<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 11, 1997
REGISTRATION NO. 333-30213
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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PRE-EFFECTIVE
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
LEUKOSITE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 2834 04-3173859
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
215 FIRST STREET
CAMBRIDGE, MA 02142
(617) 621-9350
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------
CHRISTOPHER K. MIRABELLI, PH.D.
CHAIRMAN OF THE BOARD OF DIRECTORS,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
LEUKOSITE, INC.
215 FIRST STREET
CAMBRIDGE, MA 02142
(617) 621-9350
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
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WITH COPIES TO:
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JUSTIN P. MORREALE, ESQ. STEVEN D. SINGER, ESQ.
JULIO E. VEGA, ESQ. VIRGINIA H. KINGSLEY, ESQ.
BINGHAM, DANA & GOULD LLP HALE AND DORR LLP
150 FEDERAL STREET 60 STATE STREET
BOSTON, MA 02110 BOSTON, MA 02109
(617) 951-8000 (617) 526-6000
</TABLE>
------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JULY 11, 1997
PROSPECTUS
- ----------------
2,500,000 SHARES
[LOGO]
LEUKOSITE, INC.
COMMON STOCK
All of the 2,500,000 shares of Common Stock offered hereby are being sold
by the Company. Prior to this offering, there has been no public market for the
Common Stock of the Company. It is currently estimated that the initial public
offering price will be between $8.00 and $10.00 per share. See "Underwriting"
for a discussion of the factors to be considered in determining the initial
public offering price. The Company has applied to have the Common Stock approved
for quotation on the Nasdaq National Market under the symbol LKST.
------------------
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 5.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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===================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
- ---------------------------------------------------------------------------------------------------
Per Share........................ $ $ $
- ---------------------------------------------------------------------------------------------------
Total(3)......................... $ $ $
===================================================================================================
</TABLE>
(1) See "Underwriting" for indemnification arrangements with the several
Underwriters.
(2) Before deducting expenses payable by the Company estimated at $600,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 375,000 additional shares of Common Stock solely to cover
over-allotments, if any. If all such shares are purchased, the total Price
to Public, Underwriting Discount and Proceeds to Company will be
$ , $ and $ , respectively. See "Underwriting."
------------------
The shares of Common Stock are offered by the several Underwriters subject
to prior sale, receipt and acceptance by them, and subject to the right of the
Underwriters to reject any order in whole or in part and certain other
conditions. It is expected that certificates for such shares will be available
for delivery on or about , 1997, at the offices of the agent of
Hambrecht & Quist LLC in New York, New York.
HAMBRECHT & QUIST UBS SECURITIES
, 1997
<PAGE> 3
Edgar Description
-----------------
[Appearing in a two-page foldout is the following.]
[Next to a graphic which illustrates LDP-03 activity appears the following
caption:]
LDP-O3
LDP-03 is being developed to bind to cancerous leukocytes thus causing
the immune system to destroy them while leaving stem cells intact.
[Next to a graphic which illustrates LDP-01 activity appear the following
captions:]
LDP-O1 (Stroke)
LDP-01 is being developed to prevent activated leukocytes from
causing continuing damage following ischemic stroke.
LDP-O1 (Kidney)
LDP-01 is being developed to prevent continuing ischemic damage by
activated leukocytes following kidney transplantation of cadaver
organs.
[Next to a graphic which illustrates LDP-02 activity appears the following
caption:]
LDP-O2
LDP-02 is being developed to arrest a subset of leukocytes
responsible for inflammatory bowel disease.
[Next to a graphic which illustrates the blocking of eosinophil recruitment
appears the following caption:]
Asthma
LeukoSite is working with Roche Bioscience to discover anti-asthma
drugs to block a receptor on eosinophils and to prevent their
harmful accumulation in the lung.
[Next to a graphic which illustrates the human body and various organs appears
the following caption:]
CCR3 Antagonist
Asthma
Allergic hypersensitivity
MCP-1 Antagonist
Atherosclerosis
Rheumatoid arthritis
IL-8 Antagonist
Myocardial infarction
CCR1 Antagonist
Rheumatoid Arthritis
Multiple Sclerosis
Psoriasis
CXCR3 Antagonist
Rheumatoid Arthritis
Multiple Sclerosis
Psoriasis
CCR5 Antagonist
HIV-1 infection and inflammatory diseases
[Beta]7 Integrin Receptor Antagonist
Inflammatory Bowel Disease
[A graphic which illustrates a stem cell residing in the bone marrow and the
production of leukocytes. From the stem cell, mature leukocytes radiate to the
other graphics. Next to this graphic appear the following captions:]
LeukoSite is pioneering novel treatments to block or destroy
disease causing leukocytes while sparing normal functions of the
immune system.
LeukoSite is developing drugs to selectively interrupt the disease
causing actions of certain leukocytes.
[Appearing on the facing page of the fold out with the stabilization
legend is the Company's logo.]
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CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE OF THE COMMON
STOCK, INCLUDING BY ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
------------------
LEUKOSITE and the Company's logo are trademarks of the Company. This
Prospectus also includes trademarks of companies other than LeukoSite.
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements and Notes thereto
appearing elsewhere in this Prospectus. The Common Stock offered hereby involves
a high degree of risk. See "Risk Factors."
THE COMPANY
LeukoSite, Inc. ("LeukoSite" or the "Company") is a leader in the discovery
and development of therapeutics based upon the biology of leukocytes (white
blood cells), with potential applications in cancer and inflammatory, autoimmune
and viral diseases. The Company's technologies and expertise in leukocyte
biology facilitate the discovery and development of novel and proprietary drugs
that destroy or block the disease-causing actions of leukocytes. The Company has
one product candidate that has completed Phase II clinical trials, two product
candidates that are expected to begin human clinical trials by early 1998, and
seven small molecule drug discovery programs.
In a properly functioning immune system, leukocytes rid the body of
infectious organisms and repair damage to tissues and organs. However,
leukocytes can also cause or exacerbate disease processes when their growth is
uncontrolled, resulting in malignant diseases such as lymphomas and leukemias,
or when they are abnormally recruited into tissues, resulting in autoimmune or
inflammatory diseases. In addition, disease can also result when viruses such as
HIV attach to, invade and destroy leukocytes.
LeukoSite focuses on distinct cell surface molecules found on leukocytes
and their roles in disease. The Company is developing monoclonal antibodies and
small molecule drugs that selectively deplete leukocytes or block specific
leukocyte recruitment pathways controlled by chemokines and their receptors as
well as by integrins and adhesion molecules. LeukoSite believes that these drugs
will have a high degree of specificity and reduced side effects compared to
existing anti-cancer, anti-inflammatory, immunosuppressive and anti-viral
therapies.
The Company expects to initiate late stage clinical trials of its lead
product candidate, LDP-03, in 1998. LDP-03 is a humanized monoclonal antibody to
the leukocyte antigen CAMPATH, which was licensed by the Company after reviewing
data from Phase I and II clinical trials showing activity in the treatment of
chronic lymphocytic leukemia. The Company has entered into a joint venture with
Ilex Oncology, Inc. ("Ilex") for the clinical development and commercialization
of LDP-03. Under the terms of the agreement with Ilex, LeukoSite and Ilex will
generally share equally in any profits from the sales of LDP-03 and in all
future research, development, clinical and commercialization costs. The
Company's second product candidate, LDP-01, is a humanized anti-integrin
monoclonal antibody that inhibits early leukocyte recruitment and inflammation
resulting from reperfusion injury. The Company intends to initiate two Phase
I/IIa clinical studies of LDP-01 in the United Kingdom in early 1998, one for
kidney transplantation and a second for thrombotic stroke. The Company's third
product candidate, LDP-02, is a humanized monoclonal antibody to the a4b7
integrin and is being developed for the treatment of inflammatory bowel disease,
such as Crohn's disease and ulcerative colitis. The Company intends to initiate
a Phase I/IIa study of LDP-02 in the United Kingdom in early 1998.
To date, the Company has also generated six chemokine-receptor drug
discovery targets that are the subject of collaborations with pharmaceutical
companies for small molecule drug discovery and development. The Company has
collaboration agreements with Warner-Lambert Company ("Warner-Lambert"), Roche
Bioscience and Kyowa Hakko Kogyo Co. Ltd. As of June 30, 1997, the Company had
received $8.4 million under these collaborations for research funding and
license fees and will be entitled to receive $13.0 million of additional funding
that is not subject to the achievement of milestones. In addition, in the event
that a product is successfully developed and commercialized under each of the
collaborations, LeukoSite will be entitled to receive up to $44.3 million in
development and commercialization milestone payments, as well as royalties
associated with product sales. As of June 30, 1997, Warner-Lambert had invested
$9.0 million and Roche Finance Ltd had invested $3.0 million in equity of the
Company.
The Company's executive offices are located at 215 First Street, Cambridge,
Massachusetts 02142, and its telephone number is (617) 621-9350.
3
<PAGE> 5
THE OFFERING
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Common Stock offered by the Company................... 2,500,000 shares
Common Stock to be outstanding after the offering..... 8,683,176 shares(1)
Use of proceeds....................................... To fund research and development
programs and for working capital and
general corporate purposes. See "Use
of Proceeds."
Nasdaq National Market symbol......................... LKST
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
FROM INCEPTION FROM INCEPTION
(MAY 1, 1992) SIX MONTHS (MAY 1, 1992)
THROUGH YEARS ENDED DECEMBER 31, ENDED JUNE 30, THROUGH
DECEMBER 31, ------------------------------------- --------------------- JUNE 30,
1992 1993 1994 1995 1996 1996 1997 1997
-------------- ------- ------- ------- ------- ----------- ------- --------------
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CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues.................... $-- $ -- $ -- $ 450 $ 3,674 $ 524 $ 2,275 $ 6,399
Operating expenses.......... 129 2,044 5,782 7,917 9,873 4,420 6,186 31,931
Interest income (expense),
net....................... -- (19) 148 (10) 177 63 212 508
----- ------- ------- ------- ------- ------- ------- --------
Net loss (2)................ $ (129) $(2,063) $(5,634) $(7,477) $(6,022) $(3,833) $(3,699) $(25,024)
===== ======= ======= ======= ======= ======= ======= ========
Pro forma net loss per
common share (2).......... $ (1.04) $ (.59)
======= =======
Shares used in computing pro
forma net loss per common
share (2)................. 5,770 6,290
======= =======
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<CAPTION>
JUNE 30, 1997
--------------------------------------------
PRO FORMA
ACTUAL PRO FORMA(3) AS ADJUSTED(4)
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CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and marketable securities...................... $ 11,649 $ 11,649 $ 31,974
Working capital....................................................... 6,771 6,771 27,620
Total assets.......................................................... 14,784 14,784 34,585
Long-term obligations, net of current portion......................... 1,123 1,123 1,123
Redeemable convertible preferred stock................................ 25,221 -- --
Deficit accumulated during development stage.......................... (25,512) (25,512) (25,512)
Stockholders' equity (deficit)........................................ (16,759) 8,462 28,787
</TABLE>
- ------------------------------
(1) Based on the number of shares outstanding as of June 30, 1997. Excludes (i)
an aggregate of 966,891 shares of Common Stock issuable upon exercise of
stock options outstanding as of June 30, 1997 at a weighted average exercise
price of $3.89 per share and (ii) an aggregate of 84,145 shares of Common
Stock issuable upon exercise of warrants outstanding as of June 30, 1997, at
a weighted average exercise price per share of $4.10. See "Capitalization,"
"Management -- Amended and Restated 1993 Stock Option Plan" and Note 10 of
Notes to Consolidated Financial Statements.
(2) Computed as described in Note 2(b) of Notes to Consolidated Financial
Statements.
(3) Presented on a pro forma basis to give effect to the automatic conversion
upon the closing of this offering of all outstanding shares of the Company's
Preferred Stock into an aggregate of 5,087,935 shares of Common Stock
(assuming an initial public offering price of $9.00 per share).
(4) As adjusted to reflect the sale of 2,500,000 shares of Common Stock offered
by the Company hereby at an assumed initial public offering price of $9.00
per share and the receipt of the estimated proceeds therefrom. See "Use of
Proceeds" and "Capitalization."
------------------------------
Except in the Consolidated Financial Statements of the Company or as
otherwise noted, all information in this Prospectus: (i) assumes no exercise of
the Underwriters' over-allotment option; (ii) reflects a one-for-4.1 reverse
stock split of the Common Stock to be effected prior to the date of this
Prospectus; (iii) reflects the conversion upon the closing of this offering of
all outstanding shares of the Company's Preferred Stock into 5,087,935 shares of
Common Stock (assuming an initial public offering price of $9.00 per share);
(iv) reflects the conversion upon the closing of this offering of all
outstanding warrants to purchase shares of Preferred Stock into warrants to
purchase 84,145 shares of Common Stock; and (v) reflects the amendment of the
Company's Restated Certificate of Incorporation prior to the date of this
Prospectus. See "Capitalization," "Description of Capital Stock," "Underwriting"
and Notes to Consolidated Financial Statements.
4
<PAGE> 6
RISK FACTORS
This Prospectus contains forward-looking statements that involve risks and
uncertainties. Actual results could differ materially from those discussed in
the forward-looking statements as a result of certain factors, including those
set forth below and elsewhere in this Prospectus. The following risk factors
should be considered carefully in addition to the other information in this
Prospectus before purchasing the shares of Common Stock offered hereby.
Early Stage of Product Development; Absence of Developed Products. The
Company's research and development programs are at an early stage of
development, and the Company does not expect that any drugs resulting from its
or its collaborative partners' research and development efforts will be
commercially available for several years, if at all. The Company has not
optimized any small molecule lead compound or selected any small molecule drug
candidates. Any drug candidates developed by the Company will require
significant additional research and development efforts, including extensive
preclinical (animal and in vitro) and clinical testing as well as regulatory
approval to begin testing in humans. The Company has limited experience in
conducting preclinical trials and no experience in conducting clinical trials.
Furthermore, the results obtained in preclinical trials are not necessarily
indicative of results that will be obtained in later stages of preclinical
development or in human clinical testing. In addition, the Company's potential
drug candidates will be subject to the risks of failure inherent in the
development of pharmaceutical products. These risks include the possibilities
that no drug candidate will be found safe or effective, or will otherwise meet
applicable regulatory standards or receive the necessary regulatory clearances.
There can be no assurance that these drug candidates, if safe and effective,
will be developed into commercially viable drugs, will be economical to
manufacture or produce on a large scale, will be successfully marketed or will
achieve customer acceptance. Furthermore, the Company's potential drug
candidates are subject to the risks that the proprietary rights of third parties
will preclude the Company from marketing such drugs or that third parties will
market superior or equivalent drugs. The failure to develop safe, commercially
viable drugs would have a material adverse effect on the Company's business,
financial condition and results of operations.
Dependence on Collaborative Partners. A key element of the Company's
strategy is to accelerate certain of its drug discovery and development programs
and to fund its capital requirements, in part, by entering into collaboration
agreements with major pharmaceutical companies. The Company has entered into
collaboration agreements with Warner-Lambert, Roche Bioscience and Kyowa. Under
their collaboration agreements with the Company, the Company's collaborative
partners have the right, but are not obligated, to conduct preclinical and
clinical trials of compounds developed during the collaboration with the Company
and to develop and commercialize any drug candidates resulting from the
collaborations. The collaboration agreements allow the Company's collaborative
partners significant discretion in electing whether to pursue the development of
any potential drug candidates. As a result, the Company cannot control the
amount and timing of resources dedicated by the Company's collaborative partners
to their respective collaborations with the Company. The Company's receipt of
revenues from drug development milestones or royalties on sales under the
collaboration agreements is dependent upon the activities and the development,
manufacturing and marketing resources of its collaborative partners. There can
be no assurance that such partners will pursue the development and
commercialization of compounds resulting from the collaboration, that any such
development or commercialization would be successful or that the Company would
derive any revenue from such arrangements. Moreover, certain drug candidates
discovered by the Company may be competitive with its partners' drugs or drug
candidates. Accordingly, there can be no assurance that the Company's
collaborative partners will proceed with the development of LeukoSite's drug
candidates or that they will not pursue their existing or alternative
technologies in preference to LeukoSite's drug candidates. There can be no
assurance that the interests of the Company will continue to coincide with those
of its collaborative partners, that some of the Company's collaborative partners
will not develop independently or with third parties drugs that compete with
drugs of the types contemplated by the Company's collaboration agreements, or
that disagreements over rights or
5
<PAGE> 7
technology or other proprietary interests will not occur. Disagreements between
the Company and its collaborative partners could lead to delays in research or
in the development and commercialization of certain product candidates, or could
require or result in litigation or arbitration, which could be time-consuming
and expensive. Any of these factors could have a material adverse effect on the
Company's business, financial condition and results of operations.
The Company is relying on its collaborative partners to fund a substantial
portion of its research operations over the next several years. Although each of
the collaboration agreements may be extended past its initial term, there can be
no assurance that these contracts will be extended or renewed, or that any
renewal, if made, will be on terms favorable to the Company. Moreover, each of
the collaboration agreements with Warner-Lambert may be terminated at any time
and for any reason upon six months written notice. The collaboration with Kyowa
may be terminated after April 1998 with 60 days notice. Consequently, there can
be no assurance that any of the collaboration agreements will remain in effect
for their expected term. If any of the collaborative partners terminates or
breaches its agreement with the Company, or otherwise fails to conduct its
collaborative activities in a timely manner, the development or
commercialization of any drug candidate or research program under the
collaboration agreement with such partner could be delayed, terminated, or the
Company may be required to undertake unforeseen additional responsibilities or
to devote unbudgeted additional resources to such development or
commercialization. In addition, there have been a significant number of recent
consolidations among pharmaceutical companies. Such consolidations involving the
companies with which the Company is collaborating could result in the diminution
or termination of, or delays in, the development or commercialization of drug
candidates or research programs under the collaboration agreements. The
termination or expiration of research provisions of any of the Company's
collaboration agreements, the failure by any of the Company's collaborative
partners to provide research and development funding, or the merger or
consolidation of any of the Company's collaborative partners could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business--Collaboration Agreements."
Limited Operating History; History of Losses and Expectation of Future
Losses; Uncertainty of Future Profitability. The Company has a limited history
of operations. The Company has incurred a net operating loss every year since
its inception in May 1992, and has an accumulated deficit of approximately $25.5
million through June 30, 1997. The Company expects to incur significant
additional operating losses over the next several years and expects cumulative
losses to increase substantially due to expanded research and development
efforts, preclinical and clinical trials and the funding of development
activities under the joint venture with Ilex. In the next few years, the
Company's revenues are expected to be limited to any research support payments
it may receive under the collaboration agreements and any amounts received under
other research or drug development collaborations that the Company may
establish. There can be no assurance, however, that the Company will be able to
establish any additional collaborative relationships on terms acceptable to the
Company or maintain in effect the current collaboration agreements or achieve
the milestones thereunder that are required for the Company to receive funds
from its current collaborative partners. The Company's ability to generate
revenue or achieve profitability is dependent in part on its or its
collaborative partners' ability to complete the development of drug candidates
successfully, to obtain regulatory approvals for the drug candidates and to
manufacture and commercialize any resulting drugs. The Company will not receive
revenues or royalties from commercial sales for a number of years, if ever, and
any royalties may be subject to reduction under certain circumstances. Failure
to receive significant revenues or achieve profitable operations would impair
the Company's ability to sustain operations. There can be no assurance that the
Company will ever successfully identify, develop, commercialize, manufacture and
market any products, obtain required regulatory approvals or achieve
profitability. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."
Substantial Additional Financing Requirements; Uncertainty of Available
Funding. The Company will require substantial additional funds in order to
finance its drug discovery and development
6
<PAGE> 8
programs, fund operating expenses, pursue regulatory clearances, develop
manufacturing, marketing and sales capabilities and prosecute and defend its
intellectual property rights. The Company depends upon its collaborative
partners for research funding. As of June 30, 1997, the Company had received
approximately $8.4 million for research and development under its collaboration
agreements. There can be no assurance that the Company will continue to receive
funding under its existing collaboration agreements, or that existing and
potential collaboration agreements will be sufficient to fund the Company's
operating expenses. See "Dependence on Collaborative Partners."
The Company believes that the net proceeds of this offering, together with
its existing capital resources, interest income and revenue from the
collaboration agreements, will be sufficient to fund its currently planned
operating expenses and capital requirements through early 2000. However, there
can be no assurance that such funds will be sufficient to meet the Company's
operating expenses and capital requirements during such period. The Company's
actual cash requirements may vary materially from those now planned and will
depend upon numerous factors, including the results of the Company's research
and development and collaboration programs, the timing and results of
preclinical and clinical trials, the timing and costs of obtaining regulatory
approvals, the progress of the milestone and royalty producing activities of the
Company's collaborative partners, the level of resources that the Company
commits to the development of manufacturing, marketing and sales capabilities,
the cost of filing, prosecuting, defending and enforcing patent claims and other
intellectual property rights, the ability of the Company to maintain existing
and establish new collaboration agreements with other companies, the
technological advances and activities of competitors and other factors.
The Company will need to raise substantial additional capital to fund its
operations. The Company intends to seek such additional funding through public
or private financing or collaboration or other arrangements with collaborative
partners. If additional funds are raised by issuing equity securities, further
dilution to existing stockholders may result and future investors may be granted
rights superior to those of existing stockholders. There can be no assurance,
however, that additional financing will be available from any sources or, if
available, will be available on acceptable terms. If adequate funds are not
available, the Company may be required to delay, reduce the scope of or
eliminate one, more or all of its development programs or to obtain funds by
entering into arrangements with collaborative partners or others that require
the Company to issue additional equity securities or to relinquish rights to
certain technologies or drug candidates that the Company would not otherwise
issue or relinquish in order to continue independent operations. See "Use of
Proceeds" and "Management's Discussion and Analysis of Financial Condition and
Results of Operation--Liquidity and Capital Resources."
Impact of Extensive Government Regulation. The Company's products under
development are subject to extensive and rigorous regulation by the federal
government, principally the Food and Drug Administration ("FDA"), and by state
and local governments. If these products are marketed abroad, they also are
subject to export requirements and to regulation by foreign governments. The
applicable regulatory clearance process, which must be completed prior to the
commercialization of a product, is lengthy and expensive. There can be no
assurance that the Company will be able to obtain necessary regulatory approvals
on a timely basis, if at all, for any of its products under development, and
delays in receipt or failure to receive such approvals, the loss of previously
received approvals, or failure to comply with existing or future regulatory
requirements could have a material adverse effect on the Company's business,
financial condition and results of operations.
The Federal Food, Drug, and Cosmetic Act (the "FDC Act") and the Public
Health Service Act (the "PHS Act") govern or influence the development, testing,
manufacture, labeling, storage, approval, advertising, promotion, sale and
distribution of most FDA-regulated products in the United States. Failure to
comply with the applicable FDA regulatory requirements can result in sanctions
being imposed on the Company (or its collaborative partners and contract
manufacturers), including warning letters, fines, product recalls or seizures,
injunctions, refusals to permit products to be imported into or exported out of
the United States, FDA refusal to grant premarket approval of products and/or to
allow the Company to enter into government supply contracts, withdrawals of
previously approved marketing applications and criminal prosecutions.
7
<PAGE> 9
Product development and approval to meet FDA regulatory requirements takes
a number of years, involves the expenditure of substantial resources and is
uncertain. Many products that initially appear promising ultimately do not reach
the market because they are not found to be safe or effective or cannot meet the
FDA's other regulatory requirements. In addition, there can be no assurance that
the current regulatory framework will not change or that additional regulations
will not arise at any stage of the Company's product development that may affect
approval, delay the submission or review of an application or require additional
expenditures by the Company.
It is uncertain if and when the Company, independently or with its
collaborative partners, will submit any marketing applications for any of its
monoclonal antibodies or small molecular antagonists under development for any
indications. There can be no assurance that any studies will be completed or, if
completed, will demonstrate that the products are safe and effective for their
intended uses, or that required approval will be granted by FDA on a timely
basis, or at all, for any of these products for any studied indications. Failure
of the Company to obtain marketing approval of any of its products on a timely
basis, or at all, would have a material adverse effect on the Company's
business, financial condition and results of operations. See
"Business--Government Regulation."
All of the Company's product candidates will require FDA and foreign
government approvals for commercialization, none of which have been obtained.
The Company and Ilex are required to file an IND with the FDA before beginning
clinical trials of LDP-03 in the United States. See "Business -- LeukoSite's
Drug Development Programs -- LDP-03 (CAMPATH-1H)." The Company intends to
commence trials of its LDP-01 and LDP-02 product candidates in the United
Kingdom and to continue to perform preclinical and clinical trials abroad,
subject to receipt of required United Kingdom regulatory approvals. There can be
no assurance that as a result of a request from the FDA or otherwise, the
Company would not be required to repeat certain or all of such trials in the
United States, which would increase the time and expense required to obtain
approval. See "Business--Government Regulation--Foreign Requirements."
The effect of government regulation may be to delay marketing of the
Company's products under development for a considerable or indefinite time,
impose costly procedural requirements upon the Company's activities and furnish
a competitive advantage to larger companies or companies more experienced in
regulatory affairs. Delays in obtaining governmental regulatory approval could
adversely affect the Company's marketing strategy as well as the Company's
ability to generate revenue from commercial sales.
If regulatory approval is obtained, the Company will be required to comply
with a number of post-approval requirements, including reporting certain adverse
reactions, if any, to the FDA, post-marketing testing and surveillance to
monitor the safety and efficacy of the Company's product candidates and
complying with advertising and promotional labeling requirements. In addition,
facilities and procedures used in the manufacture of the Company's product
candidates must comply with Good Manufacturing Practices ("GMP") prescribed by
the FDA. Both before and after approval is obtained, violations of regulatory
requirements may result in various adverse consequences, including the
suspension or termination of clinical trials, delays in approving or refusal to
approve a product, the withdrawal of an approved product from the market,
seizures of product, and/or the imposition of injunctions, criminal penalties
and/or civil penalties against the manufacturer and/or license holder.
In addition to the applicable FDA requirements, if the Company attempts to
sell its products overseas, the Company will be subject to foreign regulatory
requirements governing clinical trials, approvals and product sales. Whether or
not FDA approval has been obtained, approval of a product by the comparable
regulatory authorities of foreign countries must be obtained prior to the
commencement of marketing of the product in those countries. The approval
process varies from country to country and the time required may be longer or
shorter than that required for FDA approval. There can be no assurance that any
foreign country will approve any of the Company's product candidates on a timely
basis, if at all, or that if the Company receives such approval, that it will be
able to market
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products for the indications that the Company desires or that it will be able to
comply with post-approval restrictions.
The Company is subject to numerous federal, state and local laws and
regulations relating to such matters as safe working conditions, manufacturing
practices, environmental protection, fire hazard control, the experimental use
of animals and the disposal of hazardous or potentially hazardous substances.
There can be no assurance that the Company will not be required to incur
significant costs to comply with such laws and regulations in the future or that
such laws or regulations will not have a material adverse effect upon the
Company's business, financial condition and results of operations. See
"Business--Government Regulation."
Uncertainties Relating to Patents and Proprietary Rights. The Company's
success will depend in part on its ability to obtain United States and foreign
patent protection for its drug candidates and processes, preserve its trade
secrets and operate without infringing the proprietary rights of third parties.
Considerable importance is placed on obtaining patent and trade secret
protection for significant new technologies, products and processes. There can
be no assurance that any patents will issue from any of the patent applications
owned by, or licensed to, the Company. Further, there can be no assurance that
any rights the Company may have under issued patents will provide the Company
with sufficient protection against competitive products or otherwise cover
commercially valuable products or processes. Legal standards relating to the
validity of patents covering pharmaceutical and biotechnological inventions and
the scope of claims made under such patents are still developing. There is no
consistent policy regarding the breadth of claims allowed in biotechnology
patents. The patent position of the Company is highly uncertain and involves
complex legal and factual questions. There can be no assurance that any existing
or future patents issued to, or licensed by, the Company will not subsequently
be challenged, infringed upon, invalidated, found to be unenforceable or
circumvented by others. In addition, patents may have been granted, or may be
granted, covering products or processes that are necessary or useful to the
development of the Company's drug candidates. If the Company's drug candidates
or processes are found to infringe upon the patents, or otherwise impermissibly
utilize the intellectual property of others, the Company may be required to
obtain licenses from third parties to utilize the patents or proprietary rights
of others. There can be no assurance that the Company will be able to obtain
such licenses on acceptable terms, or at all. In such event, the Company's
development, manufacture and sale of such drug candidates could be severely
restricted or prohibited. There has been significant litigation in the
pharmaceutical and biotechnology industry regarding patents and other
proprietary rights. If the Company becomes involved in litigation regarding its
intellectual property rights or the intellectual property rights of others, the
potential cost of such litigation and the potential damages that the Company
could be required to pay could be substantial.
The Company's product candidates LDP-01, LDP-02 and LDP-03 are recombinant
humanized, complementarity determining region ("CDR")-grafted, monoclonal
antibodies. The Company is aware that patents have been issued in the United
States to third parties which relate to processes for producing recombinant
antibodies, compositions useful in the production of recombinant antibodies,
CDR-grafted humanized antibodies, processes for producing CDR-grafted humanized
antibodies and compositions useful in the production of CDR-grafted humanized
antibodies. Patents have also been granted to these parties in Europe, but the
European patents have been opposed. The Company may be required to seek licenses
under these patents for its humanized antibody products.
The Company is also aware of patents which have been issued to a third
party in the United States and Europe variously relating to "chimeric"
immunoglobulins and immunoglobulin chains, processes for production of such
chimeric molecules and compositions useful in the production of chimeric
molecules. The European patent has been opposed. Assuming that the European
patent survives in current form, the Company believes that, properly construed,
the United States and European patent claims do not cover the Company's LDP-01,
LDP-02 or LDP-03 product candidates.
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The Company is also aware of patents which have been issued to third
parties in the United States and/or Europe variously relating to certain
modified humanized immunoglobulins, methods of producing modified humanized
immunoglobulins, compositions useful in the production of modified humanized
immunoglobulins and methods of use of modified humanized immunoglobulins. The
European patents in these areas have also been opposed. The Company believes
that, properly construed, the U.S. patent claims do not cover the Company's
LDP-01 and LDP-03 product candidates, and that no valid claim of the European
patents covers the Company's LDP-01 and LDP-03 product candidates. The Company
is uncertain about the scope of the claims which have issued in the United
States and is uncertain whether these claims, when properly construed, cover
LDP-02. If it is determined that they do encompass LDP-02, the Company will
likely be required to seek a product license.
The Company is also aware of other third party published applications
relating to altered antibodies, methods of use of altered antibodies and methods
of production of altered antibodies. To the Company's knowledge, neither these
applications nor possible unpublished counterpart applications have proceeded to
grant in Europe or have issued as U.S. patents. There can be no assurance that
the Company may not be required to seek a license to some or all of the patents
which might issue from these patent applications.
The Company may be required to seek or choose to seek licenses to some or
all of these or other patents in order to develop and commercialize certain
product candidates or potential products incorporating the Company's technology
in the United States, Europe and other markets. There can be no assurance that
such licenses, if required, will be available to the Company, or that if they
are available, they can be obtained on commercially acceptable terms, and the
failure to do so could have a material adverse effect on the Company. In the
absence of required licenses, the patent owners may obtain an injunction, which
could prevent the manufacture, sale and use of the Company's products, with
material adverse effects on the Company. In addition, assuming such patents are
valid and enforceable, the Company can provide no assurances that if enforcement
actions were brought by the patent owners against the Company that such actions
would be resolved in the Company's favor. The Company may also choose to
challenge the validity of one or more patents or patent claims. Any such action
or challenge could result in substantial costs to the Company and diversion of
Company resources and could have a material adverse effect on the Company.
Moreover, there can be no assurance that the Company would be successful
defending against an infringement action or in challenging any such patents or
patent claims, and the failure to do so could have a material adverse effect on
the Company. If the Company does not obtain required licenses, it could
encounter delays in product development while it attempts to design around the
patents, or it could find that the development, manufacture or sale of products
requiring such licenses could be foreclosed.
Litigation, which could result in substantial costs to the Company, may be
necessary to enforce any patents issued or licensed to the Company or to
determine the scope and validity of third party proprietary rights. Some of the
Company's competitors have, or are affiliated with companies having,
substantially greater resources than the Company, and such competitors may be
able to sustain the costs of complex patent litigation to a greater degree and
for longer periods of time than the Company. Uncertainties resulting from the
initiation and continuation of any patent or related litigation could have a
material adverse effect on the Company's business, financial condition and
results of operations. An adverse outcome in connection with an infringement
proceeding brought by a third party could subject the Company to significant
liabilities, require disputed rights to be licensed from third parties or
require the Company to cease using the disputed technology, any of which could
have a material adverse effect on the Company's business, financial condition or
results of operations. If another party or parties file or have filed patent
applications in the United States that claim technology also claimed by the
Company, the Company may have to participate in interference proceedings
declared by the Patent and Trademark Office to determine priority of invention.
Participation in such proceedings could result in substantial costs to the
Company. The Company could incur substantial costs as a result
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of such proceedings, whether or not the eventual outcome is favorable to the
Company, or results in a determination that an opposing party is entitled to the
patent, or results in another unfavorable result.
In addition to patent protection, the Company relies on trade secrets,
proprietary know-how and technological advances which it seeks to protect, in
part, by confidentiality agreements with its collaborative partners, employees
and consultants. There can be no assurance that these confidentiality agreements
will not be breached, that the Company would have adequate remedies for any such
breach, or that the Company's trade secrets, proprietary know-how and
technological advances will not otherwise become known or be independently
discovered by others. See "Business--Patents and Proprietary Rights."
Intense Competition; Rapid Technological Change. The biotechnology and
pharmaceutical industries are intensely competitive and subject to rapid and
significant technological change. Competitors of the Company in the United
States and elsewhere are numerous and include, among others, major,
multinational pharmaceutical and chemical companies, specialized biotechnology
firms and universities and other research institutions. Many of these
competitors have greater financial and other resources, including larger
research and development staffs and more effective marketing and manufacturing
organizations, than the Company. Acquisitions of competitors by large
pharmaceutical companies or others could enhance financial, marketing and other
resources available to such competitors. In addition, academic and government
institutions have become increasingly aware of the commercial value of their
research findings, and such institutions are now more likely to enter into
exclusive licensing agreements with commercial enterprises, including
competitors of the Company, to market commercial products. There can be no
assurance that the Company's competitors will not succeed in developing or
licensing on an exclusive basis technologies and drugs that are more effective
or less costly than any which are being developed by the Company or which would
render the Company's technology and future drugs obsolete and noncompetitive.
The Company's competitors may succeed in obtaining FDA or other regulatory
approvals for drug candidates before the Company. Companies that commence
commercial sale of their drugs before their competitors may achieve a
significant competitive advantage, including certain patent and FDA marketing
exclusivity rights that would delay the Company's ability to market certain
products. There can be no assurance that drugs resulting from the Company's
research and development efforts, or from the joint efforts of the Company and
its collaborative partners, if approved for sale, will be able to compete
successfully with competitors' existing products or products under development.
Biotechnology and related pharmaceutical technology have undergone rapid
and significant change. The Company expects that the technologies associated
with the Company's research and development will continue to develop rapidly,
and the Company's future success will depend in large part on its ability to
maintain a competitive position with respect to these technologies. Rapid
technological development by the Company or others may result in compounds,
products or processes becoming obsolete before the Company recovers any expenses
it incurs in connection with developing such products. There can be no assurance
that the Company's approach to drug discovery will be viable or that it will
achieve market acceptance or that it will not be superseded by other drug
discovery techniques. See "Business--Competition."
Reliance on Contract Manufacturers; Lack of Manufacturing Experience. The
Company is dependent on third parties for the manufacture of its product
candidates and is aware of only a limited number of manufacturers which it
believes have the ability and capability to manufacture the Company's drug
candidates for preclinical and clinical trials. The Company is currently in
discussions with a contract manufacturer for the production of LDP-03 for some
or all of the Company's clinical trial production. The Company has also been
relying on the Therapeutic Antibody Centre ("TAC") for the manufacture of LDP-01
and LDP-02 for preclinical testing and intends to employ the manufacturing
capability of the TAC through early clinical trials. If the Company were
required to transfer manufacturing processes to other third-party manufacturers,
it could experience significant delays in supply. Delays in production would
delay the Company's preclinical and clinical trials which could have a material
adverse effect on the Company's business, financial condition and results of
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operations. There can be no assurance that the Company will be able to enter
into satisfactory arrangements with contract manufacturers or that such parties
will be able to meet the Company's needs with respect to timing, quantity or
quality. If, at any time, the Company is unable to maintain, develop or contract
for manufacturing capabilities on acceptable terms, the Company's ability to
conduct preclinical and clinical trials with the Company's drug candidates will
be adversely affected, resulting in delays in the submission of drug candidates
for regulatory approvals. See "Business--Manufacturing and Supply."
The Company's collaborative partners generally have the exclusive right to
manufacture products resulting from the collaborations. The Company has no
experience in, and currently lacks the facilities and personnel to, manufacture
products in accordance with GMP as prescribed by the FDA or to produce an
adequate supply of compounds to meet future requirements for preclinical and
clinical trials. See "Business--Collaboration Agreements."
Reliance upon the Therapeutic Antibody Centre. The Company has an
exclusive research and license agreement with the TAC. As a part of the
agreement, the Company employs the TAC's manufacturing capabilities and
established network of clinical investigators to perform early stage clinical
trials on certain monoclonal antibodies being developed by the Company for
therapeutic use. By leveraging the TAC's established antibody manufacturing
infrastructure and network of clinical investigators, the Company is able to
obtain a source of supply for its monoclonal antibody requirements and to
commence early clinical trials in the United Kingdom with respect to its
monoclonal antibodies without having to make costly investments in manufacturing
infrastructure and personnel. If the Company's collaborative relationship with
the TAC were to terminate or if the TAC were otherwise unable to supply the
Company with monoclonal antibodies, the Company would have to incur significant
costs and suffer delays in commencing and completing early clinical trials.
There can be no assurance that the Company will have the resources required to
do so.
In addition, the Company believes that its access to the resources of the
TAC will enable the Company to commence and complete early phase clinical trials
in the United Kingdom more rapidly and that this in turn may accelerate the
commencement of clinical trials in the United States if the FDA accepts the
results of any such United Kingdom clinical trials in support of an application
to commence such clinical trials in the United States. However, there can be no
assurance that any results obtained by the Company in any clinical trials in the
United Kingdom will be satisfactory to the FDA or be accepted by the FDA as the
basis for the Company to commence clinical trials in the United States. If such
results are not satisfactory to the FDA, the Company may be required to repeat
certain or all of such trials in the United States, which would increase the
time and expense to obtain approvals relating to such drug candidates in the
United States.
Risks Associated with Ilex Joint Venture. The Company has entered into a
joint venture with Ilex for the development and commercialization of LDP-03 for
chronic lymphocytic leukemia. As part of the joint venture, the Company is
obligated to provide up to $5 million in funding during the next two years.
There can be no assurance that the Company will have the cash available or will
desire to maintain its commitment to the joint venture. In the event that
LeukoSite fails for any reason to make a required capital contribution to the
joint venture, Ilex may gain control of the management of the joint venture and
become entitled to a greater share of the profits derived from product sales of
LDP-03. There can also be no assurance that Ilex will have the cash available or
will desire to maintain its commitment to the joint venture. In the event that
Ilex fails for any reason to make a required capital contribution to the joint
venture, the Company may be required to make additional capital contributions to
the joint venture to maintain the desired level of development activities by the
joint venture. There can be no assurance that the Company will be able to
compensate for any failure by Ilex to make any capital contribution or that the
joint venture would be able to continue operations with lesser funding. In
addition, the joint venture agreement provides for either company, under certain
circumstances, to purchase the other company's ownership of the joint venture
upon a change in control of such company (as defined therein) or after October
2, 2000. As a result, there can be no assurance that the Company will ever be
able to recoup its investment in the joint venture. See
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"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business--Collaboration Agreements--Ilex."
No Assurance of Market Acceptance. There can be no assurance that any
drugs successfully developed by the Company, independently or with its
collaborative partners, if approved for marketing, will achieve market
acceptance. The degree of market acceptance of any drugs developed by the
Company will depend on a number of factors, including the establishment and
demonstration of clinical efficacy and safety, their potential advantage over
existing therapies and reimbursement policies of government and third-party
payors. There can be no assurance that physicians, patients or the medical
community in general will accept and utilize any drugs that may be developed by
the Company independently or with its collaborative partners.
Dependence on Key Personnel and Consultants. The Company is highly
dependent upon the efforts of its senior management, scientific team and
consultants, including the members of its Scientific Advisory Board. The loss of
the services of one or more of these individuals might impede the achievement of
the Company's objectives. Because of the specialized scientific nature of the
Company's business, the Company is highly dependent upon its ability to attract
and retain qualified scientific and technical personnel and consultants. There
is intense competition among major pharmaceutical and chemical companies,
specialized biotechnology firms and universities and other research institutions
for qualified personnel and consultants in the areas of the Company's
activities. There can be no assurance that the Company will be able to continue
to attract or retain the qualified personnel and consultants necessary for the
development of its business. The failure to recruit or retain key scientific and
technical personnel and consultants could adversely affect the Company's
business, financial condition and results of operations. See
"Business--Employees," "--Scientific Advisory Board" and "Management--Executive
Officers and Directors."
Lack of Marketing and Sales Capability and Experience. The Company has not
yet invested in the development of marketing or sales capabilities. The Company
has no experience in marketing pharmaceutical products. The Company has granted
marketing rights to its collaborative partners with respect to drugs developed
through the collaboration agreements. In addition, the Company may seek to
collaborate with third parties to market those drugs developed by the Company
independent of any drug development collaboration or may seek to market and sell
such drugs directly. If the Company seeks to collaborate with a third party,
there can be no assurance that an agreement can be reached on acceptable terms.
If the Company seeks to market and sell such drugs directly, the Company will
need to hire additional personnel skilled in marketing and sales as it develops
drugs with commercial potential. There can be no assurance that the Company will
be able to acquire, or establish third-party relationships to provide, any or
all of these capabilities. See "Business--Collaboration Agreements."
Management of Growth. The Company's success will depend on the expansion
of its operations and the management of these expanded operations. The Company
also must successfully manage multiple additional collaboration relationships.
There can be no assurance that the Company will be successful in managing its
expansion and meeting the staffing and administrative requirements that
additional collaboration relationships will bring. Failure to achieve these
goals could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business--LeukoSite's Drug Development
Programs" and "--Employees."
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Uncertainties Related to Pharmaceuticals Pricing and Third Party
Reimbursement. The successful commercialization of, and the interest of
potential collaborative partners to invest in, the development of the Company's
drug candidates will depend substantially on reimbursement of the costs of the
resulting drugs and related treatments at acceptable levels from government
authorities, private health care insurers and other organizations, such as
health maintenance organizations ("HMOs") and pharmacy benefits management
companies. There can be no assurance that reimbursement in the United States or
elsewhere will be available for any drugs the Company may develop or, if
available, will not be decreased in the future, or that reimbursement amounts
will not reduce the demand for, or the price of, the Company's drugs, thereby
adversely affecting the Company's business. If reimbursement is not available or
is available only to limited levels, there can be no assurance that the Company
will be able to obtain collaborative partners to manufacture and commercialize
its drugs, or would be able to obtain a sufficient financial return on its own
manufacture and commercialization of any future drugs.
Third-party payors are increasingly challenging the prices charged for
medical products and services. Also, the trend toward managed health care in the
United States and the concurrent growth of organizations such as HMOs, which can
control or significantly influence the purchase of health care services and
products, as well as legislative proposals to reform health care or reduce
government insurance programs, may result in lower prices for pharmaceutical
products. The cost containment measures that health care providers are
instituting, including practice protocols and guidelines and clinical pathways,
and the effect of any health care reform, could materially adversely affect the
Company's ability to sell any of its drugs, even if successfully developed and
approved. Furthermore, in certain foreign markets, pricing or profitability of
prescription pharmaceuticals is subject to government control. In the United
States there have been, and the Company expects that there will continue to be,
a number of federal and state proposals to implement similar government control.
The Company is unable to predict what additional legislation or regulation, if
any, relating to the health care industry or third-party coverage and
reimbursement may be enacted in the future or what effect such legislation or
regulation would have on the Company's business.
Exposure to Product Liability Claims and Limited Availability of
Insurance. The Company's business exposes it to potential liability risks that
are inherent in the testing, manufacturing and marketing of pharmaceutical
products. The use of the Company's drug candidates in clinical trials may expose
the Company to product liability claims and possible adverse publicity. These
risks will expand with respect to the Company's drug candidates, if any, that
receive regulatory approval for commercial sale. Product liability insurance for
the biotechnology industry is generally expensive, if available at all. The
Company does not have product liability insurance but intends to obtain such
coverage if and when its drug candidates are tested in clinical trials conducted
by the Company. However, such coverage is becoming increasingly expensive and
there can be no assurance that the Company will be able to obtain insurance
coverage at acceptable costs or in a sufficient amount, if at all. A successful
product liability claim or series of claims brought against the Company could
have a material adverse effect on the Company's business, financial condition
and results of operations.
Control by Management and Existing Stockholders. Upon completion of this
offering, the Company's officers, directors and principal stockholders and their
affiliates will own or control approximately 60% of the Company's outstanding
Common Stock. As a result, these stockholders, acting together, will have the
ability to control most matters requiring approval by the stockholders of the
Company, including the election of the Company's Board of Directors, the
adoption of charter amendments, and the approval of mergers and acquisitions and
other extraordinary corporate transactions. Such a concentration of ownership
may have the effect of delaying or preventing a change of control of the
Company, including transactions in which the stockholders might otherwise
receive a premium for their shares over their current market prices. See
"Principal Stockholders."
No Prior Public Market, Stock Price Volatility. Prior to this offering
there has been no public market for any of the Company's securities.
Accordingly, there can be no assurance that an active trading market will
develop after this offering or that the Common Stock offered hereby will not
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<PAGE> 16
decline below the initial public offering price. The initial public offering
price will be determined by negotiations between the Company and the
Underwriters. See "Underwriting." The market price of the Company's securities
is likely to be highly volatile and there has been a history of significant
volatility in the market price for shares of other companies in the
biotechnology field. Announcements of technological innovations, new commercial
products, preclinical and clinical trials by the Company or its competitors,
other evidence of the safety or efficacy of products of the Company or its
competitors, governmental regulations and developments, health care legislation,
developments relating to patents or proprietary rights of the Company or its
competitors, including litigation, fluctuations in the Company's operating
results, market conditions for biotechnology stocks in general and other factors
may have a significant effect on the market price of the Company's Common Stock.
In particular, the realization of any of the risks described in these "Risk
Factors" could have a material adverse effect on the market price of the
Company's Common Stock. See "Underwriting."
Possible Adverse Impact of Shares Available for Future Sale. Future sales
of substantial amounts of Common Stock (including shares issued upon the
exercise of outstanding options and warrants) in the public market after this
offering or the prospect of such sales could adversely affect the market price
of the Common Stock and may have a material adverse effect on the Company's
ability to raise any necessary capital to fund future operations. Upon
completion of this offering, the Company will have 8,683,176 shares of Common
Stock outstanding. The 2,500,000 shares offered hereby will be freely tradable
without restriction or further registration under the Securities Act of 1933, as
amended (the "Securities Act"), except for any shares held by "affiliates" of
the Company within the meaning of the Securities Act which will be subject to
the resale limitations of Rule 144 promulgated under the Securities Act ("Rule
144"). The remaining 6,183,176 shares are "restricted" securities that may be
sold only if registered under the Securities Act, or sold in accordance with an
applicable exemption from registration, such as Rule 144. The officers and
directors of the Company, each person known by the Company to beneficially own
more than 5% of the Common Stock and certain other stockholders, who together
hold 6,183,176 shares of Common Stock, and options to purchase an additional
966,891 shares of Common Stock, have agreed not to sell directly or indirectly,
any Common Stock without the prior written consent of Hambrecht & Quist LLC for
a period of 180 days from the date of this Prospectus (the "Lock-up
Agreements"). Commencing on the expiration of the Lock-up Agreements, 659,289
shares of Common Stock will be eligible for sale in the public market, subject
to compliance with Rule 144. In addition, holders of 5,981,716 shares of Common
Stock will be entitled to certain registration rights with respect to such
shares. If such holders, by exercising their registration rights, cause a large
number of shares to be registered and sold in the public market, such sales
could have a material adverse effect on the market price of the Common Stock. In
addition, any demand of such holders to include such shares in Company-initiated
registration statements could have an adverse effect on the Company's ability to
raise needed capital. See "Description of Capital Stock--Registration Rights"
and "Shares Eligible for Future Sale."
Potential Anti-Takeover Effect of Certain Charter and By-Law
Provisions. Pursuant to the Company's Restated Certificate of Incorporation
(the "Restated Certificate of Incorporation"), special meetings of stockholders
may be called only by the Chairman of the Board of Directors, the President, a
majority of the Board of Directors of the Company or holders of 20% or more of
the then outstanding shares of capital stock of the Company. The Company has
agreed to give each of the entities affiliated with HealthCare Investment
Corporation, who will collectively own approximately 23% of the Company's shares
of Common Stock after the closing of this offering, the right to call a special
meeting of stockholders so long as they collectively hold 15% of the then
outstanding shares of capital stock of the Company. In addition, the Restated
Certificate of Incorporation authorizes the Board of Directors to issue
preferred stock and to determine its rights and preferences in order to
eliminate delays associated with a stockholder vote on specific issuances. The
Company has no present plans to issue any shares of preferred stock. The
Restated Certificate of Incorporation also provides for specific procedures for
director nominations by stockholders and submission of other proposals for
consideration at stockholder meetings. These provisions may have the effect of
deterring hostile takeovers or delaying or preventing changes in control or
management of the Company, including
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transactions in which stockholders might otherwise receive a premium for their
shares over then-current market prices. Certain provisions of Delaware law
applicable to the Company could also delay or make more difficult a merger,
tender offer or proxy contest involving the Company, including Section 203 of
the Delaware General Corporation Law (the "DGCL"), which prohibits a Delaware
corporation from engaging in any business combination with any stockholder
owning 15% or more of Company's outstanding voting stock ("interested
stockholder") for a period of three years from the date a stockholder becomes an
interested stockholder unless certain conditions are met. These provisions could
also limit the price that investors might be willing to pay in the future for
shares of Common Stock. See "Description of Capital Stock--Delaware Law and
Certain Charter and By-Law Provisions."
Broad Management Discretion in Use of Proceeds. The Company's management
will have broad discretion to allocate the proceeds of this offering to uses
that it believes are appropriate. There can be no assurance that the proceeds of
this offering can or will be invested to yield a positive return. See "Use of
Proceeds."
Dilution. The initial public offering price is substantially higher than
the net tangible book value per share of the currently outstanding Common Stock.
Purchases of shares of Common Stock offered hereby will therefore suffer
immediate and substantial dilution in net tangible book value of $5.68 per
share. The dilution will be increased to the extent that the holders of
outstanding options or warrants to purchase Common Stock at prices below the
initial public offering price exercise such options or warrants. See "Dilution."
Absence of Dividends. The Company has never declared or paid cash
dividends and does not intend to declare or pay any cash dividends in the
foreseeable future. See "Dividend Policy."
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USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,500,000 shares of
Common Stock offered by the Company hereby at an assumed initial public offering
price of $9.00 per share are estimated to be approximately $20,325,000
($23,464,000 if the Underwriters' over-allotment option is exercised in full).
The Company intends to use the net proceeds for research and development,
working capital and general corporate purposes. The Company expects to expand
its proprietary research, drug discovery and drug development activities,
including the further development of its leukocyte-based platform technologies
and its proprietary product development programs in cancer and inflammatory,
autoimmune and viral diseases. The Company also expects to spend funds to
recruit and employ additional scientific and technical staff and to increase
capabilities in the area of preclinical and clinical testing. Further, the
Company plans to expand its facilities to accommodate these additional staff, as
well as to support additional activities with collaborative partners. The
Company also may spend funds on clinical development activities for its
proprietary product candidates. The Company may use a portion of its available
cash to acquire technologies or products under its strategy to continue to
broaden its platform technologies. The Company may use a portion of its
available cash to acquire or invest in companies complementary to its business.
The Company is not currently in any negotiations with respect to any such
acquisitions or investments. Pending application as described above, the Company
intends to invest the net proceeds of this offering in investment-grade,
interest bearing securities.
The Company believes that the net proceeds of this offering, together with
its existing capital resources, interest income and revenue from the
collaboration agreements, will be sufficient to fund its currently planned
operating expenses and capital requirements through early 2000. However, there
can be no assurance that such funds will be sufficient to meet the Company's
operating expenses and capital requirements during such period. The Company's
actual cash requirements may vary materially from those now planned and will
depend upon numerous factors, including the results of the Company's research
and development and collaboration programs, the timing and results of
preclinical and clinical trials, the timing and costs of obtaining regulatory
approvals, the progress of the milestone and royalty producing activities of the
Company's collaborative partners, the level of resources that the Company
commits to the development of manufacturing, marketing and sales capabilities,
the cost of filing, prosecuting, defending and enforcing patent claims and other
intellectual property rights, the ability of the Company to maintain existing
and establish new collaboration agreements with other companies, the
technological advances and activities of competitors and other factors.
The Company's management will have broad discretion to allocate proceeds of
this offering to uses that it believes are appropriate. There can be no
assurance that the proceeds of this offering can or will be invested to yield a
positive return.
DIVIDEND POLICY
To date, the Company has neither declared nor paid any cash dividends on
shares of its Common Stock. The Company currently intends to retain its earnings
for future growth and, therefore, does not anticipate paying any cash dividends
in the foreseeable future.
17
<PAGE> 19
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1997, (i) on an actual basis; (ii) on a pro forma basis as described in Note
1 below; and (iii) on a pro forma basis as adjusted to give effect to the sale
by the Company of the 2,500,000 shares of Common Stock offered hereby at an
assumed initial public offering price of $9.00 per share and the application of
the estimated proceeds therefrom. This table should be read in conjunction with
the Consolidated Financial Statements of the Company and the Notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1997
-------------------------------------------
PRO FORMA
ACTUAL PRO FORMA(1) AS ADJUSTED(1)(2)
-------- ------------ -----------------
(IN THOUSANDS)
<S> <C> <C> <C>
Current portion of capital lease obligations........... $ 468 $ 468 $ 468
======== ======== =======
Capital lease obligations, net of current portion...... $ 778 $ 778 $ 778
-------- -------- -------
Redeemable convertible preferred stock, $.01 par value;
21,667,199 shares authorized and 16,746,346 shares
issued and outstanding, actual; no shares authorized,
issued or outstanding, pro forma and pro forma as
adjusted............................................. 25,221 -- --
-------- -------- -------
Stockholders' equity:
Preferred Stock, $.01 par value; no shares
authorized, issued or outstanding, actual;
5,000,000 shares authorized and no shares issued
and outstanding, pro forma and pro forma as
adjusted........................................ -- -- --
Convertible Preferred Stock, $.01 par value;
2,250,000 shares authorized, issued and
outstanding, actual; no shares authorized,
issued or outstanding, pro forma and pro forma
as adjusted..................................... 23 -- --
Common Stock, $.01 par value; 25,000,000 shares
authorized; 1,095,241 shares issued and
outstanding, actual; 6,183,176 shares issued and
outstanding, pro forma; and 8,683,176 shares
issued and outstanding, pro forma as
adjusted(3)..................................... 11 62 87
Additional paid-in capital........................ 8,720 33,913 54,213
Deficit accumulated during the development
stage........................................... (25,512) (25,512) (25,512)
-------- -------- -------
Total stockholders' equity (deficit)......... (16,759) 8,462 28,787
-------- -------- -------
Total capitalization.................... $ 9,240 $ 9,240 $29,565
======== ======== =======
</TABLE>
- ------------------------------
(1) Presented on a pro forma basis to give effect to (i) the automatic
conversion upon the closing of this offering of all outstanding shares of
the Company's Preferred Stock into an aggregate of 5,087,935 shares of
Common Stock (assuming an initial public offering price of $9.00 per share),
and (ii) the amendment of the Company's Restated Certificate of
Incorporation prior to the date of this Prospectus.
(2) As adjusted to give effect to the sale of the 2,500,000 shares of Common
Stock offered pursuant to this offering at an assumed initial public
offering price of $9.00 per share, after deducting the estimated
underwriting discount and offering expenses payable by the Company. See "Use
of Proceeds" and "Capitalization."
(3) Excludes (i) an aggregate of 966,891 shares of Common Stock issuable
pursuant to stock options outstanding as of June 30, 1997 at a weighted
average exercise price per share of $3.89, (ii) 84,145 shares of Common
Stock issuable pursuant to warrants outstanding as of June 30, 1997, at a
weighted average exercise price per share of $4.10 and (iii) shares of
Common Stock issuable pursuant to warrants outstanding as of June 30, 1997
that will expire unexercised upon the consummation of this offering. See
"Management--Amended and Restated 1993 Stock Option Plan" and Note 10 of
Notes to Consolidated Financial Statements.
18
<PAGE> 20
DILUTION
As of June 30, 1997, the Company had a pro forma net tangible book value of
approximately $7,938,000 or $1.28 per share of Common Stock. Pro forma net
tangible book value represents the amount of total tangible assets, less total
liabilities divided by 6,183,176, the number of shares of Common Stock, after
giving effect to the conversion of all outstanding shares of the Company's
Preferred Stock into an aggregate of 5,087,935 shares of Common Stock upon the
closing of this offering (assuming an initial public offering price of $9.00 per
share). Without taking into account any other changes in pro forma net tangible
book value after June 30, 1997, other than to give effect to the receipt by the
Company of the net proceeds from the sale of the 2,500,000 shares of Common
Stock offered by the Company hereby at an assumed initial public offering price
of $9.00 per share, the pro forma net tangible book value of the Company as of
June 30, 1997, would have been approximately $28,787,000 or $3.32 per share.
This represents an immediate increase in pro forma net tangible book value of
$2.04 per share to existing stockholders and an immediate dilution in pro forma
net tangible book value of $5.68 per share to new investors. The following table
illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share......... $ 9.00
Pro forma net tangible book value per share before the
offering............................................. $ 1.28
Increase per share attributable to new investors........ 2.04
Pro forma net tangible book value per share after the
offering............................................. 3.32
------
Dilution per share to new investors..................... $ 5.68
======
</TABLE>
The following table summarizes, on a pro forma basis as of June 30, 1997,
the differences between existing stockholders and the new investors with respect
to the number of shares of Common Stock purchased from the Company, the total
consideration paid and the average price per share paid:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders......... 6,183,176 71% $33,826,925 60% $5.47
New investors................. 2,500,000 29% 22,500,000 40% 9.00
--------- --- ----------- ---
Total..... 8,683,176 100% $56,326,925 100%
========= === =========== ===
</TABLE>
Other than as noted above, the foregoing tables assume the exercise of no
outstanding stock options or warrants after June 30, 1997. At June 30, 1997,
options to purchase 228,465 shares of Common Stock were exerciseable at a
weighted average price of $0.70 per share, and warrants to purchase 84,145
shares of Common Stock were exercisable at a weighted average price of $4.10 per
share. To the extent these options or warrants are exercised, there will be
further dilution to new investors. See "Management--Amended and Restated 1993
Stock Option Plan," "Certain Transactions," "Description of Capital
Stock--Warrants" and Note 11 of Notes to Consolidated Financial Statements.
19
<PAGE> 21
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated balance sheet data set forth below, as of
December 31, 1995 and 1996, and the consolidated statements of operations data
for each of the three years in the period ended December 31, 1996, are derived
from the Company's Consolidated Financial Statements which have been audited by
Arthur Andersen LLP, independent public accountants, and which are included
elsewhere in this Prospectus. The selected consolidated financial data as of
December 31, 1992, 1993 and 1994 and for the period from inception (May 1, 1992)
to December 31, 1992 and for the year ended December 31, 1993, are derived from
the Company's consolidated financial statements not included in this Prospectus,
all of which have been audited by Arthur Andersen LLP, independent public
accountants. The selected financial data as of June 30, 1997 and for the six
months ended June 30, 1996 and 1997 and for the period from inception (May 1,
1992) to June 30, 1997 are derived from the Company's unaudited consolidated
financial statements which are included elsewhere in this Prospectus and which
include, in the opinion of the Company, all adjustments (consisting only of
normal recurring adjustments) that are necessary for a fair presentation of its
financial position and the results of its operations for those periods.
Operating results for the six months ended June 30, 1997 are not necessarily
indicative of the results that may be expected for the fiscal year ending
December 31, 1997. The selected consolidated financial data should be read in
conjunction with, and are qualified by reference to, "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the Company's
Consolidated Financial Statements and Notes thereto.
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
FROM INCEPTION FROM INCEPTION
(MAY 1, 1992) SIX MONTHS (MAY 1,1992)
THROUGH YEARS ENDED DECEMBER 31, ENDED JUNE 30, THROUGH
DECEMBER 31, ------------------------------------- ------------------------ JUNE 30,
1992 1993 1994 1995 1996 1996 1997 1997
-------------- ------- ------- ------- ------- ----------- ----------- --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues:
Corporate collaborations... $ -- $ -- $ -- $ 250 $ 3,591 $ 524 $ 2,070 $ 5,911
Government grants.......... -- -- -- 200 83 -- 205 488
----- ------- ------- ------- ------- ------- ------- --------
-- -- -- 450 3,674 524 2,275 6,399
----- ------- ------- ------- ------- ------- ------- --------
Operating expenses:
Research and development... 41 1,540 5,056 7,051 8,502 3,925 5,451 27,641
General and
administrative........... 88 504 726 866 1,371 495 735 4,290
----- ------- ------- ------- ------- ------- ------- --------
Total operating
expenses............... 129 2,044 5,782 7,917 9,873 4,420 6,186 31,931
----- ------- ------- ------- ------- ------- ------- --------
Interest income (expense),
net........................ -- (19) 148 (10) 177 63 212 508
----- ------- ------- ------- ------- ------- ------- --------
Net loss..................... $ (129) $(2,063) $(5,634) $(7,477) $(6,022) $(3,833) $(3,699) $(25,024)
===== ======= ======= ======= ======= ======= ======= ========
Pro forma net loss per common
share(1)................... $ (1.04) $ (.59)
======= =======
Shares used in computing pro
forma net loss per common
share(1)................... 5,770 6,290
======= =======
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
AS OF DECEMBER 31, -----------------------------------------------
----------------------------------------------- PRO FORMA
1992 1993 1994 1995 1996 ACTUAL PRO FORMA(2) AS ADJUSTED(3)
----- ------- ------- -------- -------- ----------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET
DATA:
Cash, cash equivalents and
marketable securities.... $ -- $ 3,002 $ 7,504 $ 1,734 $ 9,384 $ 11,649 $ 11,649 $ 31,974
Working capital............ (128) 2,398 5,061 439 7,226 6,771 6,771 27,620
Total assets............... 1 3,687 10,932 4,538 11,874 14,784 14,784 34,585
Long-term obligations, net
of current portion....... -- 320 1,319 1,583 1,230 1,123 1,123 1,123
Redeemable convertible
preferred stock.......... -- 4,874 11,782 13,733 20,913 25,221 -- --
Deficit accumulated during
the development stage.... (129) (2,192) (7,826) (15,303) (21,324) (25,512) (25,512) (25,512)
Stockholders' equity
(deficit)................ (128) (2,151) (4,776) (12,161) (12,581) (16,759) 8,462 28,787
</TABLE>
- ------------------------------
(1) Computed as described in Note 2(b) of Notes to Consolidated Financial
Statements.
(2) Presented on a pro forma basis to give effect to the automatic conversion
upon the closing of this offering of all outstanding shares of the Company's
Preferred Stock into an aggregate of 5,087,935 shares of Common Stock
(assuming an initial public offering price of $9.00 per share).
(3) As adjusted to reflect the sale of 2,500,000 shares of Common Stock offered
pursuant to this offering at an assumed initial public offering price of
$9.00 per share, after deducting the estimated underwriting discount and
offering expenses payable by the Company. See "Use of Proceeds" and
"Capitalization."
20
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the Consolidated
Financial Statements and the related Notes thereto included elsewhere in this
Prospectus. Except for the historical information contained herein, the
discussion in this Prospectus contains certain forward-looking statements that
involve risks and uncertainties, such as statements of the Company's plans,
objectives, expectations and intentions. The cautionary statements made in this
Prospectus should read as being applicable to all related forward-looking
statements wherever they appear in the Prospectus. The Company's actual results
could differ materially from those discussed here. Factors that could cause or
contribute to such differences include those discussed in "Risk Factors," as
well as those discussed elsewhere herein.
OVERVIEW
The Company is a leader in the discovery and development of therapeutics
based upon the biology of leukocytes with potential applications in cancer and
inflammatory, autoimmune and viral diseases. The Company's technologies and
expertise in leukocyte biology facilitate the discovery and development of novel
and proprietary drugs that destroy or block the disease-causing actions of
leukocytes. The Company's funding has consisted of proceeds from private
placements of equity securities and receipts from collaboration agreements and
capital leases. The Company has not received any revenues from the sale of
products to date and does not expect to generate such revenues for at least the
next several years. The Company has experienced operating losses since its
inception and expects that the additional activities required to develop and
commercialize its products will result in further operating losses for at least
the next several years. As of June 30, 1997, the Company had an accumulated
deficit of approximately $25.5 million.
In 1994, 1995 and 1996, the Company entered into collaboration agreements
with Warner-Lambert for the discovery and development of drugs that inhibit the
action of the MCP-1, IL-8 and CCR5 receptors. In July 1996, the Company entered
into a collaboration agreement with Roche Bioscience for the discovery and
development of a drug to block the binding of the CCR3 receptor. In April 1997,
the Company entered into a collaboration agreement with Kyowa for the discovery
and development of a drug to inhibit the action of the CXCR3 and CCR1 receptors.
As of June 30, 1997, the Company had received approximately $8.4 million in
funding and license fee payments under these collaborations and will be entitled
to receive approximately $13.0 million of additional funding that is not subject
to the achievement of milestones (assuming each collaboration remains in effect
for its full term). In addition, in the event that a product is successfully
developed and commercialized under each of the collaborations, LeukoSite will be
entitled to receive up to approximately $44.3 million in development and
commercialization milestone payments, as well as royalties associated with the
sale of products. As of June 30, 1997, Warner-Lambert had invested $9.0 million
and Roche Finance Ltd had invested $3.0 million in equity of the Company. As of
June 30, 1997, the Company had recorded a portion of amounts received in respect
of its collaboration agreements as deferred revenue.
RESULTS OF OPERATIONS
Six Months Ended June 30, 1997 and 1996
Revenues. Revenues during the six month period ended June 30, 1997 were
$2,275,000 compared to $524,000 during the comparable period in 1996. This
increase was the result of greater research funding from corporate
collaborations with Warner-Lambert, Roche Bioscience and Kyowa and from Small
Business Innovation Research ("SBIR") grants.
Research and development. Research and development expenses were
$5,451,000 during the six months ended June 30, 1997 compared to $3,925,000
during the comparable period in 1996. This increase was primarily due to an
increase in preclinical development expenditures and to a lesser extent to an
increase in staffing and supplies associated with the Company's drug development
21
<PAGE> 23
programs. The Company expects research and development spending to increase over
the next several years as the Company further expands its discovery and
development programs.
General and administrative. General and administrative expenses were
$736,000 for the six months ended June 30, 1997 compared to $495,000 during the
comparable period in 1996. The increase was primarily due to an increase in
staffing and expenses associated with financing and corporate partnering
activities. These expenses will likely increase in future periods to support the
projected growth of the Company.
Interest income (expense), net. Interest income (expense), net was
$211,000 for the six months ended June 30, 1997 and $63,000 for the
corresponding period in 1996. This increase was primarily due to an increase in
interest income resulting from greater cash balances available for investment as
a result of the Company's preferred stock financings completed in 1996 and 1997.
Net loss. The net loss was $3,700,000 during the six months ended June 30,
1997 and $3,833,000 during the comparable period in 1996. The net loss remained
relatively unchanged as revenues increased on pace with expenditures.
Years Ended December 31, 1996 and 1995
Revenues. Revenues were $3,674,000 in 1996 compared to $450,000 in 1995.
Revenues in 1996 resulted from the collaboration agreements with Warner-Lambert
and Roche Bioscience and from SBIR grants. Revenues in 1995 were the result of a
license fee from Warner-Lambert and SBIR funding.
Research and development. Research and development expenses were
$8,502,000 during 1996 and $7,051,000 in 1995. The increase in research and
development expenses was primarily due to an increase in staffing and supplies
and preclinical development expenditures.
General and administrative. General and administrative expenses were
$1,371,000 in 1996 and $866,000 in 1995. The increase was primarily due to an
increase in financing activities as well as an increase in staffing and expenses
associated with corporate partnering activities.
Interest income (expense), net. Interest income (expense), net was
$177,000 in 1996 and an expense of $10,000 in 1995. This change was primarily
due to greater cash balances available for investment generating greater
interest income in 1996 combined with a comparable level of interest expense in
both years.
Net loss. The net loss was $6,022,000 during 1996 and $7,477,000 during
1995. The net loss decreased in 1996 as revenues generated from corporate
partners increased in 1996.
Years Ended December 31, 1995 and 1994
Revenues. Revenues were $450,000 in 1995. The Company had no revenue in
1994. Revenues in 1995 resulted from the collaboration agreements with
Warner-Lambert and SBIR funding.
Research and development. Research and development expenses were
$7,051,000 during 1995 and $5,056,000 in 1994. The increase in research and
development expenses was primarily due to an increase in staffing and expenses
associated with the Company's expansion into new facilities and to a lesser
extent to increases in supplies and preclinical development expenditures.
General and administrative. General and administrative expenses were
$866,000 in 1995 and $726,000 in 1994. The increase was primarily due to an
increase in staffing and expenses associated with the Company's expansion into
new facilities.
Interest income (expense), net. Interest income (expense), net was an
expense of $10,000 in 1995 and income of $148,000 in 1994. This change was
primarily due to greater interest expense incurred in 1995 as a result of
additional capital leases.
Net loss. The net loss was $7,477,000 during 1995 and $5,634,000 during
1994. The increased net loss was a result of increased expenditures to support
the Company's internal research programs, offset in part by revenue from
collaborations in 1995.
22
<PAGE> 24
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company's operations have been funded primarily
through private placements of preferred stock, which have raised approximately
$33.5 million, license fees and sponsored research, which have generated
approximately $8.4 million, and capital lease obligations, which have raised
approximately $2.8 million. The Company has used cash to fund operating losses
of approximately $25.0 million, the investment of approximately $2.2 million in
equipment and leasehold improvements and the repayment of approximately $1.8
million of capital lease obligations. In the years ended December 31, 1995 and
1996 and the six months ended June 30, 1997, the Company's capital expenditures
totaled approximately $40,000, $185,000 and $406,000, respectively. The Company
had no significant commitments as of June 30, 1997 for capital expenditures and
expects to expend approximately $450,000 for capital equipment over the next
twelve months. At June 30, 1997, the Company had on hand cash, cash equivalents
and marketable securities of approximately $11.6 million and working capital of
approximately $6.8 million.
The Company has entered into sponsored research and consulting agreements
with certain hospitals, academic institutions and consultants, requiring
periodic payments by the Company. Aggregate minimum funding obligations under
these agreements, which include certain cancellation provisions, total
approximately $527,000, which includes funding commitments of approximately
$457,000 and $70,000 in 1997 and 1998, respectively. The Company has also
entered into an agreement to contribute $3.0 million towards funding the
construction and equipping a research center for the TAC. The Company has paid
$1.8 million of the commitment as of June 30, 1997. The additional commitment is
funded in semi-annual installments of $250,000.
In April 1997, the Company and Ilex entered into a joint venture whereby
the parties formed a limited partnership to develop and commercialize LDP-03 for
the treatment of chronic lymphocytic leukemia. The partners are required to make
contributions each time the partnership requires working capital. Leukosite and
Ilex will generally share equally in profits from the sales of LDP-03 and in all
research, development, clinical and commercialization costs. The capital
requirements of the joint venture consist of clinical development and
commercialization costs. Leukosite and Ilex estimate that research, development
and clinical costs will be approximately $10.0 million over the next two years.
The joint venture expires in 2017, but provides for either company, under
certain circumstances, to purchase the other company's ownership of the joint
venture upon a change in control of such company (as defined therein) or after
October 2, 2000.
The Company believes that the net proceeds of this offering, together with
its existing capital resources, interest income and revenue from the
collaboration agreements, will be sufficient to fund its currently planned
operating expenses and capital requirements through early 2000. However, there
can be no assurance that such funds will be sufficient to meet the Company's
operating expenses and capital requirements during such period. The Company's
actual cash requirements may vary materially from those now planned and will
depend upon numerous factors, including the results of the Company's research
and development and collaboration programs, the timing and results of
preclinical and clinical trials, the timing and costs of obtaining regulatory
approvals, the progress of the milestone and royalty producing activities of the
Company's collaborative partners, the level of resources that the Company
commits to the development of manufacturing, marketing and sales capabilities,
the cost of filing, prosecuting, defending and enforcing patent claims and other
intellectual property rights, the ability of the Company to maintain existing
and establish new collaboration agreements with other companies, the
technological advances and activities of competitors and other factors.
The Company will need to raise substantial additional capital to fund its
operations. The Company intends to seek such additional funding through public
or private financing or collaboration or other arrangements with collaborative
partners. There can be no assurance, however, that additional financing will be
available from any sources or, if available, will be available on acceptable
terms. See "Risk Factors--Substantial Additional Financing Requirements;
Uncertainty of Available Funding."
23
<PAGE> 25
BUSINESS
THE COMPANY
LeukoSite is a leader in the discovery and development of therapeutics
based upon the biology of leukocytes with potential applications in cancer and
inflammatory, autoimmune and viral diseases. The Company's technologies and
expertise in leukocyte biology facilitate the discovery and development of novel
and proprietary drugs that destroy or block the disease-causing actions of
leukocytes. The Company has one product candidate that has completed Phase II
clinical trials, two product candidates that are expected to begin human
clinical trials by early 1998, and seven small molecule drug discovery programs.
In a properly functioning immune system, leukocytes rid the body of
infectious organisms and repair damage to tissues and organs. However,
leukocytes can also cause or exacerbate disease processes when their growth is
uncontrolled, resulting in malignant diseases such as lymphomas and leukemias,
or when they are abnormally recruited into tissues, resulting in autoimmune or
inflammatory diseases. In addition, disease can also result when viruses such as
HIV attach to, invade and destroy leukocytes.
LeukoSite focuses on distinct cell surface molecules found on leukocytes
and their roles in disease. The Company is developing monoclonal antibodies and
small molecule drugs that selectively deplete leukocytes or block specific
leukocyte recruitment pathways controlled by chemokines and their receptors as
well as by integrins and adhesion molecules. LeukoSite believes that these drugs
will have a high degree of specificity and reduced side effects compared to
existing anti-cancer, anti-inflammatory, immunosuppressive and anti-viral
therapies.
The Company expects to initiate late stage clinical trials for its lead
product candidate, LDP-03, in 1998 to support licensure of the product. LDP-03
is a humanized monoclonal antibody to the leukocyte antigen CAMPATH, which was
licensed by the Company after reviewing data from Phase I and II clinical trials
showing activity in the treatment of chronic lymphocytic leukemia ("CLL"). The
Company has entered into a joint venture with Ilex Oncology, Inc. ("Ilex") for
the clinical development and commercialization of LDP-03. Under the terms of the
agreement with Ilex, LeukoSite and Ilex will generally share equally in any
profits from the sales of LDP-03 and in all future research, development,
clinical and commercialization costs. The Company's second product candidate,
LDP-01, is a humanized anti-integrin monoclonal antibody that inhibits early
leukocyte recruitment and inflammation resulting from reperfusion injury. The
Company intends to initiate two Phase I/IIa clinical studies of LDP-01 in the
United Kingdom in early 1998, one for kidney transplantation and a second for
thrombotic stroke. The Company's third product candidate, LDP-02, is a humanized
monoclonal antibody to the (LOGO)4B7 integrin and is being developed for the
treatment of inflammatory bowel disease, such as Crohn's disease and ulcerative
colitis. The Company intends to initiate a Phase I/IIa study of LDP-02 in the
United Kingdom in early 1998.
To date, the Company has also generated six chemokine-receptor drug
discovery targets that are the subject of collaborations with pharmaceutical
companies for small molecule drug discovery and development. The Company has
collaboration agreements with Warner-Lambert Company ("Warner-Lambert"), Roche
Bioscience and Kyowa Hakko Kogyo Co. Ltd. ("Kyowa"). As of June 30, 1997, the
Company had received $8.4 million under these collaborations for research
funding and license fees and will be entitled to receive $13.0 million of
additional funding that is not subject to the achievement of milestones
(assuming each collaboration remains in effect for its full term). In addition,
in the event that a product is successfully developed and commercialized under
each of the collaborations, LeukoSite will be entitled to receive up to $44.3
million in development and commercialization milestone payments, as well as
royalties associated with product sales. As of June 30, 1997, Warner-Lambert had
invested $9.0 million and Roche Finance Ltd had invested $3.0 million in equity
of the Company.
24
<PAGE> 26
BACKGROUND
Overview of Leukocyte and Immune System Biology
The human immune system protects the body against infection by bacteria,
viruses and parasites. Leukocytes are formed in the bone marrow, mature in
lymphatic tissue and are transported throughout the body by the bloodstream.
Endothelial cells, which comprise the inner lining of blood vessels, act as
gatekeepers allowing circulating leukocytes to enter surrounding tissue when
needed. Leukocytes, in a healthy immune response, eliminate pathogens without
damaging host cells.
Leukocyte Maturation. Hematopoietic (blood-forming) stem cells in the bone
marrow produce precursor cells that mature into circulating leukocytes.
Neutrophils, eosinophils and basophils, which are types of mature leukocytes,
are normally formed only in the bone marrow and are stored there until they are
needed. The other types of leukocytes (lymphocytes and monocytes), mature in
other organs, including the lymph nodes, spleen, thymus, tonsils and gut. During
the process of maturation and storage, leukocytes differentiate into more
defined functional subtypes, after which they are released into the circulatory
system. As they mature, leukocytes undergo complex changes including the
appearance and disappearance of molecules or receptors on their outer membrane.
Proteins and other biomolecules produced in the body bind to these receptors
which in turn signal the leukocytes to respond in specific ways. If the
leukocyte maturation process does not occur normally, uncontrolled and rapid
proliferation of certain types of leukocytes may lead to malignant diseases such
as leukemias and lymphomas.
Leukocyte Recruitment. Circulating leukocytes leave the bloodstream and
migrate into tissues via a complex set of pathways and molecular interactions.
This process is a fundamental part of the human immune system and provides a way
for leukocytes to be recruited to areas of infection or damaged tissue. The
sequential steps that lead to the recruitment of leukocytes from the blood
vessel into tissues begin when selectins, expressed by endothelial cells,
momentarily tether passing leukocytes causing them to roll along the vessel
wall. If the leukocytes encounter chemokines, a type of chemical signal
emanating from an inflammation site, receptors on the surface of the tethered
leukocytes will then bind to the chemokines, initiating a series of changes
within the leukocytes. Among the changes is the enhanced activity of adhesion
receptors called integrins. In the final step, the integrins on the surface of
the leukocytes bind to complementary structures called adhesion molecules
located on the vessel wall. Once attached, the leukocytes change shape, squeeze
through the vessel wall and migrate to the area of increased chemokine
concentration at the site of inflammation.
The process of leukocyte recruitment requires precise regulation. It is
essential that the body has exact signals as to when, where and with which type
of leukocyte to respond. In many inflammatory and autoimmune diseases, these
signals operate at the wrong place or time, leading to improper recruitment and
resulting in tissue damage from the release of inflammatory substances, such as
cytokines, growth factors and oxygen radicals.
Chemokines and Chemokine Receptors. Chemokines are a family of proteins
produced in many different tissues. The expression of chemokines is increased in
response to infection or very early stages of inflammation. Chemokine receptors
are members of the G protein-coupled family of receptors located on the outer
membrane of the cell and translate a variety of signals from the outside to the
inside of the cell. Chemokines bind to these chemokine receptors and activate
leukocytes, causing them to migrate toward the source of the chemokine molecule
(that is, movement out of the bloodstream and into tissues). Each subset of
leukocytes (for example, eosinophils, monocytes, lymphocytes and neutrophils)
has distinct types of chemokine receptors that respond to only certain
chemokines. Through this discriminating mechanism, the body can control and
selectively recruit certain types of leukocytes to mediate an inflammatory
process. In addition, certain viruses, such as HIV-1, may use chemokine
receptors as a homing mechanism to bind to and infect leukocytes.
Integrins and Adhesion Molecules. Integrins and adhesion molecules provide
another degree of control over leukocyte recruitment pathways. Integrins are a
family of proteins comprised of a series of
25
<PAGE> 27
alpha and beta chains that bind to distinct receptors, called adhesion
molecules, found on endothelial and other types of cells. Adhesion molecules
attract only those leukocytes that have matching integrin molecules and allow
for the selective transfer of these leukocytes through the endothelial layer
into tissues. A subset of adhesion molecules called addressins is expressed only
on certain tissues in response to infection or damage.
THE LEUKOSITE APPROACH: LEUKOCYTE SPECIFIC DRUGS
LeukoSite is researching and developing drugs to destroy or block the
disease-causing actions of leukocytes. The Company's technology and expertise
provide the platform for the identification of novel and proprietary
anti-cancer, anti-inflammatory and anti-viral drugs.
LeukoSite's goal is to discover and develop effective and safe therapeutic
drugs that target specific types of leukocyte pathways. Most available drugs
that regulate the immune response lack specificity for disease. For example,
steroids not only block inflammation but also suppress a variety of necessary
immunologic functions. Such non-specific drugs may produce profound universal
immunosuppression and can have other side effects. The targets for the Company's
discovery and development programs include chemokines, leukocyte cell surface
molecules (including chemokine receptors and integrins) and adhesion molecules.
This technology provides the basis for the discovery of drugs that work by
destroying specific types of leukocytes or blocking the recruitment of specific
types of leukocytes into diseased tissues.
Selective Depletion of Leukocytes. Therapeutic drugs that can selectively
eliminate certain leukocytes while sparing hematopoietic stem cells may be
useful for the treatment of certain blood cancers and as therapies to reduce
rejection of transplanted bone marrow and organs. For example, LDP-03, a
humanized lymphocyte-depleting monoclonal antibody, is directed against the CD52
surface antigen expressed on lymphocytes but not on hematopoietic stem cells.
Unlike fludarabine and other traditional cytotoxic chemotherapies used to treat
lymphomas and leukemias, LDP-03 does not deplete leukocyte-generating
hematopoietic stem cells.
Selective Blockade of Leukocyte Receptor and Recruitment Pathways. Many
inflammatory and autoimmune diseases may be caused by dysfunctional
chemokine/receptor and integrin/adhesion molecule pathways. LeukoSite has
identified a number of these pathways that appear to cause specific inflammatory
diseases. The technology platform developed at LeukoSite allows it to discover,
clone and characterize novel chemokines, chemokine receptors, integrins and
adhesion molecules for the discovery of disease-specific therapeutics.
STRATEGY
LeukoSite's objective is to exploit its strength in the field of leukocyte
biology to develop, acquire and commercialize proprietary new drugs.
Exploit Expertise in Leukocyte Biology. Based on its understanding of
leukocyte biology and the role of leukocytes in disease, LeukoSite plans to
continue to identify targets and to generate small molecules and monoclonal
antibodies through internal and external programs. The Company, through its
proprietary expertise in leukocyte biology, has one product candidate that has
completed Phase II clinical trials, two product candidates that are expected to
begin human clinical trials by early 1998, and seven small molecule drug
discovery programs. LeukoSite plans to continue to discover, develop and acquire
related products and technologies to supplement its scientific expertise, drug
development capability and product portfolio.
Leverage Corporate Partnerships. LeukoSite has entered into collaboration
agreements with Warner-Lambert, Roche Bioscience and Kyowa. These collaborations
are designed to build LeukoSite's infrastructure and expertise by funding
research at LeukoSite and by giving the Company access to extensive and
complementary small molecule screening libraries and drug development expertise.
In addition, these collaborations are expected to speed discovery and
development of drug
26
<PAGE> 28
candidates through the efforts of dedicated research staffs at the partners'
facilities. The goal of each collaboration is the commercialization of drugs to
treat large patient populations.
Employ Monoclonal Antibodies as Drug Candidates and as Tools. LeukoSite
uses monoclonal antibodies to chemokines, chemokine receptors, integrins and
adhesion molecules to measure the presence of target ligands and receptors in
models of inflammatory and immune system diseases. Monoclonal antibodies that
block target ligands and receptors demonstrate the relevance of leukocyte
pathways in disease and may also become drug candidates. The Company believes
that monoclonal antibodies are well-suited for acute inflammatory indications,
certain cancers and for accessible targets, such as those on the outside of
cells and in the bloodstream. LeukoSite has generated large collections of
monoclonal antibodies to various receptors as part of its research and
development programs. In addition, the Company is currently developing three
humanized monoclonal antibodies (LDP-01, LDP-02 and LDP-03) as therapeutic
products. Moreover, monoclonal antibodies can be used as tools to speed the
development of small molecule drugs. As a result of its work on the monoclonal
antibody LDP-02 for the treatment of inflammatory bowel disease, LeukoSite
identified a key target implicated in the disease and has initiated the b7
integrin receptor small molecule antagonist development program.
Develop Small Molecule Antagonist Drugs. LeukoSite's small molecule
programs utilize proprietary assays to screen large numbers of test compounds
that bind to chemokine or integrin receptors and block their biological
function. The Company has used the libraries of its partners as well as its own
to search for leads. Once a lead is identified, the Company and its
collaborators employ medicinal and combinatorial chemistry to design and
synthesize potent and selective product candidates. In addition, LeukoSite uses
information about the structure of receptors, ligands and compounds in
computer-assisted molecular models to identify the cell surface locations of
these receptors and to assist in the design of lead drug candidates. The Company
has six small molecule discovery programs in screening and lead optimization:
CCR3 Antagonist, MCP-1 Antagonist, IL-8 Antagonist, CCR1/CXCR3 Antagonist, CCR5
Antagonist and b7 Integrin Receptor Antagonist.
Utilize Non-human Primates for Rapid Proof of Principle. Early in the
development process, LeukoSite rigorously tests the pharmacological rationale
for its drugs in progressively complex and relevant models of human disease.
Researchers at the Company administer monoclonal antibodies and small molecule
drugs to non-human primates in established models of inflammatory and autoimmune
disease. Such models validate biological targets, are important indicators of
safety and toxicity profiles, and provide important insight into human
therapeutic applications of potential drugs. LeukoSite's veterinary pathologists
are experienced in the use of monoclonal antibody immunotherapy in non-human
primates.
Minimize Investment in Manufacturing and Development
Infrastructure. LeukoSite's strategy is to dedicate its resources to
leukocyte-based drug discovery and development, an area in which the Company
believes it has a competitive advantage. The Company plans to outsource or
jointly pursue certain high cost activities associated with its drug development
programs, such as manufacturing and clinical development. LeukoSite has a senior
management team in place with experience in planning and managing these
strategic relationships.
