
distributor of Purchaser. For purposes of this Section 4.2,
net sales shall be determined as described in Schedule 4.2.
Such deferred payments shall accrue (without interest)
commencing from the Time of Closing through December 31, 1998.
Commencing January 1, 1999 such deferred payments shall be
paid quarterly in arrears not later than 30 days after the end
of each calendar quarter. During 1999 concurrently with each
such quarterly payment, Purchaser shall also pay SB Properties
one-fourth of the accrued payment with respect to the two year
period ending December 31, 1998. Purchaser's obligation with
respect to deferred payments (exclusive of any late charge for
failure to make such payments when due and payable) shall be
limited to $6 million plus the Excess Amount (as defined in
Section 2.1(c) of the Equity Agreement). Vendor agrees and
acknowledges that the deferred payments under this Section 4.2
are contingent on net sales. Purchaser makes no representation
or warranty regarding the aggregate amount that may be due as
deferred payments.
ARTICLE 2
PAYMENTS OWING TO VENDOR
2.1 Amendment to Secured Promissory Note. Section 2 of the Note is
hereby amended to read in its entirety as follows:
"Maker promises to make payments of principal under this Note
on the following dates (each a "Payment Date"):
April 1, 1998 $1,000,000
October 1, 1998 $1,000,000
January 4, 1999 $4,000,000
January 7, 1999 $5,000,000
On April 1, 1998 in addition to the payment of principal set
forth above, the Maker shall pay interest on all principal amounts
outstanding under the Note (except for the $5,000,00 principal amount
due January 7, 1999) for the period from January 1, 1998 through March
31, 1998 at the Interest Rate (as defined below), calculated on the
basis of actual days and a 360-day year. On each subsequent Payment
Date in addition to the payment of principal set forth above for such
Payment Date, the Maker
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shall pay the Payee interest on all principal amounts outstanding under
the Note (except for the $5,000,00 principal amount due January 7,
1999) for the period from the immediately prior Payment Date through
the day preceding the current Payment Date calculated on the basis
actual days and a 360-day year. The "Interest Rate" shall be equal to
sum of (a) the prime rate as publicly announced by Citibank NA from
time to time plus 2%."
2.2 Additional Payment to Vendor. In consideration of the amendments to
the Equity Agreement and the Note made herein, the Company shall pay to SB
Properties the amount of $1,000,000. Such payment shall be made and satisfied by
the delivery by the Company on or before December 31, 1997 of a wire transfer of
funds to a bank account(s) designated by SB Properties.
ARTICLE 3
MISCELLANEOUS
Except as set forth in this Omnibus Amendment, the provisions of the
Equity Agreement, the Asset Purchase Agreement and the Note shall continue in
effect without change. This Omnibus Amendment may be executed in counterparts.
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IN WITNESS WHEREOF this Omnibus Amendment has been executed by the
parties hereto as of the date first above written.
SMITHKLINE XXXXXXX CORPORATION
By: : /s/ Xxxxxx Xxxxxx
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Title: Secretary
SMITHKLINE XXXXXXX PROPERTIES, INC.
By: : /s/ Xxxxxx Xxxxxx
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Title: Vice President
SMITHKLINE XXXXXXX INC.
By: : /s/ Xxxxxx Xxxxxx
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Title: Attorney
SMITHKLINE XXXXXXX INTER-AMERICAN
CORPORATION
By: /s/ Xxxxxx Xxxxxx
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Title: Vice President
CONNETICS CORPORATION
By: /s/ Xxxxxx X. Xxxxxxx
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Title: President and Chief
Executive Officer
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The undersigned lenders of the Company hereby consent to this Omnibus
Amendment as of the date first above written.
SILICON VALLEY BANK
By: /s/ Silicon Valley Bank
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Title:
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MMC/GATX PARTNERSHIP NO. 1
By: /s/ MMC/GATX Partnership No. 1
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Title:
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