EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
IDEC PHARMACEUTICALS CORPORATION
ARTICLE I
The name of this corporation is IDEC Pharmaceuticals Corporation.
ARTICLE II
The address of the registered office of the corporation in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle.
The name of its registered agent at such address is The Corporation Trust
Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the Delaware General Corporation Law.
ARTICLE IV
(A) Classes of Stock. This corporation is authorized to issue two classes
of stock to be designated, respectively, "Common Stock" and "Preferred Stock."
The total number of shares which the corporation is authorized to issue is
Fifty-Eight Million (58,000,000) shares. Fifty Million (50,000,000) shares shall
be Common Stock, par value $0.001 per share, and Eight Million (8,000,000)
shares shall be Preferred Stock, par value $0.001 per share.
(B) Rights, Preferences and Restrictions of Preferred Stock. The Preferred
Stock authorized by this Certificate of Incorporation may be issued from time to
time in series. The rights, preferences, privileges, and restrictions granted to
and imposed on the Series A Preferred Stock, which series shall consist of One
Million Seven Hundred Fifty Thousand (1,750,000) shares, which may be issued in
seven subseries designated as (i) "Series A-1 Preferred Stock," consisting of
One Hundred Thousand (100,000) authorized shares; (ii) "Series A-2 Preferred
Stock," consisting of One Hundred Fifty Thousand (150,000) authorized shares;
(iii) "Series A-3 Preferred Stock," consisting of Seven Hundred Thousand
(700,000) authorized shares; (iv) "Series A-4 Preferred Stock," consisting of
Two Hundred Fifty Thousand (250,000) authorized shares; (v) "Series A-5
Preferred Stock," consisting of Three Hundred Fifty Thousand (350,000)
authorized shares; (vi) "Series A-6 Preferred Stock," consisting of One Hundred
Thousand (100,000) authorized shares; and (vii) "Series A-7 Preferred Stock,"
consisting of One Hundred Thousand (100,000) authorized shares, are as set forth
below in this Article IV(B). The Board of Directors is hereby authorized to fix
or alter the rights, preferences, privileges and restrictions granted to or
imposed upon additional series of Preferred Stock, and the number of shares
constituting any such additional series and the designation thereof, or of any
of them. Subject to compliance with applicable protective voting rights which
have been or may be granted to the Preferred Stock or series thereof in the
Corporation's Certificate of Incorporation, as amended and restated from time to
time, and requirements and restrictions of applicable law ("Protective
Provisions"), the rights, privileges, preferences and restrictions of any such
additional series may be subordinated to, pari passu with (including, without
limitation, inclusion in provisions with respect to liquidation and acquisition
preferences, redemption and/or approval of matters by vote or written consent),
or senior to any of those of any present or future class or series of Preferred
or Common Stock. Subject to compliance with applicable Protective Provisions,
the Board of Directors is also authorized to increase the number of shares of
any series (other than the Series A Preferred Stock), or decrease the number of
shares of any series prior or subsequent to the issue of that series, but not
below the number of shares of such series then outstanding. In case the number
of shares
of any series shall be so decreased, the shares constituting such decrease shall
resume the status which they had prior to the adoption of the resolution
originally fixing the number of shares of such series. The Series A Preferred
Stock and the subseries thereof shall have the relative rights, preferences and
restrictions set forth in Annex A hereto, which is incorporated by reference
herein and made a part hereof.
(C) Common Stock. 1. Dividend Rights. Subject to the prior rights of
holders of all classes of stock at the time outstanding having prior rights as
to dividends, the holders of the Common Stock shall be entitled to receive, when
and as declared by the Board of Directors, out of any assets of the Corporation
legally available therefor, such dividends as may be declared from time to time
by the Board of Directors.
2. Liquidation Rights. Upon the liquidation, dissolution or winding up of
the Corporation, the assets of the Corporation shall be distributed to the
holders of the Common Stock as provided in Annex A hereto.
3. Redemption. The Common Stock is not redeemable.
4. Voting Rights. The holder of each share of Common Stock shall have the
right to one vote, and shall be entitled to notice of any stockholders' meeting
in accordance with the Bylaws of the Corporation, and shall be entitled to vote
upon such matters and in such manner as may be provided by law.
