-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VD+zzY3zMqvHtrBf9FSwrrX8tlTVNUHnQi0UYiKf8+4f9c/Fea2vIla5Jv2NW9rz nFkYxr2/08bS2c5KSxBSKA== 0001116679-02-001784.txt : 20021113 0001116679-02-001784.hdr.sgml : 20021113 20021113115217 ACCESSION NUMBER: 0001116679-02-001784 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20021113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PROTEIN POLYMER TECHNOLOGIES INC CENTRAL INDEX KEY: 0000858155 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH [8731] IRS NUMBER: 330311631 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-19724 FILM NUMBER: 02818943 BUSINESS ADDRESS: STREET 1: 10655 SORRENTO VALLEY RD CITY: SAN DIEGO STATE: CA ZIP: 92121 BUSINESS PHONE: 6195586064 MAIL ADDRESS: STREET 1: 10655 SORRENTO VALLEY ROAD CITY: SAN DIEGO STATE: CA ZIP: 92121 10QSB 1 pp10q.txt FILE NO. 0-19724 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2002 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________________ to ____________________ Commission file number 0-19724 PROTEIN POLYMER TECHNOLOGIES, INC. (Exact name of small business issuer as specified in its charter) Delaware 33-0311631 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 10655 Sorrento Valley Road, San Diego, CA 92121 (Address of principal executive offices) (858) 558-6064 (Issuer's telephone number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of November 8, 2002, 27,449,028 shares of common stock were outstanding. Transitional Small Business Disclosure Format (check one): Yes No X --- --- ================================================================================ 1 PROTEIN POLYMER TECHNOLOGIES, INC. FORM 10-QSB INDEX
Page No. -------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) Condensed Balance Sheets - September 30, 2002 and December 31, 2001 .................................3 Condensed Statements of Operations - For the Three Months and Nine Months ended September 30, 2002 and 2001 and the period July 6, 1988 (inception) to September 30, 2002..............4 Condensed Statements of Cash Flows - For the Nine Months ended September 30, 2002 and 2001 and the period July 6, 1988 (inception) to September 30, 2002..............5 Notes to Condensed Financial Statements...........................................7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..............................9 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K.................................................15 Signatures.......................................................................16 Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.........17
2 PROTEIN POLYMER TECHNOLOGIES, INC. (A Development Stage Company) Condensed Balance Sheets
September 30, December 31, 2002 2001 ----------------------------------- Assets (unaudited) Current assets: Cash and cash equivalents $ 666,067 $ 234,271 Other current assets 122,537 57,520 ----------------------------------- Total current assets 788,604 291,791 Deposits 30,479 29,679 Equipment and leasehold improvements, net 108,662 205,247 ----------------------------------- $ 927,745 $ 526,717 =================================== Liabilities and stockholders' equity Current liabilities: Accounts payable $ 265,243 $ 356,942 Accrued employee benefits 100,249 118,987 Other accrued expenses 53,474 43,398 Deferred revenue 83,333 333,333 Deferred rent 54,250 24,111 ----------------------------------- Total current liabilities 556,549 876,771 Long-term portion deferred rent - 48,222 Stockholders' equity: Convertible Preferred Stock, $.01 par value, 5,000,000 shares authorized, 76,121 and 88,258 shares issued and outstanding at September 30, 2002 and December 31, 2001, respectively; liquidation preference of $7,612,100 and $8,825,800 at September 30, 2002 and December 31, 2001, respectively 7,266,780 8,480,530 Common stock, $.01 par value, 60,000,000 shares authorized, 29,724,028 and 21,740,650 shares issued and outstanding at September 30, 2002 and December 31, 2001, respectively 297,252 217,418 Additional paid-in capital 36,615,307 33,794,177 Deficit accumulated during development stage (43,808,143) (42,890,401) ----------------------------------- Total stockholders' equity (371,196) (398,276) ----------------------------------- $ 927,745 $ 526,717 ===================================
See accompanying notes. 3 PROTEIN POLYMER TECHNOLOGIES, INC. (A Development Stage Company) Condensed Statements of Operations (unaudited)
For the period July 6, 1988 (inception) to Three months ended Nine months ended September 30, September 30, September 30, 2002 2001 2002 2001 2002 ---------------------------------------------------------------------------------- Revenues: Contract revenue $ 713,742 $ 283,333 $ 2,127,084 $ 550,000 $ 8,375,099 Interest income 1,058 12,175 4,695 38,857 1,244,832 Product and other income - - 1,500 38 694,779 ---------------------------------------------------------------------------------- Total revenues 714,800 295,508 2,133,279 588,895 10,314,710 Expenses: Research and development 556,916 677,861 2,080,673 1,880,382 31,768,045 Selling, general and administrative 303,602 299,845 970,347 1,062,490 18,406,422 ---------------------------------------------------------------------------------- Total expenses 860,518 977,706 3,051,020 2,942,872 50,174,467 ---------------------------------------------------------------------------------- Net loss (145,718) (682,198) (917,741) (2,353,977) (39,859,757) Undeclared, imputed and/or paid dividends on preferred stock 69,980 69,980 207,659 207,659 6,002,591 ---------------------------------------------------------------------------------- Net loss applicable to common shareholders $ (215,698) $ (752,178) $ (1,125,400) $ (2,561,636) $ (45,862,348) ================================================================================== Basic and diluted net loss per common share $ (0.01) $ (0.03) $ (0.04) $ (0.12) ================================================================= Shares used in computing basic and diluted net loss per common share 29,713,871 21,735,420 26,964,186 20,749,940 =================================================================
See accompanying notes. 4 PROTEIN POLYMER TECHNOLOGIES, INC. (A Development Stage Company) Condensed Statements of Cash Flows (unaudited)
For the period July 6, 1988 Nine months ended (inception) to September 30, September 30, 2002 2001 2002 -------------------------------------------------- Operating activities Net loss $ (917,741) $ (2,353,977) $ (39,859,757) Adjustments to reconcile net loss to net cash used for operating activities: Stock issued for compensation and interest - - 472,676 Depreciation and amortization 123,697 107,828 2,326,196 Write-off of purchased technology - - 503,500 Changes in assets and liabilities: Deposits (800) (2,800) (30,479) Other current assets (65,017) (53,687) (122,537) Accounts payable (91,701) (15,641) 265,241 Accrued employee benefits (18,738) 39,540 100,249 Other accrued expenses (10,077) (3,819) 53,475 Deferred revenue (250,000) (250,001) 83,333 Deferred rent (18,083) 1,283 54,250 -------------------------------------------------- Net cash used for operating activities (1,228,306) (2,531,274) (36,153,853) Investing activities Purchase of technology - - (570,000) Purchase of equipment and improvements (27,112) (99,669) (1,992,832) Purchases of short-term investments - - (16,161,667) Sales of short-term investments - - 16,161,667 -------------------------------------------------- Net cash used for investing activities $ (27,112) $ (99,669) $ (2,562,832)
See accompanying notes. 5 PROTEIN POLYMER TECHNOLOGIES, INC. (A Development Stage Company) Condensed Statements of Cash Flows (unaudited)
For the period July 6, 1988 Nine months ended (inception) to September 30, September 30, 2002 2001 2002 -------------------------------------------------- Financing activities Net proceeds from exercise of options and warrants, and sale of common stock $ 1,687,214 $ 1,255,228 $ 24,006,824 Net proceeds from issuance and conversion of preferred stock - 1,218,258 14,294,668 Net proceeds from convertible notes and detachable warrants - - 1,068,457 Payment on capital lease obligations - (25,088) (288,770) Payment on note payable - - (242,750) Proceeds from note payable - - 484,323 -------------------------------------------------- Net cash provided by financing activities 1,687,214 2,448,398 39,382,752 -------------------------------------------------- Net increase in cash and cash equivalents 431,796 (182,545) 666,067 Cash and cash equivalents at beginning of period 234,271 866,220 - -------------------------------------------------- Cash and cash equivalents at end of period $ 666,067 $ 683,675 $ 666,067 ================================================== Supplemental disclosures of cash flow information Equipment purchased by capital leases $ - $ - $ 288,772 Interest paid 723 3,924 145,328 Imputed dividend on Series E stock - - 3,266,250 Conversion of Series D preferred stock to common stock - - 2,142,332 Conversion of Series E preferred stock to common stock 643,750 400,000 3,356,300 Conversion of Series G preferred stock to common stock 570,000 - 570,000 Series D stock issued for Series C stock - - 2,073,925 Series C dividends paid with Series D stock - - 253,875 Series D dividends paid with common stock $ - $ - $ 422,341
See accompanying notes. 6 PROTEIN POLYMER TECHNOLOGIES, INC. (A Development Stage Company) Notes to Condensed Financial Statements (unaudited) September 30, 2002 1. Basis of Presentation The condensed financial statements of Protein Polymer Technologies, Inc. (the "Company") for the three months and the nine months ended September 30, 2002 and 2001 are unaudited. These financial statements reflect all adjustments, consisting of only normal recurring adjustments which, in the opinion of management, are necessary to state fairly the financial position at September 30, 2002 and the results of operations for the three months and the nine months ended September 30, 2002 and 2001. The results of operations for the nine months ended September 30, 2002 are not necessarily indicative of the results to be expected for the year ended December 31, 2002. For more complete financial information, these financial statements and the notes thereto should be read in conjunction with the audited financial statements included in our Annual Report on Form 10-KSB for the year ended December 31, 2001, filed with the Securities and Exchange Commission. 2. New Accounting Pronouncements In August 2001, the Financial Accounting Standards Board issued SFAS No.144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No.144 supersedes SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS No. 144 addresses the accounting for long-lived assets to be disposed of by sale and resulting implementation issues. This statement requires the measurement of long-lived assets at the lower of carrying amount or fair value less cost to sell, whether reported in continuing operations or in discontinued operations. This statement is effective for financial statements issued for fiscal years beginning after December 15, 2001. The Company adopted SFAS No. 144 as of January 1, 2002. There was no financial impact as a result of the adoption. The Company will apply its provisions to future impairments or disposals of long-lived assets as they occur. In April 2002, the Financial Accounting Standards Board issued SFAS No. 145, which rescinds SFAS No. 4, "Reporting Gains and Losses from Extinguishment of Debt," SFAS No. 44, "Accounting for Intangible Assets of Motor Carriers" and SFAS No. 64, "Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements and amends SFAS No. 13, "Accounting for Leases." This statement updates, clarifies and simplifies existing accounting pronouncements. As a result of rescinding SFAS No. 4 and SFAS No. 64, the criteria in Accounting Principles Bulletin No. 30 will be used to classify gains and losses from extinguishment of debt. This statement is effective for financial statements issued for fiscal years beginning after May 15, 2002. The Company does not expect the adoption of SFAS No. 145 to have a material impact on the Company's financial position or its results of operations. In June 2002, the Financial Accounting Standards Board issued SFAS No. 146, "Accounting for Exit or Disposal Activities." SFAS No. 146 addresses significant issues regarding the recognition, measurement, and reporting of costs that are associated with exit and disposal activities, including restructuring activities that are currently accounted for pursuant to the guidance that the Emerging Issues Task Force ("EITF") has set forth in EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." The scope of SFAS No. 146 also includes costs related to terminating a contract that is not a capital lease and certain termination benefits provided to employees under the terms of one-time benefit arrangements. SFAS No. 146 will be effective for exit or disposal activities that are initiated after December 31, 2002. 3. Net Loss Per Share Net loss per share is computed using the weighted average number of common shares outstanding during the period. The loss figures used for this calculation recognize accumulated dividends on the Company's Series D and Series F Preferred Stock. Such dividends are payable when declared by the Board of Directors in cash or common stock. 7 4. Basic and Diluted Loss Per Share In accordance with FAS No. 128, we are required to present basic and diluted earnings per share if applicable. Basic and diluted earnings per share are determined based on the weighted average number of shares outstanding during the period. Diluted earnings per share also include potentially dilutive securities such as options and warrants outstanding and securities convertible into common stock. Both the basic and diluted loss per share for the nine months ended September 30, 2002 and 2001 are based on the weighted average number of shares of common stock outstanding during the periods. Since potentially dilutive securities have not been included in the calculation of the diluted loss per share for both periods as their effect is anti-dilutive, there is no difference between the basic and diluted loss per share calculations. 5. Revenue and Expense Recognition Research and development contract revenues are recorded as earned in accordance with the terms and performance requirements of the contracts. If the research and development activities are not successful, we are not obligated to refund payments previously received. Fees from the sale or license of technology are recognized on a straight-line basis over the term required to complete the transfer of technology or the substantial satisfaction of any performance related responsibilities. License fee payments received in advance of amounts earned are recorded as deferred revenue. Milestone payments are recorded as revenue based upon the completion of certain contract specified events that measure progress toward completion under certain long term contracts. Royalty revenue related to licensed technology is recorded when earned and in accordance with the terms of the license agreement. Research and development costs are expensed as incurred. 6. Expanded Spine Wave, Inc. Relationship On March 17, 2002, we executed additional agreements with Spine Wave, Inc. that expanded our contractual research and development relationship, and that provided us with additional equity incentives in the form of Spine Wave common stock and warrants. Under the amended Supply and Services Agreement, the Company, on behalf of Spine Wave, is proceeding with pre-clinical safety and performance studies of the injectable spinal disc nucleus device to support Spine Wave's filing of an Investigational Device Exemption with the FDA to obtain approval to initiate human clinical testing. During the subsequent period leading to regulatory marketing approvals, our contractual responsibilities include the supply of product to be used in clinical testing and preparation for commercial manufacturing operations. Research and development services performed for Spine Wave are fully reimbursed including both direct costs and associated overhead costs. Spine Wave is responsible for clinical testing, regulatory approvals, and commercialization. For the nine months ended September 30, 2002, we received $1,877,084 in contract revenue from Spine Wave which represents the reimbursement of direct costs plus overhead costs allocated to research and development resources performing collaborative activities. Additional equity incentives offered in conjunction with the expanded supply and services agreement of March 17, 2002 consist of a three year warrant to purchase 1,000,000 shares of Spine Wave common stock at an exercise price of $0.50 per share (recently issued Spine Wave preferred stock was also priced at $0.50 per share), and 400,000 shares of common stock valued at $0.05 per share subject to repurchase at cost until each of the three performance goals is achieved. The performance goals consist of: (i) completion of certain studies for filing an investigational device exemption application (100,000 shares); (ii) acceptance of the investigational device exemption application by the Food and Drug Administration (150,000 shares); and (iii) completion of certain manufacturing arrangements and production of certain quantities of product (150,000 shares). As of September 30, 2002, none of the performance goals had been completed. 7. Exercise of Warrants During January 2002, certain holders of warrants, issued in connection with the sale of Series G Preferred Stock, exercised their warrants to purchase common stock which were due to expire in February 2002. The original exercise price was $0.50 per share. As an inducement to exercise the warrant early, we offered each holder a reduced exercise price of $0.25 and the issuance of a new eighteen month warrant for a similar number of shares at an exercise price of $0.40 per share. As a result we raised $990,000. The newly issued warrants will expire on the last day of August 2003. In August 2002, certain holders of warrants, issued in connection with the sale of Series G Preferred Stock, exercised their warrants to purchase common stock which were due to expire in August 2003. The original exercise price was $0.40 per share. As an inducement to exercise the warrant early, we offered each holder a reduced exercise price of $0.30 per share and the issuance 8 of a new warrant for a similar number of shares at an exercise price of $0.10 per share. As a result we raised $682,500. The newly issued warrants will expire on the last day of August 2003. 8. Liquidity We believe our existing available cash and cash equivalents as of September 30, 2002, plus contractual amounts receivable, is sufficient to meet our anticipated capital requirements until January 2003. Substantial additional capital resources will be required to fund continuing expenditures related to our research, development, clinical trials, and product marketing activities. If adequate funds are not available, we will be required to significantly curtail our operating plans and may have to sell or license out significant portions of our technology or potential products. 9 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward Looking Statements Certain statements contained or incorporated by reference in this Quarterly Report on Form 10-QSB constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements of the company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by forward-looking statements. Such risks and uncertainties include, among others, history of operating losses, raising adequate capital for continuing operations, early stage of product development, scientific and technical uncertainties, competitive products and approaches, reliance upon collaborative partnership agreements and funding, regulatory testing and approvals, patent protection uncertainties and manufacturing scale-up and required qualifications. While these statements represent management's current judgment and expectations for the company, such risks and uncertainties could cause actual results to differ materially from any future results suggested herein. The company undertakes no obligation to release publicly the results of any revisions to these forward-looking statements to reflect events or circumstances arising after the date hereof. General Overview Incorporated in 1988, Protein Polymer Technologies, Inc., a Delaware corporation with corporate offices and laboratories located in San Diego, California, is a development-stage biotechnology company engaged in the research, development, production and clinical testing of medical products based on its proprietary protein-based biomaterials and tissue engineering technology. Since 1992, we have focused primarily on developing technology and products to be used in the surgical repair, augmentation, and regeneration of tissue; surgical adhesives and sealants; soft tissue augmentation products; matrices for wound healing and tissue engineering; and drug delivery formulations. We have been unprofitable to date, and as of September 30, 2002 had an accumulated deficit of $(43,808,143). Protein polymers are synthetic proteins created "from scratch" through chemical DNA (gene) synthesis, and produced in quantity by traditional large-scale microbial fermentation methods. As a result, protein polymers contain no human or animal components that could potentially transmit or cause disease. Due to their synthetic design, protein polymers are capable of combining the biological functionality of natural proteins with the chemical functionality and exceptional physical properties of synthetic polymers. A common goal is to develop materials that beneficially interact with human cells, enabling cell growth and the regeneration of tissues with improved outcomes as compared to current products and practices. Our product candidates for surgical repair, augmentation and regeneration of human tissues are in various stages of research and development. The more advanced programs are bulking agents for soft tissue augmentation, particularly for use in urethral tissue for the treatment of female stress incontinence and in dermal tissue for cosmetic and reconstructive procedures, and tissue adhesive formulations for the repair of spinal discs damaged due of injury or aging. We currently are devoting the majority of our resources to the development and registration of these products. Because of our technology's breadth of commercial opportunity, we are pursuing multiple routes for commercial development. Currently, we independently are developing the incontinence and the dermal augmentation products, which share similar technology and product characteristics. We have established a comprehensive license and development agreement with Genencor International for the use of our biomaterials and technology to develop, manufacture and commercialize products for industrial markets. Genencor International is one of the world's largest manufacturers of industrial enzymes and other biologically derived products. Through this arrangement, we will receive milestone payments, and eventually royalties on the sale of products. For development and commercialization of our spinal disc repair product, we joined with Windamere Venture Partners to establish a new company, Spine Wave, Inc., that will provide us with both near term research and development support and eventually royalties on the sale of licensed products. Except for the industrial products, we have retained manufacturing rights. Significant Collaborative Agreements 10 Our collaborative development agreements generally contain provision for specific payments for defined activities, services, royalties on the sales of developed products, and/or the accomplishment of performance benchmarks. These agreements also may provide for equity investments or other financial incentives. Technology license agreements usually are associated with collaborative development agreements, but occasionally we will agree to a license without an accompanying development agreement. Spine Wave - ---------- In April 2001, we joined with Windamere Venture Partners and affiliates to form a new orthopedic company, Spine Wave, Inc. ("Spine Wave"), to develop and commercialize an injectable protein-based formulation for the repair of spinal discs damaged either by injury or aging. As a result of the endeavor, we entered into an exclusive, worldwide license agreement with Spine Wave in exchange for one million shares of the founding common stock in Spine Wave, valued initially at $10,000. Royalties from the sale or sublicensing of licensed products will be determined in the future based on the gross margin (sales revenue less the cost of goods) realized by Spine Wave from the sale of the products. In connection with the license agreement, we entered into a separate supply and services agreement to provide Spine Wave with a variety of research and development services, and to supply materials to Spine Wave for pre-clinical and clinical testing. Spine Wave, in return, agreed to reimburse us for both our direct costs and the associated overhead costs for the services provided. During 2001, we recognized contract revenues of $450,000 related to activities performed under the collaborative agreement. In March 2002, we executed additional agreements with Spine Wave, Inc. that expanded our contractual research and development relationship, and that provided us with additional equity incentives in the form of Spine Wave common stock and warrants. Under the amended Supply and Services Agreement, the Company, on behalf of Spine Wave, is proceeding with pre-clinical safety and performance studies of the injectable spinal disc nucleus device to support Spine Wave's filing of an Investigational Device Exemption with the FDA to obtain approval to initiate human clinical testing. During the subsequent period leading to regulatory marketing approval, our contractual responsibilities include the supply of product to be used in clinical testing and preparation for commercial manufacturing operations. Research and development services performed for Spine Wave are fully reimbursed including both direct costs and associated overhead costs. Spine Wave is responsible for clinical testing, regulatory approvals, and commercialization. For the nine months ended September 30, 2002, we received $1,877,084 in contract revenue from Spine Wave which represents the reimbursement of direct costs plus overhead costs allocated to the research and development resources used in performing the collaborative activities. Additional equity incentives offered in conjunction with the expanded supply and services agreement of March 17, 2002 consist of a three year warrant to purchase 1,000,000 shares of Spine Wave common stock at an exercise price of $0.50 per share (recently issued Spine Wave preferred stock was also priced at $0.50 per share), and 400,000 shares of common stock valued at $0.05 per share subject to repurchase at cost until each of the three performance goals is achieved. The performance goals consist of: (i) completion of certain studies for filing an investigational device exemption application (100,000 shares); (ii) acceptance of the investigational device exemption application by the Food and Drug Administration (150,000 shares); and (iii) completion of certain manufacturing arrangements, and production of certain quantities of product (150,000 shares). As of September 30, 2002, none of the performance goals had been completed. License Agreements License agreements usually include provision for up-front