Capstone Therapeutics Corp. (OTCPK:CAPS) announced that it has entered into a securities purchase agreement for a private placement of convertible promissory notes for principal gross proceeds of $1,000,000 on December 11, 2015. The notes will be issued at its par value. The transaction will include participation from Biotechnology Value Fund affiliated entities Biotechnology Value Fund, L.P. and Biotechnology Value Fund II, L.P., funds managed by BVF Partners LP for $701,000, Biotechnology Value Trading Fund OS, L.P. for $141,000, Investment 10, LLC for $47,0000, and MSI BVF SPV, LLC for $111,000. The notes bear a fixed interest of 5% per annum and will be due April 30, 2017. The notes are secured by a security interest in all of its assets. In case of default, the notes will carry an interest of 12% per annum.

As part of the transaction, the lenders have the right to acquire convertible preferred stock on the conversion of the notes. The unpaid principal amount of the notes will convert automatically upon the closing of a qualified equity financing. If the qualified equity financing is not consummated by March 31, 2016, the unpaid principal amount of the notes may be converted at the election of the investors into shares of common stock, at a conversion price equal to the trailing 10-day weighted average trading price, but will be not be less than $0.135 or more than $0.18 per share. The agreement also provides the investors an exclusive period, initially ending January 31, 2016, to propose terms of an additional investment of at least $7,500,000, but not to exceed $10,000,000, in the company. The company and each investor will bear their respective expenses as part of the transaction.