<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the Quarter ended June 30, 1999.
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from _______ to _______.
Commission File No. 0-18549
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SICOR Inc.
(formerly named Gensia Sicor Inc.)
----------------------------------
(Exact name of registrant as
specified in its charter)
Delaware 33-0176647
---------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
19 Hughes
Irvine, California 92618
-----------------------------------
(Address of principal executive offices and zip code)
(949) 455-4700
------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common stock $.01 par value 88,558,427
- --------------------------- ----------------------------------------
Class Outstanding at June 30, 1999
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SICOR Inc.
INDEX
<TABLE>
Page
<S> <C> <C>
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements
--------------------
Consolidated Balance Sheets at June 30, 1999 and
December 31, 1998 3
Consolidated Statements of Operations and Comprehensive Loss
for the three and six months ended June 30, 1999 and 1998 4
Consolidated Statements of Cash Flows for the six
months ended June 30, 1999 and 1998 5
Notes to Consolidated Financial Statements 6
Item 2: Management's Discussion and Analysis of Financial
-------------------------------------------------
Condition and Results of Operations
-----------------------------------
Results of Operations - for the three and six months ended
June 30, 1999 and 1998 10
Liquidity and Capital Resources 12
Impact of Year 2000 13
Item 2A: Quantitative and Qualitative Disclosures about Market Risk 15
PART II OTHER INFORMATION
Item 1: Legal Proceedings 20
Item 2: Changes in Securities 20
Item 4: Submission of Matters to a Vote of Security Holders 20
Item 6: Exhibits and Reports on Form 8-K 21
SIGNATURES 23
</TABLE>
2
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SICOR Inc.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
(in thousands, except par value data)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------------- ------------------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 38,131 $ 24,461
Accounts receivable, net 53,864 51,407
Inventories, net 50,318 52,746
Other current assets 11,402 11,926
-------- --------
Total current assets 153,715 140,540
Property and equipment, net 108,013 105,067
Other noncurrent assets 12,095 11,243
Intangibles, net 44,793 46,572
Goodwill, net 67,014 68,392
-------- --------
$385,630 $371,814
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 38,540 $ 46,552
Accrued payroll and related expenses 4,513 3,156
Other accrued liabilities 16,747 17,577
Short-term borrowings 41,464 49,625
Current portion of long-term debt 7,565 5,241
Current portion of capital lease obligations 1,506 1,057
-------- --------
Total current liabilities 110,335 123,208
Other long-term liabilities 9,272 5,826
Long-term debt, less current portion 41,544 41,108
Long-term debt with related party -- 10,000
Long-term capital lease obligations, less current portion 2,716 1,210
Deferred taxes 20,719 21,453
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value, 5,000 shares authorized,
1,600 issued and outstanding, liquidation preference of
$80,000 16 16
Common stock, $.01 par value, 125,000 shares authorized,
88,558 and 79,717 shares issued and outstanding
at June 30, 1999 and December 31, 1998, respectively 885 797
Additional paid-in capital 560,508 528,545
Accumulated deficit (358,549) (360,389)
Accumulated other comprehensive income (loss) (1,816) 40
-------- --------
Total stockholders' equity 201,044 169,009
-------- --------
$385,630 $371,814
======== ========
</TABLE>
See accompanying notes.
3
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SICOR Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
-------------------- --------------------
1999 1998 1999 1998
--------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Revenues:
Product sales $54,691 $44,515 $103,048 $85,786
Contract research and license fees -- 3,477 5,303 5,810
------- ------- -------- -------
Total revenues 54,691 47,992 108,351 91,596
Costs and expenses:
Cost of sales 33,499 30,187 66,786 58,323
Research and development 3,605 5,256 8,927 10,489
Selling, general and administrative 10,644 9,714 20,267 19,440
Amortization expense 1,524 1,498 3,052 2,886
Interest and other, net 1,896 1,239 4,491 2,941
Write-down of investment and divestiture
of business charge 1,777 -- 1,777 1,130
------- ------- -------- -------
Total costs and expenses 52,945 47,894 105,300 95,209
------- ------- -------- -------
Net income (loss) before income taxes 1,746 98 3,051 (3,613)
Income tax (expense) benefit 259 (1,527) (1,242) (1,544)
------- ------- -------- -------
Net income (loss) before minority interest 2,005 (1,429) 1,809 (5,157)
Minority interest -- 472 31 759
------- ------- -------- -------
Net income (loss) before dividends 2,005 (957) 1,840 (4,398)
Dividends on preferred stock (1,504) (1,504) (2,992) (2,992)
------- ------- -------- -------
Net income (loss) applicable to common shares 501 (2,461) (1,152) (7,390)
Other comprehensive income (loss):
Foreign currency translation, net (625) 385 (1,856) (111)
------- ------- -------- -------
Comprehensive net loss $ (124) $(2,076) $ (3,008) $(7,501)
======= ======= ======== =======
Net income (loss) per share
- Basic $.01 $(.03) $(.01) $(.09)
======= ======= ======== =======
- Diluted $.01 $(.03) $(.01) $(.09)
======= ======= ======== =======
Shares used in calculating per share amounts
- Basic 84,092 79,440 81,965 79,318
======= ======= ======== =======
- Diluted 84,223 79,440 81,965 79,318
======= ======= ======== =======
</TABLE>
See accompanying notes.
4
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SICOR Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
<TABLE>
<CAPTION>
Six months ended June 30,
----------------------------------------
1999 1998
------------------- -------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,840 $ (4,398)
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Depreciation and amortization 9,542 9,079
Minority interest (31) (759)
Net deferred income taxes (21) (1,075)
Inventory purchase price allocation adjustment 324 246
Write-down of investment and divestiture of business charge 1,777 1,130
Change in operating assets and liabilities, net of effects
from acquisitions and divestiture:
Accounts receivable (5,064) (5,379)
Inventories (1,138) (1,094)
Prepaid expenses and other assets (304) (18)
Accounts payable and accrued expenses 2,297 (2,292)
-------- --------
Net cash provided by (used in) operating activities 9,222 (4,560)
Cash flows from investing activities:
Purchase of property and equipment (15,804) (8,240)
Divestiture of Metabasis Therapeutics, Inc. (4,911) --
Acquisitions of businesses, net of cash acquired -- (6,244)
Investment in other business -- (405)
Proceeds from short-term investments -- 2,000
Purchases of short-term investments -- (2,000)
-------- --------
Net cash used in investing activities (20,715) (14,889)
Cash flows from financing activities:
Payments of preferred stock dividends (2,992) (2,992)
Issuance of common stock and warrants, net 35,268 1,127
Funding from minority shareholder -- 972
Change in short-term borrowings (3,011) 6,954
Issuance of long-term debt and capital lease obligations, net 11,563 1,137
Principal payments on long-term debt from related party (10,000) --
Principal payments on long-term debt and capital lease
obligations (3,583) (1,826)
-------- --------
Net cash provided by financing activities 27,245 5,372
-------- --------
Effect of exchange rate changes on cash (2,082) (123)
-------- --------
Increase (decrease) in cash and cash equivalents 13,670 (14,200)
Cash and cash equivalents at beginning of period 24,461 41,624
-------- --------
Cash and cash equivalents at end of period $ 38,131 $ 27,424
======== ========
Supplemental schedule of noncash investing and financing
activities: $ -- $ 3,050
Common stock issued to settle accrued liabilities
</TABLE>
See accompanying notes.
5
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SICOR Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
June 30, 1999
1. Organization and Principles of Consolidation
Organization
SICOR Inc. (formerly Gensia Sicor Inc.) ("SICOR" or the "Company"), a
Delaware corporation, was incorporated November 17, 1986. SICOR is a specialty
pharmaceutical company focused on the development, manufacture and marketing of
products for worldwide oncology and injectable pharmaceutical markets. The
Company is headquartered in Irvine, California. On February 28, 1997, SICOR
completed the acquisition of Rakepoll Holding B.V. ("Rakepoll Holding") from
Rakepoll Finance N.V. ("Rakepoll Finance"). Rakepoll Holding is the parent
company of three specialty pharmaceutical businesses: SICOR-Societa Italiana
Corticosteroidi S.p.A. ("Sicor") of Milan, Italy, and two companies located in
Mexico: Lemery, S.A. de C.V. ("Lemery") and Sicor de Mexico, S.A de C.V. ("Sicor
de Mexico"). In addition, in December 1997, Sicor purchased a 50% equity
interest in Diaspa S.p.A. ("Diaspa"), an Italian company engaged in the
manufacture of certain raw materials used in Sicor's business. In June 1998,
Sicor purchased the remaining 50% of Diaspa. During the second quarter of 1999,
the Company divested a 46% interest in Metabasis Therapeutics, Inc.
("Metabasis"), a proprietary research and development subsidiary.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiary companies, all of which are wholly owned. Affiliated
companies in which the Company does not have a controlling interest, or for
which control is expected to be temporary, is accounted for using the equity
method. The four wholly-owned subsidiaries are as follows: Rakepoll Holding
B.V., Gensia Sicor Pharmaceuticals, Inc. (formerly Gensia Laboratories, Ltd. and
herein referred to as "Gensia Sicor Pharmaceuticals"), Gensia Development
Corporation and Genchem Pharma Ltd. ("Genchem Pharma"). All significant
intercompany accounts and transactions have been eliminated. As noted above, the
remaining 50% of Diaspa was acquired during the second quarter of 1998, and
accordingly, Diaspa became a wholly-owned subsidiary in the second quarter of
1998. Subsequent to the divestiture of a 46% interest in Metabasis, the Company
retained a 46% equity interest in Metabasis. Accordingly, starting in the second
quarter of 1999, investment in Metabasis was accounted for using the equity
method.
In the opinion of the Company, all adjustments, consisting only of normal
recurring adjustments, necessary for the fair statement of the results for the
three and six-month periods ended June 30, 1999 and 1998 have been made. The
results of operations for the three and six-month period ended June 30, 1999 are
not necessarily indicative of the results to be expected for the full fiscal
year.
The accompanying consolidated financial statements should be read in
conjunction with the audited financial statements and notes thereto included in
the Company's 1998 Form 10-K filed with the Securities and Exchange Commission.
Foreign currency translation
The financial statements of subsidiaries outside the United States, except
those subsidiaries located in highly inflationary economies, are generally
measured using the local currency as the functional currency. Assets and
liabilities of these subsidiaries are translated at the rates of exchange at the
balance sheet date. The resulting translation adjustments are included in
accumulated other comprehensive income (loss), a separate component of
stockholders' equity. Income and expense items are translated at average
monthly rates of exchange.
6
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Use of estimates in the preparation of financial statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Reclassifications
Certain prior year amounts have been reclassified to conform to the
classifications used in 1999.
2. Earnings Per Share
Earnings per share is computed in accordance with Statement of Financial
Accounting Standards No. 128, Earnings per Share ("Statement No. 128").
Statement No. 128 replaces APB Opinion 15, Earnings per Share ("EPS").
Statement No. 128 requires dual presentation of basic and diluted earnings per
share. Basic EPS includes no dilution and is computed by dividing net income,
after deducting preferred stock dividends, by the weighted average number of
common shares outstanding for the period. Diluted EPS reflects the potential
dilution of securities that could share in the earnings of the Company such as
common stock which may be issuable upon exercise of outstanding common stock
options and warrants.
Shares used in calculating basic and diluted earnings per share were as follows
(in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Weighted average common shares outstanding 84,092 79,440 81,965 79,318
Effect of the assumed conversion of preferred shares -- -- -- --
Effect of the assumed conversion of convertible debentures -- -- -- --
------ ------ ------ ------
Shares used in calculating per share amount - Basic 84,092 79,440 81,965 79,318
Net effect of dilutive common share equivalents using the
treasury stock method 131 -- -- --
------ ------ ------ ------
Shares used in calculating per share amount - Diluted 84,223 79,440 81,965 79,318
====== ====== ====== ======
</TABLE>
3. Comprehensive Net Income (Loss)
As of January 1, 1998, the Company adopted the Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("Statement No.
130"). The new standard established new rules for the reporting and display of
comprehensive income and its components; however, the adoption of this statement
had no impact on the Company's net loss or stockholders' equity. Statement No.
130 requires unrealized gains or losses on the Company's available-for-sale
securities and foreign currency translation adjustments, which prior to adoption
were reported separately in stockholders' equity, to be included in other
comprehensive income (loss).
7
<PAGE>
4. Inventories
Inventories at June 30, 1999 and December 31, 1998 consisted of (in
thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------------ ------------------
<S> <C> <C>
Raw materials $22,520 $21,543
Work-in-process 11,180 11,154
Finished goods 19,749 22,247
------- -------
53,449 54,944
Less reserves (3,131) (2,198)
------- -------
$50,318 $52,746
======= =======
</TABLE>
5. Unit Offering
As a part of a unit offering (the "Unit Offering"), the Company sold an
aggregate of 8,675,000 units (the "Units") for $4.00 per Unit at closings which
occurred on May 20, 1999 and June 10, 1999. Each Unit consists of one share of
Common Stock of SICOR and a Warrant to purchase one-tenth of a share of Common
Stock of SICOR at an exercise price of $5.75 per share. The aggregate gross
proceeds of the Unit Offering were $34,700,000. After deducting expenses, the
Company received approximately $34,657,500. The Units were sold directly by
SICOR to private investors and there were no commissions or fees paid to third
parties in connection with the Unit Offering. The proceeds of the Unit Offering
were and are being used to retire short-term and long-term debt and for general
corporate purposes.
Each Warrant is to be issued if the holder sells no Common Stock or other
securities of the Company for a period commencing from the date of the purchase
of Units and ending on December 31, 2000.
In connection with the Unit Offering, the Company repaid a $10 million loan
made by Carlo Salvi, the Company's Chief Executive Officer, director and
principal stockholder, in December 1998, canceling $10 million in convertible
notes which were due in 2001. Mr. Salvi purchased 2.5 million Units ($10
million) in the Unit Offering.
6. Contingencies
In July 1998, the Company was named as a defendant in a complaint filed by
Protocol Systems, Inc. ("Protocol Systems"). The complaint alleges breach of a
supply agreement (the "Supply Agreement"). In August 1999, the Company reached
a settlement with Protocol Systems concerning the alleged breach of the Supply
Agreement. The resolution of the matter did not result in adjustment to the
Company's consolidated financial position or results of operations as an
adequate provision was recorded in the fourth quarter of 1998.
In February 1999, a lawsuit was filed by Zeneca, Inc. ("Zeneca") in the
U.S. District Court in Baltimore, Maryland against the Food and Drug
Administration ("FDA") with regards to Gensia Sicor Pharmaceuticals' Abbreviated
New Drug Application ("ANDA") for propofol. In the suit, Zeneca alleges that the
FDA improperly approved Gensia Sicor Pharmaceuticals' propofol product. The
Company believes this lawsuit is without merit, and that it represents Zeneca's
continued legal maneuvering to stop the FDA approval of generic propofol. Gensia
Sicor Pharmaceuticals intervened in the lawsuit to protect its interest and
support the FDA in its defense of this lawsuit. The court denied Zeneca's motion
for a preliminary injunction on March 26, 1999, and on August 11, 1999, granted
Gensia Sicor Pharmaceuticals' and the FDA's motion for summary judgment and
entered judgment in favor of the defendants. However, in the event that Zeneca
is ultimately successful on appeal in its litigation against the FDA, it could
have a material adverse effect on the Company's financial position, results of
operations or cash flows.
8
<PAGE>
In April 1999, the Company's wholly-owned subsidiary, Gensia Sicor
Pharmaceuticals, filed a lawsuit in the Superior Court of California for Orange
County against American Pharmaceutical Partners ("APP") for breach of contract,
breach of the implied covenant of good faith and fair dealing, unfair
competition and declaratory relief. The suit alleges that APP has breached a
distributorship agreement for certain Gensia Sicor Pharmaceuticals products by,
among other things, acquiring and operating a business which competes with
Gensia Sicor Pharmaceuticals with respect to some of the same products. The
Company is seeking damages in excess of $10 million in addition to a declaration
that the Company has no obligation or liability to APP.
The Company is also a defendant in various actions, claims, and legal
proceedings arising from its normal business operations. Management believes
the Company has meritorious defenses and intends to vigorously defend against
all allegations and claims. As the ultimate outcome of these matters is
uncertain, no contingent liabilities or provisions have been recorded in the
accompanying financial statements for such matters. However, in management's
opinion, liabilities arising from such matters, if any, will not have a material
adverse effect on consolidated financial position, results of operations or cash
flows.
7. Subsequent Event
In July 1999, the Company announced that it had begun implementing new
quality assurance initiatives in response to a Warning Letter received from the
FDA relating to a routine inspection conducted in June 1999. The initiatives
respond to the FDA observations in the areas of cleaning validation of certain
compounding tanks and information system data storage. The Company has
responded to the FDA and anticipates these issues will be resolved quickly.
Manufacturing operations have not been impacted by the FDA's concerns. In the
event these issues are not resolved in a timely fashion with the FDA, it could
have a material adverse effect on the Company's financial position, results of
operations or cash flows due to delays in receiving marketing clearance of
existing and future ANDA's.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
When used in this Form 10-Q, the words "expects", "anticipates",
"estimates" and similar expressions are intended to identify forward-looking
statements. Such statements involve risks and uncertainties, including whether
new products will be timely developed, approved, and successfully marketed, the
impact of competitive products, product costs and pricing, changing market
conditions and other risks described in this Form 10-Q and in the Company's
Annual Report on Form 10-K for the year ended December 31, 1998. Actual results
may differ materially from those projected. These forward-looking statements
represent the Company's judgment only as of the date of the filing of this Form
10-Q. The Company disclaims, however, any intent or obligation to update these
forward-looking statements.
Results of Operations
SICOR has been unprofitable on an annual basis since its inception in
1986. For the period from its inception to June 30, 1999, the Company has
incurred a cumulative net loss of $358.5 million.
The Company reported a net income of $0.5 million, or $.01 per common share
(after dividends on preferred stock of $1.5 million), in the second quarter
ended June 30, 1999 compared to a net loss of $2.5 million, or $.03 per common
share (after dividends on preferred stock of $1.5 million), in the second
quarter of 1998. The Company reported a net loss of $1.2 million, or $.01 per
common share (after dividends on preferred stock of $3.0 million), for the six
months ended June 30, 1999 compared to a net loss of $7.4 million, or $.09 per
common share (after dividends on preferred stock of $3.0 million), for the six
months ended June 30, 1998. The results for the three and six-month periods
ended June 30, 1999 include a $1.8 million charge related to the divestiture of
a 46% interest in Metabasis Therapeutics, Inc. As a result of the divestiture,
the operating results of Metabasis are included in the Company's consolidated
results through the quarter ended March 31, 1999. In the second quarter of 1999,
Metabasis has been accounted for under the equity method.
Product sales in the second quarter of 1999 increased to $54.7 million from
$44.5 million in the second quarter of 1998. Product sales in the first six
months of 1999 increased to $103.0 million from $85.8 million in the same period
of 1998. The increase in product sales for the three months ended June 30, 1999
is primarily due to increased sales by Gensia Sicor Pharmaceuticals mainly from
the sale of its new product, propofol. Pursuant to the Drug Price Competition
and Patent Term Restoration Act of 1984 (the "Waxman/Hatch Act"), the Company
has a 180 day exclusive period in which to sell propofol without other generic
competition. The 180 day exclusivity period was initiated in the second quarter
of 1999 with the successful commercial launch of propofol. The Company's
propofol product is being sold in the U.S. through Baxter Pharmaceuticals
Product, Inc. ("Baxter"), which is the Company's marketing partner for a variety
of products in the U.S. The increase in product sales for the six months ended
June 30, 1999 is primarily due to increased sales at Gensia Sicor
Pharmaceuticals from the launch of propofol and from the sale of oncology
finished goods inventory to Abbott Laboratories ("Abbott") as a result of the
Sales and Distribution Agreement entered into with Abbott in January 1999.
Product sales also increased in the international operations for the six months
ended June 30, 1999 mainly as the result of sales of new products. One customer,
the Mexican government public hospital program, accounted for approximately $4.5
million and $10.6 million of sales, or 8.3% and 10.3% of the Company's sales in
the three and six months ended June 30, 1999, respectively.
Cost of sales for the second quarter of 1999 was $33.5 million which
yielded a gross margin of 39%, compared to a cost of sales of $30.2 million for
the second quarter of 1998 which yielded a gross margin of 32%. Cost of sales
for the first six months of 1999 was $66.8 million which yielded a gross margin
of 35%, compared to a cost of sales of $58.3 million in the same period of 1998
which yielded a gross margin of 32%. The gross margin for the three and
10
<PAGE>
six months of 1999 increased compared to the same periods of 1998 primarily due
to a more profitable product mix. This mix was positively impacted by the U.S.
launch of three new products during the quarter, propofol, haloperidol and
alprostadil.
There were no contract research and license fees in the second quarter of
1999 compared to $3.5 million for the same period of 1998. Contract research
and license fees for the first six months of 1999 were $5.3 million compared to
$5.8 million for the same period of 1998. The decreases are primarily due to
the divestiture of Metabasis during the second quarter of 1999 and an up-front
non-refundable license fee commitment received in June 1998 from a U.S.
pharmaceutical company for the development of a bulk drug substance. This
decrease was partially offset by a $3.5 million reimbursement received in March
1999 from Baxter for Gensia Sicor Pharmaceuticals' expenses incurred for
propofol research and development.
Research and development expenses in the second quarter of 1999 decreased
to $3.6 million from $5.3 million in the second quarter of 1998. Research and
development expenses for the first six months of 1999 decreased to $8.9 million
from $10.5 million for the same period of 1998. The decreases are primarily due
to the exclusion of Metabasis' expenses as a result of the divestiture of a 46%
interest in Metabasis in the second quarter of 1999.
Selling, general and administrative expenses in the second quarter of 1999
increased to $10.6 million from $9.7 million in the second quarter of 1998.
Selling, general and administrative expenses for the first six months of 1999
increased to $20.3 million from $19.4 million in the same period of 1998. The
increases are mainly due to higher legal expenses related to the propofol
litigation and general patent fees offset by the exclusion of Metabasis'
expenses.
The Company had amortization expense of $1.5 million in the second quarter
of 1999 and 1998. Amortization expense for the first six months of 1999 was
$3.1 million compared to $2.9 million in the same period of 1998. The increase
is due to the amortization of goodwill resulting from the acquisition of the
remaining 50% of Diaspa in June 1998 and the acquisition of a research and
development branch by the Company's subsidiary, Genchem Pharma, in March 1998.
Interest and other expenses in the second quarter of 1999 increased to $1.9
million from $1.2 million in the second quarter of 1998 mainly due to an
insurance claim paid in the second quarter of 1998 and higher foreign exchange
losses in the second quarter of 1999. Interest and other expenses for the first
six months of 1999 increased to $4.5 million from $2.9 million in the same
period of 1998 mainly due to higher net interest expense from increased debt and
other expenses as a result of Gensia Sicor Pharmaceuticals restructuring its
sales force in connection with its alliance with Abbott Laboratories and to an
insurance claim paid in the second quarter of 1998.
During the second quarter of 1999, the Company divested a 46% interest in
Metabasis Therapeutics, Inc., a proprietary research and development subsidiary
to Metabasis management. Following this transaction, the Company retained a 46%
equity interest in Metabasis. Subsequently, due to the uncertain value of the
remaining interest, the Company elected to write-off $1.8 million related to its
remaining investment in Metabasis.
The Company elected in January 1998 to write down the investment value of
its 19% interest in Gensia Automedics, Inc. from $1.8 million to $0.7 million,
due to, among other things, the lack of market acceptance of the GenESA System.
Accordingly, the difference in investment balance of $1.1 million was reflected
as a current period charge to write-down of investment in the first quarter of
1998. The Company subsequently wrote off the remaining balance of $0.7 million
in the fourth quarter of 1998.
11
<PAGE>
The Company recorded an income tax benefit of $0.3 million in the second
quarter of 1999 compared to income tax expense of $1.5 million for the same
period of 1998. Income tax expense for the first six months of 1999 decreased
to $1.2 million from $1.5 million for the same period of 1998. The decreases
are primarily due to reduced earnings in the Company's Italian subsidiaries
compared to the same period of 1998.
The Company had no minority interest accounting for the quarter ended June
30, 1999 due to the divestiture of Metabasis. For the six months ended June 30,
1999, the Company recorded minority interest income of $31,000, which represents
minority stockholders' proportionate share of the loss in Metabasis. The results
of operations of Metabasis were consolidated up through the quarter ended March
31, 1999. Minority interest income for the three and six months ended 1998 were
$0.5 million and $0.8 million, respectively which represented minority
stockholders' proportionate share of the loss in the Company's consolidated
subsidiaries, Diaspa and Metabasis. In June 1998, Sicor purchased the remaining
50% interest in Diaspa.
Liquidity and Capital Resources
As of June 30, 1999, the Company had cash and cash equivalents of $38.1
million and working capital of $43.4 million compared to $24.5 million and $17.3
million, respectively, as of December 31, 1998. The increase in cash and
working capital resulted from $9.2 million of cash provided by operations and
$27.2 million of cash from financing activities, offset by investment activities
of $20.7 million and $2.1 million of exchange rate changes.
Significant changes in operating assets and liabilities during the first
six months of 1999 included a $5.1 million increase in accounts receivable, a
$1.1 million increase in inventories and a $2.3 million increase in accounts
payable and accrued expenses. The increases reflect the Company's efforts to
launch new products and complete the marketing transition with its alliance
partners, Abbott and Baxter.
During the second quarter of 1999, the Company raised approximately $35
million through a private placement of SICOR units for $4.00 per unit. Each
unit consists of one share of Common Stock and a warrant to purchase one-tenth
of one share of the Company's Common Stock for $5.75 per share. In connection
with this transaction, the Company repaid the loan of $10 million made in the
fourth quarter of 1998 by the Company's Chief Executive Officer, director and
principal stockholder.
Gensia Sicor Pharmaceuticals also entered into an amendment to an earlier
agreement with Baxter under which a fee of approximately $3.5 million was
received in March 1999 from Baxter to reimburse Gensia Sicor Pharmaceuticals for
its expenses incurred for propofol research and development. The Company,
through Baxter, launched its generic propofol product in April 1999. The
revenues and cash flow resulting from this product are significant to the
Company's U.S. operations and contributed to the Company's overall profitability
for the quarter.
Gensia Sicor Pharmaceuticals entered into the Sales and Distribution
Agreement with Abbott in January 1999, under which the two companies formed a
strategic alliance for marketing and distribution of oncology products in the
United States. Under this agreement, the Company received $5.6 million in the
first quarter of 1999 representing an initial commitment fee by Abbott to help
finance the Company's future development of generic oncology drugs. Given the
nature of this commitment, the Company has elected to recognize these commitment
fees over the life of the agreement, through the year 2005.
The Company anticipates that its efforts to reduce overall costs and
expenses and working capital requirements, combined with its current cash and
cash equivalents on hand at June 30, 1999 of $38.1 million, and commitments from
third parties, will enable it to maintain its current and planned operations
through at least 1999. In connection with its
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plans for expanding its business, to accomplish its core strategy of being a
leading fully-integrated provider of injectable pharmaceutical products and
services, the Company's management and Board of Directors will continue to
evaluate the need to raise additional capital and, if appropriate, pursue
equity, debt and lease financing, or a combination of these, for its capital
needs. Such financings may not be available on acceptable terms, or at all. If
financing is not available, the Company may have to reduce planned expenditures,
discontinue certain operations, or otherwise restructure to continue operations.
As discussed in Note 6, the Company was named as a defendant in a complaint
filed by Protocol Systems. In August 1999, the Company reached a settlement
with Protocol Systems. The resolution of the matter did not result in
adjustment to the Company's consolidated financial position or results of
operations as an adequate provision was recorded in the fourth quarter of 1998.
As also discussed in Note 6, Gensia Sicor Pharmaceuticals intervened in
Zeneca's lawsuit against the FDA for improper approval of Gensia Sicor
Pharmaceuticals' generic propofol. The Company believes this lawsuit is without
merit, and that it represents legal maneuvering by a big pharmaceutical company
in an attempt to prevent generic competition for propofol. The FDA reviewed
Zeneca's earlier petition for stay of action (before Gensia Sicor
Pharmaceuticals' propofol was approved by the FDA for marketing), and delivered
a comprehensive response to Zeneca disputing each point raised in its petition.
The court denied Zeneca's request for a preliminary injunction and on August 11,
1999, granted Gensia Sicor Pharmaceuticals' and the FDA's motion for summary
judgment and entered judgment in favor of the defendants. However, in the event
that Zeneca is ultimately successful on appeal in its litigation against the
FDA, it could have a material adverse effect on the Company's financial
position, results of operations or cash flows.
Most of the Company's foreign subsidiaries use foreign exchange currency
contracts to reduce the negative financial impact of currency fluctuations. In
March 1999, the Company's Italian subsidiary, Sicor, entered into twenty monthly
U.S. $1 million U.S. Dollar put/Lira call options, ten at a strike price of Lira
1,696 per U.S. $1 and an additional ten at a strike price of Lira 1,750 per U.S.
$1. As of June 30, 1999, no contracts have been exercised.
In July 1999, the Company announced that it had begun implementing new
quality assurance initiatives in response to a Warning Letter received from the
FDA relating to a routine inspection conducted in June 1999. The initiatives
respond to the FDA observations in the areas of cleaning validation of certain
compounding tanks and information system data storage. The Company has responded
to the FDA and anticipates these issues will be resolved quickly. Manufacturing
operations have not been impacted by the FDA's concerns. In the event these
issues are not resolved in a timely fashion with the FDA, it could have a
material adverse effect on the Company's financial position, results of
operations or cash flows due to delays in receiving marketing clearance of
existing and future ANDA's.
In the first six months of 1999, the Company paid cash dividends on its
preferred stock totaling $3.0 million. At June 30, 1999, the Company had five
cumulative quarters, or approximately $7.5 million, in undeclared cumulative
preferred dividends. If the Company chooses to not declare dividends for six
cumulative quarters, the holders of the preferred stock, voting separately as a
class, will be entitled to elect two additional directors until the dividend in
arrears has been paid.
Impact of Year 2000
The Company has taken actions to understand the nature and extent of the
work required to make its systems and infrastructure Year 2000 compliant.
System hardware, software and microprocessor controlled equipment that support
the Company's infrastructure have been inventoried and assessed for Year 2000
compliance. To the extent necessary to address material Year 2000 issues, the
Company is in the process of obtaining and installing current releases or
upgrades from software vendors. All domestic business systems have been
upgraded and are believed to be compliant. Work is continuing with certain
research and development and manufacturing systems, which is expected to be
completed by October 1999.
Work continues on the Company's international facilities systems. Upgrades
and conversions have been completed on the Italian business systems, and are
believed to be compliant. Some work remains to be completed in Italy on various
technical, non-business systems. A third-party contractor has been engaged to
upgrade and verify Year 2000 compliance with Italy's technical systems which is
to be completed by October 1999.
In Mexico, a complete new business manufacturing system implementation is
underway, and is scheduled to
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be completed and operational by October 1999. This project is ahead of schedule,
and could become operational before the October date.
In general, the Company management is satisfied with its efforts to be Year
2000 prepared; however, in the unlikely event the international projects are not
completed before the Year 2000, this could have a material adverse effect on the
Company's business.
Because third party failures could have a material adverse impact on the
Company's ability to conduct business, the Company is attempting to obtain
written assurances from all material customers and vendors that their systems
are or will be Year 2000 compliant. The Company has received such assurances
from its domestic material customers and vendors as well as many of its
international customers and vendors; however, this is an on-going process. The
Company anticipates that this process will be completed by September 1999 for
its international operations. The Company's total sales to international
customers in the six months ended June 30, 1999 were approximately $50.4
million, which represented approximately 49% of the Company's total sales in
such period. The Mexican government public hospital program accounted for
approximately $10.6 million of the Company's sales in the six months ended June
30, 1999. If either the Company or any material customer or vendor experiences a
failure of any critical system, it could have a material adverse impact on the
Company's business or require the Company to incur unanticipated expenses.
The Company has received numerous assurances from critical customers and
material vendors, and this process is still being completed with the
international businesses. The Company is considering alternatives, including
replacement of vendors and or the building of safety stocks, and other
contingency plans based on the information collected to date. The business
interruption of any of the Company's significant customers, resulting from their
Year 2000 issues, could have a material adverse impact on the Company's revenues
and results of operations.
The Company is close to completing a formal worldwide contingency plan for
non-compliance and is planning to review this with the Board of Directors in
September 1999. Action plans are being implemented currently based on the
information obtained from third parties and an on-going evaluation of the
Company's own systems. The Company anticipates having a formal contingency plan
in place by September 1999 which will include documentation of backup
procedures, identification of alternate suppliers and some increases in
inventory levels. The Company has not identified its most reasonably likely
worst case scenario with respect to possible losses in connection with Year 2000
related problems. The Company plans on completing this analysis in September
1999 and reviewing these with its Board of Directors in the same month.
There are many factors outside the Company's control that could cause the
Year 2000 problem to seriously disrupt its operations. There are risks,
however, for which the Company is preparing and, in so doing, seeking to reduce
its exposure. The scope of the Company's efforts regarding each risk is limited
to the Company's key products, key compounds, subsidiaries, critical suppliers,
and major customers. The most critical of these risks are: a disruption in the
supply of product with particular emphasis on failures of raw material
suppliers, commercial partners, and external distribution channels; internal
infrastructure failures such as utilities, communications, internal information
technology services and integrated information technology systems; government
failures, especially as they impact import and export activity; interruption of
the product regulatory filing process; and a major customer failure or
interruption.
The cost incurred through June 30, 1999, for the Year 2000 transition was
approximately $1.2 million, which includes software and hardware upgrades that
would have been purchased in the normal course of business to accommodate future
growth and worldwide integration. The Company estimates that the remaining
costs to be incurred on upgrading systems, including the Year 2000 transition,
will be approximately $0.8 million, and as such, will not have a significant
impact on the Company's financial position or operating results. Based on
available information, including assurances from software vendors that their
products are compliant, the Company believes that, barring critical failures
arising from factors beyond the Company's direct control, it will be able to
manage its total Year 2000
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transition without any material adverse effect on its business operations,
products, operating results or financial condition.
ITEM 2A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to market risk with respect to its debt outstanding
and foreign currency transactions. Most of the Company's long-term borrowings
are based on fixed interest rates and therefore are not subject to material risk
from changes in interest rates. Short-term borrowings, however, are based on
prime or other indicative base rates plus a premium. If these indicative base
rates increase, the Company will incur higher relative interest expense and
similarly, a decrease in the rates will reduce relative interest expense. In
recent years, there have not been significant fluctuations in the prime or other
indicative base rates. A 1.0% change in the prime rate or other indicative base
rates would not materially change interest expense assuming levels of debt
consistent with historical amounts. Due to the Company's international
operations, certain transactions are conducted in foreign currencies. The
Company's Italian operations hedge against transactional risks by borrowing
against its receivables and against economic risk by buying monthly U.S.
Dollar put/Lira call options to strike at a rate equal to or above the budgeted
exchange rates.
RISK FACTORS THAT MAY AFFECT RESULTS
This report includes forward-looking statements about the Company's
business and results of operations which are subject to risks and uncertainties
that could cause the Company's actual results to vary materially from those
indicated in such forward-looking statements. Factors that could cause or
contribute to such differences include those discussed below, as well as those
discussed elsewhere in this Form 10-Q and in the Company's Annual Report on Form
10-K for the year ended December 31, 1998. The factors discussed below should
be read in conjunction with the risk factors discussed in the Company's Annual
Report on Form 10-K, which are incorporated by reference.
Future Capital Needs; Uncertainty of Additional Funding
The Company anticipates that its current capital resources, commitments
from third parties, and efforts to reduce overall costs and expenses and working
capital requirements will enable it to maintain its current and planned
operations through at least 1999. The Company will continue to evaluate the
need for additional capital and, if appropriate, pursue equity, debt and lease
financing, or a combination of these, for its capital needs. Such financings
may not be available on acceptable terms, or at all. If the Company is unable
to obtain additional financing, the Company may have to reduce its capital
expenditures, spending for the development of new products, and its workforce.
Such reductions would have a material adverse effect on the Company. In
addition, at June 30, 1999, approximately $112 million of the Company's $386
million in assets consisted of either intangibles or goodwill. The Company may
not be able to realize any value from these intangible assets. The Company
routinely assesses the recoverability of long-lived assets by determining
whether the carrying value of such assets can be recovered through undiscounted
future operating cash flows. If impairment is indicated, the Company will
measure the amount of such impairment by comparing the carrying value of the
asset to the present value of the expected future cash flows associated with the
use of the asset.
Uncertainty of Outcome of Legal Proceedings
The Company is a defendant in various actions, claims, and legal
proceedings arising from its business operations. The ultimate outcome of these
matters is uncertain and could have a material adverse effect on the Company's
financial position, results of operations or cash flows. See Note 6
Contingencies.
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Limited History of Profitability; Potential Quarterly Fluctuations in Future
Operating Results
The Company has been unprofitable on an annual basis since its inception in
1986. As of June 30, 1999, the Company had an accumulated deficit of
approximately $358.5 million. The Company may not be profitable on a quarterly
or annual basis in the future. The Company believes that future operating
results will be subject to quarterly fluctuations due to a variety of factors,
including whether and when new products are successfully developed and
introduced by the Company, market acceptance of current or new products,
regulatory delays, product recalls, manufacturing delays or inefficiencies,
shipment problems, seasonal customer demand, the timing of significant orders,
changes in reimbursement policies, competitive pressures on average selling
prices, changes in the mix of products sold and possible defense and resolution
of patent matters.
Competition
SICOR is engaged in a rapidly evolving field. Competition from large
pharmaceutical companies, biotechnology companies, and other companies is
intense. Many of these companies have substantially greater resources and
experience in developing, manufacturing and marketing pharmaceutical products
than SICOR. There can be no assurance that competitors will not succeed in
developing technologies and products that are more effective or that would
render the technology and products of SICOR obsolete or noncompetitive.
SICOR competes in the highly competitive multisource (generic) injectable
drug industry with numerous other pharmaceutical manufacturers, many of which
are established companies with greater financial and other resources than SICOR.
The Company may not be able to continue to compete effectively in this market.
Because selling prices of multisource injectable drug products typically decline
as competition intensifies, the profitability of SICOR will depend in part on
its ability to develop and introduce new products to the market in a timely
manner, to obtain raw materials at competitive prices and to improve the
efficiency of its production capability.
A significant portion of SICOR's business is dependent on winning bids from
the Mexican government public hospital program. The bidding for this program is
highly competitive with numerous other pharmaceutical manufacturers
participating, many of which are established companies with greater financial
and other resources than SICOR. The Company may not be able to continue to
compete effectively with respect to this program.
The development and commercialization process is time consuming and costly.
Delays in any part of the process or the inability of SICOR to obtain regulatory
approval for its products could materially and adversely affect the Company.
Dependence on Key Personnel
The success of SICOR depends in large part upon its ability to attract and
retain qualified scientific, manufacturing, marketing and management personnel.
SICOR faces competition for such personnel from other companies, academic
institutions, government entities and other organizations. In addition, the
success of SICOR will be dependent upon key personnel, the loss of which may
have a material adverse effect on the Company's business.
Uncertainty of Ability to Operate without Infringing on Patents and Proprietary
Technology of Others
The success of SICOR will depend, in part, on its ability to maintain trade
secret protection and operate without infringing on the proprietary rights of
third parties. The patents of others may have an adverse effect on the ability
of SICOR to commercialize its products. Litigation, which could result in
substantial cost to the Company, may be necessary to determine the scope and
validity of the proprietary rights of third parties. If any of the Company's
products are found to infringe upon the patents or other rights owned by third
parties, SICOR may be required to obtain licenses to patents or other
proprietary rights of third parties which may not be available on acceptable
terms. If SICOR does not obtain such licenses, product introductions could be
delayed or foreclosed. SICOR may not have sufficient funds to obtain licenses
that may be required in order to develop and commercialize its products, to
contest patents
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obtained by third parties, or to defend against suits brought by third parties.
Potential Inability to Obtain Raw Materials or Manufacture Products
SICOR depends on third party manufacturers for bulk raw materials for
certain of its products. These raw materials are generally available from a
limited number of sources, and certain raw materials are available only from
foreign sources. In addition, Gensia Sicor Pharmaceuticals utilizes sole
sources of supply for certain raw materials used in the manufacture of its
products and certain packaging components. Any disruption in one or more of
these supply sources could have a material adverse effect on SICOR.
Uncertainty of Pharmaceutical Pricing, Reimbursement and Related Matters
The levels of revenues and profitability of pharmaceutical companies will
be affected by the continuing efforts of governmental and third party payors to
contain or reduce the costs of health care through various means. For example,
in certain foreign markets pricing or profitability of prescription
pharmaceuticals is subject to government control. In the United States, there
have been, and SICOR expects that there will continue to be, a number of federal
and state proposals to implement government controls. While SICOR cannot
predict whether any such legislative or regulatory proposals or reforms will be
adopted or the effect such proposals or reforms may have on its businesses, the
announcement of such proposals or reforms could have a material adverse effect
on SICOR`s ability to raise capital and the adoption of such proposals or
reforms could have a material adverse effect on SICOR`s businesses, financial
condition and profitability. In addition, in both the United States and
elsewhere, sales of prescription pharmaceuticals are dependent in part on the
availability of reimbursement to the consumer from third party payors, such as
government and private insurance plans. Third party payors are increasingly
challenging the prices charged for medical products and services. The products
of SICOR may not be considered cost effective and reimbursement to the consumer
may not be available or may not be sufficient to allow SICOR to sell its
products on a competitive basis.
Product Liability Exposure; Inadequacy or Unavailability of Product Liability
Insurance
SICOR, as a manufacturer of finished drug products, faces an inherent
exposure to product liability claims in the event that the use of any of its
technology or products is alleged to have resulted in adverse effects. This
exposure exists even with respect to those products that receive regulatory
approval for commercial sale, as well as those undergoing clinical trials.
While SICOR has taken and will continue to take what it believes are appropriate
precautions, there can be no assurance that it will avoid significant product
liability exposure.
In addition, as a manufacturer of bulk drug substances, SICOR supplies
other pharmaceutical companies with active ingredients, which are contained in
finished products. The ability of SICOR to avoid significant product liability
exposures depends in part upon its ability to negotiate appropriate commercial
terms and conditions with its customers and its customers' manufacturing,
quality control and quality assurance practices. SICOR may not be able to
negotiate satisfactory terms and conditions with its customers. SICOR maintains
insurance for product liability claims, which the Company believes is in line
with the insurance coverage carried by other companies in its industry; however,
adequate insurance coverage might not continue to be available at acceptable
costs, if at all, and product liability claims could adversely affect the
business or financial condition of SICOR.
Uncertainty Regarding Mexican Economic Factors, Government Policies and
Inflation
The Mexican government has exercised and continues to exercise significant
influence over many aspects of the Mexican economy. Accordingly, Mexican
government actions could have a significant effect on Lemery and Sicor de
Mexico, and on market conditions and prices in Mexico. A large portion of the
finished multisource drug products manufactured by Lemery is sold to the
government public hospital program in Mexico. Sales to the government public
hospital program in Mexico may
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not continue in the future. In addition, although the Mexican government has
paid Lemery on a timely basis, this payment pattern may not continue in the
future. Actions by the Mexican government, future developments in the Mexican
economy and Mexico's political, social or economic situation may adversely
affect the operations of Lemery and Sicor de Mexico.
Risks Related to International Operations
For the three and six months ended June 30, 1999, percentage of total
product sales to customers outside of Canada, Western Europe, Japan and the
United States was approximately 58% and 62%, respectively. Operations outside
of Canada, Western Europe, Japan and the United States are subject in varying
degrees to greater risks involved in doing business abroad such as war, civil
disturbances, adverse governmental actions (which may disrupt or impede
operations and markets, restrict the movement of funds, impose limitations on
foreign exchange transactions or result in the expropriation of assets) and
economic and governmental instability. SICOR may experience material adverse
developments with respect to its operations outside of Canada, Western Europe,
Japan and the United States and such developments, if they were to occur, may
have a material adverse effect on the results of operations and financial
condition of SICOR.
Environmental Matters
SICOR is subject to numerous environmental regulations in the jurisdictions
in which it operates, including regulations relating to the handling, transport
and disposal of hazardous materials and the protection of the environment. In
certain of these jurisdictions, protection of the environment is becoming an
area of increased governmental scrutiny and surveillance. While SICOR has
implemented practices to comply with applicable regulations, the cost of doing
so in the future may become prohibitive and may have a significant adverse
impact on the Company's operations. SICOR may not be able to comply with all
applicable laws and regulations and such laws and regulations may have a
material adverse impact on the Company's operations.
Currency Fluctuations
SICOR has significant operations in several countries, including the United
States, Italy, Mexico and Switzerland. In addition, purchases and sales are made
in a large number of other countries. As a result, its business is subject to
the risk and uncertainties of foreign currency fluctuations. While SICOR has
policies and strategies to minimize this risk, there can be no assurance that
such policies and strategies will be effective in preventing significant
negative financial adjustments in the future.
Control by Principal Stockholder
Carlo Salvi, the Company's Chief Executive Officer and a director
beneficially owns approximately 38% of the Company's Common Stock. In addition,
pursuant to the Shareholder's Agreement, dated as of November 12, 1996, as
amended (the "Shareholder's Agreement") Rakepoll Finance, an entity controlled
by Mr. Salvi, is entitled to designate three of SICOR's nine directors, who in
turn are entitled to designate (jointly with two executive officer directors of
SICOR) five additional directors. In addition, the consent of the Rakepoll
Finance designated directors is required for SICOR to take certain actions, such
as a merger or sale of all or substantially all of the business or assets of
SICOR and certain issuances of securities. As a result of its ownership of
SICOR Common Stock, Mr. Salvi may be able to control substantially all matters
requiring approval by the stockholders of SICOR, including the election of
directors and the approval of mergers or other business combination
transactions.
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Possible Volatility of Stock Price; Dividend Policy
The market price of the shares of SICOR Common Stock, like that of the
common stock of many other life sciences companies, has been and is likely to
continue to be highly volatile, and the market for securities of such companies
has from time to time experienced significant price and volume fluctuations that
are unrelated to the operating performance of particular companies. The market
price of SICOR Common Stock could be subject to significant fluctuations in
response to variations in SICOR's anticipated or actual operating results, sales
of substantial amounts of SICOR Common Stock, other issuances of substantial
amounts of SICOR Common Stock pursuant to pre-existing obligations,
announcements concerning SICOR or its competitors, including the results of
testing, technological innovations or new commercial products or services,
developments in patent or other proprietary rights of SICOR or its competitors,
including litigation, conditions in the life sciences or pharmaceuticals
industries, governmental regulation, health care legislation, public concern as
to the safety of SICOR's products, changes in estimates of SICOR's performance
by securities analysts, market conditions for life sciences stocks in general,
and other events or factors.
SICOR has never paid cash dividends on SICOR Common Stock. SICOR presently
intends to retain earnings, if any, for the development of its businesses and
does not anticipate paying any cash dividends on SICOR Common Stock in the
foreseeable future. Unless full cumulative dividends are paid on SICOR's
outstanding $3.75 Convertible Exchangeable Preferred Stock, $.01 par value
(''Convertible Preferred Stock''), cash dividends may not be paid or declared
and set aside for payment on SICOR Common Stock. Through June 30, 1999, SICOR
had approximately $7.5 million in undeclared cumulative preferred dividends on
such Convertible Preferred Stock. If SICOR chooses not to declare dividends for
six cumulative quarters, the holders of Convertible Preferred Stock, voting
separately as a class, will be entitled to elect two additional directors until
the dividend in arrears has been paid.
Effect of Certain Anti-Takeover Provisions
SICOR's Certificate of Incorporation and Bylaws include provisions that
could discourage potential takeover attempts and make attempts by its
stockholders to change management more difficult. The approval of 66-2/3% of
SICOR's voting stock is required to approve certain transactions and to take
certain stockholder actions, including the calling of a special meeting of
stockholders and the amendment of any of the anti-takeover provisions contained
in SICOR's Certificate of Incorporation. Further, pursuant to the terms of its
stockholder rights plan, SICOR has distributed a dividend of one right for each
outstanding share of SICOR Common Stock. These rights will cause a substantial
dilution to a person or group that attempts to acquire SICOR on terms not
approved by the SICOR Board of Directors and may have the effect of deterring
hostile takeover attempts.
Impact of Year 2000 Issue
The Year 2000 issue could have a material adverse impact on the operations
of the Company. Additionally, the systems of other companies on which SICOR's
systems rely may not be timely converted, which may have an adverse effect on
the Company's systems. For example, to the extent that customers would be unable
to order products or pay invoices or suppliers would be unable to manufacture or
deliver product, the Company's operations would be adversely affected.
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PART II - OTHER INFORMATION
ITEM 1: Legal Proceedings
In April 1999, the Company's wholly-owned subsidiary, Gensia Sicor
Pharmaceuticals, filed a lawsuit in the Superior Court of California for Orange
County against American Pharmaceutical Partners ("APP") for breach of contract,
breach of the implied covenant of good faith and fair dealing, unfair
competition and declaratory relief. The suit alleges that APP has breached a
distributorship agreement for certain Gensia Sicor Pharmaceuticals products by,
among other things, acquiring and operating a business which competes with
Gensia Sicor Pharmaceuticals with respect to some of the same products. The
Company is seeking damages in excess of $10 million in addition to a declaration
that the Company has no obligation or liability to APP.
On August 6, 1999, the Company reached a settlement with Protocol Systems
concerning alleged breach of a supply agreement. The resolution of the matter
did not result in adjustment to the Company's consolidated financial position or
results of operations as an adequate provision was recorded in the fourth
quarter of 1998. See Note 6.
ITEM 2: Changes in Securities
As a part of a unit offering (the "Unit Offering"), the Company sold an
aggregate of 8,675,000 units (the "Units") for $4.00 per Unit at closings which
occurred on May 20, 1999 and June 10, 1999. Each Unit consists of one share of
Common Stock of SICOR and a Warrant to purchase one-tenth of a share of Common
Stock of SICOR at an exercise price of $5.75 per share. The aggregate gross
proceeds of the Unit Offering were $34,700,000. After deducting expenses, the
Company received approximately $34,657,500. The Units were sold directly by
SICOR to private investors and there were no commissions or fees paid to third
parties in connection with the Unit Offering. The proceeds of the Unit Offering
were and are being used to retire short-term and long-term debt and for general
corporate purposes.
Each Warrant is to be issued if the holder sells no Common Stock or other
securities of the Company for a period commencing from the date of the purchase
of Units and ending on December 31, 2000.
In connection with the Unit Offering, the Company repaid a $10 million loan
made by Carlo Salvi in December 1998, canceling $10 million in convertible notes
which were due in 2001. Mr. Salvi purchased 2.5 million Units ($10 million) in
the Unit Offering.
The Units were offered and sold to "accredited investors", and to a "non-
U.S. Person" as those terms are defined in Rule 501 of Regulation D, and Rule
902 of Regulation S, respectively, under the Securities Act of 1933, as amended
(the "Securities Act"). The issuance of the Units was made in reliance upon the
safe harbors provided by Rule 506 and Rule 902 under the Securities Act.
ITEM 4: Submission of Matters to a Vote of Security Holders
On June 16, 1999, the Company held its Annual Meeting of Stockholders. The
following actions were taken at the meeting:
1. The following three class III directors were elected:
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a. Donald E. Panoz. 71,457,390 shares were voted in favor of the nominee,
83,343 shares withheld their vote and 8,319,927 shares were not voted or
were broker non-votes.
b. Michael D. Cannon. 71,460,643 shares were voted in favor of the
nominee, 80,090 shares withheld their vote and 8,319,927 shares were not
voted or were broker non-votes.
c. Gianpaolo Colla. 71,460,643 shares were voted in favor of the nominee,
80,090 shares withheld their vote and 8,319,927 shares were not voted or
were broker non-votes.
The following directors continue in office for their existing terms: Carlos
A. Ferrer; Carlo Salvi; John W. Sayward; Frank C. Becker; Hebert J. Conrad;
Carlo Ruggeri.
2. A proposal to amend and restate the Gensia Sicor Inc. Employee Stock
Purchase Plan (the "ESPP") was approved. The proposal increased by 100,000
the aggregate number of shares of common stock reserved for issuance under
the ESPP.
67,414,431 shares were voted in favor of the proposal, 4,045,021 shares were
voted against the proposal, 81,281 shares abstained and 8,319,927 shares
were not voted or were broker non-votes.
3. A proposal to amend and restate SICOR Inc. Long-Term Incentive Plan was
approved. The proposal increased by 1,600,000 the aggregate number of shares
of common stock reserved for issuance under the Long-Term Incentive Plan.
61,547,580 shares were voted in favor of the proposal, 9,693,182 shares
were voted against the proposal, 70,235 shares abstained and 8,549,663
shares were not voted or were broker non-votes.
4. A proposal to approve an amendment of Gensia Sicor Inc.'s Restated
Certificate of Incorporation to change the name of Gensia Sicor Inc. to
SICOR Inc. was approved.
71,269,420 shares were voted in favor of the proposal, 232,857 shares
were voted against the proposal, 38,456 shares abstained and 8,319,927
shares were not voted or were broker non-votes.
5. The selection of Ernst and Young LLP as the Company's independent auditors
was ratified.
71,471,808 shares were voted in favor of the proposal, 47,105 shares were
voted against the proposal, 21,820 shares abstained and 8,319,927 shares
were not voted or were broker non-votes.
ITEM 6: Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description of Document
------ -----------------------
3(i) Restated Certificate of Incorporation of the Company, as
amended.
4.1 Form of Unit Purchase Agreement between the Company and
certain investors.
21
<PAGE>
10.1 Employment Agreement dated June 1, 1999 between the Company
and Frank C. Becker.
27.1 Financial Data Schedule.
- ----------------------
(b) Reports on Form 8-K during the second quarter
None
22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SICOR Inc.
Date: August 13, 1999 By: /s/ Carlo Salvi
----------------------------------------
Carlo Salvi, Chief Executive Officer
Date: August 13, 1999 By: /s/ John W. Sayward
----------------------------------------
John W. Sayward, Executive Vice
President, Finance, Chief Financial
Officer and Treasurer
23
<PAGE>
EXHIBIT 3 (i)
RESTATED CERTIFICATE OF INCORPORATION
-------------------------------------
OF
--
GENSIA, INC.
------------
Gensia, Inc., a corporation organized and existing under the laws of the
State of Delaware, hereby certifies as follows:
FIRST: The name of the Corporation is Gensia, Inc. and shall hereby be
changed to Gensia Sicor Inc.
SECOND: The date of filing of its original Certificate of Incorporation
with the Secretary of State of Delaware was November 17, 1986. The Corporation
was originally incorporated under the name Gensia Pharmaceuticals, Inc.
THIRD: Pursuant to the sections 242 and 245 of the General Corporation Law
of the State of Delaware, this Restated Certificate of Incorporation restates,
integrates and further amends the provisions of the Certificate of Incorporation
of this Corporation.
FOURTH: This Restated Certificate of Incorporation was duly adopted in
accordance with the provisions of the General Corporation Law of the State of
Delaware.
FIFTH: That the text of the Certificate of Incorporation of Gensia, Inc.
shall be hereby restated, integrated and amended to read in full as follows:
ARTICLE I
The name of this Corporation is Gensia Sicor Inc.
ARTICLE II
The registered office of the Corporation within the State of Delaware is
located at 1209 Orange Street in the City of Wilmington, County of New Castle.
The name of its registered agent at that address is The Corporation Trust
Company.
ARTICLE III
The nature of the business and the purposes for which the Corporation is
formed are to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware.
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<PAGE>
ARTICLE IV
A. Classes of Stock. The total number of shares of all classes of
----------------
capital stock which the Corporation shall have authority to issue is One Hundred
Thirty Million (130,000,000) of which One Hundred Twenty-Five Million
(125,000,000) shares of the par value of One Cent ($.01) each shall be Common
Stock (the "Common Stock") and Five Million (5,000,000) shares of the par value
of One Cent ($.01) each shall be Preferred Stock (the "Preferred Stock").
The Preferred Stock may be issued from time to time in one or more series.
The Board of Directors is authorized to fix the number of shares of any series
of Preferred Stock and to determine the designation of any such shares. The
Board of Directors is also authorized to determine or alter the rights
(including but not limited to voting rights), preferences, privileges and
restrictions granted to or imposed upon any wholly unissued series of Preferred
Stock, and within the limits and restrictions stated in any resolution or
resolutions of the Board of Directors originally fixing the number of shares
constituting any series, to increase or decrease (but not below the number of
shares of such series outstanding) the number of shares of such series
subsequent to the issue of shares of that series by filing a certificate
pursuant to the applicable laws of the State of Delaware.
B. Series I Participating Preferred Stock.
--------------------------------------
1. Designation and Amount. Of the Five Million (5,000,000) shares of
----------------------
Preferred Stock, One Hundred Twenty-Five Thousand (125,000) shares shall be
designated as "Series I Participating Preferred Stock," $0.01 par value per
share. Such number of shares may be increased or decreased by resolution of the
Board of Directors; provided, that no decrease shall reduce the number of shares
of Series I Participating Preferred Stock to a number less than that of the
shares then outstanding plus the number of shares issuable upon exercise of
outstanding rights, options or warrants or upon conversion of outstanding
securities issued by the Corporation.
2. Dividends and Distributions.
---------------------------
(a) Subject to the prior and superior rights of the holders of any shares
of any series of Preferred Stock ranking prior and superior to the shares of
Series I Par ticipating Preferred Stock with respect to dividends, the holders
of shares of Series I Participating Preferred Stock in preference to the holders
of shares of Common Stock of the Corporation and any other junior stock, shall
be entitled to receive, when, as and if declared by the Board
-2-
<PAGE>
of Directors out of funds legally available for the purpose, quarterly dividends
payable in cash on the first day of March, June, September and December in each
year (each such date being referred to herein as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series I Participating Preferred
Stock in an amount per share (rounded to the nearest cent) equal to the greater
of (a) $100, or (b) subject to the provision for adjustment hereinafter set
forth, 1000 times the aggregate per share amount of all cash dividends, and 1000
times the aggregate per share amount (payable in kind) of all non-cash dividends
or other distributions other than a dividend payable in shares of Common Stock
or a subdivision of the outstanding shares of Common Stock (by reclassification
or otherwise), declared on the Common Stock, since the immediately preceding
Quarterly Dividend Payment Date, or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share or fraction of a
share of Series I Participating Preferred Stock. In the event the Corporation
shall at any time after the close of business on March 16, 1992 (the "Rights
Declaration Date") (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, by reclassification or
otherwise, then in each such case the amount to which holders of shares of
Series I Participating Preferred Stock were entitled immediately prior to such
event under clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(b) The Corporation shall declare a dividend or distribution on the Series
I Participating Preferred Stock as provided in paragraph (A) above immediately
after it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided that, in the event no
dividend or distribution shall have been declared on the Common Stock during the
period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $100 per share on the Series I
Participating Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series I Participating Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of Series I
Participating Preferred Stock unless the date of issue of such
-3-
<PAGE>
shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the date
of issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of holders
of shares of Series I Participating Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date in either of
which events such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Series I Participating Pre ferred
Stock in an amount less than the total amount of such dividends at the time
accrued and payable on such shares shall be allocated pro rata on a share-by-
share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Series I Participating Preferred Stock entitled to receive payment of a dividend
or distribution declared thereon, which record date shall be no more than 30
days prior to the date fixed for the payment thereof.
3. Voting Rights. The holders of shares of Series I Participating
-------------
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment here inafter set forth, each
share of Series I Participating Preferred Stock shall entitle the holder thereof
to 1000 votes on all matters submitted to a vote of the stockholders of the
Corporation. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock into a greater number
of shares, or (iii) combine the outstanding Common Stock into a smaller number
of shares, by reclassification or otherwise, then in each such case the number
of votes per share to which holders of shares of Series I Participating
Preferred Stock were entitled immediately prior to such event shall be adjusted
by multiplying such number by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock outstanding
immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of shares
of Series I Participating Preferred Stock and the holders of shares of Common
Stock shall vote together as one class on all matters submitted to a vote of
stockholders of the Corporation.
(C) (i) If at any time dividends on any Series I Participating Preferred
Stock shall be in arrears in an amount equal to six quarterly dividends thereon,
the occur-
-4-
<PAGE>
rence of such contingency shall mark the beginning of a period (herein called a
"default period") which shall extend until such time when all accrued and unpaid
dividends for all previous quarterly dividend periods and for the current
quarterly dividend period on all shares of Series I Partici pating Preferred
Stock then outstanding shall have been declared and paid or set apart for
payment. During each default period, all holders of Preferred Stock (including
holders of the Series I Participating Preferred Stock) with dividends in arrears
in an amount equal to six quarterly dividends thereon, voting as a class,
irrespective of series, shall have the right to elect two Directors.
(ii) During any default period, such voting right of the holders of Series
I Participating Preferred Stock may be exercised initially at a special meeting
called pursuant to subparagraph (iii) of this Section 3(C) or at any annual
meeting of stockholders, and thereafter at annual meetings of stockholders,
provided that neither such voting right nor the right of the holders of any
other series of Preferred Stock, if any, to increase, in certain cases, the
authorized number of Directors shall be exercised unless the holders of ten
percent (10%) in number of shares of Preferred Stock outstanding shall be
present in person or by proxy. The absence of a quorum of the holders of Common
Stock shall not affect the exercise by the holders of Preferred Stock of such
voting right. At any meeting at which the holders of Preferred Stock shall
exercise such voting right initially during an existing default period, they
shall have the right, voting as a class, to elect Directors to fill such
vacancies, if any, in the Board of Directors as may then exist up to two
Directors or, if such right is exercised at an annual meeting, to elect two
Directors. If the number which may be so elected at any special meeting does
not amount to the required number, the holders of the Preferred Stock shall have
the right to make such increase in the number of Directors as shall be necessary
to permit the election by them of the required number. After the holders of the
Preferred Stock shall have exercised their right to elect Directors in any
default period and during the continuance of such period, the number of
Directors shall not be increased or decreased except by vote of the holders of
Preferred Stock as herein provided or pursuant to the rights of any equity
securities ranking senior to or pari passu with the Series I Participating
Preferred Stock.
(iii) Unless the holders of Preferred Stock shall, during an existing
default period, have previously exercised their right to elect Directors, the
Board of Directors may order, or any stockholder or stockholders owning in the
aggregate not less than ten percent (10%) of the total number of shares of
Preferred Stock outstanding, irrespective of series, may request, the calling of
a special meeting of the holders of Preferred Stock, which meeting shall there-
-5-
<PAGE>
upon be called by the President, a Vice President or the Secretary of the
Corporation. Notice of such meeting and of any annual meeting at which holders
of Preferred Stock are entitled to vote pursuant to this paragraph (C)(iii)
shall be given to each holder of record Preferred Stock by mailing a copy of
such notice to him at his last address as the same appears on the books of the
Corporation. Such meeting shall be called for a time not earlier than 10 days
and not later than 60 days after such order or request or in default of the
calling of such meeting within 60 days after such order or request, such meeting
may be called on similar notice by any stockholder or stockholders owning in the
aggregate not less than ten percent (10%) of the total number of shares of
Preferred Stock outstanding. Notwithstanding the provisions of this paragraph
(C)(iii), no such special meeting shall be called during the period within 60
days immediately preceding the date fixed for the next annual meeting of the
stockholders.
(iv) In any default period, the holders of Common Stock, and other classes
of stock of the Corporation, if applicable, shall continue to be entitled to
elect the whole number of Directors until the holders of Preferred Stock shall
have exercised their right to elect two Directors voting as a class, after the
exercise of which right (x) the Directors so elected by the holders of Preferred
Stock shall continue in office until their successors shall have been elected by
such holders or until the expiration of the default period, and (y) any vacancy
in the Board of Direc tors may (except as provided in paragraph (C)(ii) of this
Section 3) be filled by vote of a majority of the remaining Directors
theretofore elected by the holders of the class of stock which elected the
Director whose office shall have become vacant. References in this paragraph
(C) to Directors elected by the holders of a particular class of stock shall
include Directors elected by such Directors to fill vacancies as provided in
clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the right of
the holders of Preferred Stock as a class to elect Directors shall cease, (y)
the term of any Directors elected by the holders of Preferred Stock as a class
shall terminate, and (z) the number of Directors shall be such number as may be
provided for in, or pursuant to, the Certificate of Incorporation or By-Laws
irrespective of any increase made pursuant to the provisions of paragraph
(C)(ii) of this Section 3 (such number being subject, how ever, to change
thereafter in any manner provided by law or in the Certificate of Incorporation
or By-Laws). Any vacancies in the Board of Directors effected by the provisions
of clauses (y) and (z) in the preceding sentence may be filled by a majority of
the remaining Directors, even though less than a quorum.
-6-
<PAGE>
(D) Except as set forth herein, holders of Series I Participating
Preferred Stock shall have no special voting rights and their consent shall not
be required (except to the extent they are entitled to vote with holders of
Common Stock as set forth herein) for taking any corporate action.
4. Certain Restrictions.
--------------------
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series I Participating Preferred Stock as provided in Section 2
are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series I Participating
Preferred Stock outstanding shall have been paid in full, the Corporation shall
not
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series I Participating Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on any
shares of stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series I Participating Preferred Stock
except dividends paid ratably on the Series I Participating Preferred Stock and
all such parity stock on which dividends are payable or in arrears in proportion
to the total amounts to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares of
any stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series I Participating Preferred Stock
provided that the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such parity stock in exchange for shares of any stock of
the Corporation ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Series I Participating Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of Series
I Participating Preferred Stock or any shares of stock ranking on a parity with
the Series I Participating Preferred Stock except in accordance with a purchase
offer made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among the
respective series or classes.
-7-
<PAGE>
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section
4, purchase or otherwise acquire such shares at such time and in such manner.
5. Reacquired Shares. Any shares of Series I Participating Preferred
-----------------
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
6. Liquidation, Dissolution or Winding Up.
--------------------------------------
(A) Upon any liquidation (voluntary or otherwise), dissolution or winding
up of the Corporation, no distribution shall be made to the holders of shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series I Participating Preferred Stock unless, prior thereto,
the holders of shares of Series I Participating Preferred Stock shall have
received per share, the greater of 1000 times $1.00 or 1000 times the payment
made per share of Common Stock, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment (the "Series I Liquidation Preference"). Following the payment of
the full amount of the Series I Liquidation Preference, no additional
distributions shall be made to the holders of shares of Series I Participating
Preferred Stock unless, prior thereto, the holders of shares of Common Stock
shall have received an amount per share (the "Common Adjustment") equal to the
quotient obtained by dividing (i) the Series I Liquidation Preference by (ii)
1000 (as appropriately adjusted as set forth in subparagraph (C) below to
reflect such events as stock splits, stock dividends and recapitalization with
respect to the Common Stock) (such number in clause (ii), the "Adjustment
Number"). Following the payment of the full amount of the Series I Liquidation
Preference and the Common Adjustment in respect of all out standing shares of
Series I Participating Preferred Stock and Common Stock, respectively, holders
of Series I Participating Preferred Stock and holders of shares of Common Stock
shall receive their ratable and proportionate share of the remaining assets to
be distributed in the ratio of the Adjustment Number to 1 with respect to such
Preferred Stock and Common Stock, on a per share basis, respectively.
-8-
<PAGE>
(B) In the event there are not sufficient assets available to permit
payment in full of the Series I Liquidation Preference and the liquidation
preferences of all other series of Preferred Stock, if any, which rank on a
parity with the Series I Participating Preferred Stock then such remaining
assets shall be distributed ratably to the holders of such parity shares in
proportion to their respective liquidation preferences. In the event there are
not sufficient assets available to permit payment in full of the Common
Adjustment, then such remaining assets shall be distributed ratably to the
holders of Common Stock.
(C) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, by reclassification or
otherwise, then in each such case the Adjustment Number in effect immediately
prior to such event shall be adjusted by multiplying such Adjustment Number by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
7. Consolidation, Merger, etc. In case the Corporation shall enter into
--------------------------
any consolidation, merger, combination or other transaction in which the shares
of Common Stock are exchanged for or changed into other stock or securities,
cash and/or any other property, then in any such case the shares of Series I
Participating Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 1000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time after the Rights Declaration Date
(i) declare any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each such case the amount set
forth in the preceding sentence with respect to the exchange or change of shares
of Series I Participating Preferred Stock shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that are outstanding immediately prior to
such event.
8. Redemption. The shares of Series I Participating Preferred Stock
----------
shall not be redeemable.
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<PAGE>
9. Ranking. The Series I Participating Preferred Stock shall rank junior
-------
to all other series of the Corporation's Preferred Stock as to the payment of
dividends and the distribution of assets, unless the terms of any such series
shall provide otherwise.
10. Amendment. The Certificate of Incorporation and the By-Laws of the
---------
Corporation shall not be further amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series I
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of at least 66-2/3% of the outstanding shares of
Series I Participating Preferred Stock voting separately as a class.
11. Fractional Shares. Series I Participating Preferred Stock may be
-----------------
issued in fractions of a share which shall entitle the holder, in proportion to
such holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series I Participating Preferred Stock.
C. $3.75 Convertible Exchangeable Preferred Stock.
----------------------------------------------
1. Designation and Amount. Of the Five Million (5,000,000) shares of
----------------------
Preferred Stock, One Million Eight Hundred Forty Thousand (1,840,000) shares
shall be designated as "$3.75 Convertible Exchangeable Preferred Stock," $.01
par value per share.
2. Definitions. For purposes of the $3.75 Convertible Exchangeable
-----------
Preferred Stock and this Section C, in addition to those terms otherwise defined
in this Restated Certificate of Incorporation, the following terms shall have
the meanings indicated:
"Board of Directors" shall mean the board of directors of the Corporation
or any committee authorized by such Board of Directors to perform any of its
responsibilities with respect to the $3.75 Convertible Exchangeable Preferred
Stock.
"Business Day" shall mean any day other than a Saturday, Sunday or a day on
which banking institutions in the City of New York are authorized or obligated
by law or executive order to close.
"Closing Price" of a security on any day shall mean on such day the
reported last sales price, regular way, for the security or, in case no sale
takes place on such day, the average of the reported closing bid and asked
prices, regular way, for the security in either case as reported on the New York
Stock Exchange, on the principal national
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<PAGE>
securities exchange on which the security is listed or admitted to trading or,
if not listed or admitted to trading on any national securities exchange, on the
Nasdaq National Market or, if the security is not quoted on such National Market
system, the average of the closing bid and asked prices for the security on such
day in or, if bid and asked prices for the security on each such date shall not
have been reported by The Nasdaq Stock Market, the average of the bid and asked
prices of the security for such day as furnished by any New York Stock Exchange
member firm regularly making a market in the security selected for such purpose
by the Board of Directors or, if no such quotations are available, the fair
market value of the security furnished by any New York Stock Exchange member
firm selected from time to time by the Board of Directors for that purpose.
"Corporation Notice" shall have the meaning set forth in paragraph (b) of
Section C5 of this Article.
"Conversion Price" shall mean the conversion price per share of Common
Stock into which the $3.75 Convertible Exchangeable Preferred Stock is
convertible, as such Conversion Price may be adjusted pursuant to Section C7 of
this Article. The initial Conversion Price will be $27.60 (equivalent to the
rate of approximately 1.8116 shares of Common Stock for each share of $3.75
Convertible Exchangeable Preferred Stock).
"Current Market Price" per share of Common Stock on any date shall mean the
Closing Price of the Common Stock on the first day which is not a Saturday, a
Sunday or a day on which banking institutions and trust companies in New York,
New York are authorized by law or executive order to close or a legal holiday.
"Dividend Payment Date" shall have the meaning set forth in paragraph (a)
of Section C3 of this Article.
"Dividend Payment Record Date" shall have the meaning set forth in
paragraph (a) of Section C3 of this Article.
"Debentures" shall mean the Corporation's 7 1/2% Convertible Subordinated
Debentures due 2003.
"Dividend Periods" shall mean quarterly dividend periods commencing on the
first day of March, June, September and December of each year and ending on and
including the day preceding the first day of the next succeeding Dividend Period
(other than the initial Dividend Period which shall commence on the Issue Date
and end on and include May 31, 1993).
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<PAGE>
"Fundamental Change" shall have the meaning set forth in paragraph (c) of
Section C8 of this Article.
"Issue Date" shall mean the first date on which shares of the $3.75
Convertible Exchangeable Preferred Stock are issued.
"Person" shall mean any individual, association, partnership, corporation,
a government or a political subdivision thereof, a governmental agency or other
entity, and shall include any successor (by merger or otherwise) of such entity.
"Trading Date" with respect to Common Stock means (i) if the Common Stock
is listed or admitted for trading on the New York Stock Exchange or another
national securities exchange, a day on which the New York Stock Exchange or such
other national securities exchange is open for business or (ii) if the Common
Stock is quoted on the Nasdaq National Market, a day on which trades may be made
on such National Market system or (iii) otherwise, any Business Day.
"Transfer Agent" means ChaseMellon Shareholder Services, L.L.C., as
successor in interest to First Interstate Bank of California or such other agent
or agents of the Corporation as may be designated by the Board of Directors of
the Corporation as the transfer agent for the $3.75 Convertible Exchangeable
Preferred Stock.
3. Dividends.
---------
(a) Holders of the $3.75 Convertible Exchangeable Preferred Stock are
entitled to receive, when, as and if declared by the Board of Directors, out of
the funds of the Corporation legally available therefor, an annual cash dividend
at the annual rate of $3.75 per share of $3.75 Convertible Exchangeable
Preferred Stock, payable in quarterly installments on March 1, June 1, September
1 and December 1 (each a "Dividend Payment Date"), commencing June 1, 1993 (and,
in the case of any accrued but unpaid dividends, at such additional times and
for such interim periods, if any, as determined by the Board of Directors). If
June 1, 1993 or any other Dividend Payment Date shall be on a day other than a
Business Day, the Dividend Payment Date shall be on the next succeeding Business
Day. Dividends on the $3.75 Convertible Exchangeable Preferred Stock will be
cumulative from the Issue Date, whether or not in any Dividend Period or Periods
there shall be funds of the Corporation legally available for the payment of
such dividends and whether or not such dividends are declared, and will be
payable to holders of record as they appear on the stock books of the
Corporation on such record dates (each such date, a "Dividend Payment Record
Date"), which shall be not more than 60 days nor less than 10 days
-12-
<PAGE>
preceding the Dividend Payment Dates thereof, as shall be fixed by the Board of
Directors. Dividends on the $3.75 Convertible Exchangeable Preferred Stock
shall accrue (whether or not declared) on a daily basis from the Issue Date, and
accrued dividends for each Dividend Period shall accumulate to the extent not
paid on the Dividend Payment Date first following the Dividend Period for which
they accrue. As used herein, the term "accrued" with respect to dividends
includes both accrued and accumulated dividends.
(b) The amount of dividends payable for such full Dividend Period for the
$3.75 Convertible Exchangeable Preferred Stock shall be computed by dividing the
annual dividend rate by four (rounded down to the nearest cent). The amount of
dividends payable for the initial Dividend Period on the $3.75 Convertible
Exchangeable Preferred Stock, or any other period shorter or longer than a full
Dividend Period on the $3.75 Convertible Exchangeable Preferred Stock, shall be
computed on the basis of a 360-day year consisting of twelve 30-day months.
Holders of shares of $3.75 Convertible Exchangeable Preferred Stock called for
redemption on a redemption date falling between the close of business on a
Dividend Payment Record Date and the opening of business on the corresponding
Dividend Payment Date shall, in lieu of receiving such dividend on the Dividend
Payment Date fixed therefor, receive such dividend payment together with all
other accrued and unpaid dividends on the date fixed for redemption (unless
holder converts such shares in accordance with Section C7 of this Article).
Holders of shares of $3.75 Convertible Exchangeable Preferred Stock shall not be
entitled to any dividends, whether payable in cash, property or stock, in excess
of cumulative dividends, as herein provided. No interest, or sum of money in
lieu of interest, shall be payable in respect of any dividend payment or
payments on the $3.75 Convertible Exchangeable Preferred Stock which may be in
arrears.
(c) So long as any shares of the $3.75 Convertible Exchangeable Preferred
Stock are outstanding, no dividends, except as described in the next succeeding
sentence, shall be declared or paid or set apart for payment on any class or
series of stock of the Corporation ranking, as to the dividends, on a parity
with the $3.75 Convertible Exchangeable Preferred Stock, for any period unless
full cumulative dividends have been or contemporaneously are declared and paid
or declared and a sum sufficient for the payment thereof set apart for such
payment on the $3.75 Convertible Exchangeable Preferred Stock for all Dividend
Periods terminating on or prior to the date of payment, or setting apart for
payment, of such dividends on such parity stock. When dividends are not paid in
full or a sum sufficient for such payment is not set apart, as aforesaid, upon
the shares of the $3.75 Convertible Exchangeable
-13-
<PAGE>
Preferred Stock and any other class or series of stock ranking on a parity as to
dividends with the $3.75 Convertible Exchangeable Preferred Stock, all dividends
declared upon shares of the $3.75 Convertible Exchangeable Preferred Stock and
all dividends declared upon such other stock shall be declared pro rata so that
the amounts of dividends per share declared on the $3.75 Convertible
Exchangeable Preferred Stock and such other stock shall in all cases bear to
each other the same ratio that accrued dividends per share on the shares of the
$3.75 Convertible Exchangeable Preferred Stock and on such other stock bear to
each other.
(d) So long as any shares of the $3.75 Convertible Exchangeable Preferred
Stock are outstanding, no other stock of the Corporation ranking on a parity
with the $3.75 Convertible Exchangeable Preferred Stock as to dividends or upon
liquidation, dissolution or winding up shall be redeemed, purchased or otherwise
acquired for any consideration (or any moneys be paid to or made available for a
sinking fund or otherwise for the purchase or redemption of any shares of any
such stock) by the Corporation (except for repurchases from employees and
consultants) unless (i) the full cumulative dividends, if any, accrued on all
outstanding shares of the $3.75 Convertible Exchangeable Preferred Stock shall
have been paid or set apart for payment for all past Dividend Periods and (ii)
sufficient funds shall have been set apart for the payment of the dividend for
the current Dividend Period with respect to the $3.75 Convertible Exchangeable
Preferred Stock.
(e) So long as any shares of the $3.75 Convertible Exchangeable Preferred
Stock are outstanding, no dividends (other than dividends or distributions paid
in shares of, or options, warrants or rights to subscribe for or purchase shares
of, Common Stock or other stock ranking junior to the $3.75 Convertible
Exchangeable Preferred Stock, as to dividends and upon liquidation, dissolution
or winding up) shall be declared or paid or set apart for payment and no other
distribution shall be declared or made or set apart for payment, in each case
upon the Common Stock or any other stock of the Corporation ranking junior to
the $3.75 Convertible Exchangeable Preferred Stock as to dividends or upon
liquidation, dissolution or winding up, nor shall any Common Stock nor any other
such stock of the Corporation ranking junior to the $3.75 Convertible
Exchangeable Preferred Stock as to dividends or upon liquidation, dissolution or
winding up be redeemed, purchased or otherwise acquired for any consideration
(or any moneys be paid to or made available for a sinking fund or otherwise for
the purchase or redemption of any shares of any such stock) by the Corporation
(except by conversion into or exchange for stock of the Corporation ranking
junior to the
-14-
<PAGE>
$3.75 Convertible Exchangeable Preferred Stock as to dividends and upon
liquidation, dissolution or winding up) unless, in each case (i) the full
cumulative dividends, if any, accrued on all outstanding shares of the $3.75
Convertible Exchangeable Preferred Stock and any other stock of the Corporation
ranking on a parity with the $3.75 Convertible Exchangeable Preferred Stock as
to dividends shall have been paid or set apart for payment for all past Dividend
Periods and all past dividend periods with respect to such other stock and (ii)
sufficient funds shall have been set apart for the payment of the dividend for
the current Dividend Period with respect to the $3.75 Convertible Exchangeable
Preferred Stock and for the current dividend period with respect to any other
stock of the Corporation ranking on a parity with the $3.75 Convertible
Exchangeable Preferred Stock as to dividends.
4. Liquidation Preference.
----------------------
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, before any payment or
distribution of the assets of the Corporation (whether capital or surplus) shall
be made to or set apart for the holders of Common Stock or any other series or
class of stock of the Corporation ranking junior to the $3.75 Convertible
Exchangeable Preferred Stock upon liquidation, dissolution or winding up, the
holders of the shares of $3.75 Convertible Exchangeable Preferred Stock shall be
entitled to receive $50.00 per share plus an amount per share equal to all
dividends (whether or not earned or declared) accrued and unpaid thereon to the
date of final distribution to such holders; but such holders shall not be
entitled to any further payment. No payment on account of any liquidation,
dissolution or winding up of the Corporation shall be made to the holders of any
class or series of stock ranking on a parity with the $3.75 Convertible
Exchangeable Preferred Stock in respect of the distribution of assets upon
dissolution, liquidation or winding up unless there shall likewise be paid at
the same time to the holders of the $3.75 Convertible Exchangeable Preferred
Stock like proportionate amounts determined ratably in proportion to the full
amounts to which the holders of all outstanding shares of $3.75 Convertible
Exchangeable Preferred Stock and the holders of all outstanding shares of such
parity stock are respectively entitled with respect to such distribution. If,
upon any liquidation, dissolution or winding up of the Corporation, the assets
of the Corporation, or proceeds thereof, distributable among the holders of the
shares of, $3.75 Convertible Exchangeable Preferred Stock shall be insufficient
to pay in full the preferential amount aforesaid and liquidating payments on any
other shares of stock ranking, as to liquidation, dissolution or winding up, on
a parity with the $3.75 Convertible Exchangeable
-15-
<PAGE>
Preferred Stock, then such assets, or the proceeds thereof, shall be distributed
among the holders of shares of $3.75 Convertible Exchangeable Preferred Stock
and any such other stock ratably in accordance with the respective amounts which
would be payable on such shares of $3.75 Convertible Exchangeable Preferred
Stock and any such other stock if all amounts payable thereon were paid in full.
For the purposes of this Section C4, (i) a consolidation or merger of the
Corporation with one or more corporations or other entities, (ii) a sale, lease,
exchange or transfer of all or any part of the Corporation's assets or (iii) a
statutory share exchange shall not be deemed to be a liquidation, dissolution or
winding up, voluntary or involuntary.
(b) Subject to the rights of the holders of shares of any series or class
or classes of stock ranking on a parity with or prior to the $3.75 Convertible
Exchangeable Preferred Stock upon liquidation, dissolution or winding up, upon
any liquidation, dissolution or winding up of the Corporation, after payment
shall have been made in full to the holders of $3.75 Convertible Exchangeable
Preferred Stock, as provided in this Section C4, any other series or class or
classes of stock ranking junior to the $3.75 Convertible Exchangeable Preferred
Stock upon liquidation, dissolution or winding up shall, subject to the
respective terms and provisions (if any) applying thereto, be entitled to
receive any and all assets remaining to be paid or distributed, and the holder
of $3.75 Convertible Exchangeable Preferred Stock shall not be entitled to share
therein.
(c) Written notice of any liquidation, dissolution or winding up of the
Corporation, stating the payment date or dates when and the place or places
where the amounts distributable in such circumstances shall be payable, shall be
given by first class mail, postage prepaid, not less than thirty (30) days prior
to any payment date stated therein, to the holders of record of the $3.75
Convertible Exchangeable Preferred Stock at their respective addresses as the
same shall appear on the books of the Transfer Agent.
5. Redemption at the Option of the Corporation.
-------------------------------------------
(a) $3.75 Convertible Exchangeable Preferred Stock may not be redeemed by
the Corporation prior to March 6, 1996, on or after which the Corporation, at
its option, may redeem the shares of $3.75 Convertible Exchangeable Preferred
Stock, in whole or in part, out of funds legally available therefor, at any time
or from time to time, subject to the notice provisions and provisions for
partial redemption described below, during the period beginning on March 1, of
the years shown below (March 6 in the case of 1996), at the following redemption
prices per share plus an amount equal to accrued and unpaid dividends, if any,
to (and including)
-16-
<PAGE>
the date fixed for redemption, whether or not earned or declared:
<TABLE>
<CAPTION>
Year Price
---- -----
<S> <C>
1996 $52.50
1997 $52.08
1998 $51.67
1999 $51.25
2000 $50.83
2001 $50.42
2002 and thereafter $50.00
</TABLE>
Notwithstanding the foregoing, the $3.75 Convertible Exchangeable Preferred
Stock may not be redeemed prior to March 6, 1998 unless the Closing Price of the
Common Stock equals or exceeds 150% of the then effective Conversion Price per
share for any 20 Trading Dates during a period of 30 consecutive Trading Dates
ending within 15 days prior to the mailing of a Corporation Notice of
redemption.
(b) In the event the Corporation shall redeem shares of $3.75 Convertible
Exchangeable Preferred Stock, a Corporation Notice of such redemption shall be
given by first class mail, postage prepaid, mailed not less than 30 nor more
than 60 days prior to the redemption date, to each holder of record of the
shares to be redeemed, at such holder's address as the same appears on the stock
records of the Corporation. Each such notice shall state: (i) the redemption
date; (ii) the number of shares of $3.75 Convertible Exchangeable Preferred
Stock to be redeemed and, if less than all the shares held by such holder are to
be redeemed, the number of such shares to be redeemed from such holder; (iii)
the redemption price; (iv) the place or places where certificates for such
shares are to be surrendered for payment of the redemption price; (v) that
payment will be made upon presentation and surrender of such $3.75 Convertible
Exchangeable Preferred Stock; (vi) the then current conversion price and the
date on which the right to convert such shares of 3.75 Convertible Exchangeable
Preferred Stock will expire; (vii) that dividends on the shares to be redeemed
shall cease to accrue following such redemption date; (viii) that such
redemption is at the option of the Corporation; and (ix) that dividends accrued
to and including the date fixed for redemption will be paid as specified in said
notice. Notice having been mailed as aforesaid, from and after the redemption
date, unless the Corporation shall be in default in providing money for the
payment of the redemption price (including any accrued and unpaid dividends to
(and including) the date fixed for redemption) (x) dividends on the shares of
the $3.75 Convertible Exchangeable Preferred Stock so called for redemption
shall cease to accrue, (y) said shares shall be deemed no longer outstanding,
and (z) all rights of the
-17-
<PAGE>
holders thereof as stockholder of the Corporation (except the right to receive
from the Corporation the money payable upon redemption without interest thereon)
shall cease. The Corporation's obligation to provide moneys in accordance with
the preceding sentence shall be deemed fulfilled if, on or before the redemption
date, the Corporation shall deposit with a bank or trust company having an
office or agency in the Borough of Manhattan, City of New York, and having a
capital and surplus of at least $50,000,000, the principal amount of funds
necessary for such redemption, in trust for the account of the holders of the
shares to be redeemed (and so as to be and continue to be available therefor),
with irrevocable instructions and authority to such bank or trust company that
such funds be applied to the redemption of the shares of $3.75 Convertible
Exchangeable Preferred Stock so called for redemption. Any interest accrued on
such funds shall be paid to the Corporation from time to time. Any funds so
deposited and unclaimed at the end of three years from such redemption date
shall be released or repaid to the Corporation, after which, subject to any
applicable laws relating to escheat or unclaimed property, the holder or holders
of such shares of $3.75 Convertible Exchangeable Preferred Stock so called for
redemption shall look only to the Corporation for payment of the redemption
price.
Upon surrender in accordance with said notice of the certificates for any
such shares so redeemed (properly endorsed or assigned for transfer, if the
Board of Directors shall so require and the notice shall so state), such shares
shall be redeemed by the Corporation at the applicable redemption price
aforesaid. If fewer than all the outstanding shares of $3.75 Convertible
Exchangeable Preferred Stock are to be redeemed, shares to be redeemed shall be
selected by the Corporation from outstanding shares of $3.75 Convertible
Exchangeable Preferred Stock not previously called for redemption by lot or pro
rata (as near as may be) or by any other equitable method determined by the
Corporation in its sole discretion. If fewer than all the shares represented by
any certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares without cost to the holder thereof.
Notwithstanding the foregoing, if the Corporation Notice of redemption has
been given pursuant to this Section C5 and any holder of shares of $3.75
Convertible Exchangeable Preferred Stock shall, prior to the close of business
on the third Business Day preceding the redemption date, give written notice to
the Corporation pursuant to Section C7(b) of this Article hereof of the
conversion of any or all of the shares to be redeemed held by such holder
(accompanied by a certificate or certificates for such shares, duly endorsed or
assigned to the Corporation), then the conversion of such shares to be redeemed
shall become effective as provided in Section C7 of this Article.
-18-
<PAGE>
6. Shares to Be Retired. Any shares of $3.75 Convertible Exchangeable
--------------------
Preferred Stock converted, redeemed or otherwise acquired by the Corporation
shall be retired and cancelled and shall upon cancellation be restored to the
status of authorized but unissued shares of Preferred Stock, subject to
reissuance by the Board of Directors as $3.75 Convertible Exchangeable Preferred
Stock or as shares of Preferred Stock of one or more other series.
7. Conversion. Holders of shares of $3.75 Convertible Exchangeable
----------
Preferred Stock shall have the right to convert all or a portion of such shares
(including fractions of such shares) into shares of Common Stock, as follows:
(a) Subject to and upon compliance with the provisions of this Section C7,
a holder of shares of $3.75 Convertible Exchangeable Preferred Stock shall have
the right, at his or her option, at any time, to convert any of such shares (or
fractions thereof) into the number of fully paid and nonassessable shares of
Common Stock (calculated as to each conversion to the nearest 1/100th of a
share) obtained by dividing the aggregate liquidation preference of the shares
to be converted by the Conversion Price and by surrender of such shares, such
surrender to be made in the manner provided in paragraph (b) of this Section C7;
provided, however, that the right to convert shares called for redemption
- -------- -------
pursuant to Section C5 of this Article shall terminate at the close of business
on the third Business Day preceding the date fixed for such redemption, unless
the Corporation shall default in making payment of the amount payable upon such
redemption. Subject to the following provisions of this Section C7(a), any
shares of $3.75 Convertible Exchangeable Preferred Stock may be converted, at
the option of its holder, in part into Common Stock under the procedures set
forth above. If a part of a share of $3.75 Convertible Exchangeable Preferred
Stock is converted, then the Corporation will convert such share into the
appropriate number of shares of Common Stock (subject to paragraph (c) of this
Section C7) and issue a fractional shares of $3.75 Convertible Exchangeable
Preferred Stock evidencing the remaining interest of such holder.
(b) In order to exercise the conversion right, the holder of each share of
$3.75 Convertible Exchangeable Preferred Stock (or fraction thereof) to be
converted shall surrender the certificate representing such share, duly endorsed
or assigned to the Corporation or in blank, at the office or agency of the
Transfer Agent in the Borough of Manhattan, City of New York or Los Angeles,
California, accompanied by written notice to the Corporation that the holder
thereof elects to convert the holder's $3.75 Convertible Exchangeable Preferred
Stock or a specified portion thereof. Unless the shares issuance on conversion
-19-
<PAGE>
are to be issued in the same name as the name in which such share of $3.75
Convertible Exchangeable Preferred Stock is registered, each share surrendered
for conversion shall be accompanied by instruments of transfer, in form
satisfactory to the Corporation, duly executed by the holder or such holder's
duly authorized attorney and an amount sufficient to pay any transfer or similar
tax (or evidence reasonably satisfactory to the Corporation demonstrating that
such taxes have been paid or are not required to be paid).
Holders of shares of $3.75 Convertible Exchangeable Preferred Stock at the
close of business on a Dividend Payment Record Date will be entitled to receive
the dividend payable on such shares on the corresponding Dividend Payment Date
notwithstanding the conversion thereof or the Corporation's default on payment
of the dividend due on such Dividend Payment Date. However, shares of $3.75
Convertible Exchangeable Preferred Stock surrendered for conversion during the
period from the close of business on any Dividend Payment Record Date to the
opening of business on the corresponding Dividend Payment Date (except shares
called for redemption on a redemption date during such period) must be
accompanied by payment of an amount equal to the dividend payable on such shares
on such Dividend Payment Date. A holder of shares of $3.75 Convertible
Exchangeable Preferred Stock on a Dividend Payment Record Date who (or whose
transferee) converts shares of $3.75 Convertible Exchangeable Preferred Stock on
a dividend payment date will receive the dividend payable on such shares of
$3.75 Convertible Exchangeable Preferred Stock by the Corporation on such date,
and the converting holder need not include payment in the amount of such
dividend upon surrender of shares of $3.75 Convertible Exchangeable Preferred
Stock for conversion. Except as provided above, no payment or adjustment will
be made on account of accrued or unpaid dividends upon conversion of shares of
$3.75 Convertible Exchangeable Preferred Stock.
As promptly as practicable after the surrender of certificates for shares
of $3.75 Convertible Exchangeable Preferred Stock as aforesaid, the Corporation
shall issue and shall deliver at such office to such holder, or on his or her
written order, a certificate or certificates for the number of shares of Common
Stock issuable upon the conversion of such shares in accordance with the
provisions of this Section C7, and any fractional interest in respect of a share
of Common Stock arising upon such conversion shall be settled as provided in
paragraph (c) of this Section C7.
Each conversion shall be deemed to have been effected immediately prior to
the close of business on the date on which the certificates for shares of $3.75
Convertible Exchangeable Preferred Stock shall have been surrendered and
-20-
<PAGE>
such notice received by the Corporation as aforesaid, and the person or persons
in whose name or names any certificate of certificates for shares of Common
Stock shall be issuable upon such conversion shall be deemed to have become the
holder or holders of record of the shares represented thereby at such time on
such date and such conversion shall be at the Conversion Price in effect at such
time as such date, unless the stock transfer books of the Corporation shall be
closed on that date, in which event such person or persons shall be deemed to
have become such holder or holders of record at the close of business on the
next succeeding day on which such stock transfer books are open, but such
conversion shall be at the Conversion Price in effect on the date upon which
such shares shall have been surrendered and such notice received by the
Corporation. All shares of Common Stock delivered upon conversion of the $3.75
Convertible Exchangeable Preferred Stock will, upon delivery, be duly
authorized, validly issued and fully paid and nonassessable.
(c) In connection with the conversion of any shares of $3.75 Convertible
Exchangeable Preferred Stock, fractions of such shares may be converted;
however, no fractional shares or securities representing fractions of shares of
Common Stock shall be issued upon conversion of the $3.75 Convertible
Exchangeable Preferred Stock. Instead of any fractional interest in a share of
Common Stock which would otherwise be delivered upon the conversion of a shares
of $3.75 Convertible Exchangeable Preferred Stock (or fractions thereof), the
Corporation shall pay to the holder of such shares an amount in cash (computed
to the nearest cent) equal to the Current Market Price of Common Stock on the
Trading Date immediately preceding the date of conversion multiplied by the
fraction of a share of Common Stock represented by such fractional interest. If
more than one share (or fraction thereof) shall be surrendered for conversion at
one time by the same holder, the number of full shares of Common Stock issuable
upon conversion thereof shall be computed on the basis of the aggregate number
of shares of $3.75 Convertible Exchangeable Preferred Stock so surrendered.
(d) The Conversion Price shall be adjusted from time to time as follows:
(i) Stock Dividends and Stock Splits. If at any time after the
--------------------------------
Issue Date, (A) the Corporation shall fix a record date for the issuance of
any dividend payable in shares of Common Stock or (B) the number of shares
of Common Stock shall have been increased by a subdivision or split-up of
shares of Common Stock, then, on the record date fixed for the
determination of holders of Common Stock entitled to receive such dividend
or
-21-
<PAGE>
immediately after the effective date of such subdivision or split-up, as
the case may be, the number of shares to be delivered upon surrender of any
share of $3.75 Convertible Exchangeable Preferred Stock for conversion will
be appropriately increased so that each holder of $3.75 Convertible
Exchangeable Preferred Stock thereafter will be entitled to receive the
number of shares of Common Stock that such holder would have owned
immediately following such action had such share been surrendered for
conversion immediately prior thereto, and the Conversion Price will be
appropriately adjusted. The time of occurrence of an event giving rise to
an adjustment made pursuant to this paragraph (d)(i) shall, in the case of
subdivision or split-up, be the effective date thereof and shall, in the
case of a stock dividend, be the record date thereof.
(ii) Combination of Stock. If the number of shares of Common Stock
--------------------
outstanding at any time after the Issue Date shall have been decreased by a
combination of the outstanding shares of Common Stock, then, immediately
after the effective date of such combination, the number of shares to be
delivered upon surrender of any shares of $3.75 Convertible Exchangeable
Preferred Stock for conversion will be appropriately decreased so that each
holder thereafter will be entitled to receive the number of shares of
Common Stock that such holder would have owned immediately following such
action had such shares been surrendered for conversion immediately prior
thereto, and the Conversion Price will be appropriately adjusted.
(iii) Reorganization. If any capital reorganization of the
--------------
Corporation, or any reclassification of the Common Stock, or any
consolidation of the Corporation with or merger of the Corporation with or
into any other corporation or any sale, lease or other transfer of all or
substantially all of the assets of the Corporation to any other person
(including any individual, partnership, joint venture, corporation, trust
or group thereof) shall be effected in such a way that the Common Stock
shall be converted into the right to receive stock, securities or other
property (including cash or any combination thereof), then, upon surrender
of the $3.75 Convertible Exchangeable Preferred Stock for conversion in
accordance with the term of this Section C7, each holder shall have the
right to receive the kind and holder shall have the right to receive the
kind and amount of stock and other
-22-
<PAGE>
securities and property receivable (including cash or any combination
thereof) upon such reorganization, reclassification, consolidation, merger
or sale, lease or other transfer by a holder of the number of shares of
Common Stock that such holder of the $3.75 Convertible Exchangeable
Preferred Stock would have been entitled to receive upon surrender of the
$3.75 Convertible Exchangeable Preferred Stock for conversion pursuant to
this Section C7 had the $3.75 Convertible Exchangeable Preferred Stock been
surrendered for conversion immediately prior to such merger or sale, lease
or other transfer.
(iv) Special Dividends. If (other than in a dissolution or
-----------------
liquidation) securities of the Corporation (other than shares of Common
Stock or rights, options or warrants referred to in subparagraph (v)
hereof) or evidence of its indebtedness or assets (other than cash
dividends payable (a) out of retained earnings or (b) out of any earnings
or surplus not in excess of 10% of the average Closing Price of the Common
Stock for the thirty (30) trading days prior to the fifth trading day
before the date of declaration multiplied by the number of shares of Common
Stock outstanding during such period), are issued by way of a dividend on
outstanding shares of Common Stock, then the number of shares to be
delivered upon surrender of the $3.75 Convertible Exchangeable Preferred
Stock shall be appropriately increased so that immediately after the date
fixed by the Corporation as the record date in respect of such issuance,
each holder will be entitled to receive the number of shares of Common
Stock determined by multiplying the number of shares such holder would have
been entitled to receive immediately before the record date for the
determination of the stockholders entitled to receive such dividend by a
fraction, the denominator of which shall be the Closing Price of the Common
Stock on such record date less the then fair market value as determined by
the Board of Directors, whose determination if made in good faith shall be
conclusive, of the portion of the securities or evidence of indebtedness or
assets distributed applicable to one share of Common Stock and the
numerator of which shall be such Closing Price; and the Conversion Price
shall be appropriately adjusted. Such adjustment shall become effective
immediately prior to the opening of business on the day following such
record date.
-23-
<PAGE>
(v) Rights Offering. If the Corporation at any time after the Issue
---------------
Date shall issue or sell or fix a record date for the issuance of rights,
options or warrants to all holders of Common Stock entitling the holders
thereof to subscribe for or purchase or otherwise acquire Common Stock (of
securities convertible or exchangeable for Common Stock), in any such case,
at a price per share (or having a conversion price or exchange value per
share) that, together with the value (if for consideration other than cash,
as determined in good faith by the Board of Directors) of any consideration
paid for any such rights, options or warrants is less than the Closing
Price of the Common Stock on the date of such issuance or sale or on such
record date then, immediately after such record date, the number of shares
to be delivered upon surrender of the $3.75 Convertible Exchangeable
Preferred Stock for conversion shall be appropriately increased so that
each holder thereafter will be entitled to receive the number of shares of
Common Stock determined by multiplying the number of shares such holder
would have been entitled to receive immediately before the date of such
issuance or sale on such record date by a fraction, the numerator of which
will be the number of shares of Common Stock outstanding on such date plus
the number of additional shares of Common Stock offered for subscription or
purchase (or into which the convertible securities so offered are initially
convertible) and the denominator of which will be the number of shares of
Common Stock outstanding on such date plus the number of shares of Common
Stock that the aggregate offering price of the total number of shares so
offered for subscription or purchase would purchase at such Closing Price,
and the Conversion Price shall be appropriately adjusted. Notwithstanding
the foregoing, rights issued by the Corporation to all holders of its
Common Stock entitling the holders thereof to subscribe for or purchase
securities of the Corporation, which rights (i) are deemed to be
transferred with such shares of Common Stock, (ii) are not exercisable, and
(iii) are also issued in respect of future issuances of Common Stock
pursuant to the Corporation's Rights Agreement, dated as of March 16, 1992,
between the Corporation and First Interstate Bank, Ltd. (the "Rights Plan")
or any future or successor plan substantially similar to the Rights Plan,
in each case in clauses (i) through (iii) until the occurrence of a
specified event or events, shall for purposes of this paragraph (d) of this
Section C7 not be deemed
-24-
<PAGE>
issued until the occurrence of the earliest such specified event.
(vi) No Adjustments to Exercise Price. No adjustment in the
--------------------------------
Conversion Price in accordance with the provisions of paragraphs (i), (ii),
(iii), (iv) or (v) above need be made if such adjustment would amount to a
change in such Conversion Price of less than $.05; provided, however, that
-------- -------
the amount by which any adjustment is not made by reason of the provisions
of this section shall be carried forward and taken into account at the time
of any subsequent adjustment in the Conversion Price; and provided further,
that adjustment shall be required and made in accordance with the
provisions of this Section C7 not later than such time as may be required
in order to preserve the tax free nature of a distribution to the holder of
any share of Common Stock. Anything in this Section C7 to the contrary
notwithstanding, the Corporation shall be entitled to the extent permitted
by law to make such reductions in the Conversion Price, in addition to
those required by this Section C7, as it in its sole discretion shall
determine to be advisable in order to avoid or diminish any income tax to
any holder of Common Stock resulting from any dividend or distribution of
capital stock or rights or warrants to purchase capital stock or from any
event treated as such for income tax purposes of for any other reasons.
(vii) Readjustments, etc. If an adjustment is made under paragraphs
-------------------
(i), (ii), (iii), (iv) or (v) above, and the event to which the adjustment
relates does not occur, then any adjustment in the Conversion Price or
shares of Common Stock to be delivered upon surrender of the $3.75
Convertible Exchangeable Preferred Stock for conversion that were made in
accordance with such paragraphs shall be adjusted back to the Conversion
Price and the number of shares of Common Stock to be delivered upon
surrender of the $3.75 Convertible Exchangeable Preferred Stock for
conversion that were in effect immediately prior to the record date for
such event.
(e) Whenever the Conversion Price is adjusted as herein provided, the
Corporation shall promptly file in the custody of its Secretary or an Assistant
Secretary at its principal office and with the Transfer Agent an officers'
certificate setting forth the adjusted number of shares of Common Stock to be
delivered upon surrender of the $3.75 Convertible Exchangeable Preferred Stock
for conversion and
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<PAGE>
the Conversion Price after such adjustment, the method of calculating thereof
and setting forth a brief statement of the facts requiring such adjustment and
upon which such adjustments are based. Promptly after each such adjustment, the
Corporation shall cause a copy of such certificate to be mailed to the holder of
each share of $3.75 Convertible Exchangeable Preferred Stock at his or her last
address as shown on the stock books of the Corporation. Each such officers'
certificate shall be made available at all reasonable times for inspection by
each holder of $3.75 Convertible Exchangeable Preferred Stock.
(f) In any case in which paragraph (d) of this Section C7 provides that an
adjustment shall become effective immediately after a record date for an event
and the date fixed for conversion pursuant to Section C7 occurs after such
record date but before the occurrence of such event, the Corporation may defer
until the actual occurrence of such event (A) issuing to the holder of any share
of $3.75 Convertible Exchangeable Preferred Stock surrendered for conversion the
additional shares of Common Stock issuable upon such conversion by reason of the
adjustment required by such event over and above the Common Stock issuable upon
such conversion before giving effect to such adjustment and (B) paying to such
holder any amount in cash in lieu of any fraction pursuant to paragraph (c) of
this Section C7.
(g) The Corporation covenants that it will at all times reserve and keep
available, free from preemptive rights, out of the aggregate of its authorized
but unissued shares of Common Stock or its issued shares of Common Stock held in
its treasury, or both, sufficient shares of Common Stock to provide for
conversion of the $3.75 Convertible Exchangeable Preferred Stock from time to
time as such; $3.75 Convertible Exchangeable Preferred Stock is presented for
conversion.
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value, if any, of the shares of Common Stock
issuable upon conversion of the $3.75 Convertible Exchangeable Preferred Stock,
the Corporation will take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Corporation may validly and legally
issue shares of Common Stock at such adjusted Conversion Price which shares
shall be fully-paid and nonassessable and free from all taxes, liens and charges
with respect to the issue thereof.
Prior to the delivery of any securities which the Corporation shall be
obligated to deliver upon conversion of the $3.75 Convertible Exchangeable
Preferred Stock, the Corporation will endeavor in good faith and as
expeditiously as possible to comply with all federal and state laws and
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regulations thereunder requiring the registration of such securities with, or
any approval of or consent to the delivery thereof by, any governmental
authority.
(h) The Corporation will pay any and all documentary stamp or similar issue
or transfer taxes payable in respect of the issue or delivery of the shares of
$3.75 Convertible Exchangeable Preferred Stock (or any other securities issued
on account of the $3.75 Convertible Exchangeable Preferred Stock pursuant
hereto) or shares pursuant hereto; provided, however, that the Corporation shall
-------- -------
not be required to pay any tax which may be payable in respect of any transfer
involved in the issue or delivery of shares of $3.75 Convertible Exchangeable
Preferred Stock (or any other securities issued on account of the $3.75
Convertible Exchangeable Preferred Stock pursuant hereto) or shares of Common
Stock in a name other than the name in which the shares of $3.75 Convertible
Exchangeable Preferred Stock with respect to which such shares of Common Stock
are issued were registered and the Corporation shall not be required to make any
issue or delivery unless and until the person requesting such issue or delivery
has paid to the Corporation the amount of any such tax or has established, to
the reasonable satisfaction of the Corporation, that such tax has been paid or
is not required to be paid.
(i) If:
(i) the Corporation shall authorize the issuance to all holders of
the Common Stock of rights or warrants to subscribe for or purchase shares
of Common Stock or any other subscription rights or warrants; or
(ii) the Corporation shall authorize the distribution to all holders
of the Common Stock of evidences of its indebtedness or assets (other than
cash dividends payable out of retained earnings, distributions excluded
from the operation of subparagraph (d)(iv) of this Section C7, stock
dividends or securities issued pursuant to any stockholder rights plan or
any similar plan of the Corporation); or
(iii) there shall be any capital reorganization or reclassification of
the Common Stock (other than a subdivision or combination of the
outstanding Common Stock, an increase in the authorized capital stock of
the Corporation not involving the issuance of any shares thereof, or a
change in par value of the Common Stock), or any other consolidation or
merger to which the Corporation is a party (other than a consolidation or
merger with a subsidiary in which the
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<PAGE>
Corporation is the continuing corporation and that does not result in any
reclassification or change in the Common Stock outstanding) or a sale,
lease or transfer of all or substantially all of the assets of the
Corporation; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Corporation; or
(v) there shall be any other event that would result in an
adjustment pursuant to paragraph (d) of this Section C7 of the Conversion
Price or the number of shares of Common Stock that may be purchased upon
the conversion of the $3.75 Convertible Exchangeable Preferred Stock;
then the Corporation will cause to be filed with the Transfer Agent and to be
mailed to each holder of $3.75 Convertible Exchangeable Preferred Stock by first
class mail addressed to such holder at the address appearing in the stock
records of the Corporation, at least twenty (20) days (or ten (10) days in any
case specified in clauses (i) or (ii) above) before the applicable record or
effective date hereinafter specified, a notice stating (A) the date as of which
the holders of Common Stock of record entitled to receive any such rights,
warrants or distributions are to be determined or (B) the date on which any such
consolidation, merger, sale, lease, transfer, dissolution, liquidation or
winding-up is expected to become effective, and the date as of which it is
expected that holders of Common Stock of record will be entitled to exchange
their shares of Common Stock for securities or other property, if any,
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, lease, transfer, dissolution, liquidation or winding-up. Such notice
shall also state whether such transaction will result in any adjustment in the
Conversion Price and, if so, shall state what the adjusted Conversion Price will
be and when it will become effective. The failure to give such notice or any
defect therein shall not affect the legality or validity of any distribution
right, warrant, consolidation, merger, sale, lease, transfer, dissolution,
liquidation or winding-up or the vote upon any such action.
8. Redemption at Option of Holder Upon a Fundamental Change. (a) If a
--------------------------------------------------------
Fundamental Change (as defined in paragraph (c) of this Section C8) occurs, each
holder of $3.75 Convertible Exchangeable Preferred Stock shall have the right,
at the holder's option, to require the Corporation to repurchase all of such
holder's $3.75 Convertible Exchangeable Preferred Stock, or any portion thereof
that has an aggregate liquidation value that is a multiple of $50.00, on the
date (the "Repurchase Date")
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<PAGE>
selected by the Corporation that is not less than 10 nor more than 20 days after
the Final Surrender Date (as defined in paragraph (b) of this Section C8), a
price per share equal to $50.00, plus accrued and unpaid dividends to the
Repurchase Date. The Corporation may, at its option, pay all or any portion of
the repurchase price upon a Fundamental Change in shares of common stock of the
Corporation or any successor corporation. For purposes of calculating the
number of shares of Common Stock issuable upon such redemption, the value of any
Closing Prices of such common stock for the five Trading Dates ending on the
third Trading Date immediately preceding the Repurchase Date. Payment may not
be made in shares of common stock unless such shares (i) have been, or will be
registered on or prior to the Final Surrender Date (as defined in paragraph (b)
of this Section C8 under the Securities Act of 1933, as amended, or are freely
tradable pursuant to an exemption thereunder and (ii) are listed on a United
States national securities exchange or quoted on the Nasdaq National Market at
the time of payment.
(b) Within 30 days after the occurrence of a Fundamental Change, the
Corporation must mail to all holders of record of the $3.75 Convertible
Exchangeable Preferred Stock a Corporation Notice containing the information set
out in paragraph (b) of Section C5, of this Article, except that, for purposes
of this Section C8 only, instead of stating that such redemption is at the
option of the Corporation, the Corporation Notice shall describe the occurrence
of such Fundamental Change and of the repurchase right arising as a result
thereof. The Corporation must cause a copy of such notice to be published in a
newspaper of general circulation in the borough of Manhattan, the City of New
York. At least two Business Days prior to the Repurchase Date, the Corporation
must publish a similar notice stating whether and to what extent the repurchase
price will be paid in cash or shares of Common Stock. To exercise the
repurchase right, a holder of $3.75 Convertible Exchangeable Preferred Stock
must surrender, on or before the date which is, subject to any contrary
requirements of applicable law, 60 days after the date of mailing of the
Corporation Notice (the "Final Surrender Date"), the certificates representing
the $3.75 Convertible Exchangeable Preferred Stock with respect to which the
right is being exercised, duly endorsed for transfer to the Corporation,
together with a written notice of election.
(c) The term "Fundamental Change" shall mean any of the following:
(i) a "person" or "Group" (within the meaning of Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) becoming, in one transaction or a
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series of related transactions, the "beneficial owner" (as defined in Rule
13d-2 under the Exchange Act) of Voting Shares (as defined in this
paragraph (c)) of the Corporation entitled to exercise more than 60% of the
total voting power of all outstanding Voting Shares of the Corporation
(including any Voting Shares that are not then outstanding of which such
person or Group is deemed the beneficial owner); or
(ii) any consolidation of the Corporation with, or merger of the
Corporation into, any other person, any merger of another person into the
corporation, or any sale, lease or transfer of all or substantially all of
the assets of the Corporation to another person (other than a merger, (a)
which results in the holders of Common Stock of the Corporation immediately
prior to giving effect to such transaction owning shares of capital stock
of the surviving corporation in such transaction representing in excess of
40% of the total voting power of all shares of capital stock of such
surviving corporation entitled to vote generally in the election of
directors and (b) in which the shares of the surviving corporation held by
such holders are, or immediately upon issuance will be, listed on a
national securities exchange or quoted on the Nasdaq National Market and
are not subject to any right of repurchase by the issuer thereof or any
third party and are not otherwise subject to any encumbrance as a result of
such transaction, provided, that the surviving corporation amends its
charter or certificate of incorporation to include the $3.75 Convertible
Exchangeable Preferred Stock and its terms as set forth herein);
provided, however, that a Fundamental Change shall not occur if either (i) for
- -------- -------
any five Trading Dates during the 10 Trading Dates immediately preceding either
the public announcement by the Corporation of such transaction or the
consummation of such transaction, the Closing Price of the Common Stock is at
least equal to 105% of the Conversion Price in effect on such trading days or
(ii) at least 90% of the consideration (excluding cash payments for fractional
shares) in such transaction or transactions to the holders of Common Stock
consists of shares of common stock that are, or immediately upon issuance will
be, listed on a national securities exchange or quoted on the Nasdaq National
Market, and as a result of such transaction or transactions, the $3.75
Convertible Exchangeable Preferred Stock becomes convertible into such common
stock.
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<PAGE>
(d) An election by a holder of $3.75 Convertible Exchangeable Preferred
Stock to have the Corporation redeem shares of $3.75 Convertible Exchangeable
Preferred Stock pursuant to subsection C8(a) shall become irrevocable at the
close of business on the relevant redemption date.
(e) The Corporation agrees that it will not complete any Fundamental
Change described in subsection C8(c) unless proper provision has been made to
satisfy its obligations under this Section C8.
For purposes of this Section C8, "Voting Shares" is defined to mean all
outstanding shares of any class or classes (however designated) of capital stock
entitled to vote generally in the election of members of the Board of Directors.
9. Ranking. Any class or classes of stock of the Corporation shall be
-------
deemed to rank:
(i) prior to the $3.75 Convertible Exchangeable Preferred Stock, as
to dividends or as to distribution of assets upon liquidation, dissolution
or winding up, if the holders of such class shall be entitled to the
receipt of dividends or of amounts distributable upon liquidation,
dissolution or winding up, as the case may be, in preference or priority to
the holders of $3.75 Convertible Exchangeable Preferred Stock.
(ii) on a parity with the $3.75 Convertible Exchangeable Preferred
Stock, as to dividends or as to distribution as assets upon liquidation,
dissolution or winding up, whether or not the dividend rates, dividend
payment dates or redemption or liquidation prices per share thereof be
different from those of the $3.75 Convertible Exchangeable Preferred Stock,
if the holders of such class of stock and the $3.75 Convertible
Exchangeable Preferred Stock shall be entitled to the receipt of dividends
or of amounts distributable upon liquidation, dissolution or winding up, as
the case may be, in proportion to their respective amounts of accrued and
unpaid dividends per share or liquidation prices, without preference or
priority of one over the other; and
(iii) junior to the $3.75 Convertible Exchangeable Preferred Stock,
as to dividends or as to the distribution of assets upon liquidation,
dissolution or winding up, if such stock shall be Common Stock or if the
holder of $3.75 Convertible Exchangeable Preferred Stock shall be entitled
to
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<PAGE>
receipt of dividends or of amounts distributable upon liquidation,
dissolution or winding up, as the case may be, in preference or priority to
the holders of shares of such stock.
10. Voting. (a) Except as herein provided or as otherwise from time to
------
time required by law, holders of $3.75 Convertible Exchangeable Preferred Stock
shall have no voting rights. Whenever, at any times or times, dividends payable
on the shares of $3.75 Convertible Exchangeable Preferred Stock at the time
outstanding shall be cumulatively in arrears for such number of Dividend Periods
(whether or not consecutive) which shall in the aggregate contain not less than
540 days, the holders of $3.75 Convertible Exchangeable Preferred Stock shall
have the exclusive right, voting separately as a class with holders of shares of
any one or more other series of Preferred Stock ranking on a parity with the
$3.75 Convertible Exchangeable Preferred Stock as to dividends or on the
distribution of assets upon liquidation, dissolution or winding up and upon
which like voting rights have been conferred and are exercisable (the $3.75
Convertible Exchangeable Preferred Stock and any such other Preferred Stock,
collectively for purposes of this Section C10, the "Defaulted Preferred Stock"),
to elect two directors of the Corporation at the Corporation's next annual
meeting of stockholders and at each subsequent annual meeting of stockholders;
provided, however, that if such voting rights shall become vested more than 90
- -------- -------
days or less than 20 days before the date prescribed for the annual meeting of
stockholders, thereupon the holders of the shares of Defaulted Preferred Stock
shall be entitled to exercise their voting rights at a special meeting of the
holders of shares of Defaulted Preferred Stock as set forth in paragraphs (b)
and (c) of this Section C10. At elections for such directors, each holder of
$3.75 Convertible Exchangeable Preferred Stock shall be entitled to one vote for
each share held (the holders of shares of any other series of Defaulted
Preferred Stock ranking on such a parity being entitled to such number of votes,
if any, for each share of stock held as may be granted to them). Upon the
vesting of such right of the holders of Defaulted Preferred Stock, the maximum
authorized number of members of the Board of Directors shall automatically be
increased by two and the two vacancies so created shall be filled by vote of the
holders of outstanding Defaulted Preferred Stock as hereinafter set forth. The
right of holders of Defaulted Preferred Stock, voting separately as a class, to
elect members of the Board of Directors as aforesaid shall continue until such
time as all dividends accumulated on Defaulted Preferred Stock shall have been
paid or declared and funds set aside for payment in full, at which time such
right shall terminate, except as herein or by law expressly provided, subject to
revesting in the event
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of each and every subsequent default of the character above mentioned.
(b) Whenever such voting right shall have vested, such right may be
exercised initially either at a special meeting of the holders of shares of
Defaulted Preferred Stock called as hereinafter provided, or at any annual
meeting of stockholders held for the purpose of electing directors, and
thereafter at such meeting or by the written consent of such holders pursuant to
Section 228 of the General Corporation Law of the State of Delaware.
(c) At any time when such voting right shall have vested in the holders of
shares of Defaulted Preferred Stock entitled to vote thereon, and if such right
shall not already have been initially exercised, an officer of the Corporation
shall, upon the written request of 10% of the holders of record of shares of
such Defaulted Preferred Stock than outstanding, addressed to the Secretary of
the Corporation, call a special meeting of holders of shares of such Defaulted
Preferred Stock. Such meeting shall be held at the earliest practicable date
upon the notice required for annual meetings of stockholders at the place for
holding annual meetings of stockholders of the Corporation or, if none, at a
place designated by the Treasurer of the Corporation. If such meeting shall not
be called by the proper officers of the Corporation within 30 days after the
personal service of such written request upon the Treasurer of the Corporation,
or within 30 days after mailing the same within the United States, by registered
mail, addressed to the Secretary of the Corporation at its principal office
(such mailing to be evidenced by the registry receipt issued by the postal
authorities), then the holders of record of 10% of the shares of Defaulted
Preferred Stock then outstanding may designate in writing any person to call
such meeting at the expense of the Corporation, and such meeting may be called
by such person so designated upon the notice required for annual meetings of
stockholders and shall be held at the same place as is elsewhere provided in
this paragraph. Any holder of shares of Defaulted Preferred Stock than
outstanding that would be entitled to vote at such meeting shall have access to
the stock books of the Corporation for the purpose of causing a meeting of
stockholders to be called pursuant to the provisions of this paragraph.
Notwithstanding the provisions of this paragraph, however, no such special
meeting shall be called or held during a period within 45 days immediately
preceding the date fixed for the next annual meeting of stockholders.
(d) The directors elected pursuant to this Section shall serve until the
next annual meeting or until their respective successors shall be elected and
shall qualify; any director elected by the holders of Defaulted Preferred Stock
may be removed by, and shall not be removed otherwise
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than by, the vote of the holders of a majority of the outstanding shares of the
Defaulted Preferred Stock who were entitled to participate in such election of
directors, voting as a separate class, at a meeting called for such purpose or
by written consent as permitted by law, this Restated Certificate of
Incorporation and the By-laws of the Corporation. If the office of any director
elected by the holders of Defaulted Preferred Stock, voting as a class, becomes
vacant by reason of death, resignation, retirement, disqualification or removal
from office or otherwise, the remaining director elected by the holders of
Defaulted Preferred Stock, voting as a class, may choose a successor who shall
hold office for the unexpired term in respect of which such vacancy occurred.
Upon any termination of the right of the holders of Defaulted Preferred Stock to
vote for directors as herein provided, the term of office of all directors then
in office elected by the holders of Defaulted Preferred Stock, voting as a
class, shall terminate immediately. Whenever the terms of office of the
directors elected by the holders of Defaulted Preferred Stock, voting as a
class, shall so terminate and the special voting powers vested in the holders of
Defaulted Preferred Stock shall have expired, the number of directors shall be
such number as may be provided for in the By-laws irrespective of any increase
made pursuant to the provisions of this Section C10.
(e) So long as any shares of the $3.75 Convertible Exchangeable Preferred
Stock remain outstanding, the consent of the holders of at least a majority of
the shares of $3.75 Convertible Exchangeable Preferred Stock outstanding at the
time given in person or by proxy either in writing (as permitted by law, this
Restated Certificate of Incorporation and the By-laws of the Corporation) or at
any special or annual meeting, shall be necessary to permit, effect or validate
any one or more of the following:
(i) the authorization, creation or issuance, or any increase in the
authorized or issued amount, of any class or series of stock ranking prior
to the $3.75 Convertible Exchangeable Preferred Stock as to dividends or
the distribution of assets upon liquidation, dissolution or winding up;
(ii) the amendment, alteration or repeal, whether by merger,
consolidation or otherwise, of any of the provisions of this Restated
Certificate of Incorporation of the Corporation which would adversely
affect any right, preference, privilege or voting power of the $3.75
Convertible Exchangeable Preferred Stock or of the holders thereof;
provided, however, that any increase in the amount of authorized Preferred
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Stock or the
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creation and issuance of other series of Preferred Stock, or any increase
in the amount of authorized shares of such series or of any other series of
Preferred Stock, in each case ranking on a parity with or junior to the
$3.75 Convertible Exchangeable Preferred Stock with respect to the payment
of dividends and the distribution of assets upon liquidation, dissolution
or winding up, shall not be deemed to adversely affect such rights,
preferences or voting powers; or
(iii) the authorization of any reclassification of the $3.75
Convertible Exchangeable Preferred Stock.
11. Exchange. (a) The $3.75 Convertible Exchangeable Preferred Stock
--------
shall be exchangeable in whole, but not in part, at the option of the
Corporation on any dividend payment date beginning March 1, 1994, for the
Debentures. Holders of outstanding shares of $3.75 Convertible Exchangeable
Preferred Stock will be entitled to receive $50.00 principal amount of
Debentures in exchange for each share of $3.75 Convertible Exchangeable
Preferred Stock held by them at the time of exchange; provided that the
--------
Debentures will be issuable in denominations of $1,000 and integral multiples
thereof. If the exchange results in an amount of Debentures that is not an
integral multiple of $1,000, the amount in excess of the closest integral
multiple of $1,000 will be paid in cash by the Corporation.
(b) The Corporation will mail to each record holder of the $3.75
Convertible Exchangeable Preferred Stock written notice of its intention to
exchange the $3.75 Convertible Exchangeable Preferred Stock for the Debentures
no less than 30 nor more than 60 days prior to the date of the exchange (the
"Exchange Date"). The notice shall specify the effective date of the exchange
and the place where certificates for shares of $3.75 Convertible Exchangeable
Preferred Stock are to be surrendered for Debentures and shall state that
dividends on $3.75 Convertible Exchangeable Preferred Stock will cease to accrue
on the Exchange Date.
Prior to giving notice of intention to exchange, the Corporation shall have
executed and delivered to a bank or trust company selected by the Corporation to
act as Trustee with respect to the Debentures, which Trustee shall meet the
eligibility requirements of Section 310(a) of the Trust Indenture Act of 1939 as
then in effect, and which Trustee shall have executed and delivered to the
Corporation, an Indenture substantially in the form attached to the Placement
Agreement dated February 19, 1993, between the Corporation and Alex. Brown &
Sons Incorporated, Montgomery Securities and PaineWebber Incorporated with such
changes as may be required by law, stock exchange rule, Nasdaq National
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Market rule or customary usage (including, without limitation, such changes as
are requested by the Trustee with respect to its rights and obligations
thereunder, provided that any such changes do not adversely affect the rights of
holders of the Debentures thereunder).
(c) If the Corporation has caused the Debentures to be authenticated on or
prior to the Exchange Date and has complied with the other provisions of this
Section C11, then, notwithstanding that any certificate for shares of $3.75
Convertible Exchangeable Preferred Stock have not been surrendered for exchange,
on the Exchange Date dividends shall cease to accrue on the $3.75 Convertible
Exchangeable Preferred Stock and at the close of business on the Exchange Date
the holders of the $3.75 Convertible Exchangeable Preferred Stock shall cease to
be stockholders with respect to the $3.75 Convertible Exchangeable Preferred
Stock and shall have no interest in or other claims against the Corporation by
virtue thereof and shall have no voting or other rights with respect to the
$3.75 Convertible Exchangeable Preferred Stock, except the right to receive the
Debentures issuable upon such exchange and the right to accumulated and unpaid
dividends, without interest thereon, upon surrender (and endorsement, if
required by the Corporation) of their certificates, and the shares evidenced
thereby shall no longer be deemed outstanding for any purpose.
The Corporation will cause the Debentures to be authenticated on or before
the Exchange Date.
(d) Notwithstanding the foregoing, if notice or exchange has been given
pursuant to this Section C11 and any holder of shares of $3.75 Convertible
Exchangeable Preferred Stock shall, prior to the close of business on the
Exchange Date, give written notice to the Corporation pursuant to Section C7 of
this Article of the conversion of any or all of the shares held by the holder
(accompanied by a certificate or certificates for such shares, duly endorsed or
assigned to the Corporation), then the exchange shall not become effective as to
the shares to be converted and the conversion shall become effective as provided
in such Section C7.
(e) The Debentures will be delivered to the persons entitled thereto upon
surrender to the Corporation or its agent appointed for that purpose of the
certificates for the shares of $3.75 Convertible Exchangeable Preferred Stock
being exchanged therefor.
(f) Notwithstanding the other provisions of this Section C11, if on the
Exchange Date the Corporation has not paid full cumulative dividends on the
$3.75 Convertible Exchangeable Preferred Stock (or set aside a sum therefor)
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the Corporation may not exchange the $3.75 Convertible Exchangeable Preferred
Stock for the Debentures and any notice previously given pursuant to this
Section C11 shall be of no effect.
(g) Prior to the Exchange Date, the Corporation will comply with any
applicable securities and blue sky laws with respect to the exchange of the
$3.75 Convertible Exchangeable Preferred Stock for the Debentures.
12. Record Holders. The Corporation and the Transfer Agent may deem and
--------------
treat the record holder of any shares of $3.75 Convertible Exchangeable
Preferred Stock as the true and lawful owner thereof for all purposes, and
neither the Corporation nor the Transfer Agent shall be affected by any notice
to the contrary.
13. Notice. Except as may otherwise be provided for herein, all notices
------
referred to herein shall be in writing, and all notices hereunder shall be
deemed to have been given upon receipt, in the case of a notice of conversion
given to the Corporation as contemplated in Section C7(b) of this Article, or,
in all other cases, upon the earlier of receipt of such notice or three Business
Days after the mailing of such notice if sent by registered mail (unless first-
class mail shall be specifically permitted for such notice under the terms of
this Section C of this Article) with postage prepaid, addressed: if to the
Corporation, to its offices at 9360 Towne Centre Drive, San Diego, California
92121 (Attention: Investor Relations Department) or to an agent of the
Corporation designated as permitted by this Certificate, or, if to any holder
of the $3.75 Convertible Exchangeable Preferred Stock, to such holder at the
address of such holder of the $3.75 Convertible Exchangeable Preferred Stock as
listed in the stock record books of the Corporation (which may include the
records of any transfer agent for the $3.75 Convertible Exchangeable Preferred
Stock); or to such other address as the Corporation or holder, as the case may
be, shall have designated by notice similarly given.
D. Common Stock.
------------
1. Relative Rights of Preferred Stock and Common Stock. All preferences,
---------------------------------------------------
voting powers, relative, participating, optional or other special rights and
privileges, and qualifications, limitations or restrictions of the Common Stock
are expressly made subject and subordinate to those that may be fixed with
respect to any shares of the Preferred Stock.
2. Voting Rights. Except as otherwise required by law or this Restated
-------------
Certificate of Incorporation, each holder of Common Stock shall have one vote in
respect of
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each share of stock held by such holder of record on the books of the
Corporation for the election of directors and on all matters submitted to a vote
of stockholders of the Corporation.
3. Dividends. Subject to the preferential rights of the Preferred Stock,
---------
the holders of shares of Common Stock shall be entitled to receive, when and if
declared by the Board of Directors, out of the assets of the Corporation which
are by law available therefor, dividends payable either in cash, in property or
in shares of capital stock.
4. Dissolution, Liquidation or Winding Up. In the event of any
--------------------------------------
dissolution, liquidation or winding up of the affairs of the Corporation, after
distribution in full of the preferential amounts, if any, to be distributed to
the holders of shares of the Preferred Stock, holders of Common Stock shall be
entitled, unless otherwise provided by law or this Restated Certificate of
Incorporation, to receive all of the remaining assets of the Corporation of
whatever kind available for distribution to stockholders ratably in proportion
to the number of shares of Common Stock held by them respectively.
ARTICLE V
No action required or permitted to be taken at any annual or special
meeting of the stockholders may be taken without a meeting and the power of
stockholders to consent in writing, without a meeting, to the taking of any
action is specifically denied. Special meetings of the stockholders of the
Corporation may be called only by the Chairman of the Board or the President of
the Corporation or by a resolution adopted by the affirmative vote of a majority
of the Board of Directors.
ARTICLE VI
Except as otherwise provided for in Article IV, the Board of Directors
shall be divided into three classes, designated Class I, Class II and Class III,
as nearly equal in number as possible, and the term of office of Directors of
one class shall expire at each annual meeting of stockholders, and in all cases
as to each Director until his successor shall be elected and shall qualify or
until his earlier resignation, removal from office, death or incapacity. Except
as otherwise provided for in Article IV, additional directorships resulting from
an increase in number of Directors shall be apportioned among the classes as
equally as possible. The initial term of office of Directors of Class I shall
expire at the annual meeting of stockholders in 1993; that of Class II shall
expire at the
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<PAGE>
annual meeting in 1994; and that of Class III shall expire at the annual meeting
in 1995; and in all cases as to each Director until his successor shall be
elected and shall qualify or until his earlier resignation, removal from office,
death or incapacity. At each annual meeting of stockholders the number of
Directors equal to the number of Directors of the class whose term expires at
the time of such meeting (or, if less, the number of Directors properly
nominated and qualified for election) shall be elected to hold office until the
third succeeding annual meeting of stockholders after their election. A
Director or the entire Board of Directors may be removed, with or without cause,
by the holders of a majority of shares then entitled to vote at an election of
Directors, unless otherwise specified by law or this Restated Certificate of
Incorporation.
ARTICLE VII
Election of directors need not be by written ballot unless the By-laws so
provide.
ARTICLE VIII
Whenever a compromise or arrangement is proposed between the Corporation
and its creditors or any class of them and/or between the Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of the
Corporation or of any creditor or stockholder thereof or on the application of
any receivers appointed for the Corporation under the provisions of section 291
of Title 8 of the Delaware Code or on the application of trustees in dissolution
or of any receiver or receivers appointed for the Corporation under the
provisions of section 279 of Title 8 of the Delaware Code order a meeting of the
creditors or class of creditors, and/or the stockholders or class of
stockholders of the Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority, in number representing three-
fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
Corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall if sanctioned by the
court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on the
Corporation.
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<PAGE>
ARTICLE IX
A. No Personal Liability. A director of the Corpo ration shall not be
---------------------
personally liable to the Corporation or its stockholders for monetary damages
for breach of fidu ciary duty as a director, except for liability (1) for any
breach of the director's duty of loyalty to the Corporation and its
stockholders; (2) for acts or omissions not in good faith or which involve
intentional misconduct or knowing violations of law; (3) under section 174 of
the Delaware General Corporation law; or (4) for any transaction from which the
director derived an improper personal benefit.
B. Indemnification. Each person who is or is made a party or is
---------------
threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director or officer
of the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged action
in an official capacity as a director, officer, employee or agent or in any
other capacity while serving as a director, offi cer, employee or agent, shall
be indemnified and held harm less by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than said law permitted the Corporation to provide prior to such
amendment), against all expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid
in settlement) reasonably incurred or suffered by such person in connection
therewith and such indemnification shall continue as to a person who has ceased
to be a director, officer, employee or agent and shall incur to the benefit of
his or her heirs, executors and administrators; provided, however, that, except
as provided in the second paragraph hereof, the Corporation shall indemnify any
such person seeking indemnification in connection with a proceeding (or part
thereof) initiated by such person only if such pro ceeding (or part thereof) was
authorized by the Board of Directors of the Corporation. The right to
indemnification conferred in this section shall be a contract right and shall
include the right to be paid by the Corporation any expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that, if the Delaware General Corporation Law requires, the payment of
such expenses incurred by a director or officer
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<PAGE>
in his or her capacity as a director or officer (and not in any other capacity
in which service was or is rendered by such person while a director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of a proceeding, shall be made only upon delivery to
the Corporation of an undertaking, by or on behalf of such director or officer,
to repay all amounts so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under this section or
otherwise. The Corporation may, by action of its Board of Directors, provide
indemnification to employees and agents of the Corporation with the same scope
and effect as the foregoing indemnification of directors and officers.
If a claim under the first paragraph of this section is not paid in full by
the Corporation within thirty (30) days after a written claim has been received
by the Corporation, the claimant may at any time thereafter bring suit against
the Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Corporation) that the claimant has
not met the standards of conduct which make it permissible under the Delaware
General Corporation Law for the Corporation to indemnify the claimant for the
amount claimed, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, independent legal coun sel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determi nation by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.
The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
section shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of the Restated Certificate of
Incorporation, by-law, agreement, vote of stockholders or disinterested
directors or otherwise.
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<PAGE>
The Corporation may maintain insurance, at its expense, to protect itself
and any director, officer, employee or agent of the Corporation or another
corporation, partner ship, joint venture, trust or other enterprise against any
such expense, liability or loss, whether or not the Corporation would have the
power to indemnify such person against such expense, liability or loss under the
Delaware General Corporation Law.
ARTICLE X
The Board of Directors is expressly empowered to adopt, amend or repeal By-
Laws of the Corporation, provided, however, that any adoption, amendment or
repeal of By-Laws of the Corporation by the Board of Directors shall require the
approval of at least sixty-six and two-thirds percent (66 2/3%) of the total
number of authorized directors (whether or not there exist any vacancies in
previously authorized directorships at the time any resolution providing for
adoption, amendment or repeal is presented to the Board). The stockholders
shall also have power to adopt, amend or repeal By-Laws of the Corporation,
provided, however, that in addition to any vote of the holders of any class or
series of stock of this Corporation required by law or by this Restated
Certificate of Incorporation the affirmative vote of the holders of at least
sixty-six and two-thirds percent (66 2/3%) of the voting power of all of the
then outstanding shares of the stock of the Corporation entitled to vote
generally in the election of directors, voting together as a single class, shall
be required for such adoption, amendment or repeal by the stockholders of any
provisions of the By-Laws of the Corporation.
ARTICLE XI
Notwithstanding any other provision of this Restated Certificate of
Incorporation, the affirmative vote of the holders of at least sixty-six and
two-thirds percent (66 2/3%) of the voting power of all of the then outstand
ing shares of the stock of the Corporation entitled to vote generally in the
election of Directors, voting together as a
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<PAGE>
single class, shall be required to amend in any respect or repeal this Article
XI, or Articles V, VI, IX and X.
IN WITNESS WHEREOF, said Gensia, Inc. has caused its corporate seal to be
hereunto affixed and this certificate to be signed by its President and Chief
Executive Officer, David F. Hale, and its Secretary, Wesley N. Fach, this 26th
day of February, 1997.
By: /s/ David F. Hale
________________________________
David F. Hale, President and
Chief Executive Officer
Attest:
By: /s/ Wesley N. Fach
__________________________
Wesley N. Fach
Secretary
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<PAGE>
GENSIA SICOR INC.
CERTIFICATE OF DESIGNATION
OF SERIES A CONVERTIBLE
PREFERRED STOCK
Pursuant to Section 151(g) of the General Corporation Law of the State of
Delaware, Gensia Sicor Inc. (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
That pursuant to the authority conferred upon the Board of Directors of the
Corporation by paragraph (A) of Article IV of the Restated Certificate of
Incorporation of the Corporation (the "Certificate of Incorporation"), and in
accordance with the provisions of Section 151(g) of the General Corporation Law
of the State of Delaware, the Board of Directors of the Corporation on April 28,
1997, adopted the following resolution creating a series of Preferred Stock
designated as Series A Convertible Preferred Stock.
RESOLVED that, pursuant to the authority vested in the Board of Directors
of the Corporation in accordance with the General Corporation Law of the State
of Delaware and the provisions of the Certificate of Incorporation, a series of
the class of authorized Preferred Stock, par value $.01 per share, of the
Corporation is hereby created and that the designation and number of shares
thereof and the voting powers, preferences and relative, participating, optional
and other special rights of the shares of such series, and the qualifications,
limitations and restrictions thereof, are as follows:
Section 1. Designation and Number. (a) The shares of such series shall
----------------------
be designated "Series A Convertible Preferred Stock" (the "Series A Preferred
Stock"). The number of shares initially constituting the Series A Preferred
Stock shall be 200,000, which number may be decreased (but not increased) by the
Board of Directors without a vote of stockholders; provided, however, that such
-------- -------
number may not be decreased (i) prior to conversion or redemption of all of the
Corporation's 2.675% Subordinated Convertible Notes due May 1, 2004 (the
"Notes") and (ii) after conversion or redemption of all of the Notes, below the
number of then outstanding shares of Series A Preferred Stock.
(b) The Series A Preferred Stock shall, except as provided in Section 3(b)
hereof, with respect to dividend rights and rights on liquidation, dissolution
or winding up, (i) rank senior to the Common Stock, par value $.01 per share, of
the Corporation (the "Common Stock") and (ii) rank pari passu with or senior to
other series of convertible preferred stock of the Corporation (other than
preferred stock issuable upon exercise of the Rights as defined in Section 11)
designated by the Board of Directors of the Corporation prior to or on or after
the date hereof.
Section 2. Dividends and Distributions. (a) The holders of shares of
---------------------------
Series A Preferred Stock, in preference to the holders of shares of Common Stock
and of any shares of other capital stock of the Corporation ranking junior to
the Series A Preferred Stock as to
<PAGE>
payment of dividends, shall be entitled to receive, when, as and if declared by
the Board of Directors, out of the assets of the Corporation legally available
therefor, cumulative cash dividends at an annual rate equal to 2.675% from and
after the date of issuance of the Series A Preferred Stock (the "Issue Date"),
as long as the shares of Series A Preferred Stock remain outstanding. Dividends
shall be computed on the basis of the Stated Value, and shall accrue and be
payable quarterly, in arrears, on March 1, June 1, September 1 and December 1 in
each year or, if not a Business Day, on the next Business Day (each such date
being referred to herein as a "Quarterly Dividend Payment Date"), commencing on
the first Quarterly Dividend Payment Date following the Issue Date.
(b) Dividends payable pursuant to paragraph (a) of this Section 2 shall
begin to accrue and be cumulative from the Issue Date, whether or not earned or
declared. The amount of dividends so payable shall be determined on the basis
of twelve 30-day months and a 360-day year. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of Series A Preferred Stock in
an amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series A Preferred
Stock entitled to receive payment of a dividend declared thereon, which record
date shall be no more than sixty days prior to the date fixed for the payment
thereof.
(c) No dividend or distribution in cash, shares of stock or other property
on the Common Stock shall be declared or paid or set apart for payment unless,
at the same time, the same dividend or distribution is declared or paid or set
apart, as the case may be, on the Series A Preferred Stock payable on the same
date, at the rate per share of Series A Preferred Stock based upon the number of
shares of Common Stock into which each share of Series A Preferred Stock is
convertible (as adjusted pursuant to Section 8) on the record date for such
dividend or distribution on the Common Stock.
(d) In the event that (i) any dividend payable on the Series A Preferred
Stock pursuant to Section 2(a) shall not have been paid in full, (ii) the
Corporation shall have breached in any material respect any of the covenants
(provided the applicable covenant shall then be in effect pursuant to the terms
of the Purchase Agreement (as defined in Section 11)) set forth in the Purchase
Agreement, (iii) the Corporation shall have failed to redeem shares of Series A
Preferred Stock pursuant to Section 5(a), whether or not by reason of the
absence of legally available funds, or (iv), a Cross-Default or "Fundamental
Change" within the meaning of paragraph (c) of Section C8 of Article IV of the
Certificate of Incorporation shall occur, then, in any such case, the holders of
Series A Preferred Stock shall be entitled to annual dividends (in addition to
any dividend payable pursuant to Section 2(a)), at a rate of 11.75% per annum
from the applicable Quarterly Dividend Payment Date or date of such breach,
default or failure to redeem, as the case may be, through the date of payment of
such dividend, cure of such breach or default or redemption, as the case may be.
Section 3. Voting Rights. In addition to any voting rights provided by
-------------
law, the holders of shares of Series A Preferred Stock shall have the following
voting rights:
<PAGE>
(a) So long as any of the Series A Preferred Stock is outstanding, each
share of Series A Preferred Stock shall entitle the holder thereof to vote on
all matters submitted to a vote of the stockholders of the Corporation, voting
together as a single class with the holders of Common Stock. The holders of
each share of Series A Preferred Stock shall be entitled to vote with respect to
each share of Series A Preferred Stock held by each such holder a number of
votes equal to the number of votes which could be cast in such vote by a holder
of the number of shares of Common Stock into which such share of Series A
Preferred Stock is convertible (as adjusted pursuant to Section 8) on the record
date for such vote.
(b) The affirmative vote of the holders of at least 66 2/3% of the
outstanding shares of Series A Preferred Stock (the "66 2/3% Holders"), voting
together as a class, in person or by proxy, at a special or annual meeting of
stockholders called for the purpose, shall be necessary to (i) authorize,
increase the authorized number of shares of, or issue (including on conversion
or exchange of any convertible or exchangeable securities or by
reclassification) any shares of any class or classes or series within a class of
the Corporation's capital stock ranking prior to (either as to dividends or upon
voluntary or involuntary liquidation, dissolution or winding up) the Series A
Preferred Stock (other than the shares of participating preferred stock issuable
upon exercise of the Rights (as defined in Section 11)); (ii) increase the
authorized number of shares of, or issue (including on conversion or exchange of
any convertible or exchangeable securities or by reclassification) any shares
of, Series A Preferred Stock; or (iii) authorize, adopt or approve an amendment
to the Certificate of Incorporation or this Certificate of Designation which
would increase or decrease the par value of the shares of Series A Preferred
Stock, or alter or change the powers, preferences or special rights of the
Series A Preferred Stock so as to affect such shares of Series A Preferred Stock
adversely.
(c) (i) The foregoing rights of holders of shares of Series A Preferred
Stock to take any actions as provided in this Section 3 may be exercised at any
annual meeting of stockholders or at a special meeting of stockholders held for
such purpose as hereinafter provided or at any adjournment thereof.
So long as such right to vote continues, the Chairman of the Board of the
Corporation may call, and if the holders of Series A Preferred Stock are to vote
separately as a single class, upon the written request of holders of record of
20% of the outstanding shares of Series A Preferred Stock, addressed to the
Secretary of the Corporation, at the principal office of the Corporation, the
Chairman of the Board of the Corporation shall call, a special meeting of the
holders of shares of Series A Preferred Stock entitled to vote as provided
herein. The Corporation shall use its best efforts to hold such meeting within
60, but in any event not later than 90, days after delivery of such request to
the Secretary, at the place and upon the notice provided by law and in the By-
Laws of the Corporation for the holding of meetings of stockholders, provided
that the Corporation shall not be required to call such a special meeting if
such request is received fewer than 90 days before the date fixed for the next
ensuing annual meeting of stockholders of the Corporation, at which meeting such
newly created directorships shall be filled by the holders of the Series A
Preferred Stock.
<PAGE>
(ii) At each meeting of stockholders at which the holders of shares of
Series A Preferred Stock shall have the right, voting separately as a single
class, to take any action, the presence in person or by proxy of the holders of
record of one-third of the total number of shares of Series A Preferred Stock
then outstanding and entitled to vote on the matter shall be necessary and
sufficient to constitute a quorum. At any such meeting or at any adjournment
thereof, in the absence of a quorum of the holders of shares of Series A
Preferred Stock, a majority of the holders of such shares present in person or
by proxy shall have the power to adjourn the meeting as to the actions to be
taken by the holders of shares of Series A Preferred Stock from time to time and
place to place without notice other than announcement at the meeting until a
quorum shall be present.
For the taking of any action as provided in paragraph (b) of this Section 3
by the holders of shares of Series A Preferred Stock, each such holder shall
have one vote for each share of such stock standing in his name on the transfer
books of the Corporation as of any record date fixed for such purpose or, if no
such date be fixed, at the close of business on the Business Day (as defined in
Section 11) next preceding the day on which notice is given, or if notice is
waived, at the close of business on the Business Day next preceding the day on
which the meeting is held.
Section 4. Certain Restrictions. (a) Whenever (i) any dividend payable
--------------------
on the Series A Preferred Stock shall not have been paid in full, (ii) the
Corporation shall have breached in any material respect any of the covenants
(provided the applicable covenant shall then be in effect pursuant to the terms
of the Purchase Agreement) set forth in the Purchase Agreement, (iii) the
Corporation shall have failed to satisfy its obligation to redeem shares of
Series A Preferred Stock pursuant to Sections 5(a) or 5(b), whether or not by
reason of the absence of legally available funds therefor, or (iv), a Cross-
Default or Fundamental Change shall have occurred and any of such events set
forth in clauses (i) through (iv) above shall not have been remedied, the
Corporation shall not declare or pay dividends, or make any other distributions,
on any shares of Parity Stock or Junior Stock, except (1) dividends or
distributions payable in Junior Stock and (2) dividends or distributions paid
ratably on the Series A Preferred Stock and all Parity Stock on which dividends
are payable or in arrears, in proportion to the total amounts to which the
holders of all shares of the Series A Preferred Stock and such Parity Stock are
then entitled.
(b) Whenever dividends on the Series A Preferred Stock shall not have been
paid in full or any of the events set forth in clauses (ii) through (iv) of
Section 4(a) shall have occurred and shall not have been remedied, the
Corporation shall not: (A) redeem, purchase or otherwise acquire for
consideration any shares of Parity Stock or Junior Stock; provided, however,
-------- -------
that (1) the Corporation may at any time redeem, purchase or otherwise acquire
shares of Parity Stock in exchange for any shares of Junior Stock, (2) the
Corporation may accept shares of any Parity Stock or Junior Stock for conversion
into shares of Junior Stock, and (3) the Corporation may at any time redeem,
purchase or otherwise acquire shares of any Parity Stock pursuant to any
mandatory redemption, put, sinking fund or other similar obligation, pro rata
with the Series A Preferred Stock in proportion to the total amount then
required to be applied by it to redeem, repurchase or otherwise acquire shares
of Series A Preferred Stock and shares of such Parity Stock; or (B) redeem,
purchase or otherwise
<PAGE>
acquire for consideration any shares of Series A Preferred Stock; provided,
--------
however, that the Corporation (1) may accept shares of Series A Preferred Stock
- -------
surrendered for conversion into shares of capital stock of the Corporation
pursuant to Section 8, (2) may elect to redeem all outstanding shares of Series
A Preferred Stock pursuant to Section 5(a)(i) or (3) may redeem shares of Series
A Preferred Stock pro rata pursuant to Section 5(a)(i).
(c) Notwithstanding the foregoing, nothing herein shall prevent the
Corporation from redeeming the Rights (as defined in Section 11) at a price not
to exceed $.01 per Right.
(d) The Corporation shall not permit any Subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of capital stock of
the Corporation unless the Corporation could, pursuant to paragraph (b) of this
Section 4, purchase such shares at such time and in such manner.
Section 5. Redemption; Change of Control. (a) (i) On May 1, 2004, the
-----------------------------
Corporation shall redeem, out of funds legally available therefor, all
outstanding shares of Series A Preferred Stock, by paying therefor the Stated
Value per share, plus an amount equal to all accrued but unpaid dividends to
such date, in cash (the "Redemption Price").
(ii)The Company shall have the right, at its sole option and election
made in accordance with clause (c) below, to redeem the Series A Preferred
Stock, on or after the date 18 months after the Closing Date (as defined in the
Purchase Agreement) in whole but not in part, if the Current Market Price per
share of the Common Stock shall exceed the Conversion Price multiplied by 350%
for at least 90 consecutive Trading Days, at a redemption price, subject to the
final paragraphs of this clause (ii), equal to the Redemption Price.
In the event that at any time a Change of Control has occurred prior to a
redemption pursuant to this Section 5(a)(ii), the Redemption Price of each share
of Preferred Stock until the expiration of the 90-day period referred to in
clause (d) of this Section 5 shall equal the Change of Control Price (as defined
in clause (b) below).
(b) In the event that there occurs a Change of Control, any record holder
of Series A Preferred Stock, in accordance with the procedures set forth in
Clause (d) of this Section 5, may require the Company to redeem any or all of
the Series A Preferred Stock held by such holder for, at such holder's option,
an amount equal to (i) the greater of (A) 100% of the Stated Value of the
Preferred Stock and (B)(I) 135% of the Stated Value if such Change of Control
occurs on or before the first anniversary of the Closing Date and (II) 150% of
the Stated Value if such Change of Control occurs thereafter, less, in the case
of each of clause (B)(I) and (B)(II), the Warrant Value attributable to the
Series A Preferred Stock held by such holder, or (ii) the form and amount of
consideration that such holder would have received had such holder converted
such Series A Preferred Stock into Common Stock and had such holder received the
higher of (A) the same consideration per share of Common Stock received or
receivable on a per share basis by Rakepoll Finance N.V., any executive officer
of the Company or any of their respective Affiliates and Associates (the
"Affiliated Holders") and (B) the same consideration per share of Common Stock
received or receivable by non-Affiliated Holders in connection with such Change
of Control (the "Change of Control
<PAGE>
Price"), plus, in the case of each of clause (i) and clause (ii) all accrued
and unpaid dividends on the Series A Preferred Stock being redeemed to the date
of redemption, in cash. For purposes of this Section 5, the Warrant Value
attributable to a share of Preferred Stock shall be equal to the Warrant Value
on the date of the Change of Control multiplied by a fraction, the numerator of
which shall be the Stated Value of the Preferred Stock and the denominator of
which shall be $20,000,000.
(c) Notice of any redemption of shares of Series A Preferred Stock pursuant
to this Section 5(a) shall be mailed at least 30 but not more than 60 days prior
to the date fixed for redemption to each holder of shares of Series A Preferred
Stock to be redeemed, at such holder's address as it appears on the transfer
books of the Corporation. In order to facilitate the redemption of shares of
Series A Preferred Stock, the Board of Directors may fix a record date for the
determination of shares of Series A Preferred Stock to be redeemed.
(d) Promptly following a Change of Control (but in no event more than five
Business Days thereafter), the Company shall mail to each holder of Series A
Preferred Stock, at such holder's address as it appears on the transfer books of
the Company, notice of such Change of Control, which notice shall set forth each
holder's right to require the Company to redeem any or all Series A Preferred
Stock held by it. The Company shall thereafter during a period of 90 days from
the date of such notice (or the date the Company was required to give such
notice) redeem any Series A Preferred Stock, in whole or in part, at the option
of the holder, upon at least five days' written notice to the Company by such
holder specifying (i) the Stated Value of Series A Preferred Stock to be
redeemed and (ii) the redemption date.
(e) On the date of any redemption being made pursuant to this Section 5
which is specified in a notice given pursuant to paragraph (c) of this Section
5, the Corporation shall wire transfer to such holder the Redemption Price or
Change of Control Price, as the case may be, for the shares of Series A
Preferred Stock so redeemed.
Section 6. Reacquired Shares. Any shares of Series A Preferred Stock
-----------------
converted, redeemed, purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares of Series A Preferred Stock shall upon their
cancellation, and upon the filing of any document required by the General
Corporation Law of the State of Delaware, become authorized but unissued shares
of Preferred Stock, $.01 par value, of the Corporation and may be reissued as
part of another series of Preferred Stock, $.01 par value, of the Corporation,
subject to the conditions or restrictions on issuance set forth in Section 3(b)
or elsewhere herein.
Section 7. Liquidation, Dissolution or Winding Up. (a) If the Corporation
--------------------------------------
shall commence a voluntary case under the Federal bankruptcy laws or any other
applicable Federal or state bankruptcy, insolvency or similar law, or consent to
the entry of an order for relief in an involuntary case under such law or to the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of the Corporation, or of any
substantial part of its property, or make an assignment for the benefit of its
creditors, or admit in writing its inability to pay its debts generally as they
become due, or if a decree or order for relief in respect of the Corporation
shall be entered by a court having jurisdiction in
<PAGE>
the premises in an involuntary case under the Federal bankruptcy laws or any
other applicable Federal or state bankruptcy, insolvency or similar law, or
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator
(or other similar official) of the Corporation or of any substantial part of its
property, or ordering the winding up or liquidation of its affairs, and any such
decree or order shall be unstayed and in effect for a period of 60 consecutive
days and on account of any such event the Corporation shall liquidate, dissolve
or wind up, or if the Corporation shall otherwise liquidate, dissolve or wind
up, no distribution shall be made (i) to the holders of shares of Junior Stock
unless, prior thereto, the holders of shares of Series A Preferred Stock,
subject to Section 8, shall have received the Liquidation Preference (as defined
in Section 11) with respect to each share, or (ii) to the holders of shares of
Parity Stock unless the holders of shares of Series A Preferred Stock, subject
to Section 8, shall have received distributions made ratably to the holders of
the Series A Preferred Stock and the Parity Stock in proportion to the total
amounts to which the holders of all such shares of Series A Preferred Stock and
Parity Stock would be entitled upon such liquidation, dissolution or winding up.
(b) Neither the consolidation, merger or other business combination of the
Corporation with or into any other Person or Persons nor the sale of all or
substantially all the assets of the Corporation shall be deemed to be a
liquidation, dissolution or winding up of the Corporation for purposes of this
Section 7.
Section 8. Conversion. (a) Subject to the provisions for adjustment
----------
hereinafter set forth, each share of Series A Preferred Stock shall be
convertible at the option of the holder at any time after the Issue Date into
shares of Common Stock at the Conversion Ratio (as defined in Section 11).
(b) Any conversion by the holders of the Series A Preferred Stock shall be
in an aggregate amount with a Stated Value equal to at least $100,000 or all
shares of Series A Preferred Stock of such holder. Conversion of the Series A
Preferred Stock may be effected by any such holder upon the surrender to the
Corporation at the principal office of the Corporation in the State of
California or at the office of any agent or agents of the Corporation, as may be
designated by the Board of Directors of the Corporation (the "Transfer Agent"),
of the certificate(s) for such Series A Preferred Stock to be converted,
accompanied by a written notice stating that such holder elects to convert all
or a specified whole number of such shares in accordance with the provisions of
this Section 8 and specifying the name or names in which such holder wishes the
certificate or certificates for shares of Common Stock to be issued. In case
any holder's notice shall specify a name or names other than that of such
holder, such notice shall be accompanied by payment of all transfer taxes
payable upon the issuance of shares of Common Stock in such name or names.
Other than such taxes, the Corporation will pay any and all issue and other
taxes (other than taxes based on income) that may be payable in respect of any
issue or delivery of shares of Common Stock on conversion of Series A Preferred
Stock pursuant hereto. As promptly as practicable, and in any event within five
Business Days after the surrender of such certificate or certificates and the
receipt of such notice relating thereto and, if applicable, payment of all
transfer taxes (or the demonstration to the satisfaction of the Corporation that
such taxes have been paid), the Corporation shall deliver or cause to be
delivered (i) certificates representing
<PAGE>
the number of validly issued, fully paid and nonassessable full shares of Common
Stock, to which the holder of shares of Series A Preferred Stock being converted
shall be entitled and (ii) if less than the full number of shares of Series A
Preferred Stock evidenced by the surrendered certificate or certificates is
being converted, a new certificate or certificates, of like tenor, for the
number of shares evidenced by such surrendered certificate or certificates less
the number of shares being converted. Such conversion shall be deemed to have
been made at the close of business on the date of giving such notice so that the
rights of the holder thereof as to the shares being converted shall cease except
for the right to receive shares of Common Stock, in accordance herewith, and the
person entitled to receive the shares of Common Stock shall be treated for all
purposes as having become the record holder of such shares of Common Stock at
such time, so long as certificates for such holder's shares of Series A
Preferred Stock are delivered to the Corporation within two Business Days after
the giving of notice. In any other case of conversion at the holder's option,
the date of delivery of the certificates for the shares of Series A Preferred
Stock shall be deemed to be the date of conversion.
In case any shares of Series A Preferred Stock are to be redeemed pursuant
to Section 5, such right of conversion shall cease and terminate as to the
shares of Series A Preferred Stock to be redeemed at the close of business on
the Business Day preceding the date fixed for redemption unless the Corporation
shall default in the payment of the Redemption Price or the Change of Control
Price, as the case may be.
(c) The Conversion Ratio shall be subject to adjustment from time to time
in certain instances as hereinafter provided.
(d) In connection with the conversion of any shares of Series A Preferred
Stock into Common Stock, no fractions of shares of Common Stock shall be issued,
but in lieu thereof the Corporation shall pay a cash adjustment in respect of
such fractional interest in an amount equal to such fractional interest
multiplied by the Current Market Price per share of Common Stock on the Trading
Day on which such shares of Series A Preferred Stock are deemed to have been
converted. If more than one share of Series A Preferred Stock shall be
surrendered for conversion by the same holder at the same time, the number of
full shares of Common Stock issuable on conversion thereof shall be computed on
the basis of the total number of shares of Series A Preferred Stock so
surrendered. Promptly upon conversion, the Corporation shall pay to the holder
of shares of Series A Preferred Stock so converted out of funds legally
available, an amount equal to any accrued and unpaid dividends on the shares of
Series A Preferred Stock surrendered for conversion to the date of such
conversion, together with cash in lieu of any fractional interest of such
holder.
(e) (i) The Corporation shall at all times reserve and keep available for
issuance upon the conversion of the Series A Preferred Stock, free from any
preemptive rights such number of its authorized but unissued shares of Common
Stock as will from time to time be sufficient to permit the conversion of all
outstanding shares of Series A Preferred Stock into Common Stock, and shall take
all action required to increase the authorized number of shares of Common Stock
if necessary to permit the conversion of all outstanding shares of Series A
Preferred Stock.
<PAGE>
(ii) Upon conversion of shares of Series A Preferred Stock as contemplated
by this Section 8, the Corporation shall issue together with each such share of
Common Stock one Right (or other securities in lieu thereof), or any rights
issued to holders of Common Stock of the Corporation in addition thereto or in
replacement therefor, whether or not such rights shall be exercisable at such
time, but only if such rights are issued and outstanding and held by other
holders of Common Stock of the Corporation at such time and have not expired.
(f) The Conversion Ratio will be subject to adjustment from time to time as
follows:
(i) In case the Corporation shall at any time or from time to time after
the Issue Date (A) pay a dividend, or make a distribution, on the outstanding
shares of Common Stock in shares of Common Stock, (B) subdivide the outstanding
shares of Common Stock, (C) combine the outstanding shares of Common Stock into
a smaller number of shares or (D) issue by reclassification of the shares of
Common Stock any shares of capital stock of the Corporation, then, and in each
such case, the Conversion Ratio in effect immediately prior to such event or the
record date therefor, whichever is earlier, shall be adjusted so that the holder
of any shares of Series A Preferred Stock thereafter surrendered for conversion
into Common Stock shall be entitled to receive the number of shares of Common
Stock or other securities of the Corporation which such holder would have owned
or have been entitled to receive after the happening of any of the events
described above, had such shares of Series A Preferred Stock been surrendered
for conversion immediately prior to the happening of such event or the record
date therefor, whichever is earlier. An adjustment made pursuant to this clause
(i) shall become effective (x) in the case of any such dividend or distribution,
immediately after the close of business on the record date for the determination
of holders of shares of Common Stock entitled to receive such dividend or
distribution, or (y) in the case of such subdivision, reclassification or
combination, at the close of business on the day upon which such corporate
action becomes effective. No adjustment shall be made pursuant to this clause
(i) in connection with any transaction to which paragraph (g) applies.
(ii) In case the Corporation shall issue shares of Common Stock (or
rights, warrants or other securities convertible into or exchangeable for shares
of Common Stock) after the Issue Date at a price per share (or having a
conversion price per share) less than the Conversion Price as of the date of
issuance of such shares (or, in the case of convertible or exchangeable
securities, less than the Conversion Price as of the date of issuance of the
rights, warrants or other securities in respect of which shares of Common Stock
were issued), then, and in each such case, the Conversion Ratio and the
Conversion Price shall be adjusted so that the holder of each share of Series A
Preferred Stock shall be entitled to receive, upon the conversion thereof into
Common Stock, the number of shares of Common Stock determined by multiplying (A)
the Conversion Ratio in effect on the day immediately prior to such date by (B)
a fraction, the numerator of which shall be the sum of (1) the number of shares
of Common Stock outstanding on such date and (2) the number of additional shares
of Common Stock issued (or into which the convertible securities may convert),
and the denominator of which shall be the sum of (x) the number of shares of
Common Stock outstanding on such date and (y) the number of shares of Common
Stock purchasable at the then applicable Conversion Price per share with the
aggregate consideration receivable by the
<PAGE>
Corporation for the total number of shares of Common Stock so issued (or into
which the rights, warrants or other convertible securities may convert). An
adjustment made pursuant to this clause (ii) shall be made on the next Business
Day following the date on which any such issuance is made and shall be effective
retroactively to the close of business on the date of such issuance. For
purposes of this clause (ii), the aggregate consideration receivable by the
Corporation in connection with the issuance of shares of Common Stock or of
rights, warrants or other securities convertible into shares of Common Stock
shall be deemed to be equal to the sum of the aggregate offering price (before
deduction of underwriting discounts or commissions and expenses payable to third
parties) of all such Common Stock, rights, warrants and convertible securities
plus the minimum aggregate amount, if any, payable upon exercise or conversion
of any such rights, warrants and convertible securities into shares of Common
Stock. If Common Stock is sold as a unit with other securities, the aggregate
consideration received for such Common Stock shall be deemed to be net of the
Fair Market Value of such other securities. If Common Stock is issued in
consideration of the release of a claim brought by a shareholder against the
Corporation, whether before or after the Closing Date (as defined in the
Purchase Agreement), on the basis of events or circumstances occurring prior to
the Closing Date ("Pre-Closing Shareholder Claims"), the consideration for such
Common Stock shall be deemed to be $0. The issuance or reissuance of any shares
of Common Stock (whether treasury shares or newly issued shares) pursuant to (A)
a dividend or distribution on, or subdivision, combination or reclassification
of, the outstanding shares of Common Stock requiring an adjustment in the
conversion ratio pursuant to clause (i) of this paragraph (f), (B) shares issued
as Stock Milestone Payments or Combination Milestone Payments pursuant to
Section 5.06 of the Development and Marketing Agreement, dated June 13, 1991,
with Gensia Clinical Partners as in effect on the date hereof or pursuant to any
acquisition of BIOFA A.B. on terms approved by the full Board of Directors, (C)
any restricted stock or stock option plan or program of the Corporation
involving the grant of options or rights at below the applicable Conversion
Price (but the Company will in no event issue options or rights exercisable at
less than 85% of the Current Market Price at the date of grant) so long as the
granting of such options or rights has been approved by the full Board of
Directors or a committee of the Board of Directors on which the director
designated by the Purchaser is a member or (D) any option, warrant, right, or
convertible security outstanding as of May 1, 1997 (other than the Rights or
similar securities) shall not be deemed to constitute an issuance of Common
Stock or convertible securities by the Corporation to which this clause (ii)
applies. Upon the expiration unexercised of any options, warrants or rights to
convert any convertible securities for which an adjustment has been made
pursuant to this clause (ii), the adjustments shall forthwith be reversed to
effect such rate of conversion as would have been in effect at the time of such
expiration or termination had such options, warrants or rights or convertible
securities, to the extent outstanding immediately prior to such expiration or
termination, never been issued. Nothing herein shall limit the right of any
holder to an anti-dilution adjustment in the event that there shall occur a
"flip-in" or "flip-over" event under the Rights Agreement or any similar plan or
agreement of the Corporation. No adjustment shall be made pursuant to this
clause (ii) in connection with any transaction to which paragraph (g) applies.
(iii) In case the Corporation shall at any time or from time to time after
the Issue Date declare, order, pay or make a dividend or other distribution
(including, without
<PAGE>
limitation, any distribution of stock or other securities or property or rights
or warrants to subscribe for securities of the Corporation or any of its
Subsidiaries by way of dividend, including any distribution of shares or assets
of Metabasis Therapeutics, Inc. ("Metabasis") or Gensia Automedics, Inc.
("Automedics") and any payment or granting of anything of value in consideration
of the release of Pre-Closing Shareholder Claims, on its Common Stock, other
than dividends or distributions of shares of Common Stock which are referred to
in clause (i) of this paragraph (f), then, and in each such case, the Conversion
Ratio and the Conversion Price shall be adjusted so that the holder of each
share of Series A Preferred Stock shall be entitled to receive, upon the
conversion thereof, the number of shares of Common Stock determined by
multiplying (1) the applicable Conversion Ratio on the day immediately prior to
the record date fixed for the determination of stockholders entitled to receive
such dividend or distribution by (2) a fraction, the numerator of which shall be
the Current Market Price of the Common Stock for the period of 20 Trading Days
preceding such record date, and the denominator of which shall be such Current
Market Price of the Common Stock less the Fair Market Value (as defined in
Section 11) per share of Common Stock (as determined in good faith by the Board
of Directors and supported by an opinion from an investment banking firm of
recognized national standing acceptable to holders of a majority of the Series A
Preferred Stock) of such dividend or distribution. No adjustment shall be made
pursuant to this clause (iii) in connection with any transaction to which
paragraph (g) applies.
(iv) For purposes of this paragraph (f), the number of shares of Common
Stock at any time outstanding shall not include any shares of Common Stock then
owned or held by or for the account of the Corporation as well as any settlement
of Shareholder Litigation.
(v) The term "dividend," as used in this paragraph (f), shall mean a
dividend or other distribution upon stock of the Corporation including in
consideration of the release of claims by a shareholder against the Corporation.
(vi) Anything in this paragraph (f) to the contrary notwithstanding, the
Corporation shall not be required to give effect to any adjustment in the
Conversion Ratio (x) if such adjustment was previously taken into account in
determining the Conversion Ratio on the Issue Date, (y) if, in connection with
any event which would otherwise require an adjustment pursuant to this paragraph
(f), the holders of Series A Preferred Stock have received the dividend or
distribution to which such holders are entitled under Section 2 hereof or (z)
unless and until the net effect of one or more adjustments (each of which shall
be carried forward), determined as above provided, shall have resulted in a
change of the Conversion Ratio by at least one one-hundredth of one share of
Common Stock, and when the cumulative net effect of more than one adjustment so
determined shall be to change the Conversion Ratio by at least one one-hundredth
of one share of Common Stock, such change in Conversion Ratio shall thereupon be
given effect.
(vii) The certificate of any firm of independent public accountants of
recognized national standing selected by the Board of Directors of the
Corporation (which may be the firm of independent public accountants regularly
employed by the Corporation) shall be presumptively correct for any computation
made under this paragraph (f).
<PAGE>
(viii) If the Corporation shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive a dividend or other
distribution, and shall thereafter and before the distribution to stockholders
thereof legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the number of shares of Common
Stock issuable upon exercise of the right of conversion granted by this
paragraph (f) or in the Conversion Ratio or Conversion Price then in effect
shall be required by reason of the taking of such record.
(ix) If any event occurs as to which the provisions of this Section 8(f)
are not strictly applicable or if strictly applicable would not fairly protect
the rights of the holders of the Series A Preferred Stock in accordance with the
essential intent and principles of such provisions, the Board of Directors shall
make an adjustment in the application of such provisions, in accordance with
such essential intent and principles, so as to protect such rights of the
holders of the Series A Preferred Stock.
(x) In the case of any event which requires an adjustment to the
Conversion Ratio pursuant to this Section 8(f), the Conversion Price shall also
be appropriately adjusted to reflect such event.
(g) In the case of any consolidation or merger of the Corporation with or
into another corporation, or in case of any sale or conveyance to another
corporation of all or substantially all of the assets or property of the
Corporation (each of the foregoing being referred to as a "Transaction")
occurring in each case at any time, each share of Series A Preferred Stock then
outstanding shall thereafter be convertible into, in lieu of the Common Stock
issuable upon such conversion prior to consummation of such Transaction, the
kind and amount of shares of stock and other securities and property receivable
(including cash) upon the consummation of such Transaction by a holder of that
number of shares of Common Stock into which one share of Series A Preferred
Stock was convertible immediately prior to such Transaction. In case securities
or property other than Common Stock shall be issuable or deliverable upon
conversion as aforesaid, then all references in this Section 8 shall be deemed
to apply, so far as appropriate and nearly as may be, to such other securities
or property.
(h) In case at any time or from time to time the Corporation shall pay any
stock dividend or make any other non-cash distribution to the holders of its
Common Stock, or shall offer for subscription pro rata to the holders of its
Common Stock any additional shares of stock of any class or any other right, or
there shall be any capital reorganization or reclassification of the Common
Stock of the Corporation or consolidation or merger of the Corporation with or
into another corporation, or any sale or conveyance to another corporation of
the property of the Corporation as an entirety or substantially as an entirety,
or there shall be a voluntary or involuntary dissolution, liquidation or winding
up of the Corporation, then, in any one or more of said cases the Corporation
shall give at least 20 days' prior written notice (the time of mailing of such
notice shall be deemed to be the time of giving thereof) to the registered
holders of the Series A Preferred Stock at the addresses of each as shown on the
books of the Corporation maintained by the Transfer Agent thereof of the date on
which (i) a record shall be taken for such stock dividend, distribution or
<PAGE>
subscription rights or (ii) such reorganization, reclassification,
consolidation, merger, sale or conveyance, dissolution, liquidation or winding
up shall take place, as the case may be, provided that in the case of any
Transaction to which paragraph (g) applies the Corporation shall give at least
30 days' prior written notice as aforesaid. Such notice shall also specify the
date as of which the holders of the Common Stock of record shall participate in
said dividend, distribution or subscription rights or shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale or conveyance
or participate in such dissolution, liquidation or winding up, as the case may
be. Failure to give such notice shall not invalidate any action so taken.
Section 9. Reports as to Adjustments. Upon any adjustment of the
-------------------------
Conversion Ratio then in effect and any increase or decrease in the number of
shares of Common Stock issuable upon the operation of the conversion provisions
set forth in Section 8, then, and in each such case, the Corporation shall
promptly deliver to the Transfer Agent of the Series A Preferred Stock and
Common Stock, a certificate signed by the President or a Vice President and by
the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary of the Corporation setting forth in reasonable detail the event
requiring the adjustment and the method by which such adjustment was calculated
and specifying the Conversion Ratio then in effect following such adjustment and
the increased or decreased number of shares issuable upon the conversion granted
by Section 8, and shall set forth in reasonable detail the method of calculation
of each and a brief statement of the facts requiring such adjustment. Where
appropriate, such notice to holders of the Series A Preferred Stock may be given
in advance and included as part of the notice required under the provisions of
Section 8(h).
Section 10. Certain Covenants. Any registered holder of Series A
-----------------
Preferred Stock may proceed to protect and enforce its rights and the rights of
such holders by any available remedy by proceeding at law or in equity to
protect and enforce any such rights, whether for the specific enforcement of any
provision in this Certificate of Designation or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.
Section 11. Definitions. For the purpose of this Certificate of
-----------
Designation of Series A Convertible Preferred Stock, the following terms shall
have the meanings indicated:
"Adjustment Period" shall mean the period of five consecutive trading
-----------------
days preceding the date as of which the Fair Market Value of a security is
to be determined.
"Affiliate" and "Associate" shall have the respective meanings
--------- ---------
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
under the Exchange Act.
"Applicable Tax Rate" shall have the meaning set forth in Section
-------------------
6.18(a) of the Purchase Agreement.
"Beneficially Own" or "Beneficial Owners" with respect to any
---------------- -----------------
securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule
<PAGE>
13d-3 under the Exchange Act), including pursuant to any agreement,
arrangement or understanding, whether or not in writing.
"Board of Directors" shall mean the board of directors of the
------------------
Corporation.
"Business Day" shall mean any day other than a Saturday, Sunday, or a
------------
day on which banking institutions in the State of New York are authorized
or obligated by law or executive order to close.
"Capitalized Lease" shall mean, with respect to any person, any lease
-----------------
or any other agreement for the use of property which, in accordance with
generally accepted accounting principals, should be capitalized on the
lessee's or user's balance sheet.
"Capitalized Lease Obligation" of any person shall mean and include,
----------------------------
as of any date as of which the amount thereof is to be determined, the
amount of the liability capitalized or disclosed (or which should be
disclosed) in a balance sheet of such person in respect of a Capitalized
Lease of such person.
"Change of Control" shall mean:
-----------------
(a) A "person" or "Group" (within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act becoming, in the transaction or series of
related transactions, the Beneficial Owner of Voting Securities entitled to
exercise more than 60% of the total voting power of all outstanding Voting
Securities of the Company (including any Voting Securities that are not
then outstanding of which such person or Group is deemed the Beneficial
Owner); or
(b) liquidation of the Company; or
(c) a reorganization, merger or consolidation, in each case, with
respect to which (i) all or substantially all the individuals and entities
who were the respective Beneficial Owners of the Voting Securities of the
Company immediately prior to such reorganization, merger or consolidation
do not, following such reorganization, merger or consolidation Beneficially
Own, directly or indirectly, more than 50.1% of the combined voting power
of the then outstanding Voting Securities entitled to vote generally in the
election of directors of the corporation resulting from such
reorganization, merger or consolidation, or (ii) the shares of the
surviving corporation held by such holders are not, and immediately upon
issuance will not be, listed on a national securities exchange or quoted on
the NASDAQ Stock Market, or (iii) the shares of the Surviving Corporation
held by such holders are or will be subject to any right of repurchase by
the issuer thereof or any third-party or are otherwise subject to any
encumbrance as a result of such transaction; or
(d) the sale or other disposition of assets or property of the
Company in one transaction or series of related transactions having a book
value greater than 50% of
<PAGE>
the book value of the Company's total assets immediately preceding such
transaction; or
(e) a "Fundamental Change" within the meaning of paragraph (c) of
Section C8 of Article IV of the Company's Restated Certificate of
Incorporation.
"Commission" shall mean the Securities and Exchange Commission, and
----------
any successor agency.
"Contingent Warrant" shall have the meaning set forth in the Warrant
------------------
Agreement, dated as of the Closing Date (as defined in the Purchase
Agreement), between the Corporation and Health Care Capital Partners, L.P.
(the "Warrant").
"Conversion Price" shall mean the quotient obtained by dividing the
----------------
Stated Value by the Conversion Ratio in effect at the time.
"Conversion Ratio" shall mean the Conversion Ratio (as set forth in
----------------
the Purchase Agreement) in effect on the Issue Date for conversion into
Common Stock of the Notes, subject to adjustment as provided in Section
8(f).
"Cross-Default" shall mean (i) the Company or any Subsidiary (x) fails
-------------
to make any payment in respect of any Indebtedness, having an aggregate
principal amount (including undrawn committed or available amounts and
including amounts owing to all creditors under any combined or syndicated
credit arrangement) of more than $3,000,000 when due (whether by scheduled
maturity, required prepayment, acceleration, demand, or otherwise) and such
failure continues after the applicable grace or notice period, if any,
specified in the relevant document on the date of such failure; or (y)
fails to perform or observe any other condition or covenant, or any other
event shall occur or condition exist, under any agreement or instrument
relating to any such Indebtedness, and such failure continues after the
applicable grace or notice period, if any, specified in the relevant
document on the date of such failure if the effect of such failure, event
or condition is to cause, or to permit the holder or holders of such
Indebtedness or beneficiary or beneficiaries of such Indebtedness (or a
trustee or agent on behalf of such holder or holders or beneficiary or
beneficiaries) to cause such Indebtedness to be declared to be due and
payable prior to its stated maturity, or collateral in respect thereof to
be demanded; or (ii) there occurs under any Swap Contract an early
Termination Date (as defined in and provided for in any such Swap Contract
that is in the form of an ISDA Master Agreement) or equivalent termination
event (as provided in any other Swap Contract) resulting from (1) any event
of default under such Swap Contract as to which the Company or any
Subsidiary is the Defaulting Party (as defined in such Swap Contract) or
(2) any Termination Event (as so defined in such Swap Contract) as to which
the Company or any Subsidiary is an Affected Party (as so defined in such
Swap Contract), and, in either event, the Swap Termination Value owned by
the Company or such Subsidiary as a result thereof is greater than
$3,000,000.
<PAGE>
"Current Market Price," when used with reference to shares of Common
--------------------
Stock or other securities on any date, shall mean the closing price per
share of Common Stock or such other securities on such date and, when used
with reference to shares of Common Stock or other securities for any period
shall mean the average of the daily closing prices per share of Common
Stock or such other securities for such period. The closing price for each
day shall be the last quoted bid price in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System or such other system then in use, or, if on any such date
the Common Stock or such other securities are not quoted by any such
organization, the closing bid price as furnished by a professional market
maker making a market in the Common Stock or such other securities selected
by the Board of Directors of the Corporation. If the Common Stock is
listed or admitted to trading on a national securities exchange, the
closing price shall be the closing bid price, regular way, as reported in
the principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock Exchange or,
if the Common Stock or such other securities are not listed or admitted to
trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed
on the principal national securities exchange on which the Common Stock or
such other securities are listed or admitted to trading. If the Common
Stock or such other securities are not publicly held or so listed or
publicly traded, "Current Market Price" shall mean the Fair Market Value
per share of Common Stock or of such other securities as determined in good
faith by the Board of Directors of the Corporation based on an opinion of
an independent investment banking firm acceptable to holders of a majority
of the Series A Preferred Stock, which opinion may be based on such
assumptions as such firm shall deem to be necessary and appropriate.
"Current Warrant Price" shall have the meaning set forth in the
---------------------
Warrant.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended, or any successor Federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Securities Exchange Act of 1934,
as amended, shall include reference to the comparable section, if any, of
any such successor Federal statute.
"Fair Market Value" shall mean, as to shares of Common Stock or any
-----------------
other class of capital stock or securities of the Corporation or any other
issuer which are publicly traded, the average of the Current Market Prices
of such shares of securities for each day of the Adjustment Period. The
"Fair Market Value" of any security which is not publicly traded or of any
other property shall mean the fair value thereof as determined by an
independent investment banking or appraisal firm experienced in the
valuation of such securities or property selected in good faith by the
Board of Directors of the Corporation or a committee thereof, or, if no
such investment banking or appraisal firm is in the good faith judgment of
the Board of Directors or such committee available to make such
determination, as determined in good faith by the Board of Directors of the
Corporation or such committee.
<PAGE>
"Guarantee" by any Person shall mean all obligations (other than
---------
endorsements in the ordinary course of business of negotiable instruments
for deposit or collection) of any Person guaranteeing, or in effect
guaranteeing, any Indebtedness, dividend or other obligation of any other
Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, all obligations incurred through
an agreement, contingent or otherwise, by such Person: (i) to purchase such
Indebtedness or obligation or any property or assets constituting security
therefor, (ii) to advance or supply funds (x) for the purchase or payment
of such Indebtedness or obligation, (y) to maintain working capital or
other balance sheet condition or otherwise to advance or make available
funds for the purchase or payment of such Indebtedness or obligation, (iii)
to lease property or to purchase securities or other property or services
primarily for the purpose of assuring the owner of such Indebtedness or
obligation of the ability of the primary obligor to make payment of such
Indebtedness or obligation, or (iv) otherwise to assure the owner of the
Indebtedness or obligation of the primary obligor against loss in respect
thereof. For the purposes of any computations made under this Agreement, a
Guarantee in respect of any Indebtedness for borrowed money shall be deemed
to be Indebtedness equal to the principal amount of the Indebtedness for
borrowed money which has been guaranteed, and a Guarantee in respect of any
other obligation or liability or any dividend shall be deemed to be
Indebtedness equal to the maximum aggregate amount of such obligation,
liability or dividend.
"Indebtedness" shall mean, with respect to any person, (i) all
------------
obligations of such person for borrowed money, or with respect to deposits
or advances of any kind, (ii) all obligations of such person evidenced by
bonds, debentures, notes or similar instruments, (iii) all obligations of
such person under conditional sale or other title retention agreements
relating to property purchased by such person, (iv) all obligations of such
person issued or assumed as the deferred purchase price of property or
services (other than accounts payable to suppliers and similar accrued
liabilities incurred in the ordinary course of business and paid in a
manner consistent with industry practice), (v) all Indebtedness of others
secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any lien or security
interest on property owned or acquired by such person whether or not the
obligations secured thereby have been assumed, (vi) all Capitalized Lease
Obligations of such person, (vii) all Guarantees of such person, (viii) all
obligations (including but not limited to reimbursement obligations)
relating to the issuance of letters of credit for the account of such
person, (ix) all obligations arising out of foreign exchange contracts, and
(x) all Swap Contracts.
"Issue Date" means the date of issuance of the shares of Series A
----------
Preferred Stock upon conversion of the Notes.
"Junior Stock" shall mean any capital stock of the Corporation ranking
------------
junior (either as to dividends or upon liquidation, dissolution or winding
up) to the Series A Preferred Stock.
<PAGE>
"Liquidation Preference" with respect to a share of Series A Preferred
----------------------
Stock shall mean $100.00 per share, plus an amount equal to all accrued but
unpaid dividends.
"Parity Stock" shall mean any capital stock of the Corporation ranking
------------
on a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Preferred Stock.
"Person" shall mean any individual, firm, corporation, partnership or
------
other entity, and shall include any successor (by merger or otherwise) of
such entity.
"Preferred Stock" shall mean the shares of Preferred Stock, par value
---------------
$.01 per share, of the Corporation.
"Purchase Agreement" shall mean the Securities Purchase Agreement,
------------------
dated as of May 1, 1997, between the Corporation and the Purchaser named
therein.
"Rights" shall mean the rights to purchase Preferred Stock issued
------
pursuant to the Stockholder Rights Agreement (the "Rights Agreement") dated
as of March 16, 1992, between the Corporation and ChaseMellon Shareholder
Services, L.L.C., as successor in interest to First Interstate Bank.
"Stated Value" with respect to the Series A Preferred Stock shall
------------
mean $100.00 per share.
"Subsidiary" of any Person means any corporation or other entity of
----------
which a majority of the voting power of the voting equity securities or
equity interest is owned, directly or indirectly, by such Person.
"Swap Contract" shall mean any agreement whether or not in writing,
-------------
relating to any transaction that is a rate swap, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap
or option, bond, note or bill option, interest rate option, forward foreign
exchange transaction, cap, collar or floor transaction, currency swap,
cross-currency rate swap, swaption, currency option or any other similar
transaction (including any option to enter into any of the foregoing) or
any combination of the foregoing, and, unless the context otherwise clearly
requires, any master agreement relating to or governing any or all of the
foregoing.
"Swap Termination Value" shall mean, in respect of any one or more
----------------------
Swap Contracts, after taking into account the effect of any legally
enforceable netting agreement relating to such Swap Contracts, (a) for any
date on or after the date such Swap Contracts have been closed out and
termination value(s) determined in accordance therewith, such termination
value(s), and (b) for any date prior to the date referenced in subclause
(a) the amount(s) determined as the mark-to-market value(s) for such Swap
Contracts, as determined by the Company based upon one or more mid-
<PAGE>
market or other readily available quotations provided by any recognized
dealer in such Swap Contracts.
"Trading Day" means a Business Day or, if the Common Stock is listed
-----------
or admitted to trading on any national securities exchange, a day on which
such exchange is open for the transaction of business.
"Voting Securities" shall mean at any time shares of any class of
-----------------
capital stock of the Company which are then entitled to vote generally in
the election of directors.
"Warrant Value" shall mean at any time an amount (not less than $0)
-------------
equal to the product of (i) the number of shares of Common Stock previously
issued upon exercise of the Contingent Warrants multiplied by (ii) an
amount equal to the difference between (A) the weighted average of the
Current Market Prices of such shares of Common Stock on the respective
exercise dates of such previously exercised Contingent Warrants less (B)
----
the weighted average of the Current Warrant Prices of such previously
exercised Contingent Warrants on their respective dates of exercise.
<PAGE>
IN WITNESS WHEREOF, the officers named below, acting for and on behalf
of Gensia Sicor Inc., have hereunto subscribed their names on this 15th day of
May, 1997.
GENSIA SICOR INC.
By: /s/ John W. Sayward
----------------------------------
Name: John W. Sayward
Title: Vice President, Finance,
Chief Financial Officer
and Treasurer
Attest:
By: /s/ Wesley N. Fach
--------------------------
Name: Wesley N. Fach
Title: Secretary
<PAGE>
CERTIFICATE OF AMENDMENT TO THE
-------------------------------
RESTATED CERTIFICATE OF INCORPORATION
-------------------------------------
OF
--
GENSIA SICOR INC.
-----------------
Gensia Sicor Inc., a corporation organized and existing under the laws of
the State of Delaware, hereby certifies as follows:
FIRST: The name of the corporation is Gensia Sicor Inc. and shall hereby be
changed to SICOR Inc.
SECOND: The date of filing of its original Certificate of Incorporation
with the Secretary of State of Delaware was November 17, 1986. The corporation
was originally incorporated under the name Gensia Pharmaceuticals, Inc.
THIRD: At a meeting of the Board of Directors of Gensia Sicor Inc.,
resolutions were duly adopted providing that it was advisable and in the best
interests of the corporation that Article I of the Restated Certificate of
Incorporation of Gensia Sicor Inc., shall be amended to read in its entirety as
follows:
"ARTICLE I
The name of this Corporation is SICOR Inc."
FOURTH: This Certificate of Amendment To the Restated Certificate of
Incorporation was duly adopted at the annual meeting of the stockholders, which
was duly called and held, upon notice in accordance with Section 222 of the
General Corporation Law of the State of Delaware, by at least a majority of the
holders of outstanding stock in accordance with section 242 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said Gensia Sicor Inc. has caused its corporate seal to
be hereunto affixed and this certificate to be signed by its Secretary,
Wesley N. Fach, this 16th day of June, 1999.
By /s/ Wesley N. Fach
-----------------------------------
Wesley N. Fach
Secretary
<PAGE>
Exhibit 4.1
UNIT PURCHASE AGREEMENT
Gensia Sicor Inc.
19 Hughes
Irvine, California 92618
Ladies & Gentlemen:
The undersigned purchaser (the "Purchaser") hereby confirms its agreement
with you as follows:
1. This Unit Purchase Agreement (the "Purchase Agreement") is made by and
between Gensia Sicor Inc., a Delaware corporation (the "Company"), and the
Purchaser as of the date this Purchase Agreement is accepted by the Company
below (the "Effective Date").
2. The Company has authorized the issuance and sale of up to ten million
(10,000,000) units (the "Units"). Each Unit consists of one share of the
Company's Common Stock, par value $.01 per share (the "Common Stock"), and a
warrant (the "Warrant") to purchase one-tenth share of the Company's Common
Stock at a per share exercise price of $5.75, such Warrant to be issued if and
to the extent that the Purchaser sells no Common Stock or other securities of
the Company for a period commencing on the Effective Date and ending on December
31, 2000, all as more fully described in this Purchase Agreement, the Warrant
and accompanying documents.
3. The Company and the Purchaser agree that the Purchaser will purchase
from the Company, and the Company will sell to the Purchaser ________________
Units, at a purchase price per Unit (the "Purchase Price") equal to $4.00, and
pursuant to, the Terms and Conditions for Purchase of Units attached hereto as
Annex I and incorporated herein by reference as if fully set forth herein. The
closing of the purchase and sale of Units to the undersigned Purchaser under
Section 2.1 of such Terms and Conditions shall be held on _______________.
4. Units will be sold on a first come, first served basis. The Company
makes no representation that this Purchase Agreement will be accepted by the
Company. In its offering of Units, the Company may enter into Unit Purchase
Agreements with other purchasers; such purchasers may hereinafter be referred to
as the "Purchasers." The closings with respect to the sale of Units to such
other purchasers may occur at any time, or from time to time, but no later than
June 10, 1999.
5. Purchaser hereby agrees not to engage in the short sale of the
Company's Common Stock for a twenty (20) day period prior to and for a ninety
(90) day period following the Closing Date.
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between us by signing in the space provided below for that purpose.
PURCHASER
______________________________________
Print Name
By:
Title: _______________________________
Address: _____________________________
________________________________
________________________________
ACCEPTED as of _____________, 1999
Gensia Sicor Inc.
By:____________________________
Title:_________________________
-2-
<PAGE>
ANNEX I
TERMS AND CONDITIONS FOR PURCHASE OF UNITS
1. Authorization and Sale of the Units.
-----------------------------------
1.1 Authorization of the Units. The Company has authorized the issuance
--------------------------
and sale of up to ten million (10,000,000) units (the "Units"), each Unit
consisting of one share of the Company's Common Stock, par value $.01 per share
(the "Common Stock") and a warrant to purchase one-tenth share of the Company's
Common Stock (the "Warrant") in the form attached hereto as Exhibit 1.1.
1.2 Sale of Units. Subject to the terms and conditions hereof, the
-------------
Purchaser will purchase the number of Units agreed upon by the Purchaser at the
Purchase Price, as set forth in the Unit Purchase Agreement by and between the
Company and the Purchaser (the "Purchase Agreement"). The shares of Common
Stock sold to Purchaser pursuant to the Purchase Agreement are hereinafter
referred to as the "Initial Shares" and the shares of Common Stock arising from
the exercise of the Warrant are hereinafter referred to as the "Warrant Shares."
The Initial Shares, the Warrant and the Warrant Shares are hereinafter
collectively referred to as the "Securities."
2. Closing Date.
------------
2.1 Closing Date. The closing of the purchase and sale of the Units to
------------
the Purchaser hereunder (the "Closing") shall be held at the offices of
Pillsbury Madison & Sutro LLP, 235 Montgomery Street, San Francisco 94104, at
9:00 A.M. California time, on such date as the Company and Purchaser shall
agree, but no later than June 10, 1999. The date of the Closing with respect to
a Purchaser's purchase and sale of Units is hereinafter referred to as the
"Closing Date." As of the Closing Date, the Company shall prepare a certificate
or certificates registered in the name of the Purchaser representing the Initial
Shares to be purchased by such Purchaser under the Purchase Agreement, and the
Purchaser shall send to the Company a wire transfer (in accordance with the
instructions set forth on Exhibit 2.l(a) hereto) in the amount of the purchase
price of the Units to be purchased by such Purchaser, payable to the Company's
order. Funds received prior to the Closing Date will not bear interest.
2.2 Warrant Issuance. The Company will issue to each Purchaser a Warrant
----------------
to purchase one-tenth share of the Company's Common Stock at a per share
exercise price of $5.75 (with such number of shares and purchase price as
adjusted pursuant to the provisions of Section 3 of the Warrant for any events
which occur from and after the Closing Date and on or prior to December 31,
2000) for each share of the Company's Common Stock purchased by the Purchaser at
the Closing and held by such
I-1
<PAGE>
Purchaser until December 31, 2000 (the "Warrant Determination Date"). The
Warrant will be issued by the Company promptly after the Warrant Determination
Date; provided, however, that for purposes of calculating the amount of the
Warrant, the number of shares purchased at the Closing and held until the
Warrant Determination Date will be reduced by any other sales of Company
securities (including short sales and sales or purchases of derivative
securities) by the Purchaser from the Closing Date until the Warrant
Determination Date. The Company may request an affidavit and other reasonable
supporting materials as to the foregoing from any Purchaser prior to issuance of
the Warrant.
3. Representations and Warranties of the Company. The Company represents
---------------------------------------------
and warrants to the Purchaser as of the Closing Date as follows:
3.1 Organization and Standing. Each of the Company and its subsidiaries
-------------------------
has been duly incorporated and is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation with full corporate
power and corporate authority to own, lease and operate its properties and
conduct its businesses as described in the SEC Documents (as defined in Section
3.4 below); each of the Company and its subsidiaries is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the ownership or leasing of properties or the conduct of its business
as presently conducted require such qualification, except where the failure to
be so qualified would not have a material adverse effect on the condition
(financial or otherwise), earnings, operations or business, as presently
conducted, of the Company and its subsidiaries taken as a whole (a "Material
Adverse Effect"). To the knowledge of the Company, each of the Company and its
subsidiaries is in possession of and operating in compliance with all
authorizations, licenses, certificates, consents, orders and permits from state,
federal and other regulatory authorities that are material to the conduct of its
business, all of which are valid and in full force and effect to the extent that
the failure of such would have a Material Adverse Effect; and each of the
Company and its subsidiaries is not in violation of its respective charter or
bylaws, to the extent such a violation would have a Material Adverse Effect.
3.2 Corporate Power; Authorization. The Company has all requisite legal
------------------------------
and corporate power and has taken all requisite corporate action to execute and
deliver the Purchase Agreement, to sell and issue the Securities and to carry
out and perform all of its obligations hereunder. The Purchase Agreement has
been duly authorized, executed and delivered on behalf of the Company and
constitutes the valid and binding agreement of the Company, enforceable in
accordance with its terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization or similar laws relating to or affecting the
enforcement of creditors' rights generally, (ii) as limited by equitable
principles generally and (iii) rights to indemnification
I-2
<PAGE>
hereunder may be limited by applicable law.
3.3 Units; Warrant Shares. The Company has full corporate power and
---------------------
lawful authority to sell the Units on the terms and conditions contemplated
herein, and when so sold against payment therefor as provided herein, the
Initial Shares and, when issued, the Warrant will be validly authorized and
issued, fully paid and nonassessable. The issuance and delivery of each of the
Initial Shares and the Warrant is not subject to preemptive or any similar
rights of the stockholders of the Company or any liens or encumbrances arising
through the Company and when the Warrant Shares are issued in accordance with
the terms of the Warrant, they will be validly issued and outstanding, fully
paid and nonassessable and free of any liens or encumbrances arising through the
Company.
3.4 Securities and Exchange Commission Documents; Financial Statements.
------------------------------------------------------------------
The reports filed by the Company with the Securities and Exchange Commission
(the "SEC") under the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (the "SEC Documents") since December 31, 1998, have been provided to the
Purchaser. The SEC Documents conform in all material respects to the
requirements of the Exchange Act and the rules, regulations and instructions of
the SEC thereunder. The SEC Documents did not as of their dates contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made therein, in light of
the circumstances in which they were made, not misleading. The financial
statements of the Company included in the SEC Documents (the "Financial
Statements") comply as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto. Except as may be indicated in the notes to the Financial
Statements, the Financial Statements have been prepared in accordance with
generally accepted accounting principles consistently applied and fairly present
the consolidated financial position of the Company and its subsidiaries at the
dates thereof and the consolidated results of their operations, stockholders'
equity and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal, recurring adjustments).
3.5 Subsequent Events. Except as publicly disclosed, since December 31,
-----------------
1998, (i) neither the Company nor any of its subsidiaries has incurred any
liabilities or obligations, contingent or otherwise, that are material in the
aggregate to the Company and its subsidiaries, taken as a whole, except in the
ordinary course of business, and (ii) there has been no material adverse change
in the condition or results of operations, financial or otherwise, of the
Company and its subsidiaries, taken as a whole.
3.6 Legal Proceedings. Except as set forth in the SEC Documents, there
-----------------
are no material legal proceedings to which the Company or any subsidiary is a
party or of which property of the
I-3
<PAGE>
Company or any subsidiary is the subject and, to the Company's knowledge, no
such proceedings are contemplated by governmental authorities or others.
3.7 Approvals. Subject to compliance with the provisions of applicable
---------
securities laws of state or foreign jurisdictions, no other approval of any
public body (state or federal) is or will, on the Closing Date be necessary in
connection with the offer, issue and sale of the Initial Shares and the Warrant
as contemplated herein.
3.8 No Breach. The consummation of the transactions contemplated in the
---------
Purchase Agreement and the fulfillment of the terms thereof will not result in a
breach of any of the terms or provisions of, or constitute a default under, the
Company's Certificate of Incorporation, the Company's by-laws, or any material
indenture, mortgage, deed of trust or other agreement or installment to which
the Company is a party or by which it is bound.
3.9 Outstanding Stock. All outstanding shares of capital stock of the
-----------------
Company have been duly authorized and validly issued and are fully paid and
nonassessable; all issued and outstanding shares of capital stock of each
subsidiary of the Company have been duly authorized and validly issued and are
fully paid and nonassessable.
3.10 Intellectual Property. Except as set forth in the SEC Documents, to
---------------------
the best of the Company's knowledge, each of the Company and its subsidiaries
owns or possesses adequate rights to use all material patents, patent rights,
inventions, trade secrets, know-how, trademarks, service marks, trade names and
copyrights which are described in the SEC Documents; except as set forth in the
SEC Documents, the Company has not received any notice of, and has no knowledge
of, any infringement of or conflict with asserted rights of the Company by
others with respect to any patent, patent rights, inventions, trade secrets,
know-how, trademarks, service marks, trade names and copyrights which, singly or
in the aggregate, if the subject of an unfavorable decision, ruling or finding,
would have a Material Adverse Effect; and, except as set forth in the SEC
Documents, the Company has not received any notice of, and has no knowledge of,
any infringement of or conflict with the asserted rights of others with respect
to any patent, patent rights, inventions, trade secrets, know-how, trademarks,
service marks, trade names and copyrights which, singly or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, would have a Material
Adverse Effect.
3.11 Common Stock Registration. The Common Stock is registered pursuant to
-------------------------
Section 12(g) of the Exchange Act and is listed on The Nasdaq National Market,
and the Company has taken no action designed to, or, to the Company's knowledge,
likely to have the effect of, terminating the registration of the Common Stock
under the Exchange Act or removing the Common Stock from
I-4
<PAGE>
quotation on The Nasdaq National Market, nor has the Company received
notification that the SEC or the National Association of Securities Dealers,
Inc. (the "NASD") is contemplating terminating such registration or quotation.
3.12 Private Placement. The Company has not taken any action inconsistent
-----------------
with the treatment of the sale of the Units pursuant to the Purchase Agreement
as a private placement exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act") pursuant to the
provisions of Section 4(2) thereof and Regulation D thereunder. Assuming the
accuracy of each Purchaser's representations and warranties in each Purchaser's
Purchase Agreement and the compliance by each Purchaser with all of its
covenants and agreements, the offer, sale, and issuance by the Company of the
Units to the Purchasers as contemplated herein constitute transactions exempt
from the registration requirements of Section 5 of the Securities Act.
4. Representations and Warranties of the Purchaser; Access to
----------------------------------------------------------
Information; Independent Investigation. The Purchaser hereby represents and
- --------------------------------------
warrants to the Company as follows:
4.1 Investment Intent. The Purchaser is purchasing the Units for
-----------------
investment for its own account only and not with a view to, or for resale in
connection with, any "distribution" thereof within the meaning of the Securities
Act. The Purchaser understands that the Securities have not been registered
under the Securities Act or registered or qualified under any state securities
law in reliance on specific exemptions therefrom, which exemptions may depend
upon, among other things, the bona fide nature of Purchaser's investment intent
as expressed herein.
4.2 Investment Experience. The Purchaser is an "accredited investor"
---------------------
within the meaning of Rule 501 of the SEC, and was not organized for the
specific purpose of acquiring the Units. The Purchaser is aware of the
Company's business affairs and financial condition and has acquired sufficient
information about the Company to reach an informed and knowledgeable decision to
acquire the Units. The Purchaser has such business and financial experience as
is required to give it the capacity to protect its own interests in connection
with the purchase of the Securities.
4.3 Authorization. This Purchase Agreement has been duly and validly
-------------
authorized, executed and delivered on behalf of the Purchaser and is a valid and
binding agreement of the Purchaser enforceable in accordance with its terms,
subject as to enforceability to general principles of equity and to bankruptcy,
insolvency, moratorium and other similar laws affecting the enforcement of
creditors' rights generally.
4.4 Compliance with Securities Laws and Regulations. All subsequent
-----------------------------------------------
offers and sales of the Securities by the Purchaser
I-5
<PAGE>
shall be made pursuant to registration under the Securities Act and
qualification under the applicable state securities laws or pursuant to
exemptions from registration and qualification.
4.5 Reliance by Company. The Purchaser understands that the Units are
-------------------
being offered and sold to it in reliance on specific exemptions from the
registration and qualification requirements of United States federal and state
securities laws and that the Company is relying upon the truth and accuracy of,
and the Purchaser's compliance with the representations, warranties, agreements,
acknowledgments and understandings of the Purchaser set forth herein in order to
determine the availability of such exemptions and the eligibility of the
Purchaser to acquire the Securities.
4.6 No Government Approval. The Purchaser understands that no United
----------------------
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Units.
4.7 No Legal, Tax or Investment Advice. The Purchaser understands that
----------------------------------
nothing in the Purchase Agreement or any other materials presented to the
Purchaser in connection with the purchase and sale of the Units constitutes
legal, tax or investment advice. The Purchaser has consulted such legal, tax
and investment advisors as it, in its sole discretion, has deemed necessary or
appropriate in connection with its purchase of the Units.
4.8 Access to Information. The Purchaser acknowledges that it has had the
---------------------
opportunity to ask questions, to receive answers concerning the terms and
conditions of this offering from the Company and to obtain any additional
information from the Company that the Company possesses or can acquire without
unreasonable effort or expense regarding this offering.
4.9 Individual Investor. If Purchaser is a natural person, Purchaser
-------------------
makes the additional representations and warranties set forth on Exhibit 4.9
attached hereto
5. Restrictions on Transfer, Information and Registration Rights.
-------------------------------------------------------------
5.1 Restrictions on Transferability. The Securities shall not be
-------------------------------
transferable in the absence of a registration under the Securities Act or an
exemption therefrom, or in the absence of compliance with any term of the
Purchase Agreement. Without limiting the foregoing, (i) the Securities may be
offered, resold, pledged or otherwise transferred only (A) in a transaction
meeting the requirements of Rule 144 of the SEC ("Rule 144"), or in accordance
with another exemption from the registration requirements of the Securities Act
(and based upon an opinion of counsel if the Company so requests) or (B)
pursuant to an effective registration statement under the Securities Act, in
each case in accordance with the applicable
I-6
<PAGE>
securities laws of any state of the United States or any other applicable
jurisdiction and (ii) Purchaser will be required to notify any subsequent
purchaser of the resale restrictions set forth above. The Company shall be
entitled to give stop transfer instructions to the transfer agent with respect
to the Securities in order to enforce the foregoing restrictions.
5.2 Restrictive Legends. Each certificate representing any of the
-------------------
Securities shall bear substantially the following legends (in addition to any
legends required under applicable securities laws):
In the Case of All Securities:
-----------------------------
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"). THE SECURITIES MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS REGISTERED UNDER THE
SECURITIES ACT AND QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS OR
UNLESS SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND THE QUALIFICATION
REQUIREMENTS OF APPLICABLE STATE SECURITIES LAWS OR UNLESS THE COMPANY
RECEIVES AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION AND QUALIFICATION ARE NOT REQUIRED. THE SECURITIES
REPRESENTED BY THIS CERTIFICATE AND THE RIGHTS OF HOLDERS THEREOF ARE
SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND OTHER RESTRICTIONS, AND THE
HOLDER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE (INCLUDING ANY
FUTURE HOLDERS) IS BOUND BY THE TERMS OF A UNIT PURCHASE AGREEMENT BETWEEN
THE ORIGINAL PURCHASER AND THE COMPANY (COPIES OF WHICH MAY BE OBTAINED
FROM THE COMPANY).
5.3 Registration on Form S-3.
------------------------
5.3.1 Filing of Registration Statement. The Company shall use its
--------------------------------
best efforts to secure effectiveness of, as soon as practicable, and shall file
no later than one-hundred and eighty (180) days after the initial Closing Date
with respect to a purchase and sale of Units (unless such registration is not
permitted under the applicable rules and regulations of the SEC), a registration
statement on Form S-3 (the "Registration Statement") with the SEC under the
Securities Act to register the resale of the Initial Shares and Warrant Shares
of each Purchaser (the "Registrable Securities"); provided however, that in the
event the Company fails (due to an action or inaction of the Company) to be
eligible to file a registration statement on Form S-3, the Company shall file a
registration statement on Form S-1.
5.3.2 Registration Expenses. The Company shall pay all Registration
---------------------
Expenses (as defined below) in connection with any registration, qualification
or compliance hereunder,
I-7
<PAGE>
and each holder of Registrable Securities (a "Holder;" collectively, the
"Holders") shall pay all Selling Expenses related to such Holder's sale of
Registrable Securities (as defined below) and other expenses that are not
Registration Expenses relating to the Registrable Securities resold by such
Holder. "Registration Expenses" shall mean all expenses, except for Selling
Expenses, incurred by the Company in complying with the registration provisions
herein described, including, without limitation, all registration, qualification
and filing fees, printing expenses, fees and disbursements of counsel for the
Company, blue sky fees and expenses and the expense of any special audits
incident to or required by any such registration. "Selling Expenses" shall mean
all selling commissions, underwriting fees and stock transfer taxes applicable
to the Registrable Securities and all fees and disbursements of counsel for any
Holder.
5.3.3 Additional Company Obligations. In the case of any
------------------------------
registration effected by the Company pursuant to these registration provisions,
the Company will use its best efforts to: (i) keep such registration effective
until December 31, 2003 (or such earlier date as all of the Registrable
Securities have been sold or may be sold under Rule 144(k)); (ii) prepare and
file with the SEC such amendments and supplements to the Registration Statement
and the prospectus used in connection with the Registration Statement as may be
necessary to comply with the provisions of the Securities Act with respect to
the disposition of the Registrable Securities; (iii) furnish such number of
prospectuses and other documents incident thereto, including any amendment of or
supplement to the prospectus, as a Holder from time to time may reasonably
request; (iv) cause all such Registrable Securities registered as described
herein to be listed on each securities exchange and quoted on each quotation
service on which similar securities issued by the Company are then listed or
quoted; (v) provide a transfer agent and registrar for all Registrable
Securities registered pursuant to the Registration Statement and a CUSIP number
for all such Registrable Securities; (vi) use its best efforts to comply with
all applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months, but not more than eighteen
months, beginning with the first month after the effective date of the
Registration Statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act; and (vii) advise Holders of the issuance of
any stop order by the SEC with respect to the Registration Statement or any
request by the SEC for an amendment to the Registration Statement, and notify
Holders of the happening of any event as a result of which the prospectus
included in the Registration Statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing; (viii) file the documents required of
the Company and otherwise use its best
I-8
<PAGE>
efforts to maintain requisite blue sky clearance in (A) all jurisdictions in
which any of the Registrable Securities are originally sold and (B) all other
states specified in writing by a Holder as may reasonably be required to sell
such Holder's Registrable Securities, provided as to clause (B), however, that
the Company shall not be required to qualify to do business or consent to
service of process in any state in which it is not now so qualified or has not
so consented.
5.4 Indemnification and Contribution.
--------------------------------
5.4.1 Indemnification by the Company. The Company agrees to
------------------------------
indemnify and hold harmless each Holder from and against any losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) to which
such Holder may become subject (under the Securities Act or otherwise) insofar
as such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of, or are based upon, any claim by a third party
asserting any untrue statement of a material fact contained in the Registration
Statement, on the effective date thereof, or arise out of any failure by the
Company to fulfill any undertaking included in the Registration Statement, and
the Company will, as incurred, reimburse such Holder for any legal or other
expenses reasonably incurred in investigating, defending or preparing to defend
any such action, proceeding or claim; provided, however, that the Company shall
-------- -------
not be liable in any such case to the extent that such loss, claim, damages or
liability arises out of, or is based upon (i) an untrue statement or alleged
untrue statement made in such Registration Statement in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
such Holder specifically for use in preparation of the Registration Statement or
(ii)) any untrue statement in any prospectus that is corrected in any subsequent
prospectus that was delivered to the Holder prior to the pertinent sale or sales
by the Holder.
5.4.2 Indemnification by Holder. Each Holder, severally and not
-------------------------
jointly, agrees to indemnify and hold harmless the Company from and against any
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) to which the Company may become subject (under the Securities Act or
otherwise) insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon any claim by a
third party asserting (i) an untrue statement made in such Registration
Statement in reliance upon and in conformity with written information furnished
to the Company by or on behalf of such Holder specifically for use in
preparation of the Registration Statement, provided, however, that no Holder
-------- -------
shall be liable in any such case for any untrue statement included in any
Prospectus which statement has been corrected, in writing, by such Holder and
delivered to the Company at least three business days before the sale from which
such loss occurred or (ii) any untrue statement in any prospectus that is
corrected in any
I-9
<PAGE>
subsequent prospectus that was delivered to the Holder prior to the pertinent
sale or sales by the Holder, and each Holder, severally and not jointly, will,
as incurred, reimburse the Company for any legal or other expenses reasonably
incurred in investigating, defending or preparing to defend any such action,
proceeding or claim.
5.4.3 Indemnification Procedures. Promptly after receipt by any
--------------------------
indemnified person of a notice of a claim or the beginning of any action in
respect of which indemnity is to be sought against an indemnifying person
pursuant to this Section 5.4, such indemnified person shall notify the
indemnifying person in writing of such claim or of the commencement of such
action, and, subject to the provisions hereinafter stated, in case any such
action shall be brought against an indemnified person and the indemnifying
person shall have been notified thereof, the indemnifying person shall be
entitled to participate therein, and, to the extent that it shall wish, to
assume the defense thereof, with counsel reasonably satisfactory to the
indemnified person. After notice from the indemnifying person to such
indemnified person of the indemnifying person's election to assume the defense
thereof, the indemnifying person shall not be liable to such indemnified person
for any legal expenses subsequently incurred by such indemnified person in
connection with the defense thereof; provided, however, that if there exists or
-------- -------
shall exist a conflict of interest that would make it inappropriate in the
reasonable opinion of counsel for the indemnified person for the same counsel to
represent both the indemnified person and such indemnifying person or any
affiliate or associate thereof, the indemnified person shall be entitled to
retain its own counsel at the expense of such indemnifying person; provided,
--------
however, that in the case of the immediately preceding proviso the indemnifying
- -------
person shall not be responsible for the legal expenses of more than one counsel
for all indemnified persons.
5.4.4 Contribution in Lieu of Indemnity. If the indemnification
---------------------------------
provided for in this Section 5.4 is unavailable to or insufficient to hold
harmless an indemnified party under Section 5.4.1 or 5.4.2 above in respect of
any losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) referred to therein, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as result of such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative fault shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand or
a Holder on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Holders agree that it would not be just and equitable if
contribution pursuant to this Section 5.4.4 were determined by pro rata
allocation (even
I-10
<PAGE>
if the Holders were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to above in this Section 5.4.4. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this Section 5.4.4 shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 5.4.4, no Holder shall
be required to contribute any amount in excess of the net amount received by the
Holder from the sale of the Registrable Securities to which such loss relates.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11 (f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Holders'
obligations in this Section 5.4.4 to contribute are several in proportion to
their respective sales of Registrable Securities to which such loss relates and
not joint.
5.4.5 Controlling Persons Indemnified. The obligations of the
-------------------------------
Company and the Holders under this Section 5.4 shall be in addition to any
liability which the Company and the respective Holders may otherwise have and
shall extend, upon the same terms and conditions, to each person, if any, who
controls the Company or any Holder within the meaning of the Securities Act.
5.5 Transfer of Registration Rights. The right to sell Registrable
-------------------------------
Securities pursuant to the registration statement described herein will
automatically be assigned to each transferee of at least 50,000 Initial Shares
or Warrant Shares. In the event that it is necessary, in order to permit a
Holder to sell Registrable Securities pursuant to the Registration Statement, to
amend the Registration Statement to name such Holder, such Holder shall, upon
written notice to the Company, be entitled to have the Company make such
amendment as soon as reasonably practicable. Notwithstanding the above
provisions relating to Registration Expenses, in the event that such an
amendment is requested, the Holder shall, at the request of the Company, be
obligated to reimburse the Company for reasonable Registration Expenses incurred
by it in connection with such amendment.
5.6 Reports Under the Exchange Act. With a view to make available to the
------------------------------
Purchasers or Holders the benefits of Rule 144 promulgated under the Securities
Act and any other rule or regulation of the SEC that may at any time permit a
Purchaser or Holder to sell Securities to the public without registration or
pursuant to a registration on Form S-3, the Company will covenant and agree to:
(i) make and keep public information available, as those terms are understood
and defined in Rule 144, at all times after the Closing; (ii) file with the SEC
in a timely manner all reports and other documents required of the
I-11
<PAGE>
Company under the Securities Act and the Exchange Act; and (iii) furnish to any
Purchaser or Holder, so long as the Purchaser or Holder owns any Securities
forthwith upon request, (A) a written statement by the Company that it has
complied with the reporting requirements of Rule 144, the Securities Act and the
Exchange Act, (B) a copy of the most recent annual or quarterly report of the
Company, and (C) such other information as may be reasonably requested in order
to avail any Purchaser or Holder of any rule or regulation of the SEC that
permits the selling of any such Securities without registration or pursuant to
such Form S-3.
6. Miscellaneous.
-------------
6.1 Waivers and Amendments. Without the written consent of (i) the
----------------------
Company, (ii) each holder of 500,000 or more Units, and (iii) the record holders
of more than fifty percent (50%) of the Securities issued to the Purchasers (on
a converted-to-Common Stock basis) then outstanding that have not previously
been sold in a public offering, the terms of the Purchase Agreement may not be
waived or amended.
6.2 Governing Law. The Purchase Agreement shall be governed in all
-------------
respects by the laws of the State of California as such laws are applied to
agreements between California residents entered into and to be performed
entirely within California.
6.3 Survival. The representations, warranties, covenants and
--------
agreements made herein shall survive any investigation made by the Company or
the Purchaser and the Closing.
6.4 Successors and Assigns. Subject to Section 5.5, the provisions
----------------------
hereof shall inure to the benefit of, and be binding upon, the successors,
assigns, heirs, executors and administrators of the parties hereto (specifically
including successors in interest to the Securities).
6.5 Entire Agreement. The Purchase Agreement (including all Exhibits
----------------
thereto) constitutes the full and entire understanding and agreement between the
parties with regard to the subject hereof.
6.6 Notices, etc. All notices and other communications required or
-------------
permitted hereunder shall be effective upon receipt and shall be in writing and
may be delivered in person, by facsimile, or express delivery service, addressed
(a) if to the Purchaser, at the address set forth on the signature page hereof
or at such other address as the Purchaser shall have furnished the Company in
writing, or (b) if to the Company, at its address set forth at the beginning of
the Purchase Agreement, or at such other address as the Company shall have
furnished to the Purchaser in writing.
6.7 Severability. If any provision of the Purchase
-------------
I-12
<PAGE>
Agreement shall be judicially determined to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
6.8 Titles and Subtitles. The titles of the paragraphs and
--------------------
subparagraphs of the Purchase Agreement are for convenience of reference and
shall not, by themselves, determine the construction of the Purchase Agreement.
6.9 Counterparts. The Purchase Agreement may be executed in any
------------
number of counterparts, each of which be an original, but all of which together
shall constitute one instrument.
I-13
<PAGE>
Exhibit 1.1
-----------
Warrant No. GS99 -
-----------
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"). THE SECURITIES MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS REGISTERED UNDER THE
SECURITIES ACT AND QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS OR
UNLESS SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND THE QUALIFICATION
REQUIREMENTS OF APPLICABLE STATE SECURITIES LAWS OR UNLESS THE COMPANY
RECEIVES AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION AND QUALIFICATION ARE NOT REQUIRED. THE SECURITIES
REPRESENTED BY THIS CERTIFICATE AND THE RIGHTS OF HOLDERS THEREOF ARE
SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND OTHER RESTRICTIONS, AND THE
HOLDER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE (INCLUDING ANY
FUTURE HOLDERS) IS BOUND BY THE TERMS OF A UNIT PURCHASE AGREEMENT BETWEEN
THE ORIGINAL PURCHASER AND THE COMPANY (COPIES OF WHICH MAY BE OBTAINED
FROM THE COMPANY).
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF GENSIA SICOR INC.
This certifies that _________________ (the "Holder"), for value received is
entitled to purchase from Gensia Sicor Inc., a Delaware corporation (the
"Company"), ________________ (________) fully paid and nonassessable shares of
the Company's Common Stock (the "Warrant Shares") at a price of $5.75 per share
(the "Stock Purchase Price") at any time or from time to time on or after the
Commencement Date (as defined below) up to and including 5:00 p.m. (Pacific
time) on the Expiration Date (as defined below), upon surrender to the Company
at its principal office at 19 Hughes, Irvine, California 92618 (or at such other
location as the Company may advise Holder in writing) of this Warrant properly
endorsed with the Form of Subscription attached hereto duly filled in and signed
and upon payment by cash, cashier's check or wire transfer of immediately
available funds of the aggregate Stock Purchase Price for the number of shares
for which this Warrant is being exercised determined in accordance with the
provisions hereof, such exercise to be conditioned upon the accuracy of all
representations and warranties contained in such Form of Subscription. The
Stock Purchase Price and the number of shares purchasable hereunder are subject
to adjustment as provided in Section 3 of this Warrant. "Commencement Date"
means December 31, 2000 (the date of issuance of this Warrant) and "Expiration
Date" means the earlier of (i) December 31, 2003 (three years from the
Commencement Date) or (ii) the occurrence of an event, proposal
1.1-1
<PAGE>
of which is described in subsection (d) of Section 3.4 which causes termination
of this Warrant under Section 3.4. This Warrant is issued pursuant to the Unit
Purchase Agreement between the Company and Holder dated as of the date hereof
(the "Purchase Agreement").
This Warrant is subject to the following terms and conditions:
1. Exercise of Warrant
-------------------
1.1 Issuance of Certificates. This Warrant is exercisable at the option
------------------------
of Holder at any time or from time to time on or after the Commencement Date and
prior to or on the Expiration Date for all or a portion of the shares of Warrant
Shares which may be purchased hereunder. The Company agrees that the Warrant
Shares purchased under this Warrant shall be and are deemed to be issued to
Holder as the record owner of such shares as of the close of business on the
date on which this Warrant shall have been surrendered and payment made for such
shares. Subject to the provisions of Section 2, certificates for the Warrant
Shares so purchased, together with any other securities or property to which
Holder is entitled upon such exercise, shall be delivered to Holder by the
Company's transfer agent at the Company's expense within a reasonable time after
this Warrant has been exercised. Each stock certificate so delivered shall be
in such denominations of Warrant Shares as may be requested by Holder and shall
be registered in the name of Holder or such other name as shall be designated by
Holder, subject to the limitations contained in Section 2. If, upon exercise of
this Warrant, fewer than all of the Warrant Shares evidenced by this Warrant are
purchased prior to the date of expiration of this Warrant, one or more new
warrants substantially in the form of, and on the terms in, this Warrant will be
issued for the remaining number of Warrant Shares not purchased upon exercise of
this Warrant.
1.2 Payment. Payment of the Stock Purchase Price shall be made at the
-------
option of Holder by surrender to the Company of this Warrant properly endorsed
with the Form of Subscription attached hereto duly filled in and signed and (i)
payment by cash, cashier's check or wire transfer of immediately available funds
or (ii) by surrender of this Warrant to the Company, with a duly executed
exercise notice marked to reflect "Net Issue Exercise," and, in either case,
specifying the number of Warrant Shares to be purchased, during normal business
hours on any day that is not a Saturday or Sunday or a day on which banks are
required or permitted to be closed in the State of California. Upon a Net Issue
Exercise, Holder shall be entitled to receive Warrant Shares equal to the value
of this Warrant (or the portion thereof being exercised by Net Issue Exercise)
by surrender of this Warrant to the Company together with notice of such
election, in which event the Company shall issue to Holder a number of Warrant
Shares computed as of the date of surrender of this Warrant to the Company using
the following formula:
1.1-2
<PAGE>
X = Y x (A-B)
---------
A
Where X = the number of Warrant Shares to be issued to Holder pursuant
to this Section 1.2;
Y = the number of Warrant Shares otherwise purchasable under
this Warrant, or any lesser number of Warrant Shares as to
which this Warrant is being exercised (at the date of such
calculation);
A = the fair market value of one share of the Company's Common
Stock (at the date of such calculation);
B = the Stock Purchase Price (as adjusted to the date of such
calculation).
2. Shares to be Fully Paid; Reservation of Shares. The Company covenants
----------------------------------------------
and agrees that all Warrant Shares which may be issued upon the exercise of the
rights represented by this Warrant will, upon issuance, be duly authorized,
validly issued, fully paid and nonassessable and free from all preemptive rights
of any stockholder and free of all taxes, liens and charges with respect to the
issue thereof. The Company further covenants and agrees that during the period
within which the rights represented by this Warrant may be exercised, the
Company will use its best efforts to at all times have authorized and reserved,
for the purpose of issue or transfer upon exercise of this Warrant, a sufficient
number of shares of authorized but unissued Common Stock. When and as required
to provide for the exercise of the rights represented by this Warrant, the
Company will take all such action as may be necessary to assure that such shares
of Common Stock may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of any domestic securities
exchange or automated quotation system upon which the Common Stock may be
listed. For purposes of this Warrant, the fair market value of one Warrant
Share shall mean, to the extent it applies to the Company's Common Stock, the
average of the daily high and low trading prices of the Company's Common Stock
on the Nasdaq National Market (or other exchange or market that is the primary
trading market for the Company's Common Stock at that time, as determined by the
Company's Board of Directors in good faith) on the 20 trading days prior to the
date the Warrant is exercised and, to the extent it applies to other securities
or property, as determined by the Company's Board of Directors in good faith.
3. Adjustment of Stock Purchase Price; Number of Shares. The Stock
----------------------------------------------------
Purchase Price and the number of shares of Warrant Shares purchasable upon the
exercise of this Warrant shall be subject to adjustment from time to time upon
the occurrence of
1.1-3
<PAGE>
certain events described in this Section 3.
3.1 Adjustment of Purchase Price. In the event that the Company at
----------------------------
any time or from time to time after the issuance of this Warrant shall declare
or pay, without consideration, any dividend on the Common Stock payable in
Common Stock or in any right to acquire Common Stock for no consideration, or
shall effect a subdivision of the outstanding shares of Common Stock into a
greater number of shares of Common Stock (by stock split, reclassification or
otherwise than by payment of a dividend in Common Stock or in any right to
acquire Common Stock), or in the event the outstanding shares of Common Stock
shall be combined or consolidated, by reclassification or otherwise, into a
lesser number of shares of Common Stock, then the Stock Purchase Price in effect
immediately prior to such event shall, concurrently with the effectiveness of
such event, be proportionately decreased or increased, as appropriate. In the
event that the Company shall declare or pay, without consideration, any dividend
on the Common Stock payable in any right to acquire Common Stock for no
consideration, then the Company shall be deemed to have made a dividend payable
in Common Stock in an amount of shares equal to the maximum number of shares
issuable upon exercise of such rights to acquire Common Stock. Upon each
adjustment of the Stock Purchase Price pursuant to this Section 3.1, the holder
of this Warrant shall thereafter be entitled to purchase, at the Stock Purchase
Price resulting from such adjustment, the number of shares of Common Stock
obtained by multiplying the Stock Purchase Price in effect immediately prior to
such adjustment by the number of shares of Common Stock purchasable pursuant
hereto immediately prior to such adjustment, and dividing the product thereof by
the Stock Purchase Price resulting from such adjustment.
3.2 Adjustments for Reclassification and Reorganization. If the
---------------------------------------------------
Common Stock shall be changed into the same or a different number of shares of
any other class or classes of stock, whether by capital reorganization,
reclassification or otherwise (other than a subdivision or combination of shares
provided for in Section 3.1), the Stock Purchase Price then in effect shall,
concurrently with the effectiveness of such reorganization or reclassification,
be proportionately adjusted so that this Warrant shall represent the right to
purchase, in lieu of the number of shares of Common Stock which this Warrant
would otherwise represent the right to purchase, a number of shares of such
other class or classes of stock equivalent to the number of shares of Common
Stock which this Warrant would have otherwise entitled the holder to purchase
immediately before that change.
3.3 Notice of Adjustment. Upon any adjustment of the Stock Purchase
--------------------
Price or any increase or decrease in the number of shares of Common Stock
purchasable upon the exercise of this Warrant, the Company shall within five
business days give written notice thereof, by first class mail, postage prepaid,
(or by international delivery service, for international
1.1-4
<PAGE>
addresses) addressed to the registered holder of this Warrant at the address of
such holder as shown on the books of the Company. The notice shall be signed by
the Company's chief financial officer and shall state the Stock Purchase Price
resulting from such adjustment and the increase or decrease, if any, in the
number of shares purchasable at such price upon the exercise of this Warrant,
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based.
3.4 Other Notices. If at any time:
-------------
(a) the Company shall propose to declare any cash dividend upon
its Common Stock;
(b) the Company shall propose to declare or make any dividend or
other distribution to the holders of its Common Stock, whether in cash, property
or other securities;
(c) the Company shall propose to effect any reorganization or
reclassification of the capital stock of the Company or any consolidation or
merger of the Company with or into another corporation or any sale, lease or
conveyance of all or substantially all of the property of the Company; or
(d) the Company shall propose to effect a voluntary or
involuntary dissolution, liquidation or winding-up of the Company;
then, in any one or more of said cases, the Company shall give, by certified or
registered mail, postage prepaid, or international delivery service for
international deliveries, addressed to the holder of this Warrant at the address
of such holder as shown on the books of the Company, (i) at least fifteen (15)
business days' prior written notice of the date on which the books of the
Company shall close or a record shall be taken for such dividend or distribution
or for determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, lease, conveyance, dissolution,
liquidation or winding-up, and (ii) in the case of any such reorganization,
reclassification, consolidation, merger, sale, lease, conveyance, dissolution,
liquidation or winding-up, at least fifteen (15) business days' written notice
of the date when the same shall take place. Any notice given in accordance with
clause (i) above shall also specify, in the case of any such dividend or
distribution, the record date for such dividend or distribution, if after the
Commencement Date. Any notice given in accordance with clause (ii) above shall
also specify the date on which the holders of Common Stock shall be entitled to
exchange their Common Stock for securities or other property, if any,
deliverable upon such reorganization, reclassification, consolidation/merger,
sale, lease, conveyance, dissolution, liquidation or winding-up, as the case may
be. In the event that the Holder of the Warrant does not exercise this Warrant
prior to the occurrence of an event described in clause (a) or (b) above, the
Holder shall not
1.1-5
<PAGE>
be entitled to receive the benefits accruing to existing holders of the Common
Stock in such event. Upon the occurrence of an event described in clause (c),
the Holder shall be entitled thereafter, upon payment of the Stock Purchase
Price in effect immediately prior to such action, to receive upon exercise of
this Warrant the class and number of shares which the Holder would have been
entitled to receive after the occurrence of such event had this Warrant been
exercised immediately prior to such event. In connection with the transactions
described in clause (c), the Company will require each person (other than the
Company) that may be required to deliver any cash, stock, securities or other
property upon the exercise of this Warrant as provided herein to assume, by
written instrument delivered to, and reasonably satisfactory to, the holder of
this Warrant (x) the obligations of the Company under this Warrant and (y) the
obligation to deliver to such holder such cash, stock, securities or other
property as such holder may be entitled to receive in accordance with the
provisions of this Section 3. Upon the occurrence of an event the proposal of
which is described in clause (d), this Warrant shall terminate. Notwithstanding
any other provision hereof, no Holder shall have the right to obtain an
injunction or restraining order or otherwise interfere with or prevent the
occurrence of any of the actions described in (a) - (d) above.
4. Issue Tax. The issuance of certificates for the Warrant Shares upon
---------
the exercise of the Warrant shall be made without charge to the holder of the
Warrant for any issue tax in respect thereof; provided, however, 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 then holder of the Warrant being exercised.
5. No Voting or Dividend Rights; Limitation of Liability. Nothing
-----------------------------------------------------
contained in this Warrant shall be construed as conferring upon the holder
hereof the right to vote or to consent or to receive notice as a stockholder in
respect of meetings of stockholders for the election of directors of the Company
or any other matters or any rights whatsoever as a stockholder of the Company.
Except for the adjustment to the Stock Purchase Price pursuant to Section 3.1 in
the event of a dividend on the Common Stock payable in shares of Common Stock,
no dividends or interest shall be payable or accrued in respect of this Warrant
or the interest represented hereby or the shares purchasable hereunder until,
and only to the extent that, this Warrant shall have been exercised. No
provisions hereof, in the absence of affirmative action by the holder to
purchase shares of Warrant Shares, and no mere enumeration herein of the rights
or privileges of the holder hereof, shall give rise to any liability of such
holder for the Stock Purchase Price or as a stockholder of the Company whether
such liability is asserted by the Company or by its creditors.
6. Restrictions on Transferability of Securities:
----------------------------------------------
1.1-6
<PAGE>
Compliance With Securities Act:
- ------------------------------
6.1 Restrictions on Transferability. The Warrant and the Warrant
-------------------------------
Shares (collectively, the "Securities") shall not be transferable except upon
the conditions specified in the Purchase Agreement, which conditions are
intended to insure compliance with the provisions of the Securities Act and
applicable "blue sky" law (the "Law").
6.2 Restrictive Legend. Each certificate representing the Securities
------------------
or any other securities issued in respect of the Securities upon any stock
split, stock dividend, recapitalization, merger, consolidation or similar event,
shall (unless otherwise permitted by the provisions of the Purchase Agreement)
be stamped or otherwise imprinted with a legend substantially in the following
form (in addition to any legend required under applicable state securities
laws):
In the Case of Warrant and Warrant Shares:
-----------------------------------------
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"). THE SECURITIES MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS REGISTERED UNDER THE
SECURITIES ACT AND QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS OR
UNLESS SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND THE QUALIFICATION
REQUIREMENTS OF APPLICABLE STATE SECURITIES LAWS OR UNLESS THE COMPANY
RECEIVES AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION AND QUALIFICATION ARE NOT REQUIRED. THE SECURITIES
REPRESENTED BY THIS CERTIFICATE AND THE RIGHTS OF HOLDERS THEREOF ARE
SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND OTHER RESTRICTIONS, AND THE
HOLDER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE (INCLUDING ANY
FUTURE HOLDERS) IS BOUND BY THE TERMS OF A UNIT PURCHASE AGREEMENT BETWEEN
THE ORIGINAL PURCHASER AND THE COMPANY (COPIES OF WHICH MAY BE OBTAINED
FROM THE COMPANY).
6.3 Exchange of Warrant. Subject to the terms and conditions hereof,
-------------------
including the restrictions on transfer in this Section 6 and in the Purchase
Agreement, upon surrender of this Warrant to the Company with a duly executed
Assignment Form in the form attached hereto and funds sufficient to pay any
transfer tax, the Company shall, without charge, execute and deliver a new
Warrant or Warrants of like tenor in the name of the assignee named in such
Assignment Form and this Warrant shall promptly be canceled. The term "Warrant"
as used herein shall be deemed to include any Warrants issued in exchange for
this Warrant.
6.4 Ownership of Warrant. The Company may deem and treat the person
--------------------
in whose name this Warrant is registered as the
1.1-7
<PAGE>
holder and owner hereof (notwithstanding any notations of ownership or writing
hereon made by anyone other than the Company) for all purposes and shall not be
affected by any notice to the contrary, until presentation of this Warrant for
registration of transfer as provided in Section 6.3.
7. Modification and Waiver. Except as otherwise provided herein, this
-----------------------
Warrant and any provision hereof may be changed, waived, discharged or
terminated only by an instrument in writing signed by the party against which
enforcement of the same is sought.
8. Notices. Except as otherwise provided herein, any notice, request or
-------
other document required or permitted to be given or delivered to the holder
hereof or the Company shall be delivered or shall be sent by United States
certified or registered mail, postage prepaid, (or international delivery
service for international deliveries) to Holder at its address as shown on the
books of the Company or to the Company at the address indicated therefor in the
first paragraph of this Warrant.
9. Descriptive Headings and Governing Law. The descriptive headings of
--------------------------------------
the several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of California (without regard to its
conflicts of law provisions).
10. Lost Warrants or Stock Certificates. The Company represents and
-----------------------------------
warrants to Holder that upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction, or mutilation of any Warrant or stock
certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity and, if requested, bond reasonably satisfactory to the
Company, or, in the case of any such mutilation, upon surrender and cancellation
of such Warrant or stock certificate, the Company at its expense will make and
deliver a new Warrant or stock certificate, of like tenor, in lieu of the lost,
stolen, destroyed or mutilated Warrant or stock certificate.
11. Amendment. This Warrant may be amended only with the written approval
---------
of the Company and the Holder of this Warrant.
12. Binding Effect; Benefits. This Warrant shall inure to the benefit of
------------------------
and shall be binding upon the Company and the Warrantholder and their respective
heirs, legal representatives, successors and assigns. Nothing in this Warrant,
expressed or implied, is intended to or shall confer on any person other than
the Company and the Warrantholder, or their respective heirs, legal
representatives, successors or assigns, any rights, remedies, obligations or
liabilities under or by reason of this Warrant.
1.1-8
<PAGE>
13. Fractional Shares. No fractional shares shall be issued upon exercise
-----------------
of this Warrant. The Company shall, in lieu of issuing any fractional share,
pay the Holder entitled to such fraction a sum in cash equal to such fraction
multiplied by the market price of the Common Stock on such exercise date, which
shall be, on such date, the closing price for the Common Stock or the closing
bid if no sales were reported, as quoted on the Nasdaq National Market.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its officers, thereunto duly authorized this 31st day of December, 2000.
Gensia Sicor Inc.
By:_______________________________
Name:
Title:
1.1-9
<PAGE>
FORM OF SUBSCRIPTION
--------------------
(To be signed only upon exercise of Warrant)
To: Gensia Sicor Inc.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise such Warrant for, and to purchase thereunder,
________________ (________) shares of Common Stock of Gensia Sicor Inc. (the
"Company"), and herewith makes payment in the amount of $________ therefor. The
certificates for such shares should be issued in the name of, and delivered to,
________________ whose address is ________________________
__________________________________________________________.
The undersigned represents, unless the exercise of this Warrant has been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
that (i) the undersigned is acquiring such Common Stock for his or its own
account for investment and not with a view to or for sale in connection with any
distribution thereof (except for any resale pursuant to a registration statement
under the Securities Act), (ii) the undersigned has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of the undersigned's investment in the shares of Common Stock,
(iii) the undersigned has received all of the information the undersigned
requested from the Company and the undersigned considers necessary or
appropriate for deciding whether to purchase the shares, (iv) the undersigned
has the ability to bear the economic risks of the undersigned's prospective
investment and (v) the undersigned is able, without materially impairing his
financial condition, to hold the shares of Common Stock for an indefinite period
of time and to suffer complete loss on the undersigned's investment.
The undersigned is an "accredited investor" as defined in Regulation D of
the Securities and Exchange Commission on the date hereof.
DATED:_________________________
_______________________________________________
(Signature must conform in all respects to name
of holder as specified on the face of the
Warrant)
_______________________________________________
_______________________________________________
(Address)
1.1-10
<PAGE>
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FILED UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT.
ASSIGNMENT FORM
---------------
(To be executed only upon transfer of this Warrant)
For value received, the undersigned registered holder of the within Warrant
hereby sells, assigns and transfers unto ____________________ (the "Assignee")
the right represented by such Warrant to purchase __________ Warrant Shares and
all other rights of the Warrantholder with respect thereto under the within
Warrant, and appoints _________________ as Attorney to make such transfer on the
books of Gensia Sicor Inc. maintained for such purpose, with full power of
substitution in the premises.
The undersigned also represents that, by assignment hereof, the Assignee
acknowledges that this Warrant and the Warrant Shares to be issued upon exercise
hereof are being acquired for investment and that the Assignee will not offer,
sell or otherwise dispose of this Warrant or any Warrant Shares to be issued
upon exercise hereof except under circumstances that will not result in a
violation of the Securities Act of 1933, as amended, or any state securities
laws. Further, the Assignee has acknowledged that upon exercise of this
Warrant, the Assignee shall, if requested by the Company, confirm in writing, in
a form satisfactory to the Company, that the Warrant Shares so purchased are
being acquired for investment and not with a view toward distribution or resale.
Dated: ____________________.
Signature ______________________________
______________________________
(Print Name)
______________________________
(Street Address)
______________________________
(City) (State) (Zip Code)
1.1-11
<PAGE>
Exhibit 2.1(a)
--------------
WIRE TRANSFER INSTRUCTIONS
Bank: Bank of America
San Diego Commercial Banking Office #1450
ABA #: 121000358
Credit: 14505-01920 Gen'l Checking Account
Name of: Gensia Sicor Inc.
2.1 (a)-1
<PAGE>
Exhibit 4.9
-----------
INVESTMENT REPRESENTATION STATEMENT
1. Acquisition Entirely for Own Account. Purchaser represents and
------------------------------------
warrants that Purchaser is acquiring the Securities solely for Purchaser's own
account for investment and not with a view to sale or distribution of the
Securities or any portion or component thereof, and Purchaser will not sell,
offer to sell or otherwise dispose of or distribute the Securities or any
portion or component thereof in any transaction other than a transaction
complying with the registration requirements of the Securities Act, and
applicable state securities or "Blue Sky" laws, or pursuant to an exemption
therefrom. Purchaser also represents that the entire legal and beneficial
interest of the Securities that Purchaser is acquiring is being acquired for,
and will be held for Purchaser's account only, and neither in whole nor in part
for any other person or entity.
2. Information Concerning the Company. Purchaser represents and warrants
----------------------------------
that Purchaser has been provided with such information concerning the Company
that Purchaser deems necessary and appropriate to enable Purchaser to evaluate
the financial risk inherent in making an investment in the Securities.
Purchaser further acknowledges that Purchaser has received satisfactory and
complete information concerning the business and financial condition of the
Company in response to all inquiries in respect thereof.
3. Economic Risk and Suitability. Purchaser represents and warrants as
-----------------------------
follows:
3.1 Purchaser realizes that Purchaser's purchase of the Securities
involves a high degree of risk and will be a highly speculative investment and
that Purchaser is able, without impairing Purchaser's financial condition, to
hold the Securities for an indefinite period of time and to suffer a complete
loss of Purchaser's investment.
3.2 Purchaser has carefully considered and has, to the extent
Purchaser believes such discussions necessary, discussed with Purchaser's
professional, legal, tax and financial advisors the suitability of an investment
in the Securities for the particular legal, tax and financial situation of
Purchaser and that Purchaser and/or Purchaser's advisors have determined that
the Securities are a suitable investment for Purchaser.
3.3 Purchaser has such knowledge and experience in business and
financial matters as will enable Purchaser to evaluate the merits and risks of
an investment in the Securities and to make an informed investment decision.
3.4 Purchaser has carefully read this Agreement and
4.9-1
<PAGE>
the Company has made available to Purchaser or Purchaser's advisors all
information and documents requested by Purchaser relating to investment in the
Securities, and has provided answers to Purchaser's satisfaction to all of
Purchaser's questions concerning the Company and the Securities to be acquired.
3.5 Purchaser understands that neither the Company nor any of its
officers/directors, has any obligation to register the Securities under any
federal or state securities act or law except as otherwise expressly set forth
in Section 5 of the Purchase Agreement.
3.6 All information that Purchaser has provided concerning himself or
herself, his or her financial position and (each of) his/her Purchaser
Representative(s), if any, is correct and complete as of the date set forth
below, and if there should be any material change in such information, Purchaser
will provide such information to the Company as soon as practicable thereafter.
3.7 Purchaser understands that the Company is relying on the truth
and accuracy of the declarations, representations, warranties and agreements
made by Purchaser to the Company herein in transferring the Securities to
Purchaser.
3.8 Purchaser confirms that Purchaser has received no general
solicitation or general advertisement and has attended no seminar or meeting
(whose attendees have been invited by any general solicitation or general
advertisement) and has received no advertisement, article, notice or other
communication published in any newspaper, magazine, or similar media or
broadcast or television or radio regarding the offering of the Securities.
4. Status of Purchaser. Purchaser represents and warrants that Purchaser
-------------------
is an "Accredited Investor", as defined in Rule 501 of the Commission because
Purchaser is either:
(a) A natural person whose individual net worth, or joint net worth
with that person's spouse, at the time of his/her purchase,
exceeds $1 million; or
(b) A natural person who had individual income in excess of $200,000
in each of the two most recent years or joint income with that
person's spouse in excess of $300,000 in each of those years and
has a reasonable expectation of reaching the same income level in
the current year.
5. Residency. The undersigned is a bona fide resident of ______________.
---------
4.9-2
<PAGE>
Exhibit 10.1
June 1, 1999
CONFIDENTIAL
- ------------
Mr. Frank C. Becker
1409 Newgate
Libertyville, ILL 60048
Dear Frank:
It is with great pleasure that we present our offer to you of the position
of Chief Operating Officer of Gensia Sicor Inc. (the "Company"), effective June
1, 1999. As Chief Operating Officer, you will report directly to the Chief
Executive Officer. During your employment, you will devote such time, attention
and energy to the Company as is consistent with the duties and responsibilities
of Chief Operating Officer. We are all enthusiastic about the prospect of
working with you in this exciting company.
Your employment under this Agreement shall commence on June 1, 1999, and
shall expire on June 1, 2002, unless terminated earlier as provided herein.
This Agreement may be renewed for successive one year periods provided such
renewal is mutually agreed upon. In order to accommodate any such renewal, the
party wishing to renew the Agreement shall provide the other party with notice
of such at least 90 days prior to the date this Agreement would otherwise
expire.
As discussed, your annual salary will be $350,000, payable in equal
payments according to the Company's payroll policy. In addition, you will be
granted a fully vested stock option to purchase 100,000 shares of common stock
of the Company, pursuant to the terms of the stock option agreement previously
provided to you. In addition, on each of the first and second anniversaries of
your employment, you will be eligible to receive stock options to purchase
100,000 shares of common stock at the discretion of the Board upon the
fulfillment of certain annual milestones to be agreed upon between you and the
Board. The stock option agreements relating to these additional grants will be
substantially in the form of the stock option agreement for your initial grant,
except that (a) you must continue to be Chief Operating Officer of the Company
at the date of the grant and (b) vesting will occur upon the achievement of the
annual
<PAGE>
milestones, so that full vesting would occur in each case if the milestones are
achieved within the one year period following each date of grant. The exercise
price of the stock options will be the fair market value on the date of each
grant.
It is anticipated that arrangements for an annual cash bonus will be
developed by you and the Company's Board of Directors. Any bonus arrangements
will be based upon the achievement of milestones mutually agreed upon between
you and the Board of Directors. It is also anticipated that you will assist the
Board in developing a bonus program for the Company.
To assist you in fulfilling your duties as they relate to the Company's
operations in Irvine, California, we will provide you with appropriate housing
in the Irvine area suitable for the Chief Operating Officer of the Company. The
Company will also lease and provide to you an automobile for use suitable for
the Chief Operating Officer of the Company. The Company will reimburse you for
federal and state income taxes, if any, which may be imposed on you as a result
of these benefits.
You may also obtain such secretarial, other administrative, communications
and other ordinary and necessary office expenses and you may require in Illinois
for the conduct of your activities as Chief Operating Officer of the Company.
As an employee of the Company, you will be eligible to participate in
Company-sponsored benefits. Information relating to these plans has previously
been provided to you.
Your employment with the Company is not for a specified term and may be
terminated by you or the Company at any time for any reason, with or without
Cause (as such term is hereinafter defined), and with or without notice, but if
you are terminated by the Company without Cause, following a Change in Control
(as such term is hereinafter defined), you will be entitled to receive any
balance of your salary under this three year Agreement as if you had continued
as an employee. If you are terminated by the Company without Cause, and there
has been no Change in Control, you will be entitled to receive continuation of
your base salary for eighteen months if you have been employed by the Company as
Chief Operating Officer for less than one year, and continuation of your base
salary for the remainder of the term of the Agreement if you have been employed
by the Company as Chief Operating Officer for more than one year.
For purposes of this Agreement, the term "Cause" shall mean: (a) any
intentional action or intentional failure to act by you which was performed in
bad faith and to the material
2
<PAGE>
detriment of the Company; (b) you intentionally refuse or intentionally fail to
act in accordance with any lawful and proper direction or order of the Board;
(c) you willfully and habitually neglect the duties of employment; or (d) you
are convicted of a felony crime involving moral turpitude, provided that in the
event that any of the foregoing events is capable of being cured, the Company
shall provide written notice to you describing the nature of such event and you
shall thereafter have five (5) business days to cure such event.
For purposes of this Agreement, the term "Change in Control" shall mean:
(a) The first purchase of Company's stock occurs as a result of a tender or
exchange offer for all or part of Company's common stock (except an offer by
Company itself); (b) Company's stockholders approve a merger in which Company
does not survive as an independent and publicly owned corporation (except a
merger that leaves Company's stockholders with substantially the same ownership
in the new corporation); (c) Company's stockholders approve a consolidation or a
sale, exchange or other disposition of all, or substantially all, of Company's
assets; (d) The composition of Company's Board of Directors changes over a
period of two consecutive years, so that individuals who were directors at the
beginning of that period no longer constitute a majority of the Board of
Directors (unless the election or nomination of each new Director was approved
by at least two-thirds of the Directors who had been Directors at the beginning
of that period and who were still in office at the time of the election or
nomination); or (e) Someone who did not own more than 30% of Company's voting
stock acquires enough voting stock to own more than 30% (except an acquisition
by Company itself, by one of Company's subsidiaries or by any benefit plan
maintained by Company).
As a condition of your employment with the Company, you must sign an
Employee's Proprietary Information and Inventions Agreement, a copy of which has
previously been provided to you.
In connection with the Employee's Proprietary Information and Inventions
Agreement, this letter will confirm that you have the Company's consent to
continue, during your employment as Chief Operating Officer, your activities as
an officer of Greenfield Chemicals, Inc. In this regard, it is the Company's
understanding that Greenfield is a party to a number of confidentiality
agreements with third parties. As required by the Employee's Proprietary
Information and Inventions Agreement, you agree that you will not breach those
confidentiality agreements or bring to the Company upon commencement of your
employment, or thereafter, any proprietary information of third parties.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same instrument. This Agreement supersedes and cancels any and all previous
understandings, representations and agreements of whatever
3
<PAGE>
nature between the Company and you with respect to the matters covered herein
and constitutes the full, complete and exclusive agreement between you and the
Company with respect to the matters set forth herein. This Agreement is governed
by the laws of the State of California, other than the choice of law provisions
thereof. This Agreement may only be modified or waived in writing signed by you
and the Company. If any term of this Agreement is held to be invalid, void or
unenforceable, the remainder of this Agreement shall remain in full force and
effect and shall in no way be affected; and the parties shall use their
reasonable commercial efforts to find an alternative way to achieve the same
result.
We look forward to a mutually productive and rewarding relationship with
you at Gensia Sicor Inc. To indicate your acceptance of this offer of
employment, please sign below and return one signed copy to me.
Sincerely,
GENSIA SICOR INC.
By /s/ Carlo Salvi
----------------
Encs.
- ----
ACCEPTED AND AGREED
this 1st day of June, 1999
/s/ Frank C. Becker
- -------------------
FRANK C. BECKER
4
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 38,131
<SECURITIES> 0
<RECEIVABLES> 56,239
<ALLOWANCES> (2,375)
<INVENTORY> 50,318
<CURRENT-ASSETS> 153,715
<PP&E> 141,965
<DEPRECIATION> (33,952)
<TOTAL-ASSETS> 385,630
<CURRENT-LIABILITIES> 110,335
<BONDS> 0
0
16
<COMMON> 885
<OTHER-SE> 200,143
<TOTAL-LIABILITY-AND-EQUITY> 385,630
<SALES> 103,048
<TOTAL-REVENUES> 108,351
<CGS> 66,786
<TOTAL-COSTS> 66,786
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,435
<INCOME-PRETAX> 3,051
<INCOME-TAX> 1,242
<INCOME-CONTINUING> 1,840
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,840
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