In-license Technologically-related Products. The Company intends to
opportunistically in-license products that are based upon leukocyte biology to
supplement its product pipeline. LeukoSite has acquired rights to LDP-03, a
lymphocyte-depleting drug, which has been tested extensively in multiple human
clinical trials in several different indications. Based on its review of the
data, LeukoSite in-licensed LDP-03 and has entered into a joint venture with
Ilex to develop and commercialize LDP-03 for use in the treatment of CLL.
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<PAGE> 29
LEUKOSITE'S DRUG DEVELOPMENT PROGRAMS
LeukoSite currently has three drugs in human clinical or late preclinical
development. These monoclonal antibody programs are based on leukocyte
selectivity and tissue specificity.
<TABLE>
<CAPTION>
COMMERCIALIZATION
DRUG CANDIDATES STATUS RIGHTS
- ----------------------------------- ----------------------------------- ---------------
<S> <C> <C>
Leukocyte Antigens
LDP-03 (ANTI-CAMPATH MAB)
Chronic lymphocytic leukemia Completed Phase II
LeukoSite/Ilex
Joint Venture
Integrin/Adhesion Molecules
LDP-01 (ANTI-b2 MAB)
Kidney transplant Phase I/IIa clinical trials in the
United Kingdom to begin in 1997 LeukoSite(1)
Thrombotic stroke Phase I/IIa clinical trials in the
United Kingdom planned in early LeukoSite(1)
1998(2)
Myocardial infarction Preclinical development completed
LeukoSite(1)
LDP-02 (ANTI-b7 MAB)
Inflammatory bowel disease Preclinical development in
progress(2) LeukoSite(1)
</TABLE>
- ------------------------
(1) LeukoSite currently retains all rights to these programs. The Company may
seek to enter into development and marketing agreements for some or all of
these programs.
(2) A Phase I/IIa clinical trial pursuant to a CTX is expected to commence in
the United Kingdom in early 1998. See "Business--Government Regulation."
LDP-03 (CAMPATH-1H)
LeukoSite's lead product candidate, LDP-03, is a humanized monoclonal
antibody to the leukocyte antigen CAMPATH, which the Company is developing
jointly with Ilex for the treatment of chronic lymphocytic leukemia ("CLL"). The
Company recently licensed LDP-03 from the British Technology Group ("BTG") after
reviewing data from Phase I and II clinical trials conducted by Burroughs
Wellcome ("BW") showing activity in the treatment of patients with CLL. LDP-03
combats CLL by selectively depleting lymphocytes while sparing hematopoietic
stem cells. This selective depletion permits the body to retain needed
hematopoietic stem cells that are the precursors to, and repopulate the blood
with, leukocytes and preserve normal immune function. LDP-03 binds to the
antigen CD52, which is expressed almost exclusively on lymphocytes and which is
not expressed on hematopoietic stem cells, and destroys the lymphocytes. By
attacking the antigen CD52 and its lymphocytes, LDP-03 is more selective than
currently approved drugs for lymphomas and leukemias which indiscriminately
deplete rapidly-dividing cells, including both lymphocytes and hematopoietic
stem cells.
LDP-03 was originally tested by BW under license from BTG for a broad range
of indications, including autoimmune diseases such as rheumatoid arthritis,
non-Hodgkin's lymphoma, CLL and solid organ and bone marrow transplantations. BW
discontinued the trials after the data from rheumatoid arthritis patients
suggested that the degree of lymphocyte depletion was too great for chronic
therapy. In addition, BW's data from non-Hodgkin's lymphoma patients indicated
that there may be increased risk of opportunistic infection and that the drug's
efficacy was insufficient for first line stand-alone therapy. BW notified the
FDA that it had discontinued all development of CAMPATH-1H and that no further
enrollment into the two FDA-authorized Phase I/II CAMPATH-1H clinical trials
would occur. BW informed the FDA that, based on preliminary results from certain
of the non-Hodgkin's lymphoma
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<PAGE> 30
clinical studies, the drug's toxicity of greatest concern was infection and
there was little improvement in efficacy to offset this concern.
Studies involving 64 of the 75 patients with CLL and related prolymphocytic
leukemia who participated in the BW trials have been publicly reported. Three of
the four studies exclusively address patients who were refractory to, or who had
relapsed following, chemotherapy. All responses were evaluated according to
National Cancer Institute criteria, which define complete remission as the
absence of all clinically detectable disease for at least eight weeks, while a
partial remission is defined as 50% or greater reduction of detectable disease
for at least eight weeks. Major responses include complete and partial
remissions.
In a study of 29 refractory or relapsing patients with CLL published in the
Journal of Clinical Oncology in April 1997 by Osterborg et al., one patient (3%)
had a complete remission and eleven patients (38%) had partial remissions,
representing a total of twelve major responses (41%). Another study of seven
fludarabine-resistant CLL patients published in the British Journal of
Hematology in September 1996 by Dyer et al reported one complete remission (14%)
and two partial remissions (28%) for a total of three major responses (42%). A
thirteen patient study presented at the American Society of Hematology Annual
Meeting in December 1995 by Rai et al in fludarabine-resistant CLL patients
reported three complete remissions (23%) and six partial remissions (46%)
totaling nine major responses (69%). A study of fifteen patients with previously
treated prolymphocytic leukemia, accepted for publication in the Journal of
Clinical Oncology, reports nine patients with complete remissions (60%) and two
patients with partial remissions (13%) totaling eleven patients with major
responses (73%).
CLL patients are presently treated with chlorambucil and fludarabine as
first-line or second-line therapy. Despite this course of treatment, all
patients not dying of other causes eventually relapse. No approved therapy is
available to treat patients who fail therapy with fludarabine. Based on the data
from the clinical trials, the Company believes that LDP-03 may be effective for
symptomatic CLL patients who have failed the current standard of care and second
line therapies. The Company believes that there are approximately 56,000 CLL
patients in the United States, of which fewer than half receive treatment. The
Company estimates that in 1996 approximately 5,000 patients died with CLL.
LeukoSite entered into a joint venture with Ilex Oncology, a drug
development company with expertise in the clinical development and registration
of oncology drugs, for the clinical development and commercialization of LDP-03.
Several members of the senior management of Ilex have had direct experience in
the development of fludarabine for treating CLL before joining Ilex. The joint
venture is currently in negotiations with a contract drug manufacturing company
for the manufacture of material to be used for clinical trials and
commercialization. See "Collaboration Agreements -- Ilex."
Based on the BW Phase I and II clinical trial data from approximately 75
patients with relapsing or refractory CLL treated with LDP-03, the Company and
Ilex expect to file applications with U.S. and European regulatory agencies in
1998 to begin a multi-center late stage clinical trial in 50 to 100 previously
treated CLL patients to support licensure of the product. Patient responses will
be evaluated based on the National Cancer Institute criteria and other
parameters defined by the Company. There can be no assurance that the FDA would
permit the Company to initiate late stage clinical trials for LDP-03 in CLL
patients solely on the basis of the BW Phase I and II clinical trial data.
LDP-01 (anti-b2 mAb)
LeukoSite is developing LDP-01, a humanized monoclonal antibody to the b2
integrin on leukocytes for the prevention of post-ischemic reperfusion injury
such as that resulting from organ transplantation, stroke and myocardial
infarction. The Company believes that LDP-01 blocks the attachment of b2
integrins to their adhesion molecules and limits the recruitment of leukocytes
involved in the inflammatory process at multiple tissue sites. The b2 integrin
receptor on the surface of leukocytes interacts with specific adhesion molecules
on the surface of endothelial cells lining blood vessels. This interaction is
essential for leukocytes to migrate into tissues and organs.
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Upon the reestablishment of blood flow following transplantation of organs
from cadaver donors, leukocytes are recruited to the transplanted organ
resulting in tissue injury, organ dysfunction and potentially graft loss.
Methods that inhibit leukocyte recruitment following ischemic injury, such as
the blockade of b2 integrins, could be therapeutically beneficial to patients
with ischemic disease and to patients receiving organ transplants from cadavers.
The use of LDP-01 in the treatment of kidney transplant patients may result in a
reduction in the time for the transplanted graft to function and may enhance
graft survival. According to the United Network of Organ Sharing ("UNOS"), there
were approximately 11,000 kidney transplants performed in 1996, of which 70%
involved the use of cadaver organs. The Company intends to initiate a Phase
I/IIa clinical trial in 1997 in the United Kingdom to determine the safety,
efficacy and pharmacokinetics of LDP-01 for the reduction of post-ischemic
reperfusion injury and delayed graft function in patients receiving cadaver
kidney transplants. If the Company's anticipated study is supportive, it intends
to pursue an IND filing in the United States.
Stroke is the irreversible loss of brain cells following ischemia, the
interruption of blood flow depriving the brain of blood and oxygen. Further
damage to brain cells occurs as the result of reperfusion injury by leukocytes
when blood flow is reestablished. By inhibiting the recruitment of leukocytes,
LDP-01 may decrease the degree of reperfusion tissue damage and the extent of
the disability, and could significantly reduce the inpatient and rehabilitation
costs associated with this condition. The Company intends to initiate a Phase
I/IIa clinical trial in early 1998 in the United Kingdom to determine the
safety, efficacy and pharmacokinetics of LDP-01 for the reduction of reperfusion
tissue damage associated with ischemic stroke. If the Company's anticipated
study is supportive, it intends to pursue a IND filing in the United States.
The Company has also completed pre-clinical testing of LDP-01 for
myocardial infarction. If the Company's anticipated Phase I/IIa study in stroke
is supportive, the Company will consider pursuing an IND filing for myocardial
infarction in the United States.
Preclinical trials demonstrate that LDP-01 can block attachment of
leukocytes to endothelial cells and inhibit their inflammatory activities. In
two models of inflammation in chimpanzees, LDP-01 blocked the recruitment of
neutrophils, monocytes and lymphocytes and prevented inflammation. LDP-01 has
been administered to three patients in clinical studies sponsored by the
Therapeutic Antibody Centre ("TAC"): two for the treatment of vasculitis, an
inflammation of blood vessels, and one for the treatment of polymyositis, a
severe muscle disease resulting in the weakening of limb and trunk muscles. The
results in these patients provided clinical data that LDP-01 inhibited the
further recruitment of leukocytes into inflamed tissue.
LDP-02 (anti-b7 mAb)
LeukoSite is developing LDP-02, a humanized monoclonal antibody to the a4b7
integrin receptor on leukocytes. LDP-02 is being evaluated for the treatment of
inflammatory bowel disease, which includes ulcerative colitis and Crohn's
disease, chronic disorders characterized by inflammation and ulceration of the
intestines. Ulcerative colitis causes bleeding and inflammation of the mucosal
lining of the colon and rectum, while Crohn's disease is an inflammation that
extends deeper into all layers of the intestinal wall, and frequently involves
both the small and large intestine. Preclinical studies in rodents and non-human
primates have implicated the a4b7 integrin subset of leukocytes as major
contributors to the process of inflammatory bowel disease. LDP-02 is currently
in late preclinical development, and the Company intends to initiate a Phase
I/IIa study in the United Kingdom in early 1998.
The Company evaluated the murine homologue of LDP-02 before it was
humanized and demonstrated pharmacologic activity in three non-human primate
models of inflammatory bowel disease, including the colitic cotton-top tamarin
monkey. The Company believes that this model represents the most clinically
useful model of ulcerative colitis. In this model, when systematically
administered, the murine homologue of LDP-02 was found to be efficacious in
rapidly resolving diarrhea and in inhibiting the localization of leukocytes to
the colonic mucosa.
Current therapy for inflammatory bowel disease includes the administration
of steroids which can broadly suppress the immune system. Published data
indicate that in 1994 there were approximately
30
<PAGE> 32
300,000 Crohn's disease patients and 250,000 ulcerative colitis patients in the
United States. Based on published reports, the total annual medical cost in 1990
in the United States was estimated to be between $1.0 and $2.0 billion for
Crohn's disease patients and between $400 and $600 million for ulcerative
colitis. LeukoSite will seek to develop intravenous and subcutaneous
formulations of LDP-02 for the treatment and management of severe exacerbations
of inflammatory bowel disease.
LEUKOSITE RESEARCH AND DRUG DISCOVERY PROGRAMS
LeukoSite currently has seven research and discovery programs. These
chemokine and integrin targeted programs are based on the selective blockade of
specific chemokine, chemokine receptor or integrin controlled leukocyte pathways
or functions.
<TABLE>
<CAPTION>
COLLABORATIVE
DRUG CANDIDATE STATUS PARTNER
- -------------------------------- -------------------------------- --------------------
<S> <C> <C>
Chemokine/Chemokine Receptor
CCR3 ANTAGONIST
Asthma Allergic Small molecule screening and
hypersentitivity lead generation and optimization
Roche Bioscience(1)
MCP-1 ANTAGONIST
Atherosclerosis Rheumatoid Small molecule screening and
arthritis lead generation and optimization
Warner-Lambert(2)
IL-8 ANTAGONIST
Myocardial infarction Small molecule screening and
small molecule and mAb lead Warner-Lambert(2)
generation
CCR1 ANTAGONIST
Rheumatoid arthritis Multiple Small molecule and mAb lead
sclerosis Psoriasis generation and optimization
Kyowa(3)
CXCR3 ANTAGONIST
Rheumatoid arthritis Multiple Small molecule and mAb lead
sclerosis Psoriasis generation and optimization
Kyowa(3)
CCR5 ANTAGONIST
HIV-1 infection and Small molecule screening and
inflammatory diseases lead generation
Warner-Lambert(4)
Integrin/Adhesion Molecules
b7 INTEGRIN RECEPTOR ANTAGONIST
Inflammatory bowel disease Small molecule lead optimization
--(5)
</TABLE>
- ------------------------------
(1) Roche Bioscience has worldwide exclusive rights under the collaboration
agreement to market products.
(2) Warner-Lambert has worldwide exclusive rights under the collaboration
agreement to market products.
(3) Kyowa has exclusive rights in Asia under the collaboration agreement and
options in the rest of the world to market products related to these
targets.
(4) Warner-Lambert has an option for the exclusive right under the collaboration
agreement to market products in the United States and Europe.
(5) LeukoSite retains all rights to this program.
CCR3 Receptor Antagonist
LeukoSite is engaged in the discovery and development of an orally
available, small molecule antagonist to block eosinophil recruitment and
function for the treatment of asthma and allergies. Data in animal models and in
humans suggest that eosinophils, and their recruitment to the lung and other
tissues and organs, play a significant role in the pathogenesis of asthma and
other allergies. The
31
<PAGE> 33
Company, in connection with several of its academic collaborators, has
identified the principal eosinophil chemokine receptor, CCR3, filed a patent
application on the gene that encodes for the receptor and the therapeutic
applications of it and has developed a program to discover an antagonist to
block the CCR3 receptor and the recruitment of eosinophils to respiratory tract
tissue. The Company believes that a drug which blocks the detrimental effects of
eosinophil recruitment will reduce the inflammation that contributes to asthma
and allergies.
In July 1996, LeukoSite entered into an agreement with Roche Bioscience for
the Company's CCR3 antagonist program. Roche Bioscience is currently screening
its compound library against the Company's targets. LeukoSite is entitled to
receive payments from Roche Bioscience in the form of licensing fees, research
support and milestone payments and royalties on worldwide product sales
resulting from this collaboration. Roche Bioscience will be responsible for and
provide financial support for the preclinical and clinical development of
products resulting from this collaboration and will have worldwide exclusive
rights under the collaboration agreement to market products. See "Collaboration
Agreements--Roche Bioscience."
MCP-1 Receptor Antagonist
LeukoSite is engaged in the discovery and development of an orally
available, small molecule antagonist to the MCP-1 receptor for the treatment of
chronic inflammatory and autoimmune diseases. The chemokine MCP-1 recruits
monocytes and T cells from the bloodstream to tissues. MCP-1 activates monocytes
and T cells by binding to its receptor on the leukocyte cell membranes, often
resulting in damage to surrounding tissues and irretrievable loss of normal
function. The blockade of the MCP-1 interaction with its receptor may be an
effective approach for the treatment of chronic inflammatory and autoimmune
diseases in which monocytes and T cells play key roles. In preclinical studies,
LeukoSite and others have shown that MCP-1 is associated with the inflammatory
processes exhibited in rheumatoid arthritis and atherosclerosis.
LeukoSite entered into a collaboration agreement with Warner-Lambert in
September 1994 to discover and develop small molecule antagonists to MCP-1 and
its receptor. This collaborative effort has identified inhibitors to the MCP-1
receptor which have demonstrated pharmacological activity in animal models of
inflammatory disease. This collaboration entered into a second contractual stage
in April 1996 with the objective of optimizing the pharmacological profile of
these inhibitors and identifying a clinical development candidate.
Warner-Lambert is responsible for the worldwide clinical development of an MCP-1
antagonist derived from the collaboration, and it is anticipated that the
clinical development program will focus on the treatment of atherosclerosis and
rheumatoid arthritis.
Warner-Lambert has worldwide exclusive rights under the collaboration
agreement to develop and market products resulting from the collaboration.
LeukoSite is entitled to receive royalties on product sales. This collaboration
provides for additional sponsored research payments to be made by Warner-Lambert
to LeukoSite and for payments to be made upon the achievement of certain
specified milestones. See "Collaboration Agreements--Warner-Lambert."
IL-8 Receptor Antagonist
LeukoSite is engaged in the discovery and development of an orally
available, small molecule antagonist to the IL-8 chemokine receptor for the
treatment of diseases involving tissue injury that result from post-ischemic
reperfusion injury. Myocardial infarction results when blood flow to a region of
the heart is blocked as a result of a coronary artery becoming occluded. This
blockage results in injury to and death of heart tissue in the affected region.
A significant portion of the tissue injury and death is thought to be caused by
neutrophil-mediated inflammatory damage. IL-8 is a potent and selective
chemokine protein that causes the recruitment and activation of neutrophils,
which are responsible for subsequent inflammation and post-ischemic reperfusion
injury. The Company's program is directed at the discovery and development of
drugs which inhibit the binding of IL-8 to its
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<PAGE> 34
receptor in order to block the recruitment of neutrophils and to prevent the
resulting inflammation and reperfusion injury.
In July 1995, LeukoSite entered into a collaboration agreement with
Warner-Lambert to discover and optimize lead candidates using LeukoSite's IL-8
receptor-based technology by screening Warner-Lambert's compound library.
Warner-Lambert is responsible for the development and commercialization of
products derived from this collaboration. LeukoSite currently intends to pursue
an IL-8 receptor antagonist for post-ischemic reperfusion tissue injury
resulting from myocardial infarction. Warner-Lambert has worldwide exclusive
rights under the collaboration agreement to develop and market products
resulting from this collaboration. LeukoSite is entitled to receive royalties on
product sales. This collaboration provides for additional sponsored research
payments to be made by Warner-Lambert to LeukoSite and for payments to be made
upon the achievement of certain specified milestones. See "Collaboration
Agreements--Warner-Lambert."
CXCR3 Receptor Antagonist and CCR1 Receptor Antagonist
LeukoSite is engaged in the discovery and development of orally available,
small molecule antagonists and monoclonal antibodies to block the leukocyte
recruitment pathways controlled by chemokine receptors CXCR3 and CCR1. Ligands
for the receptors, specifically the chemokines IP-10 and RANTES, play key roles
in recruiting T cells and monocytes to sites of inflammation. LeukoSite is
studying the role these receptors play in inflammation with a combination of
tools including monoclonal antibodies. Based upon knowledge of the cells which
express these receptors, small molecule antagonists may be of therapeutic value
in the treatment of chronic inflammatory and autoimmune disease.
In April 1997, LeukoSite entered into a collaboration agreement with Kyowa
to discover small molecule antagonists and monoclonal antibody drugs that block
these chemokine receptors. Kyowa has the exclusive rights under the
collaboration agreement to develop and market products resulting from this
collaboration in Asia and an option for rights under the collaboration agreement
in the rest of the world. LeukoSite will be entitled to research support and
milestone payments and future royalties based on product sales. See
"Collaboration Agreements--Kyowa Hakko Kogyo."
CCR5 Receptor Antagonist
LeukoSite is engaged in the discovery and development of an orally
available, small molecule antagonist to the chemokine receptor CCR5. Such a drug
may be useful in the treatment of patients infected with HIV and as a therapy
for certain inflammatory and autoimmune diseases. The CCR5 receptor binds three
different chemokines and is found on lymphocytes and macrophages. The location
of this receptor and its presence on lymphocytes and macrophages suggest that
blocking it would have anti-inflammatory effects. Recent data indicate that
drugs that block CCR5 may have anti-HIV activity. Furthermore, reports of
individuals who are resistant to HIV link a deletion in the CCR5 gene and a lack
of CCR5 expression to their resistance to the disease. LeukoSite and its
collaborators have reported on the molecular mechanism by which the virus binds
to the CCR5 receptor and facilitates the entry of HIV-1 into leukocytes.
In November 1996, LeukoSite entered into a collaboration agreement with
Warner-Lambert to discover and optimize small molecule lead candidates using
LeukoSite's CCR5 receptor-based technology by screening Warner-Lambert's
compound library. LeukoSite currently intends to pursue a CCR5 receptor
antagonist for HIV-1 and a distinct receptor antagonist for chronic
inflammation. Warner-Lambert has an option for the exclusive right under the
collaboration agreement to develop and commercialize products derived from the
collaboration in North America and Europe. In the event that this option is
exercised, LeukoSite will be entitled to receive payments upon the achievement
of milestones. LeukoSite is entitled to receive royalties on product sales.
LeukoSite retains commercialization rights under the collaboration agreement in
Asia.
33
<PAGE> 35
Outside its collaboration with Warner-Lambert, the Company has generated
monoclonal antibodies to the CCR5 receptor. These antibodies block strains of
HIV from binding to and infecting human leukocytes. The Company is currently
evaluating these antibodies in preclinical studies to determine future clinical
plans. See "Collaboration Agreements--Warner-Lambert."
(Beta)7 Integrin Receptor Small Molecule Antagonist
LeukoSite is engaged in the discovery and development of a small molecule
antagonist to the (Alpha)4(Beta)7 integrin receptor present on gut-homing
T lymphocytes. The goal of this program is to identify a potent orally-active
agent for patients with inflammatory bowel disease. In contrast to LDP-02,
which is intended to treat acute flares of inflammatory bowel disease, daily
administration of the oral (Beta)7 integrin receptor antagonist is intended for
patients with mild to moderate inflammatory bowel disease in need of chronic
therapy.
LeukoSite believes that it has a strong rationale for the discovery and
development of small molecule (Beta)7 integrin receptor antagonists as a result
of observations that monoclonal antibodies to the (Alpha)4(Beta)7 integrin and
its receptor, mucosal addressin cell adhesion molecule ("MAdCAM"), produced
significant improvements in animal models of inflammatory bowel disease.
LeukoSite has made a significant advance in its program by cloning the human
gene for MAdCAM. As a result of this advance, LeukoSite has obtained important
structural information in the design of active (Beta)7 antagonists. The Company
screens its own library as well as libraries from the combinatorial chemistry
company, Oxford Asymmetry, Ltd. in connection with this program. Under the
terms of this agreement, LeukoSite retains all rights under the agreement to
commercialize drugs which result from the program between LeukoSite and Oxford
Asymmetry, Ltd. The Company has developed a high throughput (Beta)7:MAdCAM
cell-based adhesion assay. Using this assay to screen compounds, LeukoSite has
identified several active compounds and is investigating the design of optimal
drug candidates.
The Company has an agreement with Genzyme Corporation which provides
LeukoSite with access to more than 800,000 compounds to screen in its high
throughput assays. After screening is complete, should there be any active
compounds, Leukosite and Genzyme will negotiate the terms of a collaboration for
the research, development and commercialization of drug candidates.
COLLABORATION AGREEMENTS
As a key part of its business strategy, LeukoSite pursues collaboration
agreements with pharmaceutical companies, hospitals, manufacturers and other
organizations to combine the Company's drug discovery capabilities with the
collaborators' research, drug development, manufacturing, marketing and
financial resources. LeukoSite has existing collaboration agreements with
several pharmaceutical companies, contract manufacturers and medical research
institutions, and intends to continue to seek collaboration agreements with
additional third parties. The Company structures its collaborations around
specified targets, such as chemokines and chemokine receptors or integrins and
adhesion molecules, or around targeted objectives, such as the manufacture of a
certain monoclonal antibody or small molecule. This approach enables LeukoSite
to exploit its drug discovery technologies while retaining flexibility to pursue
additional collaborations.
As of June 30, 1997, LeukoSite had received $8.4 million under these
collaborations for research funding and license fees and will be entitled to
receive $13.0 million of additional funding that is not subject to the
achievement of milestones (assuming each collaboration remains in effect for its
full term). In addition, in the event that a product is successfully developed
and commercialized under each of the Warner-Lambert, Roche Bioscience and Kyowa
collaboration agreements, LeukoSite will be entitled to receive up to $44.3
million in development and commercialization milestone payments, as well as
royalties associated with product sales. As of June 30, 1997, Warner-Lambert had
invested $9.0 million and Roche Finance Ltd had invested $3.0 million in equity
of the Company.
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LeukoSite's principal existing collaborations are as follows:
Warner-Lambert
LeukoSite has entered into three collaboration agreements with
Warner-Lambert. In September 1994, LeukoSite and Warner-Lambert entered into a
drug discovery collaboration to discover and market small molecule antagonists
to the MCP-1 chemokine and its receptor (the "MCP-1 Agreement"). In July 1995,
LeukoSite and Warner-Lambert entered into a drug discovery collaboration to
discover and market small molecule antagonists to the IL-8 chemokine and its
receptor (the "IL-8 Agreement"). During the research term, Warner-Lambert may
become obligated under both agreements to make milestone payments to the
Company. The IL-8 Agreement and the MCP-1 Agreement are terminable by either
party at any time and for any reason upon six months' written notice. Upon
termination, each party retains a non-exclusive license to use all technology
arising from the respective collaboration, and an exclusive royalty-free license
to make and sell products incorporating such technology. If any product is
successfully commercialized under the collaboration, LeukoSite is entitled to
receive royalties on product sales. In the event that the initial public
offering price is less than $12.30 per share, Warner-Lambert will receive a
credit against such royalties. Assuming an initial public offering price of
$9.00 per share, the approximate amount of such credit would be $2.1 million.
In November 1996, LeukoSite and Warner-Lambert entered into a one-year
exclusive drug discovery collaboration to screen and characterize antagonists to
the CCR5 chemokine receptor (the "CCR5 Agreement"). The CCR5 Agreement
contemplates two phases: the initial research phase, and a second phase which
would involve the negotiation of a new collaboration agreement similar to the
MCP-1 and IL-8 Agreements described above. If a compound is discovered with
antiviral activity that selectively inhibits a CCR5 mechanism, Warner-Lambert
has the option to make a payment to LeukoSite or to terminate the CCR5
Agreement. If Warner-Lambert were to terminate the CCR5 Agreement, the Company
would have exclusive ownership rights with respect to all compounds discovered
thereunder. At the end of the initial term, if the parties do not agree to
continue the collaboration, either party has the right to exploit the research
results, and if either party successfully commercializes a compound derived from
a lead compound identified during the collaboration, it is obligated to pay the
other party a royalty.
Roche Bioscience
In April 1996, LeukoSite entered into a two-year collaboration agreement
with Roche Bioscience to research and discover small molecule antagonists and/or
monoclonal antibodies to the CCR3 receptor and other eosinophil recruitment
mechanisms (the "CCR3 Agreement"). Roche Bioscience is obligated under the CCR3
Agreement to provide funding to the Company to support (i) a team of
scientist-employees of the Company, (ii) humanization of monoclonal antibodies
to CCR3 and (iii) additional research if the parties mutually agree to extend
the CCR3 Agreement to a third year. In conjunction with the CCR3 Agreement, the
parties also entered into a license agreement (the "CCR3 License Agreement"),
whereby Roche Bioscience is granted the exclusive right to make and sell
products developed under the collaboration in exchange for a noncreditable
license fee. The CCR3 License Agreement also provides that milestone payments
shall be made by Roche to LeukoSite for monoclonal antibody products and for
non-monoclonal antibody products, each payment triggered by the successful
achievement by the Company of a discrete phase in the clinical trial of any such
product. In addition, LeukoSite is entitled to receive royalties on product
sales.
Kyowa Hakko Kogyo
In April 1997, LeukoSite entered into a two-year collaboration agreement
with Kyowa to research and discover small molecule antagonists and monoclonal
antibodies to the CCR1 and CXCR3 chemokine receptors (the "CCR1 Agreement").
Under the CCR1 Agreement, Kyowa is obligated to provide to the Company with
research funding payments and an additional payment if Kyowa elects to extend
the term of the agreement for a period beyond its initial term. After the first
year of the
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collaboration, Kyowa may terminate its obligation upon 60 days' notice, upon
which Kyowa's funding obligation to the Company also terminates. In connection
with the CCR1 Agreement, the parties also entered into a licensing agreement
(the "CCR1 License Agreement"), pursuant to which Kyowa retains an exclusive
license to make and sell products developed through the collaboration in Asia.
This exclusive license may be extended worldwide if Kyowa enters into a
sublicense agreement upon specified terms. Until the license becomes worldwide,
the Company retains the exclusive right to make and sell products utilizing
Kyowa-patented technology in geographic regions outside of Asia. Under the CCR1
License Agreement, Kyowa may become obligated to make milestone payments to the
Company based upon the identification of a drug candidate and the stage of such
candidate in clinical trials. Additional milestone payments are triggered if a
second drug target is identified through the collaboration. In addition,
LeukoSite is entitled to receive royalties on product sales.
Ilex
In May 1997, LeukoSite and Ilex entered into a joint venture whereby the
parties formed a limited partnership to develop and commercialize LDP-03 for the
treatment of chronic lymphocytic leukemia, pursuant to an agreement of limited
partnership and a license agreement between the LeukoSite/Ilex partnership and
LeukoSite. The partners are required to make contributions each time the
partnership requires working capital. The development and commercialization
activities of the joint venture will be managed with equal control by each
party. LeukoSite and Ilex will generally share equally in profits from the sales
of LDP-03 and in all research, development, clinical and commercialization
costs. LeukoSite and Ilex estimate that research, development and clinical costs
will be approximately $10 million over the next two years. The joint venture
expires in 2017, but provides for either company, under certain circumstances,
to purchase the other company's ownership of the joint venture upon a change in
control of such company (as defined therein) or after October 2, 2000. In
addition, in the event that one party is unable or unwilling to fulfill its
funding obligations to the joint venture, then in certain circumstances, the
party that funds the joint venture shall gain control of the management of the
joint venture, subject to certain catch-up rights of the other party.
Therapeutic Antibody Centre
In October 1994, LeukoSite, the University of Oxford and the U.K. Medical
Research Council ("MRC") entered into a collaboration agreement to jointly
construct and operate the TAC, a pharmaceutical discovery, testing and
manufacturing center. Under the terms of the collaboration, MRC and LeukoSite
contribute toward funding the cost of staffing, equipment, facility construction
and other operating expenses of the TAC. The Company retains an exclusive
worldwide right to license technology discovered at the TAC in exchange for
royalties payable to the University of Oxford and MRC. The collaboration expires
five years after the TAC is fully operational.
Other Collaboration Agreements
In addition, the Company has collaboration agreements in effect with The
Imperial College of Science, Technology of Medicine, Lynxvale, Ltd., Oxford
Asymmetry, Ltd., the National Heart and Lung Institute, the Theodor Kocher
Institute and the University of Oxford.
PATENTS AND PROPRIETARY RIGHTS
The Company's intellectual property strategy is to protect its processes
and compositions of matter by, among other things, filing patent applications in
the United States and other key markets. LeukoSite has eleven pending U.S.
patent applications and has filed four international patent applications under
the Patent Cooperation Treaty ("PCT"). In addition, LeukoSite has in-licensed
seven U.S. patents, nine U.S. patent applications, three foreign patents and 10
foreign patent applications.
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In addition, LeukoSite has an exclusive license from British Technology
Group Limited ("BTG") under United States and foreign patents and patent
applications, variously covering certain humanized antibodies against the
CAMPATH antigen, pharmaceutical compositions, host cells useful in the
production of such antibodies, processes of producing such antibodies and
medical uses of such antibodies. The Company also has a non-exclusive sublicense
from BTG under additional U.S. and foreign patents and patent applications,
including U.S. patents which cover a method of treating a human suffering from a
disease or disorder, such as a cancer or a T cell-mediated disorder.
The Company's product candidates LDP-01, LDP-02 and LDP-03 are recombinant
humanized, complementarity determining region ("CDR")-grafted, monoclonal
antibodies. The Company is aware that patents have been issued in the United
States to third parties which relate to processes for producing recombinant
antibodies, compositions useful in the production of recombinant antibodies,
CDR-grafted humanized antibodies, processes for producing CDR-grafted humanized
antibodies and compositions useful in the production of CDR-grafted humanized
antibodies. Patents have also been granted to these parties in Europe, but the
European patents have been opposed. The Company may be required to seek licenses
under these patents for its humanized antibody products.
The Company is also aware of patents which have been issued to a third
party in the United States and Europe variously relating to "chimeric"
immunoglobulins and immunoglobulin chains, processes for production of such
chimeric molecules and compositions useful in the production of chimeric
molecules. The European patent has been opposed. Assuming that the European
patent survives in current form, the Company believes that, properly construed,
the United States and European patent claims do not cover the Company's LDP-01,
LDP-02 or LDP-03 product candidates.
The Company is also aware of patents which have been issued to third
parties in the United States and/or Europe variously relating to certain
modified humanized immunoglobulins, methods of producing modified humanized
immunoglobulins, compositions useful in the production of modified humanized
immunoglobulins and methods of using of modified humanized immunoglobulins. The
European patents in these areas have also been opposed. The Company believes
that, properly construed, the U.S. patent claims do not cover the Company's
LDP-01 and LDP-03 product candidates, and that no valid claim of the European
patents covers the Company's LDP-01 and LDP-03 product candidates. The Company
is uncertain about the scope of the claims which have issued in the United
States and is uncertain whether these claims, when properly construed, cover
LDP-02. If it is determined that they do encompass LDP-02, the Company will
likely be required to seek a product license.
The Company is also aware of other third party published applications
relating to altered antibodies, methods of use of altered antibodies and methods
of production of altered antibodies. To the Company's knowledge, neither these
applications nor possible unpublished counterpart applications has proceeded to
grant in Europe or has issued as U.S. patents. There can be no assurance that
the Company will not be required to seek a license to some or all of the patents
which might issue from these patent applications.
The Company may be required to seek or choose to seek licenses to some or
all of these or other patents in order to develop and commercialize certain
product candidates or potential products incorporating the Company's technology
in the United States, Europe and other markets. There can be no assurance that
such licenses, if required, will be available to the Company, or if available,
will be obtainable on commercially acceptable terms, and the failure to obtain
such licenses could have a material adverse effect on the Company. In the
absence of required licenses, the patent owners may obtain an injunction, which
could prevent the manufacture, sale and use of the Company's products, with
material adverse effects on the Company. In addition, assuming such patents are
valid and enforceable, the Company can provide no assurances that, if
enforcement actions are brought by the patent owners against the Company, such
actions would be resolved in the Company's favor. The Company may also choose to
challenge the validity of one or more patents or patent claims. Any such action
or challenge could result in substantial costs to the Company and diversion of
Company
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resources and could have a material adverse effect on the Company. Moreover,
there can be no assurance that the Company would be successful in defending
against an infringement action or in challenging any such patents or patent
claims, and the failure to do so could have a material adverse effect on the
Company. If the Company does not obtain any required license, it could encounter
delays in product development while it attempts to design around the patents, or
it could find that the development, manufacture or sale of products requiring
such licenses could be foreclosed.
Patent law, as it relates to inventions in the pharmaceutical and
biotechnology fields, is still evolving and involves complex legal and factual
questions for which legal principles are not firmly established. Moreover,
because (i) patent applications in the United States are maintained in secrecy
until patents issue, (ii) patent applications in certain other countries
generally are not published until more than eighteen months after the earliest
priority date claimed, (iii) publication of technological developments in the
scientific or patent literature often lags behind the date of such developments
and (iv) searches of prior art may not reveal all relevant prior inventions, the
Company cannot be certain that it was the first to invent the subject matter
covered by its patent applications or that it was the first to file patent
applications for such inventions. Accordingly, there can be no assurance that
patents will be granted with respect to any of the Company's pending patent
applications or with respect to any patent applications filed by the Company in
the future. Similarly, the Company cannot be certain that the inventors of the
subject matter covered by applications which the Company has licensed were the
first to invent, or that the applicants of applications licensed by the Company
were the first to file. Accordingly, there can be no assurance that patents will
be granted with respect to any of the Company's pending licensed patent
applications or with respect to any future applications subject to a license.
The commercial success of the Company will depend in part on not infringing
patents or proprietary rights of others. There can be no assurance that the
Company will be able to obtain a license to any third party technology it may
require to conduct its business or that, if obtainable, such technology can be
licensed at a reasonable cost. Failure by the Company to obtain a license to
technology that it may require to utilize its technologies or commercialize its
products may have a material adverse effect on the Company's business, operating
results and financial condition. In some cases, litigation or other proceedings
may be necessary to defend against or assert claims of infringement, to enforce
patents issued to the Company, to protect trade secrets, know-how or other
intellectual property rights owned by the Company, or to determine the scope and
validity of the proprietary rights of third parties. Any potential litigation
could result in substantial costs to and diversion of resources by the Company
and could have a material adverse effect on the Company's business, operating
results and financial condition. There can be no assurance that any of the
Company's issued or licensed patents would ultimately be held valid or that
efforts to assert or defend any of its patents, trade secrets, know-how or other
intellectual property rights would be successful. An adverse outcome in any such
litigation or proceeding could subject the Company to significant liabilities,
require the Company to cease using the subject technology or require the Company
to license the subject technology from the third party, all of which could have
a material adverse effect on the Company's business, financial condition and
results of operations.
Much of the Company's technology and many of its processes are dependent
upon the knowledge, experience and skills, which are not patentable, of key
scientific and technical personnel. To protect its rights to and to maintain the
confidentiality of trade secrets and proprietary information, the Company
requires employees, Scientific Advisory Board members and consultants to execute
confidentiality and invention assignment agreements upon commencement of a
relationship with the Company. These agreements prohibit the disclosure of
confidential information outside the Company and require disclosure and
assignment to the Company of certain ideas, developments, discoveries and
inventions made by employees, advisors and consultants. There can be no
assurance, however, that these agreements will not be breached or that the
Company's trade secrets or proprietary information will not otherwise become
known or developed independently by others.
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GOVERNMENT REGULATION
Overview of FDA Regulations. Non-biological drugs and biological drugs,
including the Company's products under development, are subject to extensive and
rigorous regulation by the federal government, principally the FDA, and by state
and local governments. If these products are marketed abroad, they also are
subject to export requirements and to regulation by foreign governments. The
applicable regulatory clearance process, which must be completed prior to the
commercialization of a product, is lengthy and expensive. There can be no
assurance that the Company will be able to obtain the necessary regulatory
approvals on a timely basis, if at all, for any of its products under
development, and delays in receipt for failure to receive such approvals, the
loss of previously received approvals, or failure to comply with existing or
future regulatory requirements could have a material adverse effect on the
Company's business, financial condition and results of operations.
The FDC Act and the PHS Act govern or influence the development, testing,
manufacture, labeling, storage, approval, advertising, promotion, sale and
distribution of most FDA-regulated products in the United States. Failure to
comply with the applicable FDA regulatory requirements could result in sanctions
being imposed on the Company (or its collaborative partners and contract
manufacturers), including warning letters, fines, product recalls or seizures,
injunctions, refusals to permit products to be imported into or exported out of
the United States, FDA refusal to grant premarket approval of products and/or to
allow the Company to enter into government supply contracts, withdrawals of
previously approved marketing applications and criminal prosecutions.
FDA requirements for the Company's products under development vary
depending upon whether the product is a non-biological drug or biological drug.
Depending on the nature of the product, the Company's products under development
will be regulated as either non-biological drugs under the FDC Act or as
biological drugs under the FDC Act and the PHS Act. The Company believes that
its monoclonal antibody products currently in human clinical or late preclinical
development (i.e., LDP-03, LDP-01 and LDP-02) will be regulated by the FDA as
biological drugs. Because of the early research and development stages of its
small molecule antagonist program, the Company is uncertain as to whether
products under development in its small molecule antagonist program will be
regulated as non-biological drugs or biological drugs.
Regulation of Non-biological Drugs and Biological Drugs. Non-biological
drugs and biological drugs are subject to some of the same laws and regulations.
Ultimately, however, they are approved under different regulatory frameworks,
with non-biological drugs being approved under the FDC Act and biological drugs
being approved under the PHS Act. Product development and approval within either
regulatory framework takes a number of years, involves the expenditure of
substantial resources and is uncertain. Many non-biological drugs and biological
drugs that initially appear promising ultimately do not reach the market because
they are not found to be safe or effective or cannot meet the FDA's other
regulatory requirements. In addition, there can be no assurance that the current
regulatory framework will not change or that additional regulations will not
arise at any stage of the Company's product development that may affect
approval, delay the submission or review of an application or require additional
expenditures by the Company.
The activities required before a new non-biological drug or biological drug
can be marketed in the United States primarily begin with preclinical testing.
Preclinical tests include laboratory evaluation of product chemistry and other
characteristics and animal studies to assess the potential safety and efficacy
of the product as formulated. Many preclinical studies are regulated by the FDA
under the current Good Laboratory Practice ("GLP") regulations. Violations of
these regulations can, in some cases, lead to invalidation of the studies,
requiring such studies to be replicated if the data are to be submitted to the
FDA in support of a marketing application.
The entire body of preclinical development work necessary to administer
investigational non-biological drugs and biological drugs to human volunteers or
patients is summarized in an investigational new drug ("IND") application
submitted to the FDA. FDA regulations provide that human clinical trials may
begin 30 days following submission of an IND application, unless the FDA advises
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otherwise or requests additional information, clarification or additional time
to review the application. There is no assurance that the submission of an IND
will eventually allow a company to commence clinical trials. Once trials have
commenced, the FDA may stop the trials, or particular types of trials, by
placing a "clinical hold" on such trials because of concerns about, for example,
the safety of the product being tested. Such holds can cause substantial delay
and in some cases may require abandonment of a product.
Clinical testing involves the administration of the investigational
non-biological drug or biological drug to healthy human volunteers or to
patients under the supervision of a qualified principal investigator, usually a
physician, pursuant to an FDA reviewed protocol. Each clinical study is
conducted under the auspices of an Institutional Review Board ("IRB") at each of
the institutions at which the study will be conducted. An IRB will consider,
among other things, ethical factors, the safety of human subjects and the
possible liability of the institution. Human clinical trials typically are
conducted in three sequential phases, but the phases may overlap. Phase I trials
consist of testing the product in a small number of patients or normal
volunteers, primarily for safety, in one or more dosages, as well as
characterization of a drug's pharmacokinetic and/or pharmacodynamic profile. In
Phase II, in addition to safety, the efficacy of the product is evaluated in a
patient population. Phase III trials typically involve additional testing for
safety and clinical efficacy in an expanded population at geographically
dispersed sites. A clinical plan, or "protocol," accompanied by the approval of
an IRB, must be submitted to the FDA prior to commencement of each clinical
trial. All patients involved in the clinical trial must provide informed consent
prior to their participation. The FDA may order the temporary or permanent
discontinuance of a clinical trial at any time for a variety of reasons,
particularly if safety concerns exist. These clinical studies must be conducted
in conformance with the FDA's bioresearch monitoring regulations.
A company seeking FDA approval to market a new non-biological drug (in
contrast to biological drug) must file a new drug application ("NDA") with the
FDA pursuant to the FDC Act. In addition to reports of the preclinical and
clinical trials conducted under the FDA-approved IND application, the NDA
includes information pertaining to the preparation of the drug substance,
analytical methods, drug product formulation, detail on the manufacture of
finished products and proposed product packaging and labeling. In addition to
reports of the preclinical and clinical trials conducted under the
FDA-authorized IND application, the marketing application includes evidence of
the product's safety, purity, potency, and efficacy.
The FDA has established procedures designed to expedite the development,
evaluation and marketing of therapies intended to treat persons with cancer,
AIDS or other life-threatening and severely-debilitating illnesses, especially
when no satisfactory alternative therapy exists. Sponsors of such products may
request to meet with the FDA-reviewing officials early in the drug development
process to review and reach agreement on the design of necessary preclinical and
clinical studies. The term "life-threatening" is defined by FDA to mean: (1)
diseases or conditions where the likelihood or death is high unless the course
of the disease is interrupted; and (2) diseases or conditions with potentially
fatal outcomes, where the endpoint of clinical trial analysis is survival.
"Severely-debilitating" is defined by the FDA to mean diseases or conditions
that cause major irreversible morbidity. Treatment of patients with an
experimental non-biological or biological drug also may be allowed under a
Treatment IND before general marketing begins and pending FDA approval. Charging
for an investigation product also may be allowed under a Treatment IND to
recover certain costs of development if various requirements are met. There can
be no assurance that any of the Company's products under development will
qualify for expedited review or for treatment use.
Traditionally, a company seeking FDA approval to market a biological drug
(in contrast to a non-biological drug) is required to file a product license
application ("PLA"), and an establishment license application ("ELA") with the
FDA pursuant to the PHS Act before commercial marketing of a biological drug.
Recently, however, the FDA amended the biological drug regulations to eliminate
the ELA requirements for specified biotechnology and synthetic biological drugs
subject to licensing under the PHS Act, including, but not limited to,
monoclonal antibody products for in vivo use. For
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these specified products, in place of the ELA a company is required to prepare
and submit additional information for inclusion in a single biologics license
application ("BLA"). The Company believes that its monoclonal antibody products
will be subject to licensing under the BLA process, but there can be no
assurance that the FDA will determine that the Company's monoclonal antibody
products meet the agency's criteria for regulation under the BLA process.
Submission of a NDA, PLA, ELA or BLA does not assure FDA approval for
marketing. The application review process generally takes one to three years to
complete, although reviews of non-biological drugs and biological drugs for
life-threatening diseases may be accelerated or expedited. However, the process
may take substantially longer if, among other things, the FDA has questions or
concerns about the safety and/or efficacy of a product.
Since 1992, non-biological and biological drugs have been subject to the
Prescription Drug User Fee Act of 1992 ("PDUFA"). PDUFA requires that companies
submitting marketing applications for such products pay fees in connection with
review of the applications. In return, the FDA has committed to reviewing a
certain percentage of the applications within certain timeframes. For example,
in its Fiscal Year 1996 report on PDUFA, the FDA reported that 95 percent of
PLAs, BLAs and NDAs received in Fiscal Year 1995 were reviewed within 12 months
of application submission. FDA's PDUFA performance goal in Fiscal Year 1996 was
to complete its review of 70 percent of such applications within 12 months. In
Fiscal Year 1997, the FDA has committed to reaching an approval, disapproval or
additional-data-required decision on 90 percent of PLAs, BLAs and NDAs within 12
months of application submission. PDUFA is scheduled to expire on September 30,
1997. Although the Congress is considering legislation to extend PDUFA for an
additional period of time, there can be no assurance that the extension will be
enacted. Failure of the Congress to extend PDUFA or the imposition of other
requirements could have a significant adverse affect on the FDA's timeframe for
reviewing marketing applications.
In general, in order to approve a non-biological or biological drug, the
FDA requires at least two properly conducted, adequate and well-controlled
clinical studies demonstrating efficacy with sufficient levels of statistical
assurance. In the case of approval of a biological drug, one properly conducted,
adequate and well-controlled clinical study may suffice. The FDA, however,
recently proposed a new initiative under which the agency can determine that a
non-biological or biological drug is effective for a new use without requiring
data from two new clinical trials. However, additional information may be
required. For example, the FDA also may request long-term toxicity studies or
other studies relating to product safety or efficacy. Notwithstanding the
submission of such data, the FDA ultimately may decide that the NDA, PLA or BLA
does not satisfy its regulatory criteria for approval and disapprove the
application. Finally, the FDA may require additional clinical tests following
NDA, PLA or BLA approval to confirm safety and efficacy (Phase IV clinical
trials).
In addition, the FDA may, in some circumstances, impose restrictions on the
use of the non-biological drug or biological product that may be difficult and
expensive to administer. Product approval may be withdrawn if compliance with
regulatory requirements are not maintained or if problems occur after the
product reaches the market. The FDA requires reporting of certain safety and
other information that becomes known to a manufacturer of an approved
non-biological drug or biological product.
The product testing and approval process is likely to take a substantial
number of years and involves expenditure of substantial resources. There can be
no assurance that any approval will be granted on a timely basis, or at all. The
FDA also may require postmarket testing and surveillance to monitor the record
of the product and continued compliance with regulatory requirements. Upon
approval, a prescription non-biological drug or biological product may only be
marketed for the approved indications in the approved dosage forms and at the
approved dosage. Adverse experiences with the product must be reported to the
FDA.
Among the requirements for product approval is the requirement that the
prospective manufacturer conform to the FDA's current Good Manufacturing
Practices ("GMP") regulations, as supple-
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mented by the regulations pertaining to biological drugs. In complying with the
GMP regulations, manufacturers must continue to expend time, money and effort in
product record keeping and quality control to assure that the product meets
applicable specifications and other requirements. The FDA periodically inspects
manufacturing facilities in the United States and abroad in order to assure
compliance with applicable GMP requirements. Failure of the Company or the
Company's contract manufacturer to comply with the FDA's GMP regulations or
other FDA regulatory requirements could have a significant adverse effect on the
Company's business, financial condition and results of operations.
Under the Orphan Drug Act, a sponsor of a marketing application may seek to
obtain a seven-year period of marketing exclusivity for a non-biological or
biological drug intended to treat a rare disease or condition (i.e., a disease
or condition that occurs in fewer than 200,000 patients). Before a product can
receive marketing exclusivity associated with orphan product status, it must
receive orphan product designation. If a product is designated as an orphan drug
or biologic by the FDA and it is the first FDA approved application of the
specified indication, the sponsor receives seven years of marketing exclusivity.
The Company intends to seek FDA orphan product designation for LDP-03 for the
treatment of chronic lymphocytic leukemia. Even if such designation is sought,
the FDA may not grant it. Moreover, even if the Company does receive orphan
product designation for LDP-03 or any of its other products under development,
other companies also may receive orphan designation and obtain the FDA marketing
approval before the Company obtains such approval. If another company obtains
marketing approval first and receives seven-year marketing exclusivity, the
Company would not be permitted by the FDA to market the Company's product in the
United States during the exclusivity period. In addition, the Company could
incur substantial costs in asserting any rights to prevent such uses it may have
under the Orphan Drug Act. If the Company receives seven-year marketing
exclusivity, FDA may rescind the period of exclusivity under certain
circumstances, including failure of the Company to assure a sufficient quantity
of the drug.
Foreign requirements. In addition to the applicable FDA requirements, if
the Company attempts to sell its products overseas, the Company will be subject
to foreign regulatory authorities governing clinical trials, approvals and
product sales. Whether or not FDA approval has been obtained, approval of a
product by the comparable regulatory authorities of foreign countries must be
obtained prior to the commencement of marketing of the product in those
countries. The approval process varies from country to country and the time
required may be longer or shorter than that required for FDA approval. The
export of unapproved products also is subject to FDA regulation. Under certain
conditions, however, an unapproved non-biological or biological drug may be
exported to any country if the product complies with the laws of that country
and has valid marketing authorization in Australia, Canada, Israel, Japan, New
Zealand, Switzerland, South Africa, or in any country in the European Union
("EU") or the European Economic Area.
In Europe, the clinical trial approval process varies from country to
country, ranging from simple notification of intent to conduct a clinical trial
to a complete and lengthy approval process. The Company's success in obtaining
FDA approval of an IND application does not ensure clinical trial approval in
Europe, which must be pursued individually in each country in which the Company
intends to conduct clinical trials. The clinical trial approval process in the
United Kingdom (also referred to as the CTX process), where the Company intends
to conduct clinical trials beginning in 1997, is a rigidly time-limited process
depending upon acceptance by the regulatory authority in the United Kingdom of
an information summary containing details regarding the chemistry, pharmacy and
toxicology of the drug compressed into a 50-60 page document. Approval by the
regulatory authority in the United Kingdom, which must be given or refused
within 35 days, gives the applicant broad freedom to conduct trials in different
centers within the pre-agreed conditions of a usage guideline.
Unlike the highly individual approach to approval of clinical trials which
varies in Europe from country to country, the product registration system in the
EU combined with those of other European nations have been harmonized. After
1998, all non-biological and biological products which are to be marketed in
more than one EU member state must be approved either through the centralized or
42
<PAGE> 44
decentralized (mutual recognition) procedure. Use of the centralized process is
compulsory for biotechnology products, such as the Company's monoclonal antibody
products, and is available upon request for other innovative new products. The
centralized procedure involves the submission of an application to a central
authority, the European Agency for the Evaluation of Medicinal Products ("EMEA")
based in London, evaluation of the application by two of the member states
appointed as Rapporteurs and agreement by all other member states through the
decision of a delegate committee, the Committee on Proprietary Medicinal
Products ("CPMP"). The process is rigidly time-limited. In general, the total
time required for product approval ranges between one and two years. Product
approval permits the applicant to commercialize the product with a single set of
indications and contraindications throughout the European market.
Preconceived attitudes toward acceptable indications for a particular
non-biological or biological drugs may vary among member states and those
indications agreed upon by the CPMP may represent the compromise that could be
agreed upon by all members. Therefore, there can be no assurance that the
indications for use for which the Company initially seeks marketing approval
will be the same as those that are finally approved by the CPMP. In addition,
there can be no assurance that the CPMP will accept the same clinical end points
as the FDA in proving efficacy. Other applicants have found it necessary to
reassess their clinical trial results to satisfy different criteria before they
could obtain a consensus favorable opinion from the CPMP, even though the FDA
already had granted approval for marketing the product in the United States.
There can be no assurance that any application the Company submits to the EMEA
will be approved on a timely basis, or at all, and failure of the Company to
obtain marketing authorization in Europe for any of its products could have a
significant adverse effect on the Company's business, financial condition and
results of operations.
Other Regulations. The Company is subject to numerous federal, state and
local laws and regulations relating to such matters as safe working conditions,
manufacturing practices, environmental protection, fire hazard control, the
experimental use of animals and the disposal of hazardous or potentially
hazardous substances. There can be no assurance that the Company will not be
required to incur significant costs to comply with such laws and regulations in
the future or that such laws or regulations will not have a materially adverse
effect upon the Company's business, financial condition and results of
operations.
MANUFACTURING AND SUPPLY
The Company currently has no manufacturing facilities or staff for clinical
or commercial production of any monoclonal antibodies or small molecule
antagonists. The Company intends to rely initially on third parties to
manufacture certain of its product candidates for development, preclinical and
clinical trials and commercialization, if any. The monoclonal antibodies LDP-01
and LDP-02 will be manufactured for preclinical and early clinical trials in
collaboration with the TAC. The TAC has the capacity to produce these monoclonal
antibodies in sufficient quantity and of sufficient quality to support these
trials. The Company is currently in discussions with a contract manufacturer for
the production of LDP-03 for some or all of the Company's clinical trial
production.
The Company expects that its collaborative partners will manufacture
products for clinical development and commercialization. Under the Company's
collaboration agreements with Warner-Lambert, Roche Bioscience and Kyowa, the
collaborative partners have the exclusive right under the collaboration
agreements to manufacture products that result from their programs.
COMPETITION
The biotechnology and pharmaceutical industries are intensely competitive
and subject to rapid and significant technological change. Competitors of the
Company in the United States and elsewhere are numerous and include, among
others, major multinational pharmaceutical and chemical companies, specialized
biotechnology firms and universities and other research institutions. While the
Company believes that several of the drugs which may result from its research
and development efforts
43
<PAGE> 45
may be utilized in combination with existing drugs to treat specific diseases
(such as LDP-01 used in conjunction with t-PA or heparin and LDP-03 used in
conjunction with or following fludarabine), there can be no assurance that
patients, physicians or manufacturers of such existing drugs will view any of
the drugs that may be developed by the Company as complementary rather than
competitive. Many of the Company's potential competitors have greater financial
and other resources, including larger research and development staffs and more
effective marketing and manufacturing organizations, than the Company or its
collaborative partners. Acquisitions of competing companies and potential
competitors by large pharmaceutical companies or others could enhance the
financial, marketing and other resources available to such competitors. As a
result of academic and government institutions becoming increasingly aware of
the commercial value of their research findings, such institutions are more
likely to enter into exclusive licensing agreements with commercial enterprises,
including competitors of the Company. There can be no assurance that the
Company's competitors will not succeed in developing technologies and drugs that
are more effective or less costly than any which are being developed by the
Company or which would render the Company's technology and future drugs obsolete
or noncompetitive.
In addition, some of the Company's competitors have greater experience than
the Company in conducting preclinical and clinical trials and obtaining FDA and
other regulatory approvals. Accordingly, the Company's competitors may succeed
in obtaining FDA or other regulatory approvals for drug candidates more rapidly
than the Company. Companies that complete clinical trials, obtain required
regulatory agency approvals and commence commercial sale of their drugs before
their competitors may achieve a significant competitive advantage. There can be
no assurance that drugs resulting from the Company's research and development
efforts, or from the joint efforts of the Company and its collaborative
partners, will be able to compete successfully with competitors' existing
products or products under development or that they will obtain regulatory
approval in the United States or elsewhere.
EMPLOYEES
As of June 30, 1997, the Company had 54 full-time employees, of whom 19
hold Ph.D. or M.D. degrees. Of the Company's total work force, 44 are engaged in
research and development activities and 10 are engaged in business development,
finance and administration. None of the Company's employees is represented by a
collective bargaining agreement, nor has the Company experienced work stoppages.
The Company believes that relations with its employees are good.
SCIENTIFIC ADVISORY BOARD
The Company has established a Scientific Advisory Board ("SAB") to advise
on scientific and medical matters. The members of the SAB, collectively, have
considerable experience in the area of immunology and of the principal molecules
and disease targets of interest to the Company. The SAB meets as a group at
least one time per year and individual members meet with LeukoSite on an ad hoc
basis several times per year. All of the Company's SAB members have entered into
consulting agreements with the Company and have either purchased shares of
Common Stock or been granted options to purchase Common Stock.
The members of LeukoSite's SAB are:
Timothy A. Springer, Ph.D. is the Founder of LeukoSite and Chairman of the
SAB. Dr. Springer is the Latham Family Professor, Harvard Medical School,
Department of Pathology and at the Center for Blood Research. He is an expert on
the molecular and cellular pathways involved in leukocyte recruitment and
adhesion. Dr. Springer received his Ph.D. in Biochemistry and Molecular Biology
from Harvard University. In recognition of Dr. Springer's important contribution
to this area of medical science, he was elected to membership in the National
Academy of Sciences.
Eugene C. Butcher, M.D. is the Vice Chairman of the SAB and an Associate
Professor of Pathology at Stanford University Medical Center and a Staff
Physician at the Palo Alto Veterans Association
44
<PAGE> 46
Medical Center. Dr. Butcher's expertise is in the molecular and cellular
processes which are involved in lymphocyte homing and recruitment. He consults
with the Company on scientific matters pertaining to the recruitment of
lymphocytes to mucosal tissue, and in particular the role of SS7 integrins and
mucosal addressin cell adhesion molecules (MAdCAM). Dr. Butcher received his
M.D. from Washington University School of Medicine.
Michael B. Brenner, M.D. is the K. Frank Austen Professor of Medicine at
Harvard Medical School and Brigham and Women's Hospital. Dr. Brenner is an
expert in and consults with the Company on the biology of T cells found in skin
and in the mucosal lining of the gastrointestinal tract. Dr. Brenner received
his M.D. from Vanderbilt University School of Medicine.
Bruce Ganem, Ph.D. is the Franz and Elisabeth Roessler Professor of
Chemistry and Chairman of the Chemistry Department at Cornell University. Dr.
Ganem is a prominent chemist and consults with the Company in the fields of
organic synthesis and natural products chemistry. Dr. Ganem received his Ph.D.
in Organic Chemistry from Columbia University.
Craig Gerard, M.D., Ph.D. is an Associate Professor of Pediatrics at
Harvard Medical School and Children's Hospital/Brigham and Women's Hospital. Dr.
Gerard consults with the Company on the biochemistry, regulation and function of
G protein-coupled chemokine receptors and has a clinical specialty in genetic
lung diseases. Dr. Gerard received his M.D. degree from the Bowman Gray School
of Medicine and his Ph.D. in Chemistry from the University of California at San
Diego.
Martin Hemler, Ph.D. is an Associate Professor of Pathology at Harvard
Medical School and the Dana-Farber Cancer Institute. Dr. Hemler is a leader in
the field of SS1 integrins, molecules on activated leukocytes that are important
in adhesion to the endothelium and to the extracellular matrix and consults with
the Company on its integrin programs. Dr. Hemler received his Ph.D. in
Biological Chemistry from the University of Michigan.
Steven L. Kunkel, Ph.D. is a Professor of Pathology at the University of
Michigan. Dr. Kunkel is an expert on the molecular basis of inflammation and
consults with the Company on its chemokine programs. Dr. Kunkel received his
Ph.D. in Microbiology/Immunology from Kansas University.
Herman Waldmann, M.D., Ph.D., F.R.S. is a Professor of Pathology at the
University of Oxford. Dr. Waldmann is a Fellow of the Royal Society and an
expert on immunological tolerance. He consults with the Company on matters
relating to monoclonal antibodies and their use. Dr. Waldmann received his Ph.D.
in Pharmacology and Therapeutics and his M.D. from Cambridge University.
Timothy Williams, Ph.D. is a Professor of Applied Pharmacology at the
Imperial College of Science, Technology and Medicine. Dr. Williams is widely
known for his work on the molecular and cellular processes of inflammation, and
he consults with the Company on eosinophil recruitment and chemokines. Dr.
Williams received his Ph.D. in Pharmacology from University College, London.
Another key consultant to the Company is:
Daniel Podolsky, M.D. is a Professor of Medicine at Harvard Medical School
and Chairman of Gastroenterology at Massachusetts General Hospital. Dr. Podolsky
is an expert on the clinical management and research of inflammatory bowel
disease and consults with the Company on its inflammatory bowel disease program.
Dr. Podolsky received his M.D. from Harvard University.
FACILITIES
The Company's administrative and research and development facility is
located in Cambridge, Massachusetts. This 23,500 square foot facility is leased
for a term which expires in 1999. An additional 770 square feet of laboratory
and office space will become subject to the lease by December 1, 1997.
45
<PAGE> 47
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company, and their ages as of
June 30, 1997, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------- --- -------------------------------------------
<S> <C> <C>
Christopher K. Mirabelli, Ph.D............. 42 Chairman of the Board of Directors,
President and Chief Executive Officer
Augustine Lawlor........................... 40 Vice President, Corporate Development and
Chief Financial Officer
Walter Newman, Ph.D........................ 52 Vice President, Research and Discovery
Lee Brettman, M.D.......................... 50 Vice President, Pharmaceutical Development:
Clinical Development and Medical Affairs
Douglas Ringler, V.M.D..................... 40 Vice President, Pharmaceutical Development:
Preclinical Development and Laboratory
Operations
Jay Luly, Ph.D............................. 40 Vice President, Drug Discovery
Catherine Bingham(1)....................... 31 Director
John W. Littlechild(2)..................... 45 Director
Martin Peretz, Ph.D.(2).................... 57 Director
Mark Skaletsky(1).......................... 49 Director
Christopher T. Walsh, Ph.D................. 53 Director
</TABLE>
- ------------------------------
(1) Member of Audit Committee of the Board of Directors.
(2) Member of Compensation Committee of the Board of Directors.
Dr. Mirabelli has served as Chairman of the Board of Directors, President
and Chief Executive Officer since July 1993. Dr. Mirabelli was a founder of Isis
Pharmaceuticals, Inc., a biotechnology company, where he served as Executive
Vice President from 1992 to 1993, Senior Vice President of Research and
Preclinical Development from 1991 to 1992, and Vice President of Research from
1989 to 1991. From 1981 to 1989, Dr. Mirabelli served in various positions at
SmithKline & French Laboratories, most recently as Director of Molecular
Pharmacology. Dr. Mirabelli received his B.S. in Biology from the State
University of New York at Fredonia and his Ph.D. in Pharmacology from Baylor
College of Medicine.
Mr. Lawlor has served as Vice President, Corporate Development and Chief
Financial Officer since February 1997. From 1995 to 1997, he served as Chief
Financial Officer at Alpha-Beta Technology, Inc., a biotechnology company. From
1993 to 1995, Mr. Lawlor served as Chief Financial Officer at BioSurface
Technology, a biotechnology company. From 1989 to 1995, he served as Chief
Financial Officer at Armstrong Pharmaceuticals, Inc., a biotechnology company.
Mr. Lawlor received his B.A. from the University of New Hampshire and his
M.P.P.M. from the Yale School of Organizational Management.
Dr. Newman has served as Vice President, Research and Discovery since June
1996. Dr. Newman served the Company as Senior Director, Research from 1994 to
1996, and as a Director, Research from 1993 to 1994. From 1986 to 1993, he
served as Chief Scientist at Otsuka America Pharmaceuticals, a biotechnology
company, and leader of the Endothelial Cell Biology Group. Dr. Newman received
both his B.A. in Chemistry and his Ph.D. in Immunochemistry from Columbia
University.
Dr. Brettman has served as Vice President of Pharmaceutical Development:
Clinical Development and Medical Affairs since June 1996. From 1995 to 1996, he
served the Company as Senior Director, Clinical Development of the Company. From
1993 to 1995, Dr. Brettman served as Head of Clinical Research at Vertex
Pharmaceuticals, Inc., a biotechnology company. From 1990 to 1993, he served
first
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<PAGE> 48
as Associate Director of the Anti-Infectives Group at the Robert Wood Johnson
Pharmaceutical Research Institute and then as the Director of Anti-infectives
Research at Schering Plough Company, a pharmaceutical company. Dr. Brettman
received his B.S. in Biology from the Massachusetts Institute of Technology and
his M.D. from Baylor College of Medicine.
Dr. Ringler has served as Vice President of Pharmaceutical Development:
Preclinical Development, Laboratory Operations and Experimental Therapies since
June 1996. Dr. Ringler served the Company as Senior Director, Preclinical
Development from 1994 to 1996, and Director of Experimental Therapeutics from
1993 to 1994. From 1985 to 1993, he served in various positions at Harvard
Medical School, including Associate Professor and Chairman of the Division of
Comparative Pathology. Dr. Ringler received both his B.A. in Biology and his
V.M.D. from the University of Pennsylvania.
Dr. Luly has served as Vice President, Drug Discovery since June 1997. From
1996 to 1997, Dr. Luly served as Director, ImmunoRegulation Research and
research fellow at Abbott Laboratories, a health care company. From 1993 to
1995, Dr. Luly served as senior project leader and research fellow at Abbott
Laboratories. From 1990 to 1993, he served as project leader and associate
research fellow at Abbott Laboratories. Dr. Luly received his B.S. from the
University of Illinois and his Ph.D. in Organic Chemistry from the University of
California, Berkeley.
Ms. Bingham has served as a Director since September 1994. Since 1991, Ms.
Bingham has served as a Partner at Schroder Ventures, a venture capital
management company. Ms. Bingham received her first class degree in Biochemistry
from the University of Oxford and her M.B.A. from Harvard Business School.
Mr. Littlechild has served as a Director since the Company's incorporation.
Since 1992, Mr. Littlechild has served as a general partner of HealthCare
Partners III L.P. and HealthCare Partners IV L.P., the general partner,
respectively, of each of HealthCare Ventures III L.P. and HealthCare Ventures IV
L.P., and as a principal of HealthCare Investment Corporation LLC, a venture
capital management company. He is a member of the Board of Directors of Orthofix
International N.V., a medical devices company, Diacrin Inc., a biotechnology
company, and Virus Research Institute, Inc., a biotechnology company. Mr.
Littlechild received his B.Sc. from the University of Manchester and his M.B.A.
from Manchester Business School.
Dr. Peretz has served as a Director since September 1993. Since 1974, Dr.
Peretz has served as the Editor-in-Chief of The New Republic, and has been a
faculty member of the Social Studies Department at Harvard University since
1965. He is Co-Chairman of the Board of Directors of The Street.com, a financial
daily on the World Wide Web. He serves on the Board of Directors of nine mutual
funds managed by the Dreyfus Corporation. Dr. Peretz received his B.A. in
History from Brandeis University and his Ph.D. in Government from Harvard
University.
Mr. Skaletsky has served as a Director since December 1996. Since May 1993,
Mr. Skaletsky has served as President and Chief Executive Officer of GelTex
Pharmaceuticals, Inc., a biotechnology company. Previously, he served as
Chairman and Chief Executive Officer of Enzytech, Inc., and Opta Food
Ingredients, Inc., each a biotechnology company. Mr. Skaletsky also served as
President and Chief Operating Officer of Biogen, Inc., a biotechnology company.
He is a member of the Board of Directors of Isis Pharmaceuticals, Inc., a
biotechnology company. Mr. Skaletsky is currently serving as president of the
Massachusetts Biotechnology Council and is a member of the Board of Directors of
the Biotechnology Industry Organization. Mr. Skaletsky received his B.S. in
Finance from Bentley College.
Dr. Walsh has served as a Director since January 1996. Since 1991, Dr.
Walsh has served as Hamilton Kuhn Professor of Biological Chemistry and
Molecular Pharmacology at Harvard Medical School. From 1987 to 1995, he was
Chairman of the Harvard Medical School Biological Chemistry and Molecular
Pharmacology Department. Dr. Walsh received his A.B. in Biology from Harvard
University and his Ph.D. in Life Sciences from Rockefeller University.
47
<PAGE> 49
BOARD OF DIRECTORS
All directors hold their positions until the annual meeting of stockholders
at which their respective successors are elected and qualified. Executive
officers of the Company are elected annually by the Board of Directors and serve
at the discretion of the Board of Directors or until their successors are duly
elected and qualified.
The Board of Directors has appointed an Audit Committee and a Compensation
Committee. The Audit Committee reviews the scope and results of the annual audit
of the Company's financial statements conducted by the Company's independent
accountants, the scope of other services provided by the Company's independent
accountants, proposed changes in the Company's financial and accounting
standards and principles, and the Company's policies and procedures with respect
to its internal accounting, auditing and financial controls, and makes
recommendations to the Board of Directors on the engagement of the independent
accountants, as well as other matters which may come before it or as directed by
the Board of Directors. The Compensation Committee administers the Company's
compensation programs, including the Stock Option Plan, and performs such other
duties as may from time to time be determined by the Board of Directors.
DIRECTOR COMPENSATION
Dr. Walsh and Mr. Skaletsky each have received $2,500 and a stock option
grant of 9,756 shares of Common Stock as compensation for service on the Board
of Directors. No other director has received compensation for service on the
Board of Directors.
Following this offering, Non-Employee Directors will receive a fee of
$5,000 for each year of service on the Board of Directors and will be reimbursed
for expenses incurred in connection with their attendance. In addition, each
year, each Non-Employee Director will be granted automatically a stock option
exercisable for 2,000 shares of Common Stock, as described below under "Amended
and Restated 1993 Stock Option Plan."
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<PAGE> 50
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to the
annual and long-term compensation paid by the Company during the fiscal year
ended December 31, 1996 to the Chief Executive Officer and its other three most
highly compensated executive officers (the "Named Executive Officers") whose
1996 compensation exceeded $100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS(4)
ANNUAL COMPENSATION ------------
------------------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION SALARY($)(1) BONUS($)(2) COMPENSATION($)(3) OPTIONS(#)
- -------------------------------------- ------------ ----------- ------------------ ------------
<S> <C> <C> <C> <C>
Christopher K. Mirabelli.............. $222,000 $39,960 $8,097 50,914
President, Chief Executive
Officer and Chairman of the Board of
Directors
Walter Newman......................... 140,000 16,800 6,355 38,109
Vice President,
Research and Discovery
Douglas Ringler....................... 115,417 16,100 2,111 43,475
Vice President,
Pharmaceutical Development:
Preclinical Development and
Laboratory Operations
Lee Brettman.......................... 175,000 17,500 6,446 20,426
Vice President,
Pharmaceutical Development:
Clinical Development and
Medical Affairs
</TABLE>
- ------------------------------
(1) Salary includes amounts, if any, deferred pursuant to the Company's 401(k)
Plan, and excludes bonus paid in 1996 for fiscal year 1995.
(2) Bonus amounts were accrued for fiscal 1996, but were not paid until the
first quarter of 1997.
(3) Other Annual Compensation consists of health and life insurance premiums
paid by the Company on behalf of the Named Executive Officer.
(4) The Company has no long-term compensation plan that includes long-term
incentive payments.
49
<PAGE> 51
The following table sets forth certain information with respect to grants
of stock options under the Company's Stock Option Plan to the Named Executive
Officers during the year ended December 31, 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATE OF
----------------------------------------------------------- STOCK PRICE
NUMBER PERCENT OF TOTAL APPRECIATION FOR
OF SECURITIES OPTIONS GRANTED OPTIONS TERM(2)
UNDERLYING TO EMPLOYEES IN EXERCISE EXPIRATION -----------------
NAME: OPTIONS(1) FISCAL YEAR PRICE $/SH DATE 5% 10%
- ------------------------------ ------------- ----------------- ---------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Christopher K. Mirabelli...... 36,910 11.38% $5.125 4/22/06 $40,767 $87,792
14,004 4.32 6.15 12/16/06 18,560 39,970
Walter Newman................. 19,436 5.99 5.125 4/22/06 21,466 46,229
18,673 5.76 6.15 12/16/06 24,249 53,297
Douglas Ringler............... 19,200 5.92 5.125 4/22/06 21,206 45,668
24,275 7.48 6.15 12/16/06 32,174 69,287
Lee Brettman.................. 3,620 1.12 5.125 4/22/06 3,999 8,612
16,806 5.18 6.15 12/16/06 22,274 47,968
</TABLE>
- ------------------------------
(1) Represents incentive stock options granted under the Stock Option Plan to
each of the individuals listed above on April 22, 1996 and December 16,
1996. Each option becomes exercisable in four equal annual installments, and
has a maximum term of 10 years from the date of grant, subject to earlier
termination in the event of the optionee's cessation of service with the
Company. All of these options are exercisable during the holder's lifetime
only by the holder; they are exercisable by the holder only while the holder
is an employee of the Company and for certain limited periods of time
thereafter in the event of termination of employment.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based upon assumed appreciation rates of five percent and ten percent in
the fair market value of shares of Common Stock from the fair market value
on the date of grant, which rates are set by the Securities and Exchange
Commission and compounded annually from the date the respective options were
granted to their expiration date. The gains shown are net of option exercise
prices, but do not include deductions for taxes or other expenses associated
with the exercises. Actual gains, if any, are dependent on the performance
of the Common Stock and the date on which the option is exercised. There can
be no assurance that the amounts reflected will be achieved or will
otherwise be indicative of the actual amounts received, if any.
50
<PAGE> 52
The following table sets forth information with respect to (i) the number
of unexercised options held by the Named Executive Officers as of December 31,
1996 and (ii) the value of unexercised in-the-money options (options for which
the fair market value of the Common Stock exceeds the exercise price) as of
December 31, 1996.
OPTION EXERCISES IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES VALUE OPTIONS AT OPTIONS AT
ACQUIRED ON REALIZED DECEMBER 31, 1996(#) DECEMBER 31, 1996($)(1)
NAME EXERCISE(#) ($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- --------------------------- ----------- -------- ------------------------------- --------------------------
<S> <C> <C> <C> <C>
Christopher K. Mirabelli... 10,975 57,371 28,048/87,500 $146,425/$229,083
Walter Newman.............. -- -- 6,097/44,207 31,875/51,797
Douglas Ringler............ 11,402 63,440 0/54,200 0/79,493
Lee Brettman............... -- -- 6,097/38,719 30,750/95,961
</TABLE>
- ------------------------------
(1) Based on the fair market value of the Common Stock as of December 31, 1996,
of $6.15 per share, as determined by the Company's Board of Directors, less
the aggregate exercise price.
AMENDED AND RESTATED 1993 STOCK OPTION PLAN
The Stock Option Plan provides for the grant of options to purchase shares
of Common Stock to officers, employees and directors of and consultants to the
Company. The maximum number of shares of Common Stock that may be issued
pursuant to the Stock Option Plan is 1,500,000. The Stock Option Plan was
adopted by the Board of Directors and the stockholders of the Company on
September 21, 1993. The Stock Option Plan was amended and restated by the Board
of Directors on April 14, 1997, in order to increase the number of shares of
Common Stock to its current level and to provide the rights set forth below,
which amendment was approved by the stockholders of the Company as of June 25,
1997.
The Stock Option Plan will be administered by the Compensation Committee
which is presently comprised of John Littlechild and Martin Peretz. The
Compensation Committee will select participants (other than for the automatic
grants to Non-Employee Directors referred to below) and, in a manner consistent
with the terms of the Stock Option Plan, determine the number and duration of
the options to be granted and the terms and conditions of the option agreements.
In addition, each Non-Employee Director will receive, each year that such person
serves as a director, an option to purchase 2,000 shares of Common Stock at fair
market value on the date of grant. The Compensation Committee has the right to
alter, amend or terminate the Stock Option Plan at any time but any such
alteration, amendment or termination will not adversely affect options
previously granted.
The Stock Option Plan provides for grants of stock options intended to
qualify for preferential tax treatment (the "Incentive Stock Options") under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and
nonstatutory stock options that do not qualify for such treatment. All employees
of the Company are eligible for stock options under the Plan in amounts and at
prices determined by the Compensation Committee, provided that, in the case of
Incentive Stock Options, the exercise price will not be less than 100% of the
fair market value of the Common Stock on the date of grant, or not less than
110% of the fair market value of the Common Stock on the grant date if the
optionee owns, directly or indirectly, more than 10% of the total combined
voting power of all classes of stock. No participant in the Stock Option Plan
may in any year be granted stock options with respect to more than 500,000
shares of Common Stock.
Under the Stock Option Plan, the Compensation Committee may establish with
respect to each option granted such vesting provisions as it determines to be
appropriate or advisable. In general, options granted under the Stock Option
Plan have a ten-year term, and such options vest or have
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<PAGE> 53
vested over four-year periods at various rates. Unexercised options
automatically terminate upon the termination of a holder's relationship with the
Company. In addition, the Stock Option Plan includes a provision adjusting the
number of shares of Common Stock available for grant, the number of shares of
Common Stock subject to outstanding awards thereunder and the per share exercise
price thereof in the event of any stock dividend, stock split, recapitalization,
merger or certain other events.
The Stock Option Plan provides that each outstanding option will
immediately become fully exercisable upon a "Change in Control" of the Company,
as defined in the Stock Option Plan. A "Change in Control" includes the
acquisition by any third party (as hereinafter defined), directly or indirectly,
of more than 80% of the Common Stock outstanding at the time, without the prior
approval of the Company's Board of Directors. A "third party" for purposes of
the foregoing means any person other than the Company or a subsidiary or
employee benefit plan or trust maintained by the Company or any of its
subsidiaries together with any of such person's "affiliates" and "associates" as
defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended.
As of June 30, 1997, an aggregate of 966,891 shares of Common Stock were
subject to outstanding stock options granted under the Stock Option Plan. As of
June 30, 1997, options to purchase 228,465 shares of Common Stock were
exercisable at prices ranging from $.04 to $7.18 per share.
1997 EMPLOYEE STOCK PURCHASE PLAN
In April 1997, the Board adopted the 1997 Employee Stock Purchase Plan (the
"Stock Purchase Plan"), which enables eligible employees to acquire shares of
the Company's Common Stock through payroll deductions. The Stock Purchase Plan
is intended to qualify as an "employee stock purchase plan" under Section 423 of
the Code. Offerings under the Stock Purchase Plan are planned to commence on
January 1 and end on December 31 of each year. The initial offering period is
intended to commence upon January 1, 1998 and to end on December 31, 1998,
unless otherwise determined by the Board. During the offering period, an
eligible employee may select a rate of payroll deduction up to 10% of his or her
compensation up to an aggregate total payroll deduction not to exceed $10,000 in
any offering period. The purchase price for the Company's Common Stock purchased
under the Stock Purchase Plan is 85% of the lesser of the fair market value of
the shares on the first day or the last day of the offering period. A total of
150,000 shares of Common Stock have been reserved for issuance under the Stock
Purchase Plan.
401(K) PLAN
The Company has implemented a retirement savings plan (the "401(k) Plan"),
which covers all full-time employees. Pursuant to the 401(k) Plan, an employee
may elect to reduce his or her current compensation by up to 15% (subject to
certain overall dollar limits) and have the amount of such reduction contributed
to the 401(k) Plan. The 401(k) Plan allows employees to make certain tax-
deferred voluntary contributions. The 401(k) Plan is intended to qualify under
Section 401 of the Code, so that contributions by employees, and earned income
thereon, are not taxable to employees until withdrawn from the 401(k) Plan. The
administrator of the 401(k) Plan will invest each employee's account at the
direction of each such employee, who can choose among certain investment
alternatives provided.
EMPLOYMENT AGREEMENTS
The Company has no employment agreements currently in effect between it and
its employees.
COMPENSATION COMMITTEE INTERLOCKS
The Compensation Committee is responsible for determining salaries,
incentives and all other forms of compensation for directors and officers of the
Company. The Compensation Committee also administers various incentive
compensation and benefit plans, including the Stock Option Plan and Stock
Purchase Plan. The members of the Compensation Committee of the Board of
Directors are
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<PAGE> 54
John W. Littlechild and Martin Peretz, neither of whom is an employee of the
Company. Mr. Littlechild is a general partner of the general partner of
HealthCare Ventures, III, L.P., and HealthCare Ventures, IV, L.P., each a
venture fund and a principal stockholder of the Company. Dr. Peretz may be
deemed to beneficially own the shares held by I.S. Partners, L.P., a venture
capital firm and a principal stockholder of the Company. See "Principal
Stockholders" and "Certain Transactions."
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<PAGE> 55
CERTAIN TRANSACTIONS
In June 1994, the Company sold an aggregate of 5,000,000 shares of Series A
Convertible Preferred Stock (convertible into 1,219,512 shares of Common Stock)
at a purchase price of $1.00 per share ($4.10 per share on an as-converted
basis) to a group of existing investors, including HealthCare Ventures III, L.P.
("HCV III"), HealthCare Ventures IV, L.P. ("HCV IV") and I.S. Partners, L.P.
("I.S. Partners").
In September 1994, the Company sold an aggregate of 1,666,667 shares of
Series B Convertible Preferred Stock (convertible into 406,504 shares of Common
Stock) at a purchase price of $1.20 per share ($4.92 per share on an
as-converted basis) to a group of new and existing investors, including Schroder
Ventures International Life Science Fund L.P. 1, Schroder Ventures International
Life Sciences Trust, Schroders Incorporated and I.S. Partners.
In November 1994, the Company entered into a Research, Development and
Marketing Agreement with Warner-Lambert relating to the Company's MCP-1 program.
In connection with such agreement, the Company issued and sold 1,000,000 shares
of Series C Convertible Preferred Stock (convertible into 243,902 shares of
Common Stock) at a purchase price of $3.00 per share ($12.30 per share on an
as-converted basis) to Warner-Lambert Company.
In May 1995, the Series A Common Stock, which was owned by Dr. Springer and
his affiliates, automatically converted pursuant to its terms into 893,782
shares of Common Stock.
In July 1995, the Company entered into a Research, Development and
Marketing Agreement with Warner-Lambert Company relating to the Company's IL-8
program and amended the Research, Development and Marketing Agreement relating
to the MCP-1 program.
In September 1995, the Company sold an aggregate of 1,481,482 shares of
Series D Convertible Preferred Stock (convertible into 361,337 shares of Common
Stock) at a purchase price of $1.35 per share ($5.54 per share on an
as-converted basis) to a group of new and existing investors, including HCV III,
HCV IV, I.S. Partners, Schroder Ventures International Life Science Fund L.P. 1,
Schroder Ventures International Life Sciences Trust, Schroders Incorporated and
Francis H. Spiegel, Jr.
In January 1996, the Company sold 625,000 shares of Series E Convertible
Preferred Stock (convertible into 152,439 shares of Common Stock) at a purchase
price of $4.00 per share ($16.40 per share on an as-converted basis) to
Warner-Lambert.
In February 1996, the Company sold an aggregate of 910,188 shares of Series
F Convertible Preferred Stock (convertible into 221,997 shares of Common Stock)
at a purchase price of $3.00 per share ($12.30 per share on an as-converted
basis) to a group of new and existing investors, including HCV III, HCV IV, I.S.
Partners, Schroder Ventures International Life Science Fund L.P. 1, Schroder
Ventures International Life Sciences Trust, Schroders Incorporated and Lombard
Odier & Cie.
In April 1996, the Company sold 625,000 shares of Series E Convertible
Preferred Stock (convertible into 152,439 shares of Common Stock) at a purchase
price of $4.00 per share ($16.40 per share on an as-converted basis) to
Warner-Lambert.
In June 1996, the Company sold an aggregate of 728,147 shares of Series F
Convertible Preferred Stock (convertible into 194,608 shares of Common Stock) at
a purchase price of $3.00 per share ($12.30 per share on an as converted basis)
to a group of existing investors, including HCV III, HCV IV, I.S. Partners,
Schroder Ventures International Life Science Fund L.P. 1, Schroder Ventures
International Life Sciences Trust, Schroders Incorporated and Lombard Odier &
Cie.
In July 1996, the Company entered into a Research Collaboration and License
Agreement with Roche Bioscience relating to the Company's CCR3 Antagonist
program. In connection with such agreement, Roche Bioscience made a $3.0 million
license fee payment.
In December 1996, the Company sold 857,143 shares of Series G Convertible
Preferred Stock (convertible into 401,142 shares of Common Stock) at a purchase
price of $3.50 per share ($7.47 on an
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<PAGE> 56
as-converted basis) to Roche Finance Ltd. If the initial public offering price
varies within the estimated range, the number of shares of Common Stock issuable
upon the conversion of the Preferred Stock is subject to adjustment from a
maximum of 451,284 shares of Common Stock (in the event that the initial public
offering price is $8.00 per share) to a minimum of 361,027 shares of Common
Stock (in the event that the initial public offering price is $10.00 per share).
The pricing of this offering outside the estimated range will further effect the
number of shares of Common Stock into which the Preferred Stock is convertible.
In January 1997, the Company granted Augustine Lawlor, Vice President,
Corporate Development and Chief Financial Officer, an incentive stock option to
purchase 89,633 shares of Common Stock at an exercise price of $6.15, the fair
market value of the Common Stock on the date of grant.