compensation and eventual royalties on the sale of licensed products. Terms of license agreements typically commence as of the date executed and continue for a period of the greater of twenty (20) years from execution date or the date upon which the last of the patented technology under license expires. Sanyo Chemical Industries, Ltd. - ------------------------------- In February 2000, we sold our in vitro cell culture business to Sanyo Chemical Industries, Ltd., ("Sanyo"). Under the terms of the agreement, Sanyo purchased a license to our in vitro cell culture technology and existing product inventory for $280,000. As a result of the arrangement, we recognized $280,000 in revenue in the first quarter of 2000 as the licensed technology was transferred to Sanyo upon execution of the agreement and without further obligation on our part. Femcare, Ltd. - ------------- In January 2000, we entered into a strategic alliance agreement with Femcare, Ltd. ("Femcare"), for the commercialization in Europe and Australia of our product for treatment of stress urinary incontinence. Under the terms of the license agreement, 11 Femcare paid a $1 million non-refundable license fee in exchange for the patented technology and a three year commitment from us to provide support to Femcare in its efforts to clinically test our products in Great Britain and to achieve European regulatory approval. We have not incurred any research and development costs associated with our support efforts to date. As a result of the arrangement, we recognized approximately $333,000 in deferred license fee revenue for 2000 and 2001, and $250,000 for the nine months ended September 30, 2002. In accordance with the agreement, we will receive a royalty on net product sales generated by Femcare, and we have the right to manufacture commercial product for Femcare. The agreement terminates on the greater of 20 years or upon which the last of the licensed patents expire. Genencor International, Inc. - ---------------------------- In December 2000, we signed a broad-based, worldwide exclusive license agreement with Genencor International, Inc. ("Genencor") enabling Genencor to potentially develop a wide variety of new products for industrial markets. In October 2002, the license agreement was amended to provide Genencor with an additional one-year option to initiate development of products in the field of non-medical personal care. As a result of the agreements, Genencor may use our patented protein polymer design and production technology, in combination with Genencor's extensive gene expression, protein design, and large-scale manufacturing technology, to design and develop new products with improved performance properties for defined industrial fields and the field of non-medical personal care products. In return for the licensed rights, Genencor paid us an up-front license fee of $750,000, and will pay royalties on the sale of any products commercialized by Genencor under the agreement. The licensed technology was transferred to Genencor upon execution of the license agreement without any further product development obligation on our part. Future royalties on the net sales of products incorporating the technology under license and developed by Genencor will be calculated based on a royalty rate to be determined at a later date. In addition, we are entitled to receive up to $5 million in milestone payments associated with Genencor's achievement of various product development milestones incorporating the licensed technology. In connection with the license agreement, Genencor received warrants to acquire up to $1 million of our common stock. The warrants are exercisable within four years of the agreement date and at a price of 110% of the average over the counter market price during a five-day period immediately preceding the agreement date. As a result of the collaboration, we recognized $750,000 in license fee revenue (less the issuance of warrants to purchase our common stock valued at $319,000) in 2000. The agreement terminates on the date of expiration of the last remaining patent. Research and Development Our product for the treatment of female stress urinary incontinence is in pilot human clinical testing. We hope to begin pivotal clinical testing during the summer of 2003. We expect these trials, including patient follow-up, will take approximately 24 months, and the subsequent Food and Drug Administration review of our pre-market approval submission may take an additional 12 months. Assuming this schedule is met and the product is approved, U.S. sales of the product are projected to begin in 2006. Commercial manufacturing process development and completion of the clinical trials are estimated to cost approximately $10 million. Femcare, Ltd., our licensee for this product in Europe and Australia, has advised us that commercialization of the product in Europe potentially can occur 12 to 18 months in advance of U.S. commercialization. Our tissue augmentation product for use in cosmetic and reconstructive surgery applications is in pilot human clinical testing. We hope to begin pivotal clinical testing during the summer of 2003. We expect these trials, including patient follow-up, will take approximately 15 months, and the subsequent Food and Drug Administration review of our pre-market approval submission may take up to an additional 12 months. Assuming this schedule is met and the product is approved, U.S. sales are projected to begin in 2005. The pivotal clinical trial is estimated to cost approximately $2.2 million. This product is based on the same manufacturing technology as our product for the treatment of female stress urinary incontinence, and thus, the incremental cost of manufacturing development is estimated to be approximately $0.1 million. We currently do not have sufficient cash to complete the development of these products. We anticipate obtaining the necessary cash either by additional equity financings, or by sharing the cost of development with potential marketing partners, or a combination of both methods. If we are unable to obtain the necessary cash, it will have a material adverse effect on us. Our spinal disc repair product being developed for our licensee, Spine Wave, Inc., is in pre-clinical testing. The timing of this project is under the control of Spine Wave. Under our contract with Spine Wave, we are responsible for development of the formulated product, its manufacturing process, and product production for both clinical trials and commercialization. Spine Wave is responsible for funding all expenses associated with these activities. Thus contract revenue received from Spine Wave is approximately equal to our cost (direct project costs plus allocated laboratory and corporate overhead expenses) of the work performed. Total research and development costs for the nine month period ended September 30, 2002 and for the period of project inception to date are approximately $1,877,084 and $2,272,084, respectively. 12 To the extent sufficient capital resources are available, we continue to research the use of our protein polymers for other tissue repair and medical device applications, principally for use in tissue engineering matrices and drug delivery devices. Our strategy for most of our programs is to enter into collaborative development agreements with product marketing and distribution companies. Although these relationships, to the extent any are consummated, may provide significant near-term revenues through up-front licensing fees, research and development reimbursements and milestone payments, the Company expects to continue incurring operating losses for the next several years. We are aggressively pursuing domestic and international patent protection for our technology, making claim to an extensive range of recombinantly prepared structural and functional proteins, methods for preparing synthetic repetitive DNA, methods for the production and purification of protein polymers, end-use products incorporating such materials and methods for their use. To date, the United States Patent and Trademark Office ("USPTO") has issued 24 patents to us. In addition, we have filed corresponding patent applications in other relevant commercial jurisdictions. As of September 30, 2002, we had cash and cash equivalents totaling $666,067. We believe our available cash and cash equivalents, accounts receivable, and future contractual research and development payments will be sufficient to meet our anticipated capital requirements until January 2003. We will continue to attempt to raise additional funds for continuing operations through private or public offerings and collaborative agreements. See "Liquidity and Capital Resources" below for additional information and a description of the associated risks. Results of Operations We received $713,742 in contract and licensing revenue for the three months ended September 30, 2002 as compared to $283,333 for the three months ended September 30, 2001. For the nine months ended September 30, 2002, we received $2,127,084 as compared to $550,000 for the same period in 2001. The contract and licensing revenue for the three months and the nine months ended September 30, 2002 primarily represents $83,333 and $250,000, respectively, from Femcare Ltd. (the amortized portion of an up-front license payment of $1 million being recognized ratably over a period of three years ending in January of 2003) for the commercial rights to our potential incontinence product in Europe and Australia, and payments totaling $630,409 and $1,877,084, respectively, from Spine Wave, Inc. for research and development services associated with the development of an injectable spinal disc nucleus product for the treatment of lower back pain. The increase in contract and licensing revenue over the nine-month period, as compared to the same period in 2001, primarily reflects a March 17, 2002 amendment in our Supply and Services Agreement with Spine Wave (Amendment No. 1), that provides for an increase in research and development services and payments in support of the pre-clinical development of the injectable spinal disc nucleus product. Interest income was $1,058 and $4,695, respectively, for the three months and nine months ended September 30, 2002 versus $12,175 and $38,857 for the same periods in 2001. Research and development expenses for the three months ended September 30, 2002 were $556,916, compared to $677,861 for the same period in 2001. Research and development expenses for the nine-month period ended September 30, 2002 were $2,080,673 as compared to $1,880,382 for the same period in 2001. The increase in research and development expenditures for the nine-month period in 2002 primarily reflects increased pre-clinical costs associated with the development of the spinal disc nucleus replacement product. We expect, in general, that our research and development, human clinical testing and manufacturing expenses will increase over time if our incontinence and dermal products, and other products in development, successfully progress and additional capital is obtained. Selling, general and administrative expenses for the three months and the nine months ended September 30, 2002 were $303,602 and $970,347, respectively, as compared to $299,845 and $1,062,490 for the same periods in 2001. We expect that our selling, general and administrative expenses will remain largely unchanged in the near term, but may increase in the future as support for our research and development and manufacturing efforts require additional resources and to the extent additional capital is obtained. For the three months ended September 30, 2002, we recorded a net loss applicable to common shareholders of $215,698, or $0.01 per share, as compared to a loss of $752,178, or $0.03 per share for the same period in 2001. For the nine-month period, our net loss applicable to common shareholders was $1,125,400, or $0.04 per share as compared to $2,561,636, or $0.12 per share for the same period in 2001. Also included in each of the three month periods of 2002 and 2001 were 13 $69,220, and $207,659 for each of the nine-month periods, respectively, for undeclared dividends related to our preferred stock. In general, there can be significant fluctuation in revenue from quarter to quarter due to variability in outside contract and licensing payments. In general, we expect to incur increasing operating losses in the future (to the extent additional capital is obtained), due primarily to increases in our soft tissue augmentation program's development, manufacturing and business development activities, and the initiation of new tissue adhesive product development activities. Our financial results depend on our ability to establish strategic alliances and generate contract revenues, increased research, development and manufacturing efforts, pre-clinical and clinical product testing and commercialization expenditures, expenses incurred for regulatory compliance and patent prosecution, and other factors. To date we believe that inflation and changing prices have had only a modest effect on our continuing operations. However, the sharp rise in utility costs may have a greater impact in the future. Liquidity and Capital Resources As of September 30, 2002, we had cash and cash equivalents of $666,067 as compared to $234,271 at December 31, 2001. As of September 30, 2002, we had working capital of $232,055 as compared to ($584,980) at December 31, 2001. We had no long-term debt obligations as of September 30, 2002 or as of December 31, 2001. We had $27,112 in expenditures for capital equipment and leasehold improvements for the nine months ending September 30, 2002, compared to $99,669 for the same period last year. We are expecting to increase our capital expenditures in the next few quarters (to the extent additional capital is obtained), as we improve existing space to expand capacity to meet materials manufacturing requirements for clinical testing. We may also enter into capital lease arrangements if available at appropriate rates and terms. Due to increases in contractual research and development payments, we have been able over the past nine months to substantially reduce our cash burn rate. As a result our predicted cash requirements for the remainder of 2002 are lower than in previous periods. We believe our existing available cash, cash equivalents and accounts receivable, in combination with anticipated contract research payments and revenues received from the transfer of clinical testing materials, will be sufficient to meet our anticipated capital requirements until January 2003. Substantial additional capital resources will be required to fund continuing expenditures related to our research, development, manufacturing and business development activities. We believe there may be a number of alternatives to meeting the continuing capital requirements of our operations, including additional collaborative agreements and public or private financings. There can be no assurance, however, that any of these fundings will be consummated in the necessary time frames needed for continuing operations or on terms favorable to us. If adequate funds are not available, we will be required to significantly curtail or cease our operations, and may have to sell or license out significant portions of our technology or potential products. 14 Item 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits 10.43 Amendment No. 1 to Supply and Services Agreement dated February 12, 2002 between the Company and Spine Wave, Inc. 10.44 Stock Purchase and Vesting Agreement dated March 21, 2002 between the Company and Spine Wave, Inc. 10.45 Warrant to Purchase Shares of Common Stock of Spine Wave, Inc. issued to the Company 99.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 99.2 Certification of Director of Finance (Principal Financial Officer) pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 b. Reports on Form 8-K Current Report on Form 8-K filed with the Securities and Exchange Commission on September 4, 2002. 15 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PROTEIN POLYMER TECHNOLOGIES, INC. Date: November 13, 2002 By /s/ J. Thomas Parmeter ----------------------- J. Thomas Parmeter Chairman of the Board, Chief Executive Officer, President Date: November 13, 2002 By /s/ Janis Y. Neves ------------------- Janis Y. Neves Director of Finance, Controller and Assistant Secretary 16 CERTIFICATION PURSUANT TO 17 CFR 240.13a-14 PROMULGATED UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, J. Thomas Parmeter, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Protein Polymer Technologies, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report 17 financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 13, 2002 /s/ J. Thomas Parmeter - ---------------------- J. Thomas Parmeter Chief Executive Officer 18 CERTIFICATION PURSUANT TO 17 CFR 240.13a-14 PROMULGATED UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Janis Y. Neves, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Protein Polymer Technologies, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report 19 financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 13, 2002 /s/ Janis Y. Neves - ------------------ Janis Y. Neves Director of Finance 20 EXHIBIT INDEX Exhibit Number Description - ------ ----------- 10.43 Amendment No. 1 to Supply and Services Agreement dated February 12, 2002 between the Company and Spine Wave, Inc. 10.44 Stock Purchase and Vesting Agreement dated March 21, 2002 between the Company and Spine Wave, Inc. 10.45 Warrant to Purchase Shares of Common Stock of Spine Wave, Inc. issued to the Company 99.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 99.2 Certification of Director of Finance (Principal Financial Officer) pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 21 EX-10 3 ex10-43.txt EX. 10.43: AMEND. NO. 1/SUPPLY AND SERVICES AGMT. Exhibit 10.43 AMENDMENT NO. 1 TO SUPPLY AND SERVICES AGREEMENT THIS AMENDMENT NO. 1 TO SUPPLY AND SERVICES AGREEMENT (this "Amendment") is made and entered into as of the 12th day of February 2002 (the "Effective Date") by and between PROTEIN POLYMER TECHNOLOGIES, INC., a Delaware corporation ("PPTI") and SPINE WAVE, INC., a Delaware corporation ("Company") and amends the terms and conditions of that certain Supply and Services Agreement dated as of April 12, 2001 by and between the Company and PPTI (the "Original Agreement"). W I T N E S S E T H: WHEREAS, PPTI and Company are parties to the Original Agreement; WHEREAS, PPTI and the Company desire to amend certain of the terms of the Original Agreement; NOW, THEREFORE, in consideration of the mutual covenants contained herein and for other good and valuable consideration, the receipt, sufficiency and adequacy of which is hereby acknowledged, the parties hereto agree as follows: A. Definitions and Sections. All capitalized terms used but not defined in this Amendment shall have the meanings ascribed thereto in the Original Agreement. Section and Schedule references in this Amendment shall be to Sections of and Schedules to the Original Agreement, as amended hereby. B. Amendment of Section 2(a) and 2(b). Sections 2(a) and 2(b) are hereby deleted and amended and restated to read as follows: (a) During the Initial Term, PPTI shall provide Materials to Company and Company shall purchase Materials from PPTI for Non-Clinical Use as set forth in Amended and Restated Schedule 1 attached hereto. (b) During the Start-Up Term subsequent to the Initial Term, PPTI shall provide Materials to the Company and Company shall purchase Materials from PPTI as set forth in the Amended and Restated Schedule 2 attached hereto. C. Amendment of Section 5.1. The last sentence of Section 5.1 is hereby deleted and amended and restated to read as follows: PPTI shall provide the accommodations listed above to the Company at no additional charge to the Company. D. Amendment of Sections 6(c) and 6(d). Sections 6(c) and (d) are hereby deleted and amended and restated to read as follows: (c) The parties agree that the Additional Term began on February 12, 2002 and will end on February 11, 2003, absent a default or breach of the Original Agreement as amended hereby. On the first day of March, 2002 (subject to a fifteen (15) business day grace period) and on the first day of each of the next five (5) consecutive months thereafter (e.g. April 1, 2002 through August 1, 2002, both inclusive), the Company shall pay PPTI the sum of **. On the first day of September, 2002 and on the first day of each consecutive month thereafter throughout the remainder of the Additional Term, the Company shall pay PPTI the sum of **. PPTI shall throughout the Additional Term continue to apply project accounting to the work under the Original Agreement and within ** after the close of each month during the Additional Term and within ** following the termination of the Original Agreement, PPTI shall provide the Company with a statement (i) setting forth the Materials, Additional Services, Design Services and other services provided to Company by PPTI **, and (ii) itemizing any applicable credits due to the Company as set forth below and additional payments due PPTI pursuant to paragraph (d) below. The Company shall make any payment due to PPTI within ** after receipt of the statement. Any credit due to the Company shall be ** during or for the Additional Term, exclusive of the monthly payments specified above. (d) Notwithstanding anything else to the contrary contained herein, the parties agree that: (i) Upon expiration of the Initial Term, if the Company has paid the Minimum Payment each month of the Initial Term and has not received an aggregate of Initial Services and/or Materials equal to **, the Company shall ** for Materials, Additional Services, Design Services and/or other services provided hereunder after the Additional Term. (ii) Any credit due the Company upon expiration of the Additional Term, may be applied to Materials, Additional Services, Design Services and/or other services provided hereunder ** following the expiration of the Additional Term or as the Company may reasonably request following consultation with PPTI. With respect to the Injectable Disk Nucleus product, for each ** subsequent to the Additional Term, **. (iii) Intentionally omitted. - ------------ ** Material is confidential and has been omitted and filed separately with the Securities and Exchange Commission. (iv) During the Additional Term, specific external PPTI expenses authorized in writing by the Company for special supplies, services, or equipment in an amount ** in the aggregate per activity or task shall be paid by the Company to PPTI within ten (10) days of delivery of an invoice therefor from or on account of PPTI. (v) **. (vi) **. (vii) On or before the first day of August, 2002, PPTI and the Company shall review the estimated Materials, Additional Services, Design Services and/or other services to be provided by PPTI to the Company for the remainder of the - ------------ ** Material is confidential and has been omitted and filed separately with the Securities and Exchange Commission. Additional Term. The Company agrees to **. E. Schedules. The Amended and Restated Schedules 1, 2, 3, and 5 attached hereto supercede and replace in their entirety the existing Schedules 1, 2, 3 and 5 to the Original Agreement. F. Continuing Agreement. Each party hereby acknowledges that there have occurred no defaults under or breaches of the Original Agreement by the other party. Except as otherwise provided herein, the Original Agreement continues unchanged and in full force and effect. G. Conflicts. This Amendment supersedes all prior or contemporaneous understandings or agreements, whether written or oral, between the Company and the PPTI with respect to such amendment. In the event of any conflict between the terms of this Amendment and the terms of the Original Agreement, the terms of this Amendment shall govern and control. H. Further Assurances. The Company and PPTI agree to execute such further instruments, agreements and document, and to take such further action as may be reasonably necessary to carry out the intent of this Amendment. I. Counterparts. This Amendment may be executed by the parties hereto in one or more counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument. J. Governing Law. This Amendment shall be governed by, and construed in accordance with, the laws of the State of California. - ------------ ** Material is confidential and has been omitted and filed separately with the Securities and Exchange Commission. IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed as of the day and year first above written. SPINE WAVE, INC. By:/s/ Mark LoGuidice ------------------------------------- Mark LoGuidice President and Chief Executive Officer PROTEIN POLYMER TECHNOLOGIES, INC. By:/s/ J. Thomas Parmeter ------------------------------------- J. Thomas Parmeter President and Chief Executive Officer AMENDED AND RESTATED SCHEDULE 1 MATERIALS DURING THE INITIAL TERM AND FOR NON-CLINICAL USE ---------------------------------------------------------- During the Initial Term, PPTI shall supply Materials to the Company for Non-Clinical Use at the Company's request as follows: - -------------------------------------------------------------------------------- Material supplied by PPTI: Cost to Company: - -------------------------- ---------------- - -------------------------------------------------------------------------------- For each Qualified Lot of Material ** per each Qualified Lot (except as set forth below) - -------------------------------------------------------------------------------- For each Off-the-Shelf Lot of Material **. - -------------------------------------------------------------------------------- For each Additional Qualified Lot of ** per each Qualified Lot Material - -------------------------------------------------------------------------------- "Additional Qualified Lot" shall mean any Qualified Lot of Material ordered by Company (i) after the Company orders ** Qualified Lots of Material and (ii) in excess of ** for any ** period; provided that, for purposes of clarity, orders in any ** shall be counted toward any ** period with either the immediately preceding or immediately subsequent month, but not both. "Off-the-Shelf Lot" shall mean any lot of Material existing in PPTI's inventory as of the date of the Agreement. - ------------ ** Material is confidential and has been omitted and filed separately with the Securities and Exchange Commission. Schedule 1 - 1 AMENDED AND RESTATED SCHEDULE 2 MATERIALS DURING THE START-UP TERM SUBSEQUENT TO THE INITIAL TERM AND FOR CLINICAL USE ------------------------------------------------------------ During the Start-Up Term subsequent to the Initial Term or for purchases of Materials made for Clinical Use during the Start-Up Term, PPTI shall provide Materials to the Company at the Company's request as follows: - -------------------------------------------------------------------------------- Material: Cost: - --------- ----- - -------------------------------------------------------------------------------- For each Qualified Lot* supplied by ** per each Qualified Lot, ** PPTI for non-clinical use (except as set forth below) - -------------------------------------------------------------------------------- For each Excess Qualified Lot* ** per each Excess Qualified Lot, ** supplied by PPTI for non-clinical use - -------------------------------------------------------------------------------- For each Qualified Lot* supplied by ** per each Qualified Lot, ** PPTI for clinical use - -------------------------------------------------------------------------------- Qualified Lot* supplied by third-party ** per each Qualified Lot contract manufacturer - -------------------------------------------------------------------------------- "Excess Qualified Lot" shall mean any Qualified Lot of Material ordered by Company when PPTI accepts orders for more than ** of Material in any ** period during the Additional Term, any such ** determined consecutively from the start of the Additional Term. ** - ------------ ** Material is confidential and has been omitted and filed separately with the Securities and Exchange Commission. Schedule 2 - 1 AMENDED AND RESTATED SCHEDULE 3 QUALITY CONTROL PROCEDURES ** -------------------------- - ------------ ** Material is confidential and has been omitted and filed separately with the Securities and Exchange Commission. Schedule 3-1 AMENDED AND RESTATED SCHEDULE 5 ADDITIONAL SERVICES ** ------------------- - ------------ ** Material is confidential and has been omitted and filed separately with the Securities and Exchange Commission. EX-10 4 ex10-44.txt EX. 10.44: STOCK PURCHASE AND VESTING AGMT. Exhibit 10.44 STOCK PURCHASE AND VESTING AGREEMENT ------------------------------------ THIS STOCK PURCHASE AND VESTING AGREEMENT is made this 21st day of March, 2002, by and between Spine Wave, Inc., a Delaware corporation (the "Company"), and Protein Polymer Technologies, Inc., a Delaware corporation ("Purchaser"). NOW THEREFORE, IT IS HEREBY AGREED: 1. Sale of Stock. Subject to the terms hereof, the Company shall sell to Purchaser and Purchaser shall purchase from the Company Four Hundred Thousand (400,000) shares of common stock of the Company (the "Stock"). The sale and purchase shall occur at the offices of the Company on the date set forth above or at such other place and time as the parties may agree (the "Closing"). 