-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LPhUmXoMuHa5kRNUt/UxDj+31iNqgS+LpN3rGb5yRTMHiuUhuKJQGi24qPmWXs7m QaOh+aHNcZlgkombspFdCg== 0001193125-06-211081.txt : 20061019 0001193125-06-211081.hdr.sgml : 20061019 20061019154931 ACCESSION NUMBER: 0001193125-06-211081 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 20061019 DATE AS OF CHANGE: 20061019 GROUP MEMBERS: SURAYPHARM S.A.S SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: TERCICA INC CENTRAL INDEX KEY: 0001262175 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 260042539 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-79780 FILM NUMBER: 061153440 BUSINESS ADDRESS: STREET 1: 2000 SIERRA POINT PARKWAY STREET 2: SUITE 400 CITY: BRISBANE STATE: CA ZIP: 94005 BUSINESS PHONE: 6506244900 MAIL ADDRESS: STREET 1: 2000 SIERRA POINT PARKWAY STREET 2: SUITE 400 CITY: BRISBANE STATE: CA ZIP: 94005 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: Ipsen, S.A. CENTRAL INDEX KEY: 0001370483 IRS NUMBER: 000000000 STATE OF INCORPORATION: I0 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 42, RUE DU DOCTEUR BLANCHE CITY: PARIS STATE: I0 ZIP: 75016 BUSINESS PHONE: 011 33144961010 MAIL ADDRESS: STREET 1: 42, RUE DU DOCTEUR BLANCHE CITY: PARIS STATE: I0 ZIP: 75016 SC 13D/A 1 dsc13da.htm SCHEDULE 13D AMENDMENT NO. 1 Schedule 13D Amendment No. 1

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

SCHEDULE 13D

 

Under the Securities Exchange Act of 1934

(Amendment No. 1)*

 

 

 

Tercica, Inc.

(Name of Issuer)

 

Common Stock, par value $0.001 per share

(Title of Class of Securities)

 

88078L 10 5

(CUSIP Number)

 

 

Willy Mathot

General Counsel

Ipsen, S.A.

42, rue du Docteur Blanche

75016 Paris,

France

+33 1 4496 1010

(Name, Address and Telephone Number of Persons Authorized to Receive Notices and Communications)

 

October 13, 2006

(Date of Event Which Requires Filing of This Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box  ¨.

  1  

Names of Reporting Person:

I.R.S. Identification Number:

    
   

            Ipsen, S.A.

            Not applicable

    
  2   Check the Appropriate Box if a Member of a Group: (See Instructions)  
  (a)  ¨  
    (b)  x    
  3   SEC Use Only:  
         
  4   Source of Funds (See Instructions):  
                OO and WC    
  5   Check if Disclosure of Legal Proceedings is Required Pursuant to Item 2(d) or 2(e):   ¨
         
  6   Citizenship or Place of Organization:  
                 France    
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON
WITH		     7  Sole Voting Power:
 
                  8,405,524
    8  Shared Voting Power:
 
                  27,846,266
    9  Sole Dispositive Power:
 
                  8,405,524
  10  Shared Dispositive Power:
 
                  12,527,245
11   Aggregate Amount Beneficially Owned by Each Reporting Person:    
                36,251,790    
12   Check if the Aggregate Amount in Row (11) Excludes Certain Shares: (See Instructions)   ¨
         
13   Percent of Class Represented by Amount in Row (11):  
                72%    
14   Type of Reporting Person (See Instructions):  
                CO    

 

  1  

Names of Reporting Person:

I.R.S. Identification Number:

    
   

            Suraypharm S.A.S.

             Not applicable

    
  2   Check the Appropriate Box if a Member of a Group: (See Instructions)  
  (a)  ¨  
    (b)  x    
  3   SEC Use Only:  
         
  4   Source of Funds (See Instructions):  
                OO and WC    
  5   Check if Disclosure of Legal Proceedings is Required Pursuant to Item 2(d) or 2(e):   ¨
         
  6   Citizenship or Place of Organization:  
                 France    
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON
WITH		     7  Sole Voting Power:
 
                  12,527,245
    8  Shared Voting Power:
 
                  15,319,021
    9  Sole Dispositive Power:
 
                  12,527,245
  10  Shared Dispositive Power:
 
                  0
11   Aggregate Amount Beneficially Owned by Each Reporting Person:    
                27,846,266    
12   Check if the Aggregate Amount in Row (11) Excludes Certain Shares: (See Instructions)   ¨
         
13   Percent of Class Represented by Amount in Row (11):  
                56%    
14   Type of Reporting Person (See Instructions):  
                CO    

 

This Amendment No. 1 amends and updates Schedule 13D (Schedule 13D) dated July 18, 2006 filed by Ipsen, S.A. and Suraypharm S.A.S. with respect to the shares of the common stock of Tercica, Inc., a Delaware corporation, par value $0.001 per share. Capitalized terms used herein but not defined herein shall have the meaning ascribed to them in Schedule 13D.

The transactions contemplated by the Purchase Agreement were consummated on October 13, 2006, pursuant to which the Company issued to Suraypharm (a wholly-owned subsidiary of Ipsen) the Shares, and to Ipsen, the First Convertible Note and the Warrant. Accordingly, the Items of Schedule 13D reported herein are amended and updated as set forth below.

Item 3. Source and Amount of Funds or Other Consideration

Suraypharm and Ipsen used working capital to purchase the Shares, the First Convertible Note and the Warrant, respectively. The Voting Agreements are not expected to require the expenditure of any funds.

Item 4. Purpose of Transaction

At the Special Meeting held on October 12, 2006, the stockholders of the Issuer approved Proposals 1, 3 and 4 as set out in the Definitive Proxy Statement filed with the United States Securities and Exchange Commission on September 5, 2006 being in respect of the transactions contemplated by the Purchase Agreement, certain amendments to the Company’s amended and restated certificate of incorporation to waive the corporate opportunity provisions under Delaware law with respect to opportunities of which Ipsen may become aware as a result of its affiliation with the Company, adoption of a Rights Agreement implementing a stockholder rights plan. The stockholders of the Issuer did not approve Proposal 2 as set out in the Definitive Proxy Statement filed with the United States Securities and Exchange Commission on September 5, 2006 being in respect of certain amendments to the Company’s amended and restated certificate of incorporation (i) to eliminate the Company’s classified Board of Directors and certain other anti-takeover provisions; (ii) the rights of any stockholder who holds 15% or more of the outstanding shares of the common stock of the Company to request that a special meeting of stockholders be called; (iii) to establish the right to remove a director by an affirmative vote of at least 60% of the outstanding shares of the common stock of the Company entitled to vote at an election of directors; and (iv) to create additional rights reinforcing Ipsen’s rights to representation on the Company’s Board of Directors.

The transactions contemplated by the Purchase Agreement were consummated on October 13, 2006, pursuant to which the Company issued to Suraypharm the Shares, and to Ipsen, the First Convertible Note and the Warrant.

The Company and Ipsen (and/or affiliates thereof) have also entered into the License Agreements, the Affiliation Agreement and a Registration Rights Agreement. Pursuant to its rights under the Affiliation Agreement, Jean-Luc Bélingard and Christophe Jean, each nominated by Ipsen have been appointed as directors to the Company’s Board of Directors. Mssrs. Bélingard and Jean may be succeeded in the future by different nominees.

The Company has effected certain amendments to its amended and restated certificate of incorporation and bylaws to reflect the matters approved by the stockholders of the Company at the Special Meeting Held on October 12, 2006 as described above and has adopted a Rights Agreement, as described in Schedule 13D under the subheading ‘Other Matters’ of Item 4 of Schedule 13D.

Following the First Closing that occurred on October 13, 2006, the Voting Agreements are limited to matters relating to the election of certain Ipsen nominees for the Board of Directors.

Item 5. Interest in Securities of the Issuer

 

(a)-(b) As of the date hereof, Ipsen may be deemed to beneficially own an aggregate of 36,251,790 shares of Common Stock of the Company, 3,378,812 and 5,026,712 of which are the aggregate number of shares of Common Stock of the Company that Ipsen has a right to acquire pursuant to the First Convertible Note and the Warrant, respectively. Ipsen has sole voting and dispositive power over these shares of Common Stock of the Company that it has a right to acquire under the First Convertible Note and the Warrant. Because Suraypharm is a subsidiary of Ipsen, Ipsen may also be deemed to share voting and dispositive power over the 12,527,245 shares of Common Stock of the Company owned by Suraypharm.

As of the date hereof, Suraypharm beneficially owns an aggregate of 27,846,266 shares of Common Stock of the Company. These beneficially owned shares include 12,527,245 shares of Common Stock of the Company purchased at the First Closing over which Suraypharm has sole dispositive power.

The Issuer has informed Ipsen that, as of October 13, 2006, there are 50,117,193 issued and outstanding shares of Common Stock of the Company; accordingly the aggregate number of shares of Common Stock of the Company beneficially owned by each of Ipsen and Suraypharm constitute approximately 72% and 56% of the issued and outstanding shares of Common Stock of the Company as of October 13, 2006, respectively.

Of the aggregate number of shares of Common Stock of the Company reported above, Ipsen and Suraypharm may be deemed to beneficially own and share voting power over 15,319,021 as a result of the Voting Agreements, constituting approximately 31% of the shares of Common Stock of the Company as of October 13, 2006. Each of Ipsen and Suraypharm expressly disclaims beneficial ownership of any shares of Common Stock of the Company that are covered by the Voting Agreements.

 

(c) On October 13, 2006, Suraypharm purchased the Shares, and Ipsen purchased the First Convertible Note and the Warrant, pursuant to the Purchase

Agreement. Except as described herein, each Reporting Person has not effected any transaction in the shares of Common Stock of the Company reported as beneficially owned by the Reporting Persons since the date of filing of Schedule 13D.

Item 7. Materials to Be Filed as Exhibits

The following documents are hereby filed as exhibits:

 

Number  

Exhibit

  1.   Stock Purchase and Master Transaction Agreement entered into between Ipsen and the Issuer dated July 18, 2006 (previously filed as an Exhibit to Schedule 13D and incorporated by reference herein).
  2.   Form of Voting Agreement entered into by and among certain stockholders of the Issuer, Ipsen and Ipsen’s affiliate dated July 18, 2006 (previously filed as an Exhibit to Schedule 13D and incorporated by reference herein).
  3.   Joint Filing Agreement (previously filed as an Exhibit to Schedule 13D and incorporated by reference herein).
  4.   First Senior Convertible Promissory Note entered into between Ipsen and the Company dated as of October 13, 2006.
  5.   Warrant entered into between Ipsen and the Company dated as of October 13, 2006.
  6.   Affiliation Agreement entered into between Ipsen, Suraypharm and the Company dated as of October 13, 2006.
  7.   Registration Rights Agreement entered into between Ipsen, Suraypharm and the Company dated as of October 13, 2006.
  8.   Rights Agreement entered into between Computershare Trust Company, N.A. and the Company dated as of October 13, 2006.
  9.   Certificate of Designation for Series A Junior Participating Preferred Stock, as filed with the Delaware Secretary of State on October 16, 2006.
10.   Certificate of Amendment of Amended and Restated Certificate of Incorporation, as filed with the Delaware Secretary of State on October 12, 2006.

SIGNATURE

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

 

Dated October 19, 2006

Signed by

for and on behalf of

IPSEN S.A.
By:  

/s/ Jean-Luc Belingard

Name:   Jean-Luc Belingard
Title:   President and Chief Executive Officer

Signed by

for and on behalf of

SURAYPHARM S.A.S
By:  

/s/ Jean-Luc Belingard

Name:   Jean-Luc Belingard
Title:   President and Chief Executive Officer
 EX-99.4 2 dex994.htm FIRST SENIOR CONVERTIBLE PROMISSORY NOTE First Senior Convertible Promissory Note

Exhibit 4

Execution Copy

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, AND ACCORDINGLY MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT.

October 13, 2006

FIRST SENIOR CONVERTIBLE PROMISSORY NOTE

FOR THE VALUE RECEIVED, TERCICA, INC., a Delaware corporation (the Company), promises to pay Ipsen, S.A. a French société anonyme, or its registered assigns (the Holder) the principal sum of Twenty Five Million Thirty Seven Thousand Dollars ($25,037,000) on the Maturity Date (as specified herein), together with interest computed on the basis of a 360-day year of twelve 30-day months (a) on the unpaid principal balance hereof at a rate equal to 2.5% per annum from the date hereof, which interest shall be compounded quarterly on March 31, June 30, September 30 and December 31 of each year, commencing January 1, 2007, and (b) to the extent permitted by law on any overdue payment of principal or interest at a rate per annum equal to Default Rate, