<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
AFFYMETRIX, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
<PAGE>
[LOGO]
AFFYMETRIX, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON
JUNE 11, 1998
------------------------
TO THE SHAREHOLDERS:
The Annual Meeting of Shareholders of Affymetrix, Inc., a California
corporation ("Affymetrix" or the "Company"), will be held on Thursday, June 11,
1998 at 10:00 a.m., local time, at 3380 Central Expressway, Santa Clara,
California, for the following purposes:
1. To elect directors to serve until the next annual meeting of
shareholders or until their successors are elected.
2. To authorize the Company to change the Company's state of incorporation
from California to Delaware.
3. To ratify the appointment of Ernst & Young LLP as independent auditors
of the Company for the fiscal year ending December 31, 1998.
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
These items of business are more fully described in the Proxy Statement
accompanying this notice.
Only shareholders of record at the close of business on April 15, 1998 are
entitled to notice of and to vote at the meeting.
All shareholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, please mark, sign, date
and return the enclosed proxy card as soon as possible in the postage-prepaid
envelope enclosed for that purpose. Any shareholder attending the meeting may
vote in person even if the shareholder has returned a proxy.
By Order of the Board of Directors,
Vernon A. Norviel
Secretary
Santa Clara, California
, 1998
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING,
PLEASE COMPLETE AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED.
<PAGE>
AFFYMETRIX, INC.
3380 CENTRAL EXPRESSWAY
SANTA CLARA, CA 95051
------------------------
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Affymetrix, Inc. ("Affymetrix" or the "Company") for use at the annual meeting
of shareholders to be held on Thursday, June 11, 1998 at 10:00 a.m., local time,
or at any adjournment of the meeting, for the purposes set forth in this Proxy
Statement and in the accompanying Notice of Annual Meeting of Shareholders. The
annual meeting will be held at 3380 Central Expressway, Santa Clara, California
95051. The Company's telephone number is (408) 731-5000.
These proxy solicitation materials were mailed on or about May , 1998,
together with the Company's 1997 Annual Report to Shareholders, to all
shareholders of record on April 15, 1998.
RECORD DATE
Shareholders of record at the close of business on April 15, 1998 (the
"Record Date") are entitled to notice of and to vote at the meeting. At the
Record Date, the Company had outstanding approximately 22,868,300 shares of
Common Stock and 1,634,522 shares of Series AA Preferred Stock (the "Series AA
Stock").
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company a written
notice of revocation or a duly executed proxy bearing a later date or time, or
by attending the meeting and voting in person.
VOTING AND SOLICITATION
Holders of Common Stock and holders of Series AA Stock are entitled to vote
at the meeting. Each share of Common Stock and Series AA Stock entitles the
holder to one vote on each matter to come before the meeting. The Company's
Articles of Incorporation do not provide for cumulative voting.
In connection with the issuance of the Series AA Stock, the Company and
Glaxo Wellcome Americas Inc. ("GWA") entered into a voting trust agreement (the
"Voting Trust Agreement"), pursuant to which the Series AA Stock is required to
be voted proportionately in accordance with the votes cast by all holders of the
Company's Common Stock for and against on certain matters, including the
proposal to authorize the Company to change the Company's state of incorporation
from California to Delaware (Proposal No. 2).
The cost of soliciting proxies will be borne by the Company. Proxies may
also be solicited by certain of the Company's directors, officers and employees,
without additional compensation, personally or by telephone, facsimile or
letter.
QUORUM; ABSTENTIONS, AND BROKER NON-VOTES
The required quorum for the transaction of business at the annual meeting is
a majority of the shares of Common Stock and Preferred Stock outstanding on the
Record Date. Broker non-votes and shares held by persons abstaining will be
counted in determining whether a quorum is present at the annual meeting.
However, abstentions are counted as votes against a proposal for purposes of
determining whether or not a
<PAGE>
proposal has been approved, whereas broker non-votes are not counted for
purposes of determining whether a proposal has been approved.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company which are intended to be presented
by such shareholders at next year's annual meeting must be received by the
Company no later than December 28, 1998 in order that they may be included in
the proxy statement and form of proxy relating to the 1999 annual meeting.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEES
The Bylaws of the Company provide for a Board of Directors (the "Board")
consisting of not fewer than six nor more than eleven directors. The size of the
Board is set at nine. Nine directors are to be elected at the meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the Company's nine nominees named below, all of whom are presently directors
of the Company. If any nominee of the Company is unable or declines to serve as
a director at the time of the Annual Meeting, the proxies will be voted for any
nominee designated by the present Board to fill the vacancy. If additional
persons are nominated for election as directors, the proxy holders intend to
vote all proxies received by them for the nominees listed below. The Company is
not presently aware of any nominee who will be unable or will decline to serve
as a director. The term of office of each person elected as a director will
continue until the next annual meeting of shareholders or until a successor has
been elected and qualified.
The names of the nominees, and certain information about them as of the
Record Date, are set forth below.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
- --------------------------------- ----------- -------------------------------------------------------------- -----------
<S> <C> <C> <C>
John D. Diekman, Ph.D. 55 Chairman of the Board; Partner of Bay City Capital LLC 1992
Stephen P.A. Fodor, Ph.D. 44 President and Chief Executive Officer 1993
Paul Berg, Ph.D. 71 Professor of Biochemistry, Stanford University 1993
Douglas M. Hurt 41 Senior Vice President and Chief Financial Officer, Glaxo 1995
Wellcome, Inc.
Vernon R. Loucks, Jr. 63 Chairman and Chief Executive Officer, Baxter International, 1993
Inc.
Barry C. Ross, Ph.D. 49 Director, Group Research Strategy and Alliances, Glaxo 1995
Wellcome Research and Development Limited
David B. Singer 35 Senior Vice President and Chief Financial Officer, Heartport, 1993
Inc.
Lubert Stryer, M.D. 60 Professor of Neurobiology, Stanford University 1996
John A. Young 65 President and Chief Executive Officer (retired), 1993
Hewlett-Packard Co.
</TABLE>
JOHN D. DIEKMAN, PH.D., has served as a Director of the Company and Chairman
since the Company's inception. Dr. Diekman served as Chief Executive Officer of
the Company from July 1995 to March 1997.
2
<PAGE>
Prior to that, Dr. Diekman served as President and Chief Operating Officer of
Affymax N.V. ("Affymax") from July 1991 to March 1995 and as Chairman of the
Affymax Board of Directors from July 1994 to July 1995. Dr. Diekman has served
as a partner of Bay City Capital LLC, a life sciences merchant bank, since March
1997. Dr. Diekman also currently serves as a director of Quidel Corp.
STEPHEN P.A. FODOR, PH.D., is the President and Chief Executive Officer of
the Company and has been a Director of the Company since February 1993. From
July 1995 to March 1997, Dr. Fodor served as President and Chief Operating
Officer, from September 1994 to July 1995, as President and Chief Technical
Officer and, from February 1993 until September 1994, as Chief Technical Officer
of the Company. Dr. Fodor previously was Vice President and Director of Physical
Sciences at the Affymax Research Institute from November 1992 to February 1993.
PAUL BERG, PH.D., has been a Director of the Company since August 1993. Dr.
Berg is Cahill Professor in Cancer Research, Professor of Biochemistry and
Director of the Beckman Center for Molecular and Genetic Medicine at Stanford
University School of Medicine. He received the Nobel Prize in Chemistry in 1980,
the National Medal of Science in 1983 and is a member of the National Academy of
Sciences, the Royal Society, London, and the French Academy of Sciences. Dr.
Berg also serves as a member of the Company's Scientific Advisory Board. Dr.
Berg also serves as a director of Transgene S.A., Gilead Sciences, Inc. and on
the Policy Board of DNAX (a subsidiary of Schering-Plough Corp.).
DOUGLAS M. HURT, a Director of the Company since June 1995, is Senior Vice
President and Chief Financial Officer of Glaxo Wellcome, Inc. Mr. Hurt has held
various financial management positions at Glaxo Wellcome plc ("Glaxo Wellcome")
since 1983 and was designated by Glaxo Wellcome as nominee to serve on the Board
of Directors.
VERNON R. LOUCKS, JR. has been a Director of the Company since August 1993.
Mr. Loucks has served as Chief Executive Officer of Baxter International, Inc.
("Baxter") since 1980 and Chairman of Baxter since 1987. Mr. Loucks also serves
as a director of Anheuser-Busch Companies, Inc., Coastcast Corporation, The Dun
and Bradstreet Corp., Emerson Electric Co. and The Quaker Oats Company.
BARRY C. ROSS, PH.D., a Director of the Company since March 1995, has served
as Director of Group Research Strategy and Alliances at Glaxo Wellcome Research
and Development Ltd. since 1995. Dr. Ross joined Glaxo in 1984 and served as
Director, Medicinal Chemistry from 1989 to 1993 and Director of Research and
Development from 1993 to 1995. Dr. Ross was designated by Glaxo Wellcome as
nominee to serve on the Board of Directors.
DAVID B. SINGER, a Director of the Company since February 1993, served as
Vice Chairman from July 1995 to April 1996. From February 1993 to June 1995, Mr.
Singer was President and Chief Executive Officer of the Company. He served as
Vice President of Finance and Treasurer of Affymax from 1991 to 1993. Mr. Singer
has been Senior Vice President and Chief Financial Officer of Heartport, Inc.
since May 1996.
LUBERT STRYER, M.D., served as a Director of the Company since September
1996. Dr. Stryer is Winzer Professor in the School of Medicine, and a Professor
of Neurobiology at Stanford University since 1976. Dr. Stryer received the
American Chemical Society Award in Biological Chemistry (Eli Lilly Award) and is
a member of the National Academy of Sciences and received an honorary Doctor of
Science from the University of Chicago. Dr. Stryer also serves as Chairman of
the Company's Scientific Advisory Board. Dr. Stryer also serves as a director of
Aurora Biosciences Corporation.
JOHN A. YOUNG, has served as a Director of the Company since August 1993.
Mr. Young retired as President and Chief Executive Officer, Hewlett-Packard Co.
in October 1992. Mr. Young also serves as a director of Wells Fargo & Company,
Chevron Corp., SmithKline Beecham Corp., Novell, Inc., Lucent Technologies, and
is a member of the Business Council and the National Academy of Engineering.
There are no family relationships among directors or executive officers of
the Company.
3
<PAGE>
REQUIRED VOTE
The nine nominees receiving the highest number of affirmative votes of the
shares present or represented and entitled to be voted for them will be elected
as directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS
VOTE "FOR" THE ELECTION OF THE NOMINEES.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of five meetings during
the fiscal year ended December 31, 1997. Each director other than Mr. Hurt and
Mr. Young attended at least seventy-five percent of the meetings of the Board of
Directors and each committee on which the director served during 1997.
The Board of Directors has an Audit Committee, a Compensation Committee and
a Nominating Committee.
The Audit Committee of the Board of Directors, which consisted of directors
Hurt, Singer and Young, held three meetings during 1997. The Audit Committee
oversees the actions taken by the Company's independent auditors and reviews the
Company's internal financial and accounting controls and policies.
The Compensation Committee of the Board of Directors, which consisted of
directors Berg and Young and former director Alejandro C. Zaffaroni, held seven
meetings during 1997. The Compensation Committee is responsible for determining
salaries, incentives and other forms of compensation for officers and other
employees of the Company and administers various incentive compensation and
benefit plans.
The Nominating Committee, which consisted of directors Diekman, Loucks and
Young, did not meet in 1997.
COMPENSATION OF DIRECTORS
Non-employee directors receive a fee of $2,500 per Board meeting attended as
well as reimbursement of expenses incurred in attending Board meetings. In
addition, the Company's 1996 Nonemployee Directors Stock Option Plan (the
"Directors Plan") provides for the automatic grant of 33,333 shares of Common
Stock if a person who is neither an officer nor an employee of the Company and
who has not previously been a member of the Board is elected or appointed
director. Each such option vests at the rate of one-fifth of the number of
shares covered by the option on each anniversary of the grant date so long as
the director is serving on the Board with full vesting over five years. In
addition, on the date of each annual meeting of the shareholders of the Company
held after January 1, 2001 for nonemployee directors elected prior to March 1996
who continue on the Board, and 54 months after the initial option grant to
nonemployee directors elected after March 1996 who continue on the Board, each
such nonemployee director will receive an option to purchase 6,667 shares of the
Company's Common Stock, with full vesting one year after grant. The exercise
price of all options granted pursuant to the Directors Plan is the fair market
value of the Company's Common Stock at the time of grant.
PROPOSAL NO. 2
REINCORPORATION IN DELAWARE
INTRODUCTION
For the reasons set forth below, the Board of Directors believes that it is
in the best interests of the Company and its shareholders to change the state of
incorporation of the Company from California to Delaware (the "Reincorporation
Proposal" or the "Proposed Reincorporation"). SHAREHOLDERS ARE URGED TO READ
CAREFULLY THIS SECTION OF THE PROXY STATEMENT, INCLUDING THE RELATED EXHIBITS,
BEFORE VOTING ON THE REINCORPORATION PROPOSAL.
4
<PAGE>
Throughout this Proxy Statement, the term "Affymetrix California" or the
"Company" refers to Affymetrix, Inc., a California corporation, and the term
"Affymetrix Delaware" refers to the new Delaware corporation, a wholly owned
subsidiary of Affymetrix California, which is the proposed successor to
Affymetrix California in the Proposed Reincorporation.
As discussed below, the principal reasons for the Proposed Reincorporation
are the greater flexibility of Delaware corporate law, and the substantial body
of case law interpreting that law and the increased ability of the Company to
continue to attract and retain qualified directors. The Company believes that
its shareholders will benefit from the well established principles of corporate
governance that Delaware law affords. The only material differences to the
shareholders with respect to the Bylaws will be (a) the elimination in the
Bylaws of the right of stockholders holding 10% of the outstanding stock to call
a special meeting of stockholders, (b) the inclusion in the Bylaws of an advance
notice procedure with regard to the nomination, other than by or at the
direction of the Board of Directors, of candidates for the election of directors
and with regard to certain matters to be brought before an annual meeting or
special meeting of stockholders, and (c) the inclusion in the Bylaws of the
right of the Board of Directors to fill a vacancy created by the removal of a
director. The Reincorporation Proposal is not being proposed in order to prevent
an unsolicited takeover attempt, and the Board of Directors is not aware of any
present attempt by any person to acquire control of the Company, obtain
representation on the Board of Directors or take any action that would
materially affect the governance of the Company.
The Reincorporation Proposal will be effected by merging Affymetrix
California into Affymetrix Delaware (the "Merger"). Upon completion of the
Merger, Affymetrix California, as a corporate entity, will cease to exist and
Affymetrix Delaware will continue to operate the business of the Company under
its current name, Affymetrix, Inc.
Pursuant to the Agreement and Plan of Merger, in substantially the form
attached hereto as Appendix A (the "Merger Agreement") upon the effective date
of the Merger, (i) each outstanding share of Affymetrix California Common Stock,
no par value, will be automatically converted into one share of Affymetrix
Delaware Common Stock, par value $0.01 per share, and (ii) each outstanding
share of Affymetrix Series AA Preferred Stock, no par value, will be
automatically converted into one share of Affymetrix Delaware Series AA
Preferred Stock, $0.01 par value. Each stock certificate representing issued and
outstanding shares of Affymetrix California Common Stock will continue to
represent the same number of shares of Common Stock of Affymetrix Delaware, and
each stock certificate representing issued and outstanding shares of Affymetrix
California Preferred Stock will continue to represent the same number of shares
of Preferred Stock of Affymetrix Delaware. IT WILL NOT BE NECESSARY FOR
SHAREHOLDERS TO EXCHANGE THEIR EXISTING STOCK CERTIFICATES FOR STOCK
CERTIFICATES OF AFFYMETRIX DELAWARE. However, shareholders may exchange their
certificates if they so choose. The Common Stock of Affymetrix California is
listed for trading on the Nasdaq National Market and, after the Merger,
Affymetrix Delaware's Common Stock will continue to be traded on the Nasdaq
National Market without interruption, under the same symbol ("AFFX") as the
shares of Affymetrix California Common Stock are currently traded.
Under California law, the affirmative vote of a majority of the outstanding
shares of Common Stock and Series AA Stock of Affymetrix California is required
for approval of the Merger Agreement and the other terms of the Proposed
Reincorporation. See "Vote Required for the Reincorporation Proposal." Pursuant
to the Voting Trust Agreement, the Series AA Stock is required to be voted
proportionately in accordance with the votes cast by all holders of the
Company's Common Stock for and against the Reincorporation Proposal.
The Proposed Reincorporation has been unanimously approved by the Company's
Board of Directors, which unanimously recommends a vote in favor of the
proposal. If approved by the shareholders, it is anticipated that the Merger
will become effective as soon as practicable following the Annual Meeting of
Shareholders (the "Effective Date"). However, pursuant to the Merger Agreement,
the Merger may be
5
<PAGE>
abandoned or the Merger Agreement may be amended by the Board of Directors
(except that the principal terms may not be amended without shareholder
approval) either before or after shareholder approval has been obtained and
prior to the Effective Date if, in the opinion of the Board of Directors of the
Company, circumstances arise which make it inadvisable to proceed under the
original terms of the Merger Agreement. Shareholders of Affymetrix California
will have no dissenter's rights of appraisal with respect to the Merger.
The discussion set forth below is qualified in its entirety by reference to
the Merger Agreement, the Certificate of Incorporation of Affymetrix Delaware
(the "Certificate of Incorporation") and the Bylaws of Affymetrix Delaware,
copies of which will be substantially in the forms attached hereto as Appendices
A, B and C, respectively.
APPROVAL BY SHAREHOLDERS OF THE PROPOSED REINCORPORATION WILL CONSTITUTE
APPROVAL OF THE MERGER AGREEMENT, THE CERTIFICATE OF INCORPORATION AND THE
BYLAWS OF AFFYMETRIX DELAWARE AND ALL PROVISIONS THEREOF.
PRINCIPAL REASONS FOR THE PROPOSED REINCORPORATION
As the Company plans for the future, the Board of Directors and management
believe that it is essential to be able to draw upon well established principles
of corporate governance in making legal and business decisions. The prominence
and predictability of Delaware corporate law provide a reliable foundation on
which the Company's governance decisions can be based, and the Company believes
that shareholders will benefit from the responsiveness of Delaware corporate law
to their needs and to those of the corporation they own.
FLEXIBILITY OF DELAWARE LAW. For many years Delaware has followed a policy
of encouraging incorporation in that state and, in furtherance of that policy,
has been a leader in adopting, construing and implementing comprehensive,
flexible corporate laws responsive to the legal and business needs of
corporations organized under its laws. Many corporations have chosen Delaware
initially as a state of incorporation or have subsequently changed corporate
domicile to Delaware in a manner similar to that proposed by the Company.
Because of Delaware's prominence as the state of incorporation for many major
corporations, both the legislature and courts in Delaware have demonstrated an
ability and a willingness to act quickly and effectively to meet changing
business needs. The Delaware courts have developed considerable expertise in
dealing with corporate issues, and a substantial body of case law has developed
construing Delaware law and establishing public policies with respect to
corporate legal affairs.
ATTRACTION AND RETENTION OF QUALIFIED DIRECTORS. Both California and
Delaware law permit a corporation to include a provision in its certificate of
incorporation which reduces or limits the monetary liability of directors for
breaches of fiduciary duty in certain circumstances. The increasing frequency of
claims and litigation directed against directors has greatly expanded the risks
facing directors of corporations in exercising their respective duties. The
amount of time and money required to respond to such claims and to defend such
litigation can be substantial. It is the Company's desire to reduce these risks
to its directors and to limit situations in which monetary damages can be
recovered against directors so that the Company may continue to attract and
retain qualified directors who otherwise might be unwilling to serve because of
the risks involved. The Company believes that, in general, Delaware law provides
greater protection to directors than California law and that Delaware case law
regarding a corporation's ability to limit director liability is more developed
and provides more guidance than California law.
WELL ESTABLISHED PRINCIPLES OF CORPORATE GOVERNANCE. There is substantial
judicial precedent in the Delaware courts as to the legal principles applicable
to measures that may be taken by a corporation and as to the conduct of the
Board of Directors such as under the business judgment rule and other standards.