ARTICLE V
The Board of Directors may from time to time make, amend, supplement or
repeal the bylaws of the corporation by the requisite affirmative vote of
directors as set forth in the bylaws of the corporation; provided, however, that
the stockholders may change or repeal any bylaw adopted by the Board of
Directors by the requisite affirmative vote of stockholders as set forth in the
bylaws of the corporation; and, provided further, that no amendment or
supplement to the bylaws of the corporation adopted by the Board of Directors
shall vary or conflict with any amendment or supplement thus adopted by the
stockholders.
ARTICLE VI
The number of directors of the corporation shall be fixed from time to time
by, or in the manner provided in, the bylaws or amendment thereof duly adopted
by the board of directors or by the stockholders of the corporation.
ARTICLE VII
Elections of directors need not be by written ballot unless the bylaws of
the corporation shall so provide. The directors shall be classified into three
classes, as nearly equal in number as possible as determined by the board of
directors, with (i) the term of office of the first class to expire at the 1998
Annual Meeting of Stockholders, (ii) the term of office of the second class to
expire at the 1999 Annual Meeting of Stockholders and (iii) the term of office
of the third class to expire at the 2000 Annual Meeting of Stockholders. At each
Annual Meeting of Stockholders, directors elected to succeed those directors
whose terms expire shall be elected for a term of office to expire at the third
succeeding Annual Meeting of Stockholders after their election. Additional
directorships resulting from an increase in the number of directors shall be
apportioned among the classes as equally as possible as determined by the board
of directors.
ARTICLE VIII
The Corporation is to have perpetual existence.
ARTICLE IX
Meetings of stockholders may be held within or without the State of
Delaware, as the bylaws of the corporation may provide. The books of the
corporation may be kept (subject to any provision contained in the
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statutes) outside the State of Delaware at such place or places as may be
designated from time to time by the board of directors or in the bylaws of the
corporation.
ARTICLE X
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for any breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit. If the Delaware General Corporation Law is amended after
approval of this Article to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a director
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended. Any repeal or modification of the
foregoing provisions of this Article X shall not adversely affect any right or
protection of a director of the Corporation with respect to any acts or
omissions of such director occurring prior to such repeal or modification.
ARTICLE XI
To the fullest extent permitted by applicable law, the Corporation is also
authorized to provide indemnification of (and advancement of expenses to) such
agents (and any other persons to which Delaware law permits the Corporation to
provide indemnification) though bylaw provisions, agreements with such agents or
other persons, vote of stockholders or disinterested directors or otherwise, in
excess of the indemnification and advancement otherwise permitted by Section 145
of the Delaware General Corporation Law, subject only to limits created by
applicable Delaware law (statutory or non-statutory), with respect to actions
for breach of duty to the Corporation, its stockholders, and others. Any repeal
or modification of any of the foregoing provisions of this Article XI shall not
adversely affect any right or protection of a director, officer, agent or other
person existing at the time of, or increase the liability of any director of the
Corporation with respect to any acts or omissions of such director, officer or
agent occurring prior to such repeal or modification.
ARTICLE XII
The corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
IN WITNESS WHEREOF, the undersigned, the sole incorporator of the
Corporation, has executed this Amended and Restated Certificate of Incorporation
this 4th day of April, 1997.
--------------------------------------
Kenneth A. Rosenblum
Sole Incorporator
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ANNEX A
RIGHTS, PREFERENCES AND RESTRICTIONS OF THE
SERIES A-1, A-2, A-3, A-4, A-5, A-6 AND A-7 PREFERRED STOCK
The rights, preferences, restrictions and other matters relating to the
Series A Preferred Stock are as follows:
1. Certain Definitions. "Affiliate" means an entity that, directly or
indirectly, through one or more intermediaries, is controlled by IDEC or
Genentech. As used herein, the term "control" will mean the direct or indirect
ownership of fifty percent (50%) or more of the stock having the right to vote
for directors thereof or the ability to otherwise control the management of the
corporation or other business entity.
"Approval Process Event" means a determination by the Joint Development
Committee that the formulation of C2B8 and the process for C2B8 recovery are
commercially viable as more fully described in Appendix I to the Development
Plan.
"C2B8" means that certain monoclonal antibody to B cells more particularly
described on Exhibit B to the Collaboration Agreement.
"Co-Promotion Territory" means the United States and Canada.
"Collaboration Agreement" shall mean the Collaboration Agreement dated the
Effective Date between the Corporation and Genentech.
"Controlled," unless specified otherwise herein, means possession of the
ability to grant a license or sublicense as provided for herein without
violating the terms of any agreement or other arrangement with any entity other
than the Corporation or Genentech.