2. Consideration. In exchange for and as full consideration for the Stock, the Purchaser shall (i) enter into that certain Amendment No. 1 to the Supply and Services Agreement dated April 12, 2001 attached hereto as Exhibit A (the "Amendment"), (ii) have entered into and delivered to the Company that certain Certificate of Acknowledgement of Termination by and among the Company, Purchaser and Windamere Venture Partners, LLC terminating that certain Voting Agreement dated April 12, 2001, attached hereto as Exhibit B (the "Certificate of Termination"), (iii) have entered into and delivered to the Company that certain Letter Agreement attached hereto as Exhibit C (the "Letter Agreement") and (iv) have previously voted all of the shares of the Company's capital stock beneficially held by Purchaser in favor of (A) the Company's merger with VERTx, Inc. (the "Merger") and (B) the Company's sale and issuance of shares of the Company's Series A Preferred Stock (the "Series A Financing") to certain investors immediately thereafter and (C) any matter that could reasonably be expected to facilitate the Merger and Series A Financing as well as delivered to the Company or its representatives written evidence thereof. In addition, Purchaser shall deliver two (2) duly executed blank Assignments Separate from Certificate in the form attached hereto as Exhibit D, which Assignments Separate from Certificate shall only be used in connection with the exercise of the Company's Repurchase Option as set forth in Section 5 below. The Company and the Purchaser agree that the fair market value of each share of Stock as of the date of this Agreement equals $0.05 per share (the "Purchase Price"). 3. Issuance of Stock. Upon the execution and delivery of the Amendment, Certificate of Termination and Letter Agreement by the Purchaser and contingent upon the Company's verification of Purchaser's vote in favor of the approval of the Merger and the Series A Financing, the Company shall issue a duly executed certificate evidencing the Stock in the name of Purchaser and provide Purchaser with a copy of such certificate. The original of such certificate shall be held in escrow by the Company until the expiration of the Repurchase Option (as defined below); provided however, upon Purchaser's request, Company shall release to Purchaser a certificate representing that number of shares of the Stock which, as of the date of such request, are no longer subject to the Repurchase Option. 4. Repurchase Option. The Stock shall be subject to a right (but not an obligation) of repurchase by the Company (the "Repurchase Option"). The Company shall have the right to purchase Unvested Shares (as defined below) from the Purchaser at the Purchase Price as follows. a. All of the Stock shall initially be considered "Unvested Shares" subject to the Repurchase Option. b. The Repurchase Option shall lapse with respect to such portion of the Stock upon the attainment by Purchaser of each of the performance milestones as set forth on Exhibit E attached hereto (the "Milestones"). c. The Repurchase Option shall also terminate and cease to be exercisable with respect to any and all Unvested Shares in the event of (i) the consummation of a merger or consolidation of the Company ("Merger") with and into another corporation where the Company's stockholders of record immediately prior to such merger or consolidation hold less than fifty percent (50%) of the outstanding voting stock of the successor corporation, (ii) a sale or transfer of greater than fifty percent (50%) of the outstanding voting stock of the Company (other than as a result of a transaction or series of transactions the primary purpose of which is the raising of equity capital) (a "Sale") or (iii) the completion of a sale of all or substantially all of the Company's assets. d. The Repurchase Option shall be exercised by written notice signed by the President or Treasurer of the Company and delivered as provided in subparagraph 9(b) hereof. The Company shall pay for the shares of Stock it has elected to repurchase by delivery of a cashier's check or by wire transfer of immediately available funds in an aggregate amount equal to the Purchase Price multiplied by the number of shares of Stock being repurchased. e. Adjustments to Stock. If, from time to time during the term of the Repurchase Option, there is any change affecting the Company's outstanding common stock as a class that is effected without the receipt of consideration by the Company (through merger, consolidation, reorganization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating, dividend, combination of shares, change in corporation structure or other transaction not involving the receipt of consideration by the Company), then any and all new, substituted or additional securities or other property to which Purchaser is entitled by reason of Purchaser's ownership of Stock shall be immediately subject to the Repurchase Option and be included in the word "Stock" for all purposes of the Repurchase Option with the same force and effect as the shares of the Stock presently subject to the Repurchase Option, but only to the extent the Stock is, at the time, covered by such Repurchase Option. While the aggregate Purchase Price shall remain the same after each such event, the Purchase Price per share of Stock upon exercise of the Repurchase Option shall be appropriately adjusted. 5. Exercise of Repurchase Option. The Company shall have the right to exercise its Repurchase Option as follows: a. The Company shall have the right to exercise its Repurchase Option to repurchase any Unvested Shares covered by the First Milestone and the Second 2 Milestone (each as defined and set forth on Exhibit E) from Purchaser at the Purchase Price at any time on or after **. b. The Company shall have the right to exercise its Repurchase Option to repurchase any Unvested Shares covered by the Third Milestone (as defined and set forth on Exhibit E) from Purchaser at the Purchase Price at any time on or after **. 6. Right of First Refusal. Stock subject to the Repurchase Option may not be transferred, except for transfers by operation of law or other involuntary transfer. Before any shares of Stock registered in the name of Purchaser, not subject to the Repurchase Option and not otherwise restricted by applicable federal and state securities laws may be sold or transferred (excluding transfer by operation of law or other involuntary transfer) such shares shall first be offered to the Company in the following manner: a. The Purchaser or its transferee shall deliver a notice pursuant to subparagraph 10(b) ("Notice") to the principal business office of the Company stating (i) the bona fide intention to sell or transfer such shares, (ii) the number of such shares of Stock to be sold or transferred, (iii) the price and other terms, if any, for which Purchaser or its transferee proposes to sell or transfer such shares of Stock, and (iv) the name and address of the proposed purchaser or transferee, if any, and that such identified purchaser or transferee is committed to acquire the stated number of shares on the stated price and terms. b. The Company shall have the right at any time within ten (10) days of receipt of the Notice to purchase all of the shares to which the Notice refers at the price per share specified in the Notice. Said right shall be exercised by written notice signed by the President or any Vice President of the Company and delivered as provided in subparagraph 10(b) hereof, which notice shall specify the time, place and date for settlement of such purchase. c. In the event the Company does not, for any reason, exercise its right pursuant hereto, the Company may assign such right, provided such right shall not extend beyond such ten (10) day period. If exercised by the assignee pursuant hereto, the right to purchase shall be exercised by written notice signed by the exercising assignee and delivered as provided in subparagraph 10(b) hereof, which notice shall specify the time, place and date for settlement of such purchase. Purchaser shall sell the shares to the Company or such assignees within thirty (30) days after the date of the Notice. d. If all of the shares to which the Notice refers are not purchased, as provided in subparagraphs 6(b) or 6(c) above, the Purchaser may sell such shares to the person named in the Notice at the price and terms specified in the Notice, provided that such sale or transfer is consummated within seventy five (75) days of the date of the Notice to the Company, and provided further that any such sale is in accordance with all the terms and conditions hereof. If Purchaser does not consummate the sale or transfer within such seventy five (75) day period, the right provided hereby shall be deemed to be revived with respect to such shares and no sale or transfer shall be effected without first offering the shares in accordance herewith. ** Material is confidential and has been omitted and filed separately with the Securities and Exchange Commission. 3 e. Notwithstanding the above, neither the Company nor the assignees of the Company shall have any right of first refusal under this Section 6 at any time subsequent to the following: (i) the closing of a bona fide, firm commitment underwritten public offering of the common stock of the Company pursuant to a Registration Statement declared effective under the Act, (ii) the first date on which the Stock is held of record by more than five hundred (500) persons (ii) a Merger or Sale, other than a Merger or Sale in which the consideration includes capital stock that is not registered under the Securities Act of 1933, as amended, and/or is not listed on a national securities exchange, unless the issuer is subject to a contractual obligation to register and list such stock within six months of such Merger or Sale. In addition, the Company's right of first refusal under this Section 6 shall not apply to the proposed sale or transfer by Purchaser of stock subject to this Agreement as part of the sale of all or substantially all of Purchaser's assets ("Sale of Assets") except in the event that the Sale of Assets is to a direct competitor of the Company or to such other entity which directly or indirectly controls a direct competitor of the Company and provided that in such circumstance, the time period set forth in subparagraph 6(d) above shall be 180 days. 7. "Market Stand-Off" Agreement. If requested by the Company and an underwriter of Common Stock (or other securities) of the Company, Purchaser shall not sell or otherwise transfer or dispose of any Common Stock (or other securities) of the Company held by such Holder (other than those included in the registration) for no more than (i) 180 days from the effective date of the first registration of the Company's securities, including securities to be sold on its behalf to the public in an underwritten offering and (ii) 90 days for the next two subsequent registration statement of the Company after the initial public offering; provided, however, that all executive officers, directors and two percent (2%) or greater stockholders of the Company must enter into similar lock-up agreements as well. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to common stock held by Purchaser until the end of such period. 8. Representations and Warranties of Purchaser. a. Due Authorization. Purchaser hereby represents and warrants to Company that it is duly authorized and empowered to enter into and perform this Agreement; and the execution and performance of this Agreement by Purchaser does not and will not conflict with or violate any contract, agreement, indenture, mortgage, instrument, writ, judgment, or order of any court, arbiter or governmental or quasi-governmental body to which Purchaser is a party or by which Purchaser is bound. b. Investment Intent. This Agreement is made with Purchaser in reliance upon its representation to the Company, which by Purchaser's acceptance hereof confirms, that the Stock has been acquired by Purchaser for investment for an indefinite period for Purchaser's own account, not as a nominee or agent, and not with a view to the sale or distribution of any part thereof, and that Purchaser has no present intention of selling, granting participation in, or otherwise distributing the same. By executing this Agreement, Purchaser further represents that Purchaser does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer, or grant participations, to such person or to any third person, with respect to any of the Stock. 4 c. Restricted Securities. Purchaser understands that the Stock has not been registered under the Act, on the ground that the sale provided for in this Agreement is exempt from the registration requirements of the Act, and that the Company's reliance on such exemption is predicated on Purchaser's representations set forth herein. Purchaser understands that if the Company does not register with the Securities and Exchange Commission pursuant to Section 12 or 15 of the Securities Exchange Act of 1934, as amended, or if a registration statement covering the Stock (or a filing pursuant to the exemption from registration under Regulation A of the Act) under the Act is not in effect when Purchaser desires to sell the Stock, Purchaser may be required to hold the Stock for an indeterminate period. The Purchaser also acknowledges that Purchaser understands that any sale of the Stock that might be made by Purchaser in reliance upon Rule 144 under the Act may be made only in limited amounts in accordance with the terms and conditions of that rule and that Purchaser may not be able to sell the Stock at the time or in the amount Purchaser so desires. Purchaser is familiar with Rule 144 and understands that the Stock constitutes "restricted securities" within the meaning of that Rule. d. Investment Experience. In connection with the investment representations made herein Purchaser represents that Purchaser is either an "Accredited Investor", as that term is defined in Rule 501 of Regulation D promulgated under the Act, or is able to fend for itself in the transactions contemplated by this Agreement, has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investment, has the ability to bear the economic risks of its investment and has been furnished with and has had access to such information as Purchaser has requested and deems appropriate to its investment decision. e. Limitations on Disposition. Purchaser agrees that in no event will Purchaser make a disposition of any of the Stock, unless and until (i) Purchaser shall have notified the Company of the proposed disposition, and (ii) Purchaser shall have furnished the Company with an opinion of counsel satisfactory to the Company to the effect that such disposition will not require registration of such Stock under the Act or that appropriate action necessary for compliance with the Act has been taken, or (iii) the Company shall have waived, expressly and in writing, its rights under clauses (i) and (ii) of this subparagraph. In addition, prior to any disposition of any of the Stock, the Company shall require the transferee or assignee to provide in writing investment representations and such transferee's or assignee's agreement to be bound by the market stand-off provisions hereof in a form acceptable to the Company. The Company shall not be required (i) to transfer on its books any shares of Stock of the Company which shall have been sold or transferred in violation of any of the provisions set forth in this Agreement, or (ii) to treat as owner of such shares or to accord the right to vote as such owner or to pay dividends to any transferee to whom such shares shall have been so transferred. Purchaser shall, during the term of this Agreement, exercise all rights and privileges of a stockholder of the Company with respect to the Stock after the issuance, and prior to the repurchase, thereof. 5 f. Legends. All certificates representing any shares of Stock of the Company subject to the provisions of this Agreement shall have endorsed thereon the following legends: (i) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND THEY MAY NOT BE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE ACT OR PURSUANT TO RULE 144 UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT." (ii) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN STOCK PURCHASE AND VESTING AGREEMENT BETWEEN THE COMPANY AND THE HOLDER HEREOF WHICH INCLUDES A MARKET STAND-OFF AGREEMENT, A RIGHT OF REPURCHASE AND A RIGHT OF FIRST REFUSAL ON THE SALE OF THE SECURITIES. THESE SECURITIES MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED, OR IN ANY MANNER DISPOSED OF EXCEPT IN CONFORMITY WITH THE TERMS OF SUCH AGREEMENT. COPIES OF THE AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY." (iii) Any legend required to be placed thereon by applicable state laws. 9. Representations and Warranties of Company. a. Company hereby represents and warrants to Purchaser that it is duly authorized and empowered to enter into and perform this Agreement; and the execution and performance of this Agreement by the Company does not and will not conflict with or violate any contract, agreement, indenture, mortgage, instrument, writ, judgment, or order of any court, arbiter or governmental or quasi governmental body to which the Company is a party or by which the Company is bound. b. To the best of its knowledge, all business and financial information that the Company has provided to Purchaser is accurate in all material respects; provided, however, that Purchaser acknowledges that the business and financial information provided by the Company to Purchaser includes certain statements and estimates provided by the Company and its representatives with respect to the historical, pro forma and anticipated performance of the Company or that of potential strategic partners. Such statements and estimates reflect various assumptions by the Company, which may or may not prove to be accurate, as well as the exercise of a substantial degree of judgement by the Company as to the scope and presentation of such information. 10. Miscellaneous. 6 a. Further Instruments and Actions. The parties agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Agreement. b. Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (i) upon personal delivery to the party to be notified, (ii) when sent by confirmed facsimile transmission if sent during normal business hours of the recipient; if not, then on the next business day, or (iii) for domestic addresses one (1) business day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt and for international addresses three (3) business days after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the party to be notified at the address as set forth on the signature pages hereof or at such other address as such party may designate by ten (10) days advance written notice to the other parties hereto. c. Governing Law, Assignment and Enforcement. This Agreement is governed by the internal law of California and shall inure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer herein set forth, be binding upon Purchaser, its successors and assigns. The prevailing party in any action to enforce this Agreement shall be entitled to attorneys' fees and costs. The parties agree that damages are not an adequate remedy for breach hereof and each party shall accordingly be entitled to specific performance of this Agreement. d. Entire Agreement; Amendments and Waivers. This Agreement and the related Amendment, Certificate of Termination and Letter Agreement, among Purchaser and Company, and all of even date herewith (and any agreements, exhibits or schedules referenced therein), constitute the entire agreement and understanding between the parties with respect to the subject matter contained herein, and there are no promises, representations, conditions, provisions or terms related thereto other than as set forth in this Agreement and the related Amendment, Certificate of Termination and Letter Agreement between the Purchaser and Company all of even date herewith. This Agreement may only be amended with the written consent of the parties hereto, or their successors or assigns, and no oral waiver or amendment shall be effective under any circumstances whatsoever. e. Cooperation. Purchaser agrees to cooperate affirmatively with the Company, to the extent reasonably requested by the Company, to enforce rights and obligations pursuant to this Agreement. 11. California Commissioner of Corporations. THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE OF SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UNLESS THE SALE IS SO EXEMPT. 7 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. SPINE WAVE, INC. By: /s/ Mark LoGuidice -------------------------------------------- Mark LoGuidice, President and Chief Executive Officer Address: 12230 El Camino Real, Suite 300 San Diego, California 92130 PURCHASER Protein Polymer Technologies, Inc. /s/J. Thomas Parmeter -------------------------------------------- J. Thomas Parmeter President and Chief Executive Officer Address: 10655 Sorrento Valley Road San Diego, California 92121 [SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT] EXHIBIT A --------- [AMENDMENT] EXHIBIT B --------- CERTIFICATE OF ACKNOWLEDGEMENT OF TERMINATION OF VOTING AGREEMENT The undersigned parties to that certain Voting Agreement dated as of April 12, 2001, as amended through the date hereof (the "Voting Agreement"), by and among Spine Wave, Inc., Protein Polymer Technologies, Inc. and Windamere Venture Partners, LLC, hereby acknowledge and consent to the following: Pursuant to Sections 5 and 7 of the Voting Agreement, effective as of the effective date of this Certificate of Acknowledgement of Termination of Voting Agreement, the Voting Agreement is hereby terminated in its entirety for all time, is of no further force and effect and no party thereto shall have any remaining rights or obligations thereunder. This Certificate of Acknowledgement of Termination of Voting Agreement has been executed and is effective as of March __, 2002 and may be executed in more than one counterpart, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. SPINE WAVE, INC. By: --------------------------------- Mark LoGuidice, President and Chief Executive Officer PROTEIN POLYMER TECHNOLOGIES, INC. By: --------------------------------- J. Thomas Parmeter, President and Chief Executive Officer WINDAMERE VENTURE PARTNERS, LLC By: --------------------------------- Its: --------------------------------- EXHIBIT C --------- LETTER AGREEMENT March 21, 2002 Protein Polymer Technologies, Inc. 10655 Sorrento Valley Road San Diego, CA 92121 Attn: J. Thomas Parmeter, President and Chief Executive Officer Re: License Agreement. Dear Mr. Parmeter: This letter agreement (the "Letter Agreement") sets forth our understanding regarding the treatment of a certain termination provision under that certain License Agreement dated as of April 12, 2001, as amended, by and between Spine Wave, Inc. ("Spine Wave") and Protein Polymer Technologies, Inc. ("PPTI"). This Letter Agreement is being entered into in connection with and as consideration under the Stock Purchase and Vesting Agreement of even date herewith between Spine Wave and PPTI. 1. Termination of License Agreement. Notwithstanding the provisions of Section 9.2(b) of the License Agreement, and subject to the limitation set forth in the following sentence, Spine Wave and PPTI hereby agree that if Spine Wave has not closed its currently contemplated Series A Preferred Stock Financing on or before April 12, 2002, PPTI shall not, at any time prior to May 12, 2002, exercise its right to terminate the License Agreement pursuant to Section 9.2(b) thereof if and provided that Spine Wave has paid to PPTI all payments due and payable as of April 1, 2002 under that certain Supply and Services Agreement dated as of April 12, 2001, as amended through the date hereof. 2. License Agreement. Except as otherwise modified in this Letter Agreement, the License Agreement and the terms and conditions therein remain unchanged and in full force and effect. 3. Amendments and Waivers. Any term of this Letter Agreement may be amended and the observance of any term of this Letter Agreement may be waived only with the written consent of Spine Wave and PPTI. 4. Counterparts. This Letter Agreement may be executed in two counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 5. Governing Law. This Letter Agreement shall be construed and the rights of the parties shall be determined in accordance with the substantive laws of the State of California, without regard to its conflict of laws principles. Very truly yours, SPINE WAVE, INC. By: ------------------------------------------- Mark LoGuidice, President and Chief Executive Officer AGREED AND ACCEPTED: PROTEIN POLYMER TECHNOLOGIES, INC. By: ------------------------------------- J. Thomas Parmeter, President and Chief Executive Officer EXHIBIT D --------- ASSIGNMENT SEPARATE FROM CERTIFICATE FOR VALUE RECEIVED, Protein Polymer Technologies, Inc. hereby sells, assigns and transfers unto _____________________________, ______________________ (__) shares of the Common Stock of Spine Wave, Inc., standing in its name on the books of said corporation represented by Certificate No. herewith and does hereby irrevocably constitute and appoint __________________ attorney to transfer said stock on the books of the within-named corporation with full power of substitution in the premises. Dated: _________________, _____. Protein Polymer Technologies, Inc. _________________________________________________ By: Its: This Assignment Separate from Certificate was executed in conjunction with the terms of a Stock Purchase Agreement between the above assignor and Spine Wave, Inc. dated March__, 2002. EXHIBIT E --------- MILESTONES ** ** Material is confidential and has been omitted and filed separately with the Securities and Exchange Commission. APPENDIX A ---------- 1. Completion of all Acute Toxicity testing and reports (see Pre-clinical Tests below) 2. Completion of all Chronic Testing with ninety (90) day report (see Pre-clinical Tests below) 3. Characterization of the Master Cell Bank for the protein selected for the IDN 4. Characterization of the protein selected for the IDN 5. Characterization of the specified IDN material 6. Qualification of the protein manufacturing process for submission of an investigational device exemption application for a pilot clinical study of the IDN with the FDA 7. Successful results, in the Company's reasonable judgment, from the mechanical testing Preclinical Tests* Acute Tests - -------------------------------------------------------------------------------- Test Article Form Animal Model Follow up - -------------------------------------------------------------------------------- Cytotoxicity MEM extract In-vitro L929 48 hours - -------------------------------------------------------------------------------- Sensitization Saline/CSO Guinea pig 22 days extracts - -------------------------------------------------------------------------------- Intracutaneous Saline/CSO Rabbit 7 days reactivity extracts - -------------------------------------------------------------------------------- Systemic Saline/CSO Mouse 72 hours toxicity extracts - -------------------------------------------------------------------------------- Pyrogenicity Saline extract In vitro N/A LAL Endotoxin - -------------------------------------------------------------------------------- Irritation In-situ cured Rabbit (muscle) 5 days implant - -------------------------------------------------------------------------------- Genotoxicity - Saline/DMSO In vitro N/A Bacterial extracts reverse mutation - -------------------------------------------------------------------------------- Genotoxicity Saline/DMSO In vitro N/A Chromosome extracts aberration - -------------------------------------------------------------------------------- Genotoxicity Saline/DMSO In vitro N/A Micronucleus extracts test - -------------------------------------------------------------------------------- Chronic Tests - -------------------------------------------------------------------------------- Test Article Form Animal Model Follow up - -------------------------------------------------------------------------------- Subchronic In-situ cured Rabbit (peri- 30 days Neural toxicity implant sciatic nerve injection) - -------------------------------------------------------------------------------- Implantation In-situ cured Sheep 90 day interim implant intradiscal 1 year total injection - -------------------------------------------------------------------------------- Chronic toxicity In-situ cured Rabbit 7 days implant - -------------------------------------------------------------------------------- * The tests required are subject to change based on feedback from the FDA. EX-10 5 ex10-45.txt EX. 10.45: WARRANT TO PURCHASE SHARES/SPINE WAVE Exhibit 10.45 THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO AN EXEMPTION TO SUCH ACT. THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS WARRANT HAS NOT BEEN QUALIFIED WITH ANY STATE AUTHORITIES AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SUCH SECURITIES IS EXEMPT FROM QUALIFICATION PURSUANT TO PROVISIONS OF THE APPLICABLE CORPORATIONS CODE. THE RIGHTS OF THE HOLDER OF THIS WARRANT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT. Void after March 21, 2006 WARRANT TO PURCHASE SHARES OF COMMON STOCK OF SPINE WAVE, INC. INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE ---------------------------------------------------- THIS CERTIFIES THAT, for value received, PROTEIN POLYMER TECHNOLOGIES, INC., a Delaware corporation, together with its permitted successors and assigns (the "Holder"), is entitled, subject to the terms set forth below, to purchase from Spine Wave, Inc., a Delaware corporation (the "Company"), 1,000,000 shares of the common stock, $0.001 par value per share ("Common Stock") of the Company, subject to adjustment pursuant to Section 4 below (the "Shares"), at a purchase price per share of $0.50, subject to adjustment pursuant to Section 4 below (the "Exercise Price"). This Warrant and any Warrant subsequently issued upon exchange or transfer hereof are hereinafter collectively called the "Warrant". Section 1. Definitions. As used herein, the following terms shall have the meanings set forth below: "Expiration Date" shall mean the earlier to occur of: (a) March 21, 2006 or, if such date shall in New York, New York be a legal holiday or a day on which banks are required or authorized to close, the next following date that in New York, New York is not a legal holiday or a day on which banks are required or authorized to close, (b) immediately prior to the closing of the Company's first public offering of the Company's Common Stock (an "IPO"). At least thirty (30) days prior to the occurrence of an event specified in (b) above, the Company shall send the Holder notice of such event and that the Holder's rights under this Warrant shall terminate upon the occurrence of such event in order to allow the Holder an opportunity to exercise this Warrant and this Warrant shall terminate unless exercised immediately prior to an IPO. Section 2. Exercise. 2.1 Subject to the terms and conditions contained herein, this Warrant is exercisable with respect to any or all of the Shares, at the option of the Holder, at any time and from time to time at or prior to the Expiration Date, upon surrender of this Warrant to the Company together with (a) a duly completed (i) Notice of Exercise, in the form attached hereto as Exhibit A, or (ii) Net Issue Election Notice, in the form attached hereto as Exhibit B and (b) payment of an amount equal to the Exercise Price multiplied by the number of Shares with respect to which this Warrant is being exercised as provided in Section 2.2 below. If the Holder exercises this Warrant with respect to less than all of the Shares represented by this Warrant, the Company shall cancel this Warrant upon the surrender thereof and shall execute and deliver to the Holder a new Warrant for the balance of such Shares. 2.2 Payment. Payment of the Exercise Price for the Shares with respect to which this Warrant is being exercised by the Holder shall be made, at the option of the Holder, (a) by delivery of cash payable by wire transfer of immediately available funds, (b) by the delivery of a cashier's check or certified check, (c) by net issue election as set forth in Section 2.3 below, or (d) by any combination of (a) - (c). 2.3 Net Issue Election. The Holder may elect to receive, without payment by the Holder of any additional consideration, shares of Common Stock equal to the value of the this Warrant or any portion thereof by the surrender of the Warrant to the Company, together with a duly completed Net Issue Election Notice, in the form attached hereto as Exhibit B, at the principal office of the Company, in which event the Company shall issue to the Holder such number of shares of Common Stock as is computed using the following formula: X = Y (A - B) --------- A Where: X = The number of shares of Common Stock to be issued to the Holder pursuant to the issue election; Y = The number of Shares in respect of which the net issue election is made; A = The fair market value (as determined below) of one share of the Common Stock at the time the net issue election is made; B = The Exercise Price in effect under this Warrant as of the date of the net issue election. For purposes of this Section 2, the fair market value of a share of Common Stock on the time that the issue election is made shall mean: (a) If traded on a stock exchange, the fair market value of the Common Stock shall be deemed to be the average of the closing selling prices of the Common Stock on the stock exchange determined by the Board to be the primary market for the Common Stock over the ten (10) trading day period (or such shorter period immediately following the closing of an initial public offering) ending on the date prior to the date that the issue election is made, as such prices are officially quoted in the composite tape of transactions on such exchange; (b) If traded over-the-counter, the fair market value of the Common Stock shall be deemed to be the average of the closing bid prices (or, if such information is available, the closing selling prices) of the Common Stock over the ten (10) trading day period (or such shorter period immediately following the closing of an initial public offering) ending on the date prior to the Conversion Date, as such prices are reported by the National Association of Securities Dealers through its NASDAQ system, any successor system or any exchange on which it is listed, whichever is applicable; or (c) If there is no public market for the Common Stock, then the fair market value shall be determined by the Board of Directors of the Company in good faith. Section 3. Limit on Rights of the Holder upon Exercise. The Holder acknowledges and agrees that upon the exercise of this Warrant in full or in part, the following provisions shall apply to the rights of the Holder as a holder of shares of Common Stock of the Company. This Section 3 shall survive any termination, expiration or exercise of this Warrant. 3.1 Market Stand-Off Agreement. If requested by the Company and an underwriter of Common Stock (or other securities) of the Company, Purchaser shall not sell or otherwise transfer or dispose of any Common Stock (or other securities) of the Company held by such Holder (other than those included in the registration) for no more than (i) 180 days from the effective date of the first registration of the Company's securities, including securities to be sold on its behalf to the public in an underwritten offering and (ii) 90 days for the next two subsequent registration statement of the Company after the initial public offering; provided, however, that all executive officers, directors and two percent (2%) or greater stockholders of the Company must enter into similar lock-up agreements as well. Section 4. Adjustment of Exercise Price and Number of Shares. The Exercise Price and the number of Shares purchasable upon the exercise of this Warrant shall be subject to adjustment from time to time as follows: 4.1 Split, Subdivision or Combination. If the Company shall, at any time prior to the expiration of this Warrant, split, subdivide or combine the outstanding shares of Common Stock as to which the purchase rights under this Warrant exist, into a different number of shares of Common Stock, the Exercise Price hereunder shall be proportionally decreased and the number of shares which this Warrant is exercisable for shall be proportionally increased in the case of a split or subdivision and the Exercise Price will be proportionally increased and the number of shares which this Warrant is exercisable for shall be proportionally decreased in the case of a combination. 4.2 Dividends. If the Company shall, at any time prior to the expiration of this Warrant, make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, then and in each such event the Exercise Price hereunder shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date. 4.3 Reclassification or Reorganization. If the Common Stock issuable upon the exercise of this Warrant shall be changed into the same or different number of shares of any class or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a subdivision or combination of shares or a dividend provided for in Sections 4.1 and 4.2 above, or a Change of Control provided for in Section 4.4 below), then and in each such event the Holder shall be entitled to receive upon the exercise of this Warrant the kind and amount of shares of stock and other securities and property receivable upon such reorganization, reclassification or other change, to which a holder of the number of Common Stock issuable upon the exercise of this Warrant would have received if this Warrant had been exercised immediately prior to such reorganization, reclassification or other change. 4.4 In the case of (i) a consolidation or merger of the Company with and into another corporation or (ii) a sale of all or substantially all of the assets of the Company to another corporation (other than a subdivision, combination, reclassification or exchange of shares provided for elsewhere in this Section 4) (an event covered in (i) and (ii) is referred to hereinafter as a "Change of Control"), then as a part of such merger, consolidation or sale, provision shall be made so that the Holder shall thereafter be entitled to receive upon the exercise of this Warrant, the number of shares of stock or other securities or property of the Company, or of the successor corporation resulting from such reorganization, merger, consolidation or sale, to which a holder of the number of shares of Common Stock (or any shares of stock or other securities which may be) issuable upon the exercise of this Warrant would have received if this Warrant had been exercised immediately prior to such merger, consolidation or sale. 4.5 Notice of Adjustments and Record Dates. The Company shall promptly notify the Holder in writing of each adjustment or readjustment of the Exercise Price hereunder and the number of Shares issuable upon the exercise of this Warrant. Such notice shall state the adjustment or readjustment and show in reasonable detail the facts on which that adjustment or readjustment is based. In the event of any taking by the Company of a record of the holders of Common Stock for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, the Company shall notify the Holder in writing of such record date at least fifteen (15) days prior to the date specified therein. 4.6 Issue Tax. The issuance of certificates for the Shares upon exercise of this Warrant shall be made without charge to Holder of this Warrant for any issuance tax in respect thereof provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the Holder of this Warrant. 4.7 No Impairment. The Company shall not avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but shall at all times in good faith assist in the carrying out of all the provisions of this Warrant. Without limiting the generality of the foregoing, the Company (a) shall at all times reserve and keep available a number of its authorized shares of Common Stock, free from all preemptive rights therein, which shall be sufficient to permit the exercise of this Warrant and (b) shall take all such action as may be necessary or appropriate in order that all Shares as may be issued pursuant to the exercise of this Warrant shall, upon issuance, be duly and validly issued, fully paid and nonassessable. 4.8 Fractional Shares. No fractional shares shall be issued upon the exercise of this Warrant as a consequence of any adjustment pursuant hereto. All Shares (including fractions) issuable upon exercise of this Warrant may be aggregated for purposes of determining whether the exercise would result in the issuance of a fractional share. If, after aggregation, the exercise would result in the issuance of a fractional share, the Company shall, in lieu of issuance of any fractional share, pay the Holder otherwise entitled to such fraction a sum in cash equal to the product resulting from multiplying the then current fair market price value of a Share by such fraction. Section 5. Replacement of Warrants. On receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, on surrender and cancellation of such Warrant, the Company at its expense shall execute and deliver to the Holder, in lieu thereof, a new Warrant of like tenor. Section 6. No Rights or Liability as a Stockholder. This Warrant does not entitle the Holder hereof to any voting rights or other rights as a stockholder of the Company. No provisions hereof, in the absence of affirmative action by the Holder to purchase the Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder as a stockholder of the Company. Section 7. Representations and Warranties of the Holder. The Holder hereby represents and warrants to and for the benefit of the Company, with knowledge that the Company is relying thereon in issuing this Warrant to the Holder, as follows: 7.1 Purchase Entirely for Own Account. By the Holder's execution of this Warrant, the Holder hereby confirms that this Warrant and the Shares issuable upon exercise of this Warrant (collectively, the "Securities") shall be acquired for investment for the Holder's own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Holder has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Warrant, the Holder further represents that the Holder does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participation to such person or to any third person, with respect to any of the Securities. The Holder represents that it has full power and authority to enter into this Warrant. 7.2 Receipt of Information/Investment Experience. The Holder believes that it has received all the information necessary or appropriate for deciding whether to acquire the Securities. The Holder further represents that it has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Securities and to obtain any additional information necessary to verify the accuracy of the information given to the Holder. The Holder is an investor in securities of companies in the development stage and acknowledges that it is able to fend for itself, can bear the economic risk of its investment and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Securities. 7.3 Ability To Bear Economic Risk. The Holder acknowledges that an investment in the Securities involves a high degree of risk, and represents that it is able without materially impairing its financial condition to hold the Securities for an indefinite period of time and to suffer a complete loss of its investment. 7.4 Restricted Securities. The Holder understands that the Securities it is and shall be purchasing are characterized as "restricted securities" under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Securities Act of 1933, as amended (the "Act"), only in certain limited circumstances. In this connection, the Holder represents that it is familiar with Rule 144 promulgated under the Act, as now in effect, and understands the resale limitations imposed thereby and by the Act. 7.5 Legends. The Holder understands that the certificates evidencing the Securities may bear one or all of the following legends and the Holder covenants that it will not transfer the Securities represented by any such certificate or document without complying with the restrictions on transfer described in the legends endorsed on such certificate or document: (a) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD IN FULL COMPLIANCE WITH RULE 144 UNDER THE ACT. (b) Any legend required by the laws of any State. (c) Any legend required to be placed on the Securities purchased by investors in any future sale or offering of any Securities. Section 8. Miscellaneous. 8.1 Limitations on Disposition. (a) The Holder of this Warrant, by acceptance hereof, agrees to comply in all respects with the provisions of this Section 8.1. Without in any way limiting the representations set forth above, the Holder of this Warrant agrees not to make any disposition of this Warrant or any Shares, unless and until the transferee has agreed in writing for the benefit of the Company to be bound by this Section 8.1 and the other provisions of this Warrant as if such transferee were the original Holder hereof, provided and to the extent such provisions are then applicable, and: (i) There is then in effect a registration statement under the Act covering such proposed disposition and such disposition is made in accordance with such registration statement; or (ii) (A) the Holder shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and the Company has given its prior written consent, and (B) if requested by the Company, the Holder shall have furnished the Company with an opinion of counsel, satisfactory to the Company, that such disposition will not require registration of the Warrant and/or the Shares under the Act. It is agreed that the Company will not require opinions of counsel for transactions made pursuant to Rule 144 except in unusual circumstances. (b) Notwithstanding the provisions of paragraph (a) above, (i) no such registration statement, prior consent or opinion of counsel shall be necessary for a transfer (A) by a Holder which is a partnership to a partner of such partnership or a retired partner of such partnership who retires after the date hereof, or to the estate of any such partner or retired partner or to the transfer by gift, will or intestate succession of any partner to his spouse or to the siblings, lineal descendants or ancestors of such partner or his spouse, or (B) by a Holder which is a corporation to an "affiliate" of the Holder as that term is defined in Rule 405 promulgated by the Securities and Exchange Commission under the Act, if the transferee agrees in writing to be subject to the terms hereof to the same extent as if it were an original Holder hereunder, and (ii) no transferee shall be required, as a condition to any transfer of the Warrant or the Shares by the Holder, to agree to be bound by this Section 8.1, if the transferee is acquiring the Warrant and/or Shares pursuant to a Registration Statement under the Act or in a transaction made pursuant to Rule 144. Each new certificate evidencing the Warrant and/or Shares so transferred shall bear the appropriate restrictive legends, except that such certificate shall not bear such restrictive legend if, in the opinion of counsel for the Company, such legend is not required in order to establish or assist in compliance with any provisions of the Act or any applicable state securities laws. 8.2 Titles and Subtitles. The titles and subtitles used in this Warrant are for convenience only and are not to be considered in construing or interpreting this Warrant. 8.3 Notices. Any notice required or permitted under this Warrant, except as otherwise expressly provided in this Warrant, shall be given in writing and shall be deemed to have been duly given at the earlier of (i) the time of actual delivery or (ii) on the third business day following the date deposited with the United States Postal Service, postage prepaid, certified with return receipt requested, to the parties at the following addresses or at such other address as shall be given in writing by a party to the other parties: Holder: Protein Polymer Technologies, Inc. ____________________________ ____________________________ ____________________________ The Company: Spine Wave, Inc. 12230 El Camino Real, Suite 300 San Diego, CA 92130 Attn: President and Chief Executive Officer 8.4 Attorneys' Fees. If any action at law or in equity is necessary to enforce or interpret the terms of this Warrant, the prevailing party shall be entitled to reasonable attorneys' fees, costs and disbursements in addition to any other relief to which such party may be entitled. 8.5 Amendments and Waivers. This Warrant may be amended and the observance of any other term of this Warrant may be waived (either generally or in a particular instance and either retroactively or prospectively), with the written consent of the Company and the Holder. 8.6 Severability. If one or more provisions of this Warrant are held to be unenforceable under applicable law, such provision shall be excluded from this Warrant and the balance of the Warrant shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms. 8.7 Governing Law. This Warrant shall be governed by and construed and enforced in accordance with the laws of the State of California, without giving effect to its conflicts of laws principles. This Warrant may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Date: March __, 2002 SPINE WAVE, INC., a Delaware corporation By: /s/ Mark LoGuidice --------------------------- Mark LoGuidice, President and Chief Executive Officer ACKNOWLEDGED AND AGREED: PROTEIN POLYMER TECHNOLOGIES, INC. By: __________________________________ Name (please print):___________________ Title: _____________________________ EXHIBIT A --------- FORM OF NOTICE OF EXERCISE The undersigned, the holder of the within Warrant, hereby irrevocably elects to exercise this Warrant for, and to purchase thereunder, __________ shares of Common Stock of Spine Wave, Inc., a Delaware corporation and herewith makes payment of $__________ therefor and requests that the certificates for such shares be issued in the name of, and delivered to, ____________________, federal taxpayer identification number __________, whose address is _____________________________________________. In exercising this Warrant, the undersigned hereby confirms and acknowledges that the representations and warranties set forth in Section 7 of this Warrant are true and correct as of the date of this notice of exercise. Please issue a new Warrant for the unexercised portion of the attached Warrant in the name of, and delivered to, ____________________, federal taxpayer identification number __________, whose address is ____________________ _________________________. Dated:____________ ______________________________________________ (Signature must conform to name of holder as specified on the face of the Warrant) A-1 EXHIBIT B --------- FORM OF NET ISSUE ELECTION NOTICE (To be signed only on net issue exercise of the Warrant) The undersigned, the holder of the within Warrant, hereby irrevocably elects to exercise this Warrant with respect to __________ shares of Common Stock of Spine Wave, Inc., a Delaware corporation, pursuant to the net issue election provisions set forth in Section 2.3 of the Warrant and requests that the certificates for the number of shares of Common Stock issuable pursuant to said Section 2.3 after application of the net issue election formula to such __________ shares be issued in the name of, and delivered to, ____________________, federal taxpayer identification number __________, whose address is __________________________________. In exercising this Warrant, the undersigned hereby confirms and acknowledges that the representations and warranties set forth in Section 7 of this Warrant are true and correct as of the date of this net issue election notice. Please issue a new Warrant for the unexercised portion of the attached Warrant in the name of, and delivered to, ____________________, federal taxpayer identification number __________, whose address is _____________________________________________. Dated:___________________ ______________________________________________ (Signature must conform to name of holder as specified on the face of the Warrant) EX-99 6 ex99-1.txt EX. 99.1: CERTIFICATION OF CEO Exhibit 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Protein Polymer Technologies, Inc. (the "Company") on Form 10-QSB for the period ended September 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ J. Thomas Parmeter ----------------------- J. Thomas Parmeter President and Chief Executive Officer November 13, 2002 EX-99 7 ex99-2.txt EX. 99.2: CERTIFICATION OF DIRECTOR OF FINANCE Exhibit 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Protein Polymer Technologies, Inc. (the "Company") on Form 10-QSB for the period ended September 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Janis Y. Neves ------------------- Janis Y. Neves Director of Finance and Assistant Secretary November 13, 2002 -----END PRIVACY-ENHANCED MESSAGE-----