The Company believes that its shareholders will benefit from the well
established principles of corporate governance that Delaware law affords.
6
<PAGE>
NO CHANGE IN THE NAME, BOARD MEMBERS, BUSINESS, MANAGEMENT, EMPLOYEE BENEFIT
PLANS OR LOCATION OF PRINCIPAL FACILITIES OF THE COMPANY
The Reincorporation Proposal will effect only a change in the legal domicile
of the Company and certain other changes of a legal nature which are described
in this Proxy Statement. The Proposed Reincorporation will NOT result in any
change in the name, business, management, fiscal year, assets or liabilities or
location of the principal facilities of the Company. The nine directors who are
elected at the Annual Meeting of Shareholders will become the directors of
Affymetrix Delaware. All employee benefit and stock option plans of Affymetrix
California will be assumed and continued by Affymetrix Delaware, and each option
or right issued pursuant to such plans will automatically be converted into an
option or right to purchase the same number of shares of Affymetrix Delaware
Common Stock, at the same price per share, upon the same terms, and subject to
the same conditions. Shareholders should note that approval of the
Reincorporation Proposal will also constitute approval of the assumption of
these plans by Affymetrix Delaware. Other employee benefit arrangements of
Affymetrix California will also be continued by Affymetrix Delaware upon the
terms and subject to the conditions currently in effect. As noted above, after
the Merger the shares of Common Stock of Affymetrix Delaware will continue to be
traded, without interruption, on the same exchange (the Nasdaq National Market)
and under the same symbol (AFFX) as the shares of Common Stock of Affymetrix
California are currently traded. The Company believes that the Proposed
Reincorporation will not affect any of its material contracts with any third
parties and that Affymetrix California's rights and obligations under such
material contractual arrangements will continue and be assumed by Affymetrix
Delaware.
ANTI-TAKEOVER IMPLICATIONS
Delaware, like many other states, permits a corporation to adopt a number of
measures designed to reduce a corporation's vulnerability to unsolicited
takeover attempts through amendment of the corporate charter or bylaws or
otherwise. The Reincorporation Proposal is NOT being proposed in order to
prevent such a change in control and the Board of Directors is not aware of any
present attempt to acquire control of the Company or to obtain representation on
the Board of Directors.
In the discharge of its fiduciary obligations to its shareholders, the Board
of Directors has evaluated the Company's vulnerability to potential unsolicited
bidders. In the course of such evaluation, the Board of Directors of the Company
has considered and may consider in the future certain defensive strategies
designed to enhance the Board's ability to negotiate with an unsolicited bidder.
These strategies include, but are not limited to, the adoption of a shareholder
rights plan, the adoption of a severance plan for its management and key
employees which becomes effective upon the occurrence of a change in control of
the Company, the establishment of a classified board of directors, the
elimination of cumulative voting, the elimination of shareholder action by
written consent, the elimination of the right to remove a director other than
for cause and the authorization of preferred stock, the rights and preferences
of which may be determined by the Board of Directors. Other than the elimination
of cumulative voting, the elimination of shareholder action by written consent,
and the authorization of preferred stock (which will continue in Affymetrix
Delaware following the Proposed Reincorporation), NONE of these measures has
been previously adopted by Affymetrix California and NONE is contemplated as
part of the Proposed Reincorporation. It should also be noted that the
establishment of a classified board of directors also can be undertaken under
California law in certain circumstances. For a detailed discussion of all of the
changes which will be implemented as part of the Proposed Reincorporation, see
"The Charters and Bylaws of Affymetrix California and Affymetrix Delaware" and
"Significant Differences Between the Corporation Laws of California and
Delaware--Indemnification and Limitation of Liability" below.
Certain effects of the Reincorporation Proposal may be considered to have
antitakeover implications. Section 203 of the Delaware General Corporation Law,
from which Affymetrix Delaware does not intend to opt out, restricts certain
"business combinations" with "interested stockholders" for three years following
the date that a person becomes an interested stockholder, unless the Board of
Directors
7
<PAGE>
approves the business combination. See "Significant Differences Between the
Corporation Laws of California and Delaware-- Stockholder Approval of Certain
Business Combinations". The restrictions of Section 203 of the Delaware General
Corporate Law will not apply to Glaxo Wellcome, because Glaxo Wellcome acquired
its interest in the Company prior to the Proposed Reincorporation.
The Board of Directors believes that unsolicited takeover attempts may be
unfair or disadvantageous to the Company and its shareholders because, among
other reasons: (i) a non-negotiated takeover bid may be timed to take advantage
of temporarily depressed stock prices; (ii) a non-negotiated takeover bid may be
designed to foreclose or minimize the possibility of more favorable competing
bids or alternative transactions; (iii) a non-negotiated takeover bid may
involve the acquisition of only a controlling interest in the corporation's
stock, without affording all shareholders the opportunity to receive the same
economic benefits; and (iv) certain of the Company's contractual arrangements
may provide that they may not be assigned pursuant to a transaction which
results in a "change of control" of the Company without the prior written
consent of the licensor or other contracting party.
By contrast, in a transaction in which a potential acquiror must negotiate
with an independent board of directors, the board can and should take account of
the underlying and long-term values of the Company's business, technology and
other assets, the possibilities for alternative transactions on more favorable
terms, possible advantages from a tax-free reorganization, anticipated favorable
developments in the Company's business not yet reflected in the stock price and
equality of treatment of all shareholders.
Despite the belief of the Board of Directors as to the benefits to
shareholders of the Reincorporation Proposal, it may be disadvantageous to the
extent that it has the effect of discouraging a future takeover attempts which
is not approved by the Board of Directors, but which a majority of the
shareholders may deem to be in their best interests or in which shareholders may
receive a substantial premium for their shares over the then current market
value or over their cost basis in such shares. As a result of such effects of
the Reincorporation Proposal, shareholders who might wish to participate in an
unsolicited tender offer may not have an opportunity to do so. In addition, to
the extent that provisions of Delaware law enable the Board of Directors to
resist a takeover or a change in control of the Company, such provisions could
make it more difficult to change the existing Board of Directors and management.
THE CHARTERS AND BYLAWS OF AFFYMETRIX CALIFORNIA AND AFFYMETRIX DELAWARE
The provisions of the Affymetrix Delaware Certificate of Incorporation and
Bylaws are similar to those of the Affymetrix California Articles of
Incorporation and Bylaws in almost all respects. The only material differences
are the elimination in the Bylaws of the right of stockholders controlling at
least 10% of the voting shares to call a special meeting of stockholders, the
inclusion in the Bylaws of an advance notice procedure with regard to the
nomination, other than by or at the direction of the Board of Directors, of
candidates for the election of directors and with regard to certain matters to
be brought before an annual meeting or special meeting of stockholders, and the
inclusion in the Bylaws of the right of the Board of Directors to fill a vacancy
created by the removal of a director. While the Company has no present intention
to do so, Affymetrix Delaware could in the future implement certain other
changes by amendment of its Certificate of Incorporation or Bylaws. For a
discussion of such changes, see "Significant Differences Between the Corporation
Laws of California and Delaware." This discussion of the Certificate of
Incorporation and Bylaws of Affymetrix Delaware is qualified by reference to
Appendices B and C hereto, respectively.
The Articles of Incorporation of Affymetrix California currently authorize
the Company to issue up to 50,000,000 shares of Common Stock and 27,500,000
shares of Preferred Stock. The Certificate of Incorporation of Affymetrix
Delaware provides that it will have 50,000,000 authorized shares of Common
Stock, par value $0.01 per share, and 27,500,000 shares of Preferred Stock, par
value $0.01 per share, of which 1,634,522 shares are designated as Series AA
Preferred Stock. Like Affymetrix California's Articles of Incorporation,
Affymetrix Delaware's Certificate of Incorporation provides that the Board of
Directors
8
<PAGE>
is entitled to determine the powers, preferences and rights, and the
qualifications, limitations or restrictions, of the authorized and unissued
Preferred Stock.
MONETARY LIABILITY OF DIRECTORS. In accordance with current California law,
Affymetrix California's Articles of Incorporation include a provision which
limits director liability in certain circumstances. In general, however, the
ability to limit liability may be somewhat broader under Delaware law, and
Delaware case law is also more developed to provide guidance in this regard. It
should be noted, however, that neither California nor Delaware law permits a
corporation to limit or eliminate the liability of its directors for intentional
misconduct, bad faith conduct or any transaction from which the director derives
an improper personal benefit. In addition, liability for violations of federal
laws such as the federal securities laws may not be subject to any such
limitations. See "Significant Differences Between the Corporation Laws of
California and Delaware-- Indemnification and Limitation of Liability."
POWER TO CALL SPECIAL SHAREHOLDERS' MEETINGS. Under California law, a
special meeting of shareholders may be called by the Board of Directors, the
Chairman of the Board, the President, the holders of shares entitled to cast not
less than 10% of the votes at such meeting and such additional persons as are
authorized by the Articles of Incorporation or the Bylaws. Under Delaware law, a
special meeting of stockholders may be called by the board of directors or any
other person authorized to do so in the certificate of incorporation or the
bylaws. The Bylaws of Affymetrix Delaware authorize the Board of Directors, the
Chairman of the Board or the President to call a special meeting of
stockholders. Therefore, holders of 10% or more of the voting shares of the
Company will no longer be able to call a special meeting of stockholders. The
Company believes this change is warranted as a prudent corporate governance
measure to prevent an inappropriately small number of stockholders from
prematurely forcing stockholder consideration of a proposal over the opposition
of the Board of Directors by calling a special stockholders' meeting before (i)
the time that the Board believes such consideration to be appropriate or (ii)
the next annual meeting (provided that the holders meet the notice requirements
for consideration of a proposal). Such special meetings would involve
substantial expense and diversion of board and management time which the Company
believes to be inappropriate for an enterprise the size of the Company. Aside
from the foregoing, no other change is contemplated in the procedures to call a
special stockholders' meeting, although in the future the Board of Directors
could amend the Bylaws of Affymetrix Delaware without stockholder approval. The
Company and Glaxo Wellcome intend to amend the agreement dated July 6, 1996 (the
"Governance Agreement"), effective upon the Proposed Reincorporation, to give
Glaxo Wellcome the right to call a special meeting of the stockholders, so long
as Glaxo Wellcome continues to hold at least 10% of the outstanding capital
stock of the Company.
NUMBER OF DIRECTORS. The Bylaws of Affymetrix California authorize the
directors to fix the number of directors within a range from six to eleven, with
the number of directors currently set at nine. The Bylaws of Affymetrix Delaware
will also authorize the directors to fix the number of directors within a range
from six to eleven, with the number of directors set at nine. In contrast to the
Bylaws of Affymetrix California, however, the Bylaws of Affymetrix Delaware
provide that the range, as well as the exact number, of directors may be changed
by the Board of Directors without further stockholder approval. See "Significant
Differences Between the Corporation Laws of California and Delaware-- Size of
the Board of Directors."
FILLING VACANCIES ON THE BOARD OF DIRECTORS. Under California law, any
vacancy on the Board of Directors other than one created by removal of a
director may be filled by the Board. If the number of directors is less than a
quorum, a vacancy may be filled by the unanimous written consent of the
directors then in office, by the affirmative vote of a majority of the directors
at a meeting held pursuant to notice or waivers of notice or by a sole remaining
director. A vacancy created by removal of a director may be filled by the board
only if so authorized by a corporation's articles of incorporation or by a bylaw
approved by the corporation's shareholders. The Articles of Incorporation and
Bylaws of Affymetrix California do not permit directors to fill vacancies
created by removal of a director. Under Delaware law, vacancies and newly
created directorships may be filled by a majority of the directors then in
office (even though less
9
<PAGE>
than a quorum) or by a sole remaining director, unless otherwise provided in the
certificate of incorporation or bylaws (or unless the certificate of
incorporation directs that a particular class of stock is to elect such
director(s), in which case a majority of the directors elected by such class, or
a sole remaining director so elected, shall fill such vacancy or newly created
directorship). In contrast to the Bylaws of Affymetrix California, the Bylaws of
Affymetrix Delaware provide that directors may fill the vacancy created by
removal of a director by the stockholders.
NOMINATIONS OF DIRECTOR CANDIDATES AND INTRODUCTION OF BUSINESS AT
STOCKHOLDER MEETINGS. The Bylaws of Affymetrix Delaware include an advance
notice procedure with regard to the nomination, other than by or at the
direction of the Board of Directors, of candidates for election as directors
(the "Nomination Procedure") and with regard to other matters to be brought
before an annual meeting or special meeting of stockholders (the "Business
Procedure").
The Nomination Procedure provides that only persons nominated by or at the
direction of the Board of Directors or by a stockholder who has given timely
written notice to the Secretary of the Company prior to the meeting will be
eligible for election as directors. The Business Procedure provides that at an
annual or special meeting, and subject to any other applicable requirements,
only such business may be conducted as has been brought before the meeting by or
at the direction of the Board of Directors or by a stockholder who has given
timely written notice to the Secretary of the Company of such stockholder's
intention to bring such business before the meeting. In all cases, to be timely,
notice must be received by the Company not fewer than 75 days prior to the first
anniversary of the preceding year's annual meeting of stockholders.
Under the Nomination Procedure, a stockholder's notice to the Company must
contain certain information about the nominee, including name, address, the
consent to be nominated and such other information as would be required to be
included in a proxy statement soliciting proxies for the election of the
proposed nominee, and certain information about the stockholder proposing to
nominate that person, including name, address, a representation that the
stockholder is a holder of record of stock entitled to vote at the meeting and a
description of all arrangements or understandings between the stockholder and
each nominee. Under the Business Procedure, notice relating to the conduct of
business at a meeting other than the nomination of directors must contain
certain information about the business and about the stockholder who proposes to
bring the business before the meeting. If the chairman or other officer
presiding at the meeting determines that a person was not nominated in
accordance with the Nomination Procedure, such person will not be eligible for
election as a director, or if he or she determines that other business was not
properly brought before such meeting in accordance with the Business Procedure,
such business will not be conducted at such meeting. Nothing in the Nomination
Procedure or the Business Procedure will preclude discussion by any stockholder
of any nomination or business properly made or brought before an annual or
special meeting in accordance with the above-described procedures.
By requiring advance notice of nominations by stockholders, the Nomination
Procedure affords the Board of Directors an opportunity to consider the
qualifications of the proposed nominees and, to the extent deemed necessary or
desirable by the Board, to inform the stockholders about such qualifications. By
requiring advance notice of proposed business, the Business Procedure provides
the Board with an opportunity to inform stockholders of any business proposed to
be conducted at a meeting and the Board's position on any such proposal,
enabling stockholders to better determine whether they desire to attend the
meeting or grant a proxy to the Board of Directors as to the disposition of such
business. Although the Bylaws of Affymetrix Delaware do not give the Board of
Directors any power to approve or disapprove stockholder nominations for the
election of directors or any other business desired by stockholders to be
conducted at a meeting, the Bylaws of Affymetrix Delaware have the effect of
precluding a nomination for the election of directors or of precluding any other
business at a particular meeting if the proper procedures are not followed. In
addition, the procedures may discourage or deter a third party from conducting a
solicitation of proxies to elect its own slate of directors or otherwise
attempting to obtain control of the Company, even if the conduct of such
business or such attempt might be deemed to be beneficial to the Company and its
stockholders.
10
<PAGE>
SIGNIFICANT DIFFERENCES BETWEEN THE CORPORATION LAWS OF CALIFORNIA AND DELAWARE
The following provides a summary of the major substantive differences
between the Corporation Laws of California and Delaware. It is not an exhaustive
description of all differences between the two states' laws.
STOCKHOLDER APPROVAL OF CERTAIN BUSINESS COMBINATIONS
DELAWARE. In the last several years, a number of states (but not
California) have adopted special laws designed to make certain kinds of
"unfriendly" corporate takeovers, or other transactions involving a corporation
and one or more of its significant shareholders, more difficult. Under Section
203 of the Delaware General Corporation Law, certain "business combinations"
with "interested stockholders" of Delaware corporations are subject to a three
year moratorium unless specified conditions are met. Section 203 prohibits a
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for three years following the date that such person or
entity becomes an interested stockholder. With certain exceptions, an interested
stockholder is a person or entity who or which owns, individually or with or
through certain other persons or entities, 15% or more of the corporation's
outstanding voting stock (including any rights to acquire stock pursuant to an
option, warrant, agreement, arrangement or understanding, or upon the exercise
of conversion or exchange rights, and stock with respect to which the person has
voting rights only).
The three-year moratorium imposed by Section 203 on business combinations of
Section 203 does not apply if (i) prior to the date on which such stockholder
becomes an interested stockholder the Board of Directors of the subject
corporation approves either the business combination or the transaction that
resulted in the person or entity becoming an interested stockholder; (ii) upon
consummation of the transaction that made him or her an interested stockholder,
the interested stockholder owns at least 85% of the corporation's voting stock
outstanding at the time the transaction commenced (excluding from the 85%
calculation shares owned by directors who are also officers of the subject
corporation and shares held by employee stock plans that do not give employee
participants the right to decide confidentially whether to accept a tender or
exchange offer); or (iii) on or after the date such person or entity becomes an
interested stockholder, the Board approves the business combination and it is
also approved at a stockholder meeting by 66 2/3% of the outstanding voting
stock not owned by the interested stockholder. A Delaware corporation to which
Section 203 applies may elect not to be governed by Section 203. Affymetrix
Delaware does not intend to elect not to be governed by Section 203; therefore,
Section 203 will apply to Affymetrix Delaware.
The Company believes that Section 203 will have the effect of encouraging
any potential acquiror to negotiate with the Company's Board of Directors.
Section 203 also might have the effect of limiting the ability of a potential
acquiror to make a two-tiered bid for Affymetrix Delaware in which all
stockholders would not be treated equally. Shareholders should note, however,
that the application of Section 203 to Affymetrix Delaware will confer upon the
Board the power to reject a proposed business combination in certain
circumstances, even though a potential acquiror may be offering a substantial
premium for Affymetrix Delaware's shares over the then-current market price.
Section 203 would also discourage certain potential acquirors unwilling to
comply with its provisions.
CALIFORNIA. California law requires that holders of common stock receive
common stock in a merger of the corporation with the holder of more than 50% but
less than 90% of the target's common stock or its affiliate unless all of the
target company's share holders consent to the transaction. This provision of
California law may have the effect of making a "cash-out" merger by a majority
shareholder more difficult to accomplish. Although Delaware law does not
parallel California law in this respect, under some circumstances Section 203
does provide similar protection to shareholders against coercive two-tiered bids
for a corporation in which the stockholders are not treated equally.
11
<PAGE>
CUMULATIVE VOTING
DELAWARE. Under Delaware law, the certificate of incorporation may provide
for cumulative voting in the election of directors. The Certificate of
Incorporation of Affymetrix Delaware does not provide for cumulative voting, so
that unless the Certificate of Incorporation of Affymetrix Delaware is amended
following the Proposed Reincorporation to specify cumulative voting (which may
be done only with stockholder approval), stockholders of Affymetrix Delaware
will have no cumulative voting rights. The absence of cumulative voting limits
the ability of minority stockholders to obtain representation on the Board of
Directors.
CALIFORNIA. Under California law, a "listed corporation" may eliminate
cumulative voting. A "listed corporation" is a corporation whose shares are
either (i) listed on the New York or American Stock Exchanges or (ii) designated
for trading on the Nasdaq National Market and held by at least 800 shareholders.
The Articles of Incorporation of Affymetrix California were amended to eliminate
the right to elect directors by cumulative voting after the Company's initial
public offering.
CLASSIFIED BOARD OF DIRECTORS
A classified board is one on which a certain number of the directors, but
not all, are elected on a rotating basis each year.
DELAWARE. Delaware law permits, but does not require, a classified Board of
Directors, pursuant to which the directors can be divided into as many as three
classes with staggered terms of office, with only one class of directors
standing for election each year. The Certificate of Incorporation and Bylaws of
Affymetrix Delaware do not provide for a classified board, and the adoption of a
classified Board of Directors in the future would require stockholder approval.