"Development Plan" means the comprehensive plan for the development of
C2B8, designed to generate the preclinical, process development/manufacturing
scale-up, clinical and regulatory information required to obtain Regulatory
Approval in the Co-Promotion Territory, and may be modified from time to time by
the JDC. Development shall refer to all activities related to preclinical
testing, toxicology, formulation, process development, manufacturing scale-up,
quality assurance/quality control, clinical studies and regulatory affairs for a
Licensed Product in connection with obtaining Regulatory Approvals of such
Products.
"Effective Date" means March 16, 1995.
"First Anniversary Date" means the date which is twelve (12) calendar
months following March 16, 1995.
"FDA Approval Date" means the date on which the United States Food and Drug
Administration grants Regulatory Approval of C2B8 for manufacture and sale in
the United States.
"FDA Approval Event" means the FDA Approval Date occurs on or before the
Fifty-Four Month Anniversary Date.
"Fifty-Four Month Anniversary Date" means that date which is fifty-four
(54) calendar months following March 16, 1995.
"Genentech" means Genentech, Inc., a Delaware corporation, and its
Affiliates.
"IDEC" means IDEC Pharmaceuticals Corporation, a Delaware corporation, and
its Affiliates.
"Joint Development Committee" or "JDC" means that committee established
pursuant to Section 3.2 of the Collaboration Agreement.
"Licensed Product(s)" means any compound or composition of matter whose
mechanism of action is initiated by interaction with the CD20 or CD19 B-cell
determinant (including C2B8, but excluding Y2B8 (as defined in Section 2.2. of
the Collaboration Agreement) and In2B8 (as defined in Section 2.2. of the
Collaboration Agreement) unless the option set forth in Section 2.3 of the
Collaboration Agreement is exercised) (a) developed by IDEC or (b) the
intellectual property rights to which are owned or Controlled, in
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whole or in part, by IDEC, in either (a) or (b) as of the Effective Date or
during the term of the Collaboration Agreement.
"Major European Country" means the United Kingdom, Italy, Germany, France
or Spain.
"ML/MS Agreement" means the Preferred and Common Stock Purchase Agreement
dated March 16, 1995 by and between ML/MS Associates, L.P. and IDEC, whereby
IDEC reacquired the rights to certain technologies for the treatment of B-cell
lymphomas funded and developed by ML/MS Partners pursuant to a Development
Agreement and related agreements, dated as of February 17, 1988 and October 27,
1988.
"ML/MS Partners" shall mean ML Technology Ventures, L.P. and Morgan Stanley
Ventures, L.P., and any assignee or successor to ML/MS Partners.
"National Exchange" shall mean the Nasdaq National Market or any other
national exchange on which the Common Stock of the Corporation is listed.
"Option Agreement" means the Option Agreement to be dated as of the
Effective Date between Genentech and the Corporation.
"Patent Milestone Event" means the notice of grant in the European Patent
Office or issuance in a Major European Country of the first valid and
enforceable letters patent covering C2B8.
"Preferred Stock Purchase Agreement" means the Preferred Stock Purchase
Agreement dated the Effective Date between the Corporation and Genentech.
"Regulatory Approval" means any approvals (including pricing and
reimbursement approvals), licenses, registrations or authorizations of any
federal, state or local regulatory agency, department, bureau or other
governmental entity, necessary for the manufacture and sale of a Licensed
Product in a regulatory jurisdiction.
"Registration Rights Agreement" means the 1995 Registration Rights
Agreement dated as of the Effective Date between Genentech, ML/MS Associates,
L.P. and the Corporation.
"Third Anniversary Date" means that date which is thirty-six months
following March 16, 1995.
2. Dividend Provisions. a. Series A-1, A-2, A-3, A-4, A-5 and A-6
Preferred Stock Dividend Provisions. No dividend or other distribution shall be
paid, or declared and set apart for payment (other than dividends of Common
Stock on the Common Stock of the Corporation and dividends payable on the Series
A-7 Preferred Stock pursuant to Section 2(b) below), on the shares of any class
or series of capital stock of the Corporation unless and until a dividend of
equal or greater amount (calculated as if the shares of Series A-1, A-2, A-3,
A-4, A-5 and A-6 Preferred Stock had been converted Common Stock on the date the
dividend is declared) is first declared and paid with respect to any series of
Series A Preferred Stock.
b. Series A-7 Preferred Stock Dividend Provisions. Cumulative dividends
shall accrue from the date of issuance of the Series A-7 Preferred Stock at a
fluctuating rate per annum equal to the sum of two percent (2%) plus the "Prime
Rate" as announced by the Bank of America, San Francisco Branch, from time to
time. Accrued dividends shall be payable quarterly in arrears on the first day
of each quarter, commencing with the first day of the first quarter following
the earlier of the FDA Approval Date or the Fifty-Four Month Anniversary Date.
On the earlier of the FDA Approval Date or the Fifty-Four Month Anniversary
Date, all dividends accrued through such date shall be paid. Any accumulation of
dividends on the Series A-7 Preferred Stock shall not bear interest. No dividend
or other distribution shall be paid, or declared and set apart for payment
(other than dividends of Common Stock on the Common Stock of the Corporation),
on the shares of any class or series of capital stock of the Corporation unless
and until such dividends have been paid. The Corporation shall take any and all
corporate action necessary to declare and pay such dividends described in this
Section 2(b).
3. Liquidation Preference. The holders of Series A Preferred Stock share a
liquidation preference as follows:
a. Series A-1, A-2, A-3, A-4, A-5, A-6 and A-7 Preferred Stock
Liquidation Preference. In the event of any liquidation, dissolution or
winding up of this Corporation, either voluntary or involuntary,
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subject to the rights of series of Series A Preferred Stock that may from
time to time come into existence, the holders of Series A-1, Series A-2,
Series A-3, Series A-4, Series A-5, Series A-6 and Series A-7 Preferred
Stock, shall be entitled to receive, prior and in preference to any
distribution of any of the assets of this Corporation to the holders of
Common Stock and any other series of Series A Preferred Stock by reason of
their ownership thereof, an amount per share equal to the Original Issue
Price (defined below) for such subseries plus an amount equal to (i) the
declared but unpaid dividends and distributions on such share in the case
of the Series A-1, Series A-2, Series A-3, Series A-4, Series A-5 and
Series A-6 Preferred Stock and (ii) the accrued but unpaid dividends and
distributions on such share in the case of the Series A-7 Preferred Stock.
If upon the occurrence of such event, the assets and funds thus distributed
among the holders of the Series A-1, Series A-2, Series A-3, Series A-4,
Series A-5, Series A-6 and Series A-7 Preferred Stock shall be insufficient
to permit the payment to such holders of the full aforesaid preferential
amounts, then, subject to the rights of series of Series A Preferred Stock
that may from time to time come into existence, the entire assets and funds
of the Corporation legally available for distribution shall be distributed
ratably among the holders of the Series A-1, Series A-2, Series A-3, Series
A-4, Series A-5, Series A-6 and Series A-7 Preferred Stock on an
as-converted to Common Stock basis in proportion to the amount of such
stock owned by each such holder. The "Original Issue Price" for each
subseries shall mean the price at which the initial share of such subseries
is issued.
b. Upon the completion of the distribution required by subparagraph
(a) of this Section 3 and any other distribution that may be required with
respect to series of Series A Preferred Stock that may from time to time
come into existence, if assets remain in this Corporation, the holders of
the Common Stock of this Corporation, shall receive all of the remaining
assets of this Corporation.
c. If (i) a single shareholder or group of affiliated shareholders,
other than a holder of the Series A Preferred Stock, or a Controlled
Affiliate thereof, who would be required to file a Schedule 13D under the
Securities Exchange Act of 1934, as amended, acquires or obtains the right
to acquire voting stock of the Corporation so that its total holdings of
such stock equal or exceed fifty percent (50%) of the then outstanding
voting stock of the Corporation, or (ii) any third party (i.e., a party
other than a holder or a Controlled Affiliate) acquires or obtains the
right to acquire all or substantially all of the assets of the Corporation,
then such event shall be considered a liquidation under this Section 3. For
purposes hereunder, "Controlled Affiliate" shall mean a party that,
directly or indirectly, through one or more intermediaries, is controlled
by such holder.
4. Series A Preferred Stock Conversion. The holders of the Series A-1,
Series A-2, Series A-3, Series A-4, Series A-5, Series A-6 and Series A-7
Preferred Stock shall have conversion rights as follows (the "Conversion
Rights"):
a. Series A-1, Series A-2, Series A-3, Series A-4 and Series A-5,
Preferred Stock Conversion. Each share of Series A-1, Series A-2, Series
A-3, Series A-4 and Series A-5 Preferred Stock shall be convertible, at the
option of the holder thereof, at any time after the date of issuance of
such share at the office of this Corporation or any transfer agent for such
stock, into ten (10) fully paid and nonassessable shares of Common Stock
(the "Conversion Rate" for the Series A-1 Preferred Stock, Series A-2
Preferred Stock, Series A-3 Preferred Stock, Series A-4 Preferred Stock and
the Series A-5 Preferred Stock).
b. [Intentionally omitted.]
c. Series A-6 Preferred Stock Conversion. (1) "Series A-6 Conversion
Number" means the number calculated according to the following formulas:
(i) If the FDA Approval Date occurs prior to the Fifty-Four Month
Anniversary Date, then the Series A-6 Conversion Number shall equal the
average closing price for the Common Stock during the period beginning on
the FDA Approval Date and ending on the date which is twenty (20) trading
days following the FDA Approval Date, as reported on the National Exchange;
or (ii) if the Fifty-Four Month Anniversary Date occurs prior to the FDA
Approval Date, then the Series A-6 Conversion Number shall equal the
average closing price for the Common Stock during the period beginning on
the date which is twenty (20) trading days prior to the Fifty-Four
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Month Anniversary Date and ending on the Fifty-Four Month Anniversary Date,
as reported on the National Exchange.
(2) The Series A-6 Preferred Stock shall not be convertible until the
earlier of (i) twenty (20) trading days following the FDA Approval Date or
(ii) the Fifty-Four Month Anniversary Date. Thereafter, each share of
Series A-6 Preferred Stock shall be convertible, at the option of the
holder thereof, into the number of shares of fully paid and nonassessable
shares of Common Stock as equals seventy-five (75) divided by the Series
A-6 Conversion Number (the "Conversion Rate" for the Series A-6 Preferred
Stock).
d. Series A-7 Preferred Stock Conversion. (1) "Series A-7 Conversion
Number" means the average closing price for the Common Stock during the
period beginning on the twentieth (20th) trading day preceding the date on
which the holder gives notice of such holder's intention to convert (the
"Notice Date") and ending on the Notice Date, as reported on the National
Exchange.
(2) Each share of Series A-7 Preferred Stock shall be convertible, at
the option of the holder thereof, at any time after the Fifty-Four Month
Anniversary Date at the office of this Corporation or any transfer agent
for such stock, into such number of shares of fully paid and nonassessable
shares of Common Stock as equals (A) one hundred (100) divided by (B) the
Series A-7 Conversion Number (the "Conversion Rate" for the Series A-7
Preferred Stock).
e. Automatic Conversion. (i) Each share of Series A-1, Series A-2,
Series A-3, Series A-4 and Series A-5 Preferred Stock; (ii) each share of
Series A-6 Preferred Stock that has become convertible at the option of the
holder pursuant to Section 4(c); and (iii) each share of Series A-7
Preferred Stock that has become convertible at the option of the holder
pursuant to Section 4(d), shall, in each case, automatically be converted
into shares of Common Stock at its then effective Conversion Rate
immediately upon the transfer of ownership by the initial holder to a third
party which is not an Affiliate of such holder. For purposes hereunder,
"Affiliate" shall mean a party that, directly or indirectly, through one or
more intermediaries, controls or is controlled by such holder.
f. Mechanics of Conversion of Series A Preferred Stock. Before any
holder of Series A Preferred Stock shall be entitled to convert the same
into shares of Common Stock, such holder shall surrender the certificate or
certificates therefor, duly endorsed, at the office of this Corporation or
of any transfer agent for the Series A Preferred Stock, and shall give
written notice to this Corporation at its principal corporate office, of
the election to convert the same and shall state therein the name or names
in which the certificate or certificates for shares of Common Stock are to
be issued; provided, however, that in the event of an automatic conversion
pursuant to Section 4(e), the outstanding shares of Series A Preferred
Stock shall be converted automatically without any further action by the
holder of such shares and whether or not the certificates representing such
shares are surrendered to the Corporation or its transfer agent, and
provided further that the Corporation shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon such
automatic conversion unless the certificates evidencing such shares of
Series A Preferred Stock are delivered to the Corporation or its transfer
agent as provided herein. This Corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Preferred
Stock, or to the nominee or nominees of such holder, a certificate or
certificates for the number of shares of Common Stock to which such holder
shall be entitled as aforesaid and shall promptly pay in cash or, to the
extent sufficient funds are not then legally available therefor, in Common
Stock (at the Common Stock's fair market value determined by the Board of
Directors as of the date of such conversion), any declared and unpaid
dividends on the shares of Series A-1, Series A-2, Series A-3, Series A-4,
Series A-5 and Series A-6 Preferred Stock being converted and any accrued
but unpaid dividends on the shares of Series A-7 Preferred Stock being
converted. Such conversion shall be deemed to have been made immediately
prior to the close of business on the date of such surrender of the shares
of Series A Preferred Stock to be converted, or in the case of automatic
conversion pursuant to Section 4(e), on the date of transfer to the new
non-Affiliate holder; and the person or persons entitled to receive the
shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such shares of Common Stock
as of such date.
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g. Conversion Rate Adjustments of Series A Preferred Stock for Splits
and Combinations. The Conversion Rate of the Series A-1, Series A-2,
Series A-3, Series A-4, Series A-5, Series A-6 and Series A-7 Preferred
Stock shall be subject to adjustment from time to time as follows:
(1) In the event the Corporation should at any time or from time to
time after the date upon which any shares of Series A Preferred Stock
were first issued (the "Purchase Date"), fix a record date for the
effectuation of a split or subdivision of the outstanding shares of
Common Stock or the determination of holders of Common Stock entitled to
receive a dividend or other distribution payable in additional shares of
Common Stock or other securities or rights convertible into, or
entitling the holder thereof to receive directly or indirectly,
additional shares of Common Stock (hereinafter referred to as "Common
Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable
upon conversion or exercise thereof), then, as of such record date (or
the date of such dividend distribution, split or subdivision if no
record date is fixed), the Conversion Rate of the Series A Preferred
Stock shall be appropriately increased so that the number of shares of
Common Stock issuable on conversion of each share of such series shall
be increased in proportion to such increase of the aggregate of shares
of Common Stock outstanding and those issuable with respect to such
Common Stock Equivalents.
(2) If the number of shares of Common Stock outstanding at any time
after the Purchase Date is decreased by a combination of the outstanding
shares of Common Stock, then, following the record date of such
combination, the Conversion Rate for the applicable series of Series A
Preferred Stock shall be appropriately decreased so that the number of
shares of Common Stock issuable on conversion of each share of such
series shall be decreased in proportion to such decrease in outstanding
shares. Any adjustment under Section 4(g)(1) or (2) shall become
effective at the close of business on the date the split, subdivision,
stock dividend, other distribution or combination becomes effective.
h. Distributions. In the event this Corporation shall declare a
distribution payable in securities of other persons, evidences of
indebtedness issued by this Corporation or other persons, assets (excluding
cash dividends), then, in each such case for the purpose of this subsection
4(h), the holders of the Series A Preferred Stock shall be entitled to a
proportionate share of any such distribution as though they were the
holders of the number of shares of Common Stock of the Corporation into
which their shares of Series A Preferred Stock are convertible as of the
record date fixed for the determination of the holders of Common Stock of
the Corporation entitled to receive such distribution.
i. Recapitalizations. If at any time or from time to time there shall
be a recapitalization of the Common Stock (other than a subdivision or
combination provided for elsewhere in this Section 4 or a change in control
provided for in Section 3(c)) provision shall be made so that the holders
of the Series A-1, Series A-2, Series A-3, Series A-4, Series A-5, Series
A-6 and Series A-7 Preferred Stock shall thereafter be entitled to receive
upon conversion of the Series A Preferred Stock the number of shares of
stock or other securities or property of the Corporation or otherwise, to
which a holder of Common Stock deliverable upon conversion would have been
entitled on such recapitalization, all subject to further adjustment as
provided herein or with respect to such other securities or property by the
terms thereof. In any such case, appropriate adjustment shall be made in
the application of the provisions of this Section 4 with respect to the
rights of the holders of the Series A Preferred Stock after the
recapitalization to the end that the provisions of this Section 4
(including adjustment of the applicable Conversion Rate then in effect and
the number of shares purchasable upon conversion of the Series A Preferred
Stock) shall be applicable after that event as nearly equivalent as may be
practicable.
j. No Impairment. This Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by this
Corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this Section 4 and in the taking of all such action as may
be necessary
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or appropriate in order to protect the Conversion Rights of the holders of the
Series A Preferred Stock against impairment.
k. No Fractional Shares and Certificate as to Adjustments. (1) No
fractional shares shall be issued upon the conversion of any share or
shares of the Series A Preferred Stock, and the number of shares of Series
A Preferred Stock or Common Stock to be issued shall be rounded to the
nearest whole share. Whether or not fractional shares are issuable upon
such conversion shall be determined on the basis of the total number of
shares of Series A Preferred Stock the holder is at the time converting
into Series A Preferred Stock or Common Stock and the number of shares of
Series A Preferred Stock or Common Stock issuable upon such aggregate
conversion.
(2) Upon the occurrence of each adjustment or readjustment of the
Conversion Rate of Series A Preferred Stock pursuant to this Section 4,
this Corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to
each holder of Series A Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. This Corporation shall, upon the
written request at any time of any holder of Series A Preferred Stock,
furnish or cause to be furnished to such holder a like certificate setting
forth (a) such adjustment and readjustment, (b) the Conversion Rate for
such Series A Preferred Stock at the time in effect, and (c) the number of
shares of Common Stock and the amount, if any, of other property which at
the time would be received upon the conversion of a share of Series A
Preferred Stock.
l. Notices of Record Date. In the event of any taking by this
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other right,
this Corporation shall mail to each holder of Series A Preferred Stock, at
least 20 days prior to the date specified therein, a notice specifying the
date on which any such record is to be taken for the purpose of such
dividend, distribution or right, and the amount and character of such
dividend, distribution or right.
m. Reservation of Stock Issuable Upon Conversion. This Corporation
shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series A-1, Series A-2, Series A-3, Series
A-4, Series A-5, Series A-6 and Series A-7 Preferred Stock, respectively,
such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of the Series
A-1, Series A-2, Series A-3, Series A-4, Series A-5, Series A-6 and Series
A-7 Preferred Stock, respectively, and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of the Series A-1,
Series A2, Series A-3, Series A-4, Series A-5, Series A-6 and Series A-7
Preferred Stock, respectively, in addition to such other remedies as shall
be available to the holder of such Preferred Stock, this Corporation will
take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purposes, including,
without limitation, engaging in best efforts to obtain the requisite
shareholder approval of any necessary amendment to its Certificate of
Incorporation.
n. Notices. Any notice required to be given to the holders of shares of
Series A Preferred Stock shall be deemed given if deposited in the United States
mail, postage prepaid, and addressed to each holder of record at his address
appearing on the books of this Corporation.
5. Voting Rights. The holders of shares of Series A Preferred Stock shall
not have any voting rights, except as required under the General Corporation Law
of Delaware.
6. Status of Unissued, Converted or Redeemed Stock. In the event any
shares shall be converted pursuant to Section 4 hereof, the shares so converted
shall be cancelled and shall not be issuable by the Corporation. The Certificate
of Incorporation of this Corporation shall be appropriately amended to effect
the
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corresponding reduction in the Corporation's authorized capital stock. In the
event the Corporation issues less than the number of authorized shares of any
subseries of Series A Preferred Stock, the Certificate of Incorporation of this
Corporation shall be appropriately amended to effect a corresponding reduction
in such subseries of Preferred Stock.
7. Cancellation of Series A-3 Preferred Stock. If the Approval Process
Event has not occurred on or before the First Anniversary Date and if the Patent
Milestone Event occurs prior to the Third Anniversary Date, then this
Corporation may, at its option, cancel that number of shares of Series A-3
Preferred Stock (or if an insufficient number of shares of Series A-3 Preferred
Stock are outstanding, then an equivalent number of outstanding shares of other
subseries of Series A Preferred Stock or Common Stock) equal to $2,500,000
divided by the Series A-3 Cancellation Price, where the "Series A-3 Cancellation
Price" equals the higher of the (i) price paid per share for the Series A-3
Preferred Stock on the date of issuance, or (ii) fair market value of the Series
A-3 Preferred Stock calculated as (A) the average closing price for the
Corporation's Common Stock during the period beginning twenty-three (23) trading
days prior to the date of cancellation and ending three (3) trading days prior
to the date of cancellation, as reported on the National Exchange, multiplied by
(B) the Conversion Rate for the Series A-3 Preferred Stock.
8. Cancellation of Series A-7 Preferred Stock. If the FDA Approval Date
occurs on or before the Fifty-Four Month Anniversary Date, the Corporation shall
cancel all of the then outstanding shares of Series A-7 Preferred Stock by
crediting therefor an amount equal to the liquidation preference of such shares
(including accrued but unpaid dividends) against the milestone payments due the
Corporation pursuant to the Collaboration Agreement, such amount to be credited
first to the milestone payment payable upon Regulatory Approval in the United
States (as described in Section 7.4 of the Collaboration Agreement) and second,
to the extent the aforesaid liquidation preference remains unpaid, to the
milestone payment then payable on the date of regulatory approval in the first
Major European Country (as described in Section 7.4 of the Collaboration
Agreement) (collectively, the "Milestone Payments"). If at any time there is a
Default Event (defined below), the Corporation shall immediately cancel all of
the outstanding shares of Series A-7 Preferred Stock by paying the holders in
cash an amount equal to the liquidation preference of such shares (including
accrued but unpaid dividends) (an "Acceleration Event"). If the Corporation is
unable to cancel such shares of Series A-7 Preferred Stock within seven (7)
calendar days from the occurrence of the Default Event, then notwithstanding any
provision herein to the contrary, the holder of such shares may, at its sole
election, convert such shares into shares of Common Stock of the Corporation
equal to the liquidation preference of such shares (including accrued but unpaid
dividends) divided by the Original Issue Price for such subseries multiplied by
the Conversion Rate for the Series A-7 Preferred Stock. If there is an
Acceleration Event and the holder receives cash or converts to Common Stock in
exchange for cancellation of the outstanding shares of Series A-7 Preferred
Stock as described in the preceding sentence, the holder shall be obligated to
pay, in cash, to the Corporation, any and all Milestone Payments as such
payments become due under the Collaboration Agreement.
A "Default Event" shall mean the occurrence of any of the following events:
(i) Distributions. Failure to make a required payment or distribution
hereunder;
(ii) Material Adverse Event. At the end of any fiscal quarter, the
total cash, cash equivalents and marketable debt investments of the
Corporation shall be valued at less than the sum of the principal of and
unpaid accrued interest on (i) all indebtedness of the Corporation to
banks, insurance companies or financial institutions regularly engaged in
the business of lending money, which is for money borrowed by the
Corporation; (ii) all purchase money security interests in an amount not to
exceed $5,000,000 (as defined in the California Uniform Commercial Code);
and (iii) the liquidation preference of the outstanding Series A-7
Preferred Stock. In such event, the Corporation shall provide holder with
written notice thereof within twenty-four (24) hours of determining that
such event has occurred.
(iii) Bankruptcy Commenced by the Corporation. If the Corporation:
(a) shall commence any proceeding in bankruptcy or seek
reorganization, arrangement, readjustment of its debts, dissolution,
liquidation, winding-up, composition or any other relief under
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the United States Bankruptcy Act, as amended, or under any other
insolvency, liquidation, dissolution, arrangement, composition,
readjustment of debt or any other similar act or law, of any
jurisdiction, domestic or foreign, now or hereafter existing;
(b) shall admit its inability to pay its debts as they mature in
any petition or pleading in connection with any such proceeding;
(c) shall apply for, or, in writing, consent to or acquiesce in, an
appointment of a receiver, conservator, trustee or similar officer for
it or for all or substantially all of its assets;
(d) shall make a general assignment for the benefit of creditors;
or
(e) shall admit in writing its inability to pay its debts as they
mature;
(iv) Bankruptcy Commenced Against the Corporation. If any proceedings
are commenced or any other action is taken against the Corporation in
bankruptcy or seeking reorganization, arrangement, readjustment of its
debts, dissolution, liquidation, winding-up, composition or any other
relief under the United States Bankruptcy Act, as amended, or under any
other insolvency, reorganization, liquidation, dissolution, arrangement,
composition, readjustment of debt or any other similar act or law, of any
jurisdiction, domestic or foreign, now or hereafter existing; or a
receiver, conservator, trustee or similar officer for the Corporation or
for all or substantially all of its assets is appointed; and in each such
case, such event continues for ninety (90) days undismissed, unbounded and
undischarged; and
(v) Material Breach. (A) Any breach of any material representation,
warranty, covenant or obligation of the Corporation under (i) the
Collaboration Agreement, which breach is not cured within sixty (60) days
of written notice thereof from Genentech (or if such breach is not
susceptible of cure within such period, the Corporation is not making
diligent good faith efforts to cure such breach); (ii) the Preferred Stock
Purchase Agreement, the Option Agreement or the Registration Rights
Agreement, which breach is not cured within thirty (30) days after receipt
of written notice of such breach from Genentech to the Corporation; or
(iii) the ML/MS Agreement, to the extent such breach materially adversely
affects the Corporation's ability to perform its obligations under the
Collaboration Agreement; or (B) if, at any time, any of the Collaboration
Agreement, the Series A Preferred Stock Agreement, the Option Agreement or
the Registration Rights Agreement ceases to be in full force and effect.
* * *
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