In March through June 1997, the Company sold an aggregate of 1,102,719
shares of Series G Convertible Preferred Stock (convertible into 493,319 shares
of Common Stock) at a purchase price of $3.50 per share ($6.75 on an
as-converted basis) to a group of new and existing investors, including Schroder
Ventures International Life Sciences Fund L.P. 1, Schroder Ventures
International Life Sciences Trust, Schroders Incorporated and Warner-Lambert. If
the initial public offering price varies within the estimated range, the number
of shares of Common Stock issuable upon the conversion of the Preferred Stock is
subject to adjustment from a maximum of 546,273 shares of Common Stock (in the
event that the initial public offering price is $8.00 per share) to a minimum of
450,956 shares of Common Stock (in the event that the initial public offering
price is $10.00 per share). The pricing of this offering outside the estimated
range will further effect the number of shares of Common Stock into which the
Preferred Stock is convertible.
In June 1997, the Company granted Jay Luly, Vice President, Drug Discovery,
an incentive stock option to purchase 85,366 shares of Common Stock at an
exercise price of $7.18, the fair market value of the Common Stock on the date
of grant.
In June 1997, the Company entered into an agreement with Warner-Lambert
pursuant to which (i) Warner-Lambert terminated all of its equity anti-dilution
rights in connection with Company's initial public offering and (ii)
Warner-Lambert agreed to reduce the number of shares of Common Stock into which
its shares of Series G Preferred Stock would be converted upon consummation of
the Company's initial public offering. In exchange for Warner-Lambert's
agreement to so reduce certain of its equity rights in the Company, the Company
agreed to reduce the amount of certain of the royalties due to the Company by
Warner-Lambert in connection with sales of products developed pursuant to any of
the research collaborations between the Company and Warner-Lambert, and the
Company also agreed in principle to waive its right to co-promote such products
under certain circumstances. In the event that the initial public offering price
is less than $12.30 per share, Warner-Lambert will receive a credit against such
royalties. Assuming an initial public offering price of $9.00 per share, the
approximate amount of such credit would be $2.05 million.
For a description of certain transactions and certain employment and other
arrangements between the Company and certain of its directors and executive
officers, see "Management Director Compensation" and "Executive Compensation."
The Company believes that the securities issued in the transactions
involving the Company described above were sold by the Company at their then
fair market value and that the terms of the transactions described were no less
favorable than the Company could have obtained from unaffiliated third parties.
The Company has adopted a policy, effective following the consummation of
this offering, that all future transactions between the Company and its
officers, directors and affiliates must (i) be approved by a majority of the
disinterested members of the Company's Board of Directors and (ii) be on terms
no less favorable to the Company than could be obtained from unrelated third
parties. In addition, this policy requires that any loans by the Company to its
officers, directors or other affiliates be for bona fide business purposes only.
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<PAGE> 57
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of June 30, 1997, giving effect to
the conversion of all outstanding shares of the Company's Preferred Stock into
an aggregate of 5,087,935 shares of Common Stock by (i) each person known to the
Company to be the beneficial owner of more than 5% of the shares of Common
Stock, (ii) each director of the Company, (iii) each of the Named Executive
Officers and (iv) all current directors and executive officers as a group.
<TABLE>
<CAPTION>
PERCENT OWNED
SHARES ------------------------
BENEFICIALLY BEFORE THE AFTER THE
NAMES AND ADDRESS OF BENEFICIAL OWNER OWNED(1) OFFERING OFFERING
- ----------------------------------------------------------- ------------ ---------- ---------
<S> <C> <C> <C>
Entities Affiliated with HealthCare Investment
Corporation(2)........................................... 1,999,380 32.3% 23.0%
Twin Tower at Metro Park
379 Thornall Street
Edison, New Jersey 08837
Timothy Springer(3)........................................ 767,121 12.4% 8.8%
Center for Blood Research
200 Longwood Avenue
Boston, Massachusetts 02115
I.S. Partners, L.P......................................... 736,330 11.9% 8.5%
c/o Clark Estates
30 Wall Street
New York, New York 10005
Warner-Lambert Company..................................... 618,466 10.0% 7.1%
201 Tabor Road
Morris Plains, New Jersey 07950
Entities Affiliated with Schroders PLC(4).................. 423,949 6.9% 4.9%
120 Cheapside
London EC2V 6DS
England
Roche Finance Ltd.......................................... 401,141 6.5% 4.6%
c/o Hoffmann-La Roche, Ltd.
124 Grensacherstrasse
CH-4002 Basel
Switzerland
Lombard Odier & Cie........................................ 400,896 6.5% 4.6%
Toedistrasse 36
CH8027
Zurich, Switzerland
John W. Littlechild(5)..................................... 1,999,380 32.3% 23.0%
Martin Peretz(6)........................................... 736,330 11.9% 8.5%
Catherine Bingham(7)....................................... 423,949 6.9% 4.9%
Christopher K. Mirabelli(8)................................ 146,485 2.3% 1.7%
Christopher T. Walsh....................................... 3,937 * *
Mark Skaletsky............................................. 0 * *
Walter Newman(9)........................................... 38,394 * *
Douglas Ringler(10)........................................ 28,395 * *
Lee Brettman(11)........................................... 7,003 * *
All current directors and executive officers
as a group (11 persons)(12).............................. 3,383,873 54.0% 38.6%
</TABLE>
- ------------------------------
* Less than 1%.
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<PAGE> 58
(1) Beneficial ownership is determined in accordance with Rule 13d-3(d)
promulgated by the Securities and Exchange Commission under the Securities
and Exchange Act of 1934, as amended. Shares of Common Stock issuable
pursuant to options, warrants and convertible securities, to the extent
such securities are currently exercisable or convertible within 60 days of
June 30, 1997, are treated as outstanding for computing the percentage of
the person holding such securities but are not treated as outstanding for
computing the percentage of any other person. Unless otherwise noted, each
person or group identified possesses sole voting and investment power with
respect to shares, subject to community property laws where applicable.
Shares not outstanding but deemed beneficially owned by virtue of the right
of a person or group to acquire them within 60 days are treated as
outstanding only for purposes of determining the number of and percent
owned by such person or group.
(2) Includes shares held by HealthCare Ventures III, L.P. ("HCV III") and
HealthCare Ventures IV, L.P. ("HCV IV").
(3) Includes shares held by Dr. Springer's wife and the Springer Family Trust.
Dr. Springer disclaims beneficial ownership of all shares owned by his wife
and beneficial ownership of the shares owned by the Springer Family Trust
except to the extent of his proportional interest.
(4) Includes shares held by Schroder Ventures International Life Sciences Fund
L.P. 1, Schroder Ventures International Life Sciences Fund L.P. 2, Schroder
Ventures International Life Sciences Trust, Schroders Incorporated,
Schroder Venture Managers Limited as Investment Manager for the Schroder
Ventures International Life Sciences Fund Co-Investment Scheme (together,
the "Schroder Group").
(5) Includes shares held by HCV III and HCV IV. Mr. Littlechild, a director of
the Company, is a general partner of the general partner of each of HCV III
and HCV IV. Mr. Littlechild shares voting and investment control with
respect to the shares owned by HCV III and HCV IV. Mr. Littlechild may be
deemed to beneficially own the shares held by HCV III and HCV IV although
he disclaims beneficial ownership except to the extent of his proportional
ownership interests.
(6) Includes shares held by I.S. Partners, L.P. Dr. Peretz, a director of the
Company, may be deemed to beneficially own the shares held by I.S. Partners
although he disclaims beneficial ownership except to the extent of his
proportionate ownership interest.
(7) Includes shares held by the Schroder Group. Ms. Bingham may be deemed to
beneficially own the shares held by the Schroder Group although she
disclaims beneficial ownership except to the extent of her proportionate
ownership interest.
(8) Includes 55,569 shares of Common Stock which Dr. Mirabelli has the right to
acquire within 60 days of June 30, 1997 upon the exercise of stock options.
(9) Includes 14,005 shares of Common Stock which Dr. Newman has the right to
acquire within 60 days of June 30, 1997 upon the exercise of stock options.
Includes shares held by the Newman Family Trust. Dr. Newman disclaims
beneficial ownership of all shares owned by the Newman Family Trust.
(10) Includes 7,848 shares of Common Stock which Dr. Ringler has the right to
acquire within 60 days of June 30, 1997 upon the exercise of stock options.
(11) Includes 7,003 shares of Common Stock which Dr. Brettman has the right to
acquire within 60 days of June 30, 1997 upon the exercise of stock options.
(12) Includes 84,425 shares of Common Stock which the directors and officers
have the right to acquire within 60 days of June 30, 1997 upon the exercise
of stock options.
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<PAGE> 59
DESCRIPTION OF CAPITAL STOCK
Upon the completion of this offering, the Company will be authorized to
issue 25,000,000 shares of Common Stock, $0.01 par value per share, of which
8,683,176 shares will be issued and outstanding, and 5,000,000 shares of
undesignated Preferred Stock, $0.01 par value per share, of which no shares will
be issued and outstanding.
COMMON STOCK
Upon the closing of this offering, the Company's Restated Certificate of
Incorporation (the "Restated Certificate of Incorporation") will authorize the
issuance of up to 25,000,000 shares of Common Stock, $0.01 par value per share.
Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the shares of Common Stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of Common Stock are entitled to receive ratably
such dividends, if any, as may be declared by the Board of Directors out of
funds legally available therefor and subject to any preferential dividend rights
of any then outstanding Preferred Stock. Upon the liquidation, dissolution or
winding up of the Company, the holders of Common Stock are entitled to receive
ratably the net assets of the Company available after the payment of all debts
and other liabilities and subject to any liquidation preference of any then
outstanding Preferred Stock. Holders of Common Stock have no preemptive,
subscription, redemption or conversion rights. The outstanding shares of Common
Stock are, and the shares offered by the Company in this offering will be, when
issued and paid for, fully paid and nonassessable.
As of June 30, 1997, there were 6,183,176 shares of Common Stock
outstanding held by 65 stockholders (after giving effect to the automatic
conversion of all outstanding shares of Preferred Stock into an aggregate of
5,087,935 shares of Common Stock effective upon the closing of this offering).
If the initial public offering price varies within the estimated range, the
number of shares of Common Stock issuable upon the conversion of the Preferred
Stock is subject to adjustment from a maximum of 5,191,031 shares of Common
Stock (in the event that the initial public offering price is $8.00 per share)
to a minimum of 5,005,457 shares of Common Stock (in the event that the initial
public offering price is $10.00 per share). The pricing of this offering outside
the estimated range will further effect the number of shares of Common Stock
into which the Preferred Stock is convertible.
PREFERRED STOCK
Upon the closing of this offering, the Restated Certificate of
Incorporation will have an authorized class of undesignated preferred stock
consisting of 5,000,000 shares, $0.01 par value per share. The Board of
Directors will be authorized, subject to any limitations prescribed by law,
without further stockholder approval, to issue from time to time shares of
preferred stock in one or more series. Each such series of preferred stock shall
have such number of shares, designations, preferences, voting powers,
qualifications and special or relative rights or privileges as shall be
determined by the Board of Directors, which may include, among others, dividend
rights, voting rights, redemption and sinking fund provisions, liquidation
preferences, conversion rights and preemptive rights.
The rights of the holders of Common Stock will be subject to, and may be
adversely affected by, the rights of holders of any preferred stock that may be
issued in the future. Such rights may include voting and conversion rights which
could adversely affect the holders of Common Stock. Satisfaction of any dividend
preferences of outstanding preferred stock would reduce the amount of funds
available, if any, for the payment of dividends on Common Stock. See "Dividend
Policy." Holders of preferred stock would typically be entitled to receive a
preference payment in the event of a liquidation, dissolution or winding up of
the Company before any payment is made to the holders of Common Stock.
Additionally, the issuance of preferred stock could have the effect of making it
more difficult for a third party to acquire, or of discouraging a third party
from attempting to acquire, a majority of the
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<PAGE> 60
outstanding voting stock of the Company. The Company has no present plans to
issue any shares of preferred stock.
WARRANTS
As of June 30, 1997, there were outstanding warrants exercisable for up to
84,145 shares of Common Stock (after giving effect to the conversion of all
outstanding warrants to purchase shares of the Company's Series A Preferred
Stock into warrants for shares of Common Stock which will occur upon the closing
of this offering). Such warrants have expiration dates of five years from the
closing of this offering and have a weighted average exercise price equal to
$4.10. The holders of the warrants are entitled to certain registration rights
in respect of the shares of Common Stock issuable upon exercise of their
respective warrants. See "Registration Rights."
REGISTRATION RIGHTS
Certain persons and entities have rights with respect to the registration
of Common Stock under the Securities Act. Immediately after the closing of this
offering, those rights will cover approximately 5,981,716 shares of Common Stock
(the "Registrable Shares"). In general, in the event that the Company proposes
to register any shares of Common Stock under the Securities Act for its own
account or the account of other stockholders at any time or times, subject to
certain exceptions, the Company must, upon the written request of a holder of
Registrable Shares, use its best efforts to cause to be registered under the
Securities Act all of the Registrable Shares requested to be registered,
provided, however, that the Company is not required to register Registrable
Securities in excess of the amount, if any, of Common Stock which the principal
underwriter of an underwritten offering shall agree to include in such offering.
The holders of 5,981,716 of the Registrable Shares will also have the right to
require the Company to prepare and file from time to time a registration
statement under the Securities Act with respect to their Registrable Shares,
provided that such holders may not exercise such right more than twice with
respect to a registration statement on Form S-1 or more than two times in any
calendar year with respect to a registration statement on Form S-3. Upon receipt
of any such request from such holders, the Company will be required to use its
best efforts to effect such registration, subject to certain conditions and
limitations.
DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law (the "DGCL"). Subject to certain exceptions, Section 203
prohibits a publicly held Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person became an interested
stockholder, unless the interested stockholder attained such status with the
approval of the Board of Directors or unless the business combination is
approved in a prescribed manner. A "business combination" includes certain
mergers, asset sales and other transactions resulting in a financial benefit to
the interested stockholder. Subject to certain exceptions, an "interested
stockholder" is a person who, together with his or her affiliates and
associates, owns, or within three years prior did own, 15% or more of the
corporation's voting stock.
The Restated Certificate of Incorporation and Amended and Restated By-Laws
(the "By-Laws") provide that, effective upon the consummation of this offering,
any action required or permitted to be taken by the stockholders of the Company
may be taken only at duly called annual or special meetings of the stockholders,
and that special meetings may be called only by the Chairman of the Board of
Directors, the President, a majority of the Board of Directors of the Company or
holders of 20% or more of the then outstanding shares of capital stock of the
Company. These provisions may also discourage another person or entity from
making a tender offer for the Company's Common Stock, because such person or
entity, even if it acquired all or a majority of the outstanding voting
securities of the Company, would be able to take action as a stockholder (such
as electing new directors or approving a merger) only at a duly called
stockholders meeting, and not by written consent.
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<PAGE> 61
The Company's Restated Certificate of Incorporation and By-Laws provided
that, effective upon the consummation of this offering, for nominations for the
Board of Directors or for other business to be properly brought by a stockholder
before a meeting of stockholders, the stockholder must first have given timely
notice thereof in writing to the Secretary of the Company. To be timely, a
notice of nominations or other business to be brought before a stockholders
meeting must be delivered not less than 50 days prior to such stockholders
meeting, provided that in the event that less than 55 days' notice or prior
public disclosure of the date of the meeting is given or made to stockholders, a
notice of nominations or other business to be brought before such stockholders
meeting must be delivered within 7 days following the day on which such notice
of the date of the stockholders meeting was given or such public disclosure was
made. The notice must contain, among other things, certain information about the
stockholder delivering the notice and, as applicable, background information
about each nominee or a description of the proposed business to be brought
before the meeting.
The DGCL provides generally that the affirmative vote of a majority of the
shares entitled to vote on any matter is required to amend a corporation's
certificate of incorporation or by-laws, unless the corporation's certificate of
incorporation or by-laws, as the case may be, requires a greater percentage. The
Company's Restated Certificate of Incorporation requires the affirmative vote of
the holders of at least 75% of the outstanding voting stock of the Company to
amend or repeal any of the foregoing provisions, or to reduce the number of
authorized shares of Common Stock and Preferred Stock. A 75% vote is also
required to amend or repeal any of the foregoing By-Law provisions. Such 75%
stockholder vote would in either case be in addition to any separate class vote
that might in the future be required pursuant to the terms of any Preferred
Stock that might be outstanding at the time any such amendments are submitted to
stockholders. The By-Laws may also be amended or repealed by a majority vote of
the Board of Directors.
The foregoing provisions could have the effect of making it more difficult
for a third party to acquire, or of discouraging a third party from attempting
to acquire control of the Company.
The Company's Restated Certificate of Incorporation contains certain
provisions permitted under the DGCL relating to the liability of directors.
These provisions eliminate a director's personal liability for monetary damages
resulting from a breach of fiduciary duty, except in certain circumstances
involving certain wrongful acts, such as the breach of a director's duty of
loyalty or acts or omissions that involve intentional misconduct or a knowing
violation of law. These provisions do not limit or eliminate the rights of the
Company or any stockholder to seek non-monetary relief, such as an injunction or
rescission, in the event of a breach of a director's fiduciary duty. These
provisions will not alter a director's liability under federal securities laws.
The Company's Restated Certificate of Incorporation and By-Laws also contain
provisions indemnifying the directors and officers of the Company to the fullest
extent permitted by the DGCL. The Company believes that these provisions will
assist the Company in attracting and retaining qualified individuals to serve as
directors.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is American
Stock Transfer and Trust Company.
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SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have outstanding
8,683,176 shares of Common Stock (9,058,176 shares if the Underwriters'
over-allotment option is exercised in full). Of these shares, the 2,500,000
shares sold in this offering will be freely tradeable without restriction or
further registration under the Securities Act unless purchased by "affiliates"
of the Company as that term is defined in Rule 144. The remaining 6,183,176
shares outstanding upon completion of this offering will be "restricted
securities" as that term is defined under Rule 144 (the "Restricted Shares").
Sales of Restricted Shares in the public market, or the availability of such
shares for sale, could adversely affect the market price of the Common Stock.
The executive officers, directors, employees and other stockholders of the
Company who beneficially own an aggregate of 6,183,176 shares of Common Stock
outstanding prior to this offering have agreed that they will not, without the
prior written consent of Hambrecht & Quist LLC, offer, sell or otherwise dispose
of any shares of Common Stock, options or warrants to acquire shares of Common
Stock or securities exchangeable for or convertible into shares of Common Stock
owned by them for a period of 180 days after the date of this Prospectus (the
"Lock-Up Period"). See "Underwriting."
Upon expiration of the Lock-Up Period, approximately 659,289 Restricted
Shares held by non-affiliates will be eligible for sale in the public market
without restriction pursuant to Rule 144(k) under the Securities Act and
approximately 3,980,257 Restricted Shares held by affiliates and approximately
417,541 Restricted Shares held by non-affiliates will be so eligible subject to
compliance with the volume limitations of Rule 144 described below. The
remaining 924,629 Restricted Shares may be sold pursuant to Rule 144 only after
they have been fully paid for and held for at least one year from the later of
the date of issuance by the Company or acquisition from an affiliate (which
dates do not occur until after the expiration of the Lock-Up Period).
Beginning 90 days after the date of this Prospectus, certain shares issued
or issuable upon exercise of options granted by the Company prior to the date of
this Prospectus will also be eligible for sale in the public market pursuant to
Rule 701 under the Securities Act. In general, Rule 701 permits resales of
shares issued pursuant to certain compensatory benefit plans and contracts
commencing 90 days after the issuer becomes subject to the reporting
requirements of the Securities and Exchange Act of 1934, as amended, in reliance
upon Rule 144 but without compliance with certain restrictions, including the
holding period requirements, contained in Rule 144. If all the requirements of
Rule 701 are met, upon expiration of the Lock-Up Period an aggregate of 201,460
shares of Common Stock currently outstanding, and an additional 966,891 shares
of Common Stock issuable upon exercise of currently outstanding options will be
eligible for sale pursuant to such rule.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who beneficially owned Restricted Shares for at
least one year, including persons who may be deemed "affiliates" of the Company,
would be entitled to sell within any three-month period a number of shares that
does not exceed the greater of one percent of the number of shares of Common
Stock then outstanding or the average weekly trading volume of the Common Stock
during the four calendar weeks preceding the filing of a Form 144 with respect
to such sale. Sales under Rule 144 are also subject to certain manner of sale
provisions and notice requirements and to the availability of current public
information about the Company. In addition, a person who is not deemed to have
been an affiliate of the Company at any time during the 90 days preceding the
sale, and who has beneficially owned for at least two years the shares proposed
to be sold, would be entitled to sell such shares under Rule 144(k) without
complying with the manner of sale, public information, volume limitation or
notice provisions of Rule 144.
The Company is unable to estimate accurately the number of Restricted
Shares that will be sold under Rule 144 since this will depend in part on the
market price for the Common Stock, the personal circumstances of the sellers and
other factors.
Rule 144A under the Securities Act would permit, subject to certain
conditions, the sale by the current holders of Restricted Shares of all or a
portion of their shares to certain "qualified institutional buyers," as defined
in Rule 144A.
61
<PAGE> 63
The Company intends to file a Form S-8 registration statement under the
Securities Act to register all shares of Common Stock issuable under the Stock
Option Plan. That registration statement is expected to be filed approximately
180 days after the date of this Prospectus and is expected to become effective
immediately upon filing. Shares covered by such registration statement will be
eligible for resale in the public market after the effective date of such
registration statements, subject to Rule 144 limitations applicable to
affiliates and to the Lock-Up Period, if applicable.
In addition, upon completion of this offering, the holders of 5,981,716
shares of Common Stock will be entitled to certain rights with respect to
registration of such shares under the Securities Act. Registration of such
shares under the Securities Act would result in such shares becoming freely
tradeable without restriction under the Securities Act (except for shares
purchased by affiliates of the Company) immediately upon the effectiveness of
such registration. See "Description of Capital Stock--Registration Rights."
Prior to this offering, there has been no public market for the Common
Stock and no predictions can be made as to the effect, if any, that public sales
of shares or the availability of shares for sale will have on the market price
prevailing from time to time. Nevertheless, sales of substantial amounts of
Common Stock in the public market, or the perception that such sales could
occur, could have an adverse impact on the market price.
62
<PAGE> 64
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below, through their Representatives, Hambrecht & Quist LLC
and UBS Securities LLC, have severally agreed to purchase from the Company the
following respective number of shares of Common Stock:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
-------------------------------------------------------------------------- ---------
<S> <C>
Hambrecht & Quist LLC.....................................................
UBS Securities LLC........................................................
---------
Total........................................................... 2,500,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, including the absence
of any material adverse change in the Company's business and the receipt of
certain certificates, opinions and letters from the Company, its counsel and
independent auditors. The nature of the Underwriters' obligation is such that
they are committed to purchase all shares of Common Stock offered hereby if any
of such shares are purchased.
The Underwriters propose to offer the shares of Common Stock directly to
the public at the initial public offering price set forth on the cover page of
this Prospectus and to certain dealers at such price less a concession not in
excess of $ per share. The Underwriters may allow and such dealers may
reallow a concession not in excess of $ per share to certain other
dealers. After the initial public offering of the shares, the offering price and
other selling terms may be changed by the Representatives of the Underwriters.
The Underwriters have informed the Company that the Underwriters do not intend
to confirm sales of Common Stock offered hereby to accounts over which they
exercise discretionary authority.
The Company has granted the Underwriters an option, exercisable no later
than 30 days after the date of this Prospectus, to purchase up to 375,000
additional shares of Common Stock at the initial public offering price, less the
underwriting discount, set forth on the cover page of this Prospectus. To the
extent that the Underwriters exercise this option, each of the Underwriters will
have a firm commitment to purchase approximately the same percentage thereof
which the number of shares of Common Stock to be purchased by it shown in the
above table bears to the total number of shares of Common Stock offered hereby.
The Company will be obligated, pursuant to the option, to sell such shares to
the Underwriters to the extent the option is exercised. The Underwriters may
exercise such option only to cover over-allotments made in connection with the
sale of shares of Common Stock offered hereby.
Certain persons participating in this offering may overallot or effect
transactions which stabilize, maintain or otherwise affect the market price of
the Common Stock at levels above those which might otherwise prevail in the open
market, including by entering stabilizing bids, effecting syndicate covering
transactions or imposing penalty bids. A stabilizing bid means the placing of
any bid or effecting of any purchase, for the purpose of pegging, fixing or
maintaining the price of the Common Stock. A syndicate covering transaction
means the placing of any bid on behalf of the underwriting syndicate or the
effecting of any purchase to reduce a short position created in connection with
the offering. A penalty bid means an arrangement that permits the Underwriters
to reclaim a selling concession from a syndicate member in connection with the
offering when shares of Common Stock sold by the syndicate member are purchased
in syndicate covering transactions. Such transactions may be effected on the
Nasdaq Stock Market, in the over-the-counter market, or otherwise. Such
stabilizing, if commenced, may be discontinued at any time.
63
<PAGE> 65
The offering of the shares is made for delivery when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The Underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, and to contribute
to payments the Underwriters may be required to make in respect thereof.
The executive officers, directors, employees and other stockholders of the
Company, who beneficially own an aggregate of 6,183,176 shares of Common Stock
outstanding prior to this offering, have agreed that they will not, without the
prior written consent of Hambrecht & Quist LLC, offer, sell or otherwise dispose
of any shares of Common Stock, options or warrants to acquire shares of Common
Stock or securities exchangeable for or convertible into shares of Common Stock
owned by them during the 180 day period following the date of this Prospectus.
The Company has agreed that it will not, without the prior written consent of
Hambrecht & Quist LLC, offer, sell or otherwise dispose of any shares of Common
Stock, options or warrants to acquire shares of Common Stock during the 180 day
period following the date of this Prospectus, except that the Company may issue
shares upon the exercise of options granted prior to the date hereof, and may
grant additional options under its stock option plans, provided that, without
the prior written consent of Hambrecht & Quist LLC, such additional options
shall not be exercisable during such period.
Prior to the offering, there has been no public market for the Common
Stock. The initial public offering price for the Common Stock will be determined
by negotiation among the Company and the Representatives. Among the factors to
be considered in determining the initial public offering price are prevailing
market and economic conditions, certain financial information of the Company,
market valuation of other companies engaged in activities similar to the
Company, estimates of the business potential and prospects of the Company, the
present state of the Company's business operation, the Company's management and
other factors deemed relevant. The estimated initial public offering price set
forth on the cover page of this Prospectus is subject to change as a result of
market conditions and other factors.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby and certain legal
matters will be passed on for the Company by Bingham, Dana & Gould LLP, Boston,
Massachusetts. Justin P. Morreale, a partner at Bingham, Dana & Gould LLP, is
the Secretary of the Company. Certain legal matters will be passed on for the
Underwriters by Hale and Dorr LLP, Boston, Massachusetts.
EXPERTS
The audited consolidated financial statements of the Company as of December
31, 1995 and 1996 and for each of the three years in the period ended December
31, 1996, have been audited by Arthur Andersen LLP, independent public
accountants, as stated in their report with respect thereto and are included
herein in reliance upon the authority of said firm as experts in giving said
reports.
The statements in this Prospectus under the captions "Risk
Factors--Uncertainties Relating to Patents and Proprietary Rights" and
"Business--Patents and Proprietary Rights" have been reviewed and approved by
Hamilton, Brook, Smith & Reynolds, P.C., patent counsel to the Company, as
experts on such matters, and are included herein in reliance upon that review
and approval.
64
<PAGE> 66
ADDITIONAL INFORMATION
A Registration Statement on Form S-1, including amendments thereto,
relating to the Common Stock offered by the Company has been filed with the
Securities and Exchange Commission (the "Commission"), Washington, D.C. 20549.
This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. Statements
contained in this Prospectus as to the contents of any contract or any other
document referred to are not necessarily complete, and in each instance
reference is made to the copy of such contract or document filed as an exhibit
to the Registration Statement, each such statement being qualified in all
respects by such reference. For further information with respect to the Company
and the Common Stock offered hereby, reference is made to the Registration
Statement and to the exhibits and schedules thereto. A copy of the Registration
Statement may be inspected by anyone without charge at the Commission's
principal office in Washington, D.C., and copies of all or any part thereof may
be obtained from the Public Reference Section of the Commission, 450 Fifth
Street, NW., Washington, DC. 20549, upon payment of certain fees prescribed by
the Commission. The Commission maintains a World Wide Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The address of the
Commission's World Wide Web site is http://www.sec.gov.
65
<PAGE> 67
LEUKOSITE, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants........................................... F-2
Consolidated Balance Sheets as of December 31, 1995, 1996 and June 30, 1997
(Unaudited)...................................................................... F-3
Consolidated Statements of Operations for the Years Ended December 31, 1994, 1995
and 1996, for the Six Months Ended June 30, 1996 and 1997 (Unaudited) and for the
Period from Inception (May 1, 1992) to June 30, 1997 (Unaudited)................. F-4
Consolidated Statements of Stockholders' Equity (Deficit) for the Period from
Inception (May 1, 1992) to December 31, 1996, for the six months ended June 30,
1997 (Unaudited) and Pro Forma June 30, 1997 (unaudited)......................... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1994, 1995
and 1996, for the Six Months Ended June 30, 1996 and 1997 (Unaudited) and for the
Period from Inception (May 1, 1992) to June 30, 1997 (Unaudited)................. F-6
Notes to Consolidated Financial Statements......................................... F-7
</TABLE>
F-1
<PAGE> 68
Upon the consummation of the reverse stock split and charter amendment
discussed in Note 9(a), we expect to be in a position to issue the following
report.
Boston, Massachusetts Arthur Andersen LLP
March 4, 1997 (except for the matter
discussed in Note 9(a), as to which the
date is June 23, 1997)
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To LeukoSite, Inc.:
We have audited the accompanying consolidated balance sheets of LeukoSite,
Inc. (a Delaware corporation in the development stage) and subsidiary as of
December 31, 1995 and 1996, and the related consolidated statements of
operations, stockholders' equity (deficit) and cash flows for each of the three
years in the period then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of LeukoSite,
Inc. and subsidiary as of December 31, 1995 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
F-2
<PAGE> 69
LEUKOSITE, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, DECEMBER 31, JUNE 30, JUNE 30,
1995 1996 1997 1997
------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................... $ 1,734,188 $ 4,430,507 $ 6,620,171 $ 6,620,171
Marketable securities............................... -- 4,953,902 5,028,374 5,028,374
Other current assets................................ 87,509 153,779 321,802 321,802
------------ ------------ ------------ ------------
Total current assets......................... 1,821,697 9,538,188 11,970,347 11,970,347
------------ ------------ ------------ ------------
Property and equipment, at cost:
Laboratory furniture, fixtures and equipment........ 1,867,903 2,209,222 2,443,448 2,443,448
Leasehold improvements.............................. 1,700,025 1,792,989 2,045,703 2,045,703
Office furniture, fixtures and equipment............ 174,061 268,254 274,786 274,786
------------ ------------ ------------ ------------
3,741,989 4,270,465 4,763,937 4,763,937
Less--Accumulated depreciation and amortization..... 1,053,149 1,962,009 (2,502,008) (2,502,008)
------------ ------------ ------------ ------------
2,688,840 2,308,456 2,261,929 2,261,929
Other assets.......................................... 27,526 27,526 551,772 551,772
------------ ------------ ------------ ------------
Total assets................................. $ 4,538,063 $11,874,170 $ 14,784,048 $ 14,784,048
============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.................................... $ 83,419 $ 118,018 $ 175,729 $ 175,729
Accrued expenses.................................... 647,481 1,044,080 1,908,891 1,908,891
Deferred revenue.................................... -- 261,250 2,425,000 2,425,000
Deferred rent, current portion...................... -- 104,357 221,051 221,051
Current portion of capital lease obligations........ 652,090 784,168 468,288 468,288
------------ ------------ ------------ ------------
Total current liabilities.................... 1,382,990 2,311,873 5,198,959 5,198,959
------------ ------------ ------------ ------------
Deferred rent, net of current portion................. 336,231 466,078 344,493 344,493
------------ ------------ ------------ ------------
Capital lease obligations, less current portion....... 1,246,998 763,621 778,436 778,436
------------ ------------ ------------ ------------
Commitments and contingencies (Notes 3, 7, 12 and 14)
Redeemable convertible preferred stock, $.01 par
value--
Authorized--21,667,199 shares
Issued and outstanding--13,148,149 shares at
December 31, 1995, 15,643,627 shares at December
31, 1996, 16,746,346 shares at June 30, 1997 and
no shares pro forma............................... 13,732,798 20,913,405 25,220,911 --
------------ ------------ ------------ ------------
Stockholders' equity (deficit):
Preferred stock $.01 par value--
Authorized--5,000,000 shares
Issued and outstanding--no shares................. -- -- -- --
Convertible preferred stock $.01 par value--
Authorized--2,250,000 shares
Issued and outstanding--1,000,000 shares at
December 31, 1995, 2,250,000 shares at December
31, 1996 and at June 30, 1997 and no shares pro
forma........................................... 10,000 22,500 22,500 --
Common stock, $.01 par value--
Authorized--25,000,000 shares
Issued and outstanding--1,041,099 shares at
December 31, 1995, 1,086,590 shares at December
31, 1996, 1,095,241 shares at June 30, 1997 and
6,183,176 shares pro forma...................... 10,411 10,866 10,952 61,831
Additional paid-in capital.......................... 3,121,267 8,710,149 8,720,235 33,912,767
Deficit accumulated during the development stage.... (15,302,632) (21,324,322) (25,512,438) (25,512,438)
------------ ------------ ------------ ------------
Total stockholders' equity (deficit)......... (12,160,954) (12,580,807) (16,758,751) 8,462,160
------------ ------------ ------------ ------------
Total liabilities and stockholders' equity
(deficit).................................. $ 4,538,063 $11,874,170 $ 14,784,048 $ 14,784,048
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 70
LEUKOSITE, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED INCEPTION
YEAR ENDED DECEMBER 31, JUNE 30, (MAY 1, 1992)
--------------------------------------- ------------------------- THROUGH
1994 1995 1996 1996 1997 JUNE 30, 1997
----------- ----------- ----------- ----------- ----------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Corporate collaborations.... $ -- $ 250,000 $ 3,591,000 $ 523,500 $ 2,070,024 $ 5,911,024
Government grants........... -- 200,000 82,770 -- 205,422 488,192
----------- ----------- ----------- ----------- ----------- ------------
Total revenues...... -- 450,000 3,673,770 523,500 2,275,446 6,399,216
----------- ----------- ----------- ----------- ----------- ------------
Operating expenses:
Research and development.... 5,055,447 7,051,287 8,502,187 3,924,628 5,451,437 27,641,324
General and
administrative........... 726,084 865,311 1,370,538 495,274 735,562 4,289,842
----------- ----------- ----------- ----------- ----------- ------------
Total operating
expenses.......... 5,781,531 7,916,598 9,872,725 4,419,902 6,186,999 31,931,166
----------- ----------- ----------- ----------- ----------- ------------
Loss from
operations........ (5,781,531) (7,466,598) (6,198,955) (3,896,402) (3,911,553) (25,531,950)
Interest income............... 205,735 219,510 378,924 172,139 294,794 1,098,963
Interest expense.............. (58,215) (229,665) (201,659) (109,157) (83,357) (591,451)
----------- ----------- ----------- ----------- ----------- ------------
Net loss............ $(5,634,011) $(7,476,753) $(6,021,690) $(3,833,420) $(3,700,116) $ (25,024,438)
=========== =========== =========== =========== =========== ============
Pro forma net loss per common
share....................... $ (1.04) $ (.59)
=========== ===========
Shares used in computing pro
forma net loss per common
share....................... 5,770,089 6,290,299
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 71
LEUKOSITE, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
CONVERTIBLE SERIES A
PREFERRED STOCK COMMON STOCK COMMON STOCK
---------------------- --------------------- --------------------- ADDITIONAL
NUMBER $.01 NUMBER $.01 NUMBER $.01 PAID-IN
OF SHARES PAR VALUE OF SHARES PAR VALUE OF SHARES PAR VALUE CAPITAL
---------- --------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
ISSUANCE OF COMMON STOCK................ -- $ -- -- $ -- 804,878 $ 8,049 $ (7,629)
Net loss.............................. -- -- -- -- -- -- --
--------- ------- -------- ------- --------- ------- ----------
BALANCE, DECEMBER 31, 1992.............. -- -- -- -- 804,878 8,049 (7,629)
Issuance of common stock.............. -- -- -- -- 121,951 1,220 3,780
Conversion of common stock to Series A
common stock........................ -- -- 804,878 8,049 (804,878) (8,049) --
Preferred stock warrants issued in
connection with lease obligations... -- -- -- -- -- -- 35,000
Net loss.............................. -- -- -- -- -- -- --
--------- ------- -------- ------- --------- ------- ----------
BALANCE, DECEMBER 31, 1993.............. -- -- 804,878 8,049 121,951 1,220 31,151
Issuance of Series C convertible
preferred stock, net of issuance
costs of $47,691.................... 1,000,000 10,000 -- -- -- -- 2,942,309
Exercise of stock options............. -- -- -- -- 9,451 94 1,344
Preferred stock warrants issued in
connection with lease obligations... -- -- -- -- -- -- 55,500
Net loss.............................. -- -- -- -- -- -- --
--------- ------- -------- ------- --------- ------- ----------
BALANCE, DECEMBER 31, 1994.............. 1,000,000 10,000 804,878 8,049 131,402 1,314 3,030,304
Conversion of Series A common stock to
common stock........................ -- -- (804,878) (8,049) 893,782 8,938 88,450
Exercise of stock options............. -- -- -- -- 15,915 159 2,513
Net loss.............................. -- -- -- -- -- -- --
--------- ------- -------- ------- --------- ------- ----------
BALANCE, DECEMBER 31, 1995.............. 1,000,000 10,000 -- -- 1,041,099 10,411 3,121,267
Issuance of Series E convertible
preferred stock, net of issuance
costs of $40,434.................... 1,250,000 12,500 -- -- -- -- 4,947,066
Exercise of stock options............. -- -- -- -- 45,491 455 31,816
Value ascribed to guaranteed rate of
return on redeemable convertible
preferred stock..................... -- -- -- -- -- -- 610,000
Net loss.............................. -- -- -- -- -- -- --
--------- ------- -------- ------- --------- ------- ----------
BALANCE, DECEMBER 31, 1996.............. 2,250,000 22,500 -- -- 1,086,590 10,866 8,710,149
Exercise of stock options
(unaudited)......................... -- -- -- -- 8,651 86 10,086
Net loss (unaudited).................. -- -- -- -- -- -- --
Accretion of redeemable convertible
preferred stock dividends
(unaudited)......................... -- -- -- -- -- -- --
--------- ------- -------- ------- --------- ------- ----------
BALANCE, JUNE 30, 1997 (UNAUDITED)...... 2,250,000 22,500 -- -- 1,095,241 10,952 8,720,235
Conversion of convertible preferred
stock (unaudited)................... (2,250,000) (22,500) -- -- 548,780 5,488 17,012
Conversion of redeemable convertible
preferred stock (unaudited)......... -- -- -- -- 4,539,155 45,391 25,175,520
--------- ------- -------- ------- --------- ------- ----------
PRO FORMA BALANCE, JUNE 30, 1997
(UNAUDITED)........................... -- $ -- -- $ -- 6,183,176 $61,831 $33,912,767
========= ======= ======== ======= ========= ======= ==========
<CAPTION>
DEFICIT
ACCUMULATED
DURING
DEVELOPMENT
STAGE TOTAL
------------ ------------
<S> <<C> <C>
ISSUANCE OF COMMON STOCK................ $ -- $ 420
Net loss.............................. (128,634) (128,634)
------------ ------------
BALANCE, DECEMBER 31, 1992.............. (128,634) (128,214)
Issuance of common stock.............. -- 5,000
Conversion of common stock to Series A
common stock........................ -- --
Preferred stock warrants issued in
connection with lease obligations... -- 35,000
Net loss.............................. (2,063,234) (2,063,234)
------------ ------------
BALANCE, DECEMBER 31, 1993.............. (2,191,868) (2,151,448)
Issuance of Series C convertible
preferred stock, net of issuance
costs of $47,691.................... -- 2,952,309
Exercise of stock options............. -- 1,438
Preferred stock warrants issued in
connection with lease obligations... -- 55,500
Net loss.............................. (5,634,011) (5,634,011)
------------ ------------
BALANCE, DECEMBER 31, 1994.............. (7,825,879) (4,776,212)
Conversion of Series A common stock to
common stock........................ -- 89,339
Exercise of stock options............. -- 2,672
Net loss.............................. (7,476,753) (7,476,753)
------------ ------------
BALANCE, DECEMBER 31, 1995.............. (15,302,632) (12,160,954)
Issuance of Series E convertible
preferred stock, net of issuance
costs of $40,434.................... -- 4,959,566
Exercise of stock options............. -- 32,271
Value ascribed to guaranteed rate of
return on redeemable convertible
preferred stock..................... -- 610,000
Net loss.............................. (6,021,690) (6,021,690)
------------ ------------
BALANCE, DECEMBER 31, 1996.............. (21,324,322) (12,580,807)
Exercise of stock options
(unaudited)......................... -- 10,172
Net loss (unaudited).................. (3,700,116) (3,700,116)
Accretion of redeemable convertible
preferred stock dividends
(unaudited)......................... (488,000) (488,000)
------------ ------------
BALANCE, JUNE 30, 1997 (UNAUDITED)...... (25,512,438) (16,758,751)
Conversion of convertible preferred
stock (unaudited)................... -- --
Conversion of redeemable convertible
preferred stock (unaudited)......... -- 25,220,911
------------ ------------
PRO FORMA BALANCE, JUNE 30, 1997
(UNAUDITED)........................... $(25,512,438) $ 8,462,160
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 72
LEUKOSITE, INC.
(A DEVELOPEMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS INCEPTION
YEAR ENDED DECEMBER 31, ENDED JUNE 30, (MAY 1, 1992)
---------------------------------------- ------------------------- THROUGH
1994 1995 1996 1996 1997 JUNE 30, 1997
----------- ----------- ------------ ----------- ----------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss............................ $(5,634,011) $(7,476,753) $ (6,021,690) $(3,833,420) $(3,700,116) $(25,024,438)
Adjustments to reconcile net loss to
net cash used in operating
activities--
Stock compensation expense........ 86,058 3,281 -- -- -- 89,339
Depreciation and amortization..... 261,249 774,146 908,860 450,000 539,999 2,491,784
Changes in operating assets and
liabilities--
Other current assets.......... (124,143) 76,530 (66,270) (57,923) (168,023) (321,802)
Accounts payable and accrued
expenses.................... 1,139,006 (809,953) 431,198 35,567 922,522 2,651,322
Deferred revenue.............. -- -- 261,250 511,250 2,163,750 2,425,000
Deferred rent................. 27,407 308,824 234,204 118,576 (4,891) 565,544
----------- ----------- ------------ ----------- ----------- ------------
Net cash used in operating
activities.............. (4,244,434) (7,123,925) (4,252,448) (2,775,950) (246,759) (17,123,251)
----------- ----------- ------------ ----------- ----------- ------------
Cash flows from investing activities:
(Increase) decrease in marketable
securities........................ (2,000,171) 2,000,171 (4,953,902) (3,759,041) (74,472) (5,028,374)
Purchases of property and
equipment......................... (974,502) (40,283) (184,549) (22,797) (405,981) (2,192,541)
Decrease (increase) in other
assets............................ 7,500 (436) -- -- (524,246) (551,772)
----------- ----------- ------------ ----------- ----------- ------------
Net cash provided by (used
in) investing
activities.............. (2,967,173) 1,959,452 (5,138,451) (3,781,838) (1,004,699) (7,772,687)
----------- ----------- ------------ ----------- ----------- ------------
Cash flows from financing activities:
Principal payments on capital
leases............................ (148,588) (558,280) (695,226) (311,006) (388,556) (1,790,650)
Net proceeds from notes payable..... -- -- -- -- -- 2,086,312
Proceeds from redeemable convertible
preferred stock, net of issuance
costs............................. 6,907,860 1,950,908 7,790,607 4,851,717 3,819,506 23,256,599
Exercise of stock options........... 1,438 2,672 32,271 23,075 10,172 51,973
Issuance of convertible preferred
stock, net of issuance costs...... 2,952,309 -- 4,959,566 4,959,566 -- 7,911,875
----------- ----------- ------------ ----------- ----------- ------------
Net cash provided by
financing activities.... 9,713,019 1,395,300 12,087,218 9,523,352 3,441,122 31,516,109
----------- ----------- ------------ ----------- ----------- ------------
Net increase (decrease) in cash and
cash equivalents.................... $ 2,501,412 $(3,769,173) $ 2,696,319 $ 2,965,564 $ 2,189,664 $ 6,620,171
Cash and cash equivalents, beginning
of period........................... 3,001,949 5,503,361 1,734,188 1,734,188 4,430,507 --
----------- ----------- ------------ ----------- ----------- ------------
Cash and cash equivalents, end of
period.............................. $ 5,503,361 $ 1,734,188 $ 4,430,507 $ 4,699,752 $ 6,620,171 $ 6,620,171
=========== =========== ============ =========== =========== ============
Supplemental cash flow information:
Cash paid during the period for
interest.......................... $ 51,887 $ 193,197 $ 201,659 $ 109,158 $ 83,357 $ 805,066
=========== =========== ============ =========== =========== ============
Supplemental disclosure of noncash
investing and financing activities:
Property and equipment purchased
under capital lease obligations... $ 1,614,765 $ 435,301 $ 343,927 $ 70,143 $ 87,491 $ 2,811,174
=========== =========== ============ =========== =========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 73
LEUKOSITE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(1) THE COMPANY
LeukoSite, Inc. (the "Company") was incorporated on May 1, 1992. The
Company is engaged in the development of a new class of proprietary
immunomodulatory therapeutics for the treatment of inflammatory and autoimmune
diseases.
The Company is in the development stage and is devoting substantially all
of its efforts toward product research and development and raising capital.
Management anticipates that all future revenues will be derived from products
under development or those developed in the future. Principal risks to the
Company include the successful development and marketing of products to obtain
profitable operations, dependence on collaborative partners, the ability to
obtain adequate financing to fund future operations, United States Food and Drug
Administration clearance and regulation, dependence on key individuals and
competition from substitute products and larger companies.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Pro Forma Presentation
The unaudited pro forma consolidated balance sheet as of June 30, 1997
reflects the automatic conversion of all outstanding shares of redeemable
convertible preferred stock and convertible preferred stock into 5,087,935
shares of common stock (assuming an initial public offering price of $9.00 per
share) to occur upon the closing of the Company's proposed initial public
offering.
(b) Interim Financial Statements
The accompanying consolidated balance sheet as of June 30, 1997, the
consolidated statements of operations, cash flows for the six months ended June
30, 1996 and 1997 and for the period from inception (May 1, 1992) to June 30,
1997 and the consolidated statement of changes in stockholder equity (deficit)
for the period ended June 30, 1997 are unaudited, but, in the opinion of
management, have been prepared on a basis substantially consistent with the
audited financial statements and include all adjustments, consisting of only
normal recurring adjustments, necessary for a fair presentation of the results
of these interim periods. The results of the six months ended June 30, 1997 are
not necessarily indicative of the results to be expected for the entire year.
(c) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiary. All material intercompany accounts
and transactions have been eliminated in consolidation.
(d) Cash Equivalents and Marketable Securities
The Company accounts for cash equivalents and marketable securities under
Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for
Certain Investments in Debt and Equity Securities. Under SFAS No. 115,
investments for which the Company has the positive intent and ability to hold to
maturity, consisting of cash equivalents and marketable securities, are reported
at amortized
F-7
<PAGE> 74
LEUKOSITE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
cost, which approximates fair market value. Cash equivalents are highly liquid
investments with original maturities of less than three months. Marketable
securities consist of government agency securities with original maturities of
greater than three months. The average maturity of the Company's marketable
securities was approximately 6.3 months at June 30, 1997.
(e) Depreciation and Amortization
The Company provides for depreciation and amortization using the
straight-line method by charges to operations in amounts estimated to allocate
the cost of property and equipment over their estimated useful lives as follows:
<TABLE>
<CAPTION>
ESTIMATED
ASSET CLASSIFICATION USEFUL LIVES
------------------------------------------------------- -------------
<S> <C>
Laboratory furniture, fixtures and equipment........... 4-5 Years
Leasehold improvements................................. Life of lease
Office furniture, fixtures and equipment............... 4-5 Years
</TABLE>
(f) Revenue Recognition
Substantially all of the Company's revenues are derived from corporate
collaborative research arrangements and government grants. Corporate
collaboration revenues and government grants are recognized on a straight-line
basis over the period of the contract, which approximates when work is performed
and costs are incurred. License fee revenue represents technology transfer fees
received for rights to certain technology of the Company. License fees are
recognized as revenue as earned. Deferred revenue represents payments received
in advance of revenue recognition.
(g) Research and Development
All research and development costs are expensed as incurred. Research and
development expenses in the accompanying consolidated statements of operations
include funded and unfunded expenses.
(h) Disclosure of Fair Value of Financial Instruments
The Company's financial instruments consist mainly of cash and cash
equivalents, marketable securities, accounts payable and redeemable convertible
preferred stock. The carrying amounts of these financial instruments approximate
fair value due to the short-term nature of these instruments.
(i) Pro Forma Net Loss per Common Share
Pro forma net loss per common share is based on the pro forma weighted
average number of common and common equivalent shares outstanding during the
period, assuming the automatic conversion of all outstanding shares of
redeemable convertible preferred stock and convertible preferred stock into
5,087,935 shares of common stock to occur upon the consummation of the Company's
proposed initial public offering. Pursuant to the requirements of the Securities
and Exchange Commission Staff Accounting Bulletin No. 83, common and common
equivalent shares issued during the 12 months immediately prior to the date of
the initial filing of the Company's registration statement have been included in
the calculation of weighted average number of common shares outstanding for all
periods presented using the treasury stock method and the proposed initial
F-8
<PAGE> 75
LEUKOSITE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
public offering price of $9.00 per share. Historical net loss per share has not
been presented as it is not meaningful.
(3) RESEARCH, LICENSE AND CONSULTING AGREEMENTS
The Company has entered into various research, license and consulting
agreements to support its research and development activities. These agreements
generally expire over several years. Certain of such agreements contain
provisions for future royalties to be paid on sales of products developed under
the agreements. The Company also has commitments to fund research and
development under arrangements discussed in Notes 7 and 14.
Future minimum commitments under research, license and consulting
agreements at December 31, 1996 are approximately as follows:
<TABLE>
<S> <C>
1997.............................................. $457,000
1998.............................................. 70,000
</TABLE>
(4) WARNER-LAMBERT AGREEMENTS
The Company and Warner-Lambert Company (Warner) have entered into research,
development and marketing agreements to share expertise in the discovery and
development of compounds that inhibit the action of MCP-1 and IL-8 and to
research and market applications thereof.
The agreement for developing the MCP-1 technology was executed in September
1994 and amended in July 1995 (the MCP-1 Agreement). Under the MCP-1 Agreement,
the Company and Warner are working to screen and select compounds for further
development. In conjunction with the MCP-1 Agreement, Warner agreed to purchase
preferred stock at a predetermined share price and to fund a portion of the
Company's research expenses for the next three years. Warner purchased
$5,000,000 of Series E convertible preferred stock in 1996.
The agreement for developing the IL-8 technology was executed in July 1995
(the IL-8 Agreement). Under the IL-8 Agreement, the Company and Warner are
working to screen and select compounds for further development. In connection
with the IL-8 Agreement, Warner paid the Company $250,000 for the grant of a
license to the technology and made a $1 million equity investment in the Series
G preferred stock in March 1997.
The Company receives quarterly research funding under the MCP-1 and IL-8
Agreements. As of June 30, 1997, the Company had received $1,285,000 in research
support under the MCP-1 and IL-8 Agreements. The MCP-1 and IL-8 Agreements also
contain milestone payments payable to the Company beginning upon the designation
of a product candidate for development. In addition, under the MCP-1 and IL-8
Agreements, Warner will pay royalties as a percentage of sales, as defined, for
certain products developed under the agreements. Warner has waived its
antidilution rights relating to the Series C, E and G preferred stock it holds
in exchange for a credit against future royalties, if any become payable, under
the MCP-1 and IL-8 Agreements and the Kyowa Hakko Kogyo Agreement discussed in
Note 6. Assuming an initial public offering price of $9.00 per share, the
approximate amount of such credit is $2,050,000. The MCP-1 and IL-8 Agreements
can be terminated by either party with six months' written notice or for cause,
as defined.
F-9
<PAGE> 76
LEUKOSITE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(5) ROCHE BIOSCIENCE AGREEMENT
In July 1996, the Company entered into an agreement with Roche Bioscience
(Roche) for the development of a drug to block the binding of eotoxin. As part
of this agreement, Roche will make payments to the Company in the form of
licensing fees, research support and milestone payments and royalties on
world-wide sales of products resulting from the collaboration. As of June 30,
1997, the Company had received $4,125,000, in licensing and research support
payments from Roche. Roche will be responsible for preclinical and clinical
development of products and will have worldwide exclusive rights to market
products.
(6) KYOWA HAKKO KOGYO AGREEMENT
In April 1997, the Company entered into a collaboration agreement with
Kyowa Hakko Kogyo (Kyowa) to discover and develop small molecule antagonists and
monoclonal antibody drugs to CXCR3 and CCR1. Kyowa will have exclusive rights to
develop and market products resulting from this collaboration in Japan and Asia
and has an option for rights in the rest of the world. The Company is entitled
to research support and payments and milestones, as well as royalties based on
net sales, as defined. As of June 30, 1997, the Company has received $3,000,000
of research funding of which the Company has deferred recognizing as revenue
$2,250,000.
(7) ILEX AGREEMENT
In May 1997, the Company and Ilex Oncology, Inc. (Ilex) entered into a
joint venture whereby the parties formed a limited partnership to develop and
commercialize LDP-03 for the treatment of chronic lymphocytic leukemia, pursuant
to an agreement of limited partnership and a license agreement between the
Company/Ilex partnership and the Company. The partners are required to make
contributions each time the partnership requires working capital. The
development and commercialization activities of the joint venture will be
managed with equal control by each party. The Company and Ilex will generally
share equally in profits from the sales of LDP-03 and in all future research,
development, clinical and commercialization costs. The Company and Ilex estimate
that research, development and clinical costs will be approximately $10.0
million over the next two years. The joint venture expires in 2017, but provides
for either company, under certain circumstances, to purchase the other company's
ownership of the joint venture upon a change in control of such company (as
defined therein) or after October 2, 2000. In addition, in the event that one
party is unable or unwilling to fulfill its funding obligations to the joint
venture, then in certain circumstances, the party that funds the joint venture
shall gain control of the management of the joint venture, subject to certain
catch-up rights of the other party.
(8) CAPITAL LEASE
In 1993, the Company entered into a master lease agreement for the sale and
leaseback or lease of up to $2,250,000 of laboratory and office equipment and
leasehold improvements. At December 31, 1996, the Company had acquired
approximately $2,130,000 of laboratory and office equipment and leasehold
improvements under the lease agreement. The Company also has an obligation to
purchase $750,000 of leasehold improvements at the expiration of the lease term
for 15% of its original cost. The Company has issued warrants for the purchase
of 210,000 shares of Series A redeemable convertible preferred stock at an
exercise price of $1.00 per share to the lessors under the master lease
agreement (see Note 11(b)).
F-10
<PAGE> 77
LEUKOSITE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
In 1994, the Company entered into a second master equipment lease agreement
for the lease of up to $750,000 of laboratory and office equipment. At December
31, 1996, the Company had acquired approximately $730,000 of equipment under the
lease. The leased equipment reverts back to the lessor at the end of the lease
term or the Company may purchase all of the equipment for fair market value,
which will not be less than 10% or more than 20% of the cost of the equipment.
On January 18, 1996, this agreement was amended to provide an additional
$300,000 of lease availability. On March 14, 1997, the Company entered into
another lease agreement for the lease of up to $1,200,000 of laboratory and
office equipment of which $450,000 may be utilized for leasehold improvements.
As of June 30, 1997, $1,168,000 is available under this lease commitment.
Future minimum lease payments under these lease agreements at December 31,
1996 are as follows:
<TABLE>
<CAPTION>
AMOUNT
----------
<S> <C>
Year Ending December 31,
1997.............................................. $ 911,796
1998.............................................. 593,201
1999.............................................. 182,368
2000.............................................. 32,285
----------
Total..................................... 1,719,650
Less--Amount representing interest................ 171,861
----------
Present value of future lease payments.... 1,547,789
Less--Amounts due within one year................. 784,168
----------
Amounts due after one year................ $ 763,621
==========
</TABLE>
(9) CAPITAL STOCK
(a) Stock Split and Amendment to Charter
On June 23, 1997, the Company's Board of Directors approved a 1- for-4.10
reverse stock split of the Company's common stock and a change in the par value
of the Company's common stock to $.01 per share to take place upon the
effectiveness of the Company's proposed initial public offering. Accordingly,
all share and per share amounts of common stock for all periods presented have
been retroactively adjusted to reflect the reverse stock split and change in par
value. Upon completion of the Company's initial public offering, the Company
will be authorized to issue 25,000,000 shares of common stock, $.01 par value,
and 5,000,000 shares of preferred stock, $.01 par value.
(b) Series A Common Stock
On May 5, 1995, the Series A common stock automatically converted into
893,782 shares of common stock, which represented approximately 20% of the total
number of shares of common stock then outstanding on a fully-diluted basis. The
Company recognized a compensation charge of $89,339, which represents the fair
market value, as determined by the Company's Board of Directors, of the
additional shares issued on May 5, 1995.
F-11
<PAGE> 78
LEUKOSITE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(10) PREFERRED STOCK
(a) Redeemable Convertible Preferred Stock
As of June 30, 1997, the Company's Board of Directors authorized 21,667,199
shares of $.01 par value redeemable convertible preferred stock. As discussed in
Note 9(a), the Company's Board of Directors' approved an amendment to the
Company's charter that changes the authorized capital stock to take place upon
the effectiveness of the Company's proposed initial public offering.
Redeemable convertible preferred stock activity since inception is as
follows:
<TABLE>
<CAPTION>
SERIES A SERIES B SERIES D SERIES F
NUMBER CARRYING NUMBER CARRYING NUMBER CARRYING NUMBER
OF SHARES VALUE OF SHARES VALUE OF SHARES VALUE OF SHARES
---------- ---------- --------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of Series A preferred stock,
net of issuance costs of $125,970....... 5,000,000 $4,874,030 -- $ -- -- $ -- --
---------- ---------- --------- ---------- --------- ---------- ---------
Balance, December 31, 1993.............. 5,000,000 4,874,030 -- -- -- -- --
Issuance of Series A preferred stock,
net of issuance costs of $18,769........ 5,000,000 4,981,231 -- -- -- -- --
Issuance of Series B preferred stock,
net of issuance costs of $73,371........ -- -- 1,666,667 1,926,629 -- -- --
---------- ---------- --------- ---------- --------- ---------- ---------
Balance, December 31, 1994.............. 10,000,000 9,855,261 1,666,667 1,926,629 -- -- --
Issuance of Series D preferred stock,
net of issuance costs of $49,093........ -- -- -- -- 1,481,482 1,950,908 --
---------- ---------- --------- ---------- --------- ---------- ---------
Balance, December 31, 1995.............. 10,000,000 9,855,261 1,666,667 1,926,629 1,481,482 1,950,908 --
Issuance of Series F preferred stock,
net of issuance costs of $34,838........ -- -- -- -- -- -- 1,638,335
Issuance of Series G preferred stock,
net of issuance costs of $90,000........ -- -- -- -- -- -- --
Value ascribed to guaranteed rate of
return on redeemable convertible
preferred stock......................... -- -- -- -- -- -- --
---------- ---------- --------- ---------- --------- ---------- ---------
Balance, December 31, 1996.............. 10,000,000 9,855,261 1,666,667 1,926,629 1,481,482 1,950,908 1,638,335
Issuance of Series G preferred stock,
net of issuance costs of $40,000........ -- -- -- -- -- -- --
Accretion of redeemable convertible
preferred stock dividend................ -- -- -- -- -- -- --
---------- ---------- --------- ---------- --------- ---------- ---------
Balance, June 30, 1997.................. 10,000,000 $9,855,261 1,666,667 $1,926,629 1,481,482 $1,950,908 1,638,335
========== ========== ========= ========== ========= ========== =========
<CAPTION>
SERIES G
CARRYING NUMBER CARRYING
VALUE OF SHARES VALUE
---------- --------- ----------
<S> <C> <C> <C>
Issuance of Series A preferred stock,
net of issuance costs of $125,970....... $ -- -- $ --
---------- ------- ----------
Balance, December 31, 1993.............. -- -- --
Issuance of Series A preferred stock,
net of issuance costs of $18,769........ -- -- --
Issuance of Series B preferred stock,
net of issuance costs of $73,371........ -- -- --
---------- ------- ----------
Balance, December 31, 1994.............. -- -- --
Issuance of Series D preferred stock,
net of issuance costs of $49,093........ -- -- --
---------- ------- ----------
Balance, December 31, 1995.............. -- -- --
Issuance of Series F preferred stock,
net of issuance costs of $34,838........ 4,880,607 -- --
Issuance of Series G preferred stock,
net of issuance costs of $90,000........ -- 857,143 2,910,000
Value ascribed to guaranteed rate of
return on redeemable convertible
preferred stock......................... -- -- (610,000)
---------- ------- ----------
Balance, December 31, 1996.............. 4,880,607 857,143 2,300,000
Issuance of Series G preferred stock,
net of issuance costs of $40,000........ -- 1,102,719 3,819,506
Accretion of redeemable convertible
preferred stock dividend................ -- -- 488,000
---------- ------- ----------
Balance, June 30, 1997.................. $4,880,607 1,959,862 $6,607,506
========== ======= ==========
</TABLE>
F-12
<PAGE> 79
LEUKOSITE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
The rights and preferences of the redeemable convertible preferred stock
are as follows:
Voting
Preferred stockholders are entitled to the number of votes equal to the
number of shares of common stock into which each share of preferred stock is
then convertible.
Dividends
In certain events, including liquidation, dissolution or winding up of the
Company, the holders of Series A, Series B, Series D, Series F, and Series G
redeemable convertible preferred stock are entitled to $1.00, $1.20, $1.35,
$3.00, and $3.50 per share, respectively, plus 10% per annum per share, plus any
declared but unpaid dividends before any distribution may be made to other
stockholders. If the assets of the Company are insufficient to permit payment in
full to the holders of preferred stock, the assets of the Company which are
available for distribution shall be distributed in proportion to the full
preferential amount to which each such holder is entitled. Series A, Series B,
Series D, Series F, and Series G stockholders also are entitled to share ratably
in amounts available for distribution to Series C and Series E convertible
preferred and common stockholders subject to certain defined maximum amounts.
Conversion
Conversion is at the option of the holder and is mandatory upon an initial
public offering. Each share of preferred stock is convertible into .24390 share
of common stock at any time, subject to certain antidilutive adjustments. The
number of shares of common stock into which certain outstanding shares of Series
G would be converted into shall be the greater of (i) the Series G minimum
conversion shares and (ii) .24390. The Series G minimum conversion shares is
obtained by dividing the Series G original purchase price by the special
applicable conversion price. The special applicable conversion price shall mean
that if the closing of a designated public offering, as defined, occurs at any
time on or prior to the first anniversary of the original issuance date, an
amount equal to the designated offering price less a twenty-five percent (25%)
discount from such designated public offering price. The discount percentage
increases over time.
The Company also has a separate agreement with certain Series G
shareholders whereby their shares will be converted into common stock based on a
specific return on their original investment, as defined. The Company has
recorded the value attributed to the guaranteed rate of return as additional
paid in capital and will be accreting it as a preferred stock dividend over the
estimated period that the stock is outstanding. The Company has recorded
$488,000 of such accretion through June 30, 1997.
Redemption
At the request of the holders of a majority of each series, the Company
shall redeem up to 25% of the preferred stock commencing on January 1, 1998,
September 1, 1999, September 12, 2000, February 29, 2001 and December 20, 2001
for Series A, Series B, Series D, Series F and Series G, respectively. Each year
thereafter, upon the anniversary of the respective series' redemption date, up
to 25% of the remaining preferred stock may be redeemed, subject to certain
limitations. The redemption price per share for the Series A, Series B, Series
D, Series F and Series G shall be $1.00, $1.20, $1.35, $3.00 and $3.50,
respectively, plus all declared but unpaid dividends thereon.
F-13
<PAGE> 80
LEUKOSITE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
Right of First Refusal
The Company's Series A, B, D, F and G preferred stockholders have a right
of first refusal to purchase any new securities offered by the Company. In each
case, this right of first refusal terminates upon the closing of an initial
public offering of the Company's common stock.
Warrants
In connection with the issuance of the Company's Series G redeemable
convertible preferred stock, the Company granted warrants to purchase up to
7,317 shares of common stock. The total warrants issued and the exercise price
will be determined once the Company completes a designated public offering, as
defined, after December 20, 2000. The warrants shall become exercisable only if
the Company's initial public offering occurs after the fourth anniversary of the
first closing (December 20, 1996). If the Company's initial public offering
occurs on or prior to the fourth anniversary, the warrants shall become null and
void. The warrants are exercisable beginning on the later of (i) the date of the
first public offering, as defined, after December 20, 2000, or (ii) the date of
closing in connection with, or expiration of, the underwriters' overallotment
option in connection with the public offering. The warrants expire on the
earlier of (i) the date of closing of the first designated public offering, as
defined, provided the closing occurs on or prior to December 20, 2000, or (ii)
December 20, 2003.
(b) Convertible Preferred Stock
The Company's convertible preferred stock consists of the following:
In November 1994, the Company sold 1,000,000 shares of Series C convertible
preferred stock, which resulted in proceeds of $3,000,000.
In January 1996, the Company issued 625,000 shares of Series E convertible
preferred stock, which resulted in proceeds of $2,500,000.
In April 1996, the Company sold 625,000 shares of Series E convertible
preferred stock, which resulted in proceeds of $2,500,000.
The rights and preferences of the Company's Series C and Series E
convertible preferred stock are as follows:
Voting
The Company's Series C and E preferred stockholders are entitled to the
number of votes equal to the number of shares of common stock into which each
share of preferred stock is then convertible.
Dividends
The Company's Series C and E preferred stockholders are entitled to receive
dividends when and as declared by the Board of Directors.
Liquidation Rights
In certain events, including liquidation, dissolution or winding up of the
Company, the Company's Series C and Series E preferred stockholders are entitled
to $3.00 and $4.00 per share, respectively, plus any declared but unpaid
dividends before any distribution may be made to common stockholders. The
F-14
<PAGE> 81
LEUKOSITE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
Company's Series A, Series B, Series D and Series F redeemable convertible
preferred stockholders also share ratably in amounts available for distribution
to Series C and Series E convertible preferred and common stockholders subject
to certain defined maximums.
Conversion
Each share of the Company's Series C and E preferred stock is convertible
into .24390 share of common stock at any time, subject to certain antidilutive
adjustments. As discussed in Note 4, the Series C and E stockholders have waived
their antidilution rights in exchange for a credit against future royalties that
may become payable to the Company.
(11) STOCK OPTIONS AND WARRANTS
(a) Stock Options
The Company has adopted the 1993 Stock Option Plan (the "Plan") under which
it may grant both incentive stock options and nonstatutory stock options. The
Plan provides for the granting of options to purchase up to 1,500,000 shares of
common stock. As of June 30, 1997, 453,602 shares are available for future grant
under the Plan.
During 1993, the Company granted a stock option to purchase 135,000 shares
of Series A redeemable convertible preferred stock at $1.00 per share pursuant
to a stock restriction agreement with a consultant. Upon conversion of the
Series A redeemable convertible preferred stock into common stock as discussed
in Note 2(a), the option holder will be entitled to purchase 32,927 shares of
common stock at an exercise price of $4.10 per share. This option expires on the
earlier of November 2, 2003 or five years from the effective date of the
Company's initial public offering.
F-15
<PAGE> 82
LEUKOSITE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
The Company had the following common stock option activity from inception
(May 1, 1992) through June 30, 1997:
<TABLE>
<CAPTION>
OPTION
NUMBER OF PRICE WEIGHTED AVERAGE
SHARES PER SHARE EXERCISE PRICE
--------- ----------- ----------------
<S> <C> <C> <C> <C>
Balance, December 31, 1992.................. -- $ -- $ --
Granted................................... 256,707 .04- .62 .45
------- ------------ ------
Balance, December 31, 1993.................. 256,707 .04- .62 .45
Granted................................... 176,917 .04- .94 .90
Exercised................................. (9,451) .04- .62 .16
Canceled.................................. (3,659) .04- .72 .21
------- ------------ ------
Balance, December 31, 1994.................. 420,514 .04- .94 .66
Granted................................... 74,756 1.00- 1.19 1.07
Exercised................................. (15,915) .04- .94 .16
Canceled.................................. (10,579) .04- 1.00 .25
------- ------------ ------
Balance, December 31, 1995.................. 468,776 .04- 1.19 .74
Granted................................... 324,356 1.19- 6.15 5.37
Exercised................................. (45,491) .04- 1.19 .70
Canceled.................................. (15,212) .82- 5.13 2.30
------- ------------ ------
Balance, December 31, 1996.................. 732,429 .04- 6.15 2.75
Granted................................... 284,170 6.15- 7.18 6.81
Exercised................................. (8,651) .04- 5.13 1.72
Canceled.................................. (41,057) .70- 7.18 3.20
------- ------------ ------
Balance, June 30, 1997...................... 966,891 $ .04- 7.18 $ 3.89
======= ============ ======
Exercisable June 30, 1997................... 228,465 $ .04- 7.18 $ .70
======= ============ ======
</TABLE>
In October 1995, the Financial Accounting Standards Board (FASB) issued
SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No. 123 requires the
measurement of the fair value of stock options or warrants to be included in the
statement of operations or disclosed in the notes to financial statements. The
Company has determined that it will continue to account for stock-based
compensation for employees under Accounting Principles Board Opinion No. 25 and
elect the disclosure-only alternative under SFAS No. 123. The Company has
computed the pro forma disclosures required under SFAS No. 123 for options
granted in 1995 and 1996 using the Black-Scholes option pricing model prescribed
by SFAS No. 123. The weighted average assumptions used for the years ended
December 31, 1995 and 1996 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1996
----------- -----------
<S> <C> <C>
Risk free interest rate................................... 5.63%-7.79% 5.54%-6.83%
Expected dividend yield................................... 0% 0%
Expected life............................................. 7 Years 7 Years
Expected volatility....................................... 35% 35%
</TABLE>
The Black-Scholes option-pricing model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option-pricing models require the input of
highly subjective assumptions including expected stock price volatility.
F-16
<PAGE> 83
LEUKOSITE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
The total value of the options granted during the years ended 1995 and 1996
was computed as approximately $40,000 and $867,000, respectively. Of these
amounts approximately $4,000 and $99,000 would be charged to operations for the
years ended December 31, 1995 and 1996, respectively. The remaining amount would
be amortized over the related vesting periods. The resulting pro forma
compensation expense may not be representative of the amount to be expected in
future years as pro forma compensation expense may vary based upon the number of
options granted.
The pro forma net loss and pro forma net loss per common share presented
below have been computed assuming no tax benefit. The effect of a tax benefit
has not been considered since a substantial portion of the stock options granted
are incentive stock options and the Company does not anticipate a future
deduction associated with the exercise of these stock options. The pro forma
effect of SFAS No. 123 for the years ended December 31, 1995 and 1996 is as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------
1995 1996
--------------------------- ---------------------------
AS REPORTED PRO FORMA AS REPORTED PRO FORMA
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net loss...................... $(7,476,753) $(7,480,575) $(6,021,690) $(6,121,057)
=========== =========== =========== ===========
Pro forma net loss per common
share....................... $ (1.04) $ (1.06)
=========== ===========
</TABLE>
(b) Warrants
In conjunction with the Company's master lease agreement (see Note 8), the
Company issued warrants for the purchase of 210,000 shares of Series A
redeemable convertible preferred stock at an exercise price of $1.00 per share.
Upon conversion of the Series A redeemable convertible preferred stock into
common stock as discussed in Note 2(a), the warrantholder will be entitled to
purchase 51,220 shares of common stock at an exercise price of $4.10 per share.
The warrants are fully exercisable and expire on December 13, 2003 or five years
from the effective date of an initial public offering of stock by the Company,
whichever occurs first. The value assigned to the warrants, $90,500, is being
accounted for as debt discount and is being amortized over the lease period.
(12) OPERATING LEASE
In December 1994, the Company entered into an operating lease for its
office and research facilities. The lease expires in December 1999 with an
option to renew for two additional five-year terms. The Company has received
certain rent concessions during the initial term of the lease. Rent expense is
being recognized ratably over the term of the lease. Deferred rent included in
the accompanying consolidated balance sheet represents the difference between
cash paid to date and rent expense recognized to date. Rent expense for 1994,
1995 and 1996 amounted to approximately $329,000, $503,000 and $459,000,
respectively. Rent expense for the six months ended June 30, 1996 and 1997
amounted to approximately $222,000 and $236,000, respectively.
F-17
<PAGE> 84
LEUKOSITE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
Future minimum rental payments at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
AMOUNT
----------
<S> <C>
Year Ending December 31,
1997................................................. $ 592,000
1998................................................. 804,000
1999................................................. 717,000
----------
$2,113,000
==========
</TABLE>
(13) INCOME TAXES
The Company follows the provisions of SFAS No. 109, Accounting for Income
Taxes, whereby a deferred tax asset or liability is measured by the enacted tax
rates that would be in effect when any differences between the financial
statement and tax bases of assets or liabilities reverse. The Company has
elected to defer certain research and development costs as defined in the
Internal Revenue Code. As of December 31, 1996, the Company has available
deferred research and development costs of approximately $15,669,000, net
operating loss carryforwards of approximately $2,433,000 and research and
development credit carryforwards of approximately $500,000 to reduce future
federal income taxes, if any. The net operating loss and credit carryforwards
expire beginning in the year 2007 and are subject to review and possible
adjustment by the Internal Revenue Service. Due to the uncertainty related to
the realization of future tax return benefits of the deferred tax assets, a full
valuation allowance has been provided.
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Operating loss carryforwards................ $ 94,000 $ 973,000
Tax credit carryforwards.................... 357,000 500,000
Start-up costs.............................. 491,000 465,000
Development costs........................... 5,068,000 6,492,000
Nondeductible accruals...................... 70,000 191,000
Depreciation................................ 273,000 94,000
---------- ----------
6,353,000 8,715,000
Less--Valuation allowance................... 6,353,000 8,715,000
---------- ----------
$ -- $ --
========== ==========
</TABLE>
The United States Tax Reform Act of 1986 contains provisions that may limit
the Company's net operating loss and credit carryforwards available to be used
in any given year in the event of significant changes in the ownership interests
of significant stockholders. The Company has completed numerous financings since
its inception and has incurred ownership changes, as defined in the Tax Reform
Act of 1986. The Company believes that the ownership changes will not
significantly impact its ability to utilize its net operating loss and tax
credit carryforwards.
(14) LEUKOSITE (U.K.) LIMITED
In 1994, the Company formed a wholly owned subsidiary, LeukoSite U.K.
Limited ("LeukoSite UK"). LeukoSite UK was incorporated for the purpose of
entering into a research agreement to fund research activity in the United
Kingdom. An agreement has been established whereby LeukoSite UK will contribute
$3,000,000 towards funding the construction, equipping and the operations of a
F-18
<PAGE> 85
LEUKOSITE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
research center in the UK. The Company has paid and charged to operations
$1,750,000 of such commitment as of June 30, 1997, and the balance will be paid
in six-month intervals of $250,000 each. It is expected that the Company will
fund most of the cash requirements of LeukoSite UK.
(15) ACCRUED EXPENSES
Accrued expenses in the accompanying consolidated balance sheets consist of
the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996 1997
-------- ---------- ----------
<S> <C> <C> <C>
Payroll and payroll related............. $274,898 $ 338,441 $ 262,905
Consulting and contract research........ 153,631 314,595 428,101
Legal fees.............................. 17,903 62,832 303,852
Other................................... 201,049 328,212 914,033
-------- ---------- ----------
$647,481 $1,044,080 $1,908,891
======== ========== ==========
</TABLE>
(16) NEW ACCOUNTING STANDARD
In March, 1997, the Financial Accounting Standards Board issued SFAS No.
128, Earnings per Share. SFAS No. 128 is required for fiscal years ending after
December 15, 1997 and early adoption is not permitted. The adoption of SFAS No.
128 is not expected to have a material effect on the Company's net loss per
share.
F-19
<PAGE> 86
============================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH AN OFFER OR
SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM IT IS UNLAWFUL. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY OR THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary......................... 3
Risk Factors............................... 5
Use of Proceeds............................ 17
Dividend Policy............................ 17
Capitalization............................. 18
Dilution................................... 19
Selected Consolidated Financial Data....... 20
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 21
Business................................... 24
Management................................. 46
Certain Transactions....................... 54
Principal Stockholders..................... 56
Description of Capital Stock............... 58
Shares Eligible for Future Sale............ 61
Underwriting............................... 63
Legal Matters.............................. 64
Experts.................................... 64
Additional Information..................... 65
Index to Financial Statements.............. F-1
</TABLE>
------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
============================================================
============================================================
2,500,000 SHARES
[LOGO]
LEUKOSITE, INC.
COMMON STOCK
-------------------
PROSPECTUS
-------------------
HAMBRECHT & QUIST
UBS SECURITIES
, 1997
============================================================
<PAGE> 87
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Expenses of the Registrant in connection with the issuance and distribution
of the securities being registered, other than the underwriting discount and
commissions, are estimated as follows:
<TABLE>
<S> <C>
SEC Registration Fee.................................................... $ 8,713
NASD Fees............................................................... 3,375
Nasdaq National Market Listing Fees..................................... 43,000
Printing and Engraving Expenses......................................... 75,000
Legal Fees and Expenses................................................. 275,000
Accountants' Fees and Expenses.......................................... 75,000
Expenses of Qualification Under State
Securities Laws, Including Attorneys' Fees......................... 10,000
Transfer Agent and Registrar's Fees..................................... 10,000
Miscellaneous Costs..................................................... 99,912
--------
Total.............................................................. $600,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law empowers a Delaware
corporation to indemnify its officers and directors and certain other persons to
the extent and under the circumstances set forth therein.
The Restated Certificate of Incorporation and the Amended and Restated
By-Laws of the Company, copies of which are filed herein as Exhibit 3.3 and 3.4,
provide for advancement of expenses and indemnification of officers and
directors of the Registrant and certain other persons against liabilities and
expenses incurred by any of them in certain stated proceedings and under certain
stated conditions to the fullest extent permissible under Delaware law.
Section of the Underwriting Agreement between the Registrant and the
Underwriters, a copy of which is filed herein as Exhibit 1.1, will provide for
indemnification by the Registrant of the Underwriters and each person, if any,
who controls any Underwriter, against certain liabilities and expenses, as
stated therein, which may include liabilities under the Securities Act of 1933.
The Underwriting Agreement also provides that the Underwriters shall similarly
indemnify the Registrant, its directors, officers and controlling persons, as
set forth therein.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Described below is information regarding all unregistered securities of the
Company sold by the Company within the past three years. The share and per share
amounts set forth below have been adjusted to reflect the Company's one-for-4.1
reverse Common Stock split to occur prior to the consummation of this offering.
From its incorporation (May 1992) to June 1997, the Company has entered
into stock option agreements with certain employees, officers and consultants to
the Company pursuant to the Company's Amended and Restated 1993 Stock Option
Plan, as amended, covering approximately 1,046,619 shares of its Common Stock,
of which 79,508 shares of Common Stock have been issued by the Company upon
exercise of such stock options. The purchase price under the options is $0.041
to $7.175 based on the fair market value of the Common Stock on the date of
grant. These grants and sales
II-1
<PAGE> 88
were made in reliance upon Rule 701 promulgated under the Securities Act and are
deemed to be exempt transactions as sales of an issuer's securities pursuant to
a written plan or contract relating to the compensation of such individuals and
upon Section 4(2) of the Securities Act as transactions not involving any public
offering.
In June 1994, the Company issued and sold an aggregate of 5,000,000 shares
of Series A Convertible Preferred Stock (convertible into 1,219,512 shares of
Common Stock) at a purchase price of $1.00 per share ($4.10 per share on an
as-converted basis) to HealthCare Ventures III, L.P., HealthCare Ventures IV,
L.P., I.S. Partners, L.P. and Everest Trust. The issuance and sales of such
shares of Series A Convertible Preferred Stock were made in reliance upon Rule
506 of Regulation D promulgated under the Securities Act and Section 4(2) of the
Securities Act.
In September 1994, the Company issued and sold an aggregate of 1,666,667
shares of Series B Convertible Preferred Stock (convertible into 406,504 shares
of Common Stock) at a purchase price of $1.20 per share ($4.92 per share on an
as-converted basis) to Schroder Ventures International Life Science Fund L.P. 1,
Schroder Ventures International Life Science Fund L.P. 2, Schroder Ventures
International Life Sciences Trust, Schroders Incorporated, Schroder Venture
Managers Limited as investment manager for the Schroder Ventures International
Life Sciences Fund Co-Investment Scheme, I.S. Partners, L.P. and Everest Trust.
The issuance and sales of such shares of Series B Convertible Preferred Stock
were made in reliance upon Rule 506 of Regulation D promulgated under the
Securities Act and Section 4(2) of the Securities Act.
In November 1994, the Company issued and sold 1,000,000 shares of Series C
Convertible Preferred Stock (convertible into 243,902 shares of Common Stock) at
a purchase price of $3.00 per share ($12.30 per share on an as-converted basis)
to Warner-Lambert Company. The issuance and sale of such shares of Series C
Convertible Preferred Stock were made in reliance upon Section 4(2) of the
Securities Act.
In September 1995, the Company issued and sold an aggregate of 1,481,482
shares of Series D Convertible Preferred Stock (convertible into 361,337 shares
of Common Stock) at a purchase price of $1.35 per share ($5.54 per share on an
as-converted basis) to HealthCare Ventures III, L.P., HealthCare Ventures IV,
L.P., Schroder Ventures International Life Science Fund L.P. 1, Schroder
Ventures International Life Science Fund L.P. 2, Schroder Ventures International
Life Sciences Trust, Schroders Incorporated, Schroder Venture Managers Limited
as investment manager for the Schroder Ventures International Life Sciences Fund
Co-Investment Scheme, I.S. Partners, L.P., Everest Trust, Hudson Trust and
Francis H. Spiegel, Jr. The issuance and sales of such shares of Series D
Convertible Preferred Stock were made in reliance upon Rule 506 of Regulation D
promulgated under the Securities Act and Section 4(2) of the Securities Act.
In January 1996, the Company issued and sold 625,000 shares of Series E
Convertible Preferred Stock (convertible into 152,439 shares of Common Stock) at
a purchase price of $4.00 per share ($16.40 per share on an as-converted basis)
to Warner-Lambert Company. The issuance and sale of such shares of Series E
Convertible Preferred Stock were made in reliance upon Section 4(2) of the
Securities Act.
In February 1996, the Company issued and sold an aggregate of 910,188
shares of Series F Convertible Preferred Stock (convertible into 221,997 shares
of Common Stock) at a purchase price of $3.00 per share ($12.30 per share on an
as-converted basis) to HealthCare Ventures III, L.P., HealthCare Ventures IV,
L.P., I.S. Partners, L.P., Schroder Ventures International Life Science Fund
L.P. 1, Schroder Ventures International Life Science Fund L.P. 2, Schroder
Ventures International Life Sciences Trust, Schroders Incorporated, Schroder
Venture Managers Limited as investment manager for the Schroder Ventures
International Life Sciences Fund Co-Investment Scheme, I.S. Partners, L.P.,
Everest Trust, Hudson Trust, Francis H. Spiegel, Jr., Christopher T. Walsh and
Lombard Odier & Cie. The issuance and sales of such shares of Series F
Convertible Preferred Stock were made in reliance upon Rule 506 of Regulation D
promulgated under the Securities Act and Section 4(2) of the Securities Act.
II-2
<PAGE> 89
In April 1996, the Company issued and sold 625,000 shares of Series E
Convertible Preferred Stock (convertible into 152,439 shares of Common Stock) at
a purchase price of $4.00 per share ($16.40 per share on an as-converted basis)
to Warner-Lambert Company. The issuance and sale of such shares of Series E
Convertible Preferred Stock were made in reliance upon Section 4(2) of the
Securities Act.
In June 1996, the Company issued and sold an aggregate of 728,147 shares of
Series F Convertible Preferred Stock (convertible into 194,608 shares of Common
Stock) at a purchase price of $3.00 per share ($12.30 per share on an
as-converted basis) to HealthCare Ventures III, L.P., HealthCare Ventures IV,
L.P., I.S. Partners, L.P., Schroder Ventures International Life Science Fund
L.P. 1, Schroder Ventures International Life Science Fund L.P. 2, Schroder
Ventures International Life Sciences Trust, Schroders Incorporated, Schroder
Venture Managers Limited as investment manager for the Schroder Ventures
International Life Sciences Fund Co-Investment Scheme, I.S. Partners, L.P.,
Everest Trust, Hudson Trust, Christopher T. Walsh and Lombard Odier & Cie. The
issuance and sales of such shares of Series F Convertible Preferred Stock were
made in reliance upon Rule 506 of Regulation D promulgated under the Securities
Act and Section 4(2) of the Securities Act.
In December 1996, the Company sold 857,143 shares of Series G Convertible
Preferred Stock (convertible into 401,142 shares of Common Stock) at a purchase
price of $3.50 ($7.47 on an as-converted basis) to Roche Finance Ltd. If the
initial public offering price varies within the estimated range, the number of
shares of Common Stock issuable upon the conversion of the Preferred Stock is
subject to adjustment from a maximum of 451,284 shares of Common Stock (in the
event that the initial public offering price is $8.00 per share) to a minimum of
361,027 shares of Common Stock (in the event that the initial public offering
price is $10.00 per share). The pricing of this offering outside the estimated
range will further effect the number of shares of Common Stock into which the
Preferred Stock is convertible. The issuance and sales of such shares of Series
G Convertible Preferred Stock were made in reliance on Reg. Rule 506 of
Regulation D promulgated under the Securities Act and Section 4(2) of the
Securities Act.
In March through June 1997, the Company sold an aggregate of 1,102,719
shares of Series G Convertible Preferred Stock (convertible into 493,319 shares
of Common Stock) at a purchase price of $3.50 ($6.75 on an as-converted basis)
to a group of new and existing investors, including Schroder Ventures
International Life Sciences Fund L.P. 1, Schroder Ventures International Life
Sciences Fund L.P. 2, Schroder Ventures International Life Sciences Trust,
Schroders Incorporated, Schroder Ventures Managers Limited, as Investment
Manager for the Schroder Ventures International Life Sciences Fund Co-Investment
Scheme, S.R. One, Ltd., New Day Investment Partnership, L.P., WPG Life Sciences
Fund, L.P., WPG Institutional Life Sciences, L.P., Warner-Lambert Company, James
Cramer, Dr. Barbara Schildkrout, The Springer Family Trust and Daniel Kisner. If
the initial public offering price varies within the estimated range, the number
of shares of Common Stock issuable upon the conversion of the Preferred Stock is
subject to adjustment from a maximum of 546,273 shares of Common Stock (in the
event that the initial public offering price is $8.00 per share) to a minimum of
450,956 shares of Common Stock (in the event that the initial public offering
price is $10.00 per share). The pricing of this offering outside the estimated
range will further effect the number of shares of Common Stock into which the
Preferred Stock is convertible. The issuance and sales of such shares of Series
G Convertible Preferred Stock were made in reliance on Reg. Rule 506 of
Regulation D promulgated under the Securities Act and Section 4(e) of the
Securities Act.