CALIFORNIA. Under California law, a listed corporation may provide for a
classified board of directors by adopting amendments to its articles of
incorporation or bylaws, which amendments must be approved by the shareholders.
The Articles of Incorporation and Bylaws of Affymetrix California do not
currently provide for a classified board.
REMOVAL OF DIRECTORS
DELAWARE. Under Delaware law, any director or the entire Board of Directors
of a corporation that does not have a classified Board of Directors or
cumulative voting may be removed with or without cause with the approval of a
majority of the outstanding shares entitled to vote. In the case of a Delaware
corporation having cumulative voting, if less than the entire board is to be
removed, a director may not be removed without cause if the number of shares
voted against such removal would be sufficient to elect the director under
cumulative voting.
CALIFORNIA. Under California law, any director or the entire board of
directors may be removed, with or without cause, with the approval of a majority
of the outstanding shares entitled to vote; however, no individual director may
be removed (unless the entire Board is removed) if the number of votes cast
against such removal would be sufficient to elect the director under cumulative
voting.
Affymetrix California's Articles of Incorporation do not provide for a
classified board of directors and also do not provide for cumulative voting.
Similarly, the Certificate of Incorporation of Affymetrix Delaware does not
provide for cumulative voting or for a classified board of directors.
Consequently, after the Proposed Reincorporation, any director may be removed
from office at any time with or without cause upon the affirmative vote of the
holders of the majority of the then outstanding voting stock.
INDEMNIFICATION AND LIMITATION OF LIABILITY
California and Delaware have similar laws respecting indemnification by a
corporation of its officers, directors, employees and other agents. The laws of
both states also permit, with certain exceptions, a
12
<PAGE>
corporation to adopt charter provisions eliminating the liability of a director
to the corporation or its shareholders for monetary damages for breach of the
director's fiduciary duty. There are nonetheless certain differences between the
laws of the two states respecting indemnification and limitation of liability
which are summarized below.
DELAWARE. The Certificate of Incorporation of Affymetrix Delaware
eliminates the liability of directors to the corporation to the fullest extent
permissible under Delaware law, as such law exists currently and as it may be
amended in the future. Under Delaware law, such provision may not eliminate or
limit director monetary liability for: (a) breaches of the director's duty of
loyalty to the corporation or its stockholders; (b) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law; (c)
the payment of unlawful dividends or unlawful stock repurchases or redemptions;
or (d) transactions in which the director received an improper personal benefit.
Such limitation of liability provisions also may not limit a director's
liability for violation of, or otherwise relieve the Company or its directors
from the necessity of complying with federal or state securities laws, or affect
the availability of nonmonetary remedies such as injunctive relief or
rescission.
CALIFORNIA. The Articles of Incorporation of Affymetrix California also
eliminate the liability of directors to the corporation to the fullest extent
permissible under California law. California law does not permit the elimination
of monetary liability where such liability is based on: (a) intentional
misconduct or knowing and culpable violation of law; (b) acts or omissions that
a director believes to be contrary to the best interests of the corporation or
its shareholders or that involve the absence of good faith on the part of the
director; (c) receipt of an improper personal benefit; (d) acts or omissions
that show reckless disregard for the director's duty to the corporation or its
shareholders, where the director in the ordinary course of performing a
director's duties should be aware of a risk of serious injury to the corporation
or its shareholders; (e) acts or omissions that constitute an unexcused pattern
of inattention that amounts to an abdication of the director's duty to the
corporation and its shareholders; (f) transactions between the corporation and a
director who has a material financial interest in such transaction; or (g)
liability for improper distributions, loans or guarantees.
INDEMNIFICATION COMPARED AND CONTRASTED
California law requires indemnification when the individual has defended
successfully the action on the merits, while Delaware law requires
indemnification whether there has been a successful or unsuccessful defense on
the merits or otherwise. Delaware law generally permits indemnification of
expenses, including attorneys' fees, actually and reasonably incurred in the
defense or settlement of a derivative or third-party action, provided there is a
determination by a majority vote of a disinterested quorum of the directors, by
independent legal counsel or by a majority vote of a quorum of the stockholders
that the person seeking indemnification acted in good faith and in a manner
reasonably believed to be in best interests of the corporation. Without court
approval, however, no indemnification may be made in respect of any derivative
action in which such person is adjudged liable for negligence or misconduct in
the performance of his or her duty to the corporation. Delaware law requires
indemnification of expenses when the individual being indemnified has
successfully defended any action, claim, issue or matter therein, on the merits
or otherwise.
Expenses incurred by an officer or director in defending an action may be
paid in advance, under Delaware law and California law, if such director or
officer undertakes to repay such amounts if it is ultimately determined that he
or she is not entitled to indemnification. In addition, the laws of both states
authorize a corporation's purchase of indemnity insurance for the benefit of its
officers, directors, employees and agents whether or not the corporation would
have the power to indemnify against the liability covered by the policy.
California law permits a California corporation to provide rights to
indemnification beyond those provided therein to the extent such additional
indemnification is authorized in the corporation's Articles of Incorporation.
Thus, if so authorized, rights to indemnification may be provided pursuant to
agreements or
13
<PAGE>
bylaw provisions which make mandatory the permissive indemnification provided by
California law. The Articles of Incorporation of Affymetrix California permit
indemnification beyond that expressly mandated by California law and limit
director monetary liability to the extent permitted by California law.
Delaware law also permits a Delaware corporation to provide indemnification
in excess of that provided by statute. By contrast to California law, Delaware
law does not require authorizing provisions in the certificate of incorporation
and does not contain express prohibitions on indemnification in certain
circumstances. Limitations on indemnification may be imposed by a court,
however, based on principles of public policy.
LOANS TO OFFICERS AND EMPLOYEES
California Law requires that any loan or guaranty by the corporation to or
for a director or officer must be approved by shareholders, unless extended or
granted under a plan approved by shareholders. Shareholders may also approve a
bylaw authorizing the corporation's board of directors to approve loan or
guaranties to or for officers (including officers who are also directors), if
the board determines that the loan or guaranty may reasonably be expected to
benefit the corporation. Under Delaware Law, a corporation may make loans to,
guarantee the obligations of or otherwise assist its officers or other employees
(including any officer or other employee who is also a director) when, in the
board's judgment, such action may reasonably be expected to benefit the
corporation.
INSPECTION OF SHAREHOLDER LIST
Both California and Delaware law allow any shareholder to inspect the
shareholder list for a purpose reasonably related to such person's interest as a
shareholder. California law provides, in addition, for an absolute right to
inspect and copy the corporation's shareholder list by persons holding an
aggregate of 5% or more of the corporation's voting shares, or shareholders
holding an aggregate of 1% or more of such shares who have contested the
election of directors. Delaware law also provides for inspection rights as to a
list of stockholders entitled to vote at a meeting within a ten day period
preceding a stockholders' meeting for any purpose germane to the meeting.
However, Delaware law contains no provisions comparable to the absolute right of
inspection provided by California law to certain shareholders.
DIVIDENDS AND REPURCHASES OF SHARES
California law dispenses with the concepts of par value of shares as well as
statutory definitions of capital, surplus and the like. The concepts of par
value, capital and surplus are retained under Delaware law.
DELAWARE. Delaware law permits a corporation to declare and pay dividends
out of surplus or, if there is no surplus, out of net profits for the fiscal
year in which the dividend is declared and/or for the preceding fiscal year as
long as the amount of capital of the corporation following the declaration and
payment of the dividend is not less than the aggregate amount of the capital
represented by the issued and outstanding stock of all classes having a
preference upon the distribution of assets. In addition, Delaware law generally
provides that a corporation may redeem or repurchase its shares only if the
capital of the corporation is not impaired and such redemption or repurchase
would not impair the capital of the corporation.
CALIFORNIA. Under California law, a corporation may not make any
distribution (including dividends, whether in cash or other property, and
repurchases of its shares) to its shareholders unless either: (i) the
corporation's retained earnings immediately prior to the proposed distribution
equal or exceed the amount of the proposed distribution; or (ii) immediately
after giving effect to such distribution, the corporation's assets (exclusive of
goodwill, capitalized research and development expenses and deferred charges)
would be at least equal to 1 1/4 times its liabilities (not including deferred
taxes, deferred income and other deferred credits), and the corporation's
current assets would be at least equal to its current liabilities (or
14
<PAGE>
1 1/4 times its current liabilities if the average pre-tax and pre-interest
expense earnings for the preceding two fiscal years were less than the average
interest expense for such years). Such tests are applied to California
corporations on a consolidated basis.
To date, the Company has not paid cash dividends on its capital stock. It is
the current policy of the Board of Directors to retain earnings for use in the
Company's business, and therefore, the Company does not anticipate paying cash
dividends on its Common Stock in the foreseeable future. The holders of the
Preferred Stock are entitled to receive cumulative dividends at a rate of 6% per
annum, payable in two equal installments on June 30 and December 31 of each year
so long as shares of Preferred Stock are outstanding.
SHAREHOLDER VOTING
Both California and Delaware law generally require that a majority of the
shareholders of both acquiring and target corporations approve statutory
mergers.
DELAWARE. Delaware law does not require a stockholder vote of the surviving
corporation in a merger (unless the corporation provides otherwise in its
certificate of incorporation) if: (a) the merger agreement does not amend the
existing certificate of incorporation; (b) each share of stock of the surviving
corporation outstanding immediately before the effective date of the merger is
an identical outstanding share after the merger and; (c) either no shares of
common stock of the surviving corporation and no shares, securities or
obligations convertible into such stock are to be issued or delivered under the
plan of merger, or the authorized unissued shares or shares of common stock of
the surviving corporation to be issued or delivered under the plan of merger
plus those initially issuable upon conversion of any other shares, securities or
obligations to be issued or delivered under such plan do not exceed 20% of the
shares of common stock of such constituent corporation outstanding immediately
prior to the effective date of the merger.
CALIFORNIA. California law contains a similar exception to its voting
requirements for reorganizations where shareholders or the corporation itself,
or both, immediately prior to the reorganization will own immediately after the
reorganization equity securities constituting more than 83.3% (or five-sixths)
of the voting power of the surviving or acquiring corporation or its parent
entity.
Both California and Delaware law also require that a sale of all or
substantially all of the assets of a corporation be approved by a majority of
the outstanding voting shares of the corporation transferring such assets.
With certain exceptions, California law also requires that mergers,
reorganizations, certain sales of assets and similar transactions be approved by
a majority vote of each class of shares outstanding. By contrast, Delaware law
generally does not require class voting, except in certain transactions
involving an amendment to the certificate of incorporation which adversely
affects a specific class or series of shares.
California law also requires that holders of non-redeemable common stock
receive non-redeemable common stock in a merger of the corporation with the
holder of more than 50% but less than 90% of such common stock or its affiliate
unless all of the holders of such common stock consent to the transaction. This
provision of California law may have the effect of making a "cash-out" merger by
a majority shareholder more difficult to accomplish. Delaware law has no
comparable provision.
California law also provides that, except in certain circumstances, when a
tender offer or a proposal for a reorganization or for a sale of assets is made
by an interested party (generally, a controlling or managing party of the target
corporation), an affirmative opinion in writing as to the fairness of the
consideration to be paid to the shareholders must be delivered to shareholders.
This fairness opinion requirement does not apply to a corporation which does not
have shares held of record by at least 100 persons, or to a transaction which
has been qualified under California state securities laws. Furthermore, if a
tender of shares or vote is sought pursuant to an interested party's proposal
and a later proposal is made
15
<PAGE>
by another party at least ten days prior to the date of acceptance of the
interested party proposal, the shareholders must be informed of the later offer
and be afforded a reasonable opportunity to withdraw any vote, consent or proxy,
or to withdraw any tendered shares. Again, Delaware law has no comparable
provision.
APPRAISAL RIGHTS
Under both California and Delaware law, a shareholder of a corporation
participating in certain major corporate transactions may, under varying
circumstances, be entitled to appraisal rights pursuant to which such
shareholder may receive cash in the amount of the fair market value of his or
her shares in lieu of the consideration he or she would otherwise receive in the
transaction.
DELAWARE. Under Delaware law, such fair market value is determined
exclusive of any element of value arising from the accomplishment or expectation
of the merger or consolidation, and such appraisal rights are not available: (a)
with respect to the sale, lease or exchange of all or substantially all of the
assets of a corporation; (b) with respect to a merger or consolidation by a
corporation the shares of which are either listed on a national securities
exchange or are held of record by more than 2,000 holders if such stockholders
receive only shares of the surviving corporation or shares of any other
corporation that are either listed on a national securities exchange or held of
record by more than 2,000 holders, plus cash in lieu of fractional shares of
such corporations; or (c) to stockholders of a corporation surviving a merger if
no vote of the stockholders of the surviving corporation is required to approve
the merger under Delaware law.
CALIFORNIA. The limitations on the availability of appraisal rights under
California law are different from those under Delaware law. Shareholders of a
California corporation whose shares are listed on a national securities exchange
generally do not have such appraisal rights unless the holders of at least 5% of
the class of outstanding shares claim the right or the corporation or any law
restricts the transfer of such shares. Appraisal rights are also unavailable if
the shareholders of a corporation or the corporation itself, or both,
immediately prior to the reorganization will own immediately after the
reorganization equity securities constituting more than 83.3% (or five-sixths)
of the voting power of the surviving or acquiring corporation or its parent
entity. California law generally affords appraisal rights in sale of asset
reorganizations.
DISSOLUTION
Under California law, shareholders holding 50% or more of the total voting
power may authorize a corporation's dissolution, with or without the approval of
the corporation's Board of Directors, and this right may not be modified by the
articles of incorporation. Under Delaware law, unless the Board of Directors
approves the proposal to dissolve, the dissolution must be unanimously approved
by all the stockholders entitled to vote thereon. Only if the dissolution is
initially approved by the Board of Directors may the dissolution be approved by
a simple majority of the outstanding shares of the corporation's stock entitled
to vote. In the event of such a board-initiated dissolution, Delaware law allows
a Delaware corporation to include in its certificate of incorporation a
supermajority (greater than a simple majority) voting requirement in connection
with dissolutions. The Certificate of Incorporation of Affymetrix Delaware
contains no such supermajority voting requirement. A majority of the shares
voting at a meeting at which a quorum is present would be sufficient to approve
a dissolution of Affymetrix Delaware which had previously been approved by its
Board of Directors.
INTERESTED DIRECTOR TRANSACTIONS
Under both California and Delaware law, certain contracts or transactions in
which one or more of a corporation's directors has an interest are not void or
voidable because of such interest, provided that certain conditions, such as
obtaining the required approval and fulfilling the requirements of good faith
16
<PAGE>
and full disclosure, are met. With certain minor exceptions, the conditions are
similar under California and Delaware law.
SHAREHOLDER DERIVATIVE SUITS
California law provides that a shareholder bringing a derivative action on
behalf of a corporation need not have been a shareholder at the time of the
transaction in question, provided that certain tests are met. Under Delaware
law, a stockholder may bring a derivative action on behalf of the corporation
only if the stockholder was a stockholder of the corporation at the time of the
transaction in question or if his or her stock thereafter devolved upon him or
her by operation of law. California law also provides that the corporation or
the defendant in a derivative suit may make a motion to the court for an order
requiring the plaintiff shareholder to furnish a security bond. Delaware does
not have a similar bonding requirement.
APPLICATION OF THE GENERAL CORPORATION LAW OF CALIFORNIA TO DELAWARE
CORPORATIONS
Under Section 2115 of the California General Corporation Law, certain
foreign corporations (i.e., corporations not organized under California law)
which have significant contacts with California are subject to a number of key
provisions of the California General Corporation Law. However, an exemption from
Section 2115 is provided for corporations whose shares are listed on a major
national securities exchange, such as the Nasdaq National Market. Following the
Proposed Reincorporation, the Common Stock of Affymetrix Delaware will continue
to be traded on the Nasdaq National Market and, accordingly, Affymetrix Delaware
will be exempt from Section 2115.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of certain federal income tax considerations
that may be relevant to holders of Affymetrix California Common Stock and
Affymetrix California Preferred Stock who receive Affymetrix Delaware Common
Stock and Affymetrix Delaware Preferred Stock, respectively, in exchange for
their Affymetrix California Common Stock and Affymetrix California Preferred
Stock as a result of the Proposed Reincorporation. The discussion does not
address all of the tax consequences of the Proposed Reincorporation that may be
relevant to particular Affymetrix California shareholders, such as dealers in
securities, or those Affymetrix California shareholders who acquired their
shares upon the exercise of stock options, nor does it address the tax
consequences to holders of options or warrants to acquire Affymetrix California
Common Stock. Furthermore, no foreign, state, or local tax considerations are
addressed herein. IN VIEW OF THE VARYING NATURE OF SUCH TAX CONSEQUENCES, EACH
SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE SPECIFIC
TAX CONSEQUENCES OF THE PROPOSED REINCORPORATION, INCLUDING THE APPLICABILITY OF
FEDERAL, STATE, LOCAL OR FOREIGN TAX LAWS.
Subject to the limitations, qualifications and exceptions described herein,
and assuming the Proposed Reincorporation qualifies as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), the following tax consequences generally should result:
(a) No gain or loss should be recognized by holders of Affymetrix
California Common Stock or Series AA Stock upon receipt of Affymetrix
Delaware Common Stock or Series AA Stock, respectively, pursuant to the
Proposed Reincorporation;
(b) The aggregate tax basis of the Affymetrix Delaware Common Stock or
Series AA Stock received by each shareholder in the Proposed Reincorporation
should be equal to the aggregate tax basis of the Affymetrix California
Common Stock or Series AA Stock, respectively, surrendered in exchange
therefor; and
(c) The holding period of the Affymetrix Delaware Common Stock or Series
AA Stock received by each shareholder of Affymetrix California should
include the period for which such shareholder held the Affymetrix California
Common Stock or Series AA Stock, respectively, surrendered in
17
<PAGE>
exchange therefor, provided that such Affymetrix California Common Stock or
Affymetrix California Preferred Stock was held by the shareholder as a
capital asset at the time of the Proposed Reincorporation.
The Company has not requested a ruling from the Internal Revenue Service
(the "IRS") with respect to the federal income tax consequences of the Proposed
Reincorporation under the Code. THE COMPANY WILL, HOWEVER, RECEIVE AN OPINION
FROM AFFYMETRIX'S GENERAL TAX COUNSEL SUBSTANTIALLY TO THE EFFECT THAT THE
PROPOSED REINCORPORATION WILL QUALIFY AS A REORGANIZATION WITHIN THE MEANING OF
SECTION 368(a) OF THE CODE (THE "TAX OPINION"). THE TAX OPINION WILL NEITHER
BIND THE IRS NOR PRECLUDE IT FROM ASSERTING A CONTRARY POSITION. IN ADDITION,
THE TAX OPINION WILL BE SUBJECT TO CERTAIN ASSUMPTIONS AND QUALIFICATIONS AND
WILL BE BASED UPON THE TRUTH AND ACCURACY OF REPRESENTATIONS MADE BY AFFYMETRIX
DELAWARE AND AFFYMETRIX CALIFORNIA.
State, local or foreign income tax consequences to shareholders may vary
from the federal tax consequences described above.
The Company should not recognize gain or loss for federal income tax
purposes as a result of the Proposed Reincorporation, and Affymetrix Delaware
should succeed, without adjustment, to the federal income tax attributes of
Affymetrix California.
VOTE REQUIRED FOR THE REINCORPORATION PROPOSAL
Approval of the Reincorporation Proposal, which will also constitute
approval of (i) the Merger Agreement, the Certificate of Incorporation and the
Bylaws of Affymetrix Delaware, and (ii) the assumption of Affymetrix
California's employee benefit plans and stock option plans by Affymetrix
Delaware, will require the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock and Series AA Stock of Affymetrix California
entitled to vote. Pursuant to the Voting Trust Agreement, the Series AA Stock is
required to be voted proportionately in accordance with the votes cast by all
holders of the Company's Common Stock for and against the Reincorporation
Proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSED
REINCORPORATION IN DELAWARE. THE EFFECT OF AN ABSTENTION OR A BROKER NON-VOTE IS
THE SAME AS THAT OF A VOTE AGAINST THE REINCORPORATION PROPOSAL.
