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NOTICE OF FUNDAMENTAL CHANGE
AND
RIGHT TO REQUIRE REPURCHASE OF SECURITIES
OF
CONNETICS CORPORATION
2.00% Convertible Senior Notes due March 30, 2015
THE RIGHT TO REQUIRE REPURCHASE WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON
FEBRUARY 8, 2007, AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME ON FEBRUARY 9, 2007, AND BOTH MAY NOT BE EXTENDED, EXCEPT AS REQUIRED BY
APPLICABLE LAW.
Connetics Corporation ("Connetics" or the "Company"), a Delaware corporation,
hereby gives notice to the Holders of its outstanding 2.00% Convertible Senior
Notes due March 30, 2015 (the "Securities"), governed by the terms of the
Indenture, dated as of March 23, 2005 (the "Indenture"), between Connetics and
The Bank of New York Trust Company, N.A. (the "Trustee"), successor in interest
to J.P. Morgan Trust Company, National Association, of the Holders' right to
require Connetics to repurchase the Securities at a repurchase price equal to
100% of the principal amount of the Securities, plus interest accrued and unpaid
to, but excluding February 12, 2007 (the "Fundamental Change Repurchase Date").
Capitalized terms used in this notice, unless otherwise defined herein, have the
meanings given to such terms in the Indenture.
A Fundamental Change occurred on December 28, 2006, as a result of the merger on
such date of Clear Acquisition Sub, Inc., a wholly owned subsidiary of Stiefel
Laboratories, Inc. ("Stiefel"), with and into Connetics, with Connetics
continuing as the surviving entity (the "Merger") and a wholly owned subsidiary
of Stiefel. Under the terms of the Indenture, upon the occurrence of a
Fundamental Change the Holders of the Securities have a right to require
Connetics to repurchase such Holder's Securities at a repurchase price equal to
100% of the principal amount of the Securities, plus accrued and unpaid interest
to, but excluding, the Fundamental Change Repurchase Date (the "Fundamental
Change Repurchase Price"). Connetics is hereby notifying the Holders of their
right to require Connetics to repurchase all of the outstanding Securities.
Payment of the Fundamental Change Repurchase Price will be made in cash by the
Paying Agent promptly following the Fundamental Change Repurchase Date upon
presentation and surrender of the Securities as described below under "Manner of
Repurchase." On the Fundamental Change Repurchase Date, for each Security
tendered, the Fundamental Change Repurchase Price will become due and payable to
the respective Holder. Connetics is giving this notice of the Holders' right to
require repurchase in order to satisfy its obligations under the Indenture.
The Securities are obligations of Connetics. Any Securities that remain
outstanding after consummation of the repurchase of Securities provided for
herein will continue to be obligations of Connetics.
MANNER OF REPURCHASE
To exercise its right to require Connetics to repurchase Securities, a Holder of
Securities shall (1) deliver written notice (attached hereto as Exhibit A (the
"Fundamental Change Repurchase Notice")) of the Holder's exercise of such right
by letter, overnight courier, hand delivery, facsimile transmission or in any
other written form to the Paying Agent, on or before February 8, 2007, and (2)
surrender such Securities, duly endorsed for transfer, to the Paying Agent. If
the Paying Agent, on the day immediately following the Fundamental Change
Repurchase Date, holds money sufficient to pay the Fundamental Change Repurchase
Price of the Securities for which a Fundamental Change Repurchase Notice has
been given, such Securities will cease to be outstanding and interest will cease
to accrue.
An owner of beneficial interests in the Securities through The Depository Trust
Company ("DTC") electing to submit Securities for repurchase must (i) complete
the appropriate instruction form pursuant to DTC's book-entry program, (ii)
deliver through the DTC's book-entry system the beneficial interest on or prior
to 5:00 p.m. New York City time on February 8, 2007 together with an agent's
message transmitted by DTC to the Paying Agent (instead of delivering the
Fundamental Change Repurchase Notice described above) and (iii) follow any other
required directions as instructed by DTC. An "agent's message" means a message,
transmitted by DTC to, and received by, the Paying Agent and forming a part of a
book-entry confirmation, which states that DTC has received an express
acknowledgment from the participant submitting the Securities for repurchase,
which acknowledgment states that such participant has received and agreed to be
bound by the terms and conditions of the Fundamental Change Repurchase Notice.
Each owner of a beneficial interest in the Securities that has properly
delivered such beneficial interest and agent's message for repurchase through
DTC, and has not withdrawn such delivery prior to 5:00 p.m. New York City time
on February 9, 2007, will receive the Fundamental Change Repurchase Price.
Delivery by any owner of a beneficial interest in the Securities, together with
an agent's message through the facilities of DTC prior to 5:00 p.m., New York
City time, on February 8, 2007, is a condition to receipt of the Fundamental
Change Repurchase Price by such Holder.
NOTICE OF WITHDRAWAL
Any Holder of Securities in certificated form who has given a Fundamental Change
Repurchase Notice may withdraw such Fundamental Change Repurchase Notice (in
whole or in part) by delivery of a written notice of withdrawal (attached hereto
as Exhibit B (the "Withdrawal Notice")) delivered to the Paying Agent prior to
the close of business on February 9, 2007.
A Withdrawal Notice for certificated Securities may be delivered by letter,
overnight courier, hand delivery, facsimile transmission or other written form.
Beneficial owners who deliver beneficial interests in Securities through DTC
need not submit a physical Withdrawal Notice to the Paying Agent if such owners
comply with the transmittal procedures of DTC for submitting a notice of
withdrawal. For a withdrawal of Securities delivered pursuant to DTC's system to
be effective, a properly transmitted "Request Message" through DTC's system must
be received by the Paying Agent at the address set forth below prior to 5:00
p.m., New York City time, on February 9, 2007, and such Request Message should
contain the information specified in the above Withdrawal Notice.
CONVERSION RIGHTS
Holders that do not elect to require Connetics to repurchase their Securities
will have the right to convert their Securities, upon the terms and subject to
the conditions of the Indenture, into the consideration that the Holder would
have received had the Holder converted such Securities immediately prior to the
Merger. This right of conversion will end at the close of business on February
8, 2007. Each Holder of a Security has the right, upon conversion of such
Security, to receive an amount of cash equal to $493.45 for each $1,000
principal amount of Securities (the "Conversion Value"). This amount is based
upon the Initial Conversion Rate of 28.1972 shares of Connetics common stock,
par value $0.001 per share (the "Common Stock"), per $1,000 principal amount of
the Securities. The Initial Conversion Rate has not been adjusted. The
Conversion Value is fixed as of the date of the Merger and is not subject to
further adjustment. Holders exercising the right to require Connetics to
repurchase the Securities, however, will receive 100% of the principal amount of
the Securities, plus accrued and unpaid interest to, but excluding, the
Fundamental Change Repurchase Date.
In order to receive the Conversion Value, such Holder must deliver an
irrevocable conversion notice substantially in the form set forth in the
Indenture, together with the Security (if the Security is in certificated form),
duly endorsed in blank, by February 8, 2007, to the Conversion Agent at any
office or agency of Connetics maintained for that purpose pursuant to the terms
of the Indenture. Any Holder may obtain copies of the required form of the
conversion notice from the Conversion Agent. Persons that hold beneficial
2
interests in Securities through DTC need not submit a physical conversion notice
if such persons comply with the applicable procedures of DTC.
Securities with respect to which a Fundamental Change Repurchase Notice has been
given by the Holder may be converted only if the Holder withdraws the
Fundamental Change Repurchase Notice as described above.
NOTICE OF WITHDRAWAL OF RESALE REGISTRATION STATEMENT
AND RELATED WAIVER
Connetics intends to withdraw the resale registration statement on Form S-1
(Registration No. 333-125982) with respect to the resale of the Securities and
the shares of common stock issuable upon conversion of the Securities (the
"Registration Statement"), effective upon the Fundamental Change Repurchase
Date. By exercising the right to require Connetics to repurchase the Securities
and delivering the Fundamental Change Repurchase Notice or the appropriate DTC
form, each Holder waives the obligation of Connetics to keep the Registration
Statement effective as set forth in Registration Rights Agreement, by and
between Connetics and the purchasers party thereto, dated March 23, 2005, unless
such Holder notifies the Trustee, prior to the close of business on February 8,
2007, at the address or phone number below that such Holder objects to and does
not agree to provide such waiver. To the extent a Holder does not object to the
waiver, such Holder will receive the amounts due to such Holder upon the
exercise of its right to require Connetics to repurchase the Securities
contemplated hereby at least one business day prior to the date contemplated by
the Indenture.
TRUSTEE AND PAYING AGENT
The name, address, telephone number and facsimile number of the Trustee and
Paying Agent for the Securities, The Bank of New York Trust Company, N.A., are
as follows:
The Bank of New York Corporate Trust Operations
Reorganization Unit
Attn: Evangeline Gonzales
101 Barclay Street - 7 East
New York NY 10286
Telephone Number: (212) 815-3738
Facsimile Number: (212) 298-1915
Delivery of the Fundamental Change Repurchase Notice and all other required
documents to an address other than as set forth above does not constitute valid
delivery. Delivery of documents to DTC or Connetics does not constitute delivery
to the Paying Agent. The method of delivery of all documents, including
certificates representing the Securities, is at the risk of the Holder. If
delivery is by mail, registered mail with return receipt requested, properly
insured, is recommended. The Fundamental Change Repurchase Notice must be signed
in the appropriate space provided therefor, with the signature guarantee if
required.
GENERAL
The CUSIP numbers for the Securities are: 208192AC8 and 208192AD6. Such CUSIP
numbers have been assigned by Standard & Poor's Corporation and are included
solely for the convenience of Holders of the Securities.
January 10, 2006.
3
EXHIBIT A
ELECTION OF HOLDER TO REQUIRE REPURCHASE
("FUNDAMENTAL CHANGE REPURCHASE NOTICE")
(1) Pursuant to Article XIII of the Indenture, the undersigned hereby
elects to have this Security repurchased by the Company.
(2) The undersigned hereby directs the Trustee or the Company to pay it or
________________ the repurchase price as set forth in the Indenture.
Dated:
____________________
____________________
Signature(s)
Signature(s) must be guaranteed by an Eligible Guarantor Institution with
membership in an approved signature guarantee program pursuant to Rule 17Ad-15
under the Securities Exchange Act of 1934.
____________________
Signature Guaranteed
Principal amount of securities to be repurchased (at least U.S. $1,000 or an
integral multiple of $1,000 in excess thereof): ____________
Remaining principal amount following such repurchase (not less than U.S.
$1,000): ____________
NOTICE: The signature to the foregoing Election must correspond to the Name as
written upon the face of this Security in every particular, without alteration
of any change whatsoever.
The above Fundamental Change Repurchase Notice, properly completed, together
with the Securities in certificate form, MUST BE RECEIVED by The Bank of New
York Trust Company, N.A. (the "Paying Agent"), at the address set forth below
prior to 5:00 p.m., New York City Time, on February 8, 2007.
The Bank of New York Corporate Trust Operations
Reorganization Unit
Attn: Evangeline Gonzales
101 Barclay Street - 7 East
New York NY 10286
Facsimile Number: (212) 298-1915
For further information call: (212) 815-3738.
A-1
GENERAL INSTRUCTIONS TO
THE FUNDAMENTAL CHANGE REPURCHASE NOTICE
1. Please do not send Security certificates directly to the Company.
If you hold your Securities in certificated form, your Security
certificates, together with your signed and completed Fundamental Change
Repurchase Notice, should be mailed, or otherwise delivered, to the Paying
Agent, at the appropriate address indicated in this notice.
2. Signature, Assignments and Medallion Stamp Requirements.
If this Fundamental Change Repurchase Notice is signed by the registered
Holder(s) of the Securities transmitted herewith, the signature(s) must
correspond exactly with the name(s) of such registered Holder(s). If this
Fundamental Change Repurchase Notice is signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of companies or other
persons acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and proper evidence satisfactory to Connetics Corporation
(the "Company") of their authority so to act must be submitted, and the
signature(s) must be properly guaranteed by a commercial bank, broker, dealer,
municipal securities dealer, municipal securities broker, government securities
dealer, government securities broker, credit union, national securities
exchange, registered securities association, clearing agency or savings
association, and in each case such guarantor must be a member of or a
participant in the Securities Transfer Agents Medallion Program, the New York
Stock Exchange, Inc. Medallion Signature Program or the Stock Exchanges
Medallion Program.
If Securities or assignment(s) are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of companies or other
persons acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and proper evidence satisfactory to the Company of their
authority to so act must be submitted, and the signature(s) must be properly
guaranteed by a commercial bank, broker, dealer, municipal securities dealer,
municipal securities broker, government securities dealer, government securities
broker, credit union, national securities exchange, registered securities
association, clearing agency or savings association, and in each case such
guarantor must be a member of or a participant in the Securities Transfer Agents
Medallion Program, the New York Stock Exchange, Inc. Medallion Signature Program
or the Stock Exchanges Medallion Program.
3. Certificate or Check to be Issued in a Different Name.
If a check is to be issued in a name other than that of the registered
Holder(s) of the Securities, the related Security certificates must be properly
endorsed or be accompanied by appropriate bond powers (which may consist of this
Fundamental Change Repurchase Notice), properly executed by the registered
Holder(s), so that such endorsement or bond powers are signed exactly as the
name(s) of the registered Holder(s) appear on the Security certificates, and the
signature(s) must be properly guaranteed by a commercial bank, broker, dealer,
municipal securities dealer, municipal securities broker, government securities
dealer, government securities broker, credit union, national securities
exchange, registered securities association, clearing agency or savings
association, and in each case such guarantor must be a member of or a
participant in the Securities Transfer Agents Medallion Program, the New York
Stock Exchange, Inc. Medallion Signature Program or the Stock Exchanges
Medallion Program.
A-2
If the Fundamental Change Repurchase Notice is signed by someone other than
the registered owner, who is not a person described in the preceding paragraph,
the Security certificates must be properly endorsed or be accompanied by
appropriate bond powers (which may consist of this Fundamental Change Repurchase
Notice), properly executed by the registered Holder(s), so that such endorsement
or bond powers are signed exactly as the name(s) of the registered Holder(s)
appear on the Securities, and the signature(s) must be properly guaranteed by a
commercial bank, broker, dealer, municipal securities dealer, municipal
securities broker, government securities dealer, government securities broker,
credit union, national securities exchange, registered securities association,
clearing agency or savings association, and in each case such guarantor must be
a member of or a participant in the Securities Transfer Agents Medallion
Program, the New York Stock Exchange, Inc. Medallion Signature Program or the
Stock Exchanges Medallion Program.
4. Joint Holders and Debenture Certificates Registered in Different Names.
If Securities in certificated form are tendered by joint Holders, all such
persons must sign the Fundamental Change Repurchase Notice.
5. Lost or Destroyed Certificates for Securities.
If your Security certificates have been either lost or destroyed, notify
the Trustee of this fact promptly by telephoning the Trustee at The Bank of New
York Corporate Trust Operations, Attn: Evangeline Gonzales at (212) 815-3738.
You will then be instructed as to the steps you must take in order to have your
Securities repurchased. This Fundamental Change Repurchase Notice and related
documents cannot be processed until the lost certificates procedures have been
completed.
6. Questions on How to Submit Your Security Certificates.
Questions and requests for assistance on how to submit your Securities in
certificated form, as well as requests for additional copies of this Fundamental
Change Repurchase Notice, should be directed to the Paying Agent at one of the
addresses set forth in this notice or by telephoning Evangeline Gonzales at
(212) 815-3738.
A-3
EXHIBIT B
WITHDRAWAL NOTICE
FORM OF WITHDRAWAL NOTICE TO BE COMPLETED BY HOLDERS
If you wish to exercise your option to withdraw a Fundamental Change
Repurchase Notice previously given with respect to all or any portion of your
2.00% Convertible Senior Securities due 2015 (CUSIP Numbers 208192AC8 and
208192AD6) (the "Securities") and you hold beneficial interests in the
Securities held in global form pursuant to the book-entry transfer system of The
Depository Trust Company ("DTC"), you should complete the appropriate
instruction form pursuant to DTC's book-entry system, deliver by book-entry
delivery an interest in such Securities in global form and an agent's message
and follow other directions as instructed by DTC.
If you wish to withdraw a Fundamental Change Repurchase Notice with respect
to your Securities in certificated form, this Withdrawal Notice MUST BE RECEIVED
by The Bank of New York Trust Company, N.A. (the "Paying Agent"), at one of the
addresses set forth below prior to 5:00 p.m., New York City time, on February 9,
2007.
___________________
The name and address of the Paying Agent for the Securities, The Bank of New
York Trust Company, N.A., are as follows:
The Bank of New York Corporate Trust Operations
Reorganization Unit
Attn: Evangeline Gonzales
101 Barclay Street - 7 East
New York NY 10286
For further information call: (212) 815-3738.
Delivery of this Withdrawal Notice and all other required documents to an
address other than as set forth above does not constitute valid delivery.
Delivery of documents to DTC or the Company does not constitute delivery to the
Paying Agent. The method of delivery of all documents, including certificates
representing the Securities, is at the risk of the Holder. If delivery is by
mail, registered mail with return receipt requested, properly insured, is
recommended. You must sign the Withdrawal Notice in the appropriate space
provided therefor, with the signature guarantee if required.
___________________
Please note that if you are withdrawing a Fundamental Change Repurchase Notice
with respect to Securities held in global form pursuant to the book-entry
transfer system of DTC, you do not need to complete and return this Withdrawal
Notice. See "Notice of Withdrawal" in the Notice of Fundamental Change and Right
to Require Repurchase of Securities of Connetics Corporation.
B-1
Ladies and Gentlemen:
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ITEM A.
DESCRIPTION OF SECURITIES BEING WITHDRAWN
- ----------------------------------------------------------------------------------------------------------------------
Certificates Withdrawn
Name and Address of (Please fill in numbers and amounts and attach sheet
Registered Holder if the space below is inadequate.)
- ------------------------------- --------------------------------------------------------------------------------------
Principal Amount
remaining
subject to repurchase
Principal Amount being by
Withdrawn (if less than the Company (if any)
Certificate Principal all) (must be in integral (must be in integral
Number(s) Amount multiples of $1,000.00) smultiples of $1,000.00)
----------------- -------------- --------------------------- --------------------------
----------------- -------------- --------------------------- --------------------------
----------------- -------------- --------------------------- --------------------------
----------------- -------------- --------------------------- --------------------------
----------------- -------------- --------------------------- --------------------------
----------------- -------------- --------------------------- --------------------------
----------------- -------------- --------------------------- --------------------------
Total Total
Principal Principal
Amount $__________ Amount $________
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B-2
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ITEM B. REQUIRED SIGNATURES
- ---------------------------------------------------------------------
The signature(s) on this Withdrawal Notice must correspond exactly
with the name(s) of the: (1) registered owner(s) of the Security
certificate(s) being withdrawn, or (2) person(s) to whom each such
certificate has been properly assigned and transferred, in which case
evidence of transfer must accompany this Withdrawal Notice.
Dated: _______________________________________
<--
Signature: ___________________________________ PLEASE
SIGN
Signature: ___________________________________ HERE
Telephone: (___)______________________________
Social Security Number or
Employer I.D. Number: ________________________
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CONFIRMATION OF EXERCISE OF WITHDRAWAL OPTION
The signature(s) of the Holder above is confirmation that the Holder
is electing that such Securities described in Item A above shall be
withdrawn from Holder's previously delivered Fundamental Change
Repurchase Notice, and shall not be repurchased on the Fundamental
Change Repurchase Date, as provided for in the Securities and in the
Indenture.
- ---------------------------------------------------------------------
B-3
GENERAL INSTRUCTIONS TO THE WITHDRAWAL NOTICE
1. Signature, Assignments and Medallion Stamp Requirements.
If this Withdrawal Notice is signed by the registered Holder(s) of the
Securities transmitted herewith, the signature(s) must correspond exactly with
the name(s) of such registered Holder(s). If this Withdrawal Notice is signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
companies or other persons acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and proper evidence satisfactory
to Connetics Corporation (the "Company") of their authority so to act must be
submitted, and the signature(s) must be properly guaranteed by a commercial
bank, broker, dealer, municipal securities dealer, municipal securities broker,
government securities dealer, government securities broker, credit union,
national securities exchange, registered securities association, clearing agency
or savings association, and in each case such guarantor must be a member of or a
participant in the Securities Transfer Agents Medallion Program, the New York
Stock Exchange, Inc. Medallion Signature Program or the Stock Exchanges
Medallion Program.
If Securities or assignment(s) are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of companies or other
persons acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and proper evidence satisfactory to the Company of their
authority to so act must be submitted, and the signature(s) must be properly
guaranteed by a commercial bank, broker, dealer, municipal securities dealer,
municipal securities broker, government securities dealer, government securities
broker, credit union, national securities exchange, registered securities
association, clearing agency or savings association, and in each case such
guarantor must be a member of or a participant in the Securities Transfer Agents
Medallion Program, the New York Stock Exchange, Inc. Medallion Signature Program
or the Stock Exchanges Medallion Program.
2. Joint Holders and Debenture Certificates Registered in Different Names.
If Securities in certificated form are withdrawn by joint Holders, all such
persons must sign the Withdrawal Notice in Item B.
B-4