No Underwriters were engaged in connection of any of foregoing sales of
securities.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBITS
- ---------
<C> <S>
**1.1 Proposed Form of Underwriting Agreement.
3.1 Restated Certificate of Incorporation of the Registrant.
</TABLE>
II-3
<PAGE> 90
<TABLE>
<CAPTION>
EXHIBITS
- ---------
<C> <S>
*3.2 Form of Certificate of Amendment to the Restated Certificate of Incorporation of
the Registrant (to be filed with the State of Delaware prior to the effectiveness
of the Registration Statement).
*3.3 Form of Restated Certificate of Incorporation of the Registrant (to be filed with
the State of Delaware upon the closing of the Offering).
*3.4 Amended and Restated By-Laws of the Registrant, as amended to date.
**4.1 Specimen certificate for shares of Common Stock.
*4.2 Description of Capital Stock (contained in the Restated Certificate of
Incorporation of the Registrant, filed as Exhibit 3.3).
**5 Opinion of Bingham, Dana & Gould LLP, with respect to the legality of the shares
being registered.
+*10.1 Consulting Agreement, dated January 22, 1993, between the Registrant and Timothy
Springer.
+*10.2 License Agreement, dated June 15, 1993, between the Registrant and the Center for
Blood Research, Inc.
+*10.3 License Agreement, dated as of January 2, 1995, between the Registrant and Stanford
University.
+*10.4 (a) The Research, Development and Marketing Agreement, dated September 30, 1994,
between the Registrant and Warner-Lambert Company, as amended by First Amendment to
the Research, Development and Marketing Agreement, dated as of July 1, 1995.
(b) The Research, Development and Marketing Agreement, dated July 1, 1995, between
the Registrant and Warner-Lambert Company.
+*10.5 License Agreement, dated March 15, 1995, between the Registrant and Lynxvale Ltd.
+*10.6 Service Agreement, dated as of March 9, 1995, between the Registrant and MRC
Collaborative Centre.
+*10.7 License Agreement, dated March 25, 1996, between the Registrant and Children's
Medical Center Corporation.
+*10.8 (a) License Agreement, dated January 31, 1996, between the Registrant and The
Imperial College of Science, Technology & Medicine, Imperial Exploitation Limited.
(b) Research Agreement, dated March 14, 1996, between the Registrant and The
Imperial College of Science, Technology & Medicine, Imperial Exploitation Limited.
+*10.9 Research Collaboration and License Agreement, dated July 12, 1996, between the
Registrant and Roche Bioscience.
+*10.10 Agreement for the construction and operation of a Therapeutic Antibody Centre
within the University of Oxford, dated October 6, 1994, among the University of
Oxford, The Medical Research Council, the Registrant and LeukoSite Limited.
+*10.11 License Agreement between the Registrant and British Technology Group Limited.
+*10.12 Letter Agreement, dated September 30, 1996, between the Registrant and The Wellcome
Foundation Limited.
+*10.13 Material Release Agreement, dated September 30, 1996, between the Registrant and
The Wellcome Foundation Limited.
+*10.14 Letter Agreement, dated October 7, 1996, between the Registrant and Warner-
Lambert/Parke-Davis.
+*10.15 Research Collaboration and License Agreement, dated April 24, 1997, between the
Registrant and Kyowa Hakko Kogyo Co. Ltd.
+*10.16 Agreement, dated September 25, 1996, between the Registrant and Oxford Asymmetry
Limited.
+*10.17 (a) Agreement of Limited Partnership of L&I Partners, L.P.
(b) License Agreement, dated May 2, 1997, between L&I Partners, L.P. and the
Registrant.
*10.18 Lease agreement for portion of 215 First Street, Cambridge, MA, dated June 8, 1994,
between the Registrant and Robert A. Jones and K. George Najarian, as Trustees for
Athenaeum Realty Nominee Trust.
*10.19 Master Lease Agreement, dated December 13, 1993, between the Registrant and
Comdisco, Inc.
</TABLE>
II-4
<PAGE> 91
<TABLE>
<CAPTION>
EXHIBITS
- ---------
<C> <S>
10.20 (a) Warrant, dated December 13, 1993, between the Registrant and Comdisco, Inc.
(b) Warrant, dated December 13, 1993, between the Registrant and Comdisco, Inc.
*10.21 Master Equipment Lease, dated as of October 3, 1994, between the Registrant and
Phoenix Leasing Incorporated.
*10.22 Senior Loan and Security Agreement, dated March 14, 1997, between the Registrant
and Phoenix Leasing Incorporated.
*10.23 Amended and Restated 1993 Stock Option Plan.
*10.24 1997 Employee Stock Purchase Plan.
*10.25 (a) Series C Convertible Preferred Stock Purchase Agreement, dated as of November
8, 1994, between the Registrant and Warner-Lambert Company.
(b) Series E Convertible Preferred Stock Purchase Agreement, dated as of January 3,
1996, between the Registrant and Warner-Lambert Company.
(c) Amendment, Modification and Conversion Agreement, dated June 26, 1997, between
the Registrant and Warner-Lambert Company.
*10.26 Second Amended and Restated Stockholders' Agreement, dated December 20, 1996, by
and among the Registrant and parties signatory thereto, as amended.
10.27 Deed of Assumption, dated June 16, 1997, among the University of Oxford, the
Medical Research Council, LeukoSite, Inc. and LeukoSite (U.K.) Limited.
10.28 Letter Agreement, dated June 26, 1997, between the Registrant and HealthCare
Ventures III, L.P. and HealthCare Ventures IV, L.P.
*11.1 Computation of Income Per Share.
*21.1 Subsidiary of the Registrant.
**23.1 Consent of Bingham, Dana & Gould LLP (included in Exhibit 5).
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Hamilton, Brook, Smith & Reynolds, P.C.
24.1 Power of Attorney (included in signature page to Registration Statement).
*27.1 Financial Data Schedule.
</TABLE>
- ------------------------------
* Previously filed.
** To be filed by amendment.
+ Confidential Treatment requested as to certain portions.
(b) Financial Statement Schedules:
All financial statement schedules have been omitted because either they are
not required, are not applicable, or the information is otherwise set forth in
the Financial Statements and notes thereto.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions described in Item 14 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-5
<PAGE> 92
The undersigned registrant hereby undertakes:
(1) To provide the Underwriters at the closing specified in the
Underwriting Agreement certificates in such denominations and registered in
such names as required by the Underwriters to permit prompt delivery to
each purchaser.
(2) That for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4), or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(3) That for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
II-6
<PAGE> 93
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Cambridge, Commonwealth
of Massachusetts, on this 11th day of July, 1997.
LEUKOSITE, INC.
By: /s/ CHRISTOPHER K. MIRABELLI
------------------------------------
Christopher K. Mirabelli
Chairman of the Board of Directors,
President and Chief Executive
Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby appoint each of
Christopher K. Mirabelli and Augustine Lawlor severally, acting alone and
without the other, his true and lawful attorney-in-fact with the authority to
execute in the name of each such person, any and all amendments (including
without limitation, post-effective amendments) to this Registration Statement on
Form S-1, to sign any and all additional registration statements relating to the
same offering of securities as this Registration Statement that are filed
pursuant to Rule 462(b) of the Securities Act, and to file such registration
statements with the Securities and Exchange Commission, together with any
exhibits thereto and other documents therewith, necessary or advisable to enable
the registrant to comply with the Securities Act, and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, which
amendments may make such other changes in the Registration Statement as the
aforesaid attorney-in-fact executing the same deems appropriate.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- ------------------------------------ --------------
<C> <S> <C>
/s/ CHRISTOPHER K. MIRABELLI Chairman of the Board of Directors, July 11, 1997
- ---------------------------------------- President and
Christopher K. Mirabelli Chief Executive Officer
(Principal Executive Officer)
* Vice President, Corporate July 11, 1997
- ---------------------------------------- Development and Chief
Augustine Lawlor Financial Officer (Principal
Financial and Accounting
Officer)
/s/ CATHERINE BINGHAM Director July 11, 1997
- ----------------------------------------
Catherine Bingham
* Director July 11, 1997
- ----------------------------------------
John W. Littlechild
* Director July 11, 1997
- ----------------------------------------
Martin Peretz
* Director July 11, 1997
- ----------------------------------------
Mark Skaletsky
* Director July 11, 1997
- ----------------------------------------
Dr. Christopher T. Walsh
</TABLE>
*By: /s/ CHRISTOPHER K. MIRABELLI
---------------------------------
Attorney-in-Fact
II-7
<PAGE> 94
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS
- ---------
<C> <S>
**1.1 Proposed Form of Underwriting Agreement.
3.1 Restated Certificate of Incorporation of the Registrant.
*3.2 Form of Certificate of Amendment to the Restated Certificate of Incorporation of
the Registrant (to be filed with the State of Delaware prior to the effectiveness
of the Registration Statement).
*3.3 Form of Restated Certificate of Incorporation of the Registrant (to be filed with
the State of Delaware upon the closing of the Offering).
*3.4 Amended and Restated By-Laws of the Registrant, as amended to date.
**4.1 Specimen certificate for shares of Common Stock.
*4.2 Description of Capital Stock (contained in the Restated Certificate of
Incorporation of the Registrant, filed as Exhibit 3.3).
**5 Opinion of Bingham, Dana & Gould LLP, with respect to the legality of the shares
being registered.
+*10.1 Consulting Agreement, dated January 22, 1993, between the Registrant and Timothy
Springer.
+*10.2 License Agreement, dated June 15, 1993, between the Registrant and the Center for
Blood Research, Inc.
+*10.3 License Agreement, dated as of January 2, 1995, between the Registrant and Stanford
University.
+*10.4 (a) The Research, Development and Marketing Agreement, dated September 30, 1994,
between the Registrant and Warner-Lambert Company, as amended by First Amendment to
the Research, Development and Marketing Agreement, dated as of July 1, 1995.
(b) The Research, Development and Marketing Agreement, dated July 1, 1995, between
the Registrant and Warner-Lambert Company.
+*10.5 License Agreement, dated March 15, 1995, between the Registrant and Lynxvale Ltd.
+*10.6 Service Agreement, dated as of March 9, 1995, between the Registrant and MRC
Collaborative Centre.
+*10.7 License Agreement, dated March 25, 1996, between the Registrant and Children's
Medical Center Corporation.
+*10.8 (a) License Agreement, dated January 31, 1996, between the Registrant and The
Imperial College of Science, Technology & Medicine, Imperial Exploitation Limited.
(b) Research Agreement, dated March 14, 1996, between the Registrant and The
Imperial College of Science, Technology & Medicine, Imperial Exploitation Limited.
+*10.9 Research Collaboration and License Agreement, dated July 12, 1996, between the
Registrant and Roche Bioscience.
+*10.10 Agreement for the construction and operation of a Therapeutic Antibody Centre
within the University of Oxford, dated October 6, 1994, among the University of
Oxford, The Medical Research Council, the Registrant and LeukoSite Limited.
+*10.11 License Agreement between the Registrant and British Technology Group Limited.
+*10.12 Letter Agreement, dated September 30, 1996, between the Registrant and The Wellcome
Foundation Limited.
+*10.13 Material Release Agreement, dated September 30, 1996, between the Registrant and
The Wellcome Foundation Limited.
+*10.14 Letter Agreement, dated October 7, 1996, between the Registrant and Warner-
Lambert/Parke-Davis.
+*10.15 Research Collaboration and License Agreement, dated April 24, 1997, between the
Registrant and Kyowa Hakko Kogyo Co. Ltd.
+*10.16 Agreement, dated September 25, 1996, between the Registrant and Oxford Asymmetry
Limited.
+*10.17 (a) Agreement of Limited Partnership of L&I Partners, L.P.
(b) License Agreement, dated May 2, 1997, between L&I Partners, L.P. and the
Registrant.
</TABLE>
<PAGE> 95
<TABLE>
<CAPTION>
EXHIBITS
- ---------
<C> <S>
*10.18 Lease agreement for portion of 215 First Street, Cambridge, MA, dated June 8, 1994,
between the Registrant and Robert A. Jones and K. George Najarian, as Trustees for
Athenaeum Realty Nominee Trust.
*10.19 Master Lease Agreement, dated December 13, 1993, between the Registrant and
Comdisco, Inc.
10.20 (a) Warrant, dated December 13, 1993, between the Registrant and Comdisco, Inc.
(b) Warrant, dated December 13, 1993, between the Registrant and Comdisco, Inc.
*10.21 Master Equipment Lease, dated as of October 3, 1994, between the Registrant and
Phoenix Leasing Incorporated.
*10.22 Senior Loan and Security Agreement, dated March 14, 1997, between the Registrant
and Phoenix Leasing Incorporated.
*10.23 Amended and Restated 1993 Stock Option Plan.
*10.24 1997 Employee Stock Purchase Plan.
*10.25 (a) Series C Convertible Preferred Stock Purchase Agreement, dated as of November
8, 1994, between the Registrant and Warner-Lambert Company.
(b) Series E Convertible Preferred Stock Purchase Agreement, dated as of January 3,
1996, between the Registrant and Warner-Lambert Company.
*10.26 Second Amended and Restated Stockholders' Agreement, dated December 20, 1996, by
and among the Registrant and parties signatory thereto, as amended.
10.27 Deed of Assumption, dated June 16, 1997, among the University of Oxford, the
Medical Research Council, LeukoSite, Inc. and LeukoSite (U.K.) Limited.
10.28 Letter Agreement, dated June 26, 1997, between the Registrant and HealthCare
Ventures III, L.P. and HealthCare Ventures IV, L.P.
*11.1 Computation of Income Per Share.
*21.1 Subsidiary of the Registrant.
**23.1 Consent of Bingham, Dana & Gould LLP (included in Exhibit 5).
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Hamilton, Brook, Smith & Reynolds, P.C.
24.1 Power of Attorney (included in signature page to Registration Statement).
*27.1 Financial Data Schedule.
</TABLE>
- ------------------------------
* Previously filed.
** To be filed by amendment.
+ Confidential Treatment requested as to certain portions.
<PAGE> 1
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
LEUKOSITE, INC.
LEUKOSITE, INC. (the "Corporation"), a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware (the
"General Corporation Law"), hereby certifies as follows:
FIRST: The name of the Corporation is LeukoSite, Inc. The Corporation was
originally incorporated under the name Leukon, Inc., and the original
Certificate of Incorporation of the Corporation was filed by the Corporation
with the Secretary of State of Delaware on May 1, 1992.
SECOND: This Restated Certificate of Incorporation (i) restates and
integrates and further amends the Restated Certificate of Incorporation of the
Corporation, as heretofore amended, (ii) was duly adopted in accordance with the
provisions of Sections 242 and 245 of the Delaware General Corporation Law and
(iii) was approved by written consent of the stockholders of the Corporation
given in accordance with the provisions of Section 228 of the Delaware General
Corporation Law (prompt notice of such action having been given to those
stockholders who did not consent in writing).
THIRD: The text of the Restated Certificate of Incorporation of the
Corporation, as heretofore amended, is hereby further restated and amended to
read in its entirety as follows:
ARTICLE I
Name
The name of the Corporation is LeukoSite, Inc.
ARTICLE II
Purpose
The Corporation is organized to engage in any lawful act or activity for
which a corporation may be organized under the General Corporation Law of the
State of Delaware.
ARTICLE III
Capital Stock
(a) Authorization. The total number of shares of all classes of stock
which the Corporation shall have authority to issue is 50,518,309 consisting
of 21,667,199 shares of Preferred Stock, par value $.0001 per share (the
"Preferred
<PAGE> 2
-2-
Stock"), and 28,851,110 shares of Common Stock, par value $.0001 per share (the
"Common Stock").
(b) The Preferred Stock may be issued in any number of series, including
without limitation the Series A Stock (as such term is defined in Section A.1),
the Series B Stock (as such term is defined in Section B.1), the Series C Stock
(as such term is defined in Section C.1), the Series D Stock (as such term is
defined in Section D.1), the Series E Stock (as such term is defined in Section
E.1), the Series F Stock (as such term is defined in Section F.1), the Series G
Stock (as such term is defined in Section G.1) and any other series designated
by the Board of Directors of the Corporation (the "Board of Directors") pursuant
to Section H.1, subject to Sections A.6, B.6, D.6, F.6 and G.6 hereof.
PART A. SERIES A CONVERTIBLE PREFERRED STOCK
A.1. Designation and Amount. The designation of this series of capital
stock shall be "Series A Convertible Preferred Stock," par value $.0001 per
share (the "Series A Stock"). The number of shares, powers, terms, conditions,
designations, preferences and privileges, relative, participating, optional and
other special rights, and qualifications, limitations and restrictions, if any,
of the Series A Stock shall be as set forth herein. The number of authorized
shares of the Series A Stock is 10,345,000.
A.2. Ranking. The Corporation's Series A Stock shall rank, as to dividends
and upon redemption and Liquidation (as defined in Section A.4(b) hereof), (x)
pari passu with the Series B Stock, the Series D Stock, the Series F Stock and
the Series G Stock, (y) senior and prior to the Series C Stock and the Series E
Stock (but, with respect to Liquidation, only to the extent provided in Section
A.4 below) and (z) senior and prior to the Corporation's Common Stock and to all
other classes or series of stock issued by the Corporation, except as otherwise
approved by the affirmative vote or consent of the holders of shares of Series A
Stock (the "Series A Stockholders") pursuant to Section A.6 hereof and (i) in
the case of a change in the relative ranking of the Series A Stock and the
Series B Stock, as otherwise approved by the affirmative vote or consent of the
holders of Series B Stock (the "Series B Stockholders") pursuant to Section B.6
hereof, (ii) in the case of a change in the relative ranking of the Series A
Stock and the Series D Stock, as otherwise approved by the affirmative vote or
consent of the holders of Series D Stock (the "Series D Stockholders") pursuant
to Section D.6 hereof, (iii) in the case of a change in the relative ranking of
the Series A Stock and the Series F Stock, as otherwise approved by the
affirmative vote or consent of the holders of Series F Stock (the "Series F
Stockholders") pursuant to Section F.6 hereof or (iv) in the case of a change in
the relative ranking of the Series A Stock and the Series G Stock, as otherwise
approved by the affirmative vote or consent of the holders of Series G Stock
(the "Series G Stockholders") pursuant to Section G.6 hereof; provided, however,
that, notwithstanding anything in this Restated Certificate to the contrary, the
ranking of the Series A Stock relative to any other class or series of capital
stock of the Corporation (including, without limitation, the Series B Stock, the
Series C Stock, the
<PAGE> 3
-3-
Series D Stock, the Series E Stock, the Series F Stock, the Series G Stock and
the Common Stock) may be changed or altered so as to lower the ranking of the
Series A Stock relative to such other class or series with the approval by
affirmative vote or consent of the holders of at least sixty-six and two thirds
percent (66 2/3%) of the voting power of the Series A Stock then outstanding
(determined as set forth in the second sentence of Section A.6(a) hereof) and
without the vote or approval of such other class or series or any other class or
series of capital stock (including, without limitation, the Series B Stock, the
Series C Stock, the Series D Stock, the Series E Stock, the Series F Stock, the
Series G Stock and the Common Stock) being required to lower such ranking of the
Series A Stock.
A.3. Dividend Provisions.
A.3(a) The Series A Stockholders shall be entitled to receive, when and as
declared or paid by the Board of Directors on any shares of Series A Stock, out
of funds legally available for that purpose, dividends and distributions
(whether in cash, property or securities of the Corporation, including
subscription or other rights to acquire securities of the Corporation). Subject
to Section A.4(e)(ii) below, whenever any dividend may be declared or paid on
any shares of Series A Stock, the Board of Directors shall also declare and pay
a dividend on the same terms, at the same rate and in like kind upon each other
share of the Series A Stock then outstanding. Whenever any dividend, whether in
cash or property or in securities of the Corporation (or subscription or other
rights to purchase or acquire securities of the Corporation), may be declared or
paid on: (i) subject to Section A.4(e)(ii) below, any shares of the Common
Stock, the Board of Directors shall also declare and pay a dividend on the same
terms, at the same rate and in like kind upon each share of the Series A Stock
then outstanding so that all outstanding shares of Series A Stock will
participate in such dividend ratably with such shares of Common Stock
(calculated as provided in Section A.3(b) hereof); or (ii) subject to Section
A.4(e)(ii) below, any shares of any other series of Preferred Stock, the Board
of Directors shall also declare and pay a dividend on the same terms, at the
same or equivalent rate (based on the number of shares of Common Stock into
which such other series of Preferred Stock is then convertible, if applicable,
or, otherwise, the relative liquidation preference per share, as compared with
the Series A Stock then outstanding) and in like kind upon each share of Series
A Stock then outstanding, so that all Series A Stock will participate in such
dividend ratably with such shares of such other series of Preferred Stock.
A.3(b) In connection with any dividend declared or paid hereunder (other
than a dividend declared or paid only in respect of shares of Series A Stock and
in accordance with Section A.3(a) above), each share of Series A Stock shall be
deemed to be that number of shares (including fractional shares) of Common Stock
into which it is then convertible, rounded up to the nearest one-thousandth of a
share. No fractional shares of capital stock shall be issued as a dividend
hereunder. The Corporation shall pay a cash adjustment for any such fractional
interest in an amount equal to the fair market value thereof on the last
Business Day (as defined in Section
<PAGE> 4
-4-
J.3 hereof) immediately preceding the date for payment of dividends, as
determined by the Board of Directors in good faith.
A.4. Liquidation Rights.
A.4(a) With respect to rights on Liquidation, the Series A Stock shall
rank (x) pari passu with the Series B Stock, the Series D Stock, the Series F
Stock and the Series G Stock, (y) senior and prior to the Series C Stock and the
Series E Stock (but only to the extent provided in this Section A.4) and (z)
senior and prior to the Corporation's Common Stock and to all other classes or
series of stock issued by the Corporation, except as otherwise approved by the
affirmative vote or consent of the Series A Stockholders pursuant to Section A.6
hereof and (i) in the case of a change in the relative ranking upon Liquidation
of the Series A Stock and the Series B Stock, as otherwise approved by the
affirmative vote or consent of the Series B Stockholders pursuant to Section B.6
hereof, (ii) in the case of a change in the relative ranking upon Liquidation of
the Series A Stock and the Series D Stock, as otherwise approved by the
affirmative vote or consent of the Series D Stockholders pursuant to Section D.6
hereof, (iii) in the case of a change in the relative ranking upon Liquidation
of the Series A Stock and the Series F Stock, as otherwise approved by the
affirmative vote or consent of the Series F Stockholders pursuant to Section F.6
hereof or (iv) in the case of a change in the relative ranking upon Liquidation
of the Series A Stock and the Series G Stock, as otherwise approved by the
affirmative vote or consent of the Series G Stockholders pursuant to Section G.6
hereof; provided, however, that, notwithstanding anything in this Restated
Certificate to the contrary, the ranking upon Liquidation of the Series A Stock
relative to any other class or series of capital stock of the Corporation
(including, without limitation, the Series B Stock, the Series C Stock, the
Series D Stock, the Series E Stock, the Series F Stock, the Series G Stock and
the Common Stock) may be changed or altered so as to lower such ranking of the
Series A Stock relative to such other class or series with the approval by
affirmative vote or consent of the holders of at least sixty-six and two thirds
percent (66 2/3%) of the voting power of the Series A Stock then outstanding
(determined as set forth in the second sentence of Section A.6(a) hereof) and
without the vote or approval of such other class or series or any other class or
series of capital stock (including, without limitation, the Series B Stock, the
Series C Stock, the Series D Stock, the Series E Stock, the Series F Stock, the
Series G Stock and the Common Stock) being required to lower such ranking of the
Series A Stock.
A.4(b) Subject to Section A.4(e)(ii) hereof, in the event of any
liquidation, dissolution or winding-up of the affairs of the Corporation (each,
a "Liquidation"), the Series A Stockholders shall be entitled to receive out of
the assets of the Corporation legally available for distribution to its
stockholders, whether from capital, surplus or earnings, pari passu with the
rights of the Series B Stockholders, the Series D Stockholders, the Series F
Stockholders and the Series G Stockholders to receive payment of their
liquidation preference pursuant to Section B.4(b), Section D.4(b), Section
F.4(b) and Section G.4(b) hereof, respectively, but before any payment
<PAGE> 5
-5-
shall be made to the holders of Series C Stock, Series E Stock, Common Stock or
any other class or series of stock ranking on Liquidation junior to such Series
A Stock, an amount per share equal to the Series A Original Purchase Price (as
defined in Section J.36 hereof), plus 10% per annum thereon, compounded
annually, for each share of Series A Stock from the Series A Liquidation Premium
Original Issuance Date (as defined in Section J.35 hereof) until the date of
Liquidation, plus, in each case, an amount equal to any declared but unpaid
dividends thereon pursuant to Section A.3(a) hereof.
A.4(c) Subject to Sections A.4(e)(ii), B.4(e)(ii), D.4(e)(ii), F.4(e)(ii)
and G.4(e)(ii) hereof, if, upon any Liquidation, the assets of the Corporation
available for distribution to its stockholders shall be insufficient to pay the
Series A Stockholders the full amount as to which each of them shall be entitled
pursuant to Section A.4(b) above and to pay to the Series B Stockholders, the
Series D Stockholders, the Series F Stockholders and the Series G Stockholders
the full amount as to which each of them shall be entitled pursuant to Section
B.4(b), Section D.4(b), Section F.4(b) and Section G.4(b) hereof, respectively,
then the Series A Stockholders, the Series B Stockholders, the Series D
Stockholders, the Series F Stockholders and the Series G Stockholders shall
share ratably in any distribution of assets according to the respective amounts
which would be payable to them in respect of the shares of Series A Stock,
Series B Stock, Series D Stock, Series F Stock and/or Series G Stock, as the
case may be, held upon such distribution if all amounts payable on or with
respect to such shares were paid in full.
A.4(d) Subject to Sections A.4(e)(ii), B.4(e)(ii), D.4(e)(ii), F.4(e)(ii)
and G.4(e)(ii) hereof, in the event of any Liquidation, after payment shall have
been made to (i) the Series A Stockholders, the Series B Stockholders, the
Series D Stockholders, the Series F Stockholders and the Series G Stockholders
of the full amount to which they shall be entitled pursuant to Sections A.4(b),
B.4(b), D.4(b), F.4(b) and G.4(b) hereof, respectively, (ii) the holders of any
series or class of Preferred Stock ranking, as to dividends and upon
Liquidation, pari passu with the Series A Stock, the Series B Stock, the Series
D Stock, the Series F Stock or the Series G Stock (the "Other Parity Stock") of
the full amount to which they shall be entitled to receive on a parity with the
amounts referred to in clause (i) above and (iii) the Series C Stockholders (as
defined in Section J.64) and the Series E Stockholders (as defined in Section
J.85) of the full amount to which they shall be entitled pursuant to Sections
C.4(b) and E.4(b) hereof, respectively, then with respect to each other class or
series of capital stock (other than the Series C Stock, the Series E Stock and
the Common Stock) ranking on Liquidation junior to such Series A Stock (in
descending order of seniority), the Series A Stockholders, as a class, the
Series B Stockholders, as a class, the Series D Stockholders, as a class, the
Series F Stockholders, as a class, the Series G Stockholders, as a class, the
holders of Other Parity Stock (the "Other Parity Stockholders"), as a class, the
Series C Stockholders, as a class, and the Series E Stockholders, as a class,
shall be entitled to receive an amount equal (and in like kind) to the aggregate
preferential amount fixed for each such junior class or series of capital
<PAGE> 6
-6-
stock, which amount shall be distributed ratably among (i) the Series A
Stockholders in an equal amount per share of the Series A Stock then
outstanding, (ii) the Series B Stockholders in an equal amount per share of the
Series B Stock then outstanding, (iii) the Series D Stockholders in an equal
amount per share of the Series D Stock then outstanding, (iv) the Series F
Stockholders in an equal amount per share of the Series F Stock then
outstanding, (v) the Series G Stockholders in an equal amount per share of the
Series G Stock then outstanding, (vi) the Other Parity Stockholders in an equal
amount per share of the Other Parity Stock then outstanding, (vii) the Series C
Stockholders in an equal amount per share of the Series C Stock then outstanding
and (viii) the Series E Stockholders in an equal amount per share of the Series
E Stock then outstanding. If, upon any Liquidation, the assets of the
Corporation available for distribution to its stockholders shall be insufficient
to pay the Series A Stockholders, the Series B Stockholders, the Series D
Stockholders, the Series F Stockholders, the Series G Stockholders, the Other
Parity Stockholders, the Series C Stockholders, the Series E Stockholders and
each class or series of capital stock (other than the Series C Stock, the Series
E Stock and the Common Stock) junior to the Series A Stock the full amounts to
which they shall be entitled pursuant to the immediately preceding sentence, the
Series A Stockholders, the Series B Stockholders, the Series D Stockholders, the
Series F Stockholders, the Series G Stockholders, the Other Parity Stockholders,
the Series C Stockholders, the Series E Stockholders and each such other class
or series of capital stock shall share ratably in any distribution of assets
according to the respective preferential amounts fixed for the Series A Stock
(pursuant to this Section A.4(d)), the Series B Stock (pursuant to Section
B.4(d) hereof), the Series D Stock (pursuant to Section D.4(d) hereof), the
Series F Stock (pursuant to Section F.4(d) hereof), the Series G Stock (pursuant
to Section G.4(d) hereof), the Other Parity Stock (pursuant to the applicable
terms thereof), the Series C Stock (pursuant to Section C.4(d) hereof), the
Series E Stock (pursuant to Section E.4(d) hereof) and each such junior class or
series of capital stock (pursuant to the applicable terms thereof), which would
be payable in respect of the shares held by them upon such distribution if all
such preferential amounts payable on or with respect to such shares were paid in
full.
A.4(e)(i) Subject to Sections A.4(e)(ii), B.4(e)(ii), D.4(e)(ii),
F.4(e)(ii) and G.4(e)(ii) below, in the event of any Liquidation, after payment
shall have been made to the Series A Stockholders, the Series B Stockholders,
the Series D Stockholders, the Series F Stockholders, the Series G Stockholders,
the Other Parity Stockholders, the Series C Stockholders and the Series E
Stockholders of the full amount to which they shall be entitled as aforesaid,
and after payment shall have been made of the respective preferential amounts of
all other classes and series of capital stock ranking senior to the Common
Stock, the Series A Stockholders, the Series B Stockholders, the Series D
Stockholders, the Series F Stockholders, the Series G Stockholders, the Other
Parity Stockholders, the Series C Stockholders and the Series E Stockholders
shall be entitled to share ratably (calculated with respect to such Series A
Stock, Series B Stock, Series D Stock, Series F Stock, Series G Stock, Other
Parity Stock, Series C Stock and Series E Stock as provided in the next
sentence) with the
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holders of Common Stock (the "Common Stockholders") in all remaining assets of
the Corporation available for distribution to its stockholders. For purposes of
calculating the amount of any payment to be paid pursuant to this Section
A.4(e)(i) upon any such Liquidation, each share of Series A Stock, each share of
Series B Stock, each share of Series D Stock, each share of Series F Stock, each
share of Series G Stock, each share of Other Parity Stock, each share of Series
C Stock and each share of Series E Stock shall be deemed to be that number of
shares (including fractional shares) of Common Stock into which it is then
convertible, rounded to the nearest one-thousandth of a share.
A.4(e)(ii) Notwithstanding anything to the contrary set forth herein, in
no event shall the aggregate amount received in respect of each share of Series
A Stock (and any shares of capital stock or other securities issued in respect
thereof) pursuant to Section A.3 above, this Section A.4 and Section A.5 below
exceed an amount equal to the greater of (i) $4.00 for each such share, or (ii)
the aggregate amount of all payments made by the Corporation pursuant to any of
the provisions of this Restated Certificate of Incorporation (regardless of
whether such payments consist of dividends, payments made upon Liquidation or
any Special Liquidation or payments made upon any redemption pursuant to Section
A.5 hereof) in respect of all shares of its capital stock since November 5, 1993
multiplied by a fraction, the numerator of which equals the quotient of the
number of shares of Common Stock issuable upon conversion of the Series A Stock
then outstanding, rounded up to the nearest one-thousandth of a share, divided
by the number of shares of Series A Stock then outstanding, and the denominator
of which equals the sum of the number of shares of Common Stock then
outstanding, plus the number of shares of Common Stock issuable upon conversion
of the Series A Stock, the Series B Stock, the Series C Stock, the Series D
Stock, the Series E Stock, the Series F Stock, the Series G Stock and any Other
Parity Stock then outstanding, rounded up to the nearest one-thousandth of a
share.
A.4(f)(i) In the event of and simultaneously with the closing of an Event
of Sale (as hereinafter defined), the Corporation shall (unless waived pursuant
to Section A.4(f)(v) or otherwise prevented by law) redeem all of the shares of
Series A Stock then outstanding for a cash amount per share determined as set
forth herein (the "Series A Special Liquidation Price"), said redemption,
together with the redemption of all of the outstanding shares of Series B Stock,
Series C Stock, Series D Stock, Series E Stock, Series F Stock and Series G
Stock pursuant to Sections B.4(f), C.4(f), D.4(f), E.4(f), F.4(f) and G.4(f)
hereof, respectively, and of all outstanding shares of Other Parity Stock
pursuant to the applicable terms thereof, in the event of and simultaneously
with such closing being referred to herein as a "Special Liquidation". The
rights of the Series A Stockholders to receive the Series A Special Liquidation
Price pursuant to this Section A.4(f) shall be (x) pari passu with the rights of
the Series B Stockholders to receive the Series B Special Liquidation Price (as
defined in Section B.4(f)(i) hereof) pursuant to Section B.4(f) hereof, with the
rights of the Series D Stockholders to receive the Series D Special Liquidation
Price (as defined in Section
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D.4(f)(i) hereof) pursuant to Section D.4(f) hereof, with the rights of the
Series F Stockholders to receive the Series F Special Liquidation Price (as
defined in Section F.4(f)(i) hereof) pursuant to Section F.4(f) hereof, with the
rights of the Series G Stockholders to receive the Series G Special Liquidation
Price (as defined in Section G.4(f)(i) hereof) pursuant to Section G.4(f)
hereof, and with the rights of the Other Parity Stockholders to receive the
amount of their liquidation preference upon a Special Liquidation (the "Other
Parity Stock Special Liquidation Price") pursuant to the applicable terms of the
Other Parity Stock, and (y) senior and prior to the rights of the Series C
Stockholders to receive the Series C Special Liquidation Price (as defined in
Section C.4(f)(i) hereof) pursuant to Section C.4(f) and to the rights of the
Series E Stockholders to receive the Series E Special Liquidation Price (as
defined in Section E.4(f)(i) hereof) pursuant to Section E.4(f). For all
purposes of this Section A.4(f), the Series A Special Liquidation Price shall be
equal to that amount per share which would be received by each Series A
Stockholder if, in connection with an Event of Sale, all the consideration paid
in exchange for the assets or the shares of capital stock (as the case may be)
of the Corporation were actually paid to and received by the Corporation and the
Corporation were immediately thereafter liquidated and its assets distributed
pursuant to Sections A.4(a) through (e) hereof. To the extent that one or more
redemptions (as described in Section A.5 hereof) and a Special Liquidation are
occurring concurrently, the Special Liquidation shall be deemed to occur first.
The date upon which the Special Liquidation shall occur (which shall be the date
of the closing of the applicable Event of Sale) is sometimes referred to herein
as the "Special Liquidation Date".
A.4(f)(ii) At any time on or after the Special Liquidation Date, a Series
A Stockholder shall be entitled, subject to the provisions of Section
A.4(f)(iii) hereof, to receive the Series A Special Liquidation Price for each
such share of Series A Stock owned by such holder. Subject to the provisions of
Section A.4(f)(iii) hereof, payment of the Series A Special Liquidation Price
will be made upon actual delivery to the Corporation or its transfer agent of
the certificate representing such shares of Series A Stock.
A.4(f)(iii) If on the Special Liquidation Date less than all the shares of
Series A Stock, Series B Stock, Series D Stock, Series F Stock, Series G Stock,
Other Parity Stock, Series C Stock and Series E Stock then outstanding may be
legally redeemed by the Corporation, the Special Liquidation shall be effected
(x) first, with respect to such Series A Stock, Series B Stock, Series D Stock,
Series F Stock, Series G Stock and Other Parity Stock on a pro rata basis (based
upon the amounts which would be payable to the Series A Stockholders, the Series
B Stockholders, the Series D Stockholders, the Series F Stockholders and the
Series G Stockholders pursuant to this Section A.4(f), Section B.4(f), Section
D.4(f), Section F.4(f) and Section G.4(f) hereof, respectively, and to the Other
Parity Stockholders pursuant to the applicable terms of the Other Parity Stock,
upon a Special Liquidation if the Corporation had sufficient funds legally
available to effect a redemption of all outstanding shares of Series A Stock,
Series B Stock, Series D Stock, Series F Stock, Series G Stock and Other Parity
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Stock on the Special Liquidation Date) until all of the shares of Series A
Stock, Series B Stock, Series D Stock, Series F Stock, Series G Stock and Other
Parity Stock then outstanding are redeemed, and (y) second, with respect to such
Series C Stock and Series E Stock on a pro rata basis (based upon the amounts
which would be payable to each of the Series C Stockholders and Series E
Stockholders pursuant to Sections C.4(f) and E.4(f) hereof, respectively, upon a
Special Liquidation if the Corporation had sufficient funds legally available to
effect a redemption of all outstanding shares of Series C Stock and Series E
Stock on the Special Liquidation Date) if but only if, after the redemption of
all of the shares of Series A Stock, Series B Stock, Series D Stock, Series F
Stock, Series G Stock and Other Parity Stock outstanding immediately prior to
the Special Liquidation, the Corporation may legally redeem shares of Series C
Stock and Series E Stock.
A.4(f)(iv) On and after any Special Liquidation Date, all rights in
respect of the shares of Series A Stock redeemed shall cease and terminate
except the right to receive the applicable Series A Special Liquidation Price as
provided herein, and such shares of Series A Stock shall no longer be deemed to
be outstanding, whether or not the certificates representing such shares of
Series A Stock have been received by the Corporation; provided, however, that,
if the Corporation defaults in the payment of the Series A Special Liquidation
Price with respect to any Series A Stock, the rights of the holder(s) thereof
with respect to such shares of Series A Stock shall continue until the
Corporation cures such default.
A.4(f)(v) Anything contained herein to the contrary notwithstanding, the
rights of the Series A Stockholders under this Section A.4(f) may be waived by
the holders of a majority of the combined voting power of the shares of Series A
Stock, Series B Stock, Series D Stock, Series F Stock and Series G Stock then
outstanding, voting together as one class, by delivery of written notice of
waiver to the Corporation prior to the closing of any Event of Sale, in which
event the Corporation shall not redeem any shares of Series A Stock pursuant to
this Section A.4(f).
A.4(f)(vi) Any notice required to be given to the holders of shares of
Series A Stock pursuant to Section A.7(f) hereof in connection with an Event of
Sale shall include a statement by the Corporation of (A) the Series A Special
Liquidation Price which each Series A Stockholder shall be entitled to receive
pursuant to this Section A.4(f) upon the occurrence of a Special Liquidation
and (B) the extent to which the Corporation will, if at all, be legally
prohibited from paying each holder of Series A Stock the Series A Special
Liquidation Price.
A.4(f)(vii) For purposes of this Section A.4(f), Section B.4(f), Section
C.4(f), Section D.4(f), Section E.4(f), Section F.4(f) and Section G.4(f)
hereof, an "Event of Sale" shall mean (A) the merger or consolidation of the
Corporation with and into another corporation, partnership, joint venture, trust
or other entity, or the merger or consolidation of any corporation with and into
the Corporation (in which consolidation or merger the stockholders of the
Corporation receive distributions of
<PAGE> 10
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cash or securities as a result of such consolidation or merger in complete
exchange for their shares of capital stock of the Corporation) or (B) the sale
or other disposition of all or substantially all the assets of the Corporation
to any corporation, partnership, joint venture, trust, individual, group or
other entity; provided, however, that any such merger, consolidation or sale of
assets shall not be deemed an Event of Sale if, upon consummation of such
merger, consolidation or sale of assets, the holders of voting securities of the
Corporation immediately prior to such transaction continue to own directly or
indirectly not less than a majority of the voting power of the surviving
corporation.
A.5. Redemption.
A.5(a) At the request of the holder or holders of a majority of the shares
of Series A Stock then outstanding made at any date after January 1, 1998
(collectively, the "Series A Requesting Holders"), or at the request of the
holder or holders of a majority of the shares of Series B Stock then outstanding
made at any date after September 1, 1999 (collectively, the "Series B Requesting
Holders"), or at the request of the holder or holders of a majority of the
shares of Series D Stock then outstanding made at any date after September 12,
2000 (collectively, the "Series D Requesting Holders"), or at the request of the
holder or holders of a majority of the shares of Series F Stock then outstanding
made at any date after February 29, 2001, (collectively, the "Series F
Requesting Holders"), or at the request of the holder or holders of a majority
of the shares of Series G Stock then outstanding made at any date after December
20, 2001 (collectively, the "Series G Requesting Holders") (the Series A
Requesting Holders, the Series B Requesting Holders, the Series D Requesting
Holders, the Series F Requesting Holders and the Series G Requesting Holders
being referred to herein, collectively, as the "Requesting Holders" and,
individually, as a "Requesting Holder"), which request or requests shall be made
in writing and forwarded to the Corporation by first-class, certified mail,
return receipt requested, postage prepaid (collectively, the "Redemption
Requests" and, individually, a "Redemption Request"), the Corporation shall
redeem on the Redemption Date (as such term is defined in Section A.5(c)
hereof), unless otherwise prevented by law, at a redemption price per share
equal to the Original Purchase Price (as defined in Section J.20 hereof), plus
an amount equal to any declared but unpaid dividends thereon, up to twenty-five
percent (25%) of the Redeemable Stock (as defined in Section J.23 hereof) owned
of record by each Redeeming Holder (as defined in Section A.5(c) hereof) at the
time that such Redeeming Holder gives its Redemption Notice (as defined below)
to the Corporation, and in each subsequent year thereafter (upon the anniversary
of the Redemption Date) up to twenty-five percent (25%) of the Redeemable Stock
that was owned of record by such Redeeming Holder on the Redemption Date plus
that number of shares of Redeemable Stock that such Redeeming Holder could have
required the Corporation to have redeemed in the year or years following the
Redemption Date pursuant to this Section A.5(a) but elected not to have
redeemed. Notwithstanding any limitations specified in this Section A.5, in the
event that the Corporation at any time materially breaches any of its
representations, warranties, covenants and/or
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agreements set forth in the Stockholders' Agreement (as defined in Section J.112
hereof), the Series A Stock Purchase Agreement (as defined in Section J.42
hereof), the Series B Stock Purchase Agreement (as defined in Section J.53
hereof) and/or the Series D Stock Purchase Agreement (as defined in Section J.74
hereof), the Applicable Requesting Holders (as defined in Section J.1 hereof)
may elect, at their sole discretion, if any such material breach is not cured by
the later to occur of 15 days after receipt by the Corporation of notice of such
material breach or 30 days after the occurrence of such material breach, to
accelerate the maturity of their rights under this Section A.5 and immediately
redeem any or all of their shares of Redeemable Stock. Each Redeeming Holder
who desires to have any of the Redeemable Stock owned of record by such
Redeeming Holder redeemed shall specify in a written notice to the Corporation
the number of shares which the Redeeming Holder elects to redeem (a "Redemption
Notice"), in accordance with Section A.5(c) hereof. The total sum payable per
share of Redeemable Stock on the Redemption Date and/or on the subsequent
anniversaries of the Redemption Date, as the case may be, is hereinafter
referred to as the "Redemption Price," and the payment to be made on the
Redemption Date is hereinafter referred to as the "Redemption Payment."
A.5(b) On and after the Redemption Date, all rights of any Redeeming
Holder with respect to the shares of Redeemable Stock being redeemed by the
Corporation pursuant to Section A.5(a) above, except the right to receive the
Redemption Price per share of Redeemable Stock as hereinafter provided, shall
cease and terminate, and such shares of Redeemable Stock shall no longer be
deemed to be outstanding, whether or not the certificates representing such
shares have been received by the Corporation; provided, however, that,
notwithstanding anything to the contrary set forth herein, (A) if the
Corporation defaults in the payment of the Redemption Payment, the rights of the
Redeeming Holder with respect to such shares of Redeemable Stock shall continue
until the Corporation cures such default and (B) without limiting any other
rights of a Redeeming Holder, upon the occurrence of a subsequent Liquidation or
Event of Sale, with respect to the shares of Redeemable Stock in respect of
which no Redemption Payment has been received by a Redeeming Holder, such
Redeeming Holder shall be accorded the rights and benefits set forth in Section
A.4 hereof in respect of such remaining shares, as if no prior redemption
request had been made.
A.5(c) Each Redeeming Holder shall send its Redemption Notice pursuant to
this Section A.5 by first-class, certified mail, return receipt requested,
postage prepaid, to the Corporation at its principal place of business or to any
transfer agent of the Corporation. Within five (5) business days of receipt of
a Redemption Request, the Corporation shall notify in writing all other Series A
Stockholders, Series B Stockholders, Series D Stockholders, Series F
Stockholders and Series G Stockholders of the request by a Requesting Holder for
the redemption of Redeemable Stock (the "Corporation Notice"). If any other
Series A Stockholder, Series B Stockholder, Series D Stockholder, Series F
Stockholder or Series G Stockholder desires to have redeemed all or any portion
of the Redeemable Stock owned of record by such Series A
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Stockholder, Series B Stockholder, Series D Stockholder, Series F Stockholder or
Series G Stockholder, as the case may be, each such Series A Stockholder, Series
B Stockholder, Series D Stockholder, Series F Stockholder and/or Series G
Stockholder, as the case may be, shall send a Redemption Notice to the
Corporation postmarked within ten (10) business days after the receipt of the
Corporation Notice, and such Series A Stockholder, Series B Stockholder, Series
D Stockholder, Series F Stockholder and/or Series G Stockholder, as the case may
be (collectively, together with the Requesting Holders, the "Redeeming Holders"
and each individually a "Redeeming Holder"), shall be deemed to have elected to
redeem the number of shares of Redeemable Stock set forth in such Redeeming
Holder's Redemption Notice. On the twentieth (20th) business day following the
date upon which the Corporation shall have sent the Corporation Notice, the
Corporation shall pay each Redeeming Holder the applicable Redemption Price
pursuant to the terms of, and subject to the limitations set forth in, Section
A.5(a), provided that the Corporation or its transfer agent has received the
certificate(s) representing the shares of Redeemable Stock to be redeemed. Such
payment date shall be referred to herein as the "Redemption Date". Thereafter,
if any Series A Stockholder, Series B Stockholder, Series D Stockholder, Series
F Stockholder or Series G Stockholder that was not previously a Redeeming Holder
desires to have redeemed all or any portion of the Redeemable Stock owned of
record by such Series A Stockholder, Series B Stockholder, Series D Stockholder,
Series F Stockholder and/or Series G Stockholder, as the case may be, or any
prior Redeeming Holder desires to have redeemed additional shares of Redeemable
Stock that were not covered by a previous Redemption Notice, each such Series A
Stockholder, Series B Stockholder, Series D Stockholder, Series F Stockholder
and/or Series G Stockholder, as the case may be, or any prior Redeeming Holder,
as the case may be, shall send a Redemption Notice to the Corporation postmarked
at least twenty (20) business days prior to any anniversary of the Redemption
Date, and any such Series A Stockholder, Series B Stockholder, Series D
Stockholder, Series F Stockholder, Series G Stockholder and/or prior Redeeming
Holder, as the case may be, shall thereafter be deemed to be a Redeeming Holder.
On each anniversary of the Redemption Date following such timely notice, the
Corporation shall pay each such Redeeming Holder, together with each original
Redeeming Holder whose requested shares have not yet been fully redeemed, the
Redemption Price for the shares of Redeemable Stock requested to be redeemed,
subject to the twenty five percent (25%) limitation set forth in Section A.5(a)
hereof and pursuant to any other applicable terms set forth in Sections A.5(a)
and A.5(c) hereof. If, on the Redemption Date, less than all the shares of
Redeemable Stock requested to be redeemed may be legally redeemed by the
Corporation, the redemption of such Redeemable Stock shall be pro rata based
upon the total amount that would be paid by the Corporation to each Redeeming
Holder if all of the shares of Redeemable Stock requested to be redeemed by the
Redeeming Holders were so redeemed, subject to the twenty five percent (25%)
limitation set forth in Section A.5(a) hereof, if applicable, and any shares of
Redeemable Stock not redeemed shall be redeemed, at the holder's election, on
any date following such Redemption Date on which the Corporation may lawfully
redeem such shares, again subject to such twenty five percent (25%) limitation,
if applicable. The Corporation shall
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redeem (unless otherwise prevented by law and subject to the twenty five percent
(25%) limitation set forth in Section A.5(a) hereof, if applicable) the shares
of Redeemable Stock being redeemed by each Redeeming Holder on the Redemption
Date and the Corporation shall promptly advise each Redeeming Holder of such
Redemption Date or of the relevant facts applicable thereto preventing such
redemption. Upon redemption of only a portion of the number of shares covered
by a Redeemable Stock certificate, the Corporation shall issue and deliver to or
upon the written order of the holder of such Redeemable Stock certificate, at
the expense of the Corporation, a new certificate covering the number of shares
of the Redeemable Stock representing the unredeemed portion of the Redeemable
Stock certificate, which new certificate shall entitle the holder thereof to all
the rights, powers and privileges of a holder of such shares.
A.5(d) Shares of Redeemable Stock are not subject to or entitled to the
benefit of any sinking fund.
A.6. Voting.
A.6(a) In addition to any other rights provided for herein or by law, the
Series A Stockholders shall be entitled to vote, together with the Series B
Stockholders, the Series C Stockholders, the Series D Stockholders, the Series E
Stockholders, the Series F Stockholders, the Series G Stockholders and the
Common Stockholders, as one class, on all matters as to which Common
Stockholders shall be entitled to vote, in the same manner and with the same
effect as such Common Stockholders. In any such vote, each share of Series A
Stock shall entitle the holder thereof to the number of votes per share that
equals the number of shares of Common Stock (including fractional shares) into
which each such share of Series A Stock is then convertible, rounded up to the
nearest one-thousandth of a share.
A.6(b)(i) In addition to the rights specified in Section A.6(a), the
holders of a majority in voting power of the Series A Stock, voting as a
separate class, shall have the exclusive right to elect three (3) members of
the Board of Directors of the Corporation (the "Series A Preferred Directors").
In any election of Series A Preferred Directors pursuant to this Section
A.6(b), each Series A Stockholder shall be entitled to one vote for each share
of the Series A Stock held, and no Series A Stockholder shall be entitled to
cumulate its votes by giving one candidate more than one vote per share. The
exclusive voting rights of the Series A Stockholders, contained in this Section
A.6(b), may be exercised at a special meeting of the Series A Stockholders
called as provided in accordance with the By-laws of the Corporation, at any
annual or special meeting of the stockholders of the Corporation, or by written
consent of such Series A Stockholders in lieu of a meeting. The Series A
Preferred Directors elected pursuant to this Section A.6(b) shall serve from
the date of their election and qualification until their successors have been
duly elected and qualified.
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A.6(b)(ii) A vacancy in the directorships to be elected by the Series A
Stockholders, pursuant to Section A.6(b)(i), may be filled only by a vote at a
meeting called in accordance with the By-laws of the Corporation or written
consent in lieu of such meeting of (A) in the case of a vote of such Series A
Stockholders at a stockholders' meeting, the holders of at least a majority in
voting power of such Series A Stock, (B) in the case of written consent in lieu
of a meeting, the holders of at least a majority of the voting power of such
Series A Stock, or (C) the remaining director(s) elected by the Series A
Stockholders (or by the directors so elected).
A.6(c) The Corporation shall not, without the affirmative approval of the
holders of shares representing at least sixty-six and two-thirds percent (66
2/3%) of the voting power of the Series A Stock then outstanding (determined as
set forth in the second sentence of Section A.6(a) hereof), acting separately
from the holders of Series B Stock, Series C Stock, Series D Stock, Series E
Stock, Series F Stock, Series G Stock, Common Stock or any other securities of
the Corporation, given by written consent in lieu of a meeting or by vote at a
meeting called for such purpose, for which meeting timely and specific notice
shall have been given to each holder of Series A Stock, in the manner provided
in the By-laws of the Corporation: (i) authorize, designate, create, issue or
agree to issue any shares of Series A Stock other than those shares of Series A
Stock issued or issuable pursuant to the Series A Stock Purchase Agreement; (ii)
take any action to cause any amendment, alteration or repeal of any of the
provisions of this Restated Certificate of Incorporation (the "Restated
Certificate") or the By-laws of the Corporation, which amendment, alteration or
repeal adversely affects the powers, preferences or rights pertaining to the
Series A Stock, provided, however, that any such amendment, alteration or repeal
shall not require the separate class vote of the Series A Stock pursuant to this
Section A.6(c) to the extent that the effect thereof is to create an additional
class or series of Preferred Stock ranking pari passu with the Series A Stock,
the Series B Stock, the Series D Stock, the Series F Stock and the Series G
Stock as to dividends, upon Liquidation or redemption, or in any other respect;
or (iii) except for the issuance of capital stock or other securities
constituting shares of Excluded Stock (as defined in Section J.12 hereof),
authorize, designate, create, issue or agree to issue any equity security of the
Corporation ranking senior to the Series A Stock as to dividends, upon
Liquidation or redemption, or in any other respect, or any security, right,
option or warrant convertible into, or exercisable or exchangeable for, such
equity security of the Corporation.
A.6(d) The Corporation shall not, without the affirmative approval of the
holders of shares representing at least sixty-six and two-thirds percent (66
2/3%) of the combined voting power of the Series A Stock, the Series B Stock,
the Series D Stock, the Series F Stock and the Series G Stock then outstanding,
voting together as one class (which voting power shall be determined, in the
case of the Series A Stock, as set forth in the second sentence of Section
A.6(a) hereof, in the case of the Series B Stock, as set forth in the second
sentence of Section B.6(a) hereof, in the case of the Series D Stock, as set
forth in the second sentence of Section D.6(a) hereof, in the case of the
Series F Stock, as set forth in the second sentence of Section F.6(a) hereof,
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and in the case of the Series G Stock, as set forth in the second sentence
of Section G.6(a) hereof), given by written consent in lieu of a meeting or by
vote at a meeting called for such purpose, for which meeting timely and specific
notice shall have been given to each holder of Series A Stock, Series B Stock,
Series D Stock, Series F Stock and Series G Stock, in the manner provided in the
By-laws of the Corporation: (i) sell, abandon, transfer, lease or otherwise
dispose of all or substantially all of its properties or assets other than in
the ordinary course of its business; (ii) purchase, lease or otherwise acquire
all or substantially all of the assets of another entity; (iii) except as
otherwise required by this Restated Certificate of Incorporation and except to
the extent otherwise permitted in clause (iv) below, declare or pay any dividend
or make any distribution with respect to shares of its capital stock (whether in
cash, securities or property, but excluding any stock dividends or stock
splits); (iv) except as otherwise required by this Restated Certificate or in
any agreement approved by the Board of Directors with a director, officer,
employee, consultant or independent contractor of or to the Corporation
providing for the repurchase of any of its capital stock owned by such director,
officer, employee, consultant or independent contractor at the option of the
Corporation, provided that such agreements are (A) set forth on Schedule 5.2 to
the Series A Stock Purchase Agreement, Schedule 4.2 to the Series B Stock
Purchase Agreement, Schedule 4.2 to the Series D Stock Purchase Agreement,
Schedule 4.2 to the Series F Stock Purchase Agreement or Schedule 4.2 to the
Series G Securities Purchase Agreement or (B) entered into (1) pursuant to, and
upon the exercise of any outstanding stock option granted under the 1993 Stock
Option Plan of the Corporation (the "1993 Stock Option Plan") or any other stock
option plan which has been adopted by the Corporation and approved by the Board
of Directors and by the holders of at least 66 2/3% of the combined voting power
of the Series A Stock, Series B Stock, Series D Stock, Series F Stock and Series
G Stock then outstanding (including any outstanding shares of Common Stock
issued upon conversion thereof), voting together as one class, and (2) pursuant
to the forms of stock option agreements that have been approved by the Board of
Directors on or before the date of the Series A Stock Purchase Agreement or a
form of stock option agreement under the 1993 Stock Option Plan (or such other
plan) that is satisfactory in form and in substance, except for immaterial
changes thereto made from time to time by officers of the Corporation, to the
Board of Directors and to the holders of at least 66 2/3% of the combined voting
power of the Series A Stock, Series B Stock, Series D Stock, Series F Stock and
Series G Stock then outstanding (including any outstanding shares of Common
Stock issued upon conversion thereof), voting together as one class, make any
payment on account of the purchase, redemption or other retirement of any share
of capital stock of the Corporation, or distribute to Common Stockholders shares
of the Corporation's capital stock (other than Common Stock) or other securities
of other entities, evidences of indebtedness issued by the Corporation or other
entities, or other assets or options or rights (excluding options to purchase
and rights to subscribe for shares of Common Stock or the securities of the
Corporation convertible into or exchangeable for shares of Common Stock); (v)
merge or consolidate with and into, or permit any subsidiary to merge or
consolidate with and into, any other corporation, corporations or other entity
or entities; (vi) voluntarily dissolve, liquidate or wind-up or carry out any
partial
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liquidation or distribution or transaction in the nature of a partial
liquidation or distribution; (vii) except for the issuance of capital stock or
other securities constituting shares of Excluded Stock, authorize, designate,
create, issue or agree to issue any equity security of the Corporation or any
security, right, option or warrant convertible into, or exercisable or
exchangeable for, any such equity security of the Corporation or any debt
security or capitalized lease with an equity feature with respect to the capital
stock of the Corporation; (viii) adopt, amend or modify any stock option plan of
the Corporation; or (ix) accelerate the vesting schedule or exercise date or
dates of any such options or in any stock option agreement entered into between
the Corporation and its directors, officers, employees, consultants or
independent contractors, or amend or otherwise modify the Corporation's
repurchase rights with respect to any shares of the Corporation's stock issuable
pursuant to any restricted stock purchase agreement entered into between the
Corporation and its directors, officers, employees, consultants or independent
contractors.
A.7. Conversion.
A.7(a)(i) Any Series A Stockholder shall have the right, at any time
or from time to time, to convert any or all of its Series A Stock into that
number of fully paid and nonassessable shares of Common Stock for each share of
Series A Stock so converted equal to the quotient of the Series A Original
Purchase Price for such share divided by the Series A Conversion Price (as
defined in Section A.7(d) hereof) for such share, as last adjusted and then in
effect, rounded up to the nearest one-thousandth of a share; provided, however,
that cash shall be paid in lieu of the issuance of fractional shares of Common
Stock, as provided in Section A.7(c)(ii) hereof.
A.7(a)(ii) Any Series A Stockholder who exercises the right to
convert shares of Series A Stock into shares of Common Stock, pursuant to this
Section A.7, shall be entitled to payment of all declared but unpaid dividends
payable with respect to such Series A Stock pursuant to Section A.3(a) herein,
up to and including the Series A Conversion Date (as defined in Section
A.7(b)(ii) hereof).
A.7(b)(i) Any Series A Stockholder may exercise the right to convert
such shares into Common Stock pursuant to this Section A.7 by delivering to the
Corporation during regular business hours, at the office of the Corporation or
any transfer agent of the Corporation or at such other place as may be
designated by the Corporation, the certificate or certificates for the shares to
be converted (each a "Series A Preferred Certificate"), duly endorsed or
assigned in blank to the Corporation (if required by it).
A.7(b)(ii) Each Series A Preferred Certificate shall be accompanied
by written notice stating that such holder elects to convert such shares and
stating the name or names (with address) in which the certificate or
certificates for the shares of Common Stock are to be issued. Such conversion
shall be deemed to have been
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effected on the date when such delivery is made, and such date is referred to
herein as the "Series A Conversion Date."
A.7(b)(iii) As promptly as practicable thereafter, the Corporation shall
issue and deliver to or upon the written order of such holder, at the place
designated by such holder, a certificate or certificates for the number of full
shares of Common Stock to which such holder is entitled and a check or cash in
respect of any fractional interest in any shares of Common Stock, as provided
in Section A.7(c)(ii) hereof, payable with respect to the shares so converted
up to and including the Series A Conversion Date.
A.7(b)(iv) The person in whose name the certificate or certificates for
Common Stock are to be issued shall be deemed to have become a holder of record
of Common Stock on the applicable Series A Conversion Date, unless the transfer
books of the Corporation are closed on such Series A Conversion Date, in which
event the holder shall be deemed to have become the stockholder of record on
the next succeeding date on which the transfer books are open, provided that
the Series A Conversion Price shall be that Series A Conversion Price in effect
on the Series A Conversion Date.
A.7(b)(v) Upon conversion of only a portion of the number of shares
covered by a Series A Preferred Certificate, the Corporation shall issue and
deliver to or upon the written order of the holder of such Series A Preferred
Certificate, at the expense of the Corporation, a new certificate covering the
number of shares of the Series A Stock representing the unconverted number of
shares of Series A Stock represented by such Series A Preferred Certificate,
which new certificate shall entitle the holder thereof to all the rights,
powers and privileges of a holder of such shares.
A.7(c)(i) If a Series A Stockholder shall surrender more than one share
of Series A Stock for conversion at any one time, then the number of full
shares of Common Stock issuable upon conversion thereof shall be computed on
the basis of the aggregate number of shares of Series A Stock so surrendered.
A.7(c)(ii) No fractional shares of Common Stock shall be issued upon
conversion of Series A Stock. The Corporation shall pay a cash adjustment for
any such fractional interest in an amount equal to the Current Market Price
thereof on the Series A Conversion Date, as determined in accordance with
Section A.7(d)(vii) hereof.
A.7(d) For all purposes of this Section A.7, the "Series A Conversion
Price" with respect to the Series A Stock shall be equal to the Series A
Original Purchase Price with respect to each such share of Series A Stock,
subject to adjustment from time to time as follows:
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A.7(d)(i) If the Corporation shall, at any time or from time to time after
the Series A Conversion Price Original Issuance Date, issue any shares of Common
Stock (which term, for purposes of this Section A.7(d), including all
subsections thereof, shall be deemed to include all other securities convertible
into, or exchangeable or exercisable for, shares of Common Stock (including, but
not limited to, Series A Stock, Series B Stock, Series C Stock, Series D Stock,
Series E Stock, Series F Stock and Series G Stock) or options to purchase or
other rights to subscribe for such convertible or exchangeable securities, in
each case other than Excluded Stock (as hereinafter defined)), for a
consideration per share less than the applicable Series A Conversion Price in
effect immediately prior to the issuance of such Common Stock or other
securities, the Series A Conversion Price in effect immediately prior to each
such issuance shall automatically (except as otherwise provided in this Section
A.7(d)) be lowered to a price equal to the quotient obtained by dividing
(X) an amount equal to the sum of
(1) the total number of shares of Common Stock outstanding (including
any shares of Common Stock deemed outstanding after giving effect to the
provisions of Section A.7(d)(ii)(D) with respect to then outstanding
options or other rights to purchase or subscribe for Common Stock,
securities by their terms convertible into or exchangeable for Common Stock
(including, without limitation, the Series A Stock, Series B Stock, Series
C Stock, Series D Stock, Series E Stock, Series F Stock and Series G
Stock), or options to purchase or other rights to subscribe for such
convertible or exchangeable securities, in each case regardless of whether
any of such securities referred to in this clause (1) constitutes Excluded
Stock) immediately prior to such issuance multiplied by the Series A
Conversion Price in effect immediately prior to such issuance, plus
(2) the consideration received by the Corporation upon such issuance,
by
(Y) the total number of shares of Common Stock outstanding (including
any shares of Common Stock deemed outstanding after giving effect to the
provisions of Section A.7(d)(ii)(D) with respect to all outstanding options
or other rights to purchase or subscribe for Common Stock, securities by
their terms convertible into or exchangeable for Common Stock (including,
without limitation, the Series A Stock, Series B Stock, Series C Stock,
Series D Stock, Series E Stock, Series F Stock and Series G Stock), or
options to purchase or other rights to subscribe for such convertible or
exchangeable securities, in each case regardless
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of whether any of such securities constitutes Excluded Stock) immediately
after such issuance.
A.7(d)(ii) For the purposes of any adjustment of the Series A Conversion
Price pursuant to Section A.7(d)(i), the following provisions shall be
applicable:
A.7(d)(ii)(A) In the case of the issuance of Common Stock in whole or
in part for cash, the consideration shall be deemed to be the amount of cash
paid therefor after deducting therefrom any discounts, commissions or other
expenses allowed, paid or incurred by the Corporation for any underwriting or
otherwise in connection with the issuance and sale thereof, plus the value of
any property other than cash received by the Corporation, determined as provided
in Section A.7(d)(ii)(B) hereof, plus the value of any other consideration
received by the Corporation determined as set forth in Section A.7(d)(ii)(C)
hereof.
A.7(d)(ii)(B) In the case of the issuance of Common Stock for a
consideration in whole or in part in property other than cash, the value of such
property other than cash shall be deemed to be the fair market value of such
property as determined in good faith by the Board of Directors, irrespective of
any accounting treatment; provided, however, that such fair market value of such
property as determined by the Board of Directors shall not exceed the aggregate
Current Market Price (as defined in Section A.7(d)(vii) hereof) of the shares of
Common Stock being issued, less any cash consideration paid for such shares,
determined as provided in Section A.7(d)(ii)(A) hereof and less any other
consideration received by the Corporation for such shares, determined as set
forth in Section A.7(d)(ii)(C) hereof.
A.7(d)(ii)(C) In the case of the issuance of Common Stock for
consideration in whole or in part other than cash or property, the value of such
other consideration shall be deemed to be the fair market value of such other
consideration as determined in good faith by the Board of Directors,
irrespective of any accounting treatment; provided, however, that such fair
market value of such other consideration as determined by the Board of Directors
shall not exceed the aggregate Current Market Price of the shares of Common
Stock being issued, less any cash consideration paid for such shares, determined
as provided in Section A.7(d)(ii)(A) hereof and less the fair market value of
any property received by the Corporation for such shares, determined as set
forth in Section A.7(d)(ii)(B) hereof.
A.7(d)(ii)(D) In the case of the issuance of options or other rights
to purchase or subscribe for Common Stock, securities by their terms convertible
into or exchangeable for Common Stock or options to purchase or other rights to
subscribe for such convertible or exchangeable securities:
A.7(d)(ii)(D)(1) the aggregate maximum number of shares of
Common Stock deliverable upon exercise of such options to purchase or
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rights to subscribe for Common Stock (said maximum number of shares being
that set forth in the instrument relating to such options or rights to subscribe
for Common Stock without regard to any provision contained therein for a
subsequent adjustment of such number) shall be deemed to have been issued at the
time such options or rights were issued and for a consideration equal to the
consideration (determined in the manner provided in Sections A.7(d)(ii)(A), (B)
and (C) hereof), if any, received by the Corporation upon the issuance of such
options or rights plus the minimum purchase price provided in such options or
rights for the Common Stock covered thereby (the consideration in each case to
be determined in the manner provided in Sections A.7(d)(ii)(A), (B) and (C)
hereof);
A.7(d)(ii)(D)(2) the aggregate maximum number of shares of Common
Stock deliverable upon conversion of, or in exchange for, any such convertible
or exchangeable securities or upon the exercise of options to purchase or rights
to subscribe for such convertible or exchangeable securities and subsequent
conversion or exchange thereof (said maximum number of shares being that set
forth in the instrument relating to such convertible or exchangeable securities
without regard to any provision contained therein for a subsequent adjustment of
such number) shall be deemed to have been issued at the time such securities
were issued or such options or rights were issued and for a consideration equal
to the consideration received by the Corporation for any such securities and
related options or rights (excluding any cash received on account of accrued
interest or accrued dividends), plus the minimum additional consideration, if
any, to be received by the Corporation upon the conversion or exchange of such
securities or the exercise of any related options or rights (the consideration
in each case to be determined in the manner provided in Sections A.7(d)(ii)(A),
(B) and (C) hereof);
A.7(d)(ii)(D)(3) if there is any change in the exercise price of, or
number of shares deliverable upon exercise of, any such options or rights or
upon the conversion or exchange of any such convertible or exchangeable
securities (other than a change resulting from the anti-dilution provisions
thereof), then the Series A Conversion Price shall automatically be readjusted
in proportion to such change; and
A.7(d)(ii)(D)(4) upon the expiration of any such options or rights or
the termination of any such rights to convert or exchange such convertible or
exchangeable securities, the Series A Conversion Price shall be automatically
readjusted to the Series A Conversion Price that would have obtained had such
options, rights or convertible or exchangeable securities not been issued.
A.7(d)(ii)(E) Anything contained herein to the contrary notwithstanding,
the provisions of this Section A.7(d) may be waived in any instance by
the holders of a majority in voting power of the shares of Series A Stock then
outstanding, by delivery of a written notice of waiver to the Corporation.
<PAGE> 21
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A.7(d)(iii) If the number of shares of Common Stock outstanding at any
time after the Series A Conversion Price Original Issuance Date is increased by
a stock dividend payable in shares of Common Stock or by a subdivision or
split-up of shares of Common Stock, then, following the record date fixed for
the determination of holders of Common Stock entitled to receive such stock
dividend, subdivision or split-up, the Series A Conversion Price shall be
appropriately decreased so that the number of shares of Common Stock issuable
on conversion of each share of Series A Stock shall be increased in proportion
to such increase in outstanding shares.
A.7(d)(iv) If, at any time after the Series A Conversion Price Original
Issuance Date, the number of shares of Common Stock outstanding is decreased by
a combination of the outstanding shares of Common Stock, then, following the
record date for such combination, the Series A Conversion Price shall be
appropriately increased so that the number of shares of Common Stock issuable
on conversion of each share of Series A Stock shall be decreased in proportion
to such decrease in outstanding shares.
A.7(d)(v) In the event, at any time after the Series A Conversion Price
Original Issuance Date, of any capital reorganization, or any reclassification
of the capital stock of the Corporation (other than a change in par value or
from par value to no par value or from no par value to par value or as a result
of a stock dividend or subdivision, split-up or combination of shares), or the
consolidation or merger of the Corporation with or into another person (other
than consolidation or merger in which the Corporation is the continuing
corporation and which does not result in any change in the powers,
designations, preferences and rights, or the qualifications, limitations or
restrictions, if any, of the capital stock of the Corporation) or of the sale
or other disposition of all or substantially all the properties and assets of
the Corporation as an entirety to any other person (any such transaction, an
"Extraordinary Transaction"), then the Corporation shall provide appropriate
adjustment to the Series A Conversion Price with respect to each share of
Series A Stock outstanding after the effectiveness of such Extraordinary
Transaction (and excluding any Series A Stock redeemed pursuant to Section
A.4(f) hereof in connection therewith) such that each share of Series A Stock
outstanding immediately prior to the effectiveness of the Extraordinary
Transaction (other than the shares redeemed pursuant to Section A.4(f) hereof)
shall be convertible into the kind and number of shares of stock or other
securities or property of the Corporation, or of the corporation resulting from
or surviving such Extraordinary Transaction, that a holder of the number of
shares of Common Stock deliverable (immediately prior to the effectiveness of
the Extraordinary Transaction) upon conversion of such share of Series A Stock
would have been entitled to receive upon such Extraordinary Transaction. The
provisions of this Section A.7(d)(v) shall similarly apply to successive
Extraordinary Transactions.
A.7(d)(vi) All calculations under this Section A.7(d) shall be made to
the nearest one-thousandth of a cent ($.0001) or to the nearest one-thousandth
of a share, as the case may be.
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A.7(d)(vii) For the purpose of any computation pursuant to Section
A.7(c), B.7(c), B.7(d), C.6(c), C.6(d), D.7(c), D.7(d), E.6(c), E.6(d), F.7(c),
F.7(d), G.7(c) or G.7(d) hereof or this Section A.7(d), the Current Market
Price at any date of one share of Common Stock shall be deemed to be the
average of the daily closing prices for the 30 consecutive business days ending
on the fifth (5th) business day before the day in question (as adjusted for any
stock dividend, split-up, combination or reclassification that took effect
during such 30-business-day period) as follows:
A.7(d)(vii)(A) If the Common Stock is listed or admitted for trading on a
national securities exchange, then the closing price for each day shall be the
last reported sales price regular way or, in case no such reported sales took
place on such day, the average of the last reported bid and asked prices
regular way, in either case on the principal national securities exchange on
which the Common Stock is listed or admitted to trading.
A.7(d)(vii)(B) If the Common Stock is not at the time listed or admitted
for trading on any such exchange, then such price as shall be equal to the last
reported sale price, or if there is no such sale price, the average of the last
reported bid and asked prices, as reported by the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") on such day.
A.7(d)(vii)(C) If the Common Stock is not at the time quoted on the
NASDAQ, then such price shall be equal to the last reported bid and asked
prices on such day as reported by the National Quotation Bureau, Inc., or any
similar reputable quotation and reporting service, if such quotation is not
reported by the National Quotation Bureau, Inc.
A.7(d)(vii)(D) If the Common Stock is not traded in such manner that the
quotations referred to in this Section A.7(d)(vii) are available for the period
required hereunder, then the Current Market Price shall be the fair market
value of such share, as determined in good faith by a majority of the entire
Board of Directors.
A.7(d)(viii) In any case in which the provisions of this Section A.7(d)
shall require that an adjustment shall become effective immediately after a
record date for an event, the Corporation may defer until the occurrence of
such event (A) issuing to the holder of any share of Series A Stock converted
after such record date and before the occurrence of such event the additional
shares of capital stock issuable upon such conversion by reason of the
adjustment required by such event over and above the shares of capital stock
issuable upon such conversion before giving effect to such adjustment and (B)
paying to such holder any cash amounts in lieu of fractional shares pursuant to
Section A.7(c)(ii) hereof; provided, however, that the Corporation shall
deliver to such holder a due bill or other appropriate instrument
evidencing such holder's right to receive such additional shares, and such
cash, upon the occurrence of the event requiring such adjustment.
<PAGE> 23
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A.7(d)(ix) If a state of facts shall occur that, without being
specifically controlled by the provisions of this Section A.7, would not fairly
protect the conversion rights of the holders of the Series A Stock in
accordance with the essential intent and principles of such provisions, then
the Board of Directors shall make an adjustment in the application of such
provisions, in accordance with such essential intent and principles, so as to
protect such conversion rights.
A.7(e) Whenever the Series A Conversion Price shall be adjusted as
provided in Section A.7(d) hereof, the Corporation shall forthwith file and
keep on record at the office of the Secretary of the Corporation and at the
office of the transfer agent for the Series A Stock or at such other place as
may be designated by the Corporation, a statement, signed by its President or
Chief Executive Officer and by its Treasurer or Chief Financial Officer,
showing in detail the facts requiring such adjustment and the Series A
Conversion Price that shall be in effect after such adjustment. The
Corporation shall also cause a copy of such statement to be sent by
first-class, certified mail, return receipt requested, postage prepaid, to each
Series A Stockholder at such holder's address appearing on the Corporation's
records. Where appropriate, such copy shall be given in advance of any such
adjustment and shall be included as part of a notice required to be mailed
under the provisions of Section A.7(f) hereof.
A.7(f) In the event the Corporation shall propose to take any action of
the types described in Section A.7(d)(i), (iii), (iv) or (v) hereof, or any
other Event of Sale, the Corporation shall give notice to each Series A
Stockholder in the manner set forth in Section A.7(e) hereof, which notice
shall specify the record date, if any, with respect to any such action and the
date on which such action is to take place. Such notice shall also set forth
such facts with respect thereto as shall be reasonably necessary to indicate
the effect of such action (to the extent such effect may be known at the date
of such notice) on the Series A Conversion Price and the number, kind or class
of shares or other securities or property which shall be deliverable or
purchasable upon each conversion of Series A Stock. In the case of any action
that would require the fixing of a record date, such notice shall be given at
least 20 days prior to the record date so fixed, and in the case of any other
action, such notice shall be given at least 30 days prior to the taking of such
proposed action.
A.7(g) The Corporation shall pay all documentary, stamp or other
transactional taxes attributable to the issuance or delivery of shares of
capital stock of the Corporation upon conversion of any shares of Series A
Stock; provided, however, that the Corporation shall not be required to pay any
taxes which may be payable in respect of any transfer involved in the issuance
or delivery of any certificate for such shares in a name other than that of the
Series A Stockholder in respect of which such shares of Series A Stock are
being issued.
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A.7(h) The Corporation shall reserve out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of
the Series A Stock sufficient shares of Common Stock to provide for the
conversion of all outstanding shares of Series A Stock.
A.7(i) All shares of Common Stock which may be issued in connection with
the conversion provisions set forth herein will, upon issuance by the
Corporation, be validly issued, fully paid and nonassessable, not subject to
any preemptive or similar rights and free from all taxes, liens or charges with
respect thereto created or imposed by the Corporation.
A.7(j) Upon the consummation of a firm commitment underwritten public
offering of Common Stock of the Corporation registered under the Securities Act
of 1933, pursuant to which the net proceeds to the Corporation are at least
$17,500,000, each share of Series A Stock then outstanding shall, by virtue of
and immediately prior to the closing of such firm commitment public offering
and without any action on the part of the holder thereof, be deemed
automatically converted into that number of shares of Common Stock in which the
Series A Stock would be convertible if such conversion were to occur at the
time of the public offering of Common Stock. The holder of any shares of
Series A Stock converted into Common Stock pursuant to this Section A.7(j)
shall be entitled to payment of all declared but unpaid dividends, if any,
payable on or with respect to such shares up to and including the date of the
closing of such public offering which shall be deemed the Series A Conversion
Date for purposes of this Section A.7(j).
PART B. SERIES B CONVERTIBLE PREFERRED STOCK
B.1. Designation and Amount. The designation of this series of capital
stock shall be "Series B Convertible Preferred Stock," par value $.0001 per
share (the "Series B Stock"). The number of shares, powers, terms, conditions,
designations, preferences and privileges, relative, participating, optional and
other special rights, and qualifications, limitations and restrictions, if any,
of the Series B Stock shall be as set forth herein. The number of authorized
shares of the Series B Stock is 1,666,667.
B.2. Ranking. The Corporation's Series B Stock shall rank, as to
dividends and upon redemption and Liquidation, (x) pari passu with the Series A
Stock, the Series D Stock, the Series F Stock and the Series G Stock, (y)
senior and prior to the Series C Stock and the Series E Stock (but, with
respect to Liquidation, only to the extent provided in Section B.4 below) and
(z) senior and prior to the Corporation's Common Stock and to all other classes
or series of stock issued by the Corporation, except as otherwise approved by
the affirmative vote or consent of the Series B Stockholders pursuant to
Section B.6 hereof and (i) in the case of a change in the relative ranking of
the Series B Stock and the Series A Stock, as otherwise approved by the
affirmative vote or consent of the Series A Stockholders pursuant to
Section A.6
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hereof, (ii) in the case of a change in the relative ranking of the Series B
Stock and the Series D Stock, as otherwise approved by the affirmative vote or
consent of the Series D Stockholders pursuant to Section D.6 hereof, (iii) in
the case of a change in the relative ranking of the Series B Stock and the
Series F Stock, as otherwise approved by the affirmative vote or consent of the
Series F Stockholders pursuant to Section F.6 hereof or (iv) in the case of a
change in the relative ranking of the Series B Stock and the Series G Stock, as
otherwise approved by the affirmative vote or consent of the Series G
Stockholders pursuant to Section G.6 hereof; provided, however, that,
notwithstanding anything in this Restated Certificate to the contrary, the
ranking of the Series B Stock relative to any other class or series of capital
stock of the Corporation (including, without limitation, the Series A Stock, the
Series C Stock, the Series D Stock, the Series E Stock, the Series F Stock, the
Series G Stock and the Common Stock) may be changed or altered so as to lower
the ranking of the Series B Stock relative to such other class or series with
the approval by affirmative vote or consent of the holders of at least sixty-six
and two thirds percent (66 2/3%) of the voting power of the Series B Stock then
outstanding (determined as set forth in the second sentence of Section B.6(a)
hereof) and without the vote or approval of such other class or series or any
other class or series of capital stock (including, without limitation, the
Series A Stock, the Series C Stock, the Series D Stock, the Series E Stock, the
Series F Stock, the Series G Stock and the Common Stock) being required to lower
such ranking of the Series B Stock.
B.3. Dividend Provisions.
B.3(a) The Series B Stockholders shall be entitled to receive, when and
as declared or paid by the Board of Directors on any shares of Series B Stock,
out of funds legally available for that purpose, dividends and distributions
(whether in cash, property or securities of the Corporation, including
subscription or other rights to acquire securities of the Corporation).
Subject to Section B.4(e)(ii) below, whenever any dividend may be declared or
paid on any shares of Series B Stock, the Board of Directors shall also declare
and pay a dividend on the same terms, at the same rate and in like kind upon
each other share of the Series B Stock then outstanding. Whenever any
dividend, whether in cash or property or in securities of the Corporation (or
subscription or other rights to purchase or acquire securities of the
Corporation), may be declared or paid on: (i) subject to Section B.4(e)(ii)
below, any shares of the Common Stock, the Board of Directors shall also
declare and pay a dividend on the same terms, at the same rate and in like kind
upon each share of the Series B Stock then outstanding so that all outstanding
shares of Series B Stock will participate in such dividend ratably with such
shares of Common Stock (calculated as provided in Section B.3(b) hereof); or
(ii) subject to Section B.4(e)(ii) below, any shares of any other series of
Preferred Stock, the Board of Directors shall also declare and pay a dividend
on the same terms, at the same or equivalent rate (based on the number of
shares of Common Stock into which such other series of Preferred Stock is then
convertible, if applicable, or, otherwise, the relative liquidation preference
per share, as compared with the Series B Stock then outstanding) and in like
kind upon each share of
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Series B Stock then outstanding, so that all Series B Stock will participate in
such dividend ratably with such shares of such other series of Preferred Stock.
B.3(b) In connection with any dividend declared or paid hereunder (other
than a dividend declared or paid only in respect of shares of Series B Stock
and in accordance with Section B.3(a) above), each share of Series B Stock
shall be deemed to be that number of shares (including fractional shares) of
Common Stock into which it is then convertible, rounded up to the nearest
one-thousandth of a share. No fractional shares of capital stock shall be
issued as a dividend hereunder. The Corporation shall pay a cash adjustment
for any such fractional interest in an amount equal to the fair market value
thereof on the last Business Day immediately preceding the date for payment of
dividends, as determined by the Board of Directors in good faith.
B.4. Liquidation Rights.
B.4(a) With respect to rights on Liquidation, the Series B Stock shall
rank (x) pari passu with the Series A Stock, the Series D Stock, the Series F
Stock and the Series G Stock, (y) senior and prior to the Series C Stock and
the Series E Stock (but only to the extent provided in this Section B.4) and
(z) senior and prior to the Corporation's Common Stock and to all other classes
or series of stock issued by the Corporation, except as otherwise approved by
the affirmative vote or consent of the Series B Stockholders pursuant to
Section B.6 hereof and (i) in the case of a change in the relative ranking upon
Liquidation of the Series B Stock and the Series A Stock, as otherwise approved
by the affirmative vote or consent of the Series A Stockholders pursuant to
Section A.6 hereof, (ii) in the case of a change in the relative ranking upon
Liquidation of the Series B Stock and the Series D Stock, as otherwise approved
by the affirmative vote or consent of the Series D Stockholders pursuant to
Section D.6 hereof, (iii) in the case of a change in the relative ranking upon
Liquidation of the Series B Stock and the Series F Stock, as otherwise approved
by the affirmative vote or consent of the Series F Stockholders pursuant to
Section F.6 hereof or (iv) in the case of a change in the relative ranking upon
Liquidation of the Series B Stock and the Series G Stock, as otherwise approved
by the affirmative vote or consent of the Series G Stockholders pursuant to
Section G.6 hereof; provided, however, that, notwithstanding anything in this
Restated Certificate to the contrary, the ranking upon Liquidation of the
Series B Stock relative to any other class or series of capital stock of the
Corporation (including, without limitation, the Series A Stock, the Series C
Stock, the Series D Stock, the Series E Stock, the Series F Stock, the Series G
Stock and the Common Stock) may be changed or altered so as to lower such
ranking of the Series B Stock relative to such other class or series with the
approval by affirmative vote or consent of the holders of at least sixty-six
and two thirds percent (66 2/3%) of the voting power of the Series B Stock then
outstanding (determined as set forth in the second sentence of Section B.6(a)
hereof) and without the vote or approval of such other class or series or any
other class or series of capital stock (including, without limitation, the
Series A Stock, the Series C Stock, the Series D Stock, the Series E Stock, the
Series F Stock,
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the Series G Stock and the Common Stock) being required to lower such
ranking of the Series B Stock.
B.4(b) Subject to Section B.4(e)(ii) hereof, in the event of any
Liquidation, the Series B Stockholders shall be entitled to receive out of the
assets of the Corporation legally available for distribution to its
stockholders, whether from capital, surplus or earnings, pari passu with the
rights of the Series A Stockholders, the Series D Stockholders, the Series F
Stockholders and the Series G Stockholders to receive payment of their
liquidation preference pursuant to Section A.4(b), Section D.4(b), Section
F.4(b) and Section G.4(b) hereof, respectively, but before any payment shall be
made to the holders of Series C Stock, Series E Stock, Common Stock or any other
class or series of stock ranking on Liquidation junior to such Series B Stock,
an amount per share equal to the Series B Original Purchase Price (as defined in
Section J.48 hereof), plus 10% per annum thereon, compounded annually, for each
share of Series B Stock from the Series B Liquidation Premium Original Issuance
Date (as defined in Section J.47 hereof) until the date of Liquidation, plus, in
each case, an amount equal to any declared but unpaid dividends thereon pursuant
to Section B.3(a) hereof.
B.4(c) Subject to Sections B.4(e)(ii), A.4(e)(ii), D.4(e)(ii), F.4(e)(ii)
and G.4(e)(ii) hereof, if, upon any Liquidation, the assets of the Corporation
available for distribution to its stockholders shall be insufficient to pay the
Series B Stockholders the full amount as to which each of them shall be entitled
pursuant to Section B.4(b) above and to pay to the Series A Stockholders, the
Series D Stockholders, the Series F Stockholders and the Series G Stockholders
the full amount as to which each of them shall be entitled pursuant to Section
A.4(b), Section D.4(b), Section F.4(b) and Section G.4(b) hereof, respectively,
then the Series B Stockholders, the Series A Stockholders, the Series D
Stockholders, the Series F Stockholders and the Series G Stockholders shall
share ratably in any distribution of assets according to the respective amounts
which would be payable to them in respect of the shares of Series B Stock,
Series A Stock, Series D Stock, Series F Stock and/or Series G Stock, as the
case may be, held upon such distribution if all amounts payable on or with
respect to such shares were paid in full.
B.4(d) Subject to Sections B.4(e)(ii), A.4(e)(ii), D.4(e)(ii), F.4(e)(ii)
and G.4(e)(ii), in the event of any Liquidation, after payment shall have been
made to (i) the Series B Stockholders, the Series A Stockholders, the Series D
Stockholders, the Series F Stockholders and the Series G Stockholders of the
full amount to which they shall be entitled pursuant to Sections B.4(b), A.4(b),
D.4(b), F.4(b) and G.4(b) hereof, respectively, (ii) the Other Parity
Stockholders of the full amount to which they shall be entitled to receive on a
parity with the amounts referred to in clause (i) above and (iii) the Series C
Stockholders and the Series E Stockholders of the full amount to which they
shall be entitled pursuant to Sections C.4(b) and E.4(b) hereof, respectively,
then with respect to each other class or series of capital stock (other than the
Series C Stock, the Series E Stock and the Common Stock) ranking on Liquidation
junior to such
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Series B Stock (in descending order of seniority), the Series B Stockholders, as
a class, the Series A Stockholders, as a class, the Series D Stockholders, as a
class, the Series F Stockholders, as a class, the Series G Stockholders, as a
class, the Other Parity Stockholders, as a class, the Series C Stockholders, as
a class, and the Series E Stockholders, as a class, shall be entitled to receive
an amount equal (and in like kind) to the aggregate preferential amount fixed
for each such junior class or series of capital stock, which amount shall be
distributed ratably among (i) the Series B Stockholders in an equal amount per
share of the Series B Stock then outstanding, (ii) the Series A Stockholders in
an equal amount per share of the Series A Stock then outstanding, (iii) the
Series D Stockholders in an equal amount per share of the Series D Stock then
outstanding, (iv) the Series F Stockholders in an equal amount per share of the
Series F Stock then outstanding, (v) the Series G Stockholders in an equal
amount per share of the Series G Stock then outstanding, (vi) the Other Parity
Stockholders in an equal amount per share of the Other Parity Stock then
outstanding, (vii) the Series C Stockholders in an equal amount per share of the
Series C Stock then outstanding and (viii) the Series E Stockholders in an equal
amount per share of the Series E Stock then outstanding. If, upon any
Liquidation, the assets of the Corporation available for distribution to its
stockholders shall be insufficient to pay the Series B Stockholders, the Series
A Stockholders, the Series D Stockholders, the Series F Stockholders, the Series
G Stockholders, the Other Parity Stockholders, the Series C Stockholders, the
Series E Stockholders and each class or series of capital stock (other than the
Series C Stock, the Series E Stock and the Common Stock) junior to the Series B
Stock the full amounts to which they shall be entitled pursuant to the
immediately preceding sentence, the Series B Stockholders, the Series A
Stockholders, the Series D Stockholders, the Series F Stockholders, the Series G
Stockholders, the Other Parity Stockholders, the Series C Stockholders, the
Series E Stockholders and each such other class or series of capital stock shall
share ratably in any distribution of assets according to the respective
preferential amounts fixed for the Series B Stock (pursuant to this Section
B.4(d)), the Series A Stock (pursuant to Section A.4(d) hereof), the Series D
Stock (pursuant to Section D.4(d) hereof), the Series F Stock (pursuant to
Section F.4(d) hereof), the Series G Stock (pursuant to Section G.4(d) hereof),
the Other Parity Stock (pursuant to the applicable terms thereof), the Series C
Stock (pursuant to Section C.4(d) hereof), the Series E Stock (pursuant to
Section E.4(d) hereof) and each such junior class or series of capital stock
(pursuant to the applicable terms thereof), which would be payable in respect of
the shares held by them upon such distribution if all such preferential amounts
payable on or with respect to such shares were paid in full.
B.4(e)(i) Subject to Sections B.4(e)(ii), A.4(e)(ii), D.4(e)(ii),
F.4(e)(ii) and G.4(e)(ii) hereof, in the event of any Liquidation, after payment
shall have been made to the Series B Stockholders, the Series A Stockholders,
the Series D Stockholders, the Series F Stockholders, the Series G Stockholders,
the Other Parity Stockholders, the Series C Stockholders and the Series E
Stockholders of the full amount to which they shall be entitled as aforesaid,
and after payment shall have been made of the respective preferential amounts of
all other classes and series of capital
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stock ranking senior to the Common Stock, the Series B Stockholders, the Series
A Stockholders, the Series D Stockholders, the Series F Stockholders, the Series
G Stockholders, the Other Parity Stockholders, the Series C Stockholders and the
Series E Stockholders shall be entitled to share ratably (calculated with
respect to such Series B Stock, Series A Stock, Series D Stock, Series F Stock,
Series G Stock, Other Parity Stock, Series C Stock and Series E Stock as
provided in the next sentence) with the Common Stockholders in all remaining
assets of the Corporation available for distribution to its stockholders. For
purposes of calculating the amount of any payment to be paid pursuant to this
Section B.4(e)(i) upon any such Liquidation, each share of Series B Stock, each
share of Series A Stock, each share of Series D Stock, each share of Series F
Stock, each share of Series G Stock, each share of Other Parity Stock, each
share of Series C Stock and each share of Series E Stock shall be deemed to be
that number of shares (including fractional shares) of Common Stock into which
it is then convertible, rounded to the nearest one-thousandth of a share.
B.4(e)(ii) Notwithstanding anything to the contrary set forth herein, in
no event shall the aggregate amount received in respect of each share of Series
B Stock (and any shares of capital stock or other securities issued in respect
thereof) pursuant to Section B.3 above, this Section B.4 and Section A.5 above
exceed an amount equal to the greater of (i) $4.00 for each such share, or (ii)
the aggregate amount of all payments made by the Corporation pursuant to any of
the provisions of this Restated Certificate (regardless of whether such payments
consist of dividends, payments made upon Liquidation or any Special Liquidation
or payments made upon any redemption pursuant to Section A.5 hereof) in respect
of all shares of its capital stock since September 13, 1994 multiplied by a
fraction, the numerator of which equals the quotient of the number of shares of
Common Stock issuable upon conversion of the Series B Stock then outstanding,
rounded up to the nearest one-thousandth of a share, divided by the number of
shares of Series B Stock then outstanding, and the denominator of which equals
the sum of the number of shares of Common Stock then outstanding, plus the
number of shares of Common Stock issuable upon conversion of the Series B Stock,
the Series A Stock, the Series C Stock, the Series D Stock, the Series E Stock,
the Series F Stock, the Series G Stock and any Other Parity Stock then
outstanding, rounded up to the nearest one-thousandth of a share.
B.4(f)(i) In the event of and simultaneously with the closing of an Event
of Sale, the Corporation shall (unless waived pursuant to Section B.4(f)(v) or
otherwise prevented by law) redeem all of the shares of Series B Stock then
outstanding for a cash amount per share determined as set forth herein (the
"Series B Special Liquidation Price"), said redemption to occur simultaneously
with the redemption of all of the outstanding shares of Series A Stock, Series C
Stock, Series D Stock, Series E Stock, Series F Stock and Series G Stock
pursuant to Sections A.4(f), C.4(f), D.4(f), E.4(f), F.4(f) and G.4(f) hereof,
respectively, and of all outstanding shares of Other Parity Stock pursuant to
the applicable terms thereof, in connection with any such closing. The rights
of the Series B Stockholders to receive the Series B Special Liquidation Price
pursuant to this Section B.4(f) shall be (x) pari passu with the rights of
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the Series A Stockholders to receive the Series A Special Liquidation Price
pursuant to Section A.4(f) hereof, with the rights of the Series D Stockholders
to receive the Series D Special Liquidation Price pursuant to Section D.4(f)
hereof, with the rights of the Series F Stockholders to receive the Series F
Special Liquidation Price pursuant to Section F.4(f) hereof, with the rights of
the Series G Stockholders to receive the Series G Special Liquidation Price
pursuant to Section G.4(f) hereof and with the rights of the Other Parity
Stockholders to receive the Other Parity Stock Special Liquidation Price
pursuant to the applicable terms of the Other Parity Stock, and (y) senior and
prior to the rights of the Series C Stockholders to receive the Series C Special
Liquidation Price pursuant to Section C.4(f) and to the rights of the Series E
Stockholders to receive the Series E Special Liquidation Price pursuant to
Section E.4(f). For all purposes of this Section B.4(f), the Series B Special
Liquidation Price shall be equal to that amount per share which would be
received by each Series B Stockholder if, in connection with an Event of Sale,
all the consideration paid in exchange for the assets or the shares of capital
stock (as the case may be) of the Corporation were actually paid to and received
by the Corporation and the Corporation were immediately thereafter liquidated
and its assets distributed pursuant to Sections B.4(a) through (e) hereof. To
the extent that one or more redemptions (as described in Section A.5 hereof) and
a Special Liquidation are occurring concurrently, the Special Liquidation shall
be deemed to occur first.
B.4(f)(ii) At any time on or after the Special Liquidation Date, a Series
B Stockholder shall be entitled, subject to the provisions of Section
B.4(f)(iii) hereof, to receive the Series B Special Liquidation Price for each
such share of Series B Stock owned by such holder. Subject to the provisions of
Section B.4(f)(iii) hereof, payment of the Series B Special Liquidation Price
will be made upon actual delivery to the Corporation or its transfer agent of
the certificate representing such shares of Series B Stock.
B.4(f)(iii) If on the Special Liquidation Date less than all the shares of
Series B Stock, Series A Stock, Series D Stock, Series F Stock, Series G Stock,
Other Parity Stock, Series C Stock and Series E Stock then outstanding may be
legally redeemed by the Corporation, the Special Liquidation shall be effected
(x) first, with respect to such Series B Stock, Series A Stock, Series D Stock,
Series F Stock, Series G Stock and Other Parity Stock on a pro rata basis (based
upon the amounts which would be payable to the Series B Stockholders, the Series
A Stockholders, the Series D Stockholders, the Series F Stockholders and the
Series G Stockholders pursuant to this Section B.4(f), Section A.4(f), Section
D.4(f), Section F.4(f) and Section G.4(f) hereof, respectively, and to the Other
Parity Stockholders pursuant to the applicable terms of the Other Parity Stock,
upon a Special Liquidation if the Corporation had sufficient funds legally
available to effect a redemption of all outstanding shares of Series B Stock,
Series A Stock, Series D Stock, Series F Stock, Series G Stock and Other Parity
Stock on the Special Liquidation Date) until all of the shares of Series B
Stock, Series A Stock, Series D Stock, Series F Stock, Series G Stock and Other
Parity Stock then outstanding are redeemed, and (y) second, with respect to such
Series C Stock and Series E Stock on a pro rata basis (based upon the amounts
which would be payable to
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each of the Series C Stockholders and Series E Stockholders pursuant to Sections
C.4(f) and E.4(f) hereof, respectively, upon a Special Liquidation if the
Corporation had sufficient funds legally available to effect a redemption of all
outstanding shares of Series C Stock and Series E Stock on the Special
Liquidation Date) if but only if, after the redemption of all of the shares of
Series B Stock, Series A Stock, Series D Stock, Series F Stock, Series G Stock
and Other Parity Stock outstanding immediately prior to the Special Liquidation,
the Corporation may legally redeem shares of Series C Stock and Series E Stock.
B.4(f)(iv) On and after any Special Liquidation Date, all rights in
respect of the shares of Series B Stock redeemed shall cease and terminate
except the right to receive the applicable Series B Special Liquidation Price as
provided herein, and such shares of Series B Stock shall no longer be deemed to
be outstanding, whether or not the certificates representing such shares of
Series B Stock have been received by the Corporation; provided, however, that,
if the Corporation defaults in the payment of the Series B Special Liquidation
Price with respect to any Series B Stock, the rights of the holder(s) thereof
with respect to such shares of Series B Stock shall continue until the
Corporation cures such default.
B.4(f)(v) Anything contained herein to the contrary notwithstanding, the
rights of the Series B Stockholders under this Section B.4(f) may be waived by
the holders of a majority of the combined voting power of the shares of Series
B Stock, Series A Stock, Series D Stock, Series F Stock and Series G Stock then
outstanding, voting together as one class, by delivery of written notice of
waiver to the Corporation prior to the closing of any Event of Sale, in which
event the Corporation shall not redeem any shares of Series B Stock pursuant to
this Section B.4(f).
B.4(f)(vi) Any notice required to be given to the holders of shares of
Series B Stock pursuant to Section B.7(f) hereof in connection with an Event of
Sale shall include a statement by the Corporation of (A) the Series B Special
Liquidation Price which each Series B Stockholder shall be entitled to receive
pursuant to this Section B.4(f) upon the occurrence of a Special Liquidation and
(B) the extent to which the Corporation will, if at all, be legally prohibited
from paying each holder of Series B Stock the Series B Special Liquidation
Price.
B.5. Redemption.
The Corporation may, from time to time, be required to redeem shares of
Series B Stock subject to and upon the terms and conditions of Section A.5
hereof.
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B.6. Voting.
B.6(a) In addition to any other rights provided for herein or by law, the
Series B Stockholders shall be entitled to vote, together with the Series A
Stockholders, the Series C Stockholders, the Series D Stockholders, the Series E
Stockholders, the Series F Stockholders, the Series G Stockholders and the
Common Stockholders, as one class, on all matters as to which Common
Stockholders shall be entitled to vote, in the same manner and with the same
effect as such Common Stockholders. In any such vote, each share of Series B
Stock shall entitle the holder thereof to the number of votes per share that
equals the number of shares of Common Stock (including fractional shares) into
which each such share of Series B Stock is then convertible, rounded up to the
nearest one-thousandth of a share.
B.6(b) The Corporation shall not, without the affirmative approval of the
holders of shares representing at least sixty-six and two-thirds percent (66
2/3%) of the voting power of the Series B Stock then outstanding (determined as
set forth in the second sentence of Section B.6(a) hereof), acting separately
from the holders of Series A Stock, Series C Stock, Series D Stock, Series E
Stock, Series F Stock, Series G Stock, Common Stock or any other securities of
the Corporation, given by written consent in lieu of a meeting or by vote at a
meeting called for such purpose, for which meeting timely and specific notice
shall have been given to each holder of Series B Stock, in the manner provided
in the By-laws of the Corporation: (i) authorize, designate, create, issue or
agree to issue any shares of Series B Stock other than those shares of Series B
Stock issued or issuable pursuant to the Series B Stock Purchase Agreement; (ii)
take any action to cause any amendment, alteration or repeal of any of the
provisions of this Restated Certificate or the By-laws of the Corporation, which
amendment, alteration or repeal adversely affects the powers, preferences or
rights pertaining to the Series B Stock, provided, however, that any such
amendment, alteration or repeal shall not require the separate class vote of the
Series B Stock pursuant to this Section B.6(b) to the extent that the effect
thereof is to create an additional class or series of Preferred Stock ranking
pari passu with the Series A Stock, the Series B Stock, the Series D Stock, the
Series F Stock and the Series G Stock as to dividends, upon Liquidation or
redemption, or in any other respect; or (iii) except for the issuance of capital
stock or other securities constituting shares of Excluded Stock, authorize,
designate, create, issue or agree to issue any equity security of the
Corporation ranking senior to the Series B Stock as to dividends, upon
Liquidation or redemption, or in any other respect, or any security, right,
option or warrant convertible into, or exercisable or exchangeable for, any such
equity security of the Corporation.
B.6(c) The Corporation shall not, without the affirmative approval of the
holders of shares representing at least sixty-six and two-thirds percent (66
2/3%) of the combined voting power of the Series B Stock, Series A Stock, Series
D Stock, Series F Stock and Series G Stock then outstanding, voting together as
one class (which voting power shall be determined, in the case of the Series B
Stock, as set forth in the second sentence of Section B.6(a) hereof, in the case
of the Series A Stock, as
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set forth in the second sentence of Section A.6(a) hereof, in the case of the
Series D Stock, as set forth in the second sentence of Section D.6(a) hereof, in
the case of the Series F Stock, as set forth in the second sentence of Section
F.6(a) hereof, and in the case of the Series G Stock, as set forth in the second
sentence of Section G.6(a) hereof), given by written consent in lieu of a
meeting or by vote at a meeting called for such purpose, for which meeting
timely and specific notice shall have been given to each holder of Series B
Stock, Series A Stock, Series D Stock, Series F Stock and Series G Stock in the
manner provided in the By-laws of the Corporation: (i) sell, abandon, transfer,
lease or otherwise dispose of all or substantially all of its properties or
assets other than in the ordinary course of its business; (ii) purchase, lease
or otherwise acquire all or substantially all of the assets of another entity;
(iii) except as otherwise required by this Restated Certificate and except to
the extent otherwise permitted in clause (iv) below, declare or pay any dividend
or make any distribution with respect to shares of its capital stock (whether in
cash, securities or property, but excluding any stock dividends or stock
splits); (iv) except as otherwise required by this Restated Certificate or in
any agreement approved by the Board of Directors with a director, officer,
employee, consultant or independent contractor of or to the Corporation
providing for the repurchase of any of its capital stock owned by such director,
officer, employee, consultant or independent contractor at the option of the
Corporation, provided that such agreements are (A) set forth on Schedule 5.2 to
the Series A Stock Purchase Agreement, Schedule 4.2 to the Series B Stock
Purchase Agreement, Schedule 4.2 to the Series D Stock Purchase Agreement,
Schedule 4.2 to the Series F Stock Purchase Agreement or Schedule 4.2 to the
Series G Securities Purchase Agreement, or (B) entered into (1) pursuant to, and
upon the exercise of any outstanding stock option granted under, the 1993 Stock
Option Plan or any other stock option plan which has been adopted by the
Corporation and approved by the Board of Directors and by the holders of at
least 66 2/3% of the combined voting power of the Series B Stock, Series A
Stock, Series D Stock, Series F Stock and Series G Stock then outstanding
(including any outstanding shares of Common Stock issued upon conversion
thereof), voting together as one class, and (2) pursuant to the forms of stock
option agreements that have been approved by the Board of Directors on or before
the date of the Series A Stock Purchase Agreement or a form of stock option
agreement under the 1993 Stock Option Plan (or such other plan) that is
satisfactory in form and in substance, except for immaterial changes thereto
made from time to time by officers of the Corporation, to the Board of Directors
and to the holders of at least 66 2/3% of the combined voting power of the
Series B Stock, Series A Stock, Series D Stock, Series F Stock and Series G
Stock then outstanding (including any outstanding shares of Common Stock issued
upon conversion thereof), voting together as one class, make any payment on
account of the purchase, redemption or other retirement of any share of capital
stock of the Corporation, or distribute to Common Stockholders shares of the
Corporation's capital stock (other than Common Stock) or other securities of
other entities, evidences of indebtedness issued by the Corporation or other
entities, or other assets or options or rights (excluding options to purchase
and rights to subscribe for shares of Common Stock or the securities of the
Corporation convertible into or exchangeable for shares of Common Stock); (v)
merge or consolidate with and into, or
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permit any subsidiary to merge or consolidate with and into, any other
corporation, corporations or other entity or entities; (vi) voluntarily
dissolve, liquidate or wind-up or carry out any partial liquidation or
distribution or transaction in the nature of a partial liquidation or
distribution; (vii) except for the issuance of capital stock or other securities
constituting shares of Excluded Stock, authorize, designate, create, issue or
agree to issue any equity security of the Corporation or any security, right,
option or warrant convertible into, or exercisable or exchangeable for, any such
equity security of the Corporation or any debt security or capitalized lease
with an equity feature with respect to the capital stock of the Corporation;
(viii) adopt, amend or modify any stock option plan of the Corporation; or (ix)
accelerate the vesting schedule or exercise date or dates of any such options or
in any stock option agreement entered into between the Corporation and its
directors, officers, employees, consultants or independent contractors, or amend
or otherwise modify the Corporation's repurchase rights with respect to any
shares of the Corporation's stock issuable pursuant to any restricted stock
purchase agreement entered into between the Corporation and its directors,
officers, employees, consultants or independent contractors.
B.7. Conversion.
B.7(a)(i) Any Series B Stockholder shall have the right, at any time
or from time to time, to convert any or all of its Series B Stock into that
number of fully paid and nonassessable shares of Common Stock for each share of
Series B Stock so converted equal to the quotient of the Series B Original
Purchase Price for such share divided by the Series B Conversion Price (as
defined in Section B.7(d) hereof) for such share, as last adjusted and then in
effect, rounded up to the nearest one-thousandth of a share; provided, however,
that cash shall be paid in lieu of the issuance of fractional shares of Common
Stock, as provided in Section B.7(c)(ii) hereof.
B.7(a)(ii) Any Series B Stockholder who exercises the right to
convert shares of Series B Stock into shares of Common Stock, pursuant to this
Section B.7, shall be entitled to payment of all declared but unpaid dividends
payable with respect to such Series B Stock pursuant to Section B.3(a) herein,
up to and including the Series B Conversion Date (as defined in Section
B.7(b)(ii) hereof).
B.7(b)(i) Any Series B Stockholder may exercise the right to convert
such shares into Common Stock pursuant to this Section B.7 by delivering to the
Corporation during regular business hours, at the office of the Corporation or
any transfer agent of the Corporation or at such other place as may be
designated by the Corporation, the certificate or certificates for the shares to
be converted (each a "Series B Preferred Certificate"), duly endorsed or
assigned in blank to the Corporation (if required by it).
B.7(b)(ii) Each Series B Preferred Certificate shall be accompanied
by written notice stating that such holder elects to convert such shares and
stating the name or names (with address) in which the certificate or
certificates for the shares of
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Common Stock are to be issued. Such conversion shall be deemed to have been
effected on the date when such delivery is made, and such date is referred to
herein as the "Series B Conversion Date."
B.7(b)(iii) As promptly as practicable thereafter, the Corporation shall
issue and deliver to or upon the written order of such holder, at the place
designated by such holder, a certificate or certificates for the number of full
shares of Common Stock to which such holder is entitled and a check or cash in
respect of any fractional interest in any shares of Common Stock, as provided in
Section B.7(c)(ii) hereof, payable with respect to the shares so converted up to
and including the Series B Conversion Date.
B.7(b)(iv) The person in whose name the certificate or certificates for
Common Stock are to be issued shall be deemed to have become a holder of record
of Common Stock on the applicable Series B Conversion Date, unless the transfer
books of the Corporation are closed on such Series B Conversion Date, in which
event the holder shall be deemed to have become the stockholder of record on the
next succeeding date on which the transfer books are open, provided that the
Series B Conversion Price shall be that Series B Conversion Price in effect on
the Series B Conversion Date.
B.7(b)(v) Upon conversion of only a portion of the number of shares
covered by a Series B Preferred Certificate, the Corporation shall issue and
deliver to or upon the written order of the holder of such Series B Preferred
Certificate, at the expense of the Corporation, a new certificate covering the
number of shares of the Series B Stock representing the unconverted number of
shares of Series B Stock represented by such Series B Preferred Certificate,
which new certificate shall entitle the holder thereof to all the rights, powers
and privileges of a holder of such shares.
B.7(c)(i) If a Series B Stockholder shall surrender more than one share of
Series B Stock for conversion at any one time, then the number of full shares of
Common Stock issuable upon conversion thereof shall be computed on the basis of
the aggregate number of shares of Series B Stock so surrendered.
B.7(c)(ii) No fractional shares of Common Stock shall be issued upon
conversion of Series B Stock. The Corporation shall pay a cash adjustment for
any such fractional interest in an amount equal to the Current Market Price
thereof on the Series B Conversion Date, as determined in accordance with
Section B.7(d)(vii) hereof.
B.7(d) For all purposes of this Section B.7, the "Series B Conversion
Price" with respect to the Series B Stock shall be equal to the Series B
Original Purchase Price with respect to each such share of Series B Stock,
subject to adjustment from time to time as follows:
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B.7(d)(i) If the Corporation shall, at any time or from time to time after
the Series B Conversion Price Original Issuance Date, issue any shares of Common
Stock (which term, for purposes of this Section B.7(d), including all
subsections thereof, shall be deemed to include all other securities convertible
into, or exchangeable or exercisable for, shares of Common Stock (including, but
not limited to, Series B Stock, Series A Stock, Series C Stock, Series D Stock,
Series E Stock, Series F Stock and Series G Stock) or options to purchase or
other rights to subscribe for such convertible or exchangeable securities, in
each case other than Excluded Stock), for a consideration per share less than
the applicable Series B Conversion Price in effect immediately prior to the
issuance of such Common Stock or other securities, the Series B Conversion Price
in effect immediately prior to each such issuance shall automatically (except as
otherwise provided in this Section B.7(d)) be lowered to a price equal to the
quotient obtained by dividing
(X) an amount equal to the sum of
(1) the total number of shares of Common Stock outstanding
(including any shares of Common Stock deemed outstanding after giving
effect to the provisions of Section B.7(d)(ii)(D) with respect to then
outstanding options or other rights to purchase or subscribe for Common
Stock, securities by their terms convertible into or exchangeable for
Common Stock (including, without limitation, the Series A Stock, Series B
Stock, Series C Stock, Series D Stock, Series E Stock, Series F Stock and
Series G Stock), or options to purchase or other rights to subscribe for
such convertible or exchangeable securities, in each case regardless of
whether any of such securities referred to in this clause (1) constitutes
Excluded Stock) immediately prior to such issuance multiplied by the Series
B Conversion Price in effect immediately prior to such issuance, plus
(2) the consideration received by the Corporation upon such
issuance, by
(Y) the total number of shares of Common Stock outstanding (including
any shares of Common Stock deemed outstanding after giving effect to the
provisions of Section B.7(d)(ii)(D) with respect to all outstanding options
or other rights to purchase or subscribe for Common Stock, securities by
their terms convertible into or exchangeable for Common Stock (including,
without limitation, the Series A Stock, Series B Stock, Series C Stock,
Series D Stock, Series E Stock, Series F Stock and Series G Stock), or
options to purchase or other rights to subscribe for such convertible or
exchangeable securities, in each case regardless
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of whether any of such securities constitutes Excluded Stock) immediately
after such issuance.
B.7(d)(ii) For the purposes of any adjustment of the Series B Conversion
Price pursuant to Section B.7(d)(i), the following provisions shall be
applicable:
B.7(d)(ii)(A) In the case of the issuance of Common Stock in whole or
in part for cash, the consideration shall be deemed to be the amount of cash
paid therefor after deducting therefrom any discounts, commissions or other
expenses allowed, paid or incurred by the Corporation for any underwriting or
otherwise in connection with the issuance and sale thereof, plus the value of
any property other than cash received by the Corporation, determined as provided
in Section B.7(d)(ii)(B) hereof, plus the value of any other consideration
received by the Corporation determined as set forth in Section B.7(d)(ii)(C)
hereof.
B.7(d)(ii)(B) In the case of the issuance of Common Stock for a
consideration in whole or in part in property other than cash, the value of such
property other than cash shall be deemed to be the fair market value of such
property as determined in good faith by the Board of Directors, irrespective of
any accounting treatment; provided, however, that such fair market value of such
property as determined by the Board of Directors shall not exceed the aggregate
Current Market Price of the shares of Common Stock being issued, less any cash
consideration paid for such shares, determined as provided in Section
B.7(d)(ii)(A) hereof, and less any other consideration received by the
Corporation for such shares, determined as set forth in Section B.7(d)(ii)(C)
hereof.
B.7(d)(ii)(C) In the case of the issuance of Common Stock for
consideration in whole or in part other than cash or property, the value of such
other consideration shall be deemed to be the fair market value of such other
consideration as determined in good faith by the Board of Directors,
irrespective of any accounting treatment; provided, however, that such fair
market value of such other consideration as determined by the Board of Directors
shall not exceed the aggregate Current Market Price of the shares of Common
Stock being issued, less any cash consideration paid for such shares, determined
as provided in Section B.7(d)(ii)(A) hereof and less the fair market value of
any property received by the Corporation for such shares, determined as set
forth in Section B.7(d)(ii)(B) hereof.
B.7(d)(ii)(D) In the case of the issuance of options or other rights
to purchase or subscribe for Common Stock, securities by their terms convertible
into or exchangeable for Common Stock or options to purchase or other rights to
subscribe for such convertible or exchangeable securities:
B.7(d)(ii)(D)(1) the aggregate maximum number of shares of
Common Stock deliverable upon exercise of such options to purchase or
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rights to subscribe for Common Stock (said maximum number of shares being that
set forth in the instrument relating to such options or rights to subscribe for
Common Stock without regard to any provision contained therein for a subsequent
adjustment of such number) shall be deemed to have been issued at the time such
options or rights were issued and for a consideration equal to the consideration
(determined in the manner provided in Sections B.7(d)(ii)(A), (B) and (C)
hereof), if any, received by the Corporation upon the issuance of such options
or rights plus the minimum purchase price provided in such options or rights for
the Common Stock covered thereby (the consideration in each case to be
determined in the manner provided in Sections B.7(d)(ii)(A), (B) and (C)
hereof);
B.7(d)(ii)(D)(2) the aggregate maximum number of shares of
Common Stock deliverable upon conversion of, or in exchange for, any such
convertible or exchangeable securities or upon the exercise of options to
purchase or rights to subscribe for such convertible or exchangeable securities
and subsequent conversion or exchange thereof (said maximum number of shares
being that set forth in the instrument relating to such convertible or
exchangeable securities without regard to any provision contained therein for a
subsequent adjustment of such number) shall be deemed to have been issued at the
time such securities were issued or such options or rights were issued and for a
consideration equal to the consideration received by the Corporation for any
such securities and related options or rights (excluding any cash received on
account of accrued interest or accrued dividends), plus the minimum additional
consideration, if any, to be received by the Corporation upon the conversion or
exchange of such securities or the exercise of any related options or rights
(the consideration in each case to be determined in the manner provided in
Sections B.7(d)(ii)(A), (B) and (C) hereof);
B.7(d)(ii)(D)(3) if there is any change in the exercise price
of, or number of shares deliverable upon exercise of, any such options or rights
or upon the conversion or exchange of any such convertible or exchangeable
securities (other than a change resulting from the anti-dilution provisions
thereof), then the Series B Conversion Price shall automatically be readjusted
in proportion to such change; and
B.7(d)(ii)(D)(4) upon the expiration of any such options or
rights or the termination of any such rights to convert or exchange such
convertible or exchangeable securities, the Series B Conversion Price shall be
automatically readjusted to the Series B Conversion Price that would have
obtained had such options, rights or convertible or exchangeable securities not
been issued.
B.7(d)(ii)(E) Anything contained herein to the contrary notwithstanding,
the provisions of this Section B.7(d) may be waived in any instance by the
holders of a majority in voting power of the shares of Series B Stock then
outstanding, by delivery of a written notice of waiver to the Corporation.
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B.7(d)(iii) If the number of shares of Common Stock outstanding at any
time after the Series B Conversion Price Original Issuance Date is increased by
a stock dividend payable in shares of Common Stock or by a subdivision or
split-up of shares of Common Stock, then, following the record date fixed for
the determination of holders of Common Stock entitled to receive such stock
dividend, subdivision or split-up, the Series B Conversion Price shall be
appropriately decreased so that the number of shares of Common Stock issuable on
conversion of each share of Series B Stock shall be increased in proportion to
such increase in outstanding shares.
B.7(d)(iv) If, at any time after the Series B Conversion Price Original
Issuance Date, the number of shares of Common Stock outstanding is decreased by
a combination of the outstanding shares of Common Stock, then, following the
record date for such combination, the Series B Conversion Price shall be
appropriately increased so that the number of shares of Common Stock issuable on
conversion of each share of Series B Stock shall be decreased in proportion to
such decrease in outstanding shares.
B.7(d)(v) In the event, at any time after the Series B Conversion Price
Original Issuance Date, of any Extraordinary Transaction, then the Corporation
shall provide appropriate adjustment to the Series B Conversion Price with
respect to each share of Series B Stock outstanding after the effectiveness of
such Extraordinary Transaction (and excluding any Series B Stock redeemed
pursuant to Section B.4(f) hereof in connection therewith) such that each share
of Series B Stock outstanding immediately prior to the effectiveness of the
Extraordinary Transaction (other than the shares redeemed pursuant to Section
B.4(f) hereof) shall be convertible into the kind and number of shares of stock
or other securities or property of the Corporation, or of the corporation
resulting from or surviving such Extraordinary Transaction, that a holder of the
number of shares of Common Stock deliverable (immediately prior to the
effectiveness of the Extraordinary Transaction) upon conversion of such share of
Series B Stock would have been entitled to receive upon such Extraordinary
Transaction. The provisions of this Section B.7(d)(v) shall similarly apply to
successive Extraordinary Transactions.
B.7(d)(vi) All calculations under this Section B.7(d) shall be made to the
nearest one-thousandth of a cent ($.0001) or to the nearest one-thousandth of a
share, as the case may be.
B.7(d)(vii) For the purpose of any computation pursuant to Section B.7(c)
hereof or this Section B.7(d), the Current Market Price at any date of one share
of Common Stock shall be determined in the manner provided in Section
A.7(d)(vii) hereof.
B.7(d)(viii) In any case in which the provisions of this Section B.7(d)
shall require that an adjustment shall become effective immediately after a
record date for an event, the Corporation may defer until the occurrence of such
event
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(A) issuing to the holder of any share of Series B Stock converted after such
record date and before the occurrence of such event the additional shares of
capital stock issuable upon such conversion by reason of the adjustment required
by such event over and above the shares of capital stock issuable upon such
conversion before giving effect to such adjustment and (B) paying to such holder
any cash amounts in lieu of fractional shares pursuant to Section B.7(c)(ii)
hereof; provided, however, that the Corporation shall deliver to such holder a
due bill or other appropriate instrument evidencing such holder's right to
receive such additional shares, and such cash, upon the occurrence of the event
requiring such adjustment.
B.7(d)(ix) If a state of facts shall occur that, without being
specifically controlled by the provisions of this Section B.7, would not fairly
protect the conversion rights of the holders of the Series B Stock in accordance
with the essential intent and principles of such provisions, then the Board of
Directors shall make an adjustment in the application of such provisions, in
accordance with such essential intent and principles, so as to protect such
conversion rights.
B.7(e) Whenever the Series B Conversion Price shall be adjusted as
provided in Section B.7(d) hereof, the Corporation shall forthwith file and keep
on record at the office of the Secretary of the Corporation and at the office of
the transfer agent for the Series B Stock or at such other place as may be
designated by the Corporation, a statement, signed by its President or Chief
Executive Officer and by its Treasurer or Chief Financial Officer, showing in
detail the facts requiring such adjustment and the Series B Conversion Price
that shall be in effect after such adjustment. The Corporation shall also cause
a copy of such statement to be sent by first-class, certified mail, return
receipt requested, postage prepaid, to each Series B Stockholder at such
holder's address appearing on the Corporation's records. Where appropriate,
such copy shall be given in advance of any such adjustment and shall be included
as part of a notice required to be mailed under the provisions of Section B.7(f)
hereof.
B.7(f) In the event the Corporation shall propose to take any action of
the types described in Section B.7(d)(i), (iii), (iv) or (v) hereof, or any
other Event of Sale, the Corporation shall give notice to each Series B
Stockholder in the manner set forth in Section B.7(e) hereof, which notice shall
specify the record date, if any, with respect to any such action and the date on
which such action is to take place. Such notice shall also set forth such facts
with respect thereto as shall be reasonably necessary to indicate the effect of
such action (to the extent such effect may be known at the date of such notice)
on the Series B Conversion Price and the number, kind or class of shares or
other securities or property which shall be deliverable or purchasable upon each
conversion of Series B Stock. In the case of any action that would require the
fixing of a record date, such notice shall be given at least 20 days prior to
the record date so fixed, and in the case of any other action, such notice shall
be given at least 30 days prior to the taking of such proposed action.
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B.7(g) The Corporation shall pay all documentary, stamp or other
transactional taxes attributable to the issuance or delivery of shares of
capital stock of the Corporation upon conversion of any shares of Series B
Stock; provided, however, that the Corporation shall not be required to pay any
taxes which may be payable in respect of any transfer involved in the issuance
or delivery of any certificate for such shares in a name other than that of the
Series B Stockholder in respect of which such shares of Series B Stock are
being issued.
B.7(h) The Corporation shall reserve out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of
the Series B Stock sufficient shares of Common Stock to provide for the
conversion of all outstanding shares of Series B Stock.
B.7(i) All shares of Common Stock which may be issued in connection with
the conversion provisions set forth herein will, upon issuance by the
Corporation, be validly issued, fully paid and nonassessable, not subject to
any preemptive or similar rights and free from all taxes, liens or charges with
respect thereto created or imposed by the Corporation.
B.7(j) Upon the consummation of a firm commitment underwritten public
offering of Common Stock of the Corporation registered under the Securities Act
of 1933, pursuant to which the net proceeds to the Corporation are at least
$17,500,000, each share of Series B Stock then outstanding shall, by virtue of
and immediately prior to the closing of such firm commitment public offering and
without any action on the part of the holder thereof, be deemed automatically
converted into that number of shares of Common Stock in which the Series B Stock
would be convertible if such conversion were to occur at the time of the public
offering of Common Stock. The holder of any shares of Series B Stock converted
into Common Stock pursuant to this Section B.7(j) shall be entitled to payment
of all declared but unpaid dividends, if any, payable on or with respect to such
shares up to and including the date of the closing of such public offering which
shall be deemed the Series B Conversion Date for purposes of this Section
B.7(j).
PART C. SERIES C CONVERTIBLE PREFERRED STOCK
C.1. Designation and Amount. The designation of this series of capital
stock shall be "Series C Convertible Preferred Stock," par value $.0001 per
share (the "Series C Stock"). The number of shares, powers, terms, conditions,
designations, preferences and privileges, relative, participating, optional and
other special rights, and qualifications, limitations and restrictions, if any,
of the Series C Stock shall be as set forth herein. The number of authorized
shares of the Series C Stock is 1,000,000.
C.2. Ranking. The Corporation's Series C Stock shall rank, as to
dividends and upon Liquidation, (i) junior to the Series A Stock, the Series B
Stock, the Series D Stock, the Series F Stock, the Series G Stock and the Other
Parity Stock (but,
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with respect to Liquidation, only to the extent provided in Section C.4 below),
(ii) pari passu with the Series E Stock and (iii) senior and prior to the
Corporation's Common Stock. The Series C Stock, which shall have no redemption
rights other than the redemption rights provided for in Section C.4(f) hereof,
shall rank, upon any such redemption, (i) junior to the Series A Stock, the
Series B Stock, the Series D Stock, the Series F Stock, the Series G Stock and
the Other Parity Stock and (ii) pari passu with the Series E Stock.
C.3. Dividend Provisions.
C.3(a) The Series C Stockholders shall be entitled to receive, when and as
declared or paid by the Board of Directors on any shares of Series C Stock, out
of funds legally available for that purpose, dividends and distributions
(whether in cash, property or securities of the Corporation, including
subscription or other rights to acquire securities of the Corporation). Whenever
any dividend may be declared or paid on any shares of Series C Stock, the Board
of Directors shall also declare and pay a dividend on the same terms, at the
same rate and in like kind upon each other share of the Series C Stock then
outstanding. Whenever any dividend, whether in cash or property or in
securities of the Corporation (or subscription or other rights to purchase or
acquire securities of the Corporation), may be declared or paid on any shares of
the Common Stock, the Board of Directors shall also declare and pay a dividend
on the same terms, at the same rate and in like kind upon each share of the
Series C Stock then outstanding so that all outstanding shares of Series C Stock
will participate in such dividend ratably with such shares of Common Stock
(calculated as provided in Section C.3(b) hereof).
C.3(b) In connection with any dividend declared or paid hereunder (other
than a dividend declared or paid only in respect of shares of Series C Stock
and in accordance with Section C.3(a) above), each share of Series C Stock
shall be deemed to be that number of shares (including fractional shares) of
Common Stock into which it is then convertible, rounded up to the nearest
one-thousandth of a share. No fractional shares of capital stock shall be
issued as a dividend hereunder. The Corporation shall pay a cash adjustment
for any such fractional interest in an amount equal to the fair market value
thereof on the last Business Day immediately preceding the date for payment of
dividends, as determined by the Board of Directors in good faith.
C.4. Liquidation Rights.
C.4(a) With respect to rights on Liquidation, the Series C Stock shall
rank (i) junior to the Series A Stock, the Series B Stock, the Series D Stock,
the Series F Stock, the Series G Stock and the Other Parity Stock (but only to
the extent provided in this Section C.4), (ii) pari passu with the Series E
Stock and (iii) senior and prior to the Corporation's Common Stock.
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C.4(b) In the event of any Liquidation, after payment shall have been made
to the Series A Stockholders, the Series B Stockholders, the Series D
Stockholders, the Series F Stockholders and the Series G Stockholders of the
full amount to which they shall be entitled pursuant to Sections A.4(b), B.4(b),
D.4(b), F.4(b) and G.4(b) hereof, respectively, and after payment shall have
been made to the Other Parity Stockholders of the full amount to which they
shall be entitled to receive on a parity with the Series A Stockholders, the
Series B Stockholders, the Series D Stockholders, the Series F Stockholders or
the Series G Stockholders, but before any payment shall be made to the holders
of Common Stock or any other class or series of stock ranking on Liquidation
junior to the Series C Stock, the Series C Stockholders shall be entitled to
receive out of the assets of the Corporation legally available for distribution
to its stockholders, whether from capital, surplus or earnings, (pari passu with
the rights of the Series E Stockholders to receive payment of their liquidation
preference pursuant to Section E.4(b) hereof) an amount per share equal to the
Series C Original Purchase Price (as defined in Section J.59 hereof) plus, in
each case, an amount equal to any declared but unpaid dividends thereon pursuant
to Section C.3(a) hereof (the "Series C Liquidation Preference Amount").
C.4(c) If, upon any Liquidation, after payment shall have been made to the
Series A Stockholders, the Series B Stockholders, the Series D Stockholders, the
Series F Stockholders and the Series G Stockholders of the full amount to which
they shall be entitled pursuant to Sections A.4(b), B.4(b), D.4(b), F.4(b) and
G.4(b) hereof and after payment shall have been made to the Other Parity
Stockholders of the full amount to which they shall be entitled to receive on a
parity with the Series A Stockholders, the Series B Stockholders, the Series D
Stockholders, the Series F Stockholders or the Series G Stockholders, the assets
of the Corporation available for distribution to its stockholders shall be
insufficient to pay the Series C Stockholders the full amounts to which they
shall be entitled pursuant to Section C.4(b) and to pay to the Series E
Stockholders the full amounts to which they shall be entitled pursuant to
Section E.4(b) hereof, the Series C Stockholders and the Series E Stockholders
shall share ratably in any distribution of assets according to the respective
amounts which would be payable to them in respect of the shares of Series C
Stock and/or Series E Stock, as the case may be, held by them upon such
distribution if all such amounts payable on or with respect to such shares were
paid in full.
C.4(d) In the event of any Liquidation, after payment shall have been made
to (x) the Series C Stockholders and the Series E Stockholders of the full
amount to which they shall be entitled pursuant to Sections C.4(b) and E.4(b)
hereof, respectively, (y) the Series A Stockholders, the Series B Stockholders,
the Series D Stockholders, the Series F Stockholders and the Series G
Stockholders of the full amount to which they shall be entitled pursuant to
Sections A.4(b), B.4(b), D.4(b), F.4(b) and G.4(b) hereof, respectively, and (z)
the Other Parity Stockholders of the full amount to which they shall be entitled
to receive on a parity with the amounts referred to in clause (y) above, then
with respect to each other class or series of capital stock (other than the
Series C Stock, the Series E Stock and the Common Stock) ranking on
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Liquidation junior to the Series A Stock, Series B Stock, Series D Stock, Series
F Stock and Series G Stock (in descending order of seniority), the Series C
Stockholders, as a class, the Series A Stockholders, as a class, the Series B
Stockholders, as a class, the Series D Stockholders, as a class, the Series E
Stockholders, as a class, the Series F Stockholders, as a class, the Series G
Stockholders, as a class, and the Other Parity Stockholders, as a class, shall
be entitled to receive an amount equal (and in like kind) to the aggregate
preferential amount fixed for each such junior class or series of capital stock,
which amount shall be distributed ratably among (i) the Series C Stockholders in
an equal amount per share of the Series C Stock then outstanding, (ii) the
Series A Stockholders in an equal amount per share of the Series A Stock then
outstanding, (iii) the Series B Stockholders in an equal amount per share of the
Series B Stock then outstanding, (iv) the Series D Stockholders in an equal
amount per share of the Series D Stock then outstanding, (v) the Series E
Stockholders in an equal amount per share of the Series E Stock then
outstanding, (vi) the Series F Stockholders in an equal amount per share of the
Series F Stock then outstanding, (vi) the Series G Stockholders in an equal
amount per share of the Series G Stock then outstanding and (viii) the Other
Parity Stockholders in an amount equal per share of the Other Parity Stock then
outstanding. If, upon any Liquidation, the assets of the Corporation available
for distribution to its stockholders shall be insufficient to pay the Series C
Stockholders, the Series A Stockholders, the Series B Stockholders, the Series D
Stockholders, the Series E Stockholders, the Series F Stockholders, the Series G
Stockholders, the Other Parity Stockholders and each class or series of capital
stock (other than the Series C Stock, the Series E Stock and the Common Stock)
junior to the Series A Stock, the Series B Stock, the Series D Stock, the Series
F Stock and the Series G Stock the full amounts to which they shall be entitled
pursuant to the immediately preceding sentence, the Series C Stockholders, the
Series A Stockholders, the Series B Stockholders, the Series D Stockholders, the
Series E Stockholders, the Series F Stockholders, the Series G Stockholders, the
Other Parity Stockholders and each such other class or series of capital stock
shall share ratably in any distribution of assets according to the respective
preferential amounts fixed for the Series C Stock (pursuant to this Section
C.4(d)), the Series A Stock (pursuant to Section A.4(d) hereof), the Series B
Stock (pursuant to Section B.4(d) hereof), the Series D Stock (pursuant to
Section D.4(d) hereof), the Series E Stock (pursuant to Section E.4(d) hereof),
the Series F Stock (pursuant to Section F.4(d) hereof), the Series G Stock
(pursuant to Section G.4(d) hereof), the Other Parity Stock (pursuant to the
applicable terms thereof) and each such junior class or series of capital stock
(pursuant to the applicable terms thereof), which would be payable in respect of
the shares held by them upon such distribution if all such preferential amounts
payable on or with respect to such shares were paid in full.
C.4(e) In the event of any Liquidation, after payment shall have been
made to the Series C Stockholders, the Series A Stockholders, the Series B
Stockholders, the Series D Stockholders, the Series E Stockholders, the Series
F Stockholders, the Series G Stockholders and the Other Parity Stockholders of
the full amount to which they shall be entitled as aforesaid, and after payment
shall have been
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made of the respective preferential amounts of all other classes and series of
capital stock ranking senior to the Common Stock, the Series C Stockholders, the
Series A Stockholders, the Series B Stockholders, the Series D Stockholders, the
Series E Stockholders, the Series F Stockholders, the Series G Stockholders and
the Other Parity Stockholders shall be entitled to share ratably (calculated
with respect to such Series C Stock, Series A Stock, Series B Stock, Series D
Stock, Series E Stock, Series F Stock, Series G Stock and Other Parity Stock as
provided in the next sentence) with the Common Stockholders in all remaining
assets of the Corporation available for distribution to its stockholders. For
purposes of calculating the amount of any payment to be paid pursuant to this
Section C.4(e) upon any such Liquidation, each share of Series C Stock, each
share of Series A Stock, each share of Series B Stock, each share of Series D
Stock, each share of Series E Stock, each of the Series F Stock, each of the
Series G Stock and each share of Other Parity Stock shall be deemed to be that
number of shares (including fractional shares) of Common Stock into which it is
then convertible, rounded to the nearest one-thousandth of a share.
C.4(f)(i) In the event of and simultaneously with the closing of an Event
of Sale, the Corporation shall (unless waived pursuant to Section C.4(f)(v) or
otherwise prevented by law) redeem all of the shares of Series C Stock then
outstanding for a cash amount per share determined as set forth herein (the
"Series C Special Liquidation Price"), said redemption to occur simultaneously
with the redemption of all of the outstanding shares of Series A Stock, Series B
Stock, Series D Stock, Series E Stock, Series F Stock and Series G Stock
pursuant to Sections A.4(f), B.4(f), D.4(f), E.4(f), F.4(f) and G.4(f),
respectively, and of all outstanding shares of Other Parity Stock pursuant to
the terms thereof, in connection with any such closing. The rights of the
Series C Stockholders to receive the Series C Special Liquidation Price pursuant
to this Section C.4(f) shall be (x) junior to the rights of the Series A
Stockholders to receive the Series A Special Liquidation Price pursuant to
Section A.4(f) hereof, the rights of the Series B Stockholders to receive the
Series B Special Liquidation Price pursuant to Section B.4(f) hereof, the rights
of the Series D Stockholders to receive the Series D Special Liquidation Price
pursuant to Section D.4(f), the rights of the Series F Stockholders to receive
the Series F Special Liquidation Price pursuant to Section F.4(f), the rights of
the Series G Stockholders to receive the Series G Special Liquidation Price
pursuant to Section G.4(f) and the rights of the Other Parity Stockholders to
receive the Other Parity Stock Special Liquidation Price pursuant to the
applicable terms of the Other Parity Stock, and (y) pari passu with the rights
of the Series E Stockholders to receive the Series E Special Liquidation Price
pursuant to Section E.4(f). For all purposes of this Section C.4(f), the Series
C Special Liquidation Price shall be equal to that amount per share which is
equal to the Series C Liquidation Preference Amount.
C.4(f)(ii) At any time on or after the Special Liquidation Date, a Series
C Stockholder shall be entitled, subject to the provisions of Section
C.4(f)(iii) hereof, to receive the Series C Special Liquidation Price for each
such share of Series C Stock owned by such holder. Subject to the provisions of
Section C.4(f)(iii)
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hereof, payment of the Series C Special Liquidation Price will be made upon
actual delivery to the Corporation or its transfer agent of the certificate
representing such shares of Series C Stock.
C.4(f)(iii) If on the Special Liquidation Date less than all the shares of
Series C Stock, Series A Stock, Series B Stock, Series D Stock, Series E Stock,
Series F Stock, Series G Stock and Other Parity Stock then outstanding may be
legally redeemed by the Corporation, the Special Liquidation shall be effected
(x) first, with respect to such Series A Stock, Series B Stock, Series D Stock,
Series F Stock, Series G Stock and Other Parity Stock on a pro rata basis (based
upon the amounts which would be payable to the Series A Stockholders, the Series
B Stockholders, the Series D Stockholders, the Series F Stockholders and the
Series G Stockholders pursuant to Sections A.4(f), B.4(f), D.4(f), F.4(f) and
G.4(f) hereof, respectively, and to the Other Parity Stockholders pursuant to
the applicable terms of the Other Parity Stock, upon a Special Liquidation if
the Corporation had sufficient funds legally available to effect a redemption of
all outstanding shares of Series A Stock, Series B Stock, Series D Stock, Series
F Stock, Series G Stock and Other Parity Stock on the Special Liquidation Date)
until all of the shares of Series A Stock, Series B Stock, Series D Stock,
Series F Stock, Series G Stock and Other Parity Stock then outstanding are
redeemed, and (y) second, with respect to such Series C Stock and Series E Stock
on a pro rata basis (based upon the amounts which would be payable to the Series
C Stockholders and the Series E Stockholders pursuant to this Section C.4(f) and
Section E.4(f), respectively, upon a Special Liquidation if the Corporation had
sufficient funds legally available to effect a redemption of all outstanding
shares of Series C Stock and Series E Stock on the Special Liquidation Date) if
but only if, after the redemption of all of the shares of Series A Stock, Series
B Stock, Series D Stock, Series F Stock, Series G Stock and Other Parity Stock
outstanding immediately prior to the Special Liquidation, the Corporation may
legally redeem shares of Series C Stock and the Series E Stock.
C.4(f)(iv) On and after any Special Liquidation Date, all rights in
respect of the shares of Series C Stock redeemed shall cease and terminate
except the right to receive the applicable Series C Special Liquidation Price as
provided herein, and such shares of Series C Stock shall no longer be deemed to
be outstanding, whether or not the certificates representing such shares of
Series C Stock have been received by the Corporation; provided, however, that,
if the Corporation defaults in the payment of the Series C Special Liquidation
Price with respect to any Series C Stock, the rights of the holder(s) thereof
with respect to such shares of Series C Stock shall continue until the
Corporation cures such default.
C.4(f)(v) Anything contained herein to the contrary notwithstanding, (A)
the rights of the Series C Stockholders under this Section C.4(f) may be waived
by the holders of a majority of the combined voting power of the shares of
Series C Stock, Series A Stock, Series B Stock, Series D Stock, Series E Stock,
Series F Stock, Series G Stock and Other Parity Stock then outstanding, voting
together as one class, by delivery of written notice of waiver to the
Corporation prior to
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the closing of any Event of Sale, in which event the Corporation shall not
redeem any shares of Series C Stock pursuant to this Section C.4(f), and (B) the
rights of the Series C Stockholders under this Section C.4(f) shall be deemed to
have been automatically waived by the Series C Stockholders (without any action
required to be taken by any of the Series C Stockholders) in the event that the
Series A Stockholders, the Series B Stockholders, the Series D Stockholders, the
Series F Stockholders and the Series G Stockholders waive their rights under
Sections A.4(f), B.4(f), D.4(f), F.4(f) and G.4(f), respectively.
C.4(f)(vi) Any notice required to be given to the holders of shares of
Series C Stock pursuant to Section C.6(f) hereof in connection with an Event of
Sale shall include a statement by the Corporation of (A) the Series C Special
Liquidation Price which each Series C Stockholder shall be entitled to receive
upon the occurrence of a Special Liquidation and (B) the extent to which the
Corporation will, if at all, be legally prohibited from paying each holder of
Series C Stock the Series C Special Liquidation Price.
C.5. Voting.
C.5(a) In addition to any other rights provided for herein or by law, the
Series C Stockholders shall be entitled to vote, together with the Series A
Stockholders, the Series B Stockholders, the Series D Stockholders, the Series E
Stockholders, the Series F Stockholders, the Series G Stockholders, the Other
Parity Stockholders and the Common Stockholders, as one class, on all matters as
to which Common Stockholders shall be entitled to vote, in the same manner and
with the same effect as such Common Stockholders. In any such vote, each share
of Series C Stock shall entitle the holder thereof to the number of votes per
share that equals the number of shares of Common Stock (including fractional
shares) into which each such share of Series C Stock is then convertible,
rounded up to the nearest one-thousandth of a share.
C.5(b) The Corporation shall not, without the affirmative approval of the
holders of shares representing at least sixty-six and two-thirds percent (66
2/3%) of the voting power of the Series C Stock then outstanding (determined as
set forth in the second sentence of Section C.5(a) hereof), acting separately
from the holders of Series A Stock, Series B Stock, Series D Stock, Series E
Stock, Series F Stock, Series G Stock, Other Parity Stock, Common Stock or any
other securities of the Corporation, given by written consent in lieu of a
meeting or by vote at a meeting called for such purpose, for which meeting
timely and specific notice shall have been given to each holder of Series C
Stock, in the manner provided in the By-laws of the Corporation: (i)
authorize, designate, create, issue or agree to issue any shares of Series C
Stock other than those shares of Series C Stock issued or issuable pursuant to
the Series C Stock Purchase Agreement; or (ii) take any action to cause any
amendment, alteration or repeal of any of the provisions of this Restated
Certificate or the By-laws of the Corporation, which amendment, alteration or
repeal adversely affects the powers,
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preferences or rights pertaining to the Series C Stock, provided, however, that
any such amendment, alteration or repeal shall not require the separate class
vote of the Series C Stock pursuant to this Section C.5(b) to the extent that
the effect thereof is to create an additional class or series of Preferred Stock
ranking pari passu with the Series A Stock, the Series B Stock, the Series D
Stock, Series F Stock and the Series G Stock as to dividends, upon Liquidation
and in every other respect.
C.6. Conversion.
C.6(a)(i) Any Series C Stockholder shall have the right, at any time or
from time to time, to convert any or all of its Series C Stock into that number
of fully paid and nonassessable shares of Common Stock for each share of Series
C Stock so converted equal to the quotient of the Series C Original Purchase
Price for such share divided by the Series C Conversion Price (as defined in
Section C.6(d) hereof) for such share, as last adjusted and then in effect,
rounded up to the nearest one-thousandth of a share; provided, however, that
cash shall be paid in lieu of the issuance of fractional shares of Common
Stock, as provided in Section C.6(c)(ii) hereof.
C.6(a)(ii) Any Series C Stockholder who exercises the right to convert
shares of Series C Stock into shares of Common Stock, pursuant to this Section
C.6, shall be entitled to payment of all declared but unpaid dividends payable
with respect to such Series C Stock pursuant to Section C.3(a) herein, up to
and including the Series C Conversion Date (as defined in Section C.6(b)(ii)
hereof).
C.6(b)(i) Any Series C Stockholder may exercise the right to convert such
shares into Common Stock pursuant to this Section C.6 by delivering to the
Corporation during regular business hours, at the office of the Corporation or
any transfer agent of the Corporation or at such other place as may be
designated by the Corporation, the certificate or certificates for the shares to
be converted (each a "Series C Preferred Certificate"), duly endorsed or
assigned in blank to the Corporation (if required by it).
C.6(b)(ii) Each Series C Preferred Certificate shall be accompanied by
written notice stating that such holder elects to convert such shares and
stating the name or names (with address) in which the certificate or
certificates for the shares of Common Stock are to be issued. Such conversion
shall be deemed to have been effected on the date when such delivery is made,
and such date is referred to herein as the "Series C Conversion Date."
C.6(b)(iii) As promptly as practicable thereafter, the Corporation shall
issue and deliver to or upon the written order of such holder, at the place
designated by such holder, a certificate or certificates for the number of full
shares of Common Stock to which such holder is entitled and a check or cash in
respect of any fractional interest in any shares of Common Stock, as provided
in Section C.6(c)(ii)
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hereof, payable with respect to the shares so converted up to and including the
Series C Conversion Date.
C.6(b)(iv) The person in whose name the certificate or certificates for
Common Stock are to be issued shall be deemed to have become a holder of record
of Common Stock on the applicable Series C Conversion Date, unless the transfer
books of the Corporation are closed on such Series C Conversion Date, in which
event the holder shall be deemed to have become the stockholder of record on
the next succeeding date on which the transfer books are open, provided that
the Series C Conversion Price shall be that Series C Conversion Price in effect
on the Series C Conversion Date.
C.6(b)(v) Upon conversion of only a portion of the number of shares
covered by a Series C Preferred Certificate, the Corporation shall issue and
deliver to or upon the written order of the holder of such Series C Preferred
Certificate, at the expense of the Corporation, a new certificate covering the
number of shares of the Series C Stock representing the unconverted number of
shares of Series C Stock represented by such Series C Preferred Certificate,
which new certificate shall entitle the holder thereof to all the rights,
powers and privileges of a holder of such shares.
C.6(c)(i) If a Series C Stockholder shall surrender more than one share
of Series C Stock for conversion at any one time, then the number of full
shares of Common Stock issuable upon conversion thereof shall be computed on
the basis of the aggregate number of shares of Series C Stock so surrendered.
C.6(c)(ii) No fractional shares of Common Stock shall be issued upon
conversion of Series C Stock. The Corporation shall pay a cash adjustment for
any such fractional interest in an amount equal to the Current Market Price
thereof on the Series C Conversion Date, as determined in accordance with
Section A.7(d)(vii) hereof.
C.6(d) For all purposes of this Section C.6, the "Series C Conversion
Price" with respect to the Series C Stock shall be equal to the Series C
Original Purchase Price with respect to each such share of Series C Stock,
subject to adjustment from time to time as follows:
C.6(d)(i) If the number of shares of Common Stock outstanding at any time
after the Series C Conversion Price Original Issuance Date is increased by a
stock dividend payable in shares of Common Stock or by a subdivision or
split-up of shares of Common Stock, then, following the record date fixed for
the determination of holders of Common Stock entitled to receive such stock
dividend, subdivision or split-up, the Series C Conversion Price shall be
appropriately decreased so that the number of shares of Common Stock issuable
on conversion of each share of Series C Stock shall be increased in proportion
to such increase in outstanding shares.
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C.6(d)(ii) If, at any time after the Series C Conversion Price Original
Issuance Date, the number of shares of Common Stock outstanding is decreased by
a combination of the outstanding shares of Common Stock, then, following the
record date for such combination, the Series C Conversion Price shall be
appropriately increased so that the number of shares of Common Stock issuable on
conversion of each share of Series C Stock shall be decreased in proportion to
such decrease in outstanding shares.
C.6(d)(iii) In the event, at any time after the Series C Conversion Price
Original Issuance Date, of any Extraordinary Transaction, then the Corporation
shall provide appropriate adjustment to the Series C Conversion Price with
respect to each share of Series C Stock outstanding after the effectiveness of
such Extraordinary Transaction (and excluding any Series C Stock redeemed
pursuant to Section C.4(f) hereof in connection therewith) such that each share
of Series C Stock outstanding immediately prior to the effectiveness of the
Extraordinary Transaction (other than the shares redeemed pursuant to Section
C.4(f) hereof) shall be convertible into the kind and number of shares of stock
or other securities or property of the Corporation, or of the corporation
resulting from or surviving such Extraordinary Transaction, that a holder of the
number of shares of Common Stock deliverable (immediately prior to the
effectiveness of the Extraordinary Transaction) upon conversion of such share of
Series C Stock would have been entitled to receive upon such Extraordinary
Transaction. The provisions of this Section C.6(d)(iii) shall similarly apply
to successive Extraordinary Transactions.
C.6(d)(iv) All calculations under this Section C.6(d) shall be made to
the nearest one-thousandth of a cent ($.0001) or to the nearest one-thousandth
of a share, as the case may be.
C.6(d)(v) In any case in which the provisions of this Section C.6(d)
shall require that an adjustment shall become effective immediately after a
record date for an event, the Corporation may defer until the occurrence of
such event (A) issuing to the holder of any share of Series C Stock converted
after such record date and before the occurrence of such event the additional
shares of capital stock issuable upon such conversion by reason of the
adjustment required by such event over and above the shares of capital stock
issuable upon such conversion before giving effect to such adjustment and (B)
paying to such holder any cash amounts in lieu of fractional shares pursuant to
Section C.6(c)(ii) hereof; provided, however, that the Corporation shall
deliver to such holder a due bill or other appropriate instrument evidencing
such holder's right to receive such additional shares, and such cash, upon the
occurrence of the event requiring such adjustment.
C.6(d)(v) If a state of facts shall occur that, without being
specifically controlled by the provisions of this Section C.6, would not fairly
protect the conversion rights of the holders of the Series C Stock in
accordance with the essential intent and principles of such provisions, then
the Board of Directors shall make an
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adjustment in the application of such provisions, in accordance with such
essential intent and principles, so as to protect such conversion rights.
C.6(e) Whenever the Series C Conversion Price shall be adjusted as
provided in Section C.6(d) hereof, the Corporation shall forthwith file and keep
on record at the office of the Secretary of the Corporation and at the office of
the transfer agent for the Series C Stock or at such other place as may be
designated by the Corporation, a statement, signed by its President or Chief
Executive Officer and by its Treasurer or Chief Financial Officer, showing in
detail the facts requiring such adjustment and the Series C Conversion Price
that shall be in effect after such adjustment. The Corporation shall also cause
a copy of such statement to be sent by first-class, certified mail, return
receipt requested, postage prepaid, to each Series C Stockholder at such
holder's address appearing on the Corporation's records. Where appropriate,
such copy shall be given in advance of any such adjustment and shall be included
as part of a notice required to be mailed under the provisions of Section C.6(f)
hereof.
C.6(f) In the event the Corporation shall propose to take any action of
the types described in Section C.6(d)(i), (ii) or (iii) hereof, or any other
Event of Sale, the Corporation shall give notice to each Series C Stockholder in
the manner set forth in Section C.6(e) hereof, which notice shall specify the
record date, if any, with respect to any such action and the date on which such
action is to take place. Such notice shall also set forth such facts with
respect thereto as shall be reasonably necessary to indicate the effect of such
action (to the extent such effect may be known at the date of such notice) on
the Series C Conversion Price and the number, kind or class of shares or other
securities or property which shall be deliverable or purchasable upon each
conversion of Series C Stock. In the case of any action that would require the
fixing of a record date, such notice shall be given at least 20 days prior to
the record date so fixed, and in the case of any other action, such notice shall
be given at least 30 days prior to the taking of such proposed action.
C.6(g) The Corporation shall pay all documentary, stamp or other
transactional taxes attributable to the issuance or delivery of shares of
capital stock of the Corporation upon conversion of any shares of Series C
Stock; provided, however, that the Corporation shall not be required to pay any
taxes which may be payable in respect of any transfer involved in the issuance
or delivery of any certificate for such shares in a name other than that of the
Series C Stockholder in respect of which such shares of Series C Stock are being
issued.
C.6(h) The Corporation shall reserve out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of
the Series C Stock sufficient shares of Common Stock to provide for the
conversion of all outstanding shares of Series C Stock.
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C.6(i) All shares of Common Stock which may be issued in connection with
the conversion provisions set forth herein will, upon issuance by the
Corporation, be validly issued, fully paid and nonassessable, not subject to
any preemptive or similar rights and free from all taxes, liens or charges with
respect thereto created or imposed by the Corporation.
C.6(j) Upon the consummation of a firm commitment underwritten public
offering of Common Stock of the Corporation registered under the Securities Act
of 1933, each share of Series C Stock then outstanding shall, by virtue of and
immediately prior to the closing of such firm commitment public offering and
without any action on the part of the holder thereof, be deemed automatically
converted into that number of shares of Common Stock in which the Series C
Stock would be convertible if such conversion were to occur at the time of the
public offering of Common Stock. The holder of any shares of Series C Stock
converted into Common Stock pursuant to this Section C.6(j) shall be entitled
to payment of all declared but unpaid dividends, if any, payable on or with
respect to such shares up to and including the date of the closing of such
public offering which shall be deemed the Series C Conversion Date for purposes
of this Section C.6(j).
PART D. SERIES D CONVERTIBLE PREFERRED STOCK
D.1. Designation and Amount. The designation of this series of capital
stock shall be "Series D Convertible Preferred Stock," par value $.0001 per
share (the "Series D Stock"). The number of shares, powers, terms, conditions,
designations, preferences and privileges, relative, participating, optional and
other special rights, and qualifications, limitations and restrictions, if any,
of the Series D Stock shall be as set forth herein. The number of authorized
shares of the Series D Stock is 1,481,482.
D.2. Ranking. The Corporation's Series D Stock shall rank, as to dividends
and upon redemption and Liquidation, (x) pari passu with the Series A Stock, the
Series B Stock, the Series F Stock and the Series G Stock, (y) senior and prior
to the Series C Stock and the Series E Stock (but, with respect to Liquidation,
only to the extent provided in Section D.4 below) and (z) senior and prior to
the Corporation's Common Stock and to all other classes or series of stock
issued by the Corporation, except as otherwise approved by the affirmative vote
or consent of the Series D Stockholders pursuant to Section D.6 hereof and (i)
in the case of a change in the relative ranking of the Series D Stock and the
Series A Stock, as otherwise approved by the affirmative vote or consent of the
Series A Stockholders pursuant to Section A.6 hereof, (ii) in the case of a
change in the relative ranking of the Series D Stock and the Series B Stock, as
otherwise approved by the affirmative vote or consent of the Series B
Stockholders pursuant to Section B.6 hereof, (iii) in the case of a change in
the relative ranking of the Series D Stock and the Series F Stock, as otherwise
approved by the affirmative vote or consent of the Series F Stockholders
pursuant to Section F.6 hereof or (iv) in the case of a change in the relative
ranking of the Series D Stock and
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the Series G Stock, as otherwise approved by the affirmative vote or consent of
the Series G Stockholders pursuant to Section G.6 hereof, provided, however,
that, notwithstanding anything in this Restated Certificate to the contrary, the
ranking of the Series D Stock relative to any other class or series of capital
stock of the Corporation (including, without limitation, the Series A Stock, the
Series B Stock, the Series C Stock, the Series E Stock, the Series F Stock, the
Series G Stock and the Common Stock) may be changed or altered so as to lower
the ranking of the Series D Stock relative to such other class or series with
the approval by affirmative vote or consent of the holders of at least sixty-six
and two thirds percent (66 2/3%) of the voting power of the Series D Stock then
outstanding (determined as set forth in the second sentence of Section D.6(a)
hereof) and without the vote or approval of such other class or series or any
other class or series of capital stock (including, without limitation, the
Series A Stock, the Series B Stock, the Series C Stock, the Series E Stock, the
Series F Stock, the Series G Stock and the Common Stock) being required to lower
such ranking of the Series D Stock.
D.3. Dividend Provisions.
D.3(a) The Series D Stockholders shall be entitled to receive, when and as
declared or paid by the Board of Directors on any shares of Series D Stock, out
of funds legally available for that purpose, dividends and distributions
(whether in cash, property or securities of the Corporation, including
subscription or other rights to acquire securities of the Corporation). Subject
to Section D.4(e)(ii) below, whenever any dividend may be declared or paid on
any shares of Series D Stock, the Board of Directors shall also declare and pay
a dividend on the same terms, at the same rate and in like kind upon each other
share of the Series D Stock then outstanding. Whenever any dividend, whether in
cash or property or in securities of the Corporation (or subscription or other
rights to purchase or acquire securities of the Corporation), may be declared or
paid on: (i) subject to Section D.4(e)(ii) below, any shares of the Common
Stock, the Board of Directors shall also declare and pay a dividend on the same
terms, at the same rate and in like kind upon each share of the Series D Stock
then outstanding so that all outstanding shares of Series D Stock will
participate in such dividend ratably with such shares of Common Stock
(calculated as provided in Section D.3(b) hereof); or (ii) subject to Section
D.4(e)(ii) below, any shares of any other series of Preferred Stock, the Board
of Directors shall also declare and pay a dividend on the same terms, at the
same or equivalent rate (based on the number of shares of Common Stock into
which such other series of Preferred Stock is then convertible, if applicable,
or, otherwise, the relative liquidation preference per share, as compared with
the Series D Stock then outstanding) and in like kind upon each share of Series
D Stock then outstanding, so that all Series D Stock will participate in such
dividend ratably with such shares of such other series of Preferred Stock.
D.3(b) In connection with any dividend declared or paid hereunder (other
than a dividend declared or paid only in respect of shares of Series D Stock and
in accordance with Section D.3(a) above), each share of Series D Stock shall be
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deemed to be that number of shares (including fractional shares) of Common Stock
into which it is then convertible, rounded up to the nearest one-thousandth of a
share. No fractional shares of capital stock shall be issued as a dividend
hereunder. The Corporation shall pay a cash adjustment for any such fractional
interest in an amount equal to the fair market value thereof on the last
Business Day immediately preceding the date for payment of dividends, as
determined by the Board of Directors in good faith.
D.4. Liquidation Rights.
D.4(a) With respect to rights on Liquidation, the Series D Stock shall
rank (x) pari passu with the Series A Stock, the Series B Stock, the Series F
Stock and the Series G Stock, (y) senior and prior to the Series C Stock and the
Series E Stock (but only to the extent provided in this Section D.4) and (z)
senior and prior to the Corporation's Common Stock and to all other classes or
series of stock issued by the Corporation, except as otherwise approved by the
affirmative vote or consent of the Series D Stockholders pursuant to Section D.6
hereof and (i) in the case of a change in the relative ranking upon Liquidation
of the Series D Stock and the Series A Stock, as otherwise approved by the
affirmative vote or consent of the Series A Stockholders pursuant to Section A.6
hereof, (ii) in the case of a change in the relative ranking upon Liquidation of
the Series D Stock and the Series B Stock, as otherwise approved by the
affirmative vote or consent of the Series B Stockholders pursuant to Section B.6
hereof, (iii) in the case of a change in the relative ranking upon Liquidation
of the Series D Stock and the Series F Stock, as otherwise approved by the
affirmative vote or consent of the Series F Stockholders pursuant to Section F.6
hereof or (iv) in the case of a change in the relative ranking upon Liquidation
of the Series D Stock and the Series G Stock, as otherwise approved by the
affirmative vote or consent of the Series G Stockholders pursuant to Section G.6
hereof; provided, however, that, notwithstanding anything in this Restated
Certificate to the contrary, the ranking upon Liquidation of the Series D Stock
relative to any other class or series of capital stock of the Corporation
(including, without limitation, the Series A Stock, the Series B Stock, the
Series C Stock, the Series E Stock, the Series F Stock, the Series G Stock and
the Common Stock) may be changed or altered so as to lower such ranking of the
Series D Stock relative to such other class or series with the approval by
affirmative vote or consent of the holders of at least sixty-six and two thirds
percent (66 2/3%) of the voting power of the Series D Stock then outstanding
(determined as set forth in the second sentence of Section D.6(a) hereof) and
without the vote or approval of such other class or series or any other class or
series of capital stock (including, without limitation, the Series A Stock, the
Series B Stock, the Series C Stock, the Series E Stock, the Series F Stock, the
Series G Stock and the Common Stock) being required to lower such ranking of the
Series D Stock.
D.4(b) Subject to Section D.4(e)(ii) hereof, in the event of any
Liquidation, the Series D Stockholders shall be entitled to receive out of the
assets of the Corporation legally available for distribution to its
stockholders, whether from
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capital, surplus or earnings, pari passu with the rights of the Series A
Stockholders, the Series B Stockholders, the Series F Stockholders and the
Series G Stockholders to receive payment of their liquidation preference
pursuant to Section A.4(b), Section B.4(b), Section F.4(b) and Section G.4(b)
hereof, respectively, but before any payment shall be made to the holders of
Series C Stock, Series E Stock, Common Stock or any other class or series of
stock ranking on Liquidation junior to such Series D Stock, an amount per share
equal to the Series D Original Purchase Price (as defined in Section J.69
hereof), plus 10% per annum thereon, compounded annually, for each share of
Series D Stock from the Series D Liquidation Premium Original Issuance Date (as
defined in Section J.68 hereof) until the date of Liquidation, plus, in each
case, an amount equal to any declared but unpaid dividends thereon pursuant to
Section D.3(a) hereof.
D.4(c) Subject to Sections D.4(e)(ii), A.4(e)(ii), B.4(e)(ii), F.4(e)(ii)
and G.4(e)(ii) hereof, if, upon any Liquidation, the assets of the Corporation
available for distribution to its stockholders shall be insufficient to pay the
Series D Stockholders the full amount as to which each of them shall be entitled
pursuant to Section D.4(b) above and to pay to the Series A Stockholders, the
Series B Stockholders, the Series F Stockholders and the Series G Stockholders
the full amount as to which each of them shall be entitled pursuant to Section
A.4(b), Section B.4(b), Section F.4(b) and Section G.4(b) hereof, respectively,
then the Series D Stockholders, the Series A Stockholders, the Series B
Stockholders, the Series F Stockholders and the Series G Stockholders shall
share ratably in any distribution of assets according to the respective amounts
which would be payable to them in respect of the shares of Series D Stock,
Series A Stock, Series B Stock, Series F Stock and/or Series G Stock, as the
case may be, held upon such distribution if all amounts payable on or with
respect to such shares were paid in full.
D.4(d) Subject to Sections D.4(e)(ii), A.4(e)(ii), B.4(e)(ii), F.4(e)(ii)
and G.4(e)(ii), in the event of any Liquidation, after payment shall have been
made to (i) the Series D Stockholders, the Series A Stockholders, the Series B
Stockholders, the Series F Stockholders and the Series G Stockholders of the
full amount to which they shall be entitled pursuant to Sections D.4(b), A.4(b),
B.4(b), F.4(b) and G.4(b) hereof, respectively, (ii) the Other Parity
Stockholders of the full amount to which they shall be entitled to receive on a
parity with the amounts referred to in clause (i) above and (iii) the Series C
Stockholders and the Series E Stockholders of the full amount to which they
shall be entitled pursuant to Sections C.4(b) and E.4(b) hereof, respectively,
then with respect to each other class or series of capital stock (other than the
Series C Stock, the Series E Stock and the Common Stock) ranking on Liquidation
junior to such Series D Stock (in descending order of seniority), the Series D
Stockholders, as a class, the Series A Stockholders, as a class, the Series B
Stockholders, as a class, the Series F Stockholders, as a class, the Series G
Stockholders, as a class, the Other Parity Stockholders, as a class, the Series
C Stockholders, as a class, and the Series E Stockholders, as a class, shall be
entitled to receive an amount equal (and in like kind) to the aggregate
preferential amount fixed for each such junior class or series of capital
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stock, which amount shall be distributed ratably among (i) the Series D
Stockholders in an equal amount per share of the Series D Stock then
outstanding, (ii) the Series A Stockholders in an equal amount per share of the
Series A Stock then outstanding, (iii) the Series B Stockholders in an equal
amount per share of the Series B Stock then outstanding, (iv) the Series F
Stockholders in an equal amount per share of the Series F Stock then
outstanding, (v) the Series G Stockholders in an equal amount per share of the
Series G Stock then outstanding, (vi) the Other Parity Stockholders in an equal
amount per share of the Other Parity Stock then outstanding, (vii) the Series C
Stockholders in an equal amount per share of the Series C Stock then outstanding
and (viii) the Series E Stockholders in an equal amount per share of the Series
E Stock then outstanding. If, upon any Liquidation, the assets of the
Corporation available for distribution to its stockholders shall be insufficient
to pay the Series D Stockholders, the Series A Stockholders, the Series B
Stockholders, the Series F Stockholders, the Series G Stockholders, the Other
Parity Stockholders, the Series C Stockholders, the Series E Stockholders and
each class or series of capital stock (other than the Series C Stock, the Series
E Stock and the Common Stock) junior to the Series D Stock the full amounts to
which they shall be entitled pursuant to the immediately preceding sentence, the
Series D Stockholders, the Series A Stockholders, the Series B Stockholders, the
Series F Stockholders, the Series G Stockholders, the Other Parity Stockholders,
the Series C Stockholders, the Series E Stockholders and each such other class
or series of capital stock shall share ratably in any distribution of assets
according to the respective preferential amounts fixed for the Series D Stock
(pursuant to this Section D.4(d)), the Series A Stock (pursuant to Section
A.4(d) hereof), the Series B Stock (pursuant to Section B.4(d) hereof), the
Series F Stock (pursuant to Section F.4(d) hereof), the Series G Stock (pursuant
to Section G.4(d) hereof), the Other Parity Stock (pursuant to the applicable
terms thereof), the Series C Stock (pursuant to Section C.4(d) hereof), the
Series E Stock (pursuant to Section E.4(d) hereof) and each such junior class or
series of capital stock (pursuant to the applicable terms thereof), which would
be payable in respect of the shares held by them upon such distribution if all
such preferential amounts payable on or with respect to such shares were paid in
full.
D.4(e)(i) Subject to Sections D.4(e)(ii), A.4(e)(ii), B.4(e)(ii),
F.4(e)(ii) and G.4(e)(ii) hereof, in the event of any Liquidation, after payment
shall have been made to the Series D Stockholders, the Series A Stockholders,
the Series B Stockholders, the Series F Stockholders, the Series G Stockholders,
the Other Parity Stockholders, the Series C Stockholders and the Series E
Stockholders of the full amount to which they shall be entitled as aforesaid,
and after payment shall have been made of the respective preferential amounts of
all other classes and series of capital stock ranking senior to the Common
Stock, the Series D Stockholders, the Series A Stockholders, the Series B
Stockholders, the Series F Stockholders, the Series G Stockholders, the Other
Parity Stockholders, the Series C Stockholders and the Series E Stockholders
shall be entitled to share ratably (calculated with respect to such Series D
Stock, Series A Stock, Series B Stock, Series F Stock, Series G Stock, Other
Parity Stock, Series C Stock and Series E Stock as provided in the next
sentence) with the
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Common Stockholders in all remaining assets of the Corporation available for
distribution to its stockholders. For purposes of calculating the amount of any
payment to be paid pursuant to this Section D.4(e)(i) upon any such Liquidation,
each share of Series D Stock, each share of Series A Stock, each share of Series
B Stock, each share of Series F Stock, each share of Series G Stock, each share
of any such Other Parity Stock, each share of Series C Stock and each share of
Series E Stock shall be deemed to be that number of shares (including fractional
shares) of Common Stock into which it is then convertible, rounded to the
nearest one-thousandth of a share.
D.4(e)(ii) Notwithstanding anything to the contrary set forth herein, in
no event shall the aggregate amount received in respect of each share of Series
D Stock (and any shares of capital stock or other securities issued in respect
thereof) pursuant to Section D.3 above, this Section D.4 and Section A.5 above
exceed an amount equal to the greater of (i) $4.00 for each such share, or (ii)
the aggregate amount of all payments made by the Corporation pursuant to any of
the provisions of this Restated Certificate (regardless of whether such payments
consist of dividends, payments made upon Liquidation or any Special Liquidation
or payments made upon any redemption pursuant to Section A.5 hereof) in respect
of all shares of its capital stock since September 12, 1995 multiplied by a
fraction, the numerator of which equals the quotient of the number of shares of
Common Stock issuable upon conversion of the Series D Stock then outstanding,
rounded up to the nearest one-thousandth of a share, divided by the number of
shares of Series D Stock then outstanding, and the denominator of which equals
the sum of the number of shares of Common Stock then outstanding, plus the
number of shares of Common Stock issuable upon conversion of the Series D Stock,
the Series A Stock, the Series B Stock, the Series F Stock, the Series G Stock,
any Other Parity Stock, the Series C Stock and the Series E Stock then
outstanding, rounded up to the nearest one-thousandth of a share.
D.4(f)(i) In the event of and simultaneously with the closing of an Event
of Sale, the Corporation shall (unless waived pursuant to Section D.4(f)(v) or
otherwise prevented by law) redeem all of the shares of Series D Stock then
outstanding for a cash amount per share determined as set forth herein (the
"Series D Special Liquidation Price"), said redemption to occur simultaneously
with the redemption of all of the outstanding shares of Series A Stock, Series B
Stock, Series C Stock, Series E Stock, Series F Stock and Series G Stock
pursuant to Sections A.4(f), B.4(f), C.4(f), E.4(f), F.4(f) and G.4(f),
respectively, and of all outstanding shares of Other Parity Stock pursuant to
the applicable terms thereof, in connection with any such closing. The rights
of the Series D Stockholders to receive the Series D Special Liquidation Price
pursuant to this Section D.4(f) shall be (x) pari passu with the rights of the
Series A Stockholders to receive the Series A Special Liquidation Price pursuant
to Section A.4(f) hereof, with the rights of the Series B Stockholders to
receive the Series B Special Liquidation Price pursuant to Section B.4(f)
hereof, with the rights of the Series F Stockholders to receive the Series F
Special Liquidation Price pursuant to Section F.4(f) hereof, with the rights of
the Series G Stockholders to receive the Series G Special Liquidation Price
pursuant to Section G.4(f) hereof, and with the rights of the
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Other Parity Stockholders to receive the Other Parity Stock Special Liquidation
Price pursuant to the applicable terms of the Other Parity Stock, and (y) senior
and prior to the rights of the Series C Stockholders to receive the Series C
Special Liquidation Price pursuant to Section C.4(f) and to the rights of the
Series E Stockholders to receive the Series E Special Liquidation Price pursuant
to Section E.4(f). For all purposes of this Section D.4(f), the Series D
Special Liquidation Price shall be equal to that amount per share which would be
received by each Series D Stockholder if, in connection with an Event of Sale,
all the consideration paid in exchange for the assets or the shares of capital
stock (as the case may be) of the Corporation were actually paid to and received
by the Corporation and the Corporation were immediately thereafter liquidated
and its assets distributed pursuant to Sections D.4(a) through (e) hereof. To
the extent that one or more redemptions (as described in Section A.5 hereof) and
a Special Liquidation are occurring concurrently, the Special Liquidation shall
be deemed to occur first.
D.4(f)(ii) At any time on or after the Special Liquidation Date, a Series
D Stockholder shall be entitled, subject to the provisions of Section
D.4(f)(iii) hereof, to receive the Series D Special Liquidation Price for each
such share of Series D Stock owned by such holder. Subject to the provisions of
Section D.4(f)(iii) hereof, payment of the Series D Special Liquidation Price
will be made upon actual delivery to the Corporation or its transfer agent of
the certificate representing such shares of Series D Stock.
D.4(f)(iii) If on the Special Liquidation Date less than all the shares of
Series D Stock, Series A Stock, Series B Stock, Series F Stock, Series G Stock,
Other Parity Stock, Series C Stock and Series E Stock then outstanding may be
legally redeemed by the Corporation, the Special Liquidation shall be effected
(x) first, with respect to such Series D Stock, Series A Stock, Series B Stock,
Series F Stock, Series G Stock and Other Parity Stock on a pro rata basis (based
upon the amounts which would be payable to the Series D Stockholders, the Series
A Stockholders, Series B Stockholders, Series F Stockholders and Series G
Stockholders pursuant to this Section D.4(f), Section A.4(f), Section B.4(f),
Section F.4(f) and Section G.4(f) hereof, respectively, and to the Other Parity
Stockholders pursuant to the applicable terms of the Other Parity Stock, upon a
Special Liquidation if the Corporation had sufficient funds legally available to
effect a redemption of all outstanding shares of Series D Stock, Series A Stock,
Series B Stock, Series F Stock, Series G Stock and Other Parity Stock on the
Special Liquidation Date) until all of the shares of Series D Stock, Series A
Stock, Series B Stock, Series F Stock, Series G Stock and Other Parity Stock
then outstanding are redeemed, and (y) second, with respect to such Series C
Stock and Series E Stock on a pro rata basis (based upon the amounts which would
be payable to each of the Series C Stockholders and Series E Stockholders
pursuant to Sections C.4(f) and E.4(f) hereof, respectively, upon a Special
Liquidation if the Corporation had sufficient funds legally available to effect
a redemption of all outstanding shares of Series C Stock and Series E Stock on
the Special Liquidation Date) if but only if, after the redemption of all of the
shares of Series D Stock, Series A Stock, Series B Stock, Series F Stock, Series
G Stock and Other Parity Stock outstanding immediately prior to
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the Special Liquidation, the Corporation may legally redeem shares of Series C
Stock and Series E Stock.
D.4(f)(iv) On and after any Special Liquidation Date, all rights in
respect of the shares of Series D Stock redeemed shall cease and terminate
except the right to receive the applicable Series D Special Liquidation Price as
provided herein, and such shares of Series D Stock shall no longer be deemed to
be outstanding, whether or not the certificates representing such shares of
Series D Stock have been received by the Corporation; provided, however, that,
if the Corporation defaults in the payment of the Series D Special Liquidation
Price with respect to any Series D Stock, the rights of the holder(s) thereof
with respect to such shares of Series D Stock shall continue until the
Corporation cures such default.
D.4(f)(v) Anything contained herein to the contrary notwithstanding, the
rights of the Series D Stockholders under this Section D.4(f) may be waived by
the holders of a majority of the combined voting power of the shares of Series D
Stock, Series A Stock, Series B Stock, Series F Stock and Series G Stock then
outstanding, voting together as one class, by delivery of written notice of
waiver to the Corporation prior to the closing of any Event of Sale, in which
event the Corporation shall not redeem any shares of Series D Stock pursuant to
this Section D.4(f).
D.4(f)(vi) Any notice required to be given to the holders of shares of
Series D Stock pursuant to Section D.7(f) hereof in connection with an Event of
Sale shall include a statement by the Corporation of (A) the Series D Special
Liquidation Price which each Series D Stockholder shall be entitled to receive
pursuant to this Section D.4(f) upon the occurrence of a Special Liquidation and
(B) the extent to which the Corporation will, if at all, be legally prohibited
from paying each holder of Series D Stock the Series D Special Liquidation
Price.
D.5. Redemption.
The Corporation may, from time to time, be required to redeem shares of
Series D Stock subject to and upon the terms and conditions of Section A.5
hereof.
D.6. Voting.
D.6(a) In addition to any other rights provided for herein or by law, the
Series D Stockholders shall be entitled to vote, together with the Series A
Stockholders, the Series B Stockholders, the Series C Stockholders, the Series E
Stockholders, Series F Stockholders, Series G Stockholders and the Common
Stockholders, as one class, on all matters as to which Common Stockholders shall
be entitled to vote, in the same manner and with the same effect as such Common
Stockholders. In any such vote, each share of Series D Stock shall entitle the
holder thereof to the number of votes per share that equals the number of shares
of Common
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Stock (including fractional shares) into which each such share of Series D Stock
is then convertible, rounded up to the nearest one-thousandth of a share.
D.6(b) The Corporation shall not, without the affirmative approval of the
holders of shares representing at least sixty-six and two-thirds percent (66
2/3%) of the voting power of the Series D Stock then outstanding (determined as
set forth in the second sentence of Section D.6(a) hereof), acting separately
from the holders of the Series A Stock, Series B Stock, Series C Stock, Series E
Stock, Series F Stock, Series G Stock, Common Stock or any other securities of
the Corporation, given by written consent in lieu of a meeting or by vote at a
meeting called for such purpose, for which meeting timely and specific notice
shall have been given to each holder of Series D Stock, in the manner provided
in the By-laws of the Corporation: (i) authorize, designate, create, issue or
agree to issue any shares of Series D Stock other than those shares of Series D
Stock issued or issuable pursuant to the Series D Stock Purchase Agreement; (ii)
take any action to cause any amendment, alteration or repeal of any of the
provisions of this Restated Certificate or the By-laws of the Corporation, which
amendment, alteration or repeal adversely affects the powers, preferences or
rights pertaining to the Series D Stock, provided, however, that any such
amendment, alteration or repeal shall not require the separate class vote of the
Series D Stock pursuant to this Section D.6(b) to the extent that the effect
thereof is to create an additional class or series of Preferred Stock ranking
pari passu with the Series A Stock, the Series B Stock, the Series D Stock, the
Series F Stock and the Series G Stock as to dividends, upon Liquidation or
redemption, or in any other respect; or (iii) except for the issuance of capital
stock or other securities constituting shares of Excluded Stock, authorize,
designate, create, issue or agree to issue any equity security of the
Corporation ranking senior to the Series D Stock as to dividends, upon
Liquidation or redemption, or in any other respect, or any security, right,
option or warrant convertible into, or exercisable or exchangeable for, any such
equity security of the Corporation.
D.6(c) The Corporation shall not, without the affirmative approval of the
holders of shares representing at least sixty-six and two-thirds percent (66
2/3%) of the combined voting power of the Series D Stock, Series A Stock, Series
B Stock, Series F Stock and Series G Stock then outstanding, voting together as
one class (which voting power shall be determined, in the case of the Series D
Stock, as set forth in the second sentence of Section D.6(a) hereof, in the case
of the Series A Stock, as set forth in the second sentence of Section A.6(a)
hereof, in the case of the Series B Stock, as set forth in the second sentence
of Section B.6(a) hereof, in the case of Series F Stock, as set forth in the
second sentence of Section F.6(a) hereof and, in the case of the Series G Stock,
as set forth in the second sentence of Section G.6(a) hereof), given by written
consent in lieu of a meeting or by vote at a meeting called for such purpose,
for which meeting timely and specific notice shall have been given to each
holder of Series D Stock, Series A Stock, Series B Stock, Series F Stock and
Series G Stock, in the manner provided in the By-laws of the Corporation: (i)
sell, abandon, transfer, lease or otherwise dispose of all or substantially all
of its properties or assets other than in the ordinary course of its business;
(ii) purchase, lease or
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otherwise acquire all or substantially all of the assets of another entity;
(iii) except as otherwise required by this Restated Certificate and except to
the extent otherwise permitted in clause (iv) below, declare or pay any dividend
or make any distribution with respect to shares of its capital stock (whether in
cash, securities or property, but excluding any stock dividends or stock
splits); (iv) except as otherwise required by this Restated Certificate or in
any agreement approved by the Board of Directors with a director, officer,
employee, consultant or independent contractor of or to the Corporation
providing for the repurchase of any of its capital stock owned by such director,
officer, employee, consultant or independent contractor at the option of the
Corporation, provided that such agreements are (A) set forth on Schedule 5.2 to
the Series A Stock Purchase Agreement, Schedule 4.2 to the Series B Stock
Purchase Agreement, Schedule 4.2 to the Series D Stock Purchase Agreement,
Schedule 4.2 to the Series F Stock Purchase Agreement or Schedule 4.2 to the
Series G Securities Purchase Agreement, or (B) entered into (1) pursuant to, and
upon the exercise of any outstanding stock option granted under, the 1993 Stock
Option Plan or any other stock option plan which has been adopted by the
Corporation and approved by the Board of Directors and by the holders of at
least 66 2/3% of the combined voting power of the Series D Stock, Series A
Stock, Series B Stock, Series F Stock and Series G Stock then outstanding
(including any outstanding shares of Common Stock issued upon conversion
thereof), voting together as one class, and (2) pursuant to the forms of stock
option agreements that have been approved by the Board of Directors on or before
the date of the Series A Stock Purchase Agreement or a form of stock option
agreement under the 1993 Stock Option Plan (or such other plan) that is
satisfactory in form and in substance, except for immaterial changes thereto
made from time to time by officers of the Corporation, to the Board of Directors
and to the holders of at least 66 2/3% of the combined voting power of the
Series D Stock, Series A Stock, Series B Stock, Series F Stock and Series G
Stock then outstanding (including any outstanding shares of Common Stock issued
upon conversion thereof), voting together as one class, make any payment on
account of the purchase, redemption or other retirement of any share of capital
stock of the Corporation, or distribute to Common Stockholders shares of the
Corporation's capital stock (other than Common Stock) or other securities of
other entities, evidences of indebtedness issued by the Corporation or other
entities, or other assets or options or rights (excluding options to purchase
and rights to subscribe for shares of Common Stock or the securities of the
Corporation convertible into or exchangeable for shares of Common Stock); (v)
merge or consolidate with and into, or permit any subsidiary to merge or
consolidate with and into, any other corporation, corporations or other entity
or entities; (vi) voluntarily dissolve, liquidate or wind-up or carry out any
partial liquidation or distribution or transaction in the nature of a partial
liquidation or distribution; (vii) except for the issuance of capital stock or
other securities constituting shares of Excluded Stock, authorize, designate,
create, issue or agree to issue any equity security of the Corporation or any
security, right, option or warrant convertible into, or exercisable or
exchangeable for, any such equity security of the Corporation or any debt
security or capitalized lease with an equity feature with respect to the capital
stock of the Corporation; (viii) adopt, amend or modify any stock option plan of
the Corporation; or (ix) accelerate the vesting schedule or exercise date or
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dates of any such options or in any stock option agreement entered into between
the Corporation and its directors, officers, employees, consultants or
independent contractors, or amend or otherwise modify the Corporation's
repurchase rights with respect to any shares of the Corporation's stock issuable
pursuant to any restricted stock purchase agreement entered into between the
Corporation and its directors, officers, employees, consultants or independent
contractors.
D.7. Conversion.
D.7(a)(i) Any Series D Stockholder shall have the right, at any time or
from time to time, to convert any or all of its Series D Stock into that number
of fully paid and nonassessable shares of Common Stock for each share of Series
D Stock so converted equal to the quotient of the Series D Original Purchase
Price for such share divided by the Series D Conversion Price (as defined in
Section D.7(d) hereof) for such share, as last adjusted and then in effect,
rounded up to the nearest one-thousandth of a share; provided, however, that
cash shall be paid in lieu of the issuance of fractional shares of Common Stock,
as provided in Section D.7(c)(ii) hereof.
D.7(a)(ii) Any Series D Stockholder who exercises the right to convert
shares of Series D Stock into shares of Common Stock, pursuant to this Section
D.7, shall be entitled to payment of all declared but unpaid dividends payable
with respect to such Series D Stock pursuant to Section D.3(a) herein, up to
and including the Series D Conversion Date (as defined in Section D.7(b)(ii)
hereof).
D.7(b)(i) Any Series D Stockholder may exercise the right to convert such
shares into Common Stock pursuant to this Section D.7 by delivering to the
Corporation during regular business hours, at the office of the Corporation or
any transfer agent of the Corporation or at such other place as may be
designated by the Corporation, the certificate or certificates for the shares to
be converted (each a "Series D Preferred Certificate"), duly endorsed or
assigned in blank to the Corporation (if required by it).
D.7(b)(ii) Each Series D Preferred Certificate shall be accompanied by
written notice stating that such holder elects to convert such shares and
stating the name or names (with address) in which the certificate or
certificates for the shares of Common Stock are to be issued. Such conversion
shall be deemed to have been effected on the date when such delivery is made,
and such date is referred to herein as the "Series D Conversion Date."
D.7(b)(iii) As promptly as practicable thereafter, the Corporation shall
issue and deliver to or upon the written order of such holder, at the place
designated by such holder, a certificate or certificates for the number of full
shares of Common Stock to which such holder is entitled and a check or cash in
respect of any fractional interest in any shares of Common Stock, as provided in
Section D.7(c)(ii)
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hereof, payable with respect to the shares so converted up to and including the
Series D Conversion Date.
D.7(b)(iv) The person in whose name the certificate or certificates for
Common Stock are to be issued shall be deemed to have become a holder of record
of Common Stock on the applicable Series D Conversion Date, unless the transfer
books of the Corporation are closed on such Series D Conversion Date, in which
event the holder shall be deemed to have become the stockholder of record on the
next succeeding date on which the transfer books are open, provided that the
Series D Conversion Price shall be that Series D Conversion Price in effect on
the Series D Conversion Date.
D.7(b)(v) Upon conversion of only a portion of the number of shares
covered by a Series D Preferred Certificate, the Corporation shall issue and
deliver to or upon the written order of the holder of such Series D Preferred
Certificate, at the expense of the Corporation, a new certificate covering the
number of shares of the Series D Stock representing the unconverted number of
shares of Series D Stock represented by such Series D Preferred Certificate,
which new certificate shall entitle the holder thereof to all the rights, powers
and privileges of a holder of such shares.
D.7(c)(i) If a Series D Stockholder shall surrender more than one share
of Series D Stock for conversion at any one time, then the number of full
shares of Common Stock issuable upon conversion thereof shall be computed on
the basis of the aggregate number of shares of Series D Stock so surrendered.
D.7(c)(ii) No fractional shares of Common Stock shall be issued upon
conversion of Series D Stock. The Corporation shall pay a cash adjustment for
any such fractional interest in an amount equal to the Current Market Price
thereof on the Series D Conversion Date, as determined in accordance with
Section D.7(d)(vi) hereof.
D.7(d) For all purposes of this Section D.7, the "Series D Conversion
Price" with respect to the Series D Stock shall be equal to the Series D
Original Purchase Price with respect to each such share of Series D Stock,
subject to adjustment from time to time as follows:
D.7(d)(i) If the Corporation shall, at any time or from time to time after
the Series D Conversion Price Original Issuance Date, issue any shares of Common
Stock (which term, for purposes of this Section D.7(d), including all
subsections thereof, shall be deemed to include all other securities convertible
into, or exchangeable or exercisable for, shares of Common Stock (including, but
not limited to, Series D Stock, Series A Stock, Series B Stock, Series C Stock,
Series E Stock, Series F Stock and Series G Stock) or options to purchase or
other rights to subscribe for such convertible or exchangeable securities, in
each case other than Excluded Stock), for a consideration per
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share less than the applicable Series D Conversion Price in effect immediately
prior to the issuance of such Common Stock or other securities, the Series D
Conversion Price in effect immediately prior to each such issuance shall
automatically (except as otherwise provided in this Section D.7(d)) be lowered
to a price equal to the quotient obtained by dividing
(X) an amount equal to the sum of
(1) the total number of shares of Common Stock outstanding (including
any shares of Common Stock deemed outstanding after giving effect to the
provisions of Section D.7(d)(ii)(D) with respect to then outstanding options or
other rights to purchase or subscribe for Common Stock, securities by their
terms convertible into or exchangeable for Common Stock (including, without
limitation, the Series A Stock, Series B Stock, Series C Stock, Series D Stock,
Series E Stock, Series F Stock and Series G Stock), or options to purchase or
other rights to subscribe for such convertible or exchangeable securities, in
each case regardless of whether any of such securities referred to in this
clause (1) constitutes Excluded Stock) immediately prior to such issuance
multiplied by the Series D Conversion Price in effect immediately prior to such
issuance, plus
(2) the consideration received by the Corporation upon such issuance,
by
(Y) the total number of shares of Common Stock outstanding (including any
shares of Common Stock deemed outstanding after giving effect to the provisions
of Section D.7(d)(ii)(D) with respect to all outstanding options or other rights
to purchase or subscribe for Common Stock, securities by their terms convertible
into or exchangeable for Common Stock (including, without limitation, the Series
A Stock, Series B Stock, Series C Stock, Series D Stock, Series E Stock, Series
F Stock and Series G Stock), or options to purchase or other rights to subscribe
for such convertible or exchangeable securities, in each case regardless of
whether any of such securities constitutes Excluded Stock) immediately after
such issuance.
D.7(d)(ii) For the purposes of any adjustment of the Series A Conversion
Price pursuant to Section D.7(d)(i), the following provisions shall be
applicable:
D.7(d)(ii)(A) In the case of the issuance of Common Stock in whole or in
part for cash, the consideration shall be deemed to be the amount of cash
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paid therefor after deducting therefrom any discounts, commissions or other
expenses allowed, paid or incurred by the Corporation for any underwriting or
otherwise in connection with the issuance and sale thereof, plus the value of
any property other than cash received by the Corporation, determined as provided
in Section D.7(d)(ii)(B) hereof, plus the value of any other consideration
received by the Corporation determined as set forth in Section D.7(d)(ii)(C)
hereof.
D.7(d)(ii)(B) In the case of the issuance of Common Stock for a
consideration in whole or in part in property other than cash, the value of such
property other than cash shall be deemed to be the fair market value of such
property as determined in good faith by the Board of Directors, irrespective of
any accounting treatment; provided, however, that such fair market value of such
property as determined by the Board of Directors shall not exceed the aggregate
Current Market Price of the shares of Common Stock being issued, less any cash
consideration paid for such shares, determined as provided in Section
D.7(d)(ii)(A) hereof, and less any other consideration received by the
Corporation for such shares, determined as set forth in Section D.7(d)(ii)(C)
hereof.
D.7(d)(ii)(C) In the case of the issuance of Common Stock for
consideration in whole or in part other than cash or property, the value of such
other consideration shall be deemed to be the fair market value of such other
consideration as determined in good faith by the Board of Directors,
irrespective of any accounting treatment; provided, however, that such fair
market value of such other consideration as determined by the Board of Directors
shall not exceed the aggregate Current Market Price of the shares of Common
Stock being issued, less any cash consideration paid for such shares, determined
as provided in Section D.7(d)(ii)(A) hereof and less the fair market value of
any property received by the Corporation for such shares, determined as set
forth in Section D.7(d)(ii)(B) hereof.
D.7(d)(ii)(D) In the case of the issuance of options or other rights to
purchase or subscribe for Common Stock, securities by their terms convertible
into or exchangeable for Common Stock or options to purchase or other rights to
subscribe for such convertible or exchangeable securities:
D.7(d)(ii)(D)(1) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options to purchase or rights to subscribe for
Common Stock (said maximum number of shares being that set forth in the
instrument relating to such options or rights to subscribe for Common Stock
without regard to any provision contained therein for a subsequent adjustment of
such number) shall be deemed to have been issued at the time such options or
rights were issued and for a consideration equal to the consideration
(determined in the manner provided in Sections D.7(d)(ii)(A), (B) and (C)
hereof), if any, received by the Corporation upon the issuance of such options
or rights plus the minimum purchase price provided in such options or rights for
the Common Stock covered thereby (the
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consideration in each case to be determined in the manner provided in Sections
D.7(d)(ii)(A), (B) and (C) hereof);
D.7(d)(ii)(D)(2) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of, or in exchange for, any such convertible or
exchangeable securities or upon the exercise of options to purchase or rights to
subscribe for such convertible or exchangeable securities and subsequent
conversion or exchange thereof (said maximum number of shares being that set
forth in the instrument relating to such convertible or exchangeable securities
without regard to any provision contained therein for a subsequent adjustment of
such number) shall be deemed to have been issued at the time such securities
were issued or such options or rights were issued and for a consideration equal
to the consideration received by the Corporation for any such securities and
related options or rights (excluding any cash received on account of accrued
interest or accrued dividends), plus the minimum additional consideration, if
any, to be received by the Corporation upon the conversion or exchange of such
securities or the exercise of any related options or rights (the consideration
in each case to be determined in the manner provided in Sections D.7(d)(ii)(A),
(B) and (C) hereof);
D.7(d)(ii)(D)(3) if there is any change in the exercise price of, or
number of shares deliverable upon exercise of, any such options or rights or
upon the conversion or exchange of any such convertible or exchangeable
securities (other than a change resulting from the anti-dilution provisions
thereof), then the Series D Conversion Price shall automatically be readjusted
in proportion to such change; and
D.7(d)(ii)(D)(4) upon the expiration of any such options or rights or the
termination of any such rights to convert or exchange such convertible or
exchangeable securities, the Series D Conversion Price shall be automatically
readjusted to the Series D Conversion Price that would have obtained had such
options, rights or convertible or exchangeable securities not been issued.
D.7(d)(ii)(E) Anything contained herein to the contrary notwithstanding,
the provisions of this Section D.7(d) may be waived in any instance by the
holders of a majority in voting power of the shares of Series D Stock then
outstanding, by delivery of a written notice of waiver to the Corporation.
D.7(d)(iii) If the number of shares of Common Stock outstanding at any
time after the Series D Conversion Price Original Issuance Date is increased by
a stock dividend payable in shares of Common Stock or by a subdivision or
split-up of shares of Common Stock, then, following the record date fixed for
the determination of holders of Common Stock entitled to receive such stock
dividend, subdivision or split-up, the Series D Conversion Price shall be
appropriately decreased so that the number of shares of Common Stock issuable on
conversion of each share of Series D Stock shall be increased in proportion to
such increase in outstanding shares.
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D.7(d)(iv) If, at any time after the Series D Conversion Price Original
Issuance Date, the number of shares of Common Stock outstanding is decreased by
a combination of the outstanding shares of Common Stock, then, following the
record date for such combination, the Series D Conversion Price shall be
appropriately increased so that the number of shares of Common Stock issuable on
conversion of each share of Series D Stock shall be decreased in proportion to
such decrease in outstanding shares.
D.7(d)(v) In the event, at any time after the Series D Conversion Price
Original Issuance Date, of any Extraordinary Transaction, then the Corporation
shall provide appropriate adjustment to the Series D Conversion Price with
respect to each share of Series D Stock outstanding after the effectiveness of
such Extraordinary Transaction (and excluding any Series D Stock redeemed
pursuant to Section D.4(f) hereof in connection therewith) such that each share
of Series D Stock outstanding immediately prior to the effectiveness of the
Extraordinary Transaction (other than the shares redeemed pursuant to Section
D.4(f) hereof) shall be convertible into the kind and number of shares of stock
or other securities or property of the Corporation, or of the corporation
resulting from or surviving such Extraordinary Transaction, that a holder of the
number of shares of Common Stock deliverable (immediately prior to the
effectiveness of the Extraordinary Transaction) upon conversion of such share of
Series D Stock would have been entitled to receive upon such Extraordinary
Transaction. The provisions of this Section D.7(d)(v) shall similarly apply to
successive Extraordinary Transactions.
D.7(d)(vi) All calculations under this Section D.7(d) shall be made to the
nearest one-thousandth of a cent ($.0001) or to the nearest one-thousandth of a
share, as the case may be.
D.7(d)(vii) For the purpose of any computation pursuant to Section D.7(c)
hereof or this Section D.7(d), the Current Market Price at any date of one share
of Common Stock shall be determined in the manner provided in Section
A.7(d)(vii) hereof.
D.7(d)(viii) In any case in which the provisions of this Section D.7(d)
shall require that an adjustment shall become effective immediately after a
record date for an event, the Corporation may defer until the occurrence of such
event (A) issuing to the holder of any share of Series D Stock converted after
such record date and before the occurrence of such event the additional shares
of capital stock issuable upon such conversion by reason of the adjustment
required by such event over and above the shares of capital stock issuable upon
such conversion before giving effect to such adjustment and (B) paying to such
holder any cash amounts in lieu of fractional shares pursuant to Section
D.7(c)(ii) hereof; provided, however, that the Corporation shall deliver to such
holder a due bill or other appropriate instrument evidencing such holder's right
to receive such additional shares, and such cash, upon the occurrence of the
event requiring such adjustment.
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D.7(d)(ix) If a state of facts shall occur that, without being
specifically controlled by the provisions of this Section D.7, would not fairly
protect the conversion rights of the holders of the Series D Stock in accordance
with the essential intent and principles of such provisions, then the Board of
Directors shall make an adjustment in the application of such provisions, in
accordance with such essential intent and principles, so as to protect such
conversion rights.
D.7(e) Whenever the Series D Conversion Price shall be adjusted as
provided in Section D.7(d) hereof, the Corporation shall forthwith file and keep
on record at the office of the Secretary of the Corporation and at the office of
the transfer agent for the Series D Stock or at such other place as may be
designated by the Corporation, a statement, signed by its President or Chief
Executive Officer and by its Treasurer or Chief Financial Officer, showing in
detail the facts requiring such adjustment and the Series D Conversion Price
that shall be in effect after such adjustment. The Corporation shall also cause
a copy of such statement to be sent by first-class, certified mail, return
receipt requested, postage prepaid, to each Series D Stockholder at such
holder's address appearing on the Corporation's records. Where appropriate,
such copy shall be given in advance of any such adjustment and shall be included
as part of a notice required to be mailed under the provisions of Section D.7(f)
hereof.
D.7(f) In the event the Corporation shall propose to take any action of
the types described in Section D.7(d)(i), (iii), (iv) or (v) hereof, or any
other Event of Sale, the Corporation shall give notice to each Series D
Stockholder in the manner set forth in Section D.7(e) hereof, which notice shall
specify the record date, if any, with respect to any such action and the date on
which such action is to take place. Such notice shall also set forth such facts
with respect thereto as shall be reasonably necessary to indicate the effect of
such action (to the extent such effect may be known at the date of such notice)
on the Series D Conversion Price and the number, kind or class of shares or
other securities or property which shall be deliverable or purchasable upon each
conversion of Series D Stock. In the case of any action that would require the
fixing of a record date, such notice shall be given at least 20 days prior to
the record date so fixed, and in the case of any other action, such notice shall
be given at least 30 days prior to the taking of such proposed action.
D.7(g) The Corporation shall pay all documentary, stamp or other
transactional taxes attributable to the issuance or delivery of shares of
capital stock of the Corporation upon conversion of any shares of Series D
Stock; provided, however, that the Corporation shall not be required to pay any
taxes which may be payable in respect of any transfer involved in the issuance
or delivery of any certificate for such shares in a name other than that of the
Series D Stockholder in respect of which such shares of Series D Stock are being
issued.
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D.7(h) The Corporation shall reserve out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the
Series D Stock sufficient shares of Common Stock to provide for the conversion
of all outstanding shares of Series D Stock.
D.7(i) All shares of Common Stock which may be issued in connection with
the conversion provisions set forth herein will, upon issuance by the
Corporation, be validly issued, fully paid and nonassessable, not subject to any
preemptive or similar rights and free from all taxes, liens or charges with
respect thereto created or imposed by the Corporation.
D.7(j) Upon the consummation of a firm commitment underwritten public
offering of Common Stock of the Corporation registered under the Securities Act
of 1933, pursuant to which the net proceeds to the Corporation are at least
$17,500,000, each share of Series D Stock then outstanding shall, by virtue of
and immediately prior to the closing of such firm commitment public offering and
without any action on the part of the holder thereof, be deemed automatically
converted into that number of shares of Common Stock in which the Series D Stock
would be convertible if such conversion were to occur at the time of the public
offering of Common Stock. The holder of any shares of Series D Stock converted
into Common Stock pursuant to this Section D.7(j) shall be entitled to payment
of all declared but unpaid dividends, if any, payable on or with respect to such
shares up to and including the date of the closing of such public offering which
shall be deemed the Series D Conversion Date for purposes of this Section
D.7(j).
PART E. SERIES E CONVERTIBLE PREFERRED STOCK
E.1. Designation and Amount. The designation of this series of capital
stock shall be "Series E Convertible Preferred Stock," par value $.0001 per
share (the "Series E Stock"). The number of shares, powers, terms, conditions,
designations, preferences and privileges, relative, participating, optional and
other special rights, and qualifications, limitations and restrictions, if any,
of the Series E Stock shall be as set forth herein. The number of authorized
shares of the Series E Stock is 1,250,000.
E.2. Ranking. The Corporation's Series E Stock shall rank, as to dividends
and upon Liquidation, (i) junior to the Series A Stock, the Series B Stock, the
Series D Stock, the Series F Stock, the Series G Stock and the Other Parity
Stock (but, with respect to Liquidation, only to the extent provided in Section
E.4 below), (ii) pari passu with the Series C Stock and (iii) senior and prior
to the Corporation's Common Stock. The Series E Stock, which shall have no
redemption rights other than the redemption rights provided for in Section
E.4(f) hereof, shall rank, upon any such redemption, (i) junior to the Series A
Stock, the Series B Stock, the Series D Stock, the Series F Stock, the Series G
Stock and the Other Parity Stock and (ii) pari passu with the Series C Stock.
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E.3. Dividend Provisions.
E.3(a) The Series E Stockholders shall be entitled to receive, when and
as declared or paid by the Board of Directors on any shares of Series E Stock,
out of funds legally available for that purpose, dividends and distributions
(whether in cash, property or securities of the Corporation, including
subscription or other rights to acquire securities of the Corporation).
Whenever any dividend may be declared or paid on any shares of Series E Stock,
the Board of Directors shall also declare and pay a dividend on the same terms,
at the same rate and in like kind upon each other share of the Series E Stock
then outstanding. Whenever any dividend, whether in cash or property or in
securities of the Corporation (or subscription or other rights to purchase or
acquire securities of the Corporation), may be declared or paid on any shares
of the Common Stock, the Board of Directors shall also declare and pay a
dividend on the same terms, at the same rate and in like kind upon each share
of the Series E Stock then outstanding so that all outstanding shares of Series
E Stock will participate in such dividend ratably with such shares of Common
Stock (calculated as provided in Section E.3(b) hereof).
E.3(b) In connection with any dividend declared or paid hereunder (other
than a dividend declared or paid only in respect of shares of Series E Stock
and in accordance with Section E.3(a) above), each share of Series E Stock
shall be deemed to be that number of shares (including fractional shares) of
Common Stock into which it is then convertible, rounded up to the nearest
one-thousandth of a share. No fractional shares of capital stock shall be
issued as a dividend hereunder. The Corporation shall pay a cash adjustment
for any such fractional interest in an amount equal to the fair market value
thereof on the last Business Day immediately preceding the date for payment of
dividends, as determined by the Board of Directors in good faith.
E.4. Liquidation Rights.
E.4(a) With respect to rights on Liquidation, the Series E Stock shall
rank (i) junior to the Series A Stock, the Series B Stock, the Series D Stock,
the Series F Stock, the Series G Stock and the Other Parity Stock (but only to
the extent provided in this Section E.4), (ii) pari passu with the Series C
Stock and (iii) senior and prior to the Corporation's Common Stock.
E.4(b) In the event of any Liquidation, after payment shall have been
made to the Series A Stockholders, the Series B Stockholders, the Series D
Stockholders, the Series F Stockholders and the Series G Stockholders of the
full amount to which they shall be entitled pursuant to Sections A.4(b),
B.4(b), D.4(b), F.4(b) and G.4(b) hereof, respectively, and after payment shall
have been made to the Other Parity Stockholders of the full amount to which
they shall be entitled to receive on a parity with the Series A Stockholders,
the Series B Stockholders, the Series D
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Stockholders, the Series F Stockholders or the Series G Stockholders, but before
any payment shall be made to the holders of Common Stock or any other class or
series of stock ranking on Liquidation junior to the Series E Stock, the Series
E Stockholders shall be entitled to receive out of the assets of the Corporation
legally available for distribution to its stockholders, whether from capital,
surplus or earnings, (pari passu with the rights of the Series C Stockholders to
receive payment of their liquidation preference pursuant to Section C.4(b)
hereof) an amount per share equal to the Series E Original Purchase Price (as
defined in Section J.80 hereof) plus, in each case, an amount equal to any
declared but unpaid dividends thereon pursuant to Section E.3(a) hereof (the
"Series E Liquidation Preference Amount").
E.4(c) If, upon any Liquidation, after payment shall have been made to the
Series A Stockholders, the Series B Stockholders, the Series D Stockholders, the
Series F Stockholders and the Series G Stockholders of the full amount to which
they shall be entitled pursuant to Sections A.4(b), B.4(b), D.4(b), F.4(b) and
G.4(b) hereof and after payment shall have been made to the Other Parity
Stockholders of the full amount to which they shall be entitled to receive on a
parity with the Series A Stockholders, the Series B Stockholders, the Series D
Stockholders, the Series F Stockholders or the Series G Stockholders, the assets
of the Corporation available for distribution to its stockholders shall be
insufficient to pay the Series E Stockholders the full amounts to which they
shall be entitled pursuant to Section E.4(b) and to pay to the Series C
Stockholders the full amounts to which they shall be entitled pursuant to
Section C.4(b) hereof, the Series E Stockholders and the Series C Stockholders
shall share ratably in any distribution of assets according to the respective
amounts which would be payable to them in respect of the shares of Series E
Stock and/or Series C Stock, as the case may be, held by them upon such
distribution if all such amounts payable on or with respect to such shares were
paid in full.
E.4(d) In the event of any Liquidation, after payment shall have been made
to (x) the Series E Stockholders and the Series C Stockholders of the full
amount to which they shall be entitled pursuant to Sections E.4(b) and C.4(b)
hereof, respectively, (y) the Series A Stockholders, the Series B Stockholders,
the Series D Stockholders, the Series F Stockholders and the Series G
Stockholders of the full amount to which they shall be entitled pursuant to
Sections A.4(b), B.4(b), D.4(b), F.4(b) and G.4(b) hereof, respectively, and (z)
the Other Parity Stockholders of the full amount to which they shall be entitled
to receive on a parity with the amounts referred to in clause (y) above, then
with respect to each other class or series of capital stock (other than the
Series E Stock, the Series C Stock and the Common Stock) ranking on Liquidation
junior to the Series A Stock, Series B Stock, Series D Stock, Series F Stock and
Series G Stock (in descending order of seniority), the Series E Stockholders, as
a class, the Series A Stockholders, as a class, the Series B Stockholders, as a
class, the Series C Stockholders, as a class, the Series D Stockholders, as a
class, the Series F Stockholders, as a class, the Series G Stockholders, as a
class, and the Other Parity Stockholders, as a class, shall be entitled to
receive an amount equal (and in like kind) to the aggregate preferential amount
fixed for each such junior class or series of capital
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stock, which amount shall be distributed ratably among (i) the Series E
Stockholders in an equal amount per share of the Series E Stock then
outstanding, (ii) the Series A Stockholders in an equal amount per share of the
Series A Stock then outstanding, (iii) the Series B Stockholders in an equal
amount per share of the Series B Stock then outstanding, (iv) the Series C
Stockholders in an equal amount per share of the Series C Stock then
outstanding, (v) the Series D Stockholders in an equal amount per share of the
Series D Stock then outstanding, (vi) the Series F Stockholders in an equal
amount per share of the Series F Stock then outstanding, (vii) the Series G
Stockholders in an equal amount per share of the Series G Stock then outstanding
and (viii) the Other Parity Stockholders in an equal amount per share of the
Other Parity Stock then outstanding. If, upon any Liquidation, the assets of
the Corporation available for distribution to its stockholders shall be
insufficient to pay the Series E Stockholders, the Series A Stockholders, the
Series B Stockholders, the Series C Stockholders, the Series D Stockholders, the
Series F Stockholders, the Series G Stockholders, the Other Parity Stockholders
and each class or series of capital stock (other than the Series E Stock, the
Series C Stock and the Common Stock) junior to the Series A Stock, the Series B
Stock, the Series D Stock, the Series F Stock and the Series G Stock the full
amounts to which they shall be entitled pursuant to the immediately preceding
sentence, the Series E Stockholders, the Series A Stockholders, the Series B
Stockholders, the Series C Stockholders, the Series D Stockholders, the Series F
Stockholders, the Series G Stockholders, the Other Parity Stockholders and each
such other class or series of capital stock shall share ratably in any
distribution of assets according to the respective preferential amounts fixed
for the Series E Stock (pursuant to this Section E.4(d)), the Series A Stock
(pursuant to Section A.4(d) hereof), the Series B Stock (pursuant to Section
B.4(d) hereof), the Series C Stock (pursuant to Section C.4(d) hereof), the
Series D Stock (pursuant to Section D.4(d) hereof), the Series F Stock (pursuant
to Section F.4(d) hereof), the Series G Stock (pursuant to Section G.4(d)
hereof), the Other Parity Stock (pursuant to the applicable terms thereof) and
each such junior class or series of capital stock (pursuant to the applicable
terms thereof), which would be payable in respect of the shares held by them
upon such distribution if all such preferential amounts payable on or with
respect to such shares were paid in full.
E.4(e) In the event of any Liquidation, after payment shall have been
made to the Series E Stockholders, the Series A Stockholders, the Series B
Stockholders, the Series C Stockholders, the Series D Stockholders, the Series
F Stockholders, the Series G Stockholders and the Other Parity Stockholders of
the full amount to which they shall be entitled as aforesaid, and after payment
shall have been made of the respective preferential amounts of all other
classes and series of capital stock ranking senior to the Common Stock, the
Series E Stockholders, the Series A Stockholders, the Series B Stockholders,
the Series C Stockholders, the Series D Stockholders, the Series F
Stockholders, the Series G Stockholders and the Other Parity Stockholders shall
be entitled to share ratably (calculated with respect to such Series E Stock,
Series A Stock, Series B Stock, Series C Stock, Series D Stock, Series F Stock,
Series G Stock and Other Parity Stock as provided in the next sentence) with
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the Common Stockholders in all remaining assets of the Corporation available for
distribution to its stockholders. For purposes of calculating the amount of any
payment to be paid pursuant to this Section E.4(e) upon any such Liquidation,
each share of Series E Stock, each share of Series A Stock, each share of Series
B Stock, each share of Series C Stock, each share of Series D Stock, each share
of Series F Stock, each share of Series G Stock and each share of Other Parity
Stock shall be deemed to be that number of shares (including fractional shares)
of Common Stock into which it is then convertible, rounded to the nearest
one-thousandth of a share.
E.4(f)(i) In the event of and simultaneously with the closing of an Event
of Sale, the Corporation shall (unless waived pursuant to Section E.4(f)(v) or
otherwise prevented by law) redeem all of the shares of Series E Stock then
outstanding for a cash amount per share determined as set forth herein (the
"Series E Special Liquidation Price"), said redemption to occur simultaneously
with the redemption of all of the outstanding shares of Series A Stock, Series
B Stock, Series C Stock, Series D Stock, Series F Stock and Series G Stock
pursuant to Sections A.4(f), B.4(f), C.4(f), D.4(f), F.4(f) and G.4(f),
respectively, and of all outstanding shares of Other Parity Stock pursuant to
the terms thereof, in connection with any such closing. The rights of the
Series E Stockholders to receive the Series E Special Liquidation Price
pursuant to this Section E.4(f) shall be (x) junior to the rights of the Series
A Stockholders to receive the Series A Special Liquidation Price pursuant to
Section A.4(f) hereof, the rights of the Series B Stockholders to receive the
Series B Special Liquidation Price pursuant to Section B.4(f) hereof, the
rights of the Series D Stockholders to receive the Series D Special Liquidation
Price pursuant to Section D.4(f), the rights of the Series F Stockholders to
receive the Series F Special Liquidation Price pursuant to Section F.4(f)
hereof, the rights of the Series G Stockholders to receive the Series G Special
Liquidation Price pursuant to Section G.4(f) hereof and the rights of the Other
Parity Stockholders to receive the Other Parity Stock Special Liquidation Price
pursuant to the applicable terms of the Other Parity Stock, and (y) pari passu
with the rights of the Series C Stockholders to receive the Series C Special
Liquidation Price pursuant to Section C.4(f). For all purposes of this Section
E.4(f), the Series E Special Liquidation Price shall be equal to that amount
per share which is equal to the Series E Liquidation Preference Amount.
E.4(f)(ii) At any time on or after the Special Liquidation Date, a Series
E Stockholder shall be entitled, subject to the provisions of Section
E.4(f)(iii) hereof, to receive the Series E Special Liquidation Price for each
such share of Series E Stock owned by such holder. Subject to the provisions
of Section E.4(f)(iii) hereof, payment of the Series E Special Liquidation
Price will be made upon actual delivery to the Corporation or its transfer
agent of the certificate representing such shares of Series E Stock.
E.4(f)(iii) If on the Special Liquidation Date less than all the shares
of Series E Stock, Series A Stock, Series B Stock, Series C Stock, Series D
Stock, Series F Stock, Series G Stock and Other Parity Stock then outstanding
may be legally
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redeemed by the Corporation, the Special Liquidation shall be effected (x)
first, with respect to such Series A Stock, Series B Stock, Series D Stock,
Series F Stock, Series G Stock and Other Parity Stock on a pro rata basis (based
upon the amounts which would be payable to the Series A Stockholders, the Series
B Stockholders, the Series D Stockholders, the Series F Stockholders and the
Series G Stockholders pursuant to Sections A.4(f), B.4(f), D.4(f), F.4(f) and
G.4(f) hereof, respectively, and to the Other Parity Stockholders pursuant to
the applicable terms of the Other Parity Stock, upon a Special Liquidation if
the Corporation had sufficient funds legally available to effect a redemption of
all outstanding shares of Series A Stock, Series B Stock, Series D Stock, Series
F Stock, Series G Stock and Other Parity Stock on the Special Liquidation Date)
until all of the shares of Series A Stock, Series B Stock, Series D Stock,
Series F Stock, Series G Stock and Other Parity Stock then outstanding are
redeemed, and (y) second, with respect to such Series E Stock and Series C Stock
on a pro rata basis (based upon the amounts which would be payable to the Series
E Stockholders and the Series C Stockholders pursuant to this Section E.4(f) and
Section C.4(f), respectively, upon a Special Liquidation if the Corporation had
sufficient funds legally available to effect a redemption of all outstanding
shares of Series E Stock and Series C Stock on the Special Liquidation Date) if
but only if, after the redemption of all of the shares of Series A Stock, Series
B Stock, Series D Stock, Series F Stock, Series G Stock and Other Parity Stock
outstanding immediately prior to the Special Liquidation, the Corporation may
legally redeem shares of Series E Stock and Series C Stock.
E.4(f)(iv) On and after any Special Liquidation Date, all rights in
respect of the shares of Series E Stock redeemed shall cease and terminate
except the right to receive the applicable Series E Special Liquidation Price
as provided herein, and such shares of Series E Stock shall no longer be deemed
to be outstanding, whether or not the certificates representing such shares of
Series E Stock have been received by the Corporation; provided, however, that,
if the Corporation defaults in the payment of the Series E Special Liquidation
Price with respect to any Series E Stock, the rights of the holder(s) thereof
with respect to such shares of Series E Stock shall continue until the
Corporation cures such default.
E.4(f)(v) Anything contained herein to the contrary notwithstanding, (A)
the rights of the Series E Stockholders under this Section E.4(f) may be waived
by the holders of a majority of the combined voting power of the shares of
Series E Stock, Series A Stock, Series B Stock, Series C Stock, Series D Stock,
Series F Stock, Series G Stock and Other Parity Stock then outstanding, voting
together as one class, by delivery of written notice of waiver to the
Corporation prior to the closing of any Event of Sale, in which event the
Corporation shall not redeem any shares of Series E Stock pursuant to this
Section E.4(f), and (B) the rights of the Series E Stockholders under this
Section E.4(f) shall be deemed to have been automatically waived by the Series E
Stockholders (without any action required to be taken by any of the Series E
Stockholders) in the event that the Series A Stockholders, the Series B
Stockholders, the Series D Stockholders, the Series F Stockholders and the
Series G
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Stockholders waive their rights under Sections A.4(f), B.4(f), D.4(f), F.4(f)
and G.4(f), respectively.
E.4(f)(vi) Any notice required to be given to the holders of shares of
Series E Stock pursuant to Section E.6(f) hereof in connection with an Event of
Sale shall include a statement by the Corporation of (A) the Series E Special
Liquidation Price which each Series E Stockholder shall be entitled to receive
upon the occurrence of a Special Liquidation and (B) the extent to which the
Corporation will, if at all, be legally prohibited from paying each holder of
Series E Stock the Series E Special Liquidation Price.
E.5. Voting.
E.5(a) In addition to any other rights provided for herein or by law,
the Series E Stockholders shall be entitled to vote, together with the Series A
Stockholders, the Series B Stockholders, the Series C Stockholders, the Series
D Stockholders, the Series F Stockholders, the Series G Stockholders, the Other
Parity Stockholders and the Common Stockholders, as one class, on all matters
as to which Common Stockholders shall be entitled to vote, in the same manner
and with the same effect as such Common Stockholders. In any such vote, each
share of Series E Stock shall entitle the holder thereof to the number of votes
per share that equals the number of shares of Common Stock (including
fractional shares) into which each such share of Series E Stock is then
convertible, rounded up to the nearest one-thousandth of a share.
E.5(b) The Corporation shall not, without the affirmative approval of the
holders of shares representing at least sixty-six and two-thirds percent (66
2/3%) of the voting power of the Series E Stock then outstanding (determined as
set forth in the second sentence of Section E.5(a) hereof), acting separately
from the holders of Series A Stock, Series B Stock, Series C Stock, Series D
Stock, Series F Stock, Series G Stock, Other Parity Stock, Common Stock or any
other securities of the Corporation, given by written consent in lieu of a
meeting or by vote at a meeting called for such purpose, for which meeting
timely and specific notice shall have been given to each holder of Series E
Stock, in the manner provided in the By-laws of the Corporation: (i) authorize,
designate, create, issue or agree to issue any shares of Series E Stock other
than those shares of Series E Stock issued or issuable pursuant to the Series E
Stock Purchase Agreement; or (ii) take any action to cause any amendment,
alteration or repeal of any of the provisions of this Restated Certificate or
the By-laws of the Corporation, which amendment, alteration or repeal adversely
affects the powers, preferences or rights pertaining to the Series E Stock,
provided, however, that any such amendment, alteration or repeal shall not
require the separate class vote of the Series E Stock pursuant to this Section
E.5(b) to the extent that the effect thereof is to create an additional class or
series of Preferred Stock ranking pari passu with the Series A Stock, the Series
B Stock, the Series D Stock, the Series F Stock and the Series G Stock as to
dividends, upon Liquidation and in every other respect.
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E.6. Conversion.
E.6(a)(i) Any Series E Stockholder shall have the right, at any time or
from time to time, to convert any or all of its Series E Stock into that number
of fully paid and nonassessable shares of Common Stock for each share of Series
E Stock so converted equal to the quotient of the Series E Original Purchase
Price for such share divided by the Series E Conversion Price (as defined in
Section E.6(d) hereof) for such share, as last adjusted and then in effect,
rounded up to the nearest one-thousandth of a share; provided, however, that
cash shall be paid in lieu of the issuance of fractional shares of Common Stock,
as provided in Section E.6(c)(ii) hereof.
E.6(a)(ii) Any Series E Stockholder who exercises the right to convert
shares of Series E Stock into shares of Common Stock, pursuant to this Section
E.6, shall be entitled to payment of all declared but unpaid dividends payable
with respect to such Series E Stock pursuant to Section E.3(a) herein, up to and
including the Series E Conversion Date (as defined in Section E.6(b)(ii)
hereof).
E.6(b)(i) Any Series E Stockholder may exercise the right to convert such
shares into Common Stock pursuant to this Section E.6 by delivering to the
Corporation during regular business hours, at the office of the Corporation or
any transfer agent of the Corporation or at such other place as may be
designated by the Corporation, the certificate or certificates for the shares to
be converted (each a "Series E Preferred Certificate"), duly endorsed or
assigned in blank to the Corporation (if required by it).
E.6(b)(ii) Each Series E Preferred Certificate shall be accompanied by
written notice stating that such holder elects to convert such shares and
stating the name or names (with address) in which the certificate or
certificates for the shares of Common Stock are to be issued. Such conversion
shall be deemed to have been effected on the date when such delivery is made,
and such date is referred to herein as the "Series E Conversion Date."
E.6(b)(iii) As promptly as practicable thereafter, the Corporation shall
issue and deliver to or upon the written order of such holder, at the place
designated by such holder, a certificate or certificates for the number of full
shares of Common Stock to which such holder is entitled and a check or cash in
respect of any fractional interest in any shares of Common Stock, as provided in
Section E.6(c)(ii) hereof, payable with respect to the shares so converted up to
and including the Series E Conversion Date.
E.6(b)(iv) The person in whose name the certificate or certificates for
Common Stock are to be issued shall be deemed to have become a holder of record
of Common Stock on the applicable Series E Conversion Date, unless the transfer
books of the Corporation are closed on such Series E Conversion Date, in which
event
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the holder shall be deemed to have become the stockholder of record on the next
succeeding date on which the transfer books are open, provided that the Series E
Conversion Price shall be that Series E Conversion Price in effect on the Series
E Conversion Date.
E.6(b)(v) Upon conversion of only a portion of the number of shares
covered by a Series E Preferred Certificate, the Corporation shall issue and
deliver to or upon the written order of the holder of such Series E Preferred
Certificate, at the expense of the Corporation, a new certificate covering the
number of shares of the Series E Stock representing the unconverted number of
shares of Series E Stock represented by such Series E Preferred Certificate,
which new certificate shall entitle the holder thereof to all the rights, powers
and privileges of a holder of such shares.
E.6(c)(i) If a Series E Stockholder shall surrender more than one share of
Series E Stock for conversion at any one time, then the number of full shares of
Common Stock issuable upon conversion thereof shall be computed on the basis of
the aggregate number of shares of Series E Stock so surrendered.
E.6(c)(ii) No fractional shares of Common Stock shall be issued upon
conversion of Series E Stock. The Corporation shall pay a cash adjustment for
any such fractional interest in an amount equal to the Current Market Price
thereof on the Series E Conversion Date, as determined in accordance with
Section A.7(d)(vii) hereof.
E.6(d) For all purposes of this Section E.6, the "Series E Conversion
Price" with respect to the Series E Stock shall be equal to the Series E
Original Purchase Price with respect to each such share of Series E Stock,
subject to adjustment from time to time as follows:
E.6(d)(i) If the number of shares of Common Stock outstanding at any time
after the Series E Conversion Price Original Issuance Date is increased by a
stock dividend payable in shares of Common Stock or by a subdivision or split-up
of shares of Common Stock, then, following the record date fixed for the
determination of holders of Common Stock entitled to receive such stock
dividend, subdivision or split-up, the Series E Conversion Price shall be
appropriately decreased so that the number of shares of Common Stock issuable on
conversion of each share of Series E Stock shall be increased in proportion to
such increase in outstanding shares.
E.6(d)(ii) If, at any time after the Series E Conversion Price Original
Issuance Date, the number of shares of Common Stock outstanding is decreased by
a combination of the outstanding shares of Common Stock, then, following the
record date for such combination, the Series E Conversion Price shall be
appropriately increased so that the number of shares of Common Stock issuable on
conversion of each share of Series E Stock shall be decreased in proportion to
such decrease in outstanding shares.
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E.6(d)(iii) In the event, at any time after the Series E Conversion Price
Original Issuance Date, of any Extraordinary Transaction, then the Corporation
shall provide appropriate adjustment to the Series E Conversion Price with
respect to each share of Series E Stock outstanding after the effectiveness of
such Extraordinary Transaction (and excluding any Series E Stock redeemed
pursuant to Section E.4(f) hereof in connection therewith) such that each share
of Series E Stock outstanding immediately prior to the effectiveness of the
Extraordinary Transaction (other than the shares redeemed pursuant to Section
E.4(f) hereof) shall be convertible into the kind and number of shares of stock
or other securities or property of the Corporation, or of the corporation
resulting from or surviving such Extraordinary Transaction, that a holder of the
number of shares of Common Stock deliverable (immediately prior to the
effectiveness of the Extraordinary Transaction) upon conversion of such share of
Series E Stock would have been entitled to receive upon such Extraordinary
Transaction. The provisions of this Section E.6(d)(iii) shall similarly apply
to successive Extraordinary Transactions.
E.6(d)(iv) All calculations under this Section E.6(d) shall be made to the
nearest one-thousandth of a cent ($.0001) or to the nearest one-thousandth of a
share, as the case may be.
E.6(d)(v) In any case in which the provisions of this Section E.6(d) shall
require that an adjustment shall become effective immediately after a record
date for an event, the Corporation may defer until the occurrence of such event
(A) issuing to the holder of any share of Series E Stock converted after such
record date and before the occurrence of such event the additional shares of
capital stock issuable upon such conversion by reason of the adjustment required
by such event over and above the shares of capital stock issuable upon such
conversion before giving effect to such adjustment and (B) paying to such holder
any cash amounts in lieu of fractional shares pursuant to Section E.6(c)(ii)
hereof; provided, however, that the Corporation shall deliver to such holder a
due bill or other appropriate instrument evidencing such holder's right to
receive such additional shares, and such cash, upon the occurrence of the event
requiring such adjustment.
E.6(d)(v) If a state of facts shall occur that, without being specifically
controlled by the provisions of this Section E.6, would not fairly protect the
conversion rights of the holders of the Series E Stock in accordance with the
essential intent and principles of such provisions, then the Board of Directors
shall make an adjustment in the application of such provisions, in accordance
with such essential intent and principles, so as to protect such conversion
rights.
E.6(e) Whenever the Series E Conversion Price shall be adjusted as
provided in Section E.6(d) hereof, the Corporation shall forthwith file and keep
on record at the office of the Secretary of the Corporation and at the office of
the transfer agent for the Series E Stock or at such other place as may be
designated by the
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Corporation, a statement, signed by its President or Chief Executive Officer and
by its Treasurer or Chief Financial Officer, showing in detail the facts
requiring such adjustment and the Series E Conversion Price that shall be in
effect after such adjustment. The Corporation shall also cause a copy of such
statement to be sent by first-class, certified mail, return receipt requested,
postage prepaid, to each Series E Stockholder at such holder's address appearing
on the Corporation's records. Where appropriate, such copy shall be given in
advance of any such adjustment and shall be included as part of a notice
required to be mailed under the provisions of Section E.6(f) hereof.
E.6(f) In the event the Corporation shall propose to take any action of
the types described in Section E.6(d)(i), (ii) or (iii) hereof, or any other
Event of Sale, the Corporation shall give notice to each Series E Stockholder in
the manner set forth in Section E.6(e) hereof, which notice shall specify the
record date, if any, with respect to any such action and the date on which such
action is to take place. Such notice shall also set forth such facts with
respect thereto as shall be reasonably necessary to indicate the effect of such
action (to the extent such effect may be known at the date of such notice) on
the Series E Conversion Price and the number, kind or class of shares or other
securities or property which shall be deliverable or purchasable upon each
conversion of Series E Stock. In the case of any action that would require the
fixing of a record date, such notice shall be given at least 20 days prior to
the record date so fixed, and in the case of any other action, such notice shall
be given at least 30 days prior to the taking of such proposed action.
E.6(g) The Corporation shall pay all documentary, stamp or other
transactional taxes attributable to the issuance or delivery of shares of
capital stock of the Corporation upon conversion of any shares of Series E
Stock; provided, however, that the Corporation shall not be required to pay any
taxes which may be payable in respect of any transfer involved in the issuance
or delivery of any certificate for such shares in a name other than that of the
Series E Stockholder in respect of which such shares of Series E Stock are being
issued.
E.6(h) The Corporation shall reserve out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the
Series E Stock sufficient shares of Common Stock to provide for the conversion
of all outstanding shares of Series E Stock.
E.6(i) All shares of Common Stock which may be issued in connection with
the conversion provisions set forth herein will, upon issuance by the
Corporation, be validly issued, fully paid and nonassessable, not subject to any
preemptive or similar rights and free from all taxes, liens or charges with
respect thereto created or imposed by the Corporation.
E.6(j) Upon the consummation of a firm commitment underwritten public
offering of Common Stock of the Corporation registered under the Securities Act
of
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1933, each share of Series E Stock then outstanding shall, by virtue of and
immediately prior to the closing of such firm commitment public offering and
without any action on the part of the holder thereof, be deemed automatically
converted into that number of shares of Common Stock in which the Series E Stock
would be convertible if such conversion were to occur at the time of the public
offering of Common Stock. The holder of any shares of Series E Stock converted
into Common Stock pursuant to this Section E.6(j) shall be entitled to payment
of all declared but unpaid dividends, if any, payable on or with respect to such
shares up to and including the date of the closing of such public offering which
shall be deemed the Series E Conversion Date for purposes of this Section
E.6(j).
PART F. SERIES F CONVERTIBLE PREFERRED STOCK
F.1. Designation and Amount. The designation of this series of capital
stock shall be "Series F Convertible Preferred Stock," par value $.0001 per
share (the "Series F Stock"). The number of shares, powers, terms, conditions,
designations, preferences and privileges, relative, participating, optional and
other special rights, and qualifications, limitations and restrictions, if any,
of the Series F Stock shall be as set forth herein. The number of authorized
shares of the Series F Stock is 1,638,335.
F.2. Ranking. The Corporation's Series F Stock shall rank, as to dividends
and upon redemption and Liquidation, (x) pari passu with the Series A Stock, the
Series B Stock, the Series D Stock and the Series G Stock, (y) senior and prior
to the Series C Stock and the Series E Stock (but, with respect to Liquidation,
only to the extent provided in Section F.4 below) and (z) senior and prior to
the Corporation's Common Stock and to all other classes or series of stock
issued by the Corporation, except as otherwise approved by the affirmative vote
or consent of the Series F Stockholders pursuant to Section F.6 hereof and (i)
in the case of a change in the relative ranking of the Series F Stock and the
Series A Stock, as otherwise approved by the affirmative vote or consent of the
Series A Stockholders pursuant to Section A.6 hereof, (ii) in the case of a
change in the relative ranking of the Series F Stock and the Series B Stock, as
otherwise approved by the affirmative vote or consent of the Series B
Stockholders pursuant to Section B.6 hereof, (iii) in the case of a change in
the relative ranking of the Series F Stock and the Series D Stock, as otherwise
approved by the affirmative vote or consent of the Series D Stockholders
pursuant to Section D.6 hereof or (iv) in the case of a change in the relative
ranking of the Series F Stock and the Series G Stock, as otherwise approved by
the affirmative vote or consent of the Series G Stockholders pursuant to Section
G.6 hereof; provided, however, that, notwithstanding anything in this Restated
Certificate to the contrary, the ranking of the Series F Stock relative to any
other class or series of capital stock of the Corporation (including, without
limitation, the Series A Stock, the Series B Stock, the Series C Stock, the
Series D Stock, the Series E Stock, the Series G Stock and the Common Stock) may
be changed or altered so as to lower the ranking of the Series F Stock relative
to such other class or series with the approval by affirmative vote or consent
of
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the holders of at least sixty-six and two thirds percent (66 2/3%) of the voting
power of the Series F Stock then outstanding (determined as set forth in the
second sentence of Section F.6(a) hereof) and without the vote or approval of
such other class or series or any other class or series of capital stock
(including, without limitation, the Series A Stock, the Series B Stock, the
Series C Stock, the Series D Stock, the Series E Stock, the Series G Stock and
the Common Stock) being required to lower such ranking of the Series F Stock.
F.3. Dividend Provisions.
F.3(a) The Series F Stockholders shall be entitled to receive, when and as
declared or paid by the Board of Directors on any shares of Series F Stock, out
of funds legally available for that purpose, dividends and distributions
(whether in cash, property or securities of the Corporation, including
subscription or other rights to acquire securities of the Corporation). Subject
to Section F.4(e)(ii) below, whenever any dividend may be declared or paid on
any shares of Series F Stock, the Board of Directors shall also declare and pay
a dividend on the same terms, at the same rate and in like kind upon each other
share of the Series F Stock then outstanding. Whenever any dividend, whether in
cash or property or in securities of the Corporation (or subscription or other
rights to purchase or acquire securities of the Corporation), may be declared or
paid on: (i) subject to Section F.4(e)(ii) below, any shares of the Common
Stock, the Board of Directors shall also declare and pay a dividend on the same
terms, at the same rate and in like kind upon each share of the Series F Stock
then outstanding so that all outstanding shares of Series F Stock will
participate in such dividend ratably with such shares of Common Stock
(calculated as provided in Section F.3(b) hereof); or (ii) subject to Section
F.4(e)(ii) below, any shares of any other series of Preferred Stock, the Board
of Directors shall also declare and pay a dividend on the same terms, at the
same or equivalent rate (based on the number of shares of Common Stock into
which such other series of Preferred Stock is then convertible, if applicable,
or, otherwise, the relative liquidation preference per share, as compared with
the Series F Stock then outstanding) and in like kind upon each share of Series
F Stock then outstanding, so that all Series F Stock will participate in such
dividend ratably with such shares of such other series of Preferred Stock.
F.3(b) In connection with any dividend declared or paid hereunder (other
than a dividend declared or paid only in respect of shares of Series F Stock and
in accordance with Section F.3(a) above), each share of Series F Stock shall be
deemed to be that number of shares (including fractional shares) of Common Stock
into which it is then convertible, rounded up to the nearest one-thousandth of a
share. No fractional shares of capital stock shall be issued as a dividend
hereunder. The Corporation shall pay a cash adjustment for any such fractional
interest in an amount equal to the fair market value thereof on the last
Business Day immediately preceding the date for payment of dividends, as
determined by the Board of Directors in good faith.
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F.4. Liquidation Rights.
F.4(a) With respect to rights on Liquidation, the Series F Stock shall
rank (x) pari passu with the Series A Stock, the Series B Stock, the Series D
Stock and the Series G Stock, (y) senior and prior to the Series C Stock and the
Series E Stock (but only to the extent provided in this Section F.4) and (z)
senior and prior to the Corporation's Common Stock and to all other classes or
series of stock issued by the Corporation, except as otherwise approved by the
affirmative vote or consent of the Series F Stockholders pursuant to Section F.6
hereof and (i) in the case of a change in the relative ranking upon Liquidation
of the Series F Stock and the Series A Stock, as otherwise approved by the
affirmative vote or consent of the Series A Stockholders pursuant to Section A.6
hereof, (ii) in the case of a change in the relative ranking upon Liquidation of
the Series F Stock and the Series B Stock, as otherwise approved by the
affirmative vote or consent of the Series B Stockholders pursuant to Section B.6
hereof, (iii) in the case of a change in the relative ranking upon Liquidation
of the Series F Stock and the Series D Stock, as otherwise approved by the
affirmative vote or consent of the Series D Stockholders pursuant to Section F.6
hereof or (iv) in the case of a change in the relative ranking upon Liquidation
of the Series F Stock and the Series G Stock, as otherwise approved by the
affirmative vote or consent of the Series G Stockholders pursuant to Section G.6
hereof; provided, however, that, notwithstanding anything in this Restated
Certificate to the contrary, the ranking upon Liquidation of the Series F Stock
relative to any other class or series of capital stock of the Corporation
(including, without limitation, the Series A Stock, the Series B Stock, the
Series C Stock, the Series D Stock, the Series E Stock, the Series G Stock and
the Common Stock) may be changed or altered so as to lower such ranking of the
Series F Stock relative to such other class or series with the approval by
affirmative vote or consent of the holders of at least sixty-six and two thirds
percent (66 2/3%) of the voting power of the Series F Stock then outstanding
(determined as set forth in the second sentence of Section F.6(a) hereof) and
without the vote or approval of such other class or series or any other class or
series of capital stock (including, without limitation, the Series A Stock, the
Series B Stock, the Series C Stock, the Series D Stock, the Series E Stock, the
Series G Stock and the Common Stock) being required to lower such ranking of the
Series F Stock.
F.4(b) Subject to Section F.4(e)(ii) hereof, in the event of any
Liquidation, the Series F Stockholders shall be entitled to receive out of the
assets of the Corporation legally available for distribution to its
stockholders, whether from capital, surplus or earnings, pari passu with the
rights of the Series A Stockholders, the Series B Stockholders, the Series D
Stockholders and the Series G Stockholders to receive payment of their
liquidation preference pursuant to Section A.4(b), Section B.4(b), Section
D.4(b) and Section G.4(b) hereof, respectively, but before any payment shall be
made to the holders of Series C Stock, Series E Stock, Common Stock or any other
class or series of stock ranking on Liquidation junior to such Series F Stock,
an amount per share equal to the Series F Original Purchase Price (as defined in
Section J.90 hereof), plus 10% per annum thereon, compounded annually, for each
share of
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Series F Stock from the Series F Liquidation Premium Original Issuance Date (as
defined in Section J.89 hereof) until the date of Liquidation, plus, in each
case, an amount equal to any declared but unpaid dividends thereon pursuant to
Section F.3(a) hereof.
F.4(c) Subject to Sections F.4(e)(ii), A.4(e)(ii), B.4(e)(ii), D.4(e)(ii)
and G.4(e)(ii) hereof, if, upon any Liquidation, the assets of the Corporation
available for distribution to its stockholders shall be insufficient to pay the
Series F Stockholders the full amount as to which each of them shall be entitled
pursuant to Section F.4(b) above and to pay to the Series A Stockholders, the
Series B Stockholders, the Series D Stockholders and the Series G Stockholders
the full amount as to which each of them shall be entitled pursuant to Section
A.4(b), Section B.4(b), Section D.4(b), Section G.4(b) and Section F.4(b)
hereof, respectively, then the Series F Stockholders, the Series A Stockholders,
the Series B Stockholders, the Series D Stockholders and the Series G
Stockholders shall share ratably in any distribution of assets according to the
respective amounts which would be payable to them in respect of the shares of
Series F Stock, Series A Stock, Series B Stock, Series D Stock and/or Series G
Stock, as the case may be, held upon such distribution if all amounts payable on
or with respect to such shares were paid in full.
F.4(d) Subject to Sections F.4(e)(ii), A.4(e)(ii), B.4(e)(ii), D.4(e)(ii)
and G.4(e)(ii), in the event of any Liquidation, after payment shall have been
made to (i) the Series F Stockholders, the Series A Stockholders, the Series B
Stockholders, the Series D Stockholders and the Series G Stockholders of the
full amount to which they shall be entitled pursuant to Sections F.4(b), A.4(b),
B.4(b), D.4(b) and G.4(b) hereof, respectively, (ii) the Other Parity
Stockholders of the full amount to which they shall be entitled to receive on a
parity with the amounts referred to in clause (i) above and (iii) the Series C
Stockholders and the Series E Stockholders of the full amount to which they
shall be entitled pursuant to Sections C.4(b) and E.4(b) hereof, respectively,
then with respect to each other class or series of capital stock (other than the
Series C Stock, the Series E Stock and the Common Stock) ranking on Liquidation
junior to such Series F Stock (in descending order of seniority), the Series F
Stockholders, as a class, the Series A Stockholders, as a class, the Series B
Stockholders, as a class, the Series D Stockholders, as a class, the Series G
Stockholders, as a class, the Other Parity Stockholders, as a class, the Series
C Stockholders, as a class, and the Series E Stockholders, as a class, shall be
entitled to receive an amount equal (and in like kind) to the aggregate
preferential amount fixed for each such junior class or series of capital stock,
which amount shall be distributed ratably among (i) the Series F Stockholders in
an equal amount per share of the Series F Stock then outstanding, (ii) the
Series A Stockholders in an equal amount per share of the Series A Stock then
outstanding, (iii) the Series B Stockholders in an equal amount per share of the
Series B Stock then outstanding, (iv) the Series D Stockholders in an equal
amount per share of the Series D Stock then outstanding, (v) the Series G
Stockholders in an equal amount per share of the Series G Stock then
outstanding, (vi) the Other Parity Stockholders in an equal amount per share of
the Other Parity Stock then outstanding, (vii) the Series C
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Stockholders in an equal amount per share of the Series C Stock then outstanding
and (viii) the Series E Stockholders in an equal amount per share of the Series
E Stock then outstanding. If, upon any Liquidation, the assets of the
Corporation available for distribution to its stockholders shall be insufficient
to pay the Series F Stockholders, the Series A Stockholders, the Series B
Stockholders, the Series D Stockholders, the Series G Stockholders, the Other
Parity Stockholders, the Series C Stockholders, the Series E Stockholders and
each class or series of capital stock (other than the Series C Stock, the Series
E Stock and the Common Stock) junior to the Series F Stock the full amounts to
which they shall be entitled pursuant to the immediately preceding sentence, the
Series F Stockholders, the Series A Stockholders, the Series B Stockholders, the
Series D Stockholders, the Series G Stockholders the Other Parity Stockholders,
the Series C Stockholders, the Series E Stockholders and each such other class
or series of capital stock shall share ratably in any distribution of assets
according to the respective preferential amounts fixed for the Series F Stock
(pursuant to this Section F.4(d)), the Series A Stock (pursuant to Section
A.4(d) hereof), the Series B Stock (pursuant to Section B.4(d) hereof), the
Series D Stock (pursuant to Section D.4(d) hereof), the Series G Stock (pursuant
to Section G.4(d) hereof), the Other Parity Stock (pursuant to the applicable
terms thereof), the Series C Stock (pursuant to Section C.4(d) hereof), the
Series E Stock (pursuant to Section E.4(d) hereof) and each such junior class or
series of capital stock (pursuant to the applicable terms thereof), which would
be payable in respect of the shares held by them upon such distribution if all
such preferential amounts payable on or with respect to such shares were paid in
full.
F.4(e)(i) Subject to Sections F.4(e)(ii), A.4(e)(ii), B.4(e)(ii),
D.4(e)(ii) and G.4(e)(ii) hereof, in the event of any Liquidation, after payment
shall have been made to the Series F Stockholders, the Series A Stockholders,
the Series B Stockholders, the Series D Stockholders, the Series G Stockholders,
the Other Parity Stockholders, the Series C Stockholders and the Series E
Stockholders of the full amount to which they shall be entitled as aforesaid,
and after payment shall have been made of the respective preferential amounts of
all other classes and series of capital stock ranking senior to the Common
Stock, the Series F Stockholders, the Series A Stockholders, the Series B
Stockholders, the Series D Stockholders, the Series G Stockholders, the Other
Parity Stockholders, the Series C Stockholders and the Series E Stockholders
shall be entitled to share ratably (calculated with respect to such Series F
Stock, Series A Stock, Series B Stock, Series D Stock, Series G Stock, Other
Parity Stock, Series C Stock and Series E Stock as provided in the next
sentence) with the Common Stockholders in all remaining assets of the
Corporation available for distribution to its stockholders. For purposes of
calculating the amount of any payment to be paid pursuant to this Section
F.4(e)(i) upon any such Liquidation, each share of Series F Stock, each share of
Series A Stock, each share of Series B Stock, each share of Series D Stock, each
share of Series G Stock, each share of any such Other Parity Stock, each share
of Series C Stock and each share of Series E Stock shall be deemed to be that
number of shares (including fractional shares) of Common Stock into which it is
then convertible, rounded to the nearest one-thousandth of a share.
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F.4(e)(ii) Notwithstanding anything to the contrary set forth herein, in
no event shall the aggregate amount received in respect of each share of Series
F Stock (and any shares of capital stock or other securities issued in respect
thereof) pursuant to Section F.3 above, this Section F.4 and Section A.5 above
exceed an amount equal to the greater of (i) $4.00 for each such share, or (ii)
the aggregate amount of all payments made by the Corporation pursuant to any of
the provisions of this Restated Certificate (regardless of whether such payments
consist of dividends, payments made upon Liquidation or any Special Liquidation
or payments made upon any redemption pursuant to Section A.5 hereof) in respect
of all shares of its capital stock since February 29, 1996 multiplied by a
fraction, the numerator of which equals the quotient of the number of shares of
Common Stock issuable upon conversion of the Series F Stock then outstanding,
rounded up to the nearest one-thousandth of a share, divided by the number of
shares of Series F Stock then outstanding, and the denominator of which equals
the sum of the number of shares of Common Stock then outstanding, plus the
number of shares of Common Stock issuable upon conversion of the Series F Stock,
the Series A Stock, the Series B Stock, the Series D Stock, the Series G Stock,
any Other Parity Stock, the Series C Stock and the Series E Stock then
outstanding, rounded up to the nearest one-thousandth of a share.
F.4(f)(i) In the event of and simultaneously with the closing of an Event
of Sale, the Corporation shall (unless waived pursuant to Section F.4(f)(v) or
otherwise prevented by law) redeem all of the shares of Series F Stock then
outstanding for a cash amount per share determined as set forth herein (the
"Series F Special Liquidation Price"), said redemption to occur simultaneously
with the redemption of all of the outstanding shares of Series A Stock, Series B
Stock, Series C Stock, Series D Stock, Series E Stock and Series G Stock
pursuant to Sections A.4(f), B.4(f), C.4(f), D.4(f), E.4(f) and G.4(f),
respectively, and of all outstanding shares of Other Parity Stock pursuant to
the applicable terms thereof, in connection with any such closing. The rights
of the Series F Stockholders to receive the Series F Special Liquidation Price
pursuant to this Section F.4(f) shall be (x) pari passu with the rights of the
Series A Stockholders to receive the Series A Special Liquidation Price pursuant
to Section A.4(f) hereof, with the rights of the Series B Stockholders to
receive the Series B Special Liquidation Price pursuant to Section B.4(f)
hereof, with the rights of the Series D Stockholders to receive the Series D
Special Liquidation Price pursuant to Section D.4(f) hereof, with the rights of
the Series G Stockholders to receive the Series G Special Liquidation Price
pursuant to Section G.4(f) hereof and with the rights of the Other Parity
Stockholders to receive the Other Parity Stock Special Liquidation Price
pursuant to the applicable terms of the Other Parity Stock, and (y) senior and
prior to the rights of the Series C Stockholders to receive the Series C Special
Liquidation Price pursuant to Section C.4(f) and to the rights of the Series E
Stockholders to receive the Series E Special Liquidation Price pursuant to
Section E.4(f). For all purposes of this Section F.4(f), the Series F Special
Liquidation Price shall be equal to that amount per share which would be
received by each Series F Stockholder if, in connection with an Event of Sale,
all the consideration paid in exchange for the assets or the shares of
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capital stock (as the case may be) of the Corporation were actually paid to and
received by the Corporation and the Corporation were immediately thereafter
liquidated and its assets distributed pursuant to Sections F.4(a) through (e)
hereof. To the extent that one or more redemptions (as described in Section A.5
hereof) and a Special Liquidation are occurring concurrently, the Special
Liquidation shall be deemed to occur first.
F.4(f)(ii) At any time on or after the Special Liquidation Date, a Series
F Stockholder shall be entitled, subject to the provisions of Section
F.4(f)(iii) hereof, to receive the Series F Special Liquidation Price for each
such share of Series F Stock owned by such holder. Subject to the provisions of
Section F.4(f)(iii) hereof, payment of the Series F Special Liquidation Price
will be made upon actual delivery to the Corporation or its transfer agent of
the certificate representing such shares of Series F Stock.
F.4(f)(iii) If on the Special Liquidation Date less than all the shares of
Series F Stock, Series A Stock, Series B Stock, Series D Stock, Series G Stock,
Other Parity Stock, Series C Stock and Series E Stock then outstanding may be
legally redeemed by the Corporation, the Special Liquidation shall be effected
(x) first, with respect to such Series F Stock, Series A Stock, Series B Stock,
Series D Stock, Series G Stock and Other Parity Stock on a pro rata basis (based
upon the amounts which would be payable to the Series F Stockholders, the Series
A Stockholders, Series B Stockholders, Series D Stockholders and Series G
Stockholders pursuant to this Section F.4(f), Section A.4(f), Section B.4(f),
Section D.4(f) and Section G.4(f) hereof, respectively, and to the Other Parity
Stockholders pursuant to the applicable terms of the Other Parity Stock, upon a
Special Liquidation if the Corporation had sufficient funds legally available to
effect a redemption of all outstanding shares of Series F Stock, Series A Stock,
Series B Stock, Series D Stock, Series G Stock and Other Parity Stock on the
Special Liquidation Date) until all of the shares of Series F Stock, Series A
Stock, Series B Stock, Series D Stock, Series G Stock and Other Parity Stock
then outstanding are redeemed, and (y) second, with respect to such Series C
Stock and Series E Stock on a pro rata basis (based upon the amounts which would
be payable to each of the Series C Stockholders and Series E Stockholders
pursuant to Sections C.4(f) and E.4(f) hereof, respectively, upon a Special
Liquidation if the Corporation had sufficient funds legally available to effect
a redemption of all outstanding shares of Series C Stock and Series E Stock on
the Special Liquidation Date) if but only if, after the redemption of all of the
shares of Series F Stock, Series A Stock, Series B Stock, Series D Stock, Series
G Stock and Other Parity Stock outstanding immediately prior to the Special
Liquidation, the Corporation may legally redeem shares of Series C Stock and
Series E Stock.
F.4(f)(iv) On and after any Special Liquidation Date, all rights in
respect of the shares of Series F Stock redeemed shall cease and terminate
except the right to receive the applicable Series F Special Liquidation Price as
provided herein, and such shares of Series F Stock shall no longer be deemed to
be outstanding, whether or not the certificates representing such shares of
Series F Stock have been
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received by the Corporation; provided, however, that, if the Corporation
defaults in the payment of the Series F Special Liquidation Price with respect
to any Series F Stock, the rights of the holder(s) thereof with respect to such
shares of Series F Stock shall continue until the Corporation cures such
default.
F.4(f)(v) Anything contained herein to the contrary notwithstanding, the
rights of the Series F Stockholders under this Section F.4(f) may be waived by
the holders of a majority of the combined voting power of the shares of Series F
Stock, Series A Stock, Series B Stock, Series D Stock and Series G Stock then
outstanding, voting together as one class, by delivery of written notice of
waiver to the Corporation prior to the closing of any Event of Sale, in which
event the Corporation shall not redeem any shares of Series F Stock pursuant to
this Section F.4(f).
F.4(f)(vi) Any notice required to be given to the holders of shares of
Series F Stock pursuant to Section F.7(f) hereof in connection with an Event of
Sale shall include a statement by the Corporation of (A) the Series F Special
Liquidation Price which each Series F Stockholder shall be entitled to receive
pursuant to this Section F.4(f) upon the occurrence of a Special Liquidation and
(B) the extent to which the Corporation will, if at all, be legally prohibited
from paying each holder of Series F Stock the Series F Special Liquidation
Price.
F.5. Redemption.
The Corporation may, from time to time, be required to redeem shares of
Series F Stock subject to and upon the terms and conditions of Section A.5
hereof.
F.6. Voting.
F.6(a) In addition to any other rights provided for herein or by law, the
Series F Stockholders shall be entitled to vote, together with the Series A
Stockholders, the Series B Stockholders, the Series C Stockholders, the Series D
Stockholders, the Series E Stockholders, the Series G Stockholders and the
Common Stockholders, as one class, on all matters as to which Common
Stockholders shall be entitled to vote, in the same manner and with the same
effect as such Common Stockholders. In any such vote, each share of Series F
Stock shall entitle the holder thereof to the number of votes per share that
equals the number of shares of Common Stock (including fractional shares) into
which each such share of Series F Stock is then convertible, rounded up to the
nearest one-thousandth of a share.
F.6(b) The Corporation shall not, without the affirmative approval of the
holders of shares representing at least sixty-six and two-thirds percent (66
2/3%) of the voting power of the Series F Stock then outstanding (determined as
set forth in the second sentence of Section F.6(a) hereof), acting separately
from the holders of Series A Stock, Series B Stock, Series C Stock, Series D
Stock, Series E Stock, Series G Stock, Common Stock or any other securities of
the Corporation, given by written consent in lieu of a meeting or by vote at a
meeting called for such purpose, for which
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meeting timely and specific notice shall have been given to each holder of
Series F Stock, in the manner provided in the By-laws of the Corporation: (i)
authorize, designate, create, issue or agree to issue any shares of Series F
Stock other than those shares of Series F Stock issued or issuable pursuant to
the Series F Stock Purchase Agreement; (ii) take any action to cause any
amendment, alteration or repeal of any of the provisions of this Restated
Certificate or the By-laws of the Corporation, which amendment, alteration or
repeal adversely affects the powers, preferences or rights pertaining to the
Series F Stock, provided, however, that any such amendment, alteration or repeal
shall not require the separate class vote of the Series F Stock pursuant to this
Section F.6(b) to the extent that the effect thereof is to create an additional
class or series of Preferred Stock ranking pari passu with the Series A Stock,
the Series B Stock, the Series D Stock and the Series G Stock as to dividends,
upon Liquidation or redemption, or in any other respect; or (iii) except for the
issuance of capital stock or other securities constituting shares of Excluded
Stock, authorize, designate, create, issue or agree to issue any equity security
of the Corporation ranking senior to the Series F Stock as to dividends, upon
Liquidation or redemption, or in any other respect, or any security, right,
option or warrant convertible into, or exercisable or exchangeable for, any such
equity security of the Corporation.
F.6(c) The Corporation shall not, without the affirmative approval of the
holders of shares representing at least sixty-six and two-thirds percent (66
2/3%) of the combined voting power of the Series F Stock, Series A Stock, Series
B Stock, Series D Stock and Series G Stock then outstanding, voting together as
one class (which voting power shall be determined, in the case of the Series F
Stock, as set forth in the second sentence of Section F.6(a) hereof, in the case
of the Series A Stock, as set forth in the second sentence of Section A.6(a)
hereof, in the case of the Series B Stock, as set forth in the second sentence
of Section B.6(a) hereof, in the case of the Series D Stock, as set forth in the
second sentence of Section D.6(a) hereof), and in the case of the Series G
Stock, as set forth in the second sentence of Section G.6(a) hereof), given by
written consent in lieu of a meeting or by vote at a meeting called for such
purpose, for which meeting timely and specific notice shall have been given to
each holder of Series F Stock, Series A Stock, Series B Stock, Series D Stock
and Series G Stock, in the manner provided in the By-laws of the Corporation:
(i) sell, abandon, transfer, lease or otherwise dispose of all or substantially
all of its properties or assets other than in the ordinary course of its
business; (ii) purchase, lease or otherwise acquire all or substantially all of
the assets of another entity; (iii) except as otherwise required by this
Restated Certificate and except to the extent otherwise permitted in clause (iv)
below, declare or pay any dividend or make any distribution with respect to
shares of its capital stock (whether in cash, securities or property, but
excluding any stock dividends or stock splits); (iv) except as otherwise
required by this Restated Certificate or in any agreement approved by the Board
of Directors with a director, officer, employee, consultant or independent
contractor of or to the Corporation providing for the repurchase of any of its
capital stock owned by such director, officer, employee, consultant or
independent contractor at the option of the Corporation, provided that such
agreements are (A) set forth on Schedule 5.2 to the
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Series A Stock Purchase Agreement, Schedule 4.2 to the Series B Stock
Purchase Agreement, Schedule 4.2 to the Series D Stock Purchase Agreement,
Schedule 4.2 to the Series F Stock Purchase Agreement or Schedule 4.2 to the
Series G Securities Purchase Agreement, or (B) entered into (1) pursuant to, and
upon the exercise of any outstanding stock option granted under, the 1993 Stock
Option Plan or any other stock option plan which has been adopted by the
Corporation and approved by the Board of Directors and by the holders of at
least 66 2/3% of the combined voting power of the Series F Stock, Series A
Stock, Series B Stock, Series D Stock and Series G Stock then outstanding
(including any outstanding shares of Common Stock issued upon conversion
thereof), voting together as one class, and (2) pursuant to the forms of stock
option agreements that have been approved by the Board of Directors on or before
the date of the Series A Stock Purchase Agreement or a form of stock option
agreement under the 1993 Stock Option Plan (or such other plan) that is
satisfactory in form and in substance, except for immaterial changes thereto
made from time to time by officers of the Corporation, to the Board of Directors
and to the holders of at least 66 2/3% of the combined voting power of the
Series F Stock, Series A Stock, Series B Stock, Series D Stock and Series G
Stock then outstanding (including any outstanding shares of Common Stock issued
upon conversion thereof), voting together as one class, make any payment on
account of the purchase, redemption or other retirement of any share of capital
stock of the Corporation, or distribute to Common Stockholders shares of the
Corporation's capital stock (other than Common Stock) or other securities of
other entities, evidences of indebtedness issued by the Corporation or other
entities, or other assets or options or rights (excluding options to purchase
and rights to subscribe for shares of Common Stock or the securities of the
Corporation convertible into or exchangeable for shares of Common Stock); (v)
merge or consolidate with and into, or permit any subsidiary to merge or
consolidate with and into, any other corporation, corporations or other entity
or entities; (vi) voluntarily dissolve, liquidate or wind-up or carry out any
partial liquidation or distribution or transaction in the nature of a partial
liquidation or distribution; (vii) except for the issuance of capital stock or
other securities constituting shares of Excluded Stock, authorize, designate,
create, issue or agree to issue any equity security of the Corporation or any
security, right, option or warrant convertible into, or exercisable or
exchangeable for, any such equity security of the Corporation or any debt
security or capitalized lease with an equity feature with respect to the capital
stock of the Corporation; (viii) adopt, amend or modify any stock option plan of
the Corporation; or (ix) accelerate the vesting schedule or exercise date or
dates of any such options or in any stock option agreement entered into between
the Corporation and its directors, officers, employees, consultants or
independent contractors, or amend or otherwise modify the Corporation's
repurchase rights with respect to any shares of the Corporation's stock issuable
pursuant to any restricted stock purchase agreement entered into between the
Corporation and its directors, officers, employees, consultants or independent
contractors.
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F.7. Conversion.
F.7(a)(i) Any Series F Stockholder shall have the right, at any time or
from time to time, to convert any or all of its Series F Stock into that number
of fully paid and nonassessable shares of Common Stock for each share of Series
F Stock so converted equal to the quotient of the Series F Original Purchase
Price for such share divided by the Series F Conversion Price (as defined in
Section F.7(d) hereof) for such share, as last adjusted and then in effect,
rounded up to the nearest one-thousandth of a share; provided, however, that
cash shall be paid in lieu of the issuance of fractional shares of Common Stock,
as provided in Section F.7(c)(ii) hereof.
F.7(a)(ii) Any Series F Stockholder who exercises the right to convert
shares of Series F Stock into shares of Common Stock, pursuant to this Section
F.7, shall be entitled to payment of all declared but unpaid dividends payable
with respect to such Series F Stock pursuant to Section F.3(a) herein, up to and
including the Series F Conversion Date (as defined in Section F.7(b)(ii)
hereof).
F.7(b)(i) Any Series F Stockholder may exercise the right to convert such
shares into Common Stock pursuant to this Section F.7 by delivering to the
Corporation during regular business hours, at the office of the Corporation or
any transfer agent of the Corporation or at such other place as may be
designated by the Corporation, the certificate or certificates for the shares to
be converted (each a "Series F Preferred Certificate"), duly endorsed or
assigned in blank to the Corporation (if required by it).
F.7(b)(ii) Each Series F Preferred Certificate shall be accompanied by
written notice stating that such holder elects to convert such shares and
stating the name or names (with address) in which the certificate or
certificates for the shares of Common Stock are to be issued. Such conversion
shall be deemed to have been effected on the date when such delivery is made,
and such date is referred to herein as the "Series F Conversion Date."
F.7(b)(iii) As promptly as practicable thereafter, the Corporation shall
issue and deliver to or upon the written order of such holder, at the place
designated by such holder, a certificate or certificates for the number of full
shares of Common Stock to which such holder is entitled and a check or cash in
respect of any fractional interest in any shares of Common Stock, as provided in
Section F.7(c)(ii) hereof, payable with respect to the shares so converted up to
and including the Series F Conversion Date.
F.7(b)(iv) The person in whose name the certificate or certificates for
Common Stock are to be issued shall be deemed to have become a holder of record
of Common Stock on the applicable Series F Conversion Date, unless the transfer
books of the Corporation are closed on such Series F Conversion Date, in which
event the holder shall be deemed to have become the stockholder of record on the
next
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succeeding date on which the transfer books are open, provided that the Series F
Conversion Price shall be that Series F Conversion Price in effect on the Series
F Conversion Date.
F.7(b)(v) Upon conversion of only a portion of the number of shares
covered by a Series F Preferred Certificate, the Corporation shall issue and
deliver to or upon the written order of the holder of such Series F Preferred
Certificate, at the expense of the Corporation, a new certificate covering the
number of shares of the Series F Stock representing the unconverted number of
shares of Series F Stock represented by such Series F Preferred Certificate,
which new certificate shall entitle the holder thereof to all the rights, powers
and privileges of a holder of such shares.
F.7(c)(i) If a Series F Stockholder shall surrender more than one share of
Series F Stock for conversion at any one time, then the number of full shares of
Common Stock issuable upon conversion thereof shall be computed on the basis of
the aggregate number of shares of Series F Stock so surrendered.
F.7(c)(ii) No fractional shares of Common Stock shall be issued upon
conversion of Series F Stock. The Corporation shall pay a cash adjustment for
any such fractional interest in an amount equal to the Current Market Price
thereof on the Series F Conversion Date, as determined in accordance with
Section F.7(d)(vii) hereof.
F.7(d) For all purposes of this Section F.7, the "Series F Conversion
Price" with respect to the Series F Stock shall be equal to the Series F
Original Purchase Price with respect to each such share of Series F Stock,
subject to adjustment from time to time as follows:
F.7(d)(i) If the Corporation shall, at any time or from time to time after
the Series F Conversion Price Original Issuance Date, issue any shares of Common
Stock (which term, for purposes of this Section F.7(d), including all
subsections thereof, shall be deemed to include all other securities convertible
into, or exchangeable or exercisable for, shares of Common Stock (including, but
not limited to, Series F Stock, Series A Stock, Series B Stock, Series C Stock,
Series D Stock, Series E Stock and Series G Stock) or options to purchase or
other rights to subscribe for such convertible or exchangeable securities, in
each case other than Excluded Stock), for a consideration per share less than
the applicable Series F Conversion Price in effect immediately prior to the
issuance of such Common Stock or other securities, the Series F Conversion Price
in effect immediately prior to each such issuance shall automatically (except as
otherwise provided in this Section F.7(d)) be lowered to a price equal to the
quotient obtained by dividing
(X) an amount equal to the sum of
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(1) the total number of shares of Common Stock outstanding (including any
shares of Common Stock deemed outstanding after giving effect to the provisions
of Section F.7(d)(ii)(D) with respect to then outstanding options or other
rights to purchase or subscribe for Common Stock, securities by their terms
convertible into or exchangeable for Common Stock (including, without
limitation, the Series A Stock, Series B Stock, Series C Stock, Series D Stock,
Series E Stock, Series F Stock and Series G Stock), or options to purchase or
other rights to subscribe for such convertible or exchangeable securities, in
each case regardless of whether any of such securities referred to in this
clause (1) constitutes Excluded Stock) immediately prior to such issuance
multiplied by the Series F Conversion Price in effect immediately prior to such
issuance, plus
(2) the consideration received by the Corporation upon such issuance,
by
(Y) the total number of shares of Common Stock outstanding (including any
shares of Common Stock deemed outstanding after giving effect to the provisions
of Section F.7(d)(ii)(D) with respect to all outstanding options or other rights
to purchase or subscribe for Common Stock, securities by their terms convertible
into or exchangeable for Common Stock (including, without limitation, the Series
A Stock, Series B Stock, Series C Stock, Series D Stock, Series E Stock, Series
F Stock and Series G Stock), or options to purchase or other rights to subscribe
for such convertible or exchangeable securities, in each case regardless of
whether any of such securities constitutes Excluded Stock) immediately after
such issuance.
F.7(d)(ii) For the purposes of any adjustment of the Series A Conversion
Price pursuant to Section F.7(d)(i), the following provisions shall be
applicable:
F.7(d)(ii)(A) In the case of the issuance of Common Stock in whole or in
part for cash, the consideration shall be deemed to be the amount of cash paid
therefor after deducting therefrom any discounts, commissions or other expenses
allowed, paid or incurred by the Corporation for any underwriting or otherwise
in connection with the issuance and sale thereof, plus the value of any property
other than cash received by the Corporation, determined as provided in Section
F.7(d)(ii)(B) hereof, plus the value of any other consideration received by the
Corporation determined as set forth in Section F.7(d)(ii)(C) hereof.
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F.7(d)(ii)(B) In the case of the issuance of Common Stock for a
consideration in whole or in part in property other than cash, the value of such
property other than cash shall be deemed to be the fair market value of such
property as determined in good faith by the Board of Directors, irrespective of
any accounting treatment; provided, however, that such fair market value of such
property as determined by the Board of Directors shall not exceed the aggregate
Current Market Price of the shares of Common Stock being issued, less any cash
consideration paid for such shares, determined as provided in Section
F.7(d)(ii)(A) hereof, and less any other consideration received by the
Corporation for such shares, determined as set forth in Section F.7(d)(ii)(C)
hereof.
F.7(d)(ii)(C) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash or property, the value of such
other consideration shall be deemed to be the fair market value of such other
consideration as determined in good faith by the Board of Directors,
irrespective of any accounting treatment; provided, however, that such fair
market value of such other consideration as determined by the Board of Directors
shall not exceed the aggregate Current Market Price of the shares of Common
Stock being issued, less any cash consideration paid for such shares, determined
as provided in Section F.7(d)(ii)(A) hereof and less the fair market value of
any property received by the Corporation for such shares, determined as set
forth in Section F.7(d)(ii)(B) hereof.
F.7(d)(ii)(D) In the case of the issuance of options or other rights to
purchase or subscribe for Common Stock, securities by their terms convertible
into or exchangeable for Common Stock or options to purchase or other rights to
subscribe for such convertible or exchangeable securities:
F.7(d)(ii)(D)(1) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options to purchase or rights to subscribe for
Common Stock (said maximum number of shares being that set forth in the
instrument relating to such options or rights to subscribe for Common Stock
without regard to any provision contained therein for a subsequent adjustment of
such number) shall be deemed to have been issued at the time such options or
rights were issued and for a consideration equal to the consideration
(determined in the manner provided in Sections F.7(d)(ii)(A), (B) and (C)
hereof), if any, received by the Corporation upon the issuance of such options
or rights plus the minimum purchase price provided in such options or rights for
the Common Stock covered thereby (the consideration in each case to be
determined in the manner provided in Sections F.7(d)(ii)(A), (B) and (C)
hereof);
F.7(d)(ii)(D)(2) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of, or in exchange for, any such convertible or
exchangeable securities or upon the exercise of options to purchase or rights to
subscribe for such convertible or exchangeable securities and subsequent
conversion or exchange thereof (said maximum number of shares being that set
forth in
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the instrument relating to such convertible or exchangeable securities without
regard to any provision contained therein for a subsequent adjustment of such
number) shall be deemed to have been issued at the time such securities were
issued or such options or rights were issued and for a consideration equal to
the consideration received by the Corporation for any such securities and
related options or rights (excluding any cash received on account of accrued
interest or accrued dividends), plus the minimum additional consideration, if
any, to be received by the Corporation upon the conversion or exchange of such
securities or the exercise of any related options or rights (the consideration
in each case to be determined in the manner provided in Sections F.7(d)(ii)(A),
(B) and (C) hereof);
F.7(d)(ii)(D)(3) if there is any change in the exercise price of, or
number of shares deliverable upon exercise of, any such options or rights or
upon the conversion or exchange of any such convertible or exchangeable
securities (other than a change resulting from the anti-dilution provisions
thereof), then the Series F Conversion Price shall automatically be readjusted
in proportion to such change; and
F.7(d)(ii)(D)(4) upon the expiration of any such options or rights or the
termination of any such rights to convert or exchange such convertible or
exchangeable securities, the Series F Conversion Price shall be automatically
readjusted to the Series F Conversion Price that would have obtained had such
options, rights or convertible or exchangeable securities not been issued.
F.7(d)(ii)(E) Anything contained herein to the contrary notwithstanding,
the provisions of this Section F.7(d) may be waived in any instance by the
holders of a majority in voting power of the shares of Series F Stock then
outstanding, by delivery of a written notice of waiver to the Corporation.
F.7(d)(iii) If the number of shares of Common Stock outstanding at any
time after the Series F Conversion Price Original Issuance Date is increased by
a stock dividend payable in shares of Common Stock or by a subdivision or
split-up of shares of Common Stock, then, following the record date fixed for
the determination of holders of Common Stock entitled to receive such stock
dividend, subdivision or split-up, the Series F Conversion Price shall be
appropriately decreased so that the number of shares of Common Stock issuable on
conversion of each share of Series F Stock shall be increased in proportion to
such increase in outstanding shares.
F.7(d)(iv) If, at any time after the Series F Conversion Price Original
Issuance Date, the number of shares of Common Stock outstanding is decreased by
a combination of the outstanding shares of Common Stock, then, following the
record date for such combination, the Series F Conversion Price shall be
appropriately increased so that the number of shares of Common Stock issuable on
conversion of each share of Series F Stock shall be decreased in proportion to
such decrease in outstanding shares.
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F.7(d)(v) In the event, at any time after the Series F Conversion Price
Original Issuance Date, of any Extraordinary Transaction, then the Corporation
shall provide appropriate adjustment to the Series F Conversion Price with
respect to each share of Series F Stock outstanding after the effectiveness of
such Extraordinary Transaction (and excluding any Series F Stock redeemed
pursuant to Section F.4(f) hereof in connection therewith) such that each share
of Series F Stock outstanding immediately prior to the effectiveness of the
Extraordinary Transaction (other than the shares redeemed pursuant to Section
F.4(f) hereof) shall be convertible into the kind and number of shares of stock
or other securities or property of the Corporation, or of the corporation
resulting from or surviving such Extraordinary Transaction, that a holder of the
number of shares of Common Stock deliverable (immediately prior to the
effectiveness of the Extraordinary Transaction) upon conversion of such share of
Series F Stock would have been entitled to receive upon such Extraordinary
Transaction. The provisions of this Section F.7(d)(v) shall similarly apply to
successive Extraordinary Transactions.
F.7(d)(vi) All calculations under this Section F.7(d) shall be made to the
nearest one-thousandth of a cent ($.0001) or to the nearest one-thousandth of a
share, as the case may be.
F.7(d)(vii) For the purpose of any computation pursuant to Section F.7(c)
hereof or this Section F.7(d), the Current Market Price at any date of one share
of Common Stock shall be determined in the manner provided in Section
A.7(d)(vii) hereof.
F.7(d)(viii) In any case in which the provisions of this Section F.7(d)
shall require that an adjustment shall become effective immediately after a
record date for an event, the Corporation may defer until the occurrence of such
event (A) issuing to the holder of any share of Series F Stock converted after
such record date and before the occurrence of such event the additional shares
of capital stock issuable upon such conversion by reason of the adjustment
required by such event over and above the shares of capital stock issuable upon
such conversion before giving effect to such adjustment and (B) paying to such
holder any cash amounts in lieu of fractional shares pursuant to Section
F.7(c)(ii) hereof; provided, however, that the Corporation shall deliver to such
holder a due bill or other appropriate instrument evidencing such holder's right
to receive such additional shares, and such cash, upon the occurrence of the
event requiring such adjustment.
F.7(d)(ix) If a state of facts shall occur that, without being
specifically controlled by the provisions of this Section F.7, would not fairly
protect the conversion rights of the holders of the Series F Stock in accordance
with the essential intent and principles of such provisions, then the Board of
Directors shall make an adjustment in the application of such provisions, in
accordance with such essential intent and principles, so as to protect such
conversion rights.
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F.7(e) Whenever the Series F Conversion Price shall be adjusted as
provided in Section F.7(d) hereof, the Corporation shall forthwith file and keep
on record at the office of the Secretary of the Corporation and at the office of
the transfer agent for the Series F Stock or at such other place as may be
designated by the Corporation, a statement, signed by its President or Chief
Executive Officer and by its Treasurer or Chief Financial Officer, showing in
detail the facts requiring such adjustment and the Series F Conversion Price
that shall be in effect after such adjustment. The Corporation shall also cause
a copy of such statement to be sent by first-class, certified mail, return
receipt requested, postage prepaid, to each Series F Stockholder at such
holder's address appearing on the Corporation's records. Where appropriate,
such copy shall be given in advance of any such adjustment and shall be included
as part of a notice required to be mailed under the provisions of Section F.7(f)
hereof.
F.7(f) In the event the Corporation shall propose to take any action of
the types described in Section F.7(d)(i), (iii), (iv) or (v) hereof, or any
other Event of Sale, the Corporation shall give notice to each Series F
Stockholder in the manner set forth in Section F.7(e) hereof, which notice shall
specify the record date, if any, with respect to any such action and the date on
which such action is to take place. Such notice shall also set forth such facts
with respect thereto as shall be reasonably necessary to indicate the effect of
such action (to the extent such effect may be known at the date of such notice)
on the Series F Conversion Price and the number, kind or class of shares or
other securities or property which shall be deliverable or purchasable upon each
conversion of Series F Stock. In the case of any action that would require the
fixing of a record date, such notice shall be given at least 20 days prior to
the record date so fixed, and in the case of any other action, such notice shall
be given at least 30 days prior to the taking of such proposed action.
F.7(g) The Corporation shall pay all documentary, stamp or other
transactional taxes attributable to the issuance or delivery of shares of
capital stock of the Corporation upon conversion of any shares of Series F
Stock; provided, however, that the Corporation shall not be required to pay any
taxes which may be payable in respect of any transfer involved in the issuance
or delivery of any certificate for such shares in a name other than that of the
Series F Stockholder in respect of which such shares of Series F Stock are being
issued.
F.7(h) The Corporation shall reserve out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the
Series F Stock sufficient shares of Common Stock to provide for the conversion
of all outstanding shares of Series F Stock.
F.7(i) All shares of Common Stock which may be issued in connection with
the conversion provisions set forth herein will, upon issuance by the
Corporation, be validly issued, fully paid and nonassessable, not subject to any
preemptive or similar
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rights and free from all taxes, liens or charges with respect thereto created or
imposed by the Corporation.
F.7(j) Upon the consummation of a firm commitment underwritten public
offering of Common Stock of the Corporation registered under the Securities Act
of 1933, pursuant to which the net proceeds to the Corporation are at least
$17,500,000, each share of Series F Stock then outstanding shall, by virtue of
and immediately prior to the closing of such firm commitment public offering and
without any action on the part of the holder thereof, be deemed automatically
converted into that number of shares of Common Stock in which the Series F Stock
would be convertible if such conversion were to occur at the time of the public
offering of Common Stock. The holder of any shares of Series F Stock converted
into Common Stock pursuant to this Section F.7(j) shall be entitled to payment
of all declared but unpaid dividends, if any, payable on or with respect to such
shares up to and including the date of the closing of such public offering which
shall be deemed the Series F Conversion Date for purposes of this Section
F.7(j).
PART G. SERIES G CONVERTIBLE PREFERRED STOCK
G.1. Designation and Amount. The designation of this series of capital
stock shall be "Series G Convertible Preferred Stock," par value $.0001 per
share (the "Series G Stock"). The number of shares, powers, terms, conditions,
designations, preferences and privileges, relative, participating, optional and
other special rights, and qualifications, limitations and restrictions, if any,
of the Series G Stock shall be as set forth herein. The number of authorized
shares of the Series G Stock is 4,285,715.
G.2. Ranking. The Corporation's Series G Stock shall rank, as to dividends
and upon redemption and Liquidation, (x) pari passu with the Series A Stock, the
Series B Stock, the Series D Stock and the Series F Stock, (y) senior and prior
to the Series C Stock and the Series E Stock (but, with respect to Liquidation,
only to the extent provided in Section G.4 below) and (z) senior and prior to
the Corporation's Common Stock and to all other classes or series of stock
issued by the Corporation, except as otherwise approved by the affirmative vote
or consent of the Series G Stockholders pursuant to Section G.6 hereof and (i)
in the case of a change in the relative ranking of the Series G Stock and the
Series A Stock, as otherwise approved by the affirmative vote or consent of the
Series A Stockholders pursuant to Section A.6 hereof, (ii) in the case of a
change in the relative ranking of the Series G Stock and the Series B Stock, as
otherwise approved by the affirmative vote or consent of the Series B
Stockholders pursuant to Section B.6 hereof, (iii) in the case of a change in
the relative ranking of the Series G Stock and the Series D Stock, as otherwise
approved by the affirmative vote or consent of the Series D Stockholders
pursuant to Section D.6 hereof or (iv) in the case of a change in the relative
ranking of the Series G Stock and the Series F Stock, as otherwise approved by
the affirmative vote or consent of the Series F Stockholders pursuant to Section
F.6 hereof; provided, however, that,
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notwithstanding anything in this Restated Certificate to the contrary, the
ranking of the Series G Stock relative to any other class or series of capital
stock of the Corporation (including, without limitation, the Series A Stock, the
Series B Stock, the Series C Stock, the Series D Stock, the Series E Stock, the
Series F Stock and the Common Stock) may be changed or altered so as to lower
the ranking of the Series G Stock relative to such other class or series with
the approval by affirmative vote or consent of the holders of at least sixty-six
and two thirds percent (66 2/3%) of the voting power of the Series G Stock then
outstanding (determined as set forth in the second sentence of Section G.6(a)
hereof) and without the vote or approval of such other class or series or any
other class or series of capital stock (including, without limitation, the
Series A Stock, the Series B Stock, the Series C Stock, the Series D Stock, the
Series E Stock, the Series F Stock and the Common Stock) being required to lower
such ranking of the Series G Stock.
G.3. Dividend Provisions.
G.3(a) The Series G Stockholders shall be entitled to receive, when and as
declared or paid by the Board of Directors on any shares of Series G Stock, out
of funds legally available for that purpose, dividends and distributions
(whether in cash, property or securities of the Corporation, including
subscription or other rights to acquire securities of the Corporation). Subject
to Section G.4(e)(ii) below, whenever any dividend may be declared or paid on
any shares of Series G Stock, the Board of Directors shall also declare and pay
a dividend on the same terms, at the same rate and in like kind upon each other
share of the Series G Stock then outstanding. Whenever any dividend, whether in
cash or property or in securities of the Corporation (or subscription or other
rights to purchase or acquire securities of the Corporation), may be declared or
paid on: (i) subject to Section G.4(e)(ii) below, any shares of the Common
Stock, the Board of Directors shall also declare and pay a dividend on the same
terms, at the same rate and in like kind upon each share of the Series G Stock
then outstanding so that all outstanding shares of Series G Stock will
participate in such dividend ratably with such shares of Common Stock
(calculated as provided in Section G.3(b) hereof); or (ii) subject to Section
G.4(e)(ii) below, any shares of any other series of Preferred Stock, the Board
of Directors shall also declare and pay a dividend on the same terms, at the
same or equivalent rate (based on the number of shares of Common Stock into
which such other series of Preferred Stock is then convertible, if applicable,
or, otherwise, the relative liquidation preference per share, as compared with
the Series G Stock then outstanding) and in like kind upon each share of Series
G Stock then outstanding, so that all Series G Stock will participate in such
dividend ratably with such shares of such other series of Preferred Stock.
G.3(b) In connection with any dividend declared or paid hereunder (other
than a dividend declared or paid only in respect of shares of Series G Stock and
in accordance with Section G.3(a) above), each share of Series G Stock shall be
deemed to be that number of shares (including fractional shares) of Common Stock
into which it is then convertible, rounded up to the nearest one-thousandth of a
share. No
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fractional shares of capital stock shall be issued as a dividend hereunder. The
Corporation shall pay a cash adjustment for any such fractional interest in an
amount equal to the fair market value thereof on the last Business Day
immediately preceding the date for payment of dividends, as determined by the
Board of Directors in good faith.
G.4. Liquidation Rights.
G.4(a) With respect to rights on Liquidation, the Series G Stock shall
rank (x) pari passu with the Series A Stock, the Series B Stock, the Series D
Stock and the Series F Stock, (y) senior and prior to the Series C Stock and the
Series E Stock (but only to the extent provided in this Section G.4) and (z)
senior and prior to the Corporation's Common Stock and to all other classes or
series of stock issued by the Corporation, except as otherwise approved by the
affirmative vote or consent of the Series G Stockholders pursuant to Section G.6
hereof and (i) in the case of a change in the relative ranking upon Liquidation
of the Series G Stock and the Series A Stock, as otherwise approved by the
affirmative vote or consent of the Series A Stockholders pursuant to Section A.6
hereof, (ii) in the case of a change in the relative ranking upon Liquidation of
the Series G Stock and the Series B Stock, as otherwise approved by the
affirmative vote or consent of the Series B Stockholders pursuant to Section B.6
hereof, (iii) in the case of a change in the relative ranking upon Liquidation
of the Series G Stock and the Series D Stock, as otherwise approved by the
affirmative vote or consent of the Series D Stockholders pursuant to Section D.6
hereof or (iv) in the case of a change in the relative ranking upon Liquidation
of the Series G Stock and the Series F Stock, as otherwise approved by the
affirmative vote or consent of the Series F Stockholders pursuant to Section F.6
hereof; provided, however, that, notwithstanding anything in this Restated
Certificate to the contrary, the ranking upon Liquidation of the Series G Stock
relative to any other class or series of capital stock of the Corporation
(including, without limitation, the Series A Stock, the Series B Stock, the
Series C Stock, the Series D Stock, the Series E Stock, the Series F Stock and
the Common Stock) may be changed or altered so as to lower such ranking of the
Series G Stock relative to such other class or series with the approval by
affirmative vote or consent of the holders of at least sixty-six and two thirds
percent (66 2/3%) of the voting power of the Series G Stock then outstanding
(determined as set forth in the second sentence of Section G.6(a) hereof) and
without the vote or approval of such other class or series or any other class or
series of capital stock (including, without limitation, the Series A Stock, the
Series B Stock, the Series C Stock, the Series D Stock, the Series E Stock, the
Series F Stock and the Common Stock) being required to lower such ranking of the
Series G Stock.
G.4(b) Subject to Section G.4(e)(ii) hereof, in the event of any
Liquidation, the Series G Stockholders shall be entitled to receive out of the
assets of the Corporation legally available for distribution to its
stockholders, whether from capital, surplus or earnings, pari passu with the
rights of the Series A Stockholders, the Series B Stockholders, the Series D
Stockholders and the Series F Stockholders to
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receive payment of their liquidation preference pursuant to Section A.4(b),
Section B.4(b), Section D.4(b) and Section F.4(b) hereof, respectively, but
before any payment shall be made to the holders of Series C Stock, Series E
Stock, Common Stock or any other class or series of stock ranking on Liquidation
junior to such Series G Stock, an amount per share equal to the Series G
Original Purchase Price (as defined in Section J.103 hereof), plus 10% per annum
thereon, compounded annually, for each share of Series G Stock from the Series G
Liquidation Premium Original Issuance Date (as defined in Section J.101 hereof)
until the date of Liquidation, plus, in each case, an amount equal to any
declared but unpaid dividends thereon pursuant to Section G.3(a) hereof.
G.4(c) Subject to Sections G.4(e)(ii), A.4(e)(ii), B.4(e)(ii), D.4(e)(ii)
and F.4(e)(ii) hereof, if, upon any Liquidation, the assets of the Corporation
available for distribution to its stockholders shall be insufficient to pay the
Series G Stockholders the full amount as to which each of them shall be entitled
pursuant to Section G.4(b) above and to pay to the Series A Stockholders, the
Series B Stockholders, the Series D Stockholders and the Series F Stockholders
the full amount as to which each of them shall be entitled pursuant to Section
A.4(b), Section B.4(b), Section D.4(b) and Section F.4(b), respectively, then
the Series G Stockholders, the Series A Stockholders, the Series B Stockholders,
the Series D Stockholders and the Series F Stockholders shall share ratably in
any distribution of assets according to the respective amounts which would be
payable to them in respect of the shares of Series G Stock, Series A Stock,
Series B Stock, Series D Stock and/or Series F Stock, as the case may be, held
upon such distribution if all amounts payable on or with respect to such shares
were paid in full.
G.4(d) Subject to Sections G.4(e)(ii), A.4(e)(ii), B.4(e)(ii), D.4(e)(ii)
and F.4(e)(ii), in the event of any Liquidation, after payment shall have been
made to (i) the Series G Stockholders, the Series A Stockholders, the Series B
Stockholders, the Series D Stockholders and the Series F Stockholders of the
full amount to which they shall be entitled pursuant to Sections G.4(b), A.4(b),
B.4(b), D.4(b) and F.4(b) hereof, respectively, (ii) the Other Parity
Stockholders of the full amount to which they shall be entitled to receive on a
parity with the amounts referred to in clause (i) above and (iii) the Series C
Stockholders and the Series E Stockholders of the full amount to which they
shall be entitled pursuant to Sections C.4(b) and E.4(b) hereof, respectively,
then with respect to each other class or series of capital stock (other than the
Series C Stock, the Series E Stock and the Common Stock) ranking on Liquidation
junior to such Series G Stock (in descending order of seniority), the Series G
Stockholders, as a class, the Series A Stockholders, as a class, the Series B
Stockholders, as a class, the Series D Stockholders, as a class, the Series F
Stockholders, as a class, the Other Parity Stockholders, as a class, the Series
C Stockholders, as a class, and the Series E Stockholders, as a class, shall be
entitled to receive an amount equal (and in like kind) to the aggregate
preferential amount fixed for each such junior class or series of capital stock,
which amount shall be distributed ratably among (i) the Series G Stockholders in
an equal amount per share of the Series G Stock then outstanding, (ii) the
Series A
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Stockholders in an equal amount per share of the Series A Stock then
outstanding, (iii) the Series B Stockholders in an equal amount per share of the
Series B Stock then outstanding, (iv) the Series D Stockholders in an equal
amount per share of the Series D Stock then outstanding, (v) the Series F
Stockholders in an equal amount per share of the Series F Stock then
outstanding, (vi) the Other Parity Stockholders in an equal amount per share of
the Other Parity Stock then outstanding, (vii) the Series C Stockholders in an
equal amount per share of the Series C Stock then outstanding and (viii) the
Series E Stockholders in an equal amount per share of the Series E Stock then
outstanding. If, upon any Liquidation, the assets of the Corporation available
for distribution to its stockholders shall be insufficient to pay the Series G
Stockholders, the Series A Stockholders, the Series B Stockholders, the Series D
Stockholders, the Series F Stockholders, the Other Parity Stockholders, the
Series C Stockholders, the Series E Stockholders and each class or series of
capital stock (other than the Series C Stock, the Series E Stock and the Common
Stock) junior to the Series G Stock the full amounts to which they shall be
entitled pursuant to the immediately preceding sentence, the Series G
Stockholders, the Series A Stockholders, the Series B Stockholders, the Series D
Stockholders, the Series F Stockholders the Other Parity Stockholders, the
Series C Stockholders, the Series E Stockholders and each such other class or
series of capital stock shall share ratably in any distribution of assets
according to the respective preferential amounts fixed for the Series G Stock
(pursuant to this Section G.4(d)), the Series A Stock (pursuant to Section
A.4(d) hereof), the Series B Stock (pursuant to Section B.4(d) hereof), the
Series D Stock (pursuant to Section D.4(d) hereof), the Series F Stock (pursuant
to Section F.4(d) hereof), the Other Parity Stock (pursuant to the applicable
terms thereof), the Series C Stock (pursuant to Section C.4(d) hereof), the
Series E Stock (pursuant to Section E.4(d) hereof) and each such junior class or
series of capital stock (pursuant to the applicable terms thereof), which would
be payable in respect of the shares held by them upon such distribution if all
such preferential amounts payable on or with respect to such shares were paid in
full.
G.4(e)(i) Subject to Sections G.4(e)(ii), A.4(e)(ii), B.4(e)(ii),
D.4(e)(ii) and F.4(e)(ii) hereof, in the event of any Liquidation, after payment
shall have been made to the Series G Stockholders, the Series A Stockholders,
the Series B Stockholders, the Series D Stockholders, the Series F Stockholders,
the Other Parity Stockholders, the Series C Stockholders and the Series E
Stockholders of the full amount to which they shall be entitled as aforesaid,
and after payment shall have been made of the respective preferential amounts of
all other classes and series of capital stock ranking senior to the Common
Stock, the Series G Stockholders, the Series A Stockholders, the Series B
Stockholders, the Series D Stockholders, the Series F Stockholders, the Other
Parity Stockholders, the Series C Stockholders and the Series E Stockholders
shall be entitled to share ratably (calculated with respect to such Series G
Stock, Series A Stock, Series B Stock, Series D Stock, Series F Stock, Other
Parity Stock, Series C Stock and Series E Stock as provided in the next
sentence) with the Common Stockholders in all remaining assets of the
Corporation available for distribution to its stockholders. For purposes of
calculating the amount of any payment
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to be paid pursuant to this Section G.4(e)(i) upon any such Liquidation, each
share of Series G Stock, each share of Series A Stock, each share of Series B
Stock, each share of Series D Stock, each share of Series F Stock, each share of
any such Other Parity Stock, each share of Series C Stock and each share of
Series E Stock shall be deemed to be that number of shares (including fractional
shares) of Common Stock into which it is then convertible, rounded to the
nearest one-thousandth of a share.
G.4(e)(ii) Notwithstanding anything to the contrary set forth herein, in
no event shall the aggregate amount received in respect of each share of Series
G Stock (and any shares of capital stock or other securities issued in respect
thereof) pursuant to Section G.3 above, this Section G.4 and Section A.5 above
exceed an amount equal to the greater of (i) $4.00 for each such share, or (ii)
the aggregate amount of all payments made by the Corporation pursuant to any of
the provisions of this Restated Certificate (regardless of whether such payments
consist of dividends, payments made upon Liquidation or any Special Liquidation
or payments made upon any redemption pursuant to Section A.5 hereof) in respect
of all shares of its capital stock since December 20, 1996 multiplied by a
fraction, the numerator of which equals the quotient of the number of shares of
Common Stock issuable upon conversion of the Series G Stock then outstanding,
rounded up to the nearest one-thousandth of a share, divided by the number of
shares of Series G Stock then outstanding, and the denominator of which equals
the sum of the number of shares of Common Stock then outstanding, plus the
number of shares of Common Stock issuable upon conversion of the Series G Stock,
the Series A Stock, the Series B Stock, the Series D Stock, the Series F Stock,
any Other Parity Stock, the Series C Stock and the Series E Stock then
outstanding, rounded up to the nearest one-thousandth of a share.
G.4(f)(i) In the event of and simultaneously with the closing of an Event
of Sale, the Corporation shall (unless waived pursuant to Section G.4(f)(v) or
otherwise prevented by law) redeem all of the shares of Series G Stock then
outstanding for a cash amount per share determined as set forth herein (the
"Series G Special Liquidation Price"), said redemption to occur simultaneously
with the redemption of all of the outstanding shares of Series A Stock, Series B
Stock, Series C Stock, Series D Stock, Series E Stock and Series F Stock
pursuant to Sections A.4(f), B.4(f), C.4(f), D.4(f), E.4(f) and F.4(f),
respectively, and of all outstanding shares of Other Parity Stock pursuant to
the applicable terms thereof, in connection with any such closing. The rights
of the Series G Stockholders to receive the Series G Special Liquidation Price
pursuant to this Section G.4(f) shall be (x) pari passu with the rights of the
Series A Stockholders to receive the Series A Special Liquidation Price pursuant
to Section A.4(f) hereof, with the rights of the Series B Stockholders to
receive the Series B Special Liquidation Price pursuant to Section B.4(f)
hereof, with the rights of the Series D Stockholders to receive the Series D
Special Liquidation Price pursuant to Section D.4(f) hereof, with the rights of
the Series F Stockholders to receive the Series F Special Liquidation Price
pursuant to Section F.4(f) hereof and with the rights of the Other Parity
Stockholders to receive the Other Parity Stock Special Liquidation Price
pursuant to the applicable terms of the Other Parity Stock, and (y) senior and
prior to
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the rights of the Series C Stockholders to receive the Series C Special
Liquidation Price pursuant to Section C.4(f) and to the rights of the Series E
Stockholders to receive the Series E Special Liquidation Price pursuant to
Section E.4(f). For all purposes of this Section G.4(f), the Series G Special
Liquidation Price shall be an amount per share equal to the Series G Event of
Sale Applicable Return Amount (as defined in Section J.100 hereof). To the
extent that one or more redemptions (as described in Section A.5 hereof) and a
Special Liquidation are occurring concurrently, the Special Liquidation shall be
deemed to occur first.
G.4(f)(ii) At any time on or after the Special Liquidation Date, a Series
G Stockholder shall be entitled, subject to the provisions of Section
G.4(f)(iii) hereof, to receive the Series G Special Liquidation Price for each
such share of Series G Stock owned by such holder. Subject to the provisions
of Section G.4(f)(iii) hereof, payment of the Series G Special Liquidation
Price will be made upon actual delivery to the Corporation or its transfer
agent of the certificate representing such shares of Series G Stock.
G.4(f)(iii) If on the Special Liquidation Date less than all the shares of
Series G Stock, Series A Stock, Series B Stock, Series D Stock, Series F Stock,
Other Parity Stock, Series C Stock and Series E Stock then outstanding may be
legally redeemed by the Corporation, the Special Liquidation shall be effected
(x) first, with respect to such Series G Stock, Series A Stock, Series B Stock,
Series D Stock, Series F Stock and Other Parity Stock on a pro rata basis (based
upon the amounts which would be payable to the Series G Stockholders, the Series
A Stockholders, Series B Stockholders, Series D Stockholders and Series F
Stockholders pursuant to this Section G.4(f), Section A.4(f), Section B.4(f),
Section D.4(f) and Section F.4(f) hereof, respectively, and to the Other Parity
Stockholders pursuant to the applicable terms of the Other Parity Stock, upon a
Special Liquidation if the Corporation had sufficient funds legally available to
effect a redemption of all outstanding shares of Series G Stock, Series A Stock,
Series B Stock, Series D Stock, Series F Stock and Other Parity Stock on the
Special Liquidation Date) until all of the shares of Series G Stock, Series A
Stock, Series B Stock, Series D Stock, Series F Stock and Other Parity Stock
then outstanding are redeemed, and (y) second, with respect to such Series C
Stock and Series E Stock on a pro rata basis (based upon the amounts which would
be payable to each of the Series C Stockholders and Series E Stockholders
pursuant to Sections C.4(f) and E.4(f) hereof, respectively, upon a Special
Liquidation if the Corporation had sufficient funds legally available to effect
a redemption of all outstanding shares of Series C Stock and Series E Stock on
the Special Liquidation Date) if but only if, after the redemption of all of the
shares of Series G Stock, Series A Stock, Series B Stock, Series D Stock, Series
F Stock and Other Parity Stock outstanding immediately prior to the Special
Liquidation, the Corporation may legally redeem shares of Series C Stock and
Series E Stock.
G.4(f)(iv) On and after any Special Liquidation Date, all rights in
respect of the shares of Series G Stock redeemed shall cease and terminate
except the
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right to receive the applicable Series G Special Liquidation Price as provided
herein, and such shares of Series G Stock shall no longer be deemed to be
outstanding, whether or not the certificates representing such shares of Series
G Stock have been received by the Corporation; provided, however, that, if the
Corporation defaults in the payment of the Series G Special Liquidation Price
with respect to any Series G Stock, the rights of the holder(s) thereof with
respect to such shares of Series G Stock shall continue until the Corporation
cures such default.
G.4(f)(v) Anything contained herein to the contrary notwithstanding, the
rights of the Series F Stockholders under this Section G.4(f) may be waived by
the holders of a majority of the combined voting power of the shares of Series
G Stock, Series A Stock, Series B Stock, Series D Stock and Series F Stock then
outstanding, voting together as one class, by delivery of written notice of
waiver to the Corporation prior to the closing of any Event of Sale, in which
event the Corporation shall not redeem any shares of Series G Stock pursuant to
this Section G.4(f).
G.4(f)(vi) Any notice required to be given to the holders of shares of
Series G Stock pursuant to Section G.7(f) hereof in connection with an Event of
Sale shall include a statement by the Corporation of (A) the Series G Special
Liquidation Price which each Series G Stockholder shall be entitled to receive
pursuant to this Section G.4(f) upon the occurrence of a Special Liquidation
and (B) the extent to which the Corporation will, if at all, be legally
prohibited from paying each holder of Series G Stock the Series G Special
Liquidation Price.
G.5. Redemption.
The Corporation may, from time to time, be required to redeem shares of
Series G Stock subject to and upon the terms and conditions of Section A.5
hereof.
G.6. Voting.
G.6(a) In addition to any other rights provided for herein or by law, the
Series G Stockholders shall be entitled to vote, together with the Series A
Stockholders, the Series B Stockholders, the Series C Stockholders, the Series
D Stockholders, the Series E Stockholders, the Series F Stockholders and the
Common Stockholders, as one class, on all matters as to which Common
Stockholders shall be entitled to vote, in the same manner and with the same
effect as such Common Stockholders. In any such vote, each share of Series G
Stock shall entitle the holder thereof to the number of votes per share that
equals the number of shares of Common Stock (including fractional shares) into
which each such share of Series G Stock is then convertible, rounded up to the
nearest one-thousandth of a share.
G.6(b) The Corporation shall not, without the affirmative approval of the
holders of shares representing at least sixty-six and two-thirds percent (66
2/3%)
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of the voting power of the Series G Stock then outstanding (determined as set
forth in the second sentence of Section G.6(a) hereof), acting separately from
the holders of Series A Stock, Series B Stock, Series C Stock, Series D Stock,
Series E Stock, Series F Stock, Common Stock or any other securities of the
Corporation, given by written consent in lieu of a meeting or by vote at a
meeting called for such purpose, for which meeting timely and specific notice
shall have been given to each holder of Series G Stock, in the manner provided
in the By-laws of the Corporation: (i) authorize, designate, create, issue or
agree to issue any shares of Series G Stock other than those shares of Series G
Stock issued or issuable pursuant to the Series G Securities Purchase Agreement;
(ii) take any action to cause any amendment, alteration or repeal of any of the
provisions of this Restated Certificate or the By-laws of the Corporation, which
amendment, alteration or repeal adversely affects the powers, preferences or
rights pertaining to the Series G Stock, provided, however, that any such
amendment, alteration or repeal shall not require the separate class vote of the
Series G Stock pursuant to this Section G.6(b) to the extent that the effect
thereof is to create an additional class or series of Preferred Stock ranking
pari passu with the Series A Stock, the Series B Stock, the Series D Stock and
the Series F Stock as to dividends, upon Liquidation or redemption, or in any
other respect; or (iii) except for the issuance of capital stock or other
securities constituting shares of Excluded Stock, authorize, designate, create,
issue or agree to issue any equity security of the Corporation ranking senior to
the Series G Stock as to dividends, upon Liquidation or redemption, or in any
other respect, or any security, right, option or warrant convertible into, or
exercisable or exchangeable for, any such equity security of the Corporation.
G.6(c) The Corporation shall not, without the affirmative approval of the
holders of shares representing at least sixty-six and two-thirds percent (66
2/3%) of the combined voting power of the Series G Stock, Series A Stock, Series
B Stock, Series D Stock and Series F Stock then outstanding, voting together as
one class (which voting power shall be determined, in the case of the Series G
Stock, as set forth in the second sentence of Section G.6(a) hereof, in the case
of the Series A Stock, as set forth in the second sentence of Section A.6(a)
hereof, in the case of the Series B Stock, as set forth in the second sentence
of Section B.6(a) hereof, in the case of the Series D Stock, as set forth in the
second sentence of Section D.6(a) hereof), and in the case of the Series F
Stock, as set forth in the second sentence of Section F.6(a) hereof), given by
written consent in lieu of a meeting or by vote at a meeting called for such
purpose, for which meeting timely and specific notice shall have been given to
each holder of Series G Stock, Series A Stock, Series B Stock, Series D Stock
and Series F Stock, in the manner provided in the By-laws of the Corporation:
(i) sell, abandon, transfer, lease or otherwise dispose of all or substantially
all of its properties or assets other than in the ordinary course of its
business; (ii) purchase, lease or otherwise acquire all or substantially all of
the assets of another entity; (iii) except as otherwise required by this
Restated Certificate and except to the extent otherwise permitted in clause (iv)
below, declare or pay any dividend or make any distribution with respect to
shares of its capital stock (whether in cash, securities or property, but
excluding any stock dividends or stock splits); (iv) except as otherwise
required by this
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Restated Certificate or in any agreement approved by the Board of Directors with
a director, officer, employee, consultant or independent contractor of or to the
Corporation providing for the repurchase of any of its capital stock owned by
such director, officer, employee, consultant or independent contractor at the
option of the Corporation, provided that such agreements are (A) set forth on
Schedule 5.2 to the Series A Stock Purchase Agreement, Schedule 4.2 to the
Series B Stock Purchase Agreement, Schedule 4.2 to the Series D Stock Purchase
Agreement, Schedule 4.2 to the Series F Stock Purchase Agreement or Schedule 4.2
to the Series G Securities Purchase Agreement, or (B) entered into (1) pursuant
to, and upon the exercise of any outstanding stock option granted under, the
1993 Stock Option Plan or any other stock option plan which has been adopted by
the Corporation and approved by the Board of Directors and by the holders of at
least 66 2/3% of the combined voting power of the Series G Stock, Series A
Stock, Series B Stock, Series D Stock and Series F Stock then outstanding
(including any outstanding shares of Common Stock issued upon conversion
thereof), voting together as one class, and (2) pursuant to the forms of stock
option agreements that have been approved by the Board of Directors on or before
the date of the Series A Stock Purchase Agreement or a form of stock option
agreement under the 1993 Stock Option Plan (or such other plan) that is
satisfactory in form and in substance, except for immaterial changes thereto
made from time to time by officers of the Corporation, to the Board of Directors
and to the holders of at least 66 2/3% of the combined voting power of the
Series G Stock, Series A Stock, Series B Stock, Series D Stock and Series F
Stock then outstanding (including any outstanding shares of Common Stock issued
upon conversion thereof), voting together as one class, make any payment on
account of the purchase, redemption or other retirement of any share of capital
stock of the Corporation, or distribute to Common Stockholders shares of the
Corporation's capital stock (other than Common Stock) or other securities of
other entities, evidences of indebtedness issued by the Corporation or other
entities, or other assets or options or rights (excluding options to purchase
and rights to subscribe for shares of Common Stock or the securities of the
Corporation convertible into or exchangeable for shares of Common Stock); (v)
merge or consolidate with and into, or permit any subsidiary to merge or
consolidate with and into, any other corporation, corporations or other entity
or entities; (vi) voluntarily dissolve, liquidate or wind-up or carry out any
partial liquidation or distribution or transaction in the nature of a partial
liquidation or distribution; (vii) except for the issuance of capital stock or
other securities constituting shares of Excluded Stock, authorize, designate,
create, issue or agree to issue any equity security of the Corporation or any
security, right, option or warrant convertible into, or exercisable or
exchangeable for, any such equity security of the Corporation or any debt
security or capitalized lease with an equity feature with respect to the capital
stock of the Corporation; (viii) adopt, amend or modify any stock option plan of
the Corporation; or (ix) accelerate the vesting schedule or exercise date or
dates of any such options or in any stock option agreement entered into between
the Corporation and its directors, officers, employees, consultants or
independent contractors, or amend or otherwise modify the Corporation's
repurchase rights with respect to any shares of the Corporation's stock issuable
pursuant to any restricted
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stock purchase agreement entered into between the Corporation and its directors,
officers, employees, consultants or independent contractors.
G.7. Conversion.
G.7(a)(i) Any Series G Stockholder shall have the right, at any time or
from time to time, to convert any or all of its Series G Stock into that number
of fully paid and nonassessable shares of Common Stock for each share of Series
G Stock so converted equal to the quotient of the Series G Original Purchase
Price for such share divided by the Series G Conversion Price (as defined in
Section G.7(d) hereof) for such share, as last adjusted and then in effect,
rounded up to the nearest one-thousandth of a share; provided, however, that
cash shall be paid in lieu of the issuance of fractional shares of Common
Stock, as provided in Section G.7(c)(ii) hereof.
G.7(a)(ii) Any Series G Stockholder who exercises the right to convert
shares of Series G Stock into shares of Common Stock, pursuant to this Section
G.7, shall be entitled to payment of all declared but unpaid dividends payable
with respect to such Series G Stock pursuant to Section G.3(a) herein, up to
and including the Series G Conversion Date (as defined in Section G.7(b)(ii)
hereof).
G.7(b)(i) Any Series G Stockholder may exercise the right to convert such
shares into Common Stock pursuant to this Section G.7 by delivering to the
Corporation during regular business hours, at the office of the Corporation or
any transfer agent of the Corporation or at such other place as may be
designated by the Corporation, the certificate or certificates for the shares
to be converted (each a "Series G Preferred Certificate"), duly endorsed or
assigned in blank to the Corporation (if required by it).
G.7(b)(ii) Each Series G Preferred Certificate shall be accompanied by
written notice stating that such holder elects to convert such shares and
stating the name or names (with address) in which the certificate or
certificates for the shares of Common Stock are to be issued. Such conversion
shall be deemed to have been effected on the date when such delivery is made,
and such date is referred to herein as the "Series G Conversion Date."
G.7(b)(iii) As promptly as practicable thereafter, the Corporation shall
issue and deliver to or upon the written order of such holder, at the place
designated by such holder, a certificate or certificates for the number of full
shares of Common Stock to which such holder is entitled and a check or cash in
respect of any fractional interest in any shares of Common Stock, as provided
in Section G.7(c)(ii) hereof, payable with respect to the shares so converted
up to and including the Series G Conversion Date.
G.7(b)(iv) The person in whose name the certificate or certificates for
Common Stock are to be issued shall be deemed to have become a holder of record
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of Common Stock on the applicable Series G Conversion Date, unless the transfer
books of the Corporation are closed on such Series G Conversion Date, in which
event the holder shall be deemed to have become the stockholder of record on the
next succeeding date on which the transfer books are open, provided that the
Series G Conversion Price shall be that Series G Conversion Price in effect on
the Series G Conversion Date.
G.7(b)(v) Upon conversion of only a portion of the number of shares
covered by a Series G Preferred Certificate, the Corporation shall issue and
deliver to or upon the written order of the holder of such Series G Preferred
Certificate, at the expense of the Corporation, a new certificate covering the
number of shares of the Series G Stock representing the unconverted number of
shares of Series G Stock represented by such Series G Preferred Certificate,
which new certificate shall entitle the holder thereof to all the rights,
powers and privileges of a holder of such shares.
G.7(c)(i) If a Series G Stockholder shall surrender more than one share
of Series G Stock for conversion at any one time, then the number of full
shares of Common Stock issuable upon conversion thereof shall be computed on
the basis of the aggregate number of shares of Series G Stock so surrendered.
G.7(c)(ii) No fractional shares of Common Stock shall be issued upon
conversion of Series G Stock. The Corporation shall pay a cash adjustment for
any such fractional interest in an amount equal to the Current Market Price
thereof on the Series G Conversion Date, as determined in accordance with
Section G.7(d)(v) hereof.
G.7(d) For all purposes of this Section G.7, the "Series G Conversion
Price" with respect to the Series G Stock shall be equal to the Series G
Original Purchase Price with respect to each such share of Series G Stock,
subject to adjustment from time to time as follows:
G.7(d)(i) If the Corporation shall, at any time or from time to time
after the Series G Conversion Price Original Issuance Date, issue any
shares of Common Stock (which term, for purposes of this Section G.7(d),
including all subsections thereof, shall be deemed to include all other
securities convertible into, or exchangeable or exercisable for, shares of
Common Stock (including, but not limited to, Series G Stock, Series A
Stock, Series B Stock, Series C Stock, Series D Stock, Series E Stock and
Series F Stock) or options to purchase or other rights to subscribe for
such convertible or exchangeable securities, in each case other than
Excluded Stock), for a consideration per share less than the applicable
Series G Conversion Price in effect immediately prior to the issuance of
such Common Stock or other securities, the Series G Conversion Price in
effect immediately prior to each such issuance shall automatically (except
as otherwise provided in this Section G.7(d)) be lowered to a price equal
to the quotient obtained by dividing
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(X) an amount equal to the sum of
(1) the total number of shares of Common Stock outstanding
(including any shares of Common Stock deemed outstanding after
giving effect to the provisions of Section G.7(d)(ii)(D) with
respect to then outstanding options or other rights to purchase or
subscribe for Common Stock, securities by their terms convertible
into or exchangeable for Common Stock (including, without
limitation, the Series A Stock, Series B Stock, Series C Stock,
Series D Stock, Series E Stock, Series F Stock and Series G Stock),
or options to purchase or other rights to subscribe for such
convertible or exchangeable securities, in each case regardless of
whether any of such securities referred to in this clause (1)
constitutes Excluded Stock) immediately prior to such issuance
multiplied by the Series G Conversion Price in effect immediately
prior to such issuance, plus
(2) the consideration received by the Corporation upon such
issuance,
by
(Y) the total number of shares of Common Stock outstanding
(including any shares of Common Stock deemed outstanding after
giving effect to the provisions of Section G.7(d)(ii)(D) with
respect to all outstanding options or other rights to purchase or
subscribe for Common Stock, securities by their terms convertible
into or exchangeable for Common Stock (including, without
limitation, the Series A Stock, Series B Stock, Series C Stock,
Series D Stock, Series E Stock, Series F Stock and Series G Stock),
or options to purchase or other rights to subscribe for such
convertible or exchangeable securities, in each case regardless of
whether any of such securities constitutes Excluded Stock)
immediately after such issuance.
G.7(d)(ii) For the purposes of any adjustment of the Series A Conversion
Price pursuant to Section G.7(d)(i), the following provisions shall be
applicable:
G.7(d)(ii)(A) In the case of the issuance of Common Stock in whole or in
part for cash, the consideration shall be deemed to be the amount of cash paid
therefor after deducting therefrom any discounts, commissions or other expenses
allowed, paid or incurred by the Corporation for any underwriting or otherwise
in connection with the issuance and sale thereof, plus the value of any
property other than cash received by the Corporation, determined as provided in
Section G.7(d)(ii)(B)
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hereof, plus the value of any other consideration received by the Corporation
determined as set forth in Section G.7(d)(ii)(C) hereof.
G.7(d)(ii)(B) In the case of the issuance of Common Stock for a
consideration in whole or in part in property other than cash, the value of such
property other than cash shall be deemed to be the fair market value of such
property as determined in good faith by the Board of Directors, irrespective of
any accounting treatment; provided, however, that such fair market value of such
property as determined by the Board of Directors shall not exceed the aggregate
Current Market Price of the shares of Common Stock being issued, less any cash
consideration paid for such shares, determined as provided in Section
G.7(d)(ii)(A) hereof, and less any other consideration received by the
Corporation for such shares, determined as set forth in Section G.7(d)(ii)(C)
hereof.
G.7(d)(ii)(C) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash or property, the value of such
other consideration shall be deemed to be the fair market value of such other
consideration as determined in good faith by the Board of Directors,
irrespective of any accounting treatment; provided, however, that such fair
market value of such other consideration as determined by the Board of Directors
shall not exceed the aggregate Current Market Price of the shares of Common
Stock being issued, less any cash consideration paid for such shares, determined
as provided in Section G.7(d)(ii)(A) hereof and less the fair market value of
any property received by the Corporation for such shares, determined as set
forth in Section G.7(d)(ii)(B) hereof.
G.7(d)(ii)(D) In the case of the issuance of options or other rights to
purchase or subscribe for Common Stock, securities by their terms convertible
into or exchangeable for Common Stock or options to purchase or other rights to
subscribe for such convertible or exchangeable securities:
G.7(d)(ii)(D)(1) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options to purchase or rights to subscribe for
Common Stock (said maximum number of shares being that set forth in the
instrument relating to such options or rights to subscribe for Common Stock
without regard to any provision contained therein for a subsequent adjustment of
such number) shall be deemed to have been issued at the time such options or
rights were issued and for a consideration equal to the consideration
(determined in the manner provided in Sections G.7(d)(ii)(A), (B) and (C)
hereof), if any, received by the Corporation upon the issuance of such options
or rights plus the minimum purchase price provided in such options or rights for
the Common Stock covered thereby (the consideration in each case to be
determined in the manner provided in Sections G.7(d)(ii)(A), (B) and (C)
hereof);
G.7(d)(ii)(D)(2) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of, or in exchange for, any such
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convertible or exchangeable securities or upon the exercise of options to
purchase or rights to subscribe for such convertible or exchangeable securities
and subsequent conversion or exchange thereof (said maximum number of shares
being that set forth in the instrument relating to such convertible or
exchangeable securities without regard to any provision contained therein for a
subsequent adjustment of such number) shall be deemed to have been issued at the
time such securities were issued or such options or rights were issued and for a
consideration equal to the consideration received by the Corporation for any
such securities and related options or rights (excluding any cash received on
account of accrued interest or accrued dividends), plus the minimum additional
consideration, if any, to be received by the Corporation upon the conversion or
exchange of such securities or the exercise of any related options or rights
(the consideration in each case to be determined in the manner provided in
Sections G.7(d)(ii)(A), (B) and (C) hereof);
G.7(d)(ii)(D)(3) if there is any change in the exercise price of, or
number of shares deliverable upon exercise of, any such options or rights or
upon the conversion or exchange of any such convertible or exchangeable
securities (other than a change resulting from the anti-dilution provisions
thereof), then the Series G Conversion Price shall automatically be readjusted
in proportion to such change; and
G.7(d)(ii)(D)(4) upon the expiration of any such options or rights or the
termination of any such rights to convert or exchange such convertible or
exchangeable securities, the Series G Conversion Price shall be automatically
readjusted to the Series G Conversion Price that would have obtained had such
options, rights or convertible or exchangeable securities not been issued.
G.7(d)(ii)(E) Anything contained herein to the contrary notwithstanding,
the provisions of this Section G.7(d) may be waived in any instance by the
holders of a majority in voting power of the shares of Series G Stock then
outstanding, by delivery of a written notice of waiver to the Corporation.
G.7(d)(iii) If the number of shares of Common Stock outstanding at any
time after the Series G Conversion Price Original Issuance Date is increased by
a stock dividend payable in shares of Common Stock or by a subdivision or
split-up of shares of Common Stock, then, following the record date fixed for
the determination of holders of Common Stock entitled to receive such stock
dividend, subdivision or split-up, the Series G Conversion Price shall be
appropriately decreased so that the number of shares of Common Stock issuable on
conversion of each share of Series G Stock shall be increased in proportion to
such increase in outstanding shares.
G.7(d)(iv) If, at any time after the Series G Conversion Price Original
Issuance Date, the number of shares of Common Stock outstanding is decreased by
a combination of the outstanding shares of Common Stock, then, following the
record date for such combination, the Series G Conversion Price shall be
appropriately increased so that the number of shares of Common Stock issuable
on
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conversion of each share of Series G Stock shall be decreased in proportion to
such decrease in outstanding shares.
G.7(d)(v) In the event, at any time after the Series G Conversion Price
Original Issuance Date, of any Extraordinary Transaction, then the Corporation
shall provide appropriate adjustment to the Series G Conversion Price with
respect to each share of Series G Stock outstanding after the effectiveness of
such Extraordinary Transaction (and excluding any Series G Stock redeemed
pursuant to Section G.4(f) hereof in connection therewith) such that each share
of Series G Stock outstanding immediately prior to the effectiveness of the
Extraordinary Transaction (other than the shares redeemed pursuant to Section
G.4(f) hereof) shall be convertible into the kind and number of shares of stock
or other securities or property of the Corporation, or of the corporation
resulting from or surviving such Extraordinary Transaction, that a holder of the
number of shares of Common Stock deliverable (immediately prior to the
effectiveness of the Extraordinary Transaction) upon conversion of such share of
Series G Stock would have been entitled to receive upon such Extraordinary
Transaction. The provisions of this Section G.7(d)(v) shall similarly apply to
successive Extraordinary Transactions.
G.7(d)(vi) All calculations under this Section G.7(d) shall be made to the
nearest one-thousandth of a cent ($.0001) or to the nearest one-thousandth of a
share, as the case may be.
G.7(d)(vii) For the purpose of any computation pursuant to Section G.7(c)
hereof or this Section G.7(d), the Current Market Price at any date of one share
of Common Stock shall be determined in the manner provided in Section
A.7(d)(vii) hereof.
G.7(d)(viii) In any case in which the provisions of this Section G.7(d)
shall require that an adjustment shall become effective immediately after a
record date for an event, the Corporation may defer until the occurrence of such
event (A) issuing to the holder of any share of Series G Stock converted after
such record date and before the occurrence of such event the additional shares
of capital stock issuable upon such conversion by reason of the adjustment
required by such event over and above the shares of capital stock issuable upon
such conversion before giving effect to such adjustment and (B) paying to such
holder any cash amounts in lieu of fractional shares pursuant to Section
G.7(c)(ii) hereof; provided, however, that the Corporation shall deliver to such
holder a due bill or other appropriate instrument evidencing such holder's right
to receive such additional shares, and such cash, upon the occurrence of the
event requiring such adjustment.
G.7(d)(ix) If a state of facts shall occur that, without being
specifically controlled by the provisions of this Section G.7, would not fairly
protect the conversion rights of the holders of the Series G Stock in accordance
with the essential intent and principles of such provisions, then the Board of
Directors shall make an
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adjustment in the application of such provisions, in accordance with such
essential intent and principles, so as to protect such conversion rights.
G.7(e) Whenever the Series G Conversion Price shall be adjusted as
provided in Section G.7(d) hereof, the Corporation shall forthwith file and keep
on record at the office of the Secretary of the Corporation and at the office of
the transfer agent for the Series G Stock or at such other place as may be
designated by the Corporation, a statement, signed by its President or Chief
Executive Officer and by its Treasurer or Chief Financial Officer, showing in
detail the facts requiring such adjustment and the Series G Conversion Price
that shall be in effect after such adjustment. The Corporation shall also cause
a copy of such statement to be sent by first-class, certified mail, return
receipt requested, postage prepaid, to each Series G Stockholder at such
holder's address appearing on the Corporation's records. Where appropriate,
such copy shall be given in advance of any such adjustment and shall be included
as part of a notice required to be mailed under the provisions of Section G.7(f)
hereof.
G.7(f) In the event the Corporation shall propose to take any action of
the types described in Section G.7(d)(i), (iii), (iv) or (v) hereof, or any
other Event of Sale, the Corporation shall give notice to each Series G
Stockholder in the manner set forth in Section G.7(e) hereof, which notice shall
specify the record date, if any, with respect to any such action and the date on
which such action is to take place. Such notice shall also set forth such facts
with respect thereto as shall be reasonably necessary to indicate the effect of
such action (to the extent such effect may be known at the date of such notice)
on the Series G Conversion Price and the number, kind or class of shares or
other securities or property which shall be deliverable or purchasable upon each
conversion of Series G Stock. In the case of any action that would require the
fixing of a record date, such notice shall be given at least 20 days prior to
the record date so fixed, and in the case of any other action, such notice shall
be given at least 30 days prior to the taking of such proposed action.
G.7(g) The Corporation shall pay all documentary, stamp or other
transactional taxes attributable to the issuance or delivery of shares of
capital stock of the Corporation upon conversion of any shares of Series G
Stock; provided, however, that the Corporation shall not be required to pay any
taxes which may be payable in respect of any transfer involved in the issuance
or delivery of any certificate for such shares in a name other than that of the
Series G Stockholder in respect of which such shares of Series G Stock are being
issued.
G.7(h) The Corporation shall reserve out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the
Series G Stock sufficient shares of Common Stock to provide for the conversion
of all outstanding shares of Series G Stock.
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G.7(i) All shares of Common Stock which may be issued in connection with
the conversion provisions set forth herein will, upon issuance by the
Corporation, be validly issued, fully paid and nonassessable, not subject to any
preemptive or similar rights and free from all taxes, liens or charges with
respect thereto created or imposed by the Corporation.
G.7(j) Upon the consummation of a firm commitment underwritten public
offering of Common Stock of the Corporation registered under the Securities Act
of 1933, pursuant to which the net proceeds to the Corporation are at least
$17,500,000, each share of Series G Stock then outstanding shall, by virtue of
and immediately prior to the closing of such firm commitment public offering and
without any action on the part of the holder thereof, be deemed automatically
converted into the greater of (i) the Series G Minimum Conversion Shares (as
defined in Section J.101 hereof) or (ii) that number of shares of Common Stock
into which such share of Series G Stock would be convertible if the holder
thereof were then to convert it into shares of Common Stock pursuant to Section
G.7(a)(i). The holder of any shares of Series G Stock converted into Common
Stock pursuant to this Section G.7(j) shall be entitled to payment of all
declared but unpaid dividends, if any, payable on or with respect to such shares
up to and including the date of the closing of such public offering which shall
be deemed the Series G Conversion Date for purposes of this Section G.7(j).
PART H. Additional Series of Preferred Stock
H.1. Designation of Additional Series of Preferred Stock. Subject to
Sections A.6, B.6, D.6, F.6 and G.6 hereof, the Board of Directors is hereby
expressly authorized to provide for, designate and issue, out of the authorized
but unissued shares of Preferred Stock, one or more other series of Preferred
Stock in addition to the Series A Stock, Series B Stock, Series C Stock, Series
D Stock, Series E Stock, Series F Stock and Series G Stock subject to the terms
and conditions set forth herein. Before any shares of any such series are
issued, the Board of Directors shall fix, and hereby is expressly empowered to
fix, by resolution or resolutions, the following provisions of the shares of any
such series:
(a) the designation of such series, the number of shares to constitute
such series and the stated value thereof, if different from the par value
thereof;
(b) whether the shares of such series shall have voting rights or powers,
in addition to any voting rights required by law, and, if so, the terms of such
voting rights or powers, which may be full or limited;
(c) the dividends, if any, payable on such series, whether any such
dividends shall be cumulative, and, if so, from what dates, the conditions and
dates upon which such dividends shall be payable, the preference or relation
which such
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dividends shall bear to the dividends payable on any shares of stock of any
other class or series;
(d) whether the shares of such class or series shall be subject to
redemption by the Corporation, and, if so, the times, prices and other
conditions of such redemption;
(e) the amount or amounts payable with respect to shares of such class or
series upon, and the rights of the holders of such class or series in, the
voluntary or involuntary liquidation, dissolution or winding up, or upon any
distribution of the assets, of the Corporation;
(f) whether the shares of such class or series shall be subject to the
operation of a retirement or sinking fund and, if so, the extent to and manner
in which any such retirement or sinking fund shall be applied to the purchase or
redemption of the shares of such class or series for retirement or other
corporate purposes and the terms and provisions relative to the operation
thereof;
(g) whether the shares of such class or series shall be convertible into,
or exchangeable for, shares of stock of any other class or series of any other
securities and, if so, the price or prices or the rate or rates of conversion or
exchange and the method, if any, of adjusting the same, and any other terms and
conditions of conversion or exchange;
(h) the limitations and restrictions, if any, to be effective while any
shares of such class or series are outstanding upon the payment of dividends or
the making of other distributions on, and upon the purchase, redemption or other
acquisition by the Corporation of, the Common Stock or shares of stock of any
other class or series;
(i) the conditions or restrictions, if any, to be effective while any
shares of such class or series are outstanding upon the creation of indebtedness
of the Corporation or upon the issue of any additional stock, including
additional shares of such class or series or of any other class or series; and
(j) any other powers, designations, preferences and relative,
participating, optional or other special rights, and any qualifications,
limitations or restrictions thereof.
The powers, designations, preferences and relative, participating, optional
or other special rights of each series of Preferred Stock, and the
qualifications, limitations or restrictions thereof, if any, may differ from
those of any and all other series at any time outstanding. The Board of
Directors is hereby expressly authorized from time to time to increase (but not
above the total number of authorized shares of Preferred Stock) or decrease (but
not below the number of shares thereof then
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outstanding) the number of shares of stock of any series of Preferred Stock
designated to any one or more series of Preferred Stock pursuant to this
Section H.1.
PART I. Common Stock
I.1. Designation and Amount. The designation of this class of capital
stock shall be "Common Stock," par value $.0001 per share ("Common Stock"). The
number of authorized shares of Common Stock is 28,851,110. The number of
shares, powers, terms, conditions, designations, preferences and privileges,
relative, participating, optional and other special rights, and qualifications,
limitations and restrictions, of the Common Stock shall be as set forth in this
Part I. The number of authorized shares of Common Stock may be increased or
decreased (but not below the combined number of shares thereof then outstanding
and those reserved for issuance upon conversion of the Series A Stock, Series B
Stock, Series C Stock, Series D Stock, Series E Stock, Series F Stock and Series
G Stock) by the affirmative vote of the holders of the majority of the stock of
the Corporation entitled to vote, irrespective of the provisions of Section
242(b)(2) of the Delaware General Corporation Law.
I.2. Common Stock.
(a) Voting. Each Common Stockholder shall be entitled to one vote for
each share of Common Stock held of record on all matters as to which Common
Stockholders shall be entitled to vote, which voting rights shall not be
cumulative. In any election of directors, no Common Stockholder shall be
entitled to more than one vote per share.
(b) Other Rights. Each share of Common Stock issued and outstanding shall
be identical in all respects with each other such share, and no dividends shall
be paid on any shares of Common Stock unless the same dividend is paid on all
shares of Common Stock outstanding at the time of such payment. Except for and
subject to those rights expressly granted to the holders of Preferred Stock and
except as may be provided by the laws of the State of Delaware, the Common
Stockholders shall have all other rights of stockholders, including, without
limitation, (a) the right to receive dividends, when and as declared by the
Board of Directors, out of assets lawfully available therefor and (b) in the
event of any distribution of assets upon a Liquidation or otherwise, the right
to receive ratably and equally, together with the holders of the Series A Stock,
Series B Stock, Series C Stock, Series D Stock, Series E Stock, Series F Stock,
Series G Stock and Other Parity Stock and the holders of outstanding shares of
any other class or series of stock to the extent such other class or series of
stock ranks pari passu with the Common Stock upon Liquidation, all the assets
and funds of the Corporation remaining after the payment to the holders of the
Preferred Stock or of any other class or series of stock ranking senior to the
Common Stock upon Liquidation of the specific preferential amounts which they
are entitled to receive upon such Liquidation, as provided herein.
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PART J. Definitions
As used in Article III of this Restated Certificate, the following terms
shall have the meanings provided therefor below or elsewhere in this Restated
Certificate as referred to below:
J.1. "Applicable Requesting Holders" shall mean (i) in the event that the
Corporation materially breaches any of its representations, warranties,
covenants and/or agreements set forth in the Stockholders' Agreement and/or the
Series A Stock Purchase Agreement, the Series A Requesting Holders, (ii) in the
event that the Corporation materially breaches any of its representations,
warranties and/or agreements set forth in the Stockholders' Agreement and/or the
Series B Stock Purchase Agreement, the Series B Requesting Holders and (iii) in
the event that the Corporation materially breaches any of its representations,
warranties and/or agreements set forth in the Stockholders' Agreement and/or the
Series D Stock Purchase Agreement, the Series D Requesting Holders.
J.2. "Board of Directors" shall have the meaning ascribed thereto in
subparagraph (b) of Article III of this Restated Certificate.
J.3. "Business Day" shall mean any day other than a Saturday, Sunday or
public holiday in the state where the principal executive office of the
Corporation is located.
J.4. "Butcher Securities" shall mean up to a maximum of 675,000 shares of
Common Stock issued to Dr. Eugene Butcher, or, in the alternative, options
granted to Dr. Eugene Butcher to purchase up to a maximum of 675,000 shares of
Common Stock and up to a maximum of 675,000 shares of Common Stock issuable upon
exercise of such options.
J.5. "Common Stock" shall have the meaning ascribed thereto in Section I.1
hereof.
J.6. "Common Stockholders" shall have the meaning ascribed thereto in
Section A.4(e)(i) hereof.
J.7. "Continuous Holder" shall mean, with respect to any share of Series G
Stock, a holder of such share that purchased such share from the Corporation on
the Series G Conversion Price Original Issuance Date and holds such share
continuously until such share is redeemed by the Corporation pursuant to a
Special Liquidation or such share is converted into shares of Common Stock
pursuant to Section G.7(j) hereof.
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J.8. "Corporation Notice" shall have the meaning ascribed thereto in
Section A.5(c) hereof.
J.9. "Designated Public Offering" shall have the meaning ascribed thereto
in the definition of the term "Series G Minimum Conversion Shares".
J.10. "Designated Public Offering Price" shall mean the price at which the
Corporation is offering and selling shares to the public pursuant to a
Designated Public Offering (without giving effect to any discount, reduction or
offset on account of any underwriters' or brokers' discount, fees or
commissions).
J.11. "Event of Sale" shall have the meaning ascribed thereto in Section
A.4(f)(vii) hereof.
J.12. "Excluded Stock", as used throughout the Restated Certificate, shall
mean:
J.9(a) Shares of Common Stock issued and/or issuable upon conversion of
any shares of Series A Stock, Series B Stock, Series C Stock, Series D Stock,
Series E Stock, Series F Stock, Series G Stock and/or Additional Warner
Preferred Stock (as defined in Section J.9(e) hereof);
J.9(b) Common Stock issued or issuable to officers, directors or employees
of or consultants or independent contractors to the Corporation: (1) pursuant to
any written agreement, plan or arrangement, to purchase, or rights to subscribe
for, such Common Stock, that has been approved by the holders of a majority of
the combined voting power of the Series A Stock, the Series B Stock, the Series
D Stock, Series F Stock and the Series G Stock then outstanding (determined, in
the case of the Series A Stock, in accordance with Section A.6(a) hereof, in the
case of the Series B Stock, in accordance with Section B.6(a) hereof, in the
case of the Series D Stock, in accordance with Section D.6(a) hereof, in the
case of the Series F Stock, in accordance with Section F.6(a) hereof and, in the
case of the Series G Stock, in accordance with Section G.6(a) hereof), voting
together as one class, and which, as a condition precedent to the issuance of
such shares, provides for the vesting of such shares and subjects such shares to
restrictions on transfer and rights of first offer or refusal in favor of the
Corporation on terms that have been approved by the holders of a majority of the
combined voting power of the Series A Stock, the Series B Stock, the Series D
Stock, the Series F Stock and the Series G Stock then outstanding (determined,
in the case of the Series A Stock, in accordance with Section A.6(a) hereof, in
the case of the Series B Stock, in accordance with Section B.6(a) hereof, in the
case of the Series D Stock, in accordance with Section D.6(a) hereof, in the
case of the Series F Stock, in accordance with Section F.6(a) hereof and, in the
case of the Series G Stock, in accordance with Section G.6(a) hereof), voting
together as one class, (2) pursuant to the agreements that are listed on
Schedule 4.2 to the Series G Securities Purchase Agreement, or (3) upon exercise
of any and all stock options
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referred to in subsection J.9(c) below; provided, however, that the maximum
number of shares of Common Stock heretofore or hereafter issuable pursuant to
the 1993 Stock Option Plan and all such agreements, plans and arrangements
described in the foregoing clause (2) shall not exceed 2,869,404 shares (subject
to adjustment as required to comply with any anti-dilution rights set forth in
any such agreement, plan or arrangement);
J.9(c) any and all stock options granted from time to time pursuant to the
1993 Stock Option Plan or pursuant to any other stock option plan of the
Corporation adopted and approved in accordance with Sections A.6(d), B.6(c),
D.6(c), F.6(c) and G.6(c) above;
J.9(d) Common Stock issued as a stock dividend payable in shares of Common
Stock, or capital stock of any class issuable upon any subdivision,
recombination, split-up or reverse stock split of all the outstanding shares of
such class of capital stock;
J.9(e) Shares of Series A Stock issued pursuant to the Series A Stock
Purchase Agreement, shares of Series B Stock issued pursuant to the Series B
Stock Purchase Agreement, shares of Series C Stock issued pursuant to the Series
C Stock Purchase Agreement, shares of Series D Stock issued or issuable pursuant
to the Series D Stock Purchase Agreement, shares of Series E Stock issued or
issuable pursuant to the Series E Stock Purchase Agreement, shares of Series F
Stock issued or issuable pursuant to the Series F Stock Purchase Agreement,
shares of Series G Stock issued or issuable pursuant to the Series G Securities
Purchase Agreement and any shares of any other class or series of Preferred
Stock (the "Additional Warner Preferred Stock") issued or issuable pursuant to
that certain Research, Development and Marketing Agreement, dated as of
September 30, 1994, between the Corporation and Warner-Lambert Company, as
amended from time to time, or that certain Research, Development and Marketing
Agreement, dated as of July 1, 1995, between the Corporation and Warner-Lambert
Company, as amended from time to time (collectively, the "Warner Agreements");
J.9(f) the Butcher Securities;
J.9(g) the stock option to purchase 135,000 shares (subject to adjustment
as required to comply with any anti-dilution rights granted in connection with
such options) of Series A Stock granted by the Company to Dr. William A.
Haseltine, the shares of Series A Stock issued or issuable upon exercise of such
stock option, and the shares of Common Stock issued or issuable upon conversion
of such shares of Series A Stock;
J.9(h) warrants to purchase up to 210,000 shares of Series A Stock granted
to Comdisco, Inc., any and all shares of Series A Stock issued or
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issuable upon exercise of such warrants and any and all shares of Common Stock
issued or issuable upon conversion of such shares of Series A Stock.
J.9(i) shares of Common Stock issued or issuable pursuant to the Series C
Stock Purchase Agreement;
J.9(j) shares of Common Stock issued or issuable pursuant to the Series E
Stock Purchase Agreement; and
J.9(k) shares of Common Stock issued or issuable pursuant to either of the
Warner Agreements.
J.9(l) warrants to purchase shares of Common Stock and/or other capital
stock, which warrants were or will be issued pursuant to the Series G Securities
Purchase Agreement, and any and all shares of Common Stock and/or other capital
stock issued or issuable upon exercise of such warrants.
J.13. "Extraordinary Transaction" shall have the meaning ascribed thereto
in Section A.7(d)(iv) hereof.
J.14. "Liquidation" shall have the meaning ascribed thereto in Section
A.4(b) hereof.
J.15. "NASDAQ" shall have the meaning ascribed thereto in Section
A.7(d)(vii)(B) hereof.
J.16. "Other Parity Stock" shall have the meaning ascribed thereto in
Section A.4(d).
J.17. "Other Parity Stockholders" shall have the meaning ascribed thereto
in Section A.4(d).
J.18. "Other Parity Stock Special Liquidation Price shall have the meaning
ascribed thereto in Section A.4(f)(i).
J.19. "1993 Stock Option Plan" shall have the meaning ascribed thereto in
Section A.6(d) hereof.
J.20. "Original Purchase Price" shall mean (i) in the case of the Series A
Stock, the Series A Original Purchase Price, (ii) in the case of the Series B
Stock, the Series B Original Purchase Price, (iii) in the case of the Series C
Stock, the Series C Original Purchase Price, (iv) in the case of the Series D
Stock, the Series D Original Purchase Price, (v) in the case of the Series E
Stock, the Series E Original Purchase Price, (vi) in the case of the Series F
Stock, the Series F Original Purchase Price and (vi) in the case of the Series G
Stock, the Series G Original Purchase Price.
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J.21. "Preferred Stock" shall have the meaning ascribed thereto in Article
III, subparagraph (a).
J.22. "Proportional Adjustment" shall mean an adjustment made to the price
of the Series A Stock, the Series B Stock, the Series C Stock, the Series D
Stock, the Series E Stock, the Series F Stock or the Series G Stock, as the case
may be, upon the occurrence of a stock split, reverse stock split, stock
dividend, stock combination, reclassification or other similar change with
respect to such security, so that the price of one share of the Series A Stock,
the Series B Stock, the Series C Stock, the Series D Stock, the Series E Stock,
the Series F Stock or the Series G Stock, as the case may be, before the
occurrence of any such change shall equal the aggregate price of such share
together with the share (or shares or fractional share) of such security (or any
other security) received by the holder of the Series A Stock, the Series B
Stock, the Series C Stock, the Series D Stock, the Series E Stock, the Series F
Stock or the Series G Stock, as the case may be, with respect thereto upon the
effectiveness of such change.
J.23. "Redeemable Stock" shall mean (i) in the case of a Redeeming Holder
that is a Series A Stockholder, the Series A Stock, (ii) in the case of a
Redeeming Holder that is a Series B Stockholder, the Series B Stock, (iii) in
the case of a Redeeming Holder that is a Series D Stockholder, the Series D
Stock, (iv) in the case of a Redeeming Holder that is a Series F Stockholder,
the Series F Stock and (v) in the case of a Redeeming Holder that is a Series G
Stockholder, the Series G Stock.
J.24. "Redeeming Holders" shall have the meaning ascribed thereto in
Section A.5(c) hereof.
J.25. "Redemption Date" shall have the meaning ascribed thereto in Section
A.5(c) hereof.
J.26. "Redemption Notice" shall have the meaning ascribed thereto in
Section A.5(a) hereof.
J.27. "Redemption Payment" shall have the meaning ascribed thereto in
Section A.5(a) hereof.
J.28. "Redemption Price" shall have the meaning ascribed thereto in
Section A.5(a) hereof.
J.29. "Redemption Requests" shall have the meaning ascribed thereto in
Section A.5(a) hereof.
J.30. "Requesting Holders" shall have the meaning ascribed thereto in
Section A.5(a) hereof.
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J.31. "Restated Certificate" shall have the meaning ascribed thereto in
Section A.6(c) hereof.
J.32. "Series A Conversion Date" shall have the meaning ascribed thereto
in Section A.7(b)(ii) hereof.
J.33. "Series A Conversion Price" shall have the meaning ascribed thereto
in Section A.7(d) hereof.
J.34. "Series A Conversion Price Original Issuance Date" shall mean, with
respect to any share of Series A Stock, the date of first issuance by the
Corporation of the first share of Series A Stock.
J.35. "Series A Liquidation Premium Original Issuance Date" shall mean,
with respect to any share of Series A Stock, the date of first issuance by the
Corporation of such share of Series A Stock.
J.36. "Series A Original Purchase Price" shall mean, with respect to the
Series A Stock, $1.00 per share, subject, for all purposes other than Section
A.7 hereof (which provisions shall be applied in accordance with their own
terms), to Proportional Adjustment.
J.37. "Series A Preferred Certificate" shall have the meaning ascribed
thereto in Section A.7(b)(i) hereof.
J.38. "Series A Preferred Directors" shall have the meaning ascribed
thereto in Section A.6(b)(i) hereof.
J.39. "Series A Requesting Holders" shall have the meaning ascribed
thereto in Section A.5(a) hereof.
J.40. "Series A Special Liquidation Price" shall have the meaning ascribed
thereto in Section A.4(f)(i) hereof.
J.41. "Series A Stock" shall have the meaning ascribed thereto in Section
A.1 hereof.
J.42. "Series A Stock Purchase Agreement" shall mean that certain
Convertible Preferred Stock Purchase Agreement, dated November 5, 1993, by and
among the Corporation and those Series A Stockholders parties thereto, as
amended from time to time.
J.43. "Series A Stockholders" shall have the meaning ascribed thereto in
Section A.2 hereof.
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J.44. "Series B Conversion Date" shall have the meaning ascribed thereto
in Section B.7(b)(ii) hereof.
J.45. "Series B Conversion Price" shall have the meaning ascribed thereto
in Section B.7(d) hereof.
J.46. "Series B Conversion Price Original Issuance Date" shall mean, with
respect to any share of Series B Stock, the date of first issuance by the
Corporation of the first share of Series B Stock.
J.47. "Series B Liquidation Premium Original Issuance Date" shall mean,
with respect to any share of Series B Stock, the date of first issuance by the
Corporation of such share of Series B Stock.
J.48. "Series B Original Purchase Price" shall mean, with respect to the
Series B Stock, $1.20 per share, subject, for all purposes other than Section
B.7 hereof (which provisions shall be applied in accordance with their own
terms), to Proportional Adjustment.
J.49. "Series B Preferred Certificate" shall have the meaning ascribed
thereto in Section B.7(b)(i) hereof.
J.50. "Series B Requesting Holders" shall have the meaning ascribed
thereto in Section A.5(a) hereof.
J.51. "Series B Special Liquidation Price" shall have the meaning ascribed
thereto in Section B.4(f)(i) hereof.
J.52. "Series B Stock" shall have the meaning ascribed thereto in Section
B.1 hereof.
J.53. "Series B Stock Purchase Agreement" shall mean that certain Series B
Convertible Preferred Stock Purchase Agreement, dated as of September 13, 1994,
by and among the Corporation and the Series B Stockholders parties thereto, as
amended from time to time.
J.54. "Series B Stockholders" shall have the meaning ascribed thereto in
Section A.2 hereof.
J.55. "Series C Conversion Date" shall have the meaning ascribed thereto
in Section C.6(b)(ii) hereof.
J.56. "Series C Conversion Price" shall have the meaning ascribed thereto
in Section C.6(d) hereof.
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J.57. "Series C Conversion Price Original Issuance Date" shall mean, with
respect to any share of Series C Stock, the date of first issuance by the
Corporation of the first share of Series C Stock.
J.58. "Series C Liquidation Preference Amount" shall have the meaning
ascribed thereto in Section C.4(b).
J.59. "Series C Original Purchase Price" shall mean, with respect to the
Series C Stock, $3.00 per share, subject, for all purposes other than Section
C.6 hereof (which provisions shall be applied in accordance with their own
terms), to Proportional Adjustment.
J.60. "Series C Preferred Certificate" shall have the meaning ascribed
thereto in Section C.6(b)(i) hereof.
J.61. "Series C Special Liquidation Price" shall have the meaning ascribed
thereto in Section C.4(f)(i) hereof.
J.62. "Series C Stock" shall have the meaning ascribed thereto in Section
C.1 hereof.
J.63. "Series C Stock Purchase Agreement" shall mean that certain Series C
Convertible Preferred Stock Purchase Agreement, dated as of November 8, 1994, by
and between the Corporation and Warner-Lambert Company, as amended from time to
time.
J.64. "Series C Stockholders" shall mean the holders of Series C Stock.
J.65. "Series D Conversion Date" shall have the meaning ascribed thereto
in Section D.7(b)(ii) hereof.
J.66. "Series D Conversion Price" shall have the meaning ascribed thereto
in Section D.7(d) hereof.
J.67. "Series D Conversion Price Original Issuance Date" shall mean, with
respect to any share of Series D Stock, the date of first issuance by the
Corporation of the first share of Series D Stock.
J.68. "Series D Liquidation Premium Original Issuance Date" shall mean,
with respect to any share of Series D Stock, the date of first issuance by the
Corporation of such share of Series D Stock.
J.69. "Series D Original Purchase Price" shall mean, with respect to the
Series D Stock, $1.35 per share, subject, for all purposes other than Section
D.7 hereof
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(which provisions shall be applied in accordance with their own terms), to
Proportional Adjustment.
J.70. "Series D Preferred Certificate" shall have the meaning ascribed
thereto in Section D.7(b)(i) hereof.
J.71. "Series D Requesting Holders" shall have the meaning ascribed
thereto in Section A.5(a) hereof.
J.72. "Series D Special Liquidation Price" shall have the meaning ascribed
thereto in Section D.4(f)(i) hereof.
J.73. "Series D Stock" shall have the meaning ascribed thereto in Section
D.1 hereof.
J.74. "Series D Stock Purchase Agreement" shall mean that certain Series D
Convertible Preferred Stock Purchase Agreement, dated as of September 12, 1995,
by and among the Corporation and the Series D Stockholders parties thereto, as
amended from time to time.
J.75. "Series D Stockholders" shall have the meaning ascribed thereto in
Section A.2 hereof.
J.76. "Series E Conversion Date" shall have the meaning ascribed thereto
in Section E.6(b)(ii) hereof.
J.77. "Series E Conversion Price" shall have the meaning ascribed thereto
in Section E.6(d) hereof.
J.78. "Series E Conversion Price Original Issuance Date" shall mean, with
respect to any share of Series E Stock, the date of first issuance by the
Corporation of the first share of Series E Stock.
J.79. "Series E Liquidation Preference Amount" shall have the meaning
ascribed thereto in Section E.4(b).
J.80. "Series E Original Purchase Price" shall mean, with respect to the
Series E Stock, $4.00 per share, subject, for all purposes other than Section
E.6 hereof (which provisions shall be applied in accordance with their own
terms), to Proportional Adjustment.
J.81. "Series E Preferred Certificate" shall have the meaning ascribed
thereto in Section E.6(b)(i) hereof.
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J.82. "Series E Special Liquidation Price" shall have the meaning ascribed
thereto in Section E.4(f)(i) hereof.
J.83. "Series E Stock" shall have the meaning ascribed thereto in Section
E.1 hereof.
J.84. "Series E Stock Purchase Agreement" shall mean that certain Series E
Convertible Preferred Stock Purchase Agreement, dated as of January 3, 1996, by
and between the Corporation and Warner-Lambert Company, as amended from time to
time.
J.85. "Series E Stockholders" shall mean the holders of Series E Stock.
J.86. "Series F Conversion Date" shall have the meaning ascribed thereto
in Section F.7(b)(ii) hereof.
J.87. "Series F Conversion Price" shall have the meaning ascribed thereto
in Section F.7(d) hereof.
J.88. "Series F Conversion Price Original Issuance Date" shall mean, with
respect to any share of Series F Stock, the date of first issuance by the
Corporation of the first share of Series F Stock.
J.89. "Series F Liquidation Premium Original Issuance Date" shall mean,
with respect to any share of Series F Stock, the date of first issuance by the
Corporation of such share of Series F Stock.
J.90. "Series F Original Purchase Price" shall mean, with respect to the
Series F Stock, $3.00 per share, subject, for all purposes other than Section
F.7 hereof (which provisions shall be applied in accordance with their own
terms), to Proportional Adjustment.
J.91. "Series F Preferred Certificate" shall have the meaning ascribed
thereto in Section F.7(b)(i) hereof.
J.92. "Series F Requesting Holders" shall have the meaning ascribed
thereto in Section A.5(a) hereof.
J.93. "Series F Special Liquidation Price" shall have the meaning ascribed
thereto in Section F.4(f)(i) hereof.
J.94. "Series F Stock" shall have the meaning ascribed thereto in Section
F.1 hereof.
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J.95. "Series F Stock Purchase Agreement" shall mean that certain Series F
Convertible Preferred Stock Purchase Agreement, dated as of February 29, 1996,
by and among the Corporation and the Series F Stockholders parties thereto, as
amended from time to time.
J.96. "Series F Stockholders" shall have the meaning ascribed thereto in
Section A.2 hereof.
J.97. "Series G Conversion Date" shall have the meaning ascribed thereto
in Section G.7(b)(ii) hereof.
J.98. "Series G Conversion Price" shall have the meaning ascribed thereto
in Section G.7(d) hereof.
J.99. "Series G Conversion Price Original Issuance Date" shall mean, with
respect to any share of Series G Stock, the date of first issuance by the
Corporation of the first share of Series G Stock.
J.100. "Series G Event of Sale Applicable Return Amount" shall mean, with
respect to each share of Series G Stock, the amount that the Corporation shall
be required to pay to the holder of such share at the closing of a Special
Liquidation such that, if such holder had been a Continuos Holder of such share,
the internal rate of return realized by such holder in connection with such
holder's investment in such share of Series G Stock would be equal to (i) 33%,
compounded annually (computed on the basis of actual number of days elapsed in
any given year), if the closing of such Special Liquidation occurs on or prior
to the first anniversary of the Series G Conversion Price Original Issuance
Date, (ii) 49%, compounded annually (computed on the basis of actual number of
days elapsed in any given year,) if the closing of such Special Liquidation
occurs after the first anniversary of the Series G Conversion Price Original
Issuance Date but on or prior to the second anniversary of the Series G
Conversion Price Original Issuance Date, or (iii) 67%, compounded annually
(computed on the basis of actual number of days elapsed in any given year), if
the closing of such Special Liquidation occurs after the second anniversary of
the Series G Conversion Price Original Issuance Date.
J.101. "Series G Liquidation Premium Original Issuance Date" shall mean,
with respect to any share of Series G Stock, the date of first issuance by the
Corporation of such share of Series G Stock.
J.102. "Series G Minimum Conversion Shares" shall mean, with respect to
each share of Series G Stock, that number of shares of Common Stock issuable
upon mandatory conversion of such share of Series G Stock pursuant to Section
G.7(j) hereof such that (x) if all of such shares of Common Stock were sold
immediately after the closing of the firm commitment underwritten public
offering described in Section G.7(j) hereof (the "Designated Public Offering")
at a purchase price equal to the
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Designated Public Offering Price and (y) if the holder of such shares of Common
Stock had been a Continuos Holder of such share of Series G Stock, the internal
rate of return realized by such holder in connection with such holder's
investment in such share of Series G Stock would be equal to (i) 33%, compounded
annually (computed on the basis of actual number of days elapsed in any given
year), if the closing of such Designated Public Offering occurs on or prior to
the first anniversary of the Series G Conversion Price Original Issuance Date,
(ii) 49%, compounded annually (computed on the basis of actual number of days
elapsed in any given year, if the closing of such Designated Public Offering
occurs after the first anniversary of the Series G Conversion Price Original
Issuance Date but on or prior to the second anniversary of the Series G
Conversion Price Original Issuance Date, or (iii) 67%, compounded annually
(computed on the basis of actual number of days elapsed in any given year), if
the closing of such Designated Public Offering occurs after the second
anniversary of the Series G Conversion Price Original Issuance Date.
J.103. "Series G Original Purchase Price" shall mean, with respect to the
Series G Stock, $3.50 per share, subject, for all purposes other than Section
G.7 hereof (which provisions shall be applied in accordance with their own
terms), to Proportional Adjustment.
J.104. "Series G Preferred Certificate" shall have the meaning ascribed
thereto in Section G.7(b)(i) hereof.
J.105. "Series G Requesting Holders" shall have the meaning ascribed
thereto in Section A.5(a) hereof.
J.106. "Series G Securities Purchase Agreement" shall mean that certain
Securities Purchase Agreement, dated on or about December 20, 1996, by and among
the Corporation and those Series G Stockholders parties thereto, as amended from
time to time.
J.107. "Series G Special Liquidation Price" shall have the meaning
ascribed thereto in Section G.4(f)(i) hereof.
J.108. "Series G Stock" shall have the meaning ascribed thereto in Section
G.1 hereof.
J.109. "Series G Stockholders" shall have the meaning ascribed thereto in
Section A.2 hereof.
J.110. "Special Liquidation" shall have the meaning ascribed thereto in
Section A.4(f)(i) hereof.
J.111. "Special Liquidation Date" shall have the meaning ascribed thereto
in Section A.4(f)(i) hereof.
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J.112. "Stockholders' Agreement" shall mean that certain Second Amended
and Restated Stockholders' Agreement, dated on or about December 20, 1996, by
and among the Corporation, those Series A Stockholders, Series B Stockholders,
Series D Stockholders, Series F Stockholders and Series G Stockholders listed on
Schedule 1 thereto, the Series G Additional Investors (as defined therein) and
the Founders (as defined therein), as amended from time to time.
ARTICLE IV
Registered Agent
The address of the registered office of the Corporation in the State of
Delaware is 1013 Centre Road, Wilmington, New Castle County, Delaware 19801. The
name of the registered agent of the Corporation at such address is The
Corporation Service Company.
ARTICLE V
Board of Directors
A Constitution. The entire Board of Directors of the Corporation shall
consist of seven (7) persons, three (3) of whom shall be Series A Preferred
Directors, as such term defined in Section A.6(b)(i) of Article III hereof.
Unless and except to the extent that the By-laws of the Corporation otherwise
require, the election of directors of the Corporation need not be by written
ballot.
ARTICLE VI
By-laws
In furtherance and not in limitation of the powers conferred by the laws of
the State of Delaware, the Board of Directors is expressly authorized to adopt,
amend or repeal the By-laws of the Corporation, subject to the provisions of
Sections A.6, B.6, D.6, F.6 and G.6 of Article III hereof.
ARTICLE VII
Perpetual Existence
The Corporation is to have perpetual existence.
ARTICLE VIII
Amendments and Repeal
Except as otherwise specifically provided in this Restated Certificate, the
Corporation reserves the right at any time, and from time to time, to amend,
alter,
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change or repeal any provision contained in this Restated Certificate, and to
add or insert other provisions authorized at such time by the laws of the State
of Delaware, in the manner now or hereafter prescribed by law; and all rights,
preferences and privileges of whatsoever nature conferred upon stockholders,
directors or any other persons whomsoever by and pursuant to this Restated
Certificate, in its present form or as hereafter amended are granted subject to
the rights reserved in this Article VIII.
ARTICLE IX
Compromises and Arrangements
Whenever a compromise or arrangement is proposed between the Corporation
and its creditors or any class of them and/or between the Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of the
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for the Corporation under Section 291 of the
Delaware General Corporation Law or on the application of trustees in
dissolution or of any receiver or receivers appointed for the Corporation under
Section 279 of the Delaware General Corporation Law, order a meeting of the
creditors or class of creditors and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, to be summoned in such
manner as such court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors and/or of the
stockholders or class of stockholders of the Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of the
Corporation as a consequence of such compromise or arrangement, then such
compromise or arrangement and such reorganization shall, if sanctioned by the
court to which such application has been made, be binding on all the creditors
or class of creditors and/or on all of the stockholders or class of stockholders
of the Corporation, as the case may be, and also on the Corporation.
ARTICLE X
Limitation of Liability
No director of the Corporation shall be liable to the Corporation or its
stockholders for monetary damages for breach of his or her fiduciary duty as
director; provided, however, that nothing contained in this Article X shall
eliminate or limit the liability of a director:
(a) for any breach of the director's duty of loyalty to the Corporation
or its stockholders;
(b) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of the law;
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(c) under Section 174 of the General Corporation Law of the State of
Delaware; or
(d) for any transaction from which the director derived improper personal
benefit.
No amendment to or repeal of this Article X shall apply to or have any
effect on the liability or alleged liability of any director of the Corporation
for or with respect to any acts or omissions of such director occurring prior
to such amendment or repeal.
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IN WITNESS WHEREOF, the undersigned has caused this Restated Certificate
of Incorporation to be duly executed on its behalf as of December 16, 1996.
LEUKOSITE, INC.
By:
-----------------------------------
Christopher K. Mirabelli, President
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CERTIFICATE OF AMENDMENT
TO
RESTATED CERTIFICATE OF INCORPORATION
OF
LEUKOSITE, INC.
LEUKOSITE, INC., a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware (the "Corporation"),
DOES HEREBY CERTIFY:
FIRST: That, by consent of the Board of Directors of the Corporation,
resolutions were duly adopted setting forth a proposed amendment to the
Corporation's Restated Certificate of Incorporation, as heretofore amended (the
"Restated Certificate"), declaring such proposed amendment to be desirable and
in the best interest of the Corporation, and directing the officers of the
Corporation to submit such proposed amendment to the stockholders of the
Corporation for purposes of allowing such stockholders to consider such
proposed amendment and to indicate their authorization and approval thereof by
consent in writing. The resolution setting forth such proposed amendment is as
follows:
"FURTHER
RESOLVED: That, subject to obtaining the requisite stockholder approval, the
Restated Certificate be amended as set forth in paragraphs (i), (ii)
and (iii) below.
(i) Amendment of Section (a) of Article III. Section (a) of Article III
of the Restated Certificate be amended to read in its entirety as follows:
"(a) Authorization. The total number of shares of all classes of
stock which the Corporation shall have authority to issue is 51,565,875,
consisting of 21,667,199 shares of Preferred Stock, par value $.0001 per
share (the "Preferred Stock"), and 29,898,676 shares of Common Stock, par
value $.0001 per share (the "Common Stock")."
(ii) Amendment of Section I.1 of Article III. The second sentence of
Section I.1 of Article III of the Restated Certificate be amended in its
entirety to read as follows:
<PAGE> 134
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"The number of authorized shares of Common Stock is 29,898,676."
(iii) Article III of the Restated Certificate be amended by replacing the
number "2,869,404" with the number "3,916,970".
SECOND: That, thereafter, the holders of (i) at least sixty-six and
two-thirds percent (66-2/3%) of the voting power of the issued and outstanding
shares of Series A Convertible Preferred Stock, $.0001 par value per share (the
"Series A Preferred Stock"), of the Corporation, (ii) at least sixty-six and
two-thirds percent (66-2/3%) of the voting power of the issued and outstanding
shares of Series B Convertible Preferred Stock, $.0001 par value per share (the
"Series B Preferred Stock"), of the Corporation, (iii) at least sixty-six and
two-thirds percent (66 2/3%) of the voting power of the issued and outstanding
shares of Series D Convertible Preferred Stock, $.0001 par value per share (the
"Series D Preferred Stock"), of the Corporation, (iv) at least a majority of
the voting power of the issued and outstanding shares of Common Stock, (v) at
least sixty-six and two-thirds percent (66-2/3%) of the combined voting power
of the issued and outstanding shares of Series A Preferred Stock, Series B
Preferred Stock and Series D Preferred Stock, and (vi) at least a majority of
the combined voting power of the issued and outstanding shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Convertible Preferred
Stock, $.0001 par value per share, Series D Preferred Stock, Series E
Convertible Preferred Stock, $.0001 par value per share, the Series F
Convertible Preferred Stock, $.0001 par value per share, the Series G
Convertible Preferred Stock, $.0001 par value per share and Common Stock of the
Corporation, collectively representing at least the minimum number of shares of
capital stock of the Corporation required to duly authorize the proposed
amendment to the Restated Certificate, duly authorized and approved, by written
consent in accordance with Section 228 of the General Corporation Law of the
State of Delaware, the proposed amendment to the Restated Certificate.
THIRD: That the proposed amendment to the Restated Certificate was duly
adopted in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware.
<PAGE> 135
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IN WITNESS WHEREOF, LeukoSite, Inc., has caused this certificate to be
signed by Christopher K. Mirabelli, its President, this 2nd day of January,
1997.
LEUKOSITE, INC.
By:
-----------------------------
Christopher K. Mirabelli
President
<PAGE> 136
CERTIFICATE OF AMENDMENT
TO
RESTATED CERTIFICATE OF INCORPORATION
OF
LEUKOSITE, INC.
LEUKOSITE, INC., a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware (the "Corporation"),
DOES HEREBY CERTIFY:
FIRST: That, by consent of the Board of Directors of the Corporation,
resolutions were duly adopted setting forth proposed amendments to the
Corporation's Restated Certificate of Incorporation, as heretofore amended (the
"Restated Certificate"), declaring such proposed amendments to be desirable and
in the best interest of the Corporation, and directing the officers of the
Corporation to submit such proposed amendments to the stockholders of the
Corporation for purposes of allowing such stockholders to consider such
proposed amendments and to indicate their authorization and approval thereof by
consent in writing. Such proposed amendments are as follows:
(1) Amendment of Section G.7(j) of Article III. Section G.7(j) of Article
III of the Restated Certificate be and hereby is amended by deleting the
reference to Section J.101 on the 7th line of such Section G.7(j) and replacing
such reference with a reference to Section J.102.
(2) Amendment of Section J.9 of Article III. Section J.9 of Article III
of the Restated Certificate be and hereby is amended in its entirety to read as
follows:
"J.9. "Designated Public Offering" shall mean the firm commitment
underwritten public offering of Common Stock that causes or results in
the mandatory conversion of the Series G Stock into Common Stock pursuant
to, and in accordance with, the provisions of Section G.7(j) hereof."
(3) Amendment of Section J.10 of Article III. Section J.10 of Article III
of the Restated Certificate be and hereby is amended in its entirety to read as
follows:
<PAGE> 137
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"J.10. "Designated Public Offering Price" shall mean the price per
share (without giving effect to any discount, reduction or offset on
account of any underwriters' or brokers' discount, fees or commissions) at
which the Corporation is offering and selling shares of Common Stock
pursuant to the Designated Public Offering."
(4) Amendment of Section J.12 of Article III. Section J.12 of Article III
of the Restated Certificate be and hereby is amended by deleting each of the
references therein to Section J.9 and replacing such references with a
reference to Section J.12.
(5) New Section J.18A of Article III. Section J of Article III of the
Restated Certificate be and hereby is amended by inserting a new Section J.18A
reading in its entirety as follows:
"J.18A. "Other Series G Shares" shall mean, at the relevant time of
reference thereto, any and all of the shares of Series G Stock then
issued and outstanding other than the Roche Series G Shares."
(6) New Section J.31A of Article III. Section J of Article III of the
Restated Certificate be and hereby is amended by inserting a new Section J.31A
reading in its entirety as follows:
"J.31A. "Roche" shall mean Roche Finance Ltd."
(7) New Section J.31B of Article III. Section J of Article III of the
Restated Certificate be and hereby is amended by inserting a new Section J.31B
reading in its entirety as follows:
"J.31B. "Roche Series G Shares" shall mean the 857,143 shares of
Series G Stock purchased by Roche pursuant to the Series G Securities
Purchase Agreement, whether owned or held by Roche or any third party
transferee."
(8) Amendment of Section J.102 of Article III. Section J.102 of Article
III of the Restated Certificate be and hereby is amended in its entirety to
read as follows:
"J.102. "Series G Minimum Conversion Shares" shall mean:
(A) with respect to each of the Roche Series G Shares, that number
of shares of Common Stock issuable upon mandatory conversion of such
Roche Series G Share pursuant to Section G.7(j) hereof such that, if all
of such shares of Common Stock were sold immediately after the closing of
<PAGE> 138
-3-
the Designated Public Offering at a purchase price equal to the
Designated Public Offering Price, the internal rate of return realized by
the holder of such Roche Series G Share would be equal to (i) 33%,
compounded annually (computed on the basis of actual number of days
elapsed in any given year), if the closing of such Designated Public
Offering occurs on or prior to the first anniversary of the Series G
Conversion Price Original Issuance Date, (ii) 49%, compounded annually
(computed on the basis of actual number of days elapsed in any given
year), if the closing of such Designated Public Offering occurs after the
first anniversary of the Series G Conversion Price Original Issuance Date
but on or prior to the second anniversary of the Series G Conversion
Price Original Issuance Date, or (iii) 67%, compounded annually (computed
on the basis of actual number of days elapsed in any given year), if the
closing of such Designated Public Offering occurs after the second
anniversary of the Series G Conversion Price Original Issuance Date; and
(B) with respect to each of the Other Series G Shares, that number
of shares of Common Stock issuable upon mandatory conversion of such
Other Series G Share pursuant to Section G.7(j) hereof as shall be equal
to the quotient obtained by dividing (i) the Series G Original Purchase
Price by (ii) the Special Applicable Conversion Price."
(9) New Section J.109A of Article III. Section J of Article III of the
Restated Certificate be and hereby is amended by inserting a new Section J.109A
reading in its entirety as follows:
"J.109A. "Special Applicable Conversion Price" shall mean (i) in
the event that the closing of the Designated Public Offering occurs at
any time on or prior to the first anniversary of the Series G Conversion
Price Original Issuance Date, an amount equal to the Designated Public
Offering Price less a twenty five percent (25%) discount from such
Designated Public Offering Price, or (ii) in the event that the closing
of the Designated Public Offering occurs at any time after the first
anniversary of the Series G Conversion Price Original Issuance Date but
on or prior to the second anniversary of Series G Conversion Price
Original Issuance Date, an amount equal to the Designated Public Offering
Price less a thirty three percent (33%) discount from such Designated
Public Offering Price, or (iii) in the event that the closing of the
Designated Public Offering occurs at any time after the second
anniversary of the Series G Conversion Price Original Issuance Date, an
amount equal to the Designated Public Offering Price less a forty percent
(40%) discount from such Designated Public Offering Price."
<PAGE> 139
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SECOND: That, thereafter,
(i) the holders of at least a majority of the combined voting power of the
issued and outstanding shares of the Corporation's Series A Convertible
Preferred Stock, $.0001 par value per share (the "Series A Preferred Stock"),
Series B Convertible Preferred Stock, $.0001 par value per share (the "Series B
Preferred Stock"), Series C Convertible Preferred Stock, $.0001 par value per
share (the "Series C Preferred Stock"), Series D Convertible Preferred Stock,
$.0001 par value per share (the "Series D Preferred Stock"), Series E
Convertible Preferred Stock, $.0001 par value per share (the "Series E
Preferred Stock"), Series F Convertible Preferred Stock, $.0001 par value per
share (the "Series F Preferred Stock"), Series G Convertible Preferred Stock,
$.0001 par value per share (the "Series G Preferred Stock"), and Common Stock,
$.0001 par value per share (the "Common Stock"),
(ii) the holders of at least a majority of the combined voting power of
the issued and outstanding shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock, Series F Preferred Stock, and Series G Preferred Stock,
(iii) the holders of at least a majority of the voting power of the issued
and outstanding shares of Common Stock,
(iv) the holders of at least sixty-six and two-thirds percent (66-2/3%) of
the combined voting power of the issued and outstanding shares of Series A
Preferred Stock, Series B Preferred Stock, Series D Preferred Stock, Series F
Preferred Stock and Series G Preferred Stock, and
(v) the holders of at least sixty-six and two-thirds percent (66-2/3%) of
the voting power of the issued and outstanding shares of Series G Preferred
Stock of the Corporation,
collectively representing not less than the minimum number of shares of capital
stock of the Corporation required to duly authorize the proposed amendments to
the Restated Certificate, duly authorized and approved, by written consent in
accordance with Section 228 of the General Corporation Law of the State of
Delaware, the proposed amendments to the Restated Certificate.
THIRD: That the proposed amendments to the Restated Certificate were duly
adopted in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware.
<PAGE> 140
-5-
IN WITNESS WHEREOF, LeukoSite, Inc., has caused this certificate to be
signed by Christopher K. Mirabelli, its President, this __ day of June, 1997.
LEUKOSITE, INC.
By:
------------------------------
Christopher K. Mirabelli
President
<PAGE> 141
CERTIFICATE OF AMENDMENT
TO
RESTATED CERTIFICATE OF INCORPORATION
OF
LEUKOSITE, INC.
LEUKOSITE, INC., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: That, by consent of the Board of Directors of the Corporation,
resolutions were duly adopted setting forth proposed amendments to the
Corporation's Restated Certificate of Incorporation, as heretofore amended (the
"Restated Certificate"), declaring such proposed amendments to be desirable and
in the best interest of the Corporation, and directing the officers of the
Corporation to submit such proposed amendments to the stockholders of the
Corporation for purposes of allowing such stockholders to consider such proposed
amendments and to indicate their authorization and approval thereof by consent
in writing. Such proposed amendments are as follows:
(1) AMENDMENT OF SECTION (a) OF ARTICLE III. Section (a) of Article III of
the Restated Certificate be amended to read in its entirety as follows:
"(a) AUTHORIZATION. The total number of shares of all classes of
stock which the Corporation shall have authority to issue is 51,940,044,
consisting of 21,667,199 shares of Preferred Stock, par value $.0001 per
share (the "Preferred Stock"), and 30,272,845 shares of Common Stock, par
value $.0001 per share (the "Common Stock")."
(2) AMENDMENT OF SECTION A.7(j) OF ARTICLE III. Section A.7(j) of
Article III of the Restated Certificate be and hereby is amended by deleting the
text "pursuant to which the net proceeds to the Corporation are at least
$17,500,000," in the third line of such Section A.7(j).
(3) AMENDMENT OF SECTION B.7(j) OF ARTICLE III. Section B.7(j) of
Article III of the Restated Certificate be and hereby is amended by deleting the
text "pursuant
<PAGE> 142
-2-
to which the net proceeds to the Corporation are at least $17,500,000," in the
third line of such Section B.7(j).
(4) AMENDMENT OF SECTION D.7(j) OF ARTICLE III. Section D.7(j) of
Article III of the Restated Certificate be and hereby is amended by deleting the
text "pursuant to which the net proceeds to the Corporation are at least
$17,500,000," in the third line of such Section D.7(j).
(5) AMENDMENT OF SECTION F.7(j) OF ARTICLE III. Section F.7(j) of Article
III of the Restated Certificate be and hereby is amended by deleting the text
"pursuant to which the net proceeds to the Corporation are at least
$17,500,000," in the third line of such Section F.7(j).
(6) AMENDMENT OF SECTION G.7(j) OF ARTICLE III. Section G.7(j) of Article
III of the Restated Certificate be and hereby is amended by deleting the text
"pursuant to which the net proceeds to the Corporation are at least
$17,500,000," in the third line of such Section G.7(j).
(7) AMENDMENT OF SECTION I.1 OF ARTICLE III. The second sentence of
Section I.1 of Article III of the Restated Certificate be amended in its
entirety to read as follows:
"The number of authorized shares of Common Stock is 30,272,845."
(8) AMENDMENT OF SECTION J.9(b) OF ARTICLE III. Section J.9(b) of Article
III of the Restated Certificate be amended by replacing the number "3,916,970"
with the number "4,291,139".
SECOND: That, thereafter,
(i) the holders of at least sixty-six and two-thirds percent (66-2/3%) of
the voting power of the issued and outstanding shares of Series A Convertible
Preferred Stock, $.0001 par value per share (the "Series A Preferred Stock"), of
the Corporation,
(ii) the holders of at least sixty-six and two-thirds percent (66-2/3%) of
the voting power of the issued and outstanding shares of Series B Convertible
Preferred Stock, $.0001 par value per share (the "Series B Preferred Stock"), of
the Corporation,
(iii) the holders of at least sixty-six and two-thirds percent (66 2/3%) of
the voting power of the issued and outstanding shares of Series D Convertible
<PAGE> 143
-3-
Preferred Stock, $.0001 par value per share (the "Series D Preferred Stock"), of
the Corporation,
(iv) the holders of at least sixty-six and two-thirds percent (66 2/3%) of
the voting power of the issued and outstanding shares of Series F Convertible
Preferred Stock, $.0001 par value per share (the "Series F Preferred Stock"), of
the Corporation,
(v) the holders of at least sixty-six and two-thirds percent (66 2/3%) of
the voting power of the issued and outstanding shares of Series G Convertible
Preferred Stock, $.0001 par value per share (the "Series G Preferred Stock"), of
the Corporation,
(vi) the holders of at least a majority of the voting power of the issued
and outstanding shares of common stock, $.0001 par value per share (the "Common
Stock"), of the Corporation,
(vii) the holders of at least sixty-six and two-thirds percent (66-2/3%) of
the combined voting power of the issued and outstanding shares of Series A
Preferred Stock, Series B Preferred Stock, Series D Preferred Stock, Series F
Preferred Stock and Series G Preferred Stock, and
(viii) the holders of at least a majority of the combined voting power of
the issued and outstanding shares of Series A Preferred Stock, Series B
Preferred Stock, the Corporation's Series C Convertible Preferred Stock, $.0001
par value per share (the "Series C Preferred Stock"), Series D Preferred Stock,
the Corporation's Series E Convertible Preferred Stock, $.0001 par value per
share (the "Series E Preferred Stock"), the Series F Preferred Stock, the Series
G Preferred Stock and the Common Stock,
collectively representing not less than the minimum number of shares of capital
stock of the Corporation required to duly authorize the proposed amendments to
the Restated Certificate, duly authorized and approved, by written consent in
accordance with Section 228 of the General Corporation Law of the State of
Delaware, the proposed amendments to the Restated Certificate.
THIRD: That the proposed amendments to the Restated Certificate were duly
adopted in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware.
<PAGE> 144
-4-
IN WITNESS WHEREOF, LeukoSite, Inc., has caused this certificate to be
signed by Christopher K. Mirabelli, its President, this __ day of June, 1997.
LEUKOSITE, INC.
By:
----------------------------------
Christopher K. Mirabelli
President
<PAGE> 1
Exhibit 10.20(a)
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL (WHICH
MAY BE COMPANY COUNSEL) REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
WARRANT AGREEMENT
To Purchase Shares of Series A Convertible Preferred Stock of
LEUKOSITE, INC.
Dated as of December 13, 1993 (the "Effective Date")
WHEREAS, LeukoSite, Inc., a Delaware corporation (the "Company"), has
entered into a Master Lease Agreement dated as of December 13, 1993, Equipment
Schedule No. VL-1, and related Schedules (the "Leases") with Comdisco, Inc., a
Delaware corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for such Leases, the right to purchase shares of its Series A Convertible
Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Leases and in consideration of the mutual covenants and
agreements contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
----------------------------------------------
The Company hereby grants to the Warrantholder, and the Warrantholder is
entitled, upon the terms and subject to the conditions hereinafter set forth, to
subscribe to and purchase, from the Company, that number of fully paid and
nonassessable shares of the Company's Series A Convertible Preferred Stock
("Preferred Stock") obtained by dividing (i) the product of (x) $500,000 and (y)
9.0%, by (ii) the exercise price computed in accordance with the sentence below
(the "Exercise Price"). The Exercise Price shall be equal to the sum of $1.00
per share of the Preferred Stock (the "Last Round") plus the product of (a) the
<PAGE> 2
-2-
difference between the price per share of the next round of equity financing
(the "Next Round") and the Last Round, multiplied by (b) the fraction resulting
from dividing (x) the number of days from the date of closing of the Last Round
to the date of execution of the Leases, by (y) the number of days from the date
of the closing of the Last Round to the date of the closing of the Next Round;
provided, however, if the Next Round is not successfully completed by September
30, 1994 or an amount less than $5.0 million in financing is raised, then the
Exercise Price shall be equal to $1.00 per share. The number and kind of such
shares and the Exercise Price are subject to adjustment as provided in Sections
3 and 8 hereof.
If the Warrantholder fails to make available the additional $500,000 of
lease financing as set forth in Part II of Equipment Schedule VL-1, then this
Warrant shall become null and void.
2. TERM OF THE WARRANT AGREEMENT.
-----------------------------
Except as otherwise provided for herein, the term of this Warrant Agreement
and the right to purchase Preferred Stock as granted herein shall commence on
the Effective Date and shall be exercisable for a period ending on the earlier
of (i) the tenth anniversary of the Effective Date, or (ii) the fifth
anniversary of the closing of the Company's initial public offering. The
Warrantholder agrees to a ninety (90) day lockup period from the effective date
of the Company's initial public offering and, if requested by the underwriter,
will agree to an additional ninety (90) day lockup period for a maximum lockup
of one hundred eighty (180) days.
3. EXERCISE OF THE PURCHASE RIGHTS.
-------------------------------
The purchase rights set forth in this Warrant Agreement are exercisable by
the Warrantholder, at any time, or from time to time, prior to the expiration of
the term set forth in Section 2 above, for all or any part of the shares of
Preferred Stock (but not for a fraction of a share); PROVIDED, HOWEVER, that
notwithstanding anything in this Warrant Agreement to the contrary, in no event
shall the Warrantholder have the right hereunder to acquire any shares of
Preferred Stock, or otherwise exercise any of its rights hereunder, at any time
prior to the time that the Warrantholder makes available to the Company the
additional $500,000 of lease financing as set forth in Part II of Equipment
Schedule VL-1. In the event that pursuant to the Company's Certificate of
Incorporation, as amended, an event causing mandatory conversion of the
Company's Preferred Stock shall have occurred, then this Warrant Agreement shall
be exercisable for the number of shares of Common Stock of the Company into
which the number of shares of Preferred Stock purchasable pursuant
<PAGE> 3
-3-
to this Warrant Agreement would have been so converted had the Warrantholder
exercised his purchase rights hereunder in full immediately prior to such
mandatory conversion (and, in such event, any reference to "Preferred Stock" in
this Warrant Agreement shall be deemed, when the context requires, to be a
reference to "Common Stock"). The Warrantholder shall exercise his purchase
rights hereunder by tendering to the Company at its principal office a notice of
exercise in the form attached hereto as Exhibit I (the "Notice of Exercise"),
duly completed and executed. Promptly upon receipt of the Notice of Exercise and
the payment of the aggregate Exercise Price for the number of shares of
Preferred Stock being purchased (paid payment to be made in accordance with the
terms set forth below), and in no event later than twenty-one (21) days
thereafter, the Company shall issue to the Warrantholder a certificate for the
number of shares of Preferred Stock purchased and shall execute the Notice of
Exercise indicating the number of shares which remain subject to future
purchases, if any.
The aggregate Exercise Price may be paid at the Warrantholder's election
either (i) by cash or check, or (ii) by surrender of Warrants ("Net Issuance")
as determined below. If the Warrantholder elects the Net Issuance method, the
Company will issue Preferred Stock in accordance with the following formula:
X = Y (A-B)
-------
A
Where: X = the number of shares of Preferred Stock to be issued to the
Warrantholder.
Y = the number of shares of Preferred Stock requested to be
exercised under this Warrant Agreement.
A = the fair market value of one (1) share of Preferred Stock.
B = the Exercise Price.
As used herein, the current fair market value of the Preferred Stock shall
mean, with respect to each share of Preferred Stock, the fair market value
thereof as determined (in good faith) by the Board of Directors of the Company.
In the event that this Warrant Agreement shall, at any time, become exercisable
for Common Stock pursuant to, and in accordance with, the provisions of the
first paragraph of this
<PAGE> 4
-4-
Section 3, then, the current fair market value of Common Stock shall mean, with
respect to each share of Common Stock:
(i) if the exercise is in connection with an initial public offering, and
if the Company's Registration Statement relating to such public offering
has been declared effective by the SEC, then the initial "Price to Public"
specified in the final prospectus with respect to the offering;
(ii) if this Warrant Agreement is exercised after, and not in connection
with the Company's initial public offering, and:
(a) if traded on a securities exchange, the fair market value shall be
deemed to be the average of the closing prices over a twenty-one (21)
day period ending three days before the day the current fair market
value of the securities is being determined; or
(b) if actively traded over-the-counter, the fair market value shall
be deemed to be the average of the closing bid and asked prices quoted
on the NASDAQ system (or similar system) over the twenty-one (21) day
period ending three days before the day the current fair market value
of the securities is being determined;
(iii) if at any time the Common stock is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the
current fair market value of Common Stock shall be the highest price per
share which the Company could obtain from a willing buyer (not a current
employee or director) for shares of Common Stock sold by the Company, from
authorized but unissued shares, as determined in good faith by its Board of
Directors, unless the Company shall become subject to a merger, acquisition
or other consolidation pursuant to which the Company is not the surviving
party, in which case the fair market value of Common Stock shall be deemed
to be the value received by the holders of the Company's Preferred Stock on
a common equivalent basis pursuant to such merger or acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number of
shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
<PAGE> 5
-5-
4. RESERVATION OF SHARES.
---------------------
(a) AUTHORIZATION AND RESERVATION OF SHARES. During the term of this
Warrant Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provide for the exercise
of the rights to purchase Preferred stock as provided for herein.
(b) REGISTRATION OR LISTING. If any shares of Preferred Stock required to
be reserved hereunder require registration with or approval of any governmental
authority under any Federal or State law (other than any registration under the
1933 Act, as then in effect, or any similar Federal statute then enforced, or
any state securities law), or listing on any domestic securities exchange,
before such shares may be issued, the Company will, at its expense and as
expeditiously as possible, use its best efforts to cause such shares to be duly
registered, listed or approved for listing on such domestic securities exchange,
as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP.
-----------------------------
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant Agreement, but in lieu of such
fractional shares the Company shall make a cash payment therefor upon the basis
of the Exercise Price then in effect.
6. NO RIGHTS AS SHAREHOLDER.
------------------------
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrant Agreement.
7. WARRANTHOLDER REGISTRY.
----------------------
The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
-----------------
In addition to any adjustment, pursuant to Section 3 hereof, to the number
and kind of shares purchasable hereunder, the Exercise Price and the number and
kind of shares purchasable hereunder are subject to adjustment, as follows:
<PAGE> 6
-6-
(a) MERGER AND SALE OF ASSETS. If at any time there shall be a capital
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation when the Company is not the surviving corporation, or the sale of
all or substantially all of the Company's properties and assets to any other
person shall be effected in such a way that holders of Preferred Stock shall be
entitled to receive securities with respect to or in exchange for Preferred
Stock (hereinafter referred to as a "Merger Event"), then, as a part of such
Merger Event, lawful provision shall be made so that the Warrantholder shall
thereafter be entitled to purchase and receive, upon exercise of this Warrant
Agreement, the number of shares of preferred stock or other securities of the
successor corporation resulting from such Merger Event, equivalent in value to
that which would have been issuable if Warrantholder had exercised this Warrant
Agreement immediately prior to the Merger Event. In any such case, appropriate
adjustment (as determined in good faith by the Company's Board of Directors)
shall be made in the application of the provisions of this Warrant Agreement
with respect to the rights and interest of the Warrantholder after the Merger
Event to the end that the provisions of this Warrant Agreement (including
adjustments of the Exercise Price and number of shares purchasable upon exercise
of this Warrant Agreement) shall be applicable to the greatest extent possible.
(b) RECLASSIFICATION OF SHARES. If the Company at any time shall, by
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes, this Warrant Agreement shall thereafter represent the
right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject
to the purchase rights under this Warrant Agreement immediately prior to such
combination, reclassification, exchange, subdivision or other change.
(c) SUBDIVISION OR COMBINATION OF SHARES. If the Company at any time shall
combine or subdivide its Preferred Stock, (i) the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination, and (ii) the number of shares of
Preferred Stock purchasable hereunder shall be proportionately increased in the
case of a subdivision, or proportionately decreased in the case of a
combination.
<PAGE> 7
-7-
(d) STOCK DIVIDENDS. If the Company at any time shall pay a dividend
payable in, or make any other distribution (except any distribution specifically
provided for in the foregoing subsections (a) or (b)) of the Company's Preferred
Stock, then the Exercise Price shall be adjusted, from and after the record date
of such dividend or distribution, to that price determined by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction (i)
the numerator of which shall be the total number of all shares of the Company's
Preferred Stock outstanding immediately prior to such dividend or distribution,
and (ii) the denominator of which shall be the total number of all shares of the
Company's Preferred Stock outstanding immediately after such dividend or
distribution. The Warrantholder shall thereafter be entitled to purchase, at the
Exercise Price resulting from such adjustment, the number of shares of Preferred
Stock (calculated to the nearest whole share) obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
shares of Preferred Stock issuable upon the exercise hereof immediately prior to
such adjustment and dividing the product thereof by the Exercise Price resulting
from such adjustment.
(e) ANTIDILUTION RIGHTS. Any shares of Preferred Stock purchased upon
exercise of the Warrantholder's rights hereunder shall be entitled to additional
antidilution rights as set forth in the Company's Certificate of Incorporation,
as amended. A true and complete copy of the Company's Certificate of
Incorporation, as amended through the Effective Date, is attached hereto as
Exhibit III (the "Charter"). The Company shall promptly provide the
Warrantholder with any restatement, amendment, modification or waiver of the
Charter.
(f) NOTICE OF ADJUSTMENTS. If: (i) the Company shall declare any dividend
or distribution upon its stock, whether in cash, property, stock or other
securities; (ii) the Company shall offer for subscription prorata to the holders
of any class of its Preferred or other convertible stock any additional shares
of stock of any class or other rights; (iii) there shall be any Merger Event; or
(iv) there shall be any voluntary or involuntary dissolution, liquidation or
winding up of the Company; then, in connection with each such event, the Company
shall send to the Warrantholder: (A) at least twenty (20) days' prior written
notice of the date on which the books of the Company shall close or a record
shall be taken for such dividend, distribution, subscription rights (specifying
the date on which the holders of Preferred Stock shall be entitled thereto) or
for determining rights to vote in respect of such Merger Event, dissolution,
liquidation or winding up; and (B) in the case of any such Merger Event,
dissolution, liquidation or winding up, at least twenty (20) days' prior written
notice of
<PAGE> 8
-8-
the date when the same shall take place (and specifying the date on which the
holders of Preferred Stock shall be entitled to exchange their Preferred Stock
for securities or other property deliverable upon such Merger Event,
dissolution, liquidation or winding up). In the case of a public offering, the
Company shall give Warrantholder at least twenty (20) days written notice prior
to the effective date thereof.
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the adjusted Exercise
Price, and (v) the number of shares subject to purchase hereunder after giving
effect to such adjustment, and shall be given in accordance with Section 12(e)
hereof.
(g) TIMELY NOTICE. Failure to timely provide such notice required by
subsection (f) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder. The notice period shall begin
on the date such notice is given in accordance with Section 12(e) hereof.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
--------------------------------------------------------
(a) RESERVATION OF PREFERRED STOCK. The Preferred Stock issuable upon
exercise of the Warrantholder's rights has been duly and validly reserved and,
when issued in accordance with the provisions of this Warrant Agreement, will be
validly issued, fully paid and non-assessable, and will be free of any taxes,
liens, charges or encumbrances of any nature whatsoever; provided, however, that
the Preferred Stock issuable pursuant to this warrant Agreement may be subject
to restrictions on transfer under state and/or Federal securities laws. The
Company has made available to the Warrantholder true, correct and complete
copies of its Charter and Bylaws, as amended, and minutes of all Board of
Directors (including all committees of the Board of Directors, if any) and
Shareholder meetings from October 31, 1993 through November 30, 1993. The
issuance of certificates for shares of Preferred Stock upon exercise of the
Warrant Agreement shall be made without charge to the Warrantholder for any
issuance tax in respect thereof, or other cost incurred by the Company in
connection with such exercise and the related issuance of shares of Preferred
Stock. The Company shall not be required to pay any tax which may be payable in
respect of any transfer involved and the issuance and delivery of any
certificate in a name other than that of the Warrantholder.
<PAGE> 9
-9-
(b) DUE AUTHORITY. The execution and delivery by the Company of this
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and the Leases and this Warrant Agreement are
not inconsistent with the Company's Charter or Bylaws, do not contravene any law
or governmental rule, regulation or order applicable to it, do not and will not
contravene any material provision of, or constitute a material default under,
any material indenture, mortgage, contract or other instrument to which it is a
party or by which it is bound, and the Leases and this Warrant Agreement
constitute legal, valid and binding agreements of the Company, enforceable in
accordance with their respective terms; except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application relating to or affecting enforcement of
creditors rights and the application of equitable principles in any action,
legal or equitable, and except as rights to indemnity or contribution may be
limited by applicable law.
(c) CONSENTS AND APPROVALS. No consent or approval of, giving of notice to,
registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement.
(d) ISSUED SECURITIES. All issued and outstanding shares of Common Stock,
Preferred Stock or any other securities of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. All outstanding shares
of Common Stock, Preferred Stock and any other securities were issued in full
compliance with all Federal and state securities laws. In addition:
(i) The authorized capital of the Company consists of (A) 18,420,000 shares
of Common Stock, of which (1) 3,300,000 have been designated as shares of Series
A Common Stock, all of which are issued and outstanding, and (2) 15,120,000 have
been designated as shares of Common Stock, of which 500,000 are issued and
outstanding, and (B) 10,135,000 shares of preferred stock, all of which have
been designated as shares of Series A Convertible Preferred Stock, and 5,000,000
of which are issued and outstanding, an additional 5,000,000 have been reserved
for issuance to certain venture capital investors of the Company and 135,000 are
issuable upon exercise of an outstanding stock option.
<PAGE> 10
-10-
(ii) The company has reserved (A) 1,185,000 shares of Common Stock for
issuance under its 1993 Stock Option Plan, under which 1,054,500 options are
outstanding at an average price of approximately $.11 per share. Except for the
foregoing options and for an outstanding stock option exercisable for 135,000
shares of the company's Preferred Stock, there are no other options, warrants,
conversion privileges or other rights presently outstanding to purchase or
otherwise acquire any authorized but unissued shares of the Company's capital
stock or other securities of the Company.
(e) INSURANCE. The Company has in full force and effect insurance policies,
with extended coverage, insuring the Company and its property and business
against such losses and risks, and in such amounts, as are customary for
corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(f) OTHER COMMITMENTS TO REGISTER SECURITIES. Except as set forth in that
certain Stockholders' Agreement, dated as of November 5, 1993, among the Company
and certain stockholders of the company, the Company is not, pursuant to the
terms of any other agreement currently in existence, under any obligation to
register under the 1933 Act any of its presently outstanding securities or any
of its securities which may hereafter be issued.
(g) EXEMPT TRANSACTION. Subject to the accuracy of the Warrantholder's
representations in section 10 hereof, the issuance of the Preferred Stock upon
exercise of this Warrant Agreement will constitute a transaction exempt from (i)
the registration requirements of Section 5 of the 1933 Act, in reliance upon
Section 4(2) thereof, and (ii) the qualification requirements of any applicable
State securities laws.
(h) COMPLIANCE WITH RULE 144. At the written request of the Warrantholder,
who proposes to sell Preferred Stock issuable upon the exercise of the Warrant
Agreement in compliance with Rule 144 promulgated by the Securities and Exchange
Commission, the Company shall furnish to the Warrantholder, within ten days
after receipt of such request, a written statement confirming the Company's
compliance with the filing requirements of the Securities and Exchange
Commission as set forth in such Rule, as such Rule may be amended from time to
time.
<PAGE> 11
-11-
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
--------------------------------------------------
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder:
(a) INVESTMENT PURPOSE. The right to acquire Preferred Stock or the
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and the Warrantholder has no present intention
of selling or engaging in any public distribution of the same except pursuant to
a registration or exemption.
(b) PRIVATE ISSUE. The Warrantholder understands (i) that the Preferred
Stock issuable upon exercise of this Warrant Agreement is not registered under
the 1933 Act or qualified under applicable state securities laws on the ground
that the issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
(c) DISPOSITION OF WARRANTHOLDER'S RIGHTS. In no event will the
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise of such rights unless and until (i) it
shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion of
counsel (which counsel shall be outside counsel to the Warrantholder)
satisfactory to the Company and its counsel to the effect that (A) appropriate
action necessary for compliance with the 1933 Act has been taken, or (B) an
exemption from the registration requirements of the 1933 Act is available.
Notwithstanding the foregoing, the restrictions imposed upon the transferability
of any of its rights to acquire Preferred Stock or Preferred Stock issuable on
the exercise of such rights do not apply to transfers from the beneficial owner
of any of the aforementioned securities to its nominee or from such nominee to
its beneficial owner, and shall terminate as to any particular share of
Preferred Stock when (1) such security shall have been effectively registered
under the 1933 Act and sold by the holder thereof in accordance with such
registration or (2) such security shall have been sold without registration in
compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been
issued to the Warrantholder at its request by the staff of the Securities and
Exchange Commission or a ruling shall have been issued to the Warrantholder at
its
<PAGE> 12
-12-
request by such Commission stating that no action shall be recommended by such
staff or taken by such Commission, as the case may be, if such security is
transferred without registration under the 1933 Act in accordance with the
conditions set forth in such letter or ruling and such letter or ruling
specifies that no subsequent restrictions on transfer are required. Whenever the
restrictions imposed hereunder shall terminate, as hereinabove provided, the
Warrantholder or holder of a share of Preferred Stock then outstanding as to
which such restrictions have terminated shall be entitled to receive from the
Company, without expense to such holder, one or more new certificates for the
Warrant Agreement or for such shares of Preferred Stock not bearing any
restrictive legend.
(d) FINANCIAL RISK; ACCREDITED INVESTOR STATUS. The Warrantholder has such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of its investment, and has the ability to bear
the economic risks of its investment. The Warrantholder is an accredited
investor as such term is defined in Rule 501(a) of the 1933 Act.
(e) RISK OF NO REGISTRATION. The Warrantholder understands that if the
Company does not register with the Securities and Exchange Commission pursuant
to Section 12 of the 1933 Act, or file reports pursuant to Section 15(d), of the
Securities Exchange Act of 1934 (the "1934 Act"), or if a registration statement
covering the securities under the 1933 Act is not in effect when it desires to
sell (i) the rights to purchase Preferred Stock pursuant to this Warrant
Agreement, or (ii) the Preferred Stock issuable upon exercise of the right to
purchase, it may be required to hold such securities for an indefinite period.
The Warrantholder also understands that any sale of its rights of the
Warrantholder to purchase Preferred Stock or Preferred Stock which might be made
by it in reliance upon Rule 144 under the 1933 Act may be made only in
accordance with the terms and conditions of that Rule.
11. TRANSFERS.
---------
Subject to the terms and conditions contained in Section 10 hereof, this
Warrant Agreement and all rights hereunder are transferable in whole or in part
by the Warrantholder and any successor transferee, provided, however, in no
event shall the number of transfers of the rights and interests in all of the
Warrant Agreements exceed three (3) transfers. The transfer shall be recorded on
the books of the Company upon receipt by the Company of a notice of transfer in
the form attached hereto as Exhibit II (the 'Transfer Notice"), at its principal
offices and the payment
<PAGE> 13
-13-
to the Company of all transfer taxes and other governmental charges imposed on
such transfer.
12. MISCELLANEOUS.
-------------
(a) EFFECTIVE DATE. The provisions of this Warrant Agreement shall be
construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Warrant Agreement shall be
binding upon the parties hereto and their respective successors and assigns.
(b) ATTORNEY'S FEES. In any litigation, arbitration or court proceeding
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
(c) GOVERNING LAW. This Warrant Agreement shall be governed by and
construed for all purposes under and in accordance with the laws of the State of
Delaware.
(d) COUNTERPARTS. This Warrant Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) NOTICES. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery, facsimile
transmission (provided that the original is sent by personal delivery, overnight
mail, or mail as hereinafter set forth), delivery by overnight mail, or seven
(7) days after deposit in the United States mail, by registered or certified
mail, addressed (i) to the Warrantholder at 6111 North River Road, Rosemont,
Illinois 60018, attention: James Labe, Venture Leasing Director, cc: Legal
Department, (and/or, if by facsimile, (708) 518-5465) and (ii) to the Company at
800 Huntington Avenue, Boston, Massachusetts 02115, attn: Robert Gallahue,
Controller (and/or if by facsimile, (617) 278-5910), or at such other address as
any such party may subsequently designate by written notice to the other party.
(f) REMEDIES. In the event of any default hereunder, the non-defaulting
party may proceed to protect and enforce its rights either by suit in equity
and/or by action at law, including but not limited to an action for damages as a
result of any such default, and/or an action for specific performance for any
default where Warrantholder will not have an adequate remedy at law and where
damages will not be readily
<PAGE> 14
-14-
ascertainable. The Company expressly agrees that it shall not oppose an
application by the Warrantholder or any other person entitled to the benefit of
this Agreement requiring specific performance of any or all provisions hereof or
enjoining the Company from continuing to commit any such breach of this
Agreement.
(g) NO IMPAIRMENT OF RIGHTS. The Company will not, by amendment of its
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant Agreement, but will at all times
in good faith assist in the carrying out of all such terms and in the taking of
all such actions as may be necessary or appropriate in order to protect the
rights of the Warrantholder against impairment.
(h) SURVIVAL. The representations, warranties, covenants and conditions of
the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(i) SEVERABILITY. In the event any one or more of the provisions of this
Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
(j) AMENDMENTS. Any provision of this Warrant Agreement may be amended by a
written instrument signed by the Company and by the Warrantholder.
(k) ADDITIONAL DOCUMENTS. The Company, upon execution of this Warrant
Agreement, shall provide the Warrantholder with certified resolutions with
respect to the representations, warranties and covenants set forth in
subparagraphs (a) through (d), (f) and (g) of Section 9 above. If the purchase
price for the Leases referenced in the preamble of this Warrant Agreement
exceeds $1,000,000, the Company will also provide Warrantholder with an opinion
from the Company's counsel with respect to those same representations,
warranties and covenants. The Company shall also supply such other documents as
the Warrantholder may from time to time reasonably request.
<PAGE> 15
-15-
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be executed by its officers thereunto duly authorized as of the Effective
Date.
Company: LEUKOSITE, INC.
By: /s/ CHRISTOPHER K. MIRABELLI
--------------------------------------------
Title: CEO AND CHAIRMAN
----------------------------------------
Warrantholder: COMDISCO, INC.
By: /s/ JILL C. HANSES
--------------------------------------------
Title: ASSISTANT VICE PRESIDENT/VENTURE LEASE
----------------------------------------
<PAGE> 16
EXHIBIT I
NOTICE OF EXERCISE
To:
--------------------------------------
(1) The undersigned Warrantholder hereby elects to purchase _______ shares of
the Preferred Stock of LeukoSite, Inc., pursuant to the terms of the
Warrant Agreement dated the 30th day of August, 1993 (the "Warrant
Agreement") between LeukoSite, Inc. and the Warrantholder, and tenders
herewith payment of the purchase price for such shares in full, together
with all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Preferred Stock of LeukoSite,
Inc., the undersigned hereby confirms and acknowledges the investment
representations and warranties made in Section 10 of the Warrant Agreement.
(3) Please issue a certificate or certificates representing said shares of
Preferred Stock in the name of the undersigned or in such other name as is
specified below.
- -----------------------------------------
(Name)
- -----------------------------------------
(Address)
Warrantholder: COMDISCO, INC.
By:
--------------------------------------
Title:
-----------------------------------
Date:
------------------------------------
<PAGE> 17
ACKNOWLEDGMENT OF EXERCISE
The undersigned ______________________________, hereby acknowledges receipt of
the "Notice of Exercise" from Comdisco, Inc., to purchase ___ shares of the
Preferred Stock of LeukoSite, Inc., pursuant to the terms of the Warrant
Agreement, and further acknowledges that _______ shares remain subject to
purchase under the terms of the Warrant Agreement.
Company:
By:
-----------------------------------
Title:
--------------------------------
Date:
---------------------------------
<PAGE> 18
EXHIBIT II
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this form
and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
- --------------------------------------------------------------------------------
(Please Print)
whose address is
---------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated
--------------------------------------------------
Holder's Signature
-------------------------------------
Holder's Address
---------------------------------------
--------------------------------------------------------
Signature Guaranteed:
-----------------------------------------------------------
NOTE: The signature to this Transfer Notice must correspond with the name as
it appears on the face of the Warrant Agreement, without alteration or
enlargement or any change whatever. Officers of corporations and those
acting in a fiduciary or other representative capacity should file
proper evidence of authority to assign the foregoing Warrant
Agreement.
<PAGE> 1
EXHIBIT 10.20(b)
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL (WHICH
MAY BE COMPANY COUNSEL) REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
WARRANT AGREEMENT
To Purchase Shares of Series A Convertible Preferred Stock of
LEUKOSITE, INC.
Dated as of December 13, 1993 (the "Effective Date")
WHEREAS, LeukoSite, Inc., a Delaware corporation (the "Company"), has
entered into a Master Lease Agreement dated as of December 13, 1993, Equipment
Schedules No. VL-1 and VL-2, and related Schedules (the "Leases") with Comdisco,
Inc., a Delaware corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for such Leases, the right to purchase shares of its Series A Convertible
Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Leases and in consideration of the mutual covenants and
agreements contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
----------------------------------------------
(a) The Company hereby grants to the Warrantholder pursuant to Equipment
Schedule VL-1, and the Warrantholder is entitled, upon the terms and subject to
the conditions hereinafter set forth, to subscribe to and purchase, from the
Company, 90,000 fully paid and non-assessable shares of the Company's Series A
Convertible Preferred Stock ("Preferred Stock") at a purchase price of $1.00 per
share (the "Exercise Price"). The number and kind of such shares and the
Exercise Price are subject to adjustment as provided in Sections 3 and 8 hereof.
<PAGE> 2
-2-
(b) The Company hereby grants to the Warrantholder pursuant to Equipment
Schedule VL-2, and the Warrantholder is entitled, upon the terms and subject to
the conditions hereinafter set forth, to subscribe to and purchase, from the
Company, 75,000 fully paid and non-assessable shares of the Company's Preferred
Stock at a purchase price equal to the Exercise Price. The number and kind of
such shares and the Exercise Price are subject to adjustment as provided below
in this Section 1 and in Sections 3 and 8 hereof.
If the Company notifies the Warrantholder in writing by June 30, 1994 that
it does not intend to utilize all or any portion of the financing as set forth
in Equipment Schedule VL-2 (including, without limitation, on account of the
Company's intention to transfer any portion of unused financing under Equipment
Schedule VL-2 to Equipment Schedule VL-1), then the number of shares of the
Company's Preferred Stock which the Warrantholder shall be entitled to purchase
hereunder shall be reduced by subtracting that number of shares obtained by
dividing (i) the product of (x) the unused portion of Equipment Schedule VL-2
and (y) 10%, by the then applicable Exercise Price; PROVIDED, HOWEVER, that if
the Company uses any portion of Equipment Schedule VL-2, the number of shares of
Preferred Stock purchasable by the Warrantholder pursuant to Section 1 (b)
hereof shall in any event be at least equal to twenty-five percent (25%) of the
number of shares of Preferred Stock purchasable by the Warrantholder pursuant to
said Section 1 (b) on the date hereof. In the event the Company does not utilize
any portion of the financing set forth under Equipment Schedule VL-2
Warrantholder agrees that there will be no shares purchasable or fees due as
provided for under Section l(b) of this Warrant Agreement. In addition, in the
event the Company exercises their option to apply any unused portion of
financing available under Equipment Schedule VL-2 to Equipment Schedule VL-1,
the Company hereby grants to the Warrantholder, and the Warrantholder is
entitled, upon the terms and subject to the conditions hereinafter set forth, to
subscribe for and purchase, from the Company that number of fully paid and
non-assessable shares of the Company's Preferred Stock obtained by dividing (i)
the product of (x) the dollar amount of any unused portion of financing
transferred from Equipment Schedule VL-2 to Equipment Schedule VL-1 and (y) 9%,
by (ii) $1.00.
2. TERM OF THE WARRANT AGREEMENT.
-----------------------------
Except as otherwise provided for herein, the term of this Warrant Agreement
and the right to purchase Preferred Stock as granted herein shall commence on
the Effective Date and shall be exercisable for a period ending on the earlier
of (i) the tenth anniversary of the Effective Date, or
<PAGE> 3
-3-
(ii) the fifth anniversary of the closing of the Company's initial public
offering. The Warrantholder agrees to a ninety (90) day lockup period from the
effective date of the Company's initial public offering and, if requested by the
underwriter, will agree to an additional ninety (90) day lockup period for a
maximum lockup of one hundred eighty (180) days.
3. EXERCISE OF THE PURCHASE RIGHTS.
-------------------------------
The purchase rights set forth in this Warrant Agreement are exercisable by
the Warrantholder, at any time, or from time to time, prior to the expiration of
the term set forth in Section 2 above, for all or any part of the shares of
Preferred Stock (but not for a fraction of a share); PROVIDED, HOWEVER, that in
no event shall the Warrantholder be entitled to exercise its purchase rights
under Section 1 (b) hereof until June 30, 1994. In the event, however, that
pursuant to the Company's Certificate of Incorporation, as amended, an event
causing mandatory conversion of the Company's Preferred Stock shall have
occurred, then this Warrant Agreement shall be exercisable for the number of
shares of Common Stock of the Company into which the number of shares of
Preferred Stock purchasable pursuant to this Warrant Agreement would have been
so converted had the Warrantholder exercised his purchase rights hereunder in
full immediately prior to such mandatory conversion (and, in such event, any
reference to "Preferred Stock" in this Warrant Agreement shall be deemed, when
the context requires, to be a reference to "Common Stock"). The Warrantholder
shall exercise his purchase rights hereunder by tendering to the Company at its
principal office a notice of exercise in the form attached hereto as Exhibit I
(the "Notice of Exercise"), duly completed and executed. Promptly upon receipt
of the Notice of Exercise and the payment of the aggregate Exercise Price for
the number of shares of Preferred Stock being purchased (said payment to be made
in accordance with the terms set forth below), and in no event later than
twenty-one (21) days thereafter, the Company shall issue to the Warrantholder a
certificate for the number of shares of Preferred Stock purchased and shall
execute the Notice of Exercise indicating the number of shares which remain
subject to future purchases, if any.
The aggregate Exercise Price may be paid at the Warrantholder's election
either (i) by cash or check, or (ii) by surrender of Warrants ("Net Issuance")
as determined below. If the Warrantholder elects the Net Issuance method, the
Company will issue Preferred Stock in accordance with the following formula:
<PAGE> 4
-4-
X = Y (A-B)
-------
A
Where: X = the number of shares of Preferred Stock to be issued to the
Warrantholder.
Y = the number of shares of Preferred Stock requested to be
exercised under this Warrant Agreement.
A = the fair market value of one (1) share of Preferred Stock.
B = the Exercise Price.
As used herein, the current fair market value of the Preferred Stock shall
mean, with respect to each share of Preferred Stock, the fair market value
thereof as determined (in good faith) by the Board of Directors of the Company.
In the event that this Warrant Agreement shall, at any time, become exercisable
for Common Stock pursuant to, and in accordance with, the provisions of the
first paragraph of this Section 3, then, the current fair market value of Common
Stock shall mean, with respect to each share of Common Stock:
(i) if the exercise is in connection with an initial public offering, and
if the Company's Registration Statement relating to such public offering
has been declared effective by the SEC, then the initial "Price to Public"
specified in the final prospectus with respect to the offering;
(ii) if this Warrant Agreement is exercised after, and not in connection
with the Company's initial public offering, and:
(a) if traded on a securities exchange, the fair market value shall be
deemed to be the average of the closing prices over a twenty-one (21)
day period ending three days before the day the current fair market
value of the securities is being determined; or
(b) if actively traded over-the-counter, the fair market value shall
be deemed to be the average of the closing bid and asked prices quoted
on the NASDAQ system (or similar system) over the twenty-one (21) day
period ending three days before the day the current fair market value
of the securities is being determined;
<PAGE> 5
-5-
(iii) if at any time the Common Stock is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the
current fair market value of Common Stock shall be the highest price per
share which the Company could obtain from a willing buyer (not a current
employee or director) for shares of Common Stock sold by the Company, from
authorized but unissued shares, as determined in good faith by its Board of
Directors, unless the Company shall become subject to a merger, acquisition
or other consolidation pursuant to which the Company is not the surviving
party, in which case the fair market value of Common Stock shall be deemed
to be the value received by the holders of the Company's Preferred Stock on
a common equivalent basis pursuant to such merger or acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number of
shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
---------------------
(a) AUTHORIZATION AND RESERVATION OF SHARES. During the term of this
Warrant Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provide for the exercise
of the rights to purchase Preferred Stock as provided for herein.
(b) REGISTRATION OR LISTING. If any shares of Preferred Stock required to
be reserved hereunder require registration with or approval of any governmental
authority under any Federal or State law (other than any registration under the
1933 Act, as then in effect, or any similar Federal statute then enforced, or
any state securities law), or listing on any domestic securities exchange,
before such shares may be issued, the Company will, at its expense and as
expeditiously as possible, use its best efforts to cause such shares to be duly
registered, listed or approved for listing on such domestic securities exchange,
as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP.
-----------------------------
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant Agreement, but in lieu of such
<PAGE> 6
-6-
fractional shares the Company shall make a cash payment therefor upon the basis
of the Exercise Price then in effect.
6. NO RIGHTS AS SHAREHOLDER.
------------------------
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrant Agreement.
7. WARRANTHOLDER REGISTRY.
----------------------
The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
-----------------
In addition to any adjustment, pursuant to Section 3 hereof, to the number
and kind of shares purchasable hereunder, the Exercise Price and the number and
kind of shares purchasable hereunder are subject to adjustment, as follows:
(a) MERGER AND SALE OF ASSETS. If at any time there shall be a capital
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation when the Company is not the surviving corporation, or the sale of
all or substantially all of the Company's properties and assets to any other
person shall be effected in such a way that holders of Preferred Stock shall be
entitled to receive securities with respect to or in exchange for Preferred
Stock (hereinafter referred to as a "Merger Event"), then, as a part of such
Merger Event, lawful provision shall be made so that the Warrantholder shall
thereafter be entitled to purchase and receive, upon exercise of this Warrant
Agreement, the number of shares of preferred stock or other securities of the
successor corporation resulting from such Merger Event, equivalent in value to
that which would have been issuable if Warrantholder had exercised this Warrant
Agreement immediately prior to the Merger Event. In any such case, appropriate
adjustment (as determined in good faith by the Company's Board of Directors)
shall be made in the application of the provisions of this Warrant Agreement
with respect to the rights and interest of the Warrantholder after the Merger
Event to the end that the provisions of this Warrant Agreement (including
adjustments of the Exercise Price and number of shares purchasable upon exercise
of this Warrant Agreement) shall be applicable to the greatest extent possible.
<PAGE> 7
-7-
(b) RECLASSIFICATION OF SHARES. If the Company at any time shall, by
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes, this Warrant Agreement shall thereafter represent the
right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject
to the purchase rights under this Warrant Agreement immediately prior to such
combination, reclassification, exchange, subdivision or other change.
(c) SUBDIVISION OR COMBINATION OF SHARES. If the Company at any time shall
combine or subdivide its Preferred Stock, (i) the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination, and (ii) the number of shares of
Preferred Stock purchasable hereunder shall be proportionately increased in the
case of a subdivision, or proportionately decreased in the case of a
combination.
(d) STOCK DIVIDENDS. If the Company at any time shall pay a dividend
payable in, or make any other distribution (except any distribution specifically
provided for in the foregoing subsections (a) or (b)) of the Company's Preferred
Stock, then the Exercise Price shall be adjusted, from and after the record date
of such dividend or distribution, to that price determined by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction (i)
the numerator of which shall be the total number of all shares of the Company's
Preferred Stock outstanding immediately prior to such dividend or distribution,
and (ii) the denominator of which shall be the total number of all shares of the
Company's Preferred Stock outstanding immediately after such dividend or
distribution. The Warrantholder shall thereafter be entitled to purchase, at the
Exercise Price resulting from such adjustment, the number of shares of Preferred
Stock (calculated to the nearest whole share) obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
shares of Preferred Stock issuable upon the exercise hereof immediately prior to
such adjustment and dividing the product thereof by the Exercise Price resulting
from such adjustment.
(e) ANTIDILUTION RIGHTS. Any shares of Preferred Stock purchased upon
exercise of the Warrantholder's rights hereunder shall be entitled to additional
antidilution rights as set forth in the Company's Certificate of Incorporation,
as amended. A true and complete copy of the Company's
<PAGE> 8
-8-
Certificate of Incorporation, as amended through the Effective Date, is attached
hereto as Exhibit III (the "Charter"). The Company shall promptly provide the
Warrantholder with any restatement, amendment, modification or waiver of the
Charter.
(f) NOTICE OF ADJUSTMENTS. If: (i) the Company shall declare any dividend
or distribution upon its stock, whether in cash, property, stock or other
securities; (ii) the Company shall offer for subscription pro rata to the
holders of any class of its Preferred or other convertible stock any additional
shares of stock of any class or other rights; (iii) there shall be any Merger
Event; or (iv) there shall be any voluntary or involuntary dissolution,
liquidation or winding up of the Company; then, in connection with each such
event, the Company shall send to the Warrantholder: (A) at least twenty (20)
days' prior written notice of the date on which the books of the Company shall
close or a record shall be taken for such dividend, distribution, subscription
rights (specifying the date on which the holders of Preferred Stock shall be
entitled thereto) or for determining rights to vote in respect of such Merger
Event, dissolution, liquidation or winding up; and (B) in the case of any such
Merger Event, dissolution, liquidation or winding up, at least twenty (20) days'
prior written notice of the date when the same shall take place (and specifying
the date on which the holders of Preferred Stock shall be entitled to exchange
their Preferred Stock for securities or other property deliverable upon such
Merger Event, dissolution, liquidation or winding up). In the case of a public
offering, the Company shall give Warrantholder at least twenty (20) days written
notice prior to the effective date thereof.
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the adjusted Exercise
Price, and (v) the number of shares subject to purchase hereunder after giving
effect to such adjustment, and shall be given in accordance with Section 12(e)
hereof.
(g) TIMELY NOTICE. Failure to timely provide such notice required by
subsection (f) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder. The notice period shall begin
on the date such notice is given in accordance with Section 12(e) hereof.
<PAGE> 9
-9-
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
--------------------------------------------------------
(a) RESERVATION OF PREFERRED STOCK. The Preferred Stock issuable upon
exercise of the Warrantholder's rights has been duly and validly reserved and,
when issued in accordance with the provisions of this Warrant Agreement, will be
validly issued, fully paid and non-assessable, and will be free of any taxes,
liens, charges or encumbrances of any nature whatsoever; provided, however, that
the Preferred Stock issuable pursuant to this Warrant Agreement may be subject
to restrictions on transfer under state and/or Federal securities laws. The
Company has made available to the Warrantholder true, correct and complete
copies of its Charter and Bylaws, as amended, and minutes of all Board of
Directors (including all committees of the Board of Directors, if any) and
Shareholder meetings from October 31, 1993 through November 30, 1993. The
issuance of certificates for shares of Preferred Stock upon exercise of the
Warrant Agreement shall be made without charge to the Warrantholder for any
issuance tax in respect thereof, or other cost incurred by the Company in
connection with such exercise and the related issuance of shares of Preferred
Stock. The Company shall not be required to pay any tax which may be payable in
respect of any transfer involved and the issuance and delivery of any
certificate in a name other than that of the Warrantholder.
(b) DUE AUTHORITY. The execution and delivery by the Company of this
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and the Leases and this Warrant Agreement are
not inconsistent with the Company's Charter or Bylaws, do not contravene any law
or governmental rule, regulation or order applicable to it, do not and will not
contravene any material provision of, or constitute a material default under,
any material indenture, mortgage, contract or other instrument to which it is a
party or by which it is bound, and the Leases and this Warrant Agreement
constitute legal, valid and binding agreements of the Company, enforceable in
accordance with their respective terms; except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application relating to or affecting enforcement of
creditors' rights and the application of equitable principles in any action,
legal or equitable, and except as rights to indemnity or contribution may be
limited by applicable law.
<PAGE> 10
-10-
(c) CONSENTS AND APPROVALS. No consent or approval of, giving of notice to,
registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement.
(d) ISSUED SECURITIES. All issued and outstanding shares of Common Stock,
Preferred Stock or any other securities of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. All outstanding shares
of Common Stock, Preferred Stock and any other securities were issued in full
compliance with all Federal and state securities laws. In addition:
(i) The authorized capital of the Company consists of (A) 18,420,000
shares of Common Stock, of which (1) 3,300,000 have been designated as
shares of Series A Common Stock, all of which are issued and outstanding,
and (2) 15,120,000 have been designated as shares of Common Stock, of which
500,000 are issued and outstanding, and (B) 10,135,000 shares of preferred
stock, all of which have been designated as shares of Series A Convertible
Preferred Stock, and 5,000,000 of which are issued and outstanding, an
additional 5,000,000 have been reserved for issuance to certain venture
capital investors of the Company and 135,000 are issuable upon exercise of
an outstanding stock option.
(ii) The Company has reserved (A) 1,185,000 shares of Common Stock for
issuance under its 1993 Stock Option Plan, under which 1,054,500 options
are outstanding at an average price of approximately $.11 per share. Except
for the foregoing options and for an outstanding stock option exercisable
for 135,000 shares of the Company's Preferred Stock, there are no other
options, warrants, conversion privileges or other rights presently
outstanding to purchase or otherwise acquire any authorized but unissued
shares of the Company's capital stock or other securities of the Company.
(e) INSURANCE. The Company has in full force and effect insurance policies,
with extended coverage, insuring the Company and its property and business
against such losses and risks, and in such amounts, as are customary for
corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
<PAGE> 11
-11-
(f) OTHER COMMITMENTS TO REGISTER SECURITIES. Except as set forth in that
certain Stockholders' Agreement, dated as of November 5, 1993, among the Company
and certain stockholders of the Company, the Company is not, pursuant to the
terms of any other agreement currently in existence, under any obligation to
register under the 1933 Act any of its presently outstanding securities or any
of its securities which may hereafter be issued.
(g) EXEMPT TRANSACTION. Subject to the accuracy of the Warrantholder's
representations in section 10 hereof, the issuance of the Preferred Stock upon
exercise of this Warrant Agreement will constitute a transaction exempt from (i)
the registration requirements of Section 5 of the 1933 Act, in reliance upon
Section 4(2) thereof, and (ii) the qualification requirements of any applicable
State securities laws.
(h) COMPLIANCE WITH RULE 144. At the written request of the Warrantholder,
who proposes to sell Preferred Stock issuable upon the exercise of the Warrant
Agreement in compliance with Rule 144 promulgated by the Securities and Exchange
Commission, the Company shall furnish to the Warrantholder, within ten days
after receipt of such request, a written statement confirming the Company's
compliance with the filing requirements of the Securities and Exchange
Commission as set forth in such Rule, as such Rule may be amended from time to
time.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
--------------------------------------------------
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder:
(a) INVESTMENT PURPOSE. The right to acquire Preferred Stock or the
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and the Warrantholder has no present intention
of selling or engaging in any public distribution of the same except pursuant to
a registration or exemption.
(b) PRIVATE ISSUE. The Warrantholder understands (i) that the Preferred
Stock issuable upon exercise of this Warrant Agreement is not registered under
the 1933 Act or qualified under applicable state securities laws on the ground
that the issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance
<PAGE> 12
-12-
on such exemption is predicated on the representations set forth in this Section
10.
(c) DISPOSITION OF WARRANTHOLDER'S RIGHTS. In no event will the
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise of such rights unless and until (i) it
shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion of
counsel (which counsel shall be outside counsel to the Warrantholder)
satisfactory to the Company and its counsel to the effect that (A) appropriate
action necessary for compliance with the 1933 Act has been taken, or (B) an
exemption from the registration requirements of the 1933 Act is available.
Notwithstanding the foregoing, the restrictions imposed upon the transferability
of any of its rights to acquire Preferred Stock or Preferred Stock issuable on
the exercise of such rights do not apply to transfers from the beneficial owner
of any of the aforementioned securities to its nominee or from such nominee to
its beneficial owner, and shall terminate as to any particular share of
Preferred Stock when (1) such security shall have been effectively registered
under the 1933 Act and sold by the holder thereof in accordance with such
registration or (2) such security shall have been sold without registration in
compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been
issued to the Warrantholder at its request by the staff of the Securities and
Exchange Commission or a ruling shall have been issued to the Warrantholder at
its request by such Commission stating that no action shall be recommended by
such staff or taken by such Commission, as the case may be, if such security is
transferred without registration under the 1933 Act in accordance with the
conditions set forth in such letter or ruling and such letter or ruling
specifies that no subsequent restrictions on transfer are required. Whenever the
restrictions imposed hereunder shall terminate, as hereinabove provided, the
Warrantholder or holder of a share of Preferred Stock then outstanding as to
which such restrictions have terminated shall be entitled to receive from the
Company, without expense to such holder, one or more new certificates for the
Warrant Agreement or for such shares of Preferred Stock not bearing any
restrictive legend.
(d) FINANCIAL RISK; ACCREDITED INVESTOR STATUS. The Warrantholder has such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of its investment, and has the ability to bear
the economic risks of its investment. The Warrantholder is an accredited
investor as such term is defined in Rule 501(a) of the 1933 Act.
<PAGE> 13
-13-
(e) RISK OF NO REGISTRATION. The Warrantholder understands that if the
Company does not register with the Securities and Exchange Commission pursuant
to Section 12 of the 1933 Act, or file reports pursuant to Section 15(d), of the
Securities Exchange Act of 1934 (the "1934 Act"), or if a registration statement
covering the securities under the 1933 Act is not in effect when it desires to
sell (i) the rights to purchase Preferred Stock pursuant to this Warrant
Agreement, or (ii) the Preferred Stock issuable upon exercise of the right to
purchase, it may be required to hold such securities for an indefinite period.
The Warrantholder also understands that any sale of its rights of the
Warrantholder to purchase Preferred Stock or Preferred Stock which might be made
by it in reliance upon Rule 144 under the 1933 Act may be made only in
accordance with the terms and conditions of that Rule.
11. TRANSFERS.
---------
Subject to the terms and conditions contained in Section 10 hereof, this
Warrant Agreement and all rights hereunder are transferable in whole or in part
by the Warrantholder and any successor transferee, provided, however, in no
event shall the number of transfers of the rights and interests in all of the
Warrant Agreements exceed three (3) transfers. The transfer shall be recorded on
the books of the Company upon receipt by the Company of a notice of transfer in
the form attached hereto as Exhibit II (the "Transfer Notice"), at its principal
offices and the payment to the Company of all transfer taxes and other
governmental charges imposed on such transfer.
12. MISCELLANEOUS.
-------------
(a) EFFECTIVE DATE. The provisions of this Warrant Agreement shall be
construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Warrant Agreement shall be
binding upon the parties hereto and their respective successors and assigns.
(b) ATTORNEY'S FEES. In any litigation, arbitration or court proceeding
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
(c) GOVERNING LAW. This Warrant Agreement shall be governed by and
construed for all purposes under and in accordance with the laws of the State of
Delaware.
<PAGE> 14
-14-
(d) COUNTERPARTS. This Warrant Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) NOTICE. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery, facsimile
transmission (provided that the original is sent by personal delivery, overnight
mail, or mail as hereinafter set forth), delivery by overnight mail, or seven
(7) days after deposit in the United States mail, by registered or certified
mail, addressed (i) to the Warrantholder at 6111 North River Road, Rosemont,
Illinois 60018, attention: James Labe, Venture Leasing Director, cc: Legal
Department, (and/or, if by facsimile, (708) 518-5465) and (ii) to the Company at
800 Huntington Avenue, Boston, Massachusetts 02115, attn: Robert Gallahue,
Controller (and/or if by facsimile, (617) 278-5910), or at such other address as
any such party may subsequently designate by written notice to the other party.
(f) REMEDIES. In the event of any default hereunder, the non-defaulting
party may proceed to protect and enforce its rights either by suit in equity
and/or by action at law, including but not limited to an action for damages as a
result of any such default, and/or an action for specific performance for any
default where Warrantholder will not have an adequate remedy at law and where
damages will not be readily ascertainable. The Company expressly agrees that it
shall not oppose an application by the Warrantholder or any other person
entitled to the benefit of this Agreement requiring specific performance of any
or all provisions hereof or enjoining the Company from continuing to commit any
such breach of this Agreement.
(g) NO IMPAIRMENT OF RIGHTS. The Company will not, by amendment of its
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant Agreement, but will at all times
in good faith assist in the carrying out of all such terms and in the taking of
all such actions as may be necessary or appropriate in order to protect the
rights of the Warrantholder against impairment.
(h) SURVIVAL. The representations, warranties, covenants and conditions of
the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
<PAGE> 15
-15-
(i) SEVERABILITY. In the event any one or more of the provisions of this
Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
(j) AMENDMENTS. Any provision of this Warrant Agreement may be amended by a
written instrument signed by the Company and by the Warrantholder.
(k) ADDITIONAL DOCUMENTS. The Company, upon execution of this Warrant
Agreement, shall provide the Warrantholder with certified resolutions with
respect to the representations, warranties and covenants set forth in
Subparagraphs (a) through (d), (f) and (g) of Section 9 above. If the purchase
price for the Leases referenced in the preamble of this Warrant Agreement
exceeds $1,000,000, the Company will also provide Warrantholder with an opinion
from the Company's counsel with respect to those same representations warranties
and covenants. The Company shall also supply such other documents as the
Warrantholder may from time to time reasonably request.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be executed by its officers thereunto duly authorized as of the Effective
Date.
Company: LEUKOSITE, INC.
By: /s/ CHRISTOPHER K. MIRABELLI
--------------------------------------------
Title: CEO AND CHAIRMAN
----------------------------------------
Warrantholder: COMDISCO, INC.
By: /s/ JILL C. HANSES
--------------------------------------------
Title: ASSISTANT VICE PRESIDENT/VENTURE LEASE
----------------------------------------
<PAGE> 16
EXHIBIT I
NOTICE OF EXERCISE
To:
--------------------------------------
(1) The undersigned Warrantholder hereby elects to purchase _______ shares of
the Preferred Stock of LeukoSite, Inc., pursuant to the terms of the
Warrant Agreement dated the 30th day of August, 1993 (the "Warrant
Agreement") between LeukoSite, Inc. and the Warrantholder, and tenders
herewith payment of the purchase price for such shares in full, together
with all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Preferred Stock of LeukoSite,
Inc., the undersigned hereby confirms and acknowledges the investment
representations and warranties made in Section 10 of the Warrant Agreement.
(3) Please issue a certificate or certificates representing said shares of
Preferred Stock in the name of the undersigned or in such other name as is
specified below.
- -----------------------------------------
(Name)
- -----------------------------------------
(Address)
Warrantholder: COMDISCO, INC.
By:
--------------------------------------
Title:
-----------------------------------
Date:
------------------------------------
<PAGE> 17
ACKNOWLEDGMENT OF EXERCISE
The undersigned ______________________________, hereby acknowledges receipt of
the "Notice of Exercise" from Comdisco, Inc., to purchase ___ shares of the
Preferred Stock of LeukoSite, Inc., pursuant to the terms of the Warrant
Agreement, and further acknowledges that _______ shares remain subject to
purchase under the terms of the Warrant Agreement.
Company:
By:
-----------------------------------
Title:
--------------------------------
Date:
---------------------------------
<PAGE> 18
EXHIBIT II
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this form
and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
- --------------------------------------------------------------------------------
(Please Print)
whose address is
---------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated
--------------------------------------------------
Holder's Signature
-------------------------------------
Holder's Address
---------------------------------------
--------------------------------------------------------
Signature Guaranteed:
-----------------------------------------------------------
NOTE: The signature to this Transfer Notice must correspond with the name as
it appears on the face of the Warrant Agreement, without alteration or
enlargement or any change whatever. Officers of corporations and those
acting in a fiduciary or other representative capacity should file
proper evidence of authority to assign the foregoing Warrant
Agreement.
<PAGE> 1
Exhibit 10.27
Dated June 16, 1997
-------------------
(1) THE UNIVERSITY OF OXFORD
(2) THE MEDICAL RESEARCH COUNCIL
(3) LEUKOSITE, INC.
(4) LEUKOSITE (UK) LIMITED
- --------------------------------------------------------------------------------
DEED OF ASSUMPTION
- --------------------------------------------------------------------------------
MARRIOTT HARRISON
Solicitors
12 Great James Street
London WC1N 3DR
Tel: 0171 209 2000
Fax: 0171 209 2001
REF: DJFI/DJ70519A
<PAGE> 2
THIS DEED is made on June 16, 1997
BETWEEN:
- --------
1. THE CHANCELLOR, MASTERS AND SCHOLARS OF THE UNIVERSITY OF OXFORD whose
administrative offices are at Wellington Square, Oxford OX1 2JD,
England ("the University");
2. THE MEDICAL RESEARCH COUNCIL of 20 Park Crescent, London W1N 4AL,
England ("the MRC");
3. LEUKOSITE, INC. a Delaware Corporation, whose principal place of
business is at 215 First Street, Cambridge, Massachusetts 02142, USA
("LeukoSite (US)");
4. LEUKOSITE (UK) LIMITED (Registered No. 3347775) whose registered office
is at 12 Great James Street, London WC1N 3DR, England ("LeukoSite
(UK)").
WHEREAS:
- --------
A. On 6th October 1994 the University, the MRC and LeukoSite (US) ("the
Continuing Parties") and LeukoSite Limited (Registered No. 2932583)
entered into an Agreement for the construction and operation of a
Therapeutic Antibody Centre within the University of Oxford
("Agreement").
B. On 19th March 1996 LeukoSite Limited was dissolved by the Registrar of
Companies and its name removed from the Register of Companies.
C. LeukoSite (UK) wishes to take over the rights and obligations of
LeukoSite Limited under the Agreement and the parties hereto wish to
enter into this Deed of Assumption to enable LeukoSite (UK) to take the
place of LeukoSite Limited under the Agreement.
NOW THIS DEED WITNESSETH as follows:
- ------------------------------------
1. The Continuing Parties agree that, notwithstanding the dissolution of
LeukoSite Limited, the Agreement shall continue in full force and
effect as between them for all periods both before and after the said
dissolution and after the date of this Deed and each party hereby
waives all rights which it may have in respect of the others as regards
such dissolution.
<PAGE> 3
-2-
2. The Continuing Parties hereby agree with LeukoSite (UK) that LeukoSite
(UK) shall be treated as a party to the Agreement with effect from the
date of the Agreement with all the rights and obligations of LeukoSite
Limited as though LeukoSite (UK) was originally a party to the
Agreement. LeukoSite (UK) hereby agrees with the Continuing Parties to
assume all the rights and obligations of LeukoSite Limited in respect
of the Agreement with effect from the date of the Agreement and agrees
to be bound by the same as though originally party thereto.
3. Clause 6.7 of the Agreement shall be amended in its final paragraph by
deleting the reference to LeukoSite (UK) and substituting the
following:
In the case of LeukoSite (UK)
The Managing Director
LeukoSite (UK) Limited
12 Great James Street
London WC1N 3DR
with a copy to:
Gerald J. Kehoe
Bingham, Dana & Gould LLP
39 Victoria street
London SE1H 0EE
England
4. This Deed shall be governed by English law and the parties hereto agree
to submit to the jurisdiction of the English Courts.
IN WITNESS whereof the parties hereto have caused this Deed to be duly executed
on the day and year first above written.
<PAGE> 4
<TABLE>
<CAPTION>
EXECUTED as a Deed of EXECUTED as a Deed of
THE CHANCELLOR, MASTERS THE MEDICAL RESEARCH COUNCIL
AND SCHOLARS OF THE
UNIVERSITY OF OXFORD
<S> <C>
Name: Dr. M.E. Ceadel Name: Martin R. Wood Ph.D.
---------------------------------------- --------------------------------------
Position: Senior Proctor Position: Head of Technology Transfer
------------------------------------ -----------------------------------
Signature: /s/ M.E. Ceadel Signature: /s/ Martin R. Wood
----------------------------------- -----------------------------------
Name: Annette M. Volfing Name: Graham L. Wagner
---------------------------------------- --------------------------------------
Position: Junior Proctor Position: Licensing and Agreements Manager
------------------------------------ -----------------------------------
Signature: /s/ Annette M. Volfing Signature: /s/ Graham L. Wagner
----------------------------------- -----------------------------------
EXECUTED as a Deed of EXECUTED as a Deed of
LEUKOSITE, INC. LEUKOSITE (UK) LIMITED
Name: Christopher Mirabelli Name: Christopher Mirabelli
---------------------------------------- --------------------------------------
Position: CEO and Director Position: Director
------------------------------------ -----------------------------------
Signature: /s/ Christopher Mirabelli Signature: /s/ Christopher Mirabelli
----------------------------------- -----------------------------------
Name: Augustine Lawlor Name:
---------------------------------------- ---------------------------------------
Position: Vice President of Corp. Dev. and CFO Position:
------------------------------------ ------------------------------------
Signature: /s/ Augustine Lawlor Signature:
----------------------------------- -----------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 10.28
LEUKOSITE, INC.
215 FIRST STREET
CAMBRIDGE, MA 02139
June 26, 1997
HEALTHCARE VENTURES III, L.P.
HEALTHCARE VENTURES IV, L.P.
c/o HealthCare Investment Corporation
379 Thornall Street
Edison, NJ 08837
Ladies and Gentlemen:
Reference is hereby made to that certain Second Amended and Restated
Stockholders Agreement, dated December 20, 1996, between LeukoSite, Inc, a
Delaware corporation (the "Company"), you and certain other stockholders of the
Company (such Second Amended and Restated Stockholders Agreement, as amended or
modified from time to time, being referred to herein as the "Stockholders
Agreement").
In consideration of your agreement to terminate certain of your rights
under the Stockholders Agreement and to grant certain written consents that are
necessary in order to enable the Company to complete its proposed initial
public offering, the Company hereby agrees with both of you (collectively, the
"Investors" and, individually, an "Investor") as follows:
1. SURVIVAL OF CERTAIN COVENANTS UNDER THE STOCKHOLDERS AGREEMENT.
Notwithstanding the agreement reached by the Company with all of the
stockholder parties to the Stockholders Agreement (including the Investors) to
terminate the covenants set forth in Section 2 of the Stockholders Agreement,
each of the Investors (but none of the other stockholder parties to the
Stockholders Agreement) shall have the right to enforce the Company's
obligations under Section 2.5 or Section 2.7(e)(1) of the Stockholders
Agreement upon the terms and conditions thereof, all to the same extent as if
Section 2.5 and 2.7(e)(1) had not been so terminated. The rights of each
Investor under this Section 1 shall terminate at such time as such Investor
ceases to own any Investment Shares (as previously defined under the
Stockholders Agreement).
<PAGE> 2
-2-
2. CALL OF SPECIAL MEETING. So long as the Investors own, collectively,
at least fifteen percent (15%) of the issued and outstanding shares of common
stock, $0.0001 par value per share ("Common Stock"), of the Company, either
Investor shall have the right to cause the Company to hold a special meeting of
stockholders of the Company. Either Investor, if such Investor is entitled to
exercise such right, may exercise such right by giving written notice to the
Company of its request that the Company call a special meeting of stockholders
of the Company. Upon receipt of such written notice from such Investor, the
Company shall cause the appropriate officer or officers who have the power or
authority under the Restated Certificate of Incorporation or By-laws of the
Company to call a special meeting of stockholders of the Company, to call
promptly the special meeting of stockholders requested by such Investor. The
rights of each Investor under this Section 2 shall terminate at such time the
Investors own, collectively, less than fifteen percent (15%) of the issued and
outstanding shares of Common Stock. The Company acknowledges that, in the event
of any breach by it of its obligations under this Section 2, the Investors will
have no adequate remedy at law and, accordingly, shall be entitled to
injunctive relief or other appropriate equitable remedies against such breach.
The Company shall not, in any action or proceeding brought to obtain any such
injunctive relief or other appropriate equitable remedies, assert the claim or
defense that an adequate remedy at law exists.
3. AMENDMENT OF CHANGE OF CONTROL PROVISIONS IN THE AMENDED AND RESTATED
1993 STOCK OPTION PLAN OF THE COMPANY. At such time after the date hereof as
the Company's Chief Executive Officer deems appropriate (but in no event later
than the first regular meeting of the Board of Directors of the Company after
the closing of the Company's proposed initial public offering), the President
will include as an agenda item to discuss at a Board of Directors meeting
whether the Amended and Restated 1993 Stock Option Plan of the Company (the
"Plan") that has been adopted in connection with, and will become effective
upon consummation of, such proposed initial public offering, should be amended
to change the terms of the Plan so that outstanding stock options under the
Plan do not vest automatically upon the occurrence of a Change of Control (as
defined in the Plan).
4. GENERAL. This letter agreement may be signed in multiple counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument. This letter agreement shall be
construed and enforced in accordance with the laws of the State of Delaware
applicable to a contract made and performed in the State of Delaware by
residents thereof.
<PAGE> 3
-3-
If the foregoing represents our agreement, please sign where indicated
below, whereupon this letter agreement will constitute a legally binding and
enforceable agreement executed under seal.
Very truly yours,
LEUKOSITE, INC.
By: /s/Christopher K. Mirabelli
--------------------------------------
Christopher K. Mirabelli, President
Accepted and Agreed To:
HEALTHCARE VENTURES III, L.P.
By: HealthCare Partners III, L.P.
as General Partner
By: /s/ John Littlechild
-----------------------------
Name: John Littlechild
Title: General Partner
HEALTHCARE VENTURES IV, L.P.
By: HealthCare Partners IV, L.P.
as General Partner
By: /s/ John Littlechild
-----------------------------
Name: John Littlechild
Title: General Partner
<PAGE> 1
Exhibit 23.2
Upon the consummation of the reverse stock split and charter amendment
discussed in Note 9(a), we expect to be in a position to issue the following
consent.
Arthur Andersen LLP
Boston, Massachusetts
July 11, 1997
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report and to all references to our Firm included in or made part of this
Registration Statement.
<PAGE> 1
Exhibit 23.3
[HAMILTON, BROOK, SMITH & REYNOLDS, P.C. LETTERHEAD]
CONSENT OF SPECIAL COUNSEL FOR LEUKOSITE, INC.
We hereby consent to the reference to our name, and to the statements
with respect to us, in LeukoSite, Inc.'s Registration Statement on Form S-1 and
the Prospectus relating thereto under the caption "Experts".
HAMILTON, BROOK, SMITH & REYNOLDS, P.C.
By: /s/ David E. Brook
--------------------------
David E. Brook
Dated: July 11, 1997