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP, independent auditors,
to audit the financial statements of the Company for the fiscal year ending
December 31, 1998. Ernst & Young LLP has audited the Company's financial
statements since inception. Representatives of Ernst & Young LLP are expected to
be present at the meeting with the opportunity to make a statement if they
desire to do so, and are expected to be available to respond to appropriate
questions.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the shares of the
Company's Common Stock and Series AA Stock voting together in person or by proxy
on this proposal at the annual meeting is required to approve the appointment of
the independent auditors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS.
18
<PAGE>
STOCK OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table sets forth the beneficial ownership of Common Stock of
the Company as of March 16, 1998 by: (a) each person known to the Company who
beneficially owns five percent or more of the outstanding shares of its Common
Stock; (b) each director; (c) each of the officers named in the Summary
Compensation Table below; and (d) all directors and executive officers as a
group:
<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES SHARES
BENEFICIALLY BENEFICIALLY
BENEFICIAL OWNER OWNED (1) OWNED (1)(2)
- --------------------------------------------------------------------------------------- ----------- ---------------
<S> <C> <C>
Glaxo Wellcome plc (3)................................................................. 7,705,067 33.4%
Greenford Road
Greenford, Middlesex, UBG OHE, UK.
Paul A. Berg, Ph.D. (4)................................................................ 58,446 *
John D. Diekman, Ph.D. (5)............................................................. 182,133 *
Stephen P.A. Fodor, Ph.D. (6).......................................................... 209,999 *
Douglas M. Hurt (7).................................................................... 7,731,731 33.5%
Vernon R. Loucks, Jr. (8).............................................................. 68,331 *
Vernon A. Norviel (9).................................................................. 32,364 *
Kenneth J. Nussbacher (10)............................................................. 36,666 *
Richard P. Rava, Ph.D. (11)............................................................ 25,333 *
Barry C. Ross, Ph.D. (7)............................................................... 7,731,731 33.5%
David B. Singer (12)................................................................... 123,998 *
Lubert Stryer, M.D. (13)............................................................... 124,581 *
John A. Young (14)..................................................................... 54,665 *
All directors and executive officers as a group (17 persons) (15)...................... 8,788,269 37.3%
</TABLE>
- ------------------------
* Represents beneficial ownership of less than one percent of the Common
Stock.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of Shares
beneficially owned by a person and the percentage of ownership of that
person, shares of Common Stock subject to options held by that person that
are currently exercisable or exercisable within 60 days of March 16, 1998
are deemed outstanding. Such shares, however, are not deemed outstanding
for the purpose of computing the percentage ownership of each other person.
The persons named in this table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws where applicable and except as indicated
in the other footnotes to this table.
(2) Percentage of beneficial ownership is based on 22,857,488 shares of Common
Stock outstanding as of March 16, 1998. Does not include 1,634,522 shares
of Series AA Stock issued on April 14, 1998.
(3) Held through its subsidiary, Affymax N.V. and includes 203,881 shares
issuable upon exercise of outstanding warrants at $8.25 per share. Does not
include the 1,634,522 shares of Series AA Stock issued to GWA, a wholly
owned subsidiary of Glaxo Wellcome, on April 14, 1998, which, on an as
converted basis, increases Glaxo Wellcome's beneficial ownership to 36.9%.
(4) Includes 13,332 shares issuable upon exercise of options exercisable within
60 days of March 16, 1998.
(5) Includes 104,999 shares issuable upon exercise of options exercisable
within 60 days of March 16, 1998.
(6) Includes 126,666 shares issuable upon exercise of options exercisable
within 60 days of March 16, 1998.
19
<PAGE>
(7) Includes 7,705,067 shares of Common Stock beneficially owned by Glaxo
Wellcome, of which Mr. Hurt and Dr. Ross disclaim beneficial ownership, and
26,664 shares issuable upon exercise of options exercisable within 60 days
of March 16, 1998 granted to Mr. Hurt and Dr. Ross in consideration of
their acting as directors on the Board. Does not include the 1,634,522
shares of Series AA Stock issued to GWA, a wholly owned subsidiary of Glaxo
Wellcome, on April 14, 1998, of which Mr. Hurt and Dr. Ross disclaim
beneficial ownership.
(8) Includes 13,332 shares issuable upon exercise of options exercisable within
60 days of March 16, 1998.
(9) Includes 32,364 shares issuable upon exercise of options exercisable within
60 days of March 16, 1998.
(10) Includes 21,666 shares issuable upon exercise of options exercisable
within 60 days of March 16, 1998.
(11) Includes 13,333 shares issuable upon exercise of options exercisable
within 60 days of March 16, 1998.
(12) Includes 13,332 shares issuable upon exercise of options exercisable
within 60 days of March 16, 1998.
(13) Includes 9,999 shares issuable upon exercise of options exercisable within
60 days of March 16, 1998.
(14) Includes 13,332 shares issuable upon exercise of options exercisable
within 60 days of March 16, 1998.
(15) Includes 492,179 shares issuable upon exercise of options exercisable
within 60 days of March 16, 1998. Also includes 7,705,067 shares owned by
Glaxo Wellcome, of which Mr. Hurt and Dr. Ross disclaim beneficial
ownership. Does not include the 1,634,522 shares of Series AA Stock issued
to GWA on April 14, 1998, of which Mr. Hurt and Dr. Ross disclaim
beneficial ownership. The inclusion of such shares, on an as converted
basis, would increase the beneficial ownership of all directors and
executive officers as a group to 40.5%.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors and persons who own more than ten percent of a registered class of
the Company's equity securities, to file with the Securities and Exchange
Commission (the "SEC") initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Executive
officers, directors and ten percent shareholders are required by SEC regulation
to furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge (based solely on review of the copies of such
reports furnished to the Company or written representations that no other
reports were required), during the year ended December 31, 1997, all executive
officers, directors and ten percent shareholders complied with all Section 16(a)
filing requirements.
20
<PAGE>
MANAGEMENT
The executive officers of the Company, and their ages and position as of the
Record Date, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------- --- ---------------------------------------------------------------
<S> <C> <C>
Stephen P.A. Fodor............... 44 President and Chief Executive Officer
Thomas R. Gingeras............... 50 Vice President, Biological Research
Karen H. Haynes.................. 37 Vice President, Human Resources and Administration
Edward M. Hurwitz................ 34 Vice President and Chief Financial Officer
Paul M. Kaplan................... 52 Vice President, Product Development
Robert J. Lipshutz............... 43 Vice President, Corporate Development
Vernon A. Norviel................ 39 Senior Vice President, General Counsel and Secretary
Kenneth J. Nussbacher............ 45 Executive Vice President
Richard P. Rava.................. 40 Senior Vice President, Operations and Technology
</TABLE>
STEPHEN P.A. FODOR, PH.D. See "Election of Directors."
THOMAS R. GINGERAS, PH.D., has served as Vice President, Biological Research
since January 1997. Dr. Gingeras joined the Company in December 1993 as Director
of Molecular Biology. From 1990 to 1993, Dr. Gingeras was Director of Baxter
Healthcare's Life Sciences Research Laboratory.
KAREN H. HAYNES was appointed Vice President, Human Resources and
Administration in March 1997. From 1993 to 1997, Ms. Haynes held various human
resources management positions at Affymax and Affymetrix, most recently as
Director of Human Resources for Affymetrix from 1995 to 1997. Prior to 1993, Ms.
Haynes held human resources positions at Lattice Semiconductor and Measurex
Corporation.
EDWARD M. HURWITZ, J.D., joined Affymetrix in May 1997 as Vice President and
Chief Financial Officer. From April 1994 to March 1997 Mr. Hurwitz served as
Senior Biotechnology Analyst at Robertson Stephens & Company. From 1992 to 1994,
Mr. Hurwitz held the position of Senior Biotechnology Analyst at Smith Barney
Shearson.
PAUL M. KAPLAN, PH.D., has been Vice President of Product Development since
joining the Company in April 1994. From 1988 to 1994, Dr. Kaplan served as Vice
President, Research and Development of the Diagnostic Division at Centocor,
Inc., where he was responsible for the identification, development and
commercialization of a variety of proprietary immunoassay products.
ROBERT J. LIPSHUTZ, PH.D., was appointed Vice President, Corporate
Development in March 1997. From May 1993 to February 1997 Dr. Lipshutz was
Director, Advanced Technology and Bioinformatics. From 1991 to 1993, Dr.
Lipshutz held the position of Vice President at Daniel H. Wagner, Associates.
VERNON A. NORVIEL, J.D., was appointed Vice President and General Counsel of
the Company in February 1996 and Senior Vice President, General Counsel and
Secretary in December 1997. From 1989 to 1996, Mr. Norviel was an associate and
then a partner with Townsend and Townsend and Crew LLP. In 1995 and for a
portion of 1996 (prior to becoming a full-time employee of the Company), Mr.
Norviel worked part-time for the Company.
KENNETH J. NUSSBACHER, J.D., has been Executive Vice President since joining
the Company in September 1995. From September 1995 to May 1997, Mr. Nussbacher
also served as Chief Financial Officer. From 1989 to 1995, Mr. Nussbacher held
various management positions at Affymax, most recently as Executive Vice
President for Business and Legal Affairs and Managing Director of Affymax
Technologies N.V.
21
<PAGE>
RICHARD P. RAVA, PH.D., has served as Senior Vice President, Operations and
Technology since September 1996. From September 1994 to September 1996, Dr. Rava
was Vice President of Research and Engineering. Dr. Rava joined the Company in
February 1993 as Director of Biomedical Engineering. From 1992 to 1993, Dr. Rava
was a Senior Scientist at Affymax Research Institute.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information concerning the
compensation of the Company's Chief Executive Officer ("CEO") and each of the
four other most highly compensated executive officers during 1997 (collectively,
the "Named Executive Officers") for services in all capacities as officers to
the Company during fiscal years 1995, 1996 and 1997.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION -------------
----------------------- SECURITIES
YEAR ENDING UNDERLYING
NAME AND PRINCIPAL POSITION 12/31 SALARY OPTIONS (#)
- ----------------------------------------------------------------------------- ----------- ---------- -------------
<S> <C> <C> <C>
John D. Diekman (1) 1997 $ 255,046 25,000
Chairman of the Board 1996 232,458 --
1995 97,304 166,666
Stephen P.A. Fodor (2) 1997 292,323 100,000
President and Chief Executive Officer 1996 240,824 --
1995 188,819 166,667
Vernon A. Norviel (3) 1997 200,045 25,000
Senior Vice President, General Counsel and Secretary 1996 122,775 86,667
Kenneth J. Nussbacher (4) 1997 220,583 50,000
Executive Vice President 1996 193,555 --
1995 50,087 116,667
Richard P. Rava 1997 200,045 50,000
Senior Vice President, Operations and Technology 1996 165,061 --
1995 136,962 60,000
</TABLE>
- ------------------------
(1) Dr. Diekman served as Chief Executive Officer from July 1995 to March 1997.
Prior to March 1996 when he became a full-time employee, Dr. Diekmen devoted
80% of his time to the Company and 20% to Affymax.
(2) Dr. Fodor became Chief Executive Officer commencing March 1997.
(3) Mr. Norviel was appointed Vice President and General Counsel in February
1996 and Senior Vice President, General Counsel and Secretary in December
1997. In 1996, Mr. Norviel devoted 80% of his time to the Company and 20% of
his time as a partner with Townsend and Townsend and Crew. Compensation for
1996 was for a partial year. In 1995, Mr. Norviel received $75,050 in salary
and options to purchase 6,667 shares of Common Stock as part-time patent
counsel to the Company.
(4) Mr. Nussbacher joined the Company in September 1995. Compensation for 1995
was for a partial year.
22
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following tables set forth information regarding stock options granted
to and exercised by the Named Officers during the last fiscal year, as well as
options held by such officers as of December 31, 1997, the last day of the
Company's 1997 fiscal year.
OPTIONS GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
INDIVIDUAL GRANTS (1) AT ANNUAL RATES OF STOCK
--------------------------------------------- PRICE APPRECIATION FOR
% OF TOTAL OPTIONS EXERCISE OR OPTION TERM (2)
OPTIONS GRANTED TO EMPLOYEES BASE PRICE EXPIRATION --------------------------
NAME GRANTED IN FISCAL YEAR PER SHARE DATE 5% 10%
- ------------------------------ --------- --------------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
John D. Diekman............... 25,000 2.5% $ 29.125 03/10/07 $ 457,914 $ 1,160,444
Stephen P.A. Fodor............ 100,000 10.0 29.125 03/10/07 1,831,656 4,641,775
Vernon A. Norviel............. 25,000 2.5 29.125 03/10/07 457,914 1,160,444
Kenneth Nussbacher............ 50,000 5.0 29.125 03/10/07 915,828 2,320,888
Richard P. Rava............... 50,000 5.0 29.125 03/10/07 915,828 2,320,888
</TABLE>
- ------------------------
(1) Each of these options was granted pursuant to the Company's Amended and
Restated 1993 Stock Plan and is subject to the terms of such plan.
(2) In accordance with the rules of the SEC, shown are the hypothetical gains or
"option spreads" that would exist for the respective options. These gains
are based on assumed rates of annual compounded stock price appreciation of
5% and 10% from the date the option was granted over the full option term.
The 5% and 10% assumed rates of appreciation are mandated by the rules of
the SEC and do not represent the Company's estimate or projection of future
increase in the price of its Common Stock.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following table sets forth certain information concerning the exercise
of options to purchase Common Stock during the year ended December 31, 1997 and
the number of unexercised options held as of December 31, 1997 by the Named
Officers.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES VALUE OPTIONS AT DECEMBER 31, DECEMBER 31, 1997
ACQUIRED ON REALIZED 1997 EXERCISABLE/UNEXERCISABLE
NAME EXERCISE ($)(1) EXERCISABLE/UNEXERCISABLE(#) ($)(2)
- ------------------------------------ ----------- ---------- --------------------------- ------------------------
<S> <C> <C> <C> <C>
John D. Diekman..................... -- -- 86,665/65,002 $ 2,638,950/$1,268,061
Stephen P.A. Fodor.................. -- -- 126,666/240,001 3,856,980/4,463,031
Vernon A. Norviel................... 2,300 $ 60,129 21,698/101,003 558,742/1,954,892
Kenneth J. Nussbacher............... 20,000 711,813 21,666/120,001 659,730/2,231,531
Richard P. Rava..................... 27,998 946,934 13,333/98,670 405,990/1,585,753
</TABLE>
- ------------------------
(1) Based on the value of the Company's Common Stock on the date of exercise
minus the exercise price of the options multiplied by the number of shares
underlying the option.
(2) Assuming a stock price of $31.125 per share, which was the closing price of
a Share of Common Stock reported on the Nasdaq National Market on December
31, 1997.
23
<PAGE>
COMPENSATION COMMITTEE REPORT(1)
The Compensation Committee (the "Committee") of the Board of Directors is
generally responsible for the design, structure and administration of the
executive officer compensation program, including reviewing compensation and
stock option grants for the Company's executive team. Executive compensation is
initially recommended by the President and Chief Executive Officer (other than
for himself). The basis for such recommendations includes performance reviews
and competitive base salary data. The compensation and performance of the
President and Chief Executive Officer are separately evaluated. In determining
compensation policies, the Committee has access to compensation and benefits
surveys for regional biotechnology companies that compete with the Company. The
Committee consists of three non-employee directors.
COMPENSATION POLICIES
The Committee, together with the Company's Board of Directors, has developed
an executive compensation program, which (i) relates each executive's level of
compensation to Affymetrix's success in achieving its annual and long-term
performance goals, (ii) rewards individual achievement, and (iii) seeks to
attract and retain qualified executives. Affymetrix positions its executive
compensation with the compensation of similar management positions in peer
companies consisting primarily of regional biotechnology and other high
technology companies. The level of compensation paid to executive officers of
the Company also takes into account the Company's technological achievements
during the year, new product offerings to customers, the Company's success in
entering into significant technology agreements with collaborators, as well as
an evaluation of the individual performance and contribution of each executive
to the Company's overall performance for the year. The Committee does not use
either the profitability of the Company or the market value of its stock in
setting executive officer base compensation.
Compensation for senior management consists of (i) cash compensation, which
is based on such factors as the individual officer's level of responsibility for
meeting the Company's strategic, technological, and financial objectives, and
(ii) stock options which are intended to align the interests of executives with
the interests of the shareholders. Guidelines for executive stock option grants
are developed through analysis of long-term incentive awards based on each
individual executive's position, responsibilities, performance and contribution
to the achievement of the Company's long-term goals using competitive stock
option data from regional biotechnology companies.
CHIEF EXECUTIVE OFFICER'S COMPENSATION
The 1997 compensation of Dr. Stephen P.A. Fodor, the Company's President and
Chief Executive Officer, took into account the policies identified above, and
specific achievement of the Company's 1997 milestones. These milestones included
new product offerings, signing over 30 academic and commercial agreements,
expanding the Company's installed base with customers to 55 GeneChip systems,
expanding the Company's distribution and manufacturing capabilities and
investing in new long-term research initiatives. The Committee believes that the
compensation of the Company's Chief Executive Officer was in the mid-range for
CEOs of regional biotechnology companies.
COMPENSATION PAYABLE TO EXECUTIVE OFFICERS
Compensation payable to the Company's other executive officers takes into
account the above policies and the individual contribution of each executive
officer to the Company's performance during the year.
- ------------------------
(1) The Compensation Committee Report, the Stock Performance Graph and related
disclosure are not soliciting material, are not deemed to be filed with the SEC,
and are not to be incorporated by reference in any filing of the Company under
the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,
as amended, whether made before or after the date of this proxy statement and
irrespective of any general incorporation language in such filing.
24
<PAGE>
With respect to cash compensation payable to its executive officers for 1997,
the Committee benchmarks its base salary structure to salary survey data at the
50th percentile. The Committee believes that the compensation of the Company's
executive officers was in the mid range payable to executive officers of
comparable regional biotechnology companies for 1997.
SECTION 162(m) COMPLIANCE
Section 162(m) of the Code limits the Company to a deduction for federal
income tax purposes of no more than $1 million of compensation paid to the Named
Executive Officers in a taxable year. Compensation above $1 million may be
deducted if it is "performance-based compensation" within the meaning of the
Code.
The Compensation Committee has determined that stock options granted under
the Company's 1993 Stock Plan with an exercise price at least equal to the fair
market value of the Company's Common Stock on the date of grant shall be treated
as "performance-based compensation." At the 1997 Annual Meeting of Shareholders,
the shareholders approved an amendment to the 1993 Stock Plan which would allow
compensation recognized by a Named Executive Officer as a result of the grant of
such a stock option to be deductible by the Company.
Dr. Paul Berg
Mr. John Young
Dr. Alejandro Zaffaroni
CERTAIN TRANSACTIONS
In July 1995, the Company and Glaxo Wellcome entered into an agreement (the
"Governance Agreement") pursuant to which Glaxo Wellcome has the right to
designate a number of directors based on the percentage of voting stock then
held directly or indirectly by Glaxo Wellcome and is obligated to vote its
shares for the slate of directors recommended to the shareholders. The
Governance Agreement was amended in March 1998 in connection with the issuance
of the Preferred Stock to GWA. Glaxo Wellcome currently has the right to
designate three of the nine directors of the Company. Pursuant to the Governance
Agreement, Glaxo Wellcome also agreed that any merger, consolidation or business
combination whereby the Company would become a direct or indirect wholly-owned
subsidiary of Glaxo Wellcome and any material transaction between the Company
and Glaxo Wellcome must be approved by a majority of the independent directors
of the Company. In addition, pursuant to the Governance Agreement, the Company
granted Glaxo Wellcome certain registration rights with respect to its shares.
The Company and Glaxo Wellcome intend to amend the Governance Agreement,
effective upon the Proposed Reincorporation, to give Glaxo Wellcome the right to
call a special meeting of the stockholders, so long as Glaxo Wellcome continues
to hold at least 10% of the outstanding capital stock of the Company.
In May 1996, the Company entered into an agreement with Glaxo Wellcome to
develop and supply probe arrays to detect polymorphisms in specific genes. The
agreement, which has a term of up to three years, provides for development
funding and milestone payments upon achievement of certain technical goals. In
January 1997, the Company entered into a HIV data base agreement with Glaxo
Wellcome. Under the terms of the agreement, the Company and Glaxo Wellcome will
work together to build a database to understand the correlation between
mutations in HIV and response to antiviral drugs. Glaxo Wellcome will pay all
costs of the project. For the year ended December 31, 1997, the Company
recognized revenue under both agreements totaling $1,890,000.
On April 14, 1998, the Company sold 1,634,522 shares of Series AA Stock at
$30.59 per share to GWA in a private placement. The Series AA Stock is
convertible into Common Stock at approximately $40 per share. Until such time as
the Series AA Stock is converted into Common Stock, Affymetrix is required to
pay a 6.5% cumulative dividend on such shares. The Series AA Stock and the
Common Stock underlying
25
<PAGE>
the Series AA Stock have not been registered under the Securities Act of 1933.
In connection with the issuance of the Preferred Stock, the Company and Glaxo
Wellcome agreed to amend the Governance Agreement.
The Company and GWA also entered into the Voting Trust Agreement pursuant to
which, with respect to any consolidation, reorganization or merger of the
Company or any other transaction requiring a majority vote of each outstanding
class of capital stock voting as separate class, the Series AA Stock is required
to be voted proportionately in accordance with the votes cast by all holders of
the Company's Common Stock for and against such transaction, except where such
transaction would have an adverse effect on the Series AA Stock.
In February 1997, the Company entered into an agreement with Affymax and
several of its affiliated entities that supersedes the technology license
agreement between the Company and Affymax entered into in 1993. Under the terms
of the agreement, which was effective as of 1995, Affymax assigned to the
Company all rights in patents relating to light directed synthesis technologies
and probe array technologies, and the Company's license rights in certain
technologies including "encoded synthetic library" technology were terminated.
The Company retains or was assigned rights to use certain trademarks, including
"Affymetrix."
In February 1996, the Company and Symyx, Inc. ("Symyx") entered into a
sublease agreement at market rates for a portion of the property leased to the
Company in Sunnyvale. For the year ended December 31, 1997, Symyx paid the
Company $127,000 under this sublease. Kenneth J. Nussbacher is a director of
Symyx. The sublease agreement expired in October 1997.
In April 1997, the Company made a $500,000 secured loan to Dr. Fodor to
assist him in purchasing a house. The loan bears an interest rate of 6.49% and
is due on the first to occur of April 11, 2002, the sale of the house, or
termination of Dr. Fodor's employment.
In June 1995, the Company entered into an agreement with David B. Singer in
connection with his resignation as President and Chief Executive Officer and
assumption of the position of Vice Chairman of the Board. Pursuant to the
agreement, the Company relinquished its right to repurchase any of the 133,333
shares of Common Stock acquired by Mr. Singer in December 1993, amended the
option to purchase 100,000 shares granted to Mr. Singer in December 1994 to
fully vest 50,000 shares as of September 1995, and waived its right to demand
repayment of a secured promissory note in the principal amount of $40,000,
evidencing a loan made to Mr. Singer in December 1993 to enable him to purchase
133,000 shares of Common Stock until July 1998. The loan bears interest at the
rate of 5.07% per annum. Pursuant to the agreement, Mr. Singer agreed to
continue to serve as a Director of the Company if nominated and elected by the
shareholders, to serve as Vice Chairman of the Board, and to provide consulting
services to the Company relating to the financing of the Company, grants and
government relations.
The Company has entered into indemnification agreements with each of its
directors and executive officers. Such agreements require the Company to
indemnify such persons to the fullest extent permitted by California law. The
Company intends to enter into indemnification agreements with each of its
directors and executive officers after the Proposed Reincorporation. Such
agreements will require the Company to indemnify such persons to the fullest
extent permitted by Delaware law.
26
<PAGE>
STOCK PERFORMANCE GRAPH(1)
SHAREHOLDER RETURN COMPARISON
The graph below compares the cumulative total return* on the Company's
Common Stock for period commencing June 6, 1996 (the date on which the Company's
Common Stock was first publicly traded) and ending December 31, 1997 compared to
the CRSP Total Return Index for the Nasdaq National Market (U.S. companies) and
the CRSP Total Return Index for the NASDAQ Pharmaceutical Stocks (SIC 283). The
stock price performance shown on the graph below is not necessarily indicative
of future price performance.
COMPARISON OF CUMULATIVE SHAREHOLDER RETURN*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AFFYMETRIX, INC. NASDAQ PHARMACEUTICAL NASDAQ STOCK MARKET-US
<S> <C> <C> <C>
6/06/96 $100.00 $100.00 $100.00
6/96 101.7 89.82 96.31
12/96 134.6 89.14 104.64
6/97 231.70 91.39 117.11
12/31/97 207.5 92.04 128.43
</TABLE>
- ------------------------
* Assumes $100 invested on June 6, 1996 in the Company's Common Stock and in
each index listed above. The total return for the Company's Common Stock and the
indices used assumes the reinvestment of dividends, even though dividends have
never been declared on the Company's Common Stock.
27
<PAGE>
OTHER MATTERS
The Company knows of no other matters to be submitted at the meeting. If any
other matters properly come before the meeting, it is the intention of the
persons named in the enclosed proxy to vote the shares they represent as the
Board of Directors may recommend.
It is important that your shares be represented at the meeting, regardless
of the number of shares which you hold. Please complete, date, execute and
return, at your earliest convenience, the accompanying proxy card in the
envelope which has been enclosed.
BY ORDER OF THE BOARD OF DIRECTORS
Vernon A. Norviel
Secretary
Dated: , 1998
28
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BETWEEN
AFFYMETRIX, INC.,
A CALIFORNIA CORPORATION
AND
AFFYMETRIX, INC.,
A DELAWARE CORPORATION
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is dated as of ,
1998 between Affymetrix, Inc., a California corporation ("Affymetrix
California"), and Affymetrix, Inc., a Delaware corporation ("Affymetrix
Delaware"), a wholly owned subsidiary of Affymetrix California.
BACKGROUND
A. Affymetrix California is a corporation duly organized, validly existing
and in good standing under the laws of the State of California and, on the date
of this Agreement, has authority to issue 77,500,000 shares consisting of
50,000,000 shares of Common Stock, no par value, and 27,500,000 shares of
Preferred Stock, no par value, of which shares of Common Stock and 1,634,522
shares of Preferred Stock are issued and outstanding.
B. Affymetrix Delaware is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and, on the date of
this Agreement, has authority to issue 77,500,000 shares, consisting of
50,000,000 shares of Common Stock, $0.01 par value, and 27,500,000 shares of
Preferred Stock, $0.01 par value, of which one share of Common Stock is issued
and outstanding and owned by Affymetrix California and no shares of Preferred
Stock are issued and outstanding.
C. The Board of Directors of each of Affymetrix California and Affymetrix
Delaware have determined that it is advisable and in the best interests of each
of such corporations that Affymetrix California merge into Affymetrix Delaware
upon the terms and subject to the conditions set forth in this Agreement, for
the purpose of effecting the reincorporation of Affymetrix California in the
State of Delaware and have, by resolutions duly adopted, approved this Agreement
and directed that it be submitted to a vote of their respective stockholders and
executed by the undersigned officers.
THE PARTIES AGREE AS FOLLOWS:
ARTICLE I
DEFINITIONS
When used in this Agreement (and in any Exhibit in which such terms are not
otherwise defined) the following terms shall have the following meanings:
"CALIFORNIA COMMON STOCK" shall mean shares of Common Stock, no par value,
of Affymetrix California.
"CALIFORNIA PREFERRED STOCK" shall mean shares of Preferred Stock, no par
value, of Affymetrix California.
"CERTIFICATE OF MERGER" shall mean the Certificate of Merger of Affymetrix
California into Affymetrix Delaware to be filed with the Secretary of State of
the State of Delaware in substantially the form attached hereto as Exhibit 2.1.
"DELAWARE COMMON STOCK" shall mean shares of Common Stock, $0.01 par value,
of Affymetrix Delaware.
"DELAWARE PREFERRED STOCK" shall mean shares of Preferred Stock, $0.01 par
value, of Affymetrix Delaware.
<PAGE>
"EFFECTIVE TIME" shall mean the time when the Certificate of Merger is filed
with the Secretary of State of the State of Delaware and the Merger becomes
effective.
"MERGER" shall mean the merger of Affymetrix California into Affymetrix
Delaware.
"SURVIVING CORPORATION" shall mean Affymetrix Delaware from and after the
Effective Time.
ARTICLE II
MERGER
2.1 MERGER. At the Effective Time, the Merger shall become effective under
Section 252 of the Delaware General Corporation Law and Section 1108(d) of the
California General Corporation Law, and Affymetrix California shall merge into
Affymetrix Delaware, the separate existence of Affymetrix California shall cease
and Affymetrix Delaware shall continue in existence as the surviving corporation
under the Delaware General Corporation Law.
2.2 FILINGS. On or prior to the Closing Date, Affymetrix California and
Affymetrix Delaware shall cause:
(a) an executed counterpart of the Certificate of Merger to be filed
with the Secretary of State of California; and
(b) the Certificate of Merger to be filed with the Secretary of State of
Delaware. As soon as practicable after the Effective Time, the Surviving
Corporation shall cause the Certificate of Merger to be filed with the
County Recorder of the county in which the registered office of Affymetrix
Delaware in the State of Delaware is located and shall cause such other
local filings to be made as are required under the laws of the State of
California.
2.3 EFFECTS OF THE MERGER. At the Effective Time:
(a) the separate existence of Affymetrix California shall cease and
Affymetrix California shall be merged into Affymetrix Delaware;
(b) the Certificate of Incorporation of Affymetrix Delaware shall
continue as the Certificate of Incorporation of the Surviving Corporation;
(c) the Bylaws of Affymetrix Delaware shall continue as the Bylaws of
the Surviving Corporation;
(d) each officer and director of Affymetrix California in office
immediately prior to the Effective Time shall serve in the same capacity as
an officer or director of the Surviving Corporation immediately after the
Effective Time;
(e) each share of California Common Stock outstanding immediately prior
to the Effective Time shall be converted into one share of Delaware Common
Stock pursuant to Article III;
(f) each share of California Preferred Stock outstanding immediately
prior to the Effective Time shall be converted into one share of Delaware
Preferred Stock pursuant to Article III; and
(g) without further transfer, act, or deed, the separate existence of
Affymetrix California shall cease and the Surviving Corporation shall
possess all the rights, privileges, powers and franchises, and shall be
subject to all the restrictions, disabilities and duties, of Affymetrix
California; and all property, real, personal and mixed, and all debts due to
Affymetrix California on whatever account, as well as stock subscriptions
and all other things belonging to Affymetrix California shall be vested in
the Surviving Corporation; and all property, rights, privileges, powers and
franchises, and all and every other interest of Affymetrix California shall
be thereafter as effectually the property of the Surviving Corporation as
they were of Affymetrix California, and the title to any real estate vested
by deed or otherwise in Affymetrix California shall not revert or be in any
way impaired by reason of the Merger; and all rights of creditors of
Affymetrix California and all liens upon any property of Affymetrix
2
<PAGE>
California shall be preserved unimpaired and all debts, liabilities and
duties of Affymetrix California shall attach to the Surviving Corporation
and may be enforced against it to the same extent as if such debts,
liabilities and duties had been incurred or contracted by it.
2.4 FURTHER ASSURANCES. Affymetrix California agrees that if, at any time
after the Effective Time, the Surviving Corporation shall consider or be advised
that any further deeds, assignments or assurances are necessary or desirable to
vest, perfect or confirm in the Surviving Corporation title to any property or
rights of Affymetrix California, the Surviving Corporation and its officers and
directors may execute and deliver all such deeds, assignments and assurances and
do all other things necessary or desirable to vest, perfect or confirm title to
such property or rights in the Surviving Corporation and otherwise to carry out
the purposes of this Agreement, in the name of Affymetrix California or
otherwise.
ARTICLE III
CONVERSION OF STOCK
3.1 CONVERSION OF STOCK. At the Effective Time, the stock of Affymetrix
California shall be converted into stock of Affymetrix Delaware, as follows:
(a) each share of California Common Stock issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into one
share of Delaware Common Stock;
(b) each share of California Preferred Stock issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into one
share of Delaware Preferred Stock; and
(c) each share of Delaware Common Stock issued and outstanding
immediately prior to the Effective Time shall be canceled and retired and no
stock shall be issued in the Merger in respect thereof.
3.2 STOCK CERTIFICATES. At and after the Effective Time, all of the
outstanding certificates which immediately prior to the Effective Time
represented shares of California Common Stock or California Preferred Stock
shall be deemed for all purposes to evidence ownership of, and to represent,
shares of Delaware Common Stock or Delaware Preferred Stock, respectively, into
which the shares of California Common Stock or California Preferred Stock
formerly represented by such certificates have been converted as provided in
this Agreement. The registered owner on the books and records of Affymetrix
Delaware or its transfer agent of any outstanding stock certificate shall, until
such certificate shall have been surrendered for transfer or otherwise accounted
for to Affymetrix Delaware or its transfer agents, have and be entitled to
exercise any voting and other rights with respect to, and to receive any
dividends and other distributions upon, the shares of Delaware Common Stock or
Delaware Preferred Stock evidenced by such outstanding certificate as provided
above.
3.3 STOCK OPTIONS. Each right or option to purchase shares of California
Common Stock granted under the Affymetrix, Inc. Amended and Restated 1993 Stock
Plan (the "1993 Plan") and the Director's Stock Option Plan (the "Director's
Plan" and collectively with the 1993 Plan, the "Plans") which are outstanding
immediately prior to the Effective Time, shall by virtue of the Merger and
without any action on the part of the holder thereof, be converted into and
become an option to purchase the same number of shares of Delaware Common Stock
at the same option price per share, and upon the same terms and subject to the
same conditions as in effect at the Effective Time. The same number of shares of
Delaware Common Stock shall be reserved for purposes of said Plans as is equal
to the number of shares of California Common Stock so reserved as of the
Effective Time. As of the Effective Time, Affymetrix Delaware hereby assumes the
Plans and all obligations of Affymetrix California under the Plans including the
outstanding options or awards or portions thereof granted pursuant to the Plans.
3
<PAGE>
3.4 VALIDITY OF DELAWARE COMMON STOCK AND DELAWARE PREFERRED STOCK. All
shares of Delaware Common Stock and Delaware Preferred Stock into which
California Common Stock and California Preferred Stock, respectively, are to be
converted pursuant to the Merger shall not be subject to any statutory or
contractual preemptive rights, shall be validly issued, fully paid and
nonassessable and shall be issued in full satisfaction of all rights pertaining
to such California Common Stock and California Preferred Stock, respectively.
3.5 RIGHTS OF FORMER HOLDERS. From and after the Effective Time, no holder
of certificates which evidenced California Common Stock or California Preferred
Stock immediately prior to the Effective Time shall have any rights with respect
to the shares formerly evidenced by those certificates, other than to receive
the shares of Delaware Common Stock or Delaware Preferred Stock into which such
California Common Stock or California Preferred Stock shall have been converted
pursuant to the Merger.
ARTICLE IV
GENERAL
4.1 CONSENTS. Each of Affymetrix California and Affymetrix Delaware shall
use its best efforts to obtain the consent and approval of each person (other
than shareholders of Affymetrix California in their capacities as such) whose
consent or approval shall be required in order to permit consummation of the
Merger.
4.2 GOVERNMENTAL AUTHORIZATIONS. Each of Affymetrix California and
Affymetrix Delaware shall cooperate in filing any necessary reports or other
documents with any federal, state, local or foreign authorities having
jurisdiction with respect to the Merger.
4.3 WAIVER AND AMENDMENT. This Agreement may be amended by action of the
Board of Directors of each of Affymetrix California and Affymetrix Delaware
without action by the stockholders of the parties, except that (a) any amendment
to Section 3.1, (b) any amendment changing the terms, rights, powers or
preferences of the Delaware Common Stock or Delaware Preferred Stock, or (c) any
amendment altering any terms of this Agreement if such alteration would
adversely affect the holders of California Common Stock, California Preferred
Stock or Delaware Common Stock or Delaware Preferred Stock must be approved by
the stockholders of the parties as required by applicable law.
4.4 TERMINATION. This Agreement may be terminated and the Merger and other
transactions provided for by this Agreement abandoned at any time prior to the
Effective Time, whether before or after adoption and approval of this Agreement
by the shareholders of Affymetrix California, by action of the Board of
Directors of Affymetrix California if the Board determines that the consummation
of the transactions contemplated by this Agreement would not, for any reason, be
in the best interests of Affymetrix California and its shareholders.
4.5 ENTIRE AGREEMENT. This Agreement (including any exhibits), contains
the entire agreement among the parties with respect to the Merger and supersedes
all prior and concurrent arrangements, letters of intent or understandings
relating to the Merger.
4.6 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which when taken
together shall constitute one and the same agreement. This Agreement shall
become effective when one or more counterparts has been signed by each of the
parties and delivered to each of the other parties.
4.7 HEADINGS. The article, section and paragraph headings in this
Agreement have been inserted for identification and reference and shall not by
themselves determine the meaning or interpretation of any provision of this
Agreement.
4.8 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware and, so far as applicable, the
merger provisions of the California General Corporation Law.
4
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as
of the date first above written.
AFFYMETRIX, INC.
a California Corporation
By: __________________________________
Title: _______________________________
AFFYMETRIX, INC.
a Delaware Corporation
By: __________________________________
Title: _______________________________
5
<PAGE>
APPENDIX B
CERTIFICATE OF INCORPORATION
OF
AFFYMETRIX, INC.
FIRST: The name of the corporation is Affymetrix, Inc. (the "Corporation").
SECOND: The address of the Corporation's registered office in the State of
Delaware is 9 E. Lockerman Street, City of Dover, County of Kent. The name of
the Corporation's registered agent at such address is National Corporate
Research.
THIRD: The nature of the business or purposes to be conducted or promoted
by the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the Delaware General Corporation Law.
FOURTH: I. The Corporation is authorized to issue two classes of stock to
be designated, respectively, Common Stock, par value $0.01 per share ("Common
Stock"), and Preferred Stock, par value $0.01 per share ("Preferred Stock"). The
total number of shares of all classes of stock which the Corporation shall have
authority to issue is Seventy Seven Million Five Hundred Thousand (77,500,000),
consisting of Fifty Million (50,000,000) shares of Common Stock and Twenty Seven
Million Five Hundred Thousand (27,500,000) shares of Preferred Stock.
II. The board of directors is authorized from time to time, subject to any
limitations prescribed by law, to provide for the issuance of shares of
Preferred Stock in one or more series, and in connection with the creation of
any such series, by resolution or resolutions providing for the issuance of
shares thereof, to establish from time to time the number of shares to be
included in each such series, to determine and fix such voting powers, full or
limited or no voting powers, and to fix the designation, preferences, and
relative, participating, optional or other special rights of the shares of each
such series, and any qualifications, limitations or restrictions thereof. The
number of authorized shares of Preferred Stock may be increased or decreased
(but not below the number of shares thereof then outstanding) by the affirmative
vote of the holders of a majority of the Common Stock, without a vote of the
holders of the Preferred Stock, or of any series thereof, unless a vote of any
such holders is required pursuant to the terms of any resolution or resolutions
providing for the issue of such stock adopted by the board of directors of the
Corporation.
FIFTH: There shall be a series of Preferred Stock designated as "Series AA
Preferred Stock" and the number of shares constituting such series shall be one
million six hundred thirty four thousand five hundred twenty two (1,634,522)
shares (the "Series AA Preferred Stock"). The rights, preferences, privileges,
and restrictions granted to and imposed on the Series AA Preferred Stock are as
set forth below:
1. DIVIDEND PROVISIONS.
(a) Subject to the rights of any series of Preferred Stock that may from
time to time come into existence, the holders of shares of Series AA
Preferred Stock shall be entitled to receive dividends payable in cash, out
of any assets legally available therefor, prior and in preference to any
declaration or payment of any dividend (payable other than in Common Stock
or other securities and rights convertible into or entitling the holder
thereof to receive, directly or indirectly, additional shares of Common
Stock of this Corporation) on the Common Stock of this Corporation, at the
rate per share per annum of $1.99 (as adjusted for any stock splits, stock
dividends, combinations, recapitalizations or the like with respect to the
Series AA Preferred Stock) payable in two equal installments on June 30 and
December 31 of each year so long as such share of Series AA Preferred Stock
is then outstanding. Such dividends shall accrue on each share from the
Purchase Date (as defined below), and shall accrue from day to day, whether
or not earned or declared. Such dividends shall be cumulative so that,
except as provided below, if such dividends in respect of any previous or
current dividend period, at the annual rate specified above, shall not have
been paid, the deficiency shall first be fully paid before any dividend or
other distribution shall be paid on or declared and set apart for
<PAGE>
the Common Stock. Cumulative dividends with respect to a share of Series AA
Preferred Stock which are accrued, payable and/or in arrears shall, upon
conversion of such share to Common Stock or redemption of such share, be
paid to the extent assets are legally available therefor pursuant to the
provisions of Section 2 and Section 3, respectively, and any amounts for
which assets are not legally available shall be paid promptly as assets
become legally available therefor; any partial payment will be made pro rata
among the holders of such shares. The holders of the outstanding Series AA
Preferred Stock can waive any dividend preference that such holders shall be
entitled to receive under this Section 1 upon the affirmative vote or
written consent of the holders of at least a majority of the Series AA
Preferred Stock then outstanding.
(b) Subject to the rights of any shares of Preferred Stock that may from
time to time come into existence and in addition to the amounts paid
pursuant to subsection 1(a) above, the holders of shares of Series AA
Preferred Stock shall be entitled to receive an amount equal to any dividend
paid (other than dividends paid in Common Stock or other securities and
rights convertible into or entitling the holder thereof to receive, directly
or indirectly, additional shares of Common Stock of this Corporation) on the
Common Stock of this Corporation (as determined on a per annum basis and on
as a converted basis for the Series AA Preferred Stock), payable when, as
and if declared by the Board of Directors. Such dividends shall not be
cumulative.
2. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up of this
Corporation, either voluntary or involuntary, subject to the rights of
series of Preferred Stock that may from time to time come into existence,
the holders of Series AA Preferred Stock shall be entitled to receive, prior
and in preference to any distribution of any of the assets of this
Corporation to the holders of Common Stock by reason of their ownership
thereof, an amount per share equal to the sum of (i) $30.59 for each
outstanding share of Series AA Preferred Stock (the "Original Series AA
Issue Price") (subject to adjustment of such fixed dollar amounts for any
stock splits, stock dividends, combinations, recapitalizations or the like
with respect to the Series AA Preferred Stock), (ii) accrued but unpaid
dividends on such share, and (iii) a per share amount equal to the
difference obtained by subtracting (A) the product of ten percent of the
annual per share dividend multiplied by a fraction, the numerator of which
is the number of days elapsed since the date upon which the first share of
Series AA Preferred Stock was first issued (the "Purchase Date") and the
denominator of which is 365, from (B) the annual per share dividend. The sum
obtained by adding the amounts described in clauses (i), (ii) and (iii) of
the preceding sentence is referred to herein as the "Series AA Liquidation
Preference". If upon the occurrence of such event, the assets and funds thus
distributed among the holders of the Series AA Preferred Stock shall be
insufficient to permit the payment to such holders of the full aforesaid
preferential amounts, then, subject to the rights of series of Preferred
Stock that may from time to time come into existence, the entire assets and
funds of this Corporation legally available for distribution shall be
distributed ratably among the holders of the Series AA Preferred Stock in
proportion to the amount of such stock owned by each such holder.
(b) Upon the completion of the distribution required by subparagraph (a)
of this Section 2 and any other distribution that may be required with
respect to series of Preferred Stock that may from time to time come into
existence, if assets remain in this Corporation, the holders of the Common
Stock of this Corporation, shall receive an amount per share of Common Stock
equal to the quotient obtained by dividing (i) the Series AA Liquidation
Preference, by (ii) the number of shares of Common Stock into which one (1)
share of Series AA Preferred Stock could then be converted pursuant to
Section 4 hereof. If upon the occurrence of such event, the assets and funds
thus distributed among the holders of the Common Stock shall be insufficient
to permit the payment to such holders of the full aforesaid preferential
amount, then, subject to the rights of series of Preferred Stock that may
from time to time come into existence, the entire remaining assets and funds
of this
2
<PAGE>
Corporation legally available for distribution shall be distributed ratably
among the holders of the Common Stock in proportion to the amount of such
stock owned by each such holder.
(c) After the distributions described in subsection (a) and (b) above
have been paid, subject to the rights of series of Preferred Stock that may
from time to time come into existence, the remaining assets of this
Corporation available for distribution to stockholders shall be distributed
among the holders of Series AA Preferred Stock and Common Stock pro rata
based on the number of shares of Common Stock held by each (assuming full
conversion of all such Series AA Preferred Stock).
(d) (i) The following events shall be deemed to be a liquidation,
dissolution or winding up within the meaning of this Section 2: (A) a
consolidation or merger of this Corporation with or into any other
corporation or corporations as a result of which the holders of voting stock
of this Corporation immediately prior to such transaction do not own,
directly or indirectly, more than 50% of the voting power of the surviving
corporation or its parent corporation immediately after such transaction, or
(B) a sale, conveyance or disposition of all or substantially all of the
assets of this Corporation.
(ii) In any of such events, the value of the assets distributed to
the stockholders of this Corporation shall be determined as set forth
herein. If the assets distributed to the stockholders of this Corporation
consist of other than cash or securities, the value of such assets shall
be the fair market value thereof, as determined by this Corporation and
the holders of at least a majority of the voting power of all the then
outstanding shares of Preferred Stock. If the assets distributed to the
stockholders of this Corporation consist of securities, such securities
shall be valued as follows:
(A) Securities not subject to investment letter or other similar
restrictions on free marketability covered by (B) below:
(1) If traded on a securities exchange or through the Nasdaq
National Market, the value shall be deemed to be the average of
the closing prices of the securities on such exchange or system
over the twenty (20) trading day period ending three (3) trading
days prior to the closing;
(2) If actively traded over-the-counter, the value shall be
deemed to be the average of the closing bid or sale prices
(whichever is applicable) over the twenty (20) trading day period
ending three (3) trading days prior to the closing; and
(3) If there is no active public market, the value shall be
the fair market value thereof, as mutually determined by this
Corporation and the holders of at least a majority of the voting
power of all then outstanding shares of Preferred Stock.
(B) The method of valuation of securities subject to investment
letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a stockholder's status as an
affiliate or former affiliate) shall be to make an appropriate
discount from the market value determined as above in (A) (1), (2) or
(3) to reflect the approximate fair market value thereof, as mutually
determined by this Corporation and the holders of at least a majority
of the voting power of all then outstanding shares of such Preferred
Stock.
3. REDEMPTION.
(a) REDEMPTION AT THE OPTION OF THIS CORPORATION.
(i) Subject to the rights of series of Preferred Stock that may from
time to time come into existence, at any time on or prior to March 9,
2001, this Corporation may at any time it may lawfully do so, at the
option of the Board of Directors, redeem in whole or in part the Series
AA Preferred Stock by paying in cash therefor a sum equal to (A) the
Original Series AA Issue Price
3
<PAGE>
(subject to adjustment of such fixed dollar amount for any stock splits,
stock dividends, combinations, recapitalizations or the like with respect
to the Series AA Preferred Stock), plus (B) accrued but unpaid dividends
on such share (the "Early Redemption Price"); provided that the closing
sale price of this Corporation's Common Stock on the Nasdaq National
Market (or such other national securities exchange on which the Common
Stock is then listed) has been at or above $52.00 (subject to adjustment
of such fixed dollar amount for any stock splits, stock dividends,
combinations, recapitalizations or the like with respect to the Common
Stock) for twenty (20) of thirty (30) consecutive trading days prior to
the applicable Corporation Redemption Date (as defined below), which
thirty (30) day period shall have ended not more than ten (10) trading
days prior to the date of the Corporation Redemption Notice (as defined
below). Any redemption effected pursuant to this subsection 3(a)(i) shall
be made on a pro rata basis among the holders of the Series AA Preferred
Stock in proportion to the number of shares of Series AA Preferred Stock
then held by them.
(ii) Subject to the rights of series of Preferred Stock that may
from time to time come into existence, at any time after March 9, 2001,
this Corporation may at any time it may lawfully do so, at the option of
the Board of Directors, redeem in whole or in part the Series AA
Preferred Stock by paying in cash therefor a sum equal to the Series AA
Liquidation Preference (the "Late Redemption Price"). Any redemption
effected pursuant to this subsection 3(a)(ii) shall be made on a pro rata
basis among the holders of the Series AA Preferred Stock in proportion to
the number of shares of Series AA Preferred Stock then held by them.
(iii) Subject to the rights of series of Preferred Stock that may
from time to time come into existence, at least twenty (20) but no more
than thirty (30) days prior to the date on which this Corporation
proposes to redeem any shares of Series AA Preferred Stock (each a
"Corporation Redemption Date"), written notice shall be personally
delivered, sent by reliable international courier, or sent by confirmed
facsimile to each holder of record (at the close of business on the
business day next preceding the day on which notice is given) of the
Series AA Preferred Stock to be redeemed, at the address last shown on
the records of this Corporation for such holder, notifying such holder of
the redemption to be effected on the applicable Corporation Redemption
Date, specifying the number of shares to be redeemed from such holder,
the applicable Corporation Redemption Date, the Early or Late Redemption
Price, as applicable, the place at which payment may be obtained and
calling upon such holder to surrender to this Corporation, in the manner
and at the place designated, his, her or its certificate or certificates
representing the shares to be redeemed (the "Corporation Redemption
Notice"). Except as provided in subsection 3(a)(iv) or 3(a)(v), on or
after each Corporation Redemption Date, each holder of Series AA
Preferred Stock to be redeemed on such Corporation Redemption Date shall
surrender to this Corporation the certificate or certificates
representing such shares, in the manner and at the place designated in
the Corporation Redemption Notice, and thereupon the Early or Late
Redemption Price, as applicable, of such shares shall be payable to the
order of the person whose name appears on such certificate or
certificates as the owner thereof and each surrendered certificate shall
be cancelled. In the event less than all the shares represented by any
such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares. Any shares of Series AA Preferred
Stock that are not redeemed shall remain subject to redemption by this
Corporation pursuant to this Section 3(a).
(iv) Each holder of Series AA Preferred Stock may, at anytime up to
two (2) trading days prior to the applicable Corporation Redemption Date,
elect to convert all shares of Series AA Preferred Stock designated for
redemption in the Corporation Redemption Notice into shares of Common
Stock pursuant to Section 4 below.
(v) From and after each Corporation Redemption Date, unless there
shall have been a default in payment of the Early or Late Redemption
Price, as applicable, all rights of the holders
4
<PAGE>
of shares of Series AA Preferred Stock designated for redemption on such
Corporation Redemption Date in the Corporation Redemption Notice as
holders of Series AA Preferred Stock (except the right to receive the
Early or Late Redemption Price, as applicable, without interest upon
surrender of their certificate or certificates) shall cease with respect
to such shares, and such shares shall not thereafter be transferred on
the books of this Corporation or be deemed to be outstanding for any
purpose whatsoever. Subject to the rights of series of Preferred Stock
that may from time to time come into existence, if the funds of this
Corporation legally available for redemption of shares of Series AA
Preferred Stock on any Corporation Redemption Date are insufficient to
redeem the total number of shares of Series AA Preferred Stock to be
redeemed on such date, those funds that are legally available will be
used to redeem the maximum possible number of such shares ratably among
the holder(s) of such shares to be redeemed such that an equal percentage
of the number of shares held by each holder of Series AA Preferred Stock
is redeemed (provided that this Corporation shall have no obligation to
issue or redeem any fractional shares). The shares of Series AA Preferred
Stock not redeemed shall remain outstanding and entitled to all the
rights and preferences provided herein. Subject to the rights of series
of Preferred Stock that may from time to time come into existence, at any
time thereafter when additional funds of this Corporation are legally
available for the redemption of shares of Series AA Preferred Stock, such
funds will immediately be used to redeem the balance of the shares that
this Corporation has become obliged to redeem on any Corporation
Redemption Date but that it has not redeemed.
(b) REDEMPTION AT OPTION OF STOCKHOLDERS.
(i) Subject to the rights of series of Preferred Stock that may from
time to time come into existence, at any time on or after March 9, 2005,
provided that this Corporation shall have received a written request from
the holders of not less than a majority of the then outstanding Series AA
Preferred Stock that a specified percentage of such holders' shares of
Series AA Preferred Stock be redeemed, and concurrently with surrender by
such holders of the certificates representing such shares, this
Corporation shall, to the extent it may lawfully do so, redeem the shares
specified in such request by paying in cash therefor a sum per share
equal to (A) $30.59 per share of Series AA Preferred Stock (as adjusted
for any stock splits, stock dividends, recapitalizations or the like)
plus (B) accrued but unpaid dividends on such share (the "Series AA
Redemption Price"); provided, however, in no event shall this Corporation
be required to redeem more than 817,261 shares of Series AA Preferred
Stock (as adjusted for any stock splits, stock dividends,
recapitalizations or the like) during any twelve month period. Any
request made pursuant to this subsection 3(b)(i) shall be delivered at
least one hundred and eighty (180) days prior to the date on which the
redemption is requested to occur (a "Stockholder Redemption Date"). Any
redemption of Series AA Preferred Stock effected pursuant to this
subsection 3(b)(i) shall be made on a pro rata basis among the holders of
the Series AA Preferred Stock in proportion to the number of shares of
Series AA Preferred Stock proposed to be redeemed by such holders.
(ii) Subject to the rights of series of Preferred Stock that may
from time to time come into existence, at least twenty (20) but no more
than thirty (30) days prior to a Stockholder Redemption Date, written
notice shall be personally delivered, sent by reliable international
courier, or sent by confirmed facsimile to each holder of record (at the
close of business on the business day next preceding the day on which
notice is given) of the Series AA Preferred Stock to be redeemed, at the
address last shown on the records of this Corporation for such holder,
notifying such holder of the redemption to be effected on the Stockholder
Redemption Date, specifying the number of shares to be redeemed from such
holder, the Stockholder Redemption Date, the Series AA Redemption Price,
the place at which payment may be obtained and calling upon such holder
to surrender to this Corporation, in the manner and at the place
designated,
5
<PAGE>
his, her or its certificate or certificates representing the shares to be
redeemed (the "Stockholder Redemption Notice"). Except as provided in
subsection (3)(b)(iii), on or after the Stockholder Redemption Date, each
holder of Series AA Preferred Stock to be redeemed on such Redemption
Date shall surrender to this Corporation the certificate or certificates
representing such shares, in the manner and at the place designated in
the Stockholder Redemption Notice, and thereupon the Series AA Redemption
Price for such shares shall be payable to the order of the person whose
name appears on such certificate or certificates as the owner thereof and
each surrendered certificate shall be cancelled. In the event less than
all the shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares.
(iii) From and after the Stockholder Redemption Date, unless there
shall have been a default in payment of the Series AA Redemption Price,
all rights of the holders of shares of Series AA Preferred Stock
designated for redemption on the Stockholder Redemption Date in the
Stockholder Redemption Notice as holders of Series AA Preferred Stock
(except the right to receive the Series AA Redemption Price without
interest upon surrender of their certificate or certificates) shall cease
with respect to such shares, and such shares shall not thereafter be
transferred on the books of this Corporation or be deemed to be
outstanding for any purpose whatsoever. Subject to the rights of series
of Preferred Stock that may from time to time come into existence, if the
funds of this Corporation legally available for redemption of shares of
Series AA Preferred Stock on the Stockholder Redemption Date are
insufficient to redeem the total number of shares of Series AA Preferred
Stock to be redeemed on such date, those funds that are legally available
will be used to redeem the maximum possible number of such shares ratably
among the holders of such shares to be redeemed such that an equal
percentage of the number of shares held by each holder of Series AA
Preferred Stock is redeemed (provided that this Corporation shall have no
obligation to issue or redeem any fractional shares). The shares of
Series AA Preferred Stock not redeemed shall remain outstanding and
entitled to all the rights and preferences provided herein. Subject to
the rights of series of Preferred Stock that may from time to time come
into existence, at any time thereafter when additional funds of this
Corporation are legally available for the redemption of shares of Series
AA Preferred Stock, such funds will immediately be used to redeem the
balance of the shares that this Corporation has become obliged to redeem
on the Stockholder Redemption Date but that it has not redeemed.
4. CONVERSION. The holders of the Series AA Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT. Each share of Series AA Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the
Purchase Date of such share and on or prior to the second trading day prior
to the Redemption Date, if any, as may have been fixed in any Redemption
Notice with respect to such share of the Series AA Preferred Stock, at the
office of this Corporation or any transfer agent for such stock, into such
number of fully paid and nonassessable shares of Common Stock as is
determined by dividing the Original Series AA Issue Price by the Conversion
Price applicable to such share, determined as hereafter provided, in effect
on the date the certificate is surrendered for conversion (the "Conversion
Ratio"). The initial Conversion Price per share for shares of Series AA
Preferred Stock shall be $39.77 per share; provided, however, that the
Conversion Price for the Series AA Preferred Stock shall be subject to
adjustment as set forth in subsection 4(d).
(b) AUTOMATIC CONVERSION. Each share of Series AA Preferred Stock
shall automatically be converted into shares of Common Stock at the
Conversion Ratio at the time in effect for such Series AA Preferred Stock
immediately upon the date specified by written consent or agreement of the
holders of a majority of the then outstanding shares of Series AA Preferred
Stock.
6
<PAGE>
(c) MECHANICS OF CONVERSION. Before any holder of Series AA Preferred
Stock shall be entitled to convert the same into shares of Common Stock, he
or she shall surrender the certificate or certificates therefor, duly
endorsed, at the office of this Corporation or of any transfer agent for the
Series AA Preferred Stock, and shall give written notice to this Corporation
at its principal corporate office, of the election to convert the same and
shall state therein the name or names in which the certificate or
certificates for shares of Common Stock are to be issued. This Corporation
shall, as soon as practicable thereafter, issue and deliver at such office
to such holder of Series AA Preferred Stock, or to the nominee or nominees
of such holder, a certificate or certificates for the number of shares of
Common Stock to which such holder shall be entitled as aforesaid. Such
conversion shall be deemed to have been made immediately prior to the close
of business on the date of such surrender of the shares of Series AA
Preferred Stock to be converted, and the person or persons entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock as of such date. If the conversion is in connection with an
underwritten offering of securities registered pursuant to the Securities
Act of 1933, the conversion may, at the option of any holder tendering
Series AA Preferred Stock for conversion, be conditioned upon the closing
with the underwriters of the sale of securities pursuant to such offering,
in which event the persons entitled to receive the Common Stock upon
conversion of the Series AA Preferred Stock shall not be deemed to have
converted such Series AA Preferred Stock until immediately prior to the
closing of such sale of securities.
(d) CONVERSION PRICE ADJUSTMENTS OF PREFERRED STOCK FOR SPLITS, STOCK
DIVIDENDS, COMBINATIONS AND THE LIKE. The Conversion Price of the Series AA
Preferred Stock shall be subject to adjustment from time to time as follows:
(i) In the event this Corporation should at any time or from time to
time after the Purchase Date fix a record date for the effectuation of a
split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend
or other distribution payable in additional shares of Common Stock or
other securities or rights convertible into, or entitling the holder
thereof to receive directly or indirectly, additional shares of Common
Stock (hereinafter referred to as "Common Stock Equivalents") without
payment of any consideration by such holder for the additional shares of
Common Stock or the Common Stock Equivalents (including the additional
shares of Common Stock issuable upon conversion or exercise thereof),
then, as of such record date (or the date of such dividend distribution,
split or subdivision if no record date is fixed), the Conversion Price of
the Series AA Preferred Stock shall be appropriately decreased so that
the number of shares of Common Stock issuable on conversion of each share
of such series shall be increased in proportion to such increase of the
aggregate of shares of Common Stock outstanding and those issuable with
respect to such Common Stock Equivalents.
(ii) If the number of shares of Common Stock outstanding at any time
after the Purchase Date is decreased by a combination of the outstanding
shares of Common Stock, then, following the record date of such
combination, the Conversion Price for the Series AA Preferred Stock shall
be appropriately increased so that the number of shares of Common Stock
issuable on conversion of each share of such series shall be decreased in
proportion to such decrease in outstanding shares.
(e) OTHER DISTRIBUTIONS. In the event this Corporation shall declare a
distribution payable in securities of other persons, evidences of
indebtedness issued by this Corporation or other persons, assets (excluding
cash dividends) or other options or rights not referred to in subsection
4(d)(i), then, in each such case for the purpose of this Subsection 4(e),
the holders of the Series AA Preferred Stock shall be entitled to a
proportionate share of any such distribution as though they were the holders
of the number of shares of Common Stock of this Corporation into which their
shares of Series AA Preferred Stock are convertible as of the record date
fixed for the determination of the holders of Common Stock of this
Corporation entitled to receive such distribution.
7
<PAGE>
(f) RECAPITALIZATIONS. If at any time or from time to time there shall
be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere
in this Section 4 or Section 2) provision shall be made so that the holders
of the Series AA Preferred Stock shall thereafter be entitled to receive
upon conversion of the Series AA Preferred Stock the number of shares of
stock or other securities or property of this Corporation or otherwise, to
which a holder of Common Stock deliverable upon conversion would have been
entitled on such recapitalization. In any such case, appropriate adjustment
shall be made in the application of the provisions of this Section 4 with
respect to the rights of the holders of the Series AA Preferred Stock after
the recapitalization to the end that the provisions of this Section 4
(including adjustment of the Conversion Price then in effect and the number
of shares purchasable upon conversion of the Series AA Preferred Stock)
shall be applicable after that event as nearly equivalent as may be
practicable.
(g) NO IMPAIRMENT. This Corporation will not, by amendment of its
Amended and Restated Articles of Incorporation or through any
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to
be observed or performed hereunder by this Corporation, but will at all
times in good faith assist in the carrying out of all the provisions of this
Section 4 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Series AA Preferred Stock against impairment.
(h) NO FRACTIONAL SHARES AND CERTIFICATE AS TO ADJUSTMENTS.
(i) No fractional shares shall be issued upon the conversion of any
share or shares of the Series AA Preferred Stock, and the number of
shares of Common Stock to be issued shall be rounded down to the nearest
whole share. This Corporation shall provide the holder of any fractional
interest with an amount of cash equal to the fair market value of one
share of this Corporation's Common Stock multiplied by such fractional
interest. Whether or not fractional shares are issuable upon such
conversion shall be determined on the basis of the total number of shares
of Series AA Preferred Stock the holder is at the time converting into
Common Stock and the number of shares of Common Stock issuable upon such
aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment of the
Conversion Price of Series AA Preferred Stock pursuant to this Section 4,
this Corporation, at its expense, shall promptly compute such adjustment
or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of Series AA Preferred Stock a certificate setting
forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. This Corporation
shall, upon the written request at any time of any holder of Series AA
Preferred Stock, furnish or cause to be furnished to such holder a like
certificate setting forth (A) such adjustment and readjustment, (B) the
Conversion Price for such series of Preferred Stock at the time in
effect, and (C) the number of shares of Common Stock and the amount, if
any, of other property that at the time would be received upon the
conversion of a share of Series AA Preferred Stock.
(i) NOTICES OF RECORD DATE. In the event of any taking by this
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other right,
this Corporation shall mail to each holder of Series AA Preferred Stock, at
least twenty (20) days prior to the date specified therein, a notice
specifying the date on which any such record is to be taken for the purpose
of such dividend, distribution or right, and the amount and character of
such dividend, distribution or right.
8
<PAGE>
(j) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. This Corporation
shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series AA Preferred Stock, such number of
its shares of Common Stock as shall from time to time be sufficient to
effect the conversion of all outstanding shares of the Series AA Preferred
Stock; and if at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of all then
outstanding shares of the Series AA Preferred Stock, in addition to such
other remedies as shall be available to the holder of such Preferred Stock,
this Corporation will take such corporate action as may, in the opinion of
its counsel, be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such
purposes, including, without limitation, engaging in best efforts to obtain
the requisite stockholder approval of any necessary amendment to this
Certificate of Designation or the Amended and Restated Articles of
Incorporation.
(k) NOTICES. Any notice required by the provisions of this Section 4
to be given to the holders of shares of Series AA Preferred Stock shall be
deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of
this Corporation.
5. VOTING RIGHTS. The holder of each share of Series AA Preferred Stock
shall have the right to one vote for each share of Common Stock into which such
Series AA Preferred Stock could then be converted at the record date for
determination of the stockholders entitled to vote thereon, and with respect to
such vote, such holder shall have full voting rights and powers equal to the
voting rights and powers of the holders of Common Stock, and shall be entitled,
notwithstanding any provision hereof, to notice of any stockholders' meeting in
accordance with the bylaws of this Corporation, and shall be entitled to vote,
together with holders of Common Stock, with respect to any question upon which
holders of Common Stock have the right to vote and otherwise as required by law.
Fractional votes shall not, however, be permitted and any fractional voting
rights available on an as-converted basis (after aggregating all shares into
which shares of Series AA Preferred Stock held by each holder could be
converted) shall be rounded to the nearest whole number (with one-half being
rounded upward).
SIXTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
A. The business and affairs of the Corporation shall be managed by or
under the direction of the board of directors. In addition to the powers and
authority expressly conferred upon them by statute or by this Certificate of
Incorporation or the Bylaws of the Corporation, the directors are hereby
empowered to exercise all such powers and do all such acts and things as may
be exercised or done by the Corporation.
B. The directors of the Corporation need not be elected by written
ballot unless the Bylaws of the Corporation so provide. Directors need not
be stockholders.
C. Any action required or permitted to be taken by the stockholders of
the Corporation must be effected at a duly called annual or special meeting
of stockholders of the Corporation and may not be effected by any consent in
writing by such stockholders.
D. Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting
of the stockholders of the Corporation shall be given in the manner provided
in the Bylaws of the Corporation.
E. Special meetings of stockholders of the Corporation may be called
only by the Chairman of the Board or the President or by the board of
directors acting pursuant to a resolution adopted by a majority of the
entire board of directors. For purposes of this Certificate of
Incorporation, the term
9
<PAGE>
"entire board of directors" shall mean the total number of authorized
directors whether or not there exist any vacancies in previously authorized
directorships.
SEVENTH: The board of directors is expressly empowered to adopt, alter,
amend or repeal Bylaws of the Corporation. Any adoption, alteration, amendment
or repeal of the Bylaws of the Corporation by the board of directors shall
require the approval of a majority of the entire board of directors. The
stockholders shall also have power to adopt, amend or repeal the Bylaws of the
Corporation; provided, however, that, in addition to any vote of the holders of
any class or series of stock of the Corporation required by law or by this
Certificate of Incorporation, the affirmative vote of the holders of at least a
majority of the voting power of all of the then-outstanding shares of the
capital stock of the Corporation entitled to vote generally in the election of
directors, voting together as a single class, shall be required to adopt, alter,
amend or repeal any provision of the Bylaws of the Corporation.
EIGHTH: The corporation reserves the right to amend and repeal any
provision contained in this Certificate of Incorporation in the manner from time
to time prescribed by the laws of the State of Delaware. All rights herein
conferred are granted subject to this reservation.
NINTH: To the fullest extent permitted by Delaware General Corporation Law,
a director of the corporation shall not be personally liable to the corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv)
for any transaction from which the director derived an improper personal
benefit. If the Delaware General Corporation Law is amended to authorize
corporate action further eliminating or limiting the personal liability of
directors, then the liability of a director of the corporation shall be
eliminated or limited to the fullest extent permitted by the Delaware General
Corporation Law, as so amended. Any repeal or modification of this provision
shall not adversely affect any right or protection of a director of the
corporation existing at the time of such repeal or modification.
TENTH: The name and mailing address of the incorporator is Stephen C.
Ferruolo, 525 University Avenue, Palo Alto, California 94301-1900.
I, THE UNDERSIGNED, being the incorporator, for the purpose of forming a
corporation under the laws of the State of Delaware do make, file and record
this Certificate of Incorporation, do certify that the facts herein stated are
true, and, accordingly, have hereto set my hand and seal this day of ,
1998.
<TABLE>
<S> <C>
--------------------------------------
Stephen C. Ferruolo, Sole Incorporator
</TABLE>
10
<PAGE>
APPENDIX C
BYLAWS
ARTICLE I
STOCKHOLDERS
Section 1. ANNUAL MEETING.
An annual meeting of the stockholders, for the election of directors to
succeed those whose terms expire and for the transaction of such other business
as may properly come before the meeting, shall be held at 11:00 a.m. on the
first Tuesday of the fifth calendar month following the end of the Corporation's
fiscal year or at such time as the Board of Directors shall each year fix, which
date shall be within 13 months of the last annual meeting of stockholders.
Section 2. NOMINATIONS OF DIRECTORS.
Nominations of persons for election to the Board of Directors and the
proposal of business to be transacted by the stockholders may be made at an
annual meeting of stockholders (a) pursuant to the notice given by the
Corporation with respect to such meeting, (b) by or at the direction of the
Board of Directors or (c) by any stockholder of record of the Corporation who
was a stockholder of record at the time of the giving of the notice provided for
in the following paragraph, who is entitled to vote at the meeting and who has
complied with the notice procedures set forth in this section.
For nominations or other business to be properly brought before an annual
meeting by a stockholder pursuant to clause (c) of the foregoing paragraph, (x)
the stockholder must have given timely notice thereof in writing to the
Secretary of the Corporation, (y) such business must be a proper matter for
stockholder action under the General Corporation Law of the State of Delaware
and, (z) if the stockholder, or the beneficial owner on whose behalf any such
proposal or nomination is made, solicits or participates in the solicitation of
proxies in support of such proposal or nominees, the stockholder must have
timely indicated its, or such beneficial owner's, intention to do so as provided
in subclause (c)(iii) of this paragraph. To be timely, a stockholder's notice
shall be delivered to the Secretary at the principal executive offices of the
Corporation not less than 75 days prior to the first anniversary of the
preceding year's annual meeting of stockholders; provided, however, that if the
date of the annual meeting is advanced more than 30 days prior to or delayed by
more than 75 days after such anniversary date, notice by the stockholder to be
timely must be so delivered not later than the close of business on the later of
the 75th day prior to such annual meeting or the 10th day following the day on
which Public Announcement (as defined below) of the date of such meeting is
first made. Such stockholder's notice shall set forth (a) as to each person whom
the stockholder proposes to nominate for election or reelection as a director
all information relating to such person as would be required to be disclosed in
solicitations of proxies for the election of such nominees as directors pursuant
to Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and such person's written consent to serving as a director if
elected; (b) as to any other business that the stockholder proposes to bring
before the meeting, a brief description of such business, the reasons for
conducting such business at the meeting and any material interest in such
business of such stockholder and the beneficial owner, if any, on whose behalf
the proposal is made; and (c) as to the stockholder giving the notice and the
beneficial owner, if any, on whose behalf the nomination or proposal is made (i)
the name and address of such stockholder, as they appear on the Corporation's
books, and of such beneficial owner, (ii) the class and number of shares of the
Corporation that are owned beneficially and of record by such stockholder and
such beneficial owner, and (iii) whether either such stockholder or beneficial
owner intends to solicit or participate in the solicitation of proxies in favor
of such proposal or nominee or nominees.
Notwithstanding anything in the second sentence of the second paragraph of
this Section to the contrary, in the event that the number of directors to be
elected to the Board of Directors is increased and there is no Public
Announcement naming all of the nominees for director or specifying the size of
the increased Board of Directors made by the Corporation at least 75 days prior
to the first anniversary of the preceding year's annual meeting, a stockholder's
notice required by this Bylaw shall also be considered
<PAGE>
timely, but only with respect to nominees for any new positions created by such
increase, if it shall be delivered to the Secretary at the principal executive
offices of the Corporation not later than the close of business on the 10th day
following the day on which such Public Announcement is first made by the
Corporation.
Nominations of persons for election to the Board of Directors may be made at
a special meeting of stockholders at which directors are to be elected pursuant
to the Corporation's notice of meeting (a) by or at the direction of the Board
of Directors or (b) by any stockholder of record of the corporation who is a
stockholder of record at the time of giving of notice provided for in this
Section, who shall be entitled to vote at the meeting and who complies with the
notice procedures set forth in this Section. Nominations by stockholders of
persons for election to the Board of Directors may be made at such a special
meeting of stockholders if the stockholder's notice required by the third
paragraph of this Section shall be delivered to the Secretary at the principal
executive offices of the Corporation not later than the close of business on the
later of the 75th day prior to such special meeting or the 10th day following
the day on which Public Announcement is first made of the date of the special
meeting and of the nominees proposed by the Board of Directors to be elected at
such meeting.
Only persons nominated in accordance with the procedures set forth in this
Section shall be eligible to serve as directors and only such business shall be
conducted at an annual meeting of stockholders as shall have been brought before
the meeting in accordance with the procedures set forth in this Section. The
chairman of the meeting shall have the power and the duty to determine whether a
nomination or any business proposed to be brought before the meeting has been
made in accordance with the procedures set forth in these Bylaws and, if any
proposed nomination or business is not in compliance with these Bylaws to
declare that such defective proposed business or nomination shall not be
presented for stockholder action at the meeting and shall be disregarded.
For purposes of this Section, "Public Announcement" shall mean disclosure in
a press release reported by the Dow Jones News Service, Associated Press or a
comparable national news service or in a document publicly filed by the
Corporation with the securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
Notwithstanding the foregoing provisions of this Section, a stockholder
shall also comply with all applicable requirements of the Exchange Act and the
rules and regulations thereunder with respect to matters set forth in this
Section. Nothing in this Section shall be deemed to affect any rights of
stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act.
Section 3. SPECIAL MEETINGS; NOTICE.
Special meetings of the stockholders, other than those required by statute,
may be called only by the Chairman of the Board or the President or by the Board
of Directors acting pursuant to a resolution adopted by a majority of the entire
Board of Directors. For purposes herein, the term "entire Board of Directors"
shall mean the total number of authorized directors whether or not there exist
any vacancies in previously authorized directorships. Notice of every special
meeting, stating the time, place and purpose, shall be given by mailing, postage
prepaid, at least 35 but not more than 60 days before each such meeting, a copy
of such notice addressed to each stockholder of the Corporation at his post
office address as recorded on the books of the Corporation. Only such business
shall be conducted at a special meeting of stockholders as shall have been
brought before the meeting pursuant to the Corporation's notice of meeting. The
Board of Directors may postpone or reschedule any previously scheduled special
meeting.
Section 4. NOTICE OF MEETINGS.
Written notice of the place, date, and time of all meetings of the
stockholders shall be given, not less than 10 nor more than 60 days before the
date on which the meeting is to be held, to each stockholder entitled to vote at
such meeting, except as otherwise provided herein or required by law (meaning,
here
2
<PAGE>
and hereinafter, as required from time to time by the Delaware General
Corporation Law or the Certificate of Incorporation of the Corporation).
When a meeting is adjourned to another place, date or time, written notice
need not be given of the adjourned meeting if the place, date and time thereof
are announced at the meeting at which the adjournment is taken; provided,
however, that if the date of any adjourned meeting is more than 30 days after
the date for which the meeting was originally noticed, or if a new record date
is fixed for the adjourned meeting, written notice of the place, date, and time
of the adjourned meeting shall be given in conformity herewith. At any adjourned
meeting, any business may be transacted which might have been transacted at the
original meeting.
Section 5. QUORUM.
At any meeting of the stockholders, the holders of a majority of all of the
shares of stock entitled to vote at the meeting, present in person or by proxy,
shall constitute a quorum for all purposes, unless or except to the extent that
the presence of a larger number may be required by law. Where a separate vote by
a class or classes or series is required, a majority of the shares of such class
or classes or series present in person or represented by proxy shall constitute
a quorum entitled to take action with respect to that vote on that matter.
If a quorum shall fail to attend any meeting, the chairman of the meeting
may adjourn the meeting to another place, date, or time.
Section 6. ORGANIZATION.
Such person as the Board of Directors may have designated or, in the absence
of such a person, the Chairman of the Board of Directors or, in his or her
absence, the Chief Executive Officer of the Corporation or, in his or her
absence, such person as may be chosen by the holders of a majority of the shares
entitled to vote who are present, in person or by proxy, shall call to order any
meeting of the stockholders and act as chairman of the meeting. In the absence
of the Secretary of the Corporation, the secretary of the meeting shall be such
person as the chairman of the meeting appoints.
Section 7. CONDUCT OF BUSINESS.
The chairman of any meeting of stockholders shall determine the order of
business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of discussion as seem to him or her in order.
The chairman of the meeting shall have the power to adjourn the meeting to
another place, date and time. The date and time of the opening and closing of
the polls for each matter upon which the stockholders will vote at the meeting
shall be announced at the meeting.
Section 8. PROXIES AND VOTING.
At any meeting of the stockholders, every stockholder entitled to vote may
vote in person or by proxy authorized by an instrument in writing or by a
transmission permitted by law filed in accordance with the procedure established
for the meeting. Any copy, facsimile telecommunication or other reliable
reproduction of the writing or transmission created pursuant to this paragraph
may be substituted or used in lieu of the original writing or transmission for
any and all purposes for which the original writing or transmission could be
used, provided that such copy, facsimile telecommunication or other reproduction
shall be a complete reproduction of the entire original writing or transmission.
All voting, including on the election of directors but excepting where
otherwise required by law, may be by a voice vote; provided, however, that upon
demand therefore by a stockholder entitled to vote or by his or her proxy, a
stock vote shall be taken. Every stock vote shall be taken by ballots, each of
which shall state the name of the stockholder or proxy voting and such other
information as may be required under the procedure established for the meeting.
3
<PAGE>
The Corporation may, and to the extent required by law, shall, in advance of
any meeting of stockholders, appoint one or more inspectors to act at the
meeting and make a written report thereof. The Corporation may designate one or
more persons as alternate inspectors to replace any inspector who fails to act.
If no inspector or alternate is able to act at a meeting of stockholders,
the person presiding at the meeting may, and to the extent required by law,
shall, appoint one or more inspectors to act at the meeting. Each inspector,
before entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict impartiality and
according to the best of his ability. Every vote taken by ballots shall be
counted by a duly appointed inspector or inspectors.
All elections shall be determined by a plurality of the votes cast, and
except as otherwise required by law, all other matters shall be determined by
the affirmative vote of a majority of the shares present in person or
represented by proxy and entitled to vote on such matter.
Section 9. STOCK LIST.
A complete list of stockholders entitled to vote at any meeting of
stockholders, arranged in alphabetical order for each class of stock and showing
the address of each such stockholder and the number of shares registered in his
or her name, shall be open to the examination of any such stockholder, for any
purpose germane to the meeting, during ordinary business hours for a period of
at least 10 days prior to the meeting, either at a place within the city where
the meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during the
whole time thereof and shall be open to the examination of any such stockholder
who is present. This list shall presumptively determine the identity of the
stockholders entitled to vote at the meeting and the number of shares held by
each of them.
ARTICLE II
BOARD OF DIRECTORS
Section 1. NUMBER OF DIRECTORS.
Subject to the rights of the holders of any series of preferred stock to
elect directors under specified circumstances, the number of directors shall be
fixed from time to time exclusively by the Board of Directors pursuant to a duly
adopted resolution.
Section 2. NEWLY-CREATED DIRECTORSHIPS.
Whenever the authorized number of directors is increased between annual
meetings of the stockholders, a majority of the directors then in office shall
have the power to elect such new directors for the balance of a term and until
their successors are elected and qualified. Any decrease in the authorized
number of directors shall not become effective until the expiration of the term
of the directors then in office unless, at the time of such decrease, there
shall be vacancies on the Board of Directors which are being eliminated by the
decrease.
Section 3. VACANCIES.
Subject to applicable law and to the rights of the holders of any series of
preferred stock with respect to such series of preferred stock, and unless the
Board of Directors otherwise determines, vacancies on the Board of Directors
(including without limitation vacancies resulting from death, resignation,
retirement, disqualification from office or other cause) shall be filled only by
a majority vote of the directors then in office, though less than a quorum, and
directors so chosen shall hold office for the unexpired term and until his or
her successor is duly elected or qualified. No decrease in the number of
authorized directors constituting the entire Board of Directors shall shorten
the term of any incumbent director.
4
<PAGE>
Section 4. REGULAR MEETINGS.
Regular meetings of the Board of Directors shall be held at such place or
places, on such date or dates, and at such time or times as shall have been
established by the Board of Directors and publicized among all directors. A
notice of each regular meeting shall not be required.
Section 5. SPECIAL MEETINGS.
Special meetings of the Board of Directors may be called by the Chairman of
the Board of Directors, the President or by two or more directors then in office
and shall be held at such place, on such date, and at such time as they or he or
she shall fix. Notice of the place, date, and time of each such special meeting
shall be given each director by whom it is not waived by mailing written notice
not less than four days before the meeting or by telephone or by telegraphing or
telexing or by facsimile transmission of the same not less than 24 hours before
the meeting. Unless otherwise indicated in the notice thereof, any and all
business may be transacted at a special meeting.
Section 6. QUORUM.
At any meeting of the Board of Directors, a majority of the total number of
the whole Board of Directors shall constitute a quorum for all purposes. If a
quorum shall fail to attend any meeting, a majority of those present may adjourn
the meeting to another place, date, or time, without further notice or waiver
thereof.
Section 7. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE.
Members of the Board of Directors, or of any committee thereof, may
participate in a meeting of such Board of Directors or committee by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other and such participation
shall constitute presence in person at such meeting.
Section 8. CONDUCT OF BUSINESS.
At any meeting of the Board of Directors, business shall be transacted in
such order and manner as the Board of Directors may from time to time determine,
and all matters shall be determined by the vote of a majority of the directors
present, except as otherwise provided herein or required by law. Action may be
taken by the Board of Directors without a meeting if all members thereof consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the Board of Directors.
Section 9. POWERS.
The Board of Directors may, except as otherwise required by law, exercise
all such powers and do all such acts and things as may be exercised or done by
the Corporation, including, without limiting the generality of the foregoing,
the unqualified power:
(1) To declare dividends from time to time in accordance with law;
(2) To purchase or otherwise acquire any property, rights or privileges on
such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such form as it may
determine, of written obligations of every kind, negotiable or
non-negotiable, secured or unsecured, and to do all things necessary in
connection therewith;
(4) To remove any officer of the Corporation with or without cause, and from
time to time to devolve the powers and duties of any officer upon any
other person for the time being;
(5) To confer upon any officer of the Corporation the power to appoint,
remove and suspend subordinate officers, employees and agents;
5
<PAGE>
(6) To adopt from time to time such stock option, stock purchase, bonus or
other compensation plans for directors, officers, employees and agents of
the Corporation and its subsidiaries as it may determine;
(7) To adopt from time to time such insurance, retirement, and other benefit
plans for directors, officers, employees and agents of the Corporation
and its subsidiaries as it may determine; and
(8) To adopt from time to time regulations, not inconsistent with these
Bylaws, for the management of the Corporation's business and affairs.
Section 10. COMPENSATION OF DIRECTORS.
Unless otherwise restricted by the certificate of incorporation, the Board
of Directors shall have the authority to fix the compensation of the directors.
The directors may be paid their expenses, if any, of attendance at each meeting
of the Board of Directors and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or paid a stated salary or paid other
compensation as director. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
ARTICLE III
COMMITTEES
Section 1. COMMITTEES OF THE BOARD OF DIRECTORS.
The Board of Directors may from time to time designate committees of the
Board of Directors, with such lawfully delegable powers and duties as it thereby
confers, to serve at the pleasure of the Board of Directors and shall, for those
committees and any others provided for herein, elect a director or directors to
serve as the member or members, designating, if it desires, other directors as
alternate members who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of any member of
any committee and any alternate member in his or her place, the member or
members of the committee present at the meeting and not disqualified from
voting, whether or not he or she or they constitute a quorum, may by unanimous
vote appoint another member of the Board of Directors to act at the meeting in
the place of the absent or disqualified member.
Section 2. CONDUCT OF BUSINESS.
Each committee may determine the procedural rules for meeting and conducting
its business and shall act in accordance therewith, except as otherwise provided
herein or required by law. Adequate provision shall be made for notice to
members of all meetings; a majority of the members shall constitute a quorum
unless the committee shall consist of one or two members, in which event one
member shall constitute a quorum; and all matters shall be determined by the
affirmative vote of a majority of the members present. Action may be taken by
any committee without a meeting if all members thereof consent thereto in
writing, and the writing or writings are filed with the minutes of the
proceedings of such committee.
ARTICLE IV
OFFICERS
Section 1. GENERALLY.
The officers of the Corporation shall consist of a Chairman of the Board,
President, one or more Vice Presidents, a Secretary, a Treasurer and such other
officers as may from time to time be appointed by the Board of Directors.
Officers shall be elected by the Board of Directors, which shall consider that
subject at its first meeting after every annual meeting of stockholders. Each
officer shall hold office until his or her successor is elected and qualified or
until his or her earlier resignation or removal. Any number of offices may be
held by the same person. The salaries of officers elected by the Board of
Directors shall be fixed
6
<PAGE>
from time to time by the Board of Directors or by such officers as may be
designated by resolution of the Board of Directors.
Section 2. CHAIRMAN OF THE BOARD.
The Chairman of the Board of Directors, if present, shall preside at
meetings of the stockholders and the Board of Directors and exercise and perform
such other powers and duties as may from time to time be assigned to him or her
by the Board of Directors or as may be prescribed by these Bylaws. The Chairman
of the Board shall report to the Board of Directors.
Section 3. PRESIDENT.
The President shall be the Chief Executive Officer of the Corporation.
Subject to the provisions of these Bylaws and to the direction of the Board of
Directors, he or she shall have the responsibility for the general management
and control of the business and affairs of the Corporation and shall perform all
duties and have all powers which are commonly incident to the office of chief
executive or which are delegated to him or her by the Board of Directors. He or
she shall have power to sign all stock certificates, contracts and other
instruments of the Corporation which are authorized and shall have general
supervision and direction of all of the other officers, employees and agents of
the Corporation.
Section 4. VICE PRESIDENTS.
Each Vice President shall have such powers and duties as may be delegated to
him or her by the Board of Directors.
Section 5. TREASURER.
The Treasurer shall have the responsibility for maintaining the financial
records of the Corporation. He or she shall make such disbursements of the funds
of the Corporation as are authorized and shall render from time to time an
account of all such transactions and of the financial condition of the
Corporation. The Treasurer shall also perform such other duties as the Board of
Directors may from time to time prescribe.
Section 6. SECRETARY.
The Secretary shall issue all authorized notices for, and shall keep minutes
of, all meetings of the stockholders and the Board of Directors. He or she shall
have charge of the corporate books and shall perform such other duties as the
Board of Directors may from time to time prescribe.
Section 7. DELEGATION OF AUTHORITY.
The Board of Directors may from time to time delegate the powers or duties
of any officer to any other officers or agents, notwithstanding any provision
hereof.
Section 8. REMOVAL.
Any officer of the Corporation may be removed at any time, with or without
cause, by the Board of Directors.
Section 9. ACTION WITH RESPECT TO SECURITIES OF OTHER CORPORATIONS.
Unless otherwise directed by the Board of Directors, the President or any
officer of the Corporation authorized by the President shall have power to vote
and otherwise act on behalf of the Corporation, in person or by proxy, at any
meeting of stockholders of or with respect to any action of stockholders of any
other Corporation in which this Corporation may hold securities and otherwise to
exercise any and all rights and powers which this Corporation may possess by
reason of its ownership of securities in such other Corporation.
7
<PAGE>
ARTICLE V
STOCK
Section 1. CERTIFICATES OF STOCK.
Each stockholder shall be entitled to a certificate signed by, or in the
name of the Corporation by, the President or a Vice President, and by the
Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer,
certifying the number of shares owned by him or her. Any or all of the
signatures on the certificate may be by facsimile.
Section 2. TRANSFERS OF STOCK.
Transfers of stock shall be made only upon the transfer books of the
Corporation kept at an office of the Corporation or by transfer agents
designated to transfer shares of the stock of the Corporation. Except where a
certificate is issued in accordance with Section 4 of Article V of these Bylaws,
an outstanding certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued therefor.
Section 3. RECORD DATE.
In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders, or to receive payment of
any dividend or other distribution or allotment of any rights or to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may, except as
otherwise required by law, fix a record date, which record date shall not
precede the date on which the resolution fixing the record date is adopted and
which record date shall not be more than 60 nor less than 10 days before the
date of any meeting of stockholders, nor more than 60 days prior to the time for
such other action as hereinbefore described; provided, however, that if no
record date is fixed by the Board of Directors, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held, and, for determining
stockholders entitled to receive payment of any dividend or other distribution
or allotment of rights or to exercise any rights of change, conversion or
exchange of stock or for any other purpose, the record date shall be at the
close of business on the day on which the Board of Directors adopts a resolution
relating thereto.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 4. LOST, STOLEN OR DESTROYED CERTIFICATES.
In the event of the loss, theft or destruction of any certificate of stock,
another may be issued in its place pursuant to such regulations as the Board of
Directors may establish concerning proof of such loss, theft or destruction and
concerning the giving of a satisfactory bond or bonds of indemnity.
Section 5. REGULATIONS.
The issue, transfer, conversion and registration of certificates of stock
shall be governed by such other regulations as the Board of Directors may
establish.
ARTICLE VI
NOTICES
Section 1. NOTICES.
Except as otherwise specifically provided herein or required by law, all
notices required to be given to any stockholder, director, officer, employee or
agent shall be in writing and may in every instance be
8
<PAGE>
effectively given by hand delivery to the recipient thereof, by depositing such
notice in the mails, postage paid, recognized overnight delivery service or by
sending such notice by facsimile, receipt acknowledged, or by prepaid telegram
or mailgram. Any such notice shall be addressed to such stockholder, director,
officer, employee or agent at his or her last known address as the same appears
on the books of the Corporation. The time when such notice is received, if hand
delivered, or dispatched, if delivered through the mails or by telegram or
mailgram, shall be the time of the giving of the notice.
Section 2. WAIVERS.
A written waiver of any notice, signed by a stockholder, director, officer,
employee or agent, whether before or after the time of the event for which
notice is to be given, shall be deemed equivalent to the notice required to be
given to such stockholder, director, officer, employee or agent. Neither the
business nor the purpose of any meeting need be specified in such a waiver.
Attendance at any meeting shall constitute waiver of notice except attendance
for the sole purpose of objecting to the timeliness of notice.
ARTICLE VII
MISCELLANEOUS
Section 1. FACSIMILE SIGNATURES.
In addition to the provisions for use of facsimile signatures elsewhere
specifically authorized in these Bylaws, facsimile signatures of any officer or
officers of the Corporation may be used whenever and as authorized by the Board
of Directors or a committee thereof.
Section 2. CORPORATE SEAL.
The Board of Directors may provide a suitable seal, containing the name of
the Corporation, which seal shall be in the charge of the Secretary. If and when
so directed by the Board of Directors or a committee thereof, duplicates of the
seal may be kept and used by the Treasurer or by an Assistant Secretary or
Assistant Treasurer.
Section 3. RELIANCE UPON BOOKS, REPORTS AND RECORDS.
Each director, each member of any committee designated by the Board of
Directors, and each officer of the Corporation shall, in the performance of his
or her duties, be fully protected in relying in good faith upon the books of
account or other records of the Corporation and upon such information, opinions,
reports or statements presented to the Corporation by any of its officers or
employees, or committees of the Board of Directors so designated, or by any
other person as to matters which such director or committee member reasonably
believes are within such other person's professional or expert competence and
who has been selected with reasonable care by or on behalf of the Corporation.
Section 4. FISCAL YEAR.
The fiscal year of the Corporation shall be as fixed by the Board of
Directors.
Section 5. TIME PERIODS.
In applying any provision of these Bylaws which requires that an act be done
or not be done a specified number of days prior to an event or that an act be
done during a period of a specified number of days prior to an event, calendar
days shall be used, the day of the doing of the act shall be excluded, and the
day of the event shall be included.
9
<PAGE>
ARTICLE VIII
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1. RIGHT TO INDEMNIFICATION.
Each person who was or is made a party or is threatened to be made a party
to or is otherwise 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 is or was a director or an officer of the
Corporation or is or was serving at the request of the Corporation as a director
or officer of another corporation or of a partnership, joint venture, trust or
other enterprise, including service with respect to an employee benefit plan
(hereinafter an "Indemnitee"), whether the basis of such Proceeding is alleged
action in an official capacity as a director or officer or in any other capacity
while serving as a director or officer, shall be indemnified and held harmless
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 such 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 in settlement) reasonably incurred or
suffered by such indemnitee in connection therewith; provided, however, that,
except as provided in Section 3 of this ARTICLE VIII with respect to proceedings
to enforce rights to indemnification, the Corporation shall indemnify any such
Indemnitee in connection with a Proceeding (or part thereof) initiated by such
Indemnitee only if such Proceeding (or part thereof) was authorized by the Board
of Directors of the Corporation.
Section 2. RIGHT TO ADVANCEMENT OF EXPENSES.
The right to indemnification conferred in Section 1 of this ARTICLE VIII
shall include the right to be paid by the Corporation the expenses (including
attorney's fees) incurred in defending any such Proceeding in advance of its
final disposition (hereinafter an "advancement of expenses"); provided, however,
that, if the Delaware General Corporation Law requires, an advancement of
expenses incurred by an Indemnitee 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 Indemnitee, including, without limitation, service to an employee benefit
plan) shall be made only upon delivery to the Corporation of an undertaking
(hereinafter an "Undertaking"), by or on behalf of such Indemnitee, to repay all
amounts so advanced if it shall ultimately be determined by final judicial
decision from which there is no further right to appeal (hereinafter a "Final
Adjudication") that such Indemnitee is not entitled to be indemnified for such
expenses under this Section 2 or otherwise. The rights to indemnification and to
the advancement of expenses conferred in Sections 1 and 2 of this ARTICLE VIII
shall be contract rights and such rights shall continue as to an Indemnitee who
has ceased to be a director or officer and shall inure to the benefit of the
Indemnitee's heirs, executors and administrators.
Section 3. RIGHT OF INDEMNITEE TO BRING SUIT.
If a claim under Section 1 or 2 of this ARTICLE VIII is not paid in full by
the Corporation within 60 days after a written claim has been received by the
Corporation, except in the case of a claim for an advancement of expenses, in
which case the applicable period shall be 20 days, the Indemnitee may at any
time thereafter bring suit against the Corporation to recover the unpaid amount
of the claim. If successful in whole or in part in any such suit, or in a suit
brought by the Corporation to recover an advancement of expenses pursuant to the
terms of an Undertaking, the Indemnitee shall be entitled to be paid also the
expense of prosecuting or defending such suit. In (i) any suit brought by the
Indemnitee to enforce a right to indemnification hereunder (but not in a suit
brought by the Indemnitee to enforce a right to an advancement of expenses) it
shall be a defense that, and (ii) any suit brought by the Corporation to recover
an advancement of expenses pursuant to the terms of an Undertaking the
Corporation shall be entitled to recover such expenses upon a Final Adjudication
that, the indemnitee has not met any applicable standard for indemnification set
forth in the Delaware General Corporation Law. Neither the failure of the
10
<PAGE>
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the Indemnitee is proper in the circumstances
because the Indemnitee has met the applicable standard of conduct set forth in
the Delaware General Corporation Law, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) that the Indemnitee has not met such applicable standard of
conduct, shall create a presumption that the Indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
Indemnitee, be a defense to such suit. In any suit brought by the Indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or brought by the Corporation to recover an advancement of expenses pursuant to
the terms of an Undertaking, the burden of proving that the Indemnitee is not
entitled to be indemnified or to such advancement of expenses, under this
ARTICLE VIII or otherwise shall be on the Corporation.
Section 4. NON-EXCLUSIVITY OF RIGHTS.
The rights to indemnification and to the advancement of expenses conferred
in this ARTICLE VIII shall not be exclusive of any other right which any person
may have or hereafter acquire under any statute, the Corporation's Certificate
of Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise.
Section 5. INSURANCE.
The Corporation may maintain insurance, at its expense, to protect itself
and any director, officer, employee or agent of the Corporation or another
corporation, partnership, joint venture, trust or other enterprise against any
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.
Section 6. INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE CORPORATION.
The Corporation may, to the extent authorized from time to time by the Board
of Directors, grant rights to indemnification and to the advancement of expenses
to any officer, employee or agent of the Corporation to the fullest extent of
the provisions of this Article with respect to the indemnification and
advancement of expenses of directors and officers of the Corporation.
ARTICLE IX
AMENDMENTS
In furtherance and not in limitation of the powers conferred by law, the
Board of Directors is expressly empowered to adopt, alter, amend or repeal
Bylaws of the Corporation. Any adoption, alteration, amendment or repeal of the
Bylaws of the Corporation by the board of directors shall require the approval
of a majority of the entire Board of Directors. The stockholders shall also have
power to adopt, amend or repeal the Bylaws of the Corporation; provided,
however, that, in addition to any vote of the holders of any class or series of
stock of the Corporation required by law or by the Certificate of Incorporation,
the affirmative vote of the holders of at least a majority of the voting power
of all of the then-outstanding shares of the capital stock of the Corporation
entitled to vote generally in the election of directors, voting together as a
single class, shall be required.
11
<PAGE>
PROXY AFFYMETRIX, INC. PROXY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
JUNE 11, 1998
The undersigned shareholder of Affymetrix, Inc. (the "Company") hereby
appoints John D. Diekman and Kenneth J. Nussbacher and each of them with full
power of substitution to each, the true and lawful attorneys, agents and
proxyholders of the undersigned, and hereby authorizes them to represent and
vote, as specified herein, all of the shares of Common Stock of the Company
held of record by the undersigned on April 15, 1998, at the Annual Meeting of
Shareholders of the Company to be held on June 11, 1998 (the "Annual
Meeting") at 10:00 a.m. at 3380 Central Expressway, Santa Clara, California
and any adjournments or postponements thereof.
NEW ADDRESS: ___________________
________________________________
Check here for / / ________________________________
address change ________________________________
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
<PAGE>
/X/ PLEASE MARK VOTES AS IN THIS EXAMPLE
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED.
IN THE ABSENCE OF DIRECTION, THE SHARES WILL BE VOTED FOR THE PROPOSALS.
THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL
MEETING OF SHAREHOLDERS RELATING TO THE ANNUAL MEETING.
<TABLE>
<S> <C> <C> <C>
VOTE FOR ALL THE NOMINEES VOTE WITHHELD
(EXCEPT AS DIRECTED FROM ALL
TO THE CONTRARY) NOMINEES NOMINEES: John D. Diekman, Ph.D.
1. To elect as directors, to hold / / / / Stephen P. A. Fodor, Ph.D.
office until the next meeting Paul Berg, Ph.D.
of shareholders and until their Douglas M. Hurt
successors are elected, the nine Vernon R. Loucks, Jr.
(9) nominees listed to the right: Barry C. Ross, Ph.D.
David B. Singer
Lubert Stryer, M.D.
_____________________________________________________________________ John A. Young
INSTRUCTIONS: To withhold vote for any individual nominee,
write the nominee's name in the space provided below:
</TABLE>
FOR AGAINST ABSTAIN
2. To authorize the Company to change the Company's / / / / / /
state of incorporation from California to Delaware.
3. To ratify the appointment of Ernst & Young LLP as / / / / / /
independent auditors of the Company for the
fiscal year ending December 31, 1998.
Please sign exactly as name appears hereon. Joint owners should each sign.
Trustees and others acting in a representative capacity should indicate the
capacity in which they sign and give their full title. If a corporation,
please have an authorized officer sign and indicate the full corporate name.
If a partnership, please sign in partnership name by an authorized person.
Please mark, sign and date this proxy and return it promptly whether you plan
to attend the meeting or not. If you do attend, you may vote in person if you
desire.
SIGNATURE(S) ________________________________________ DATE ___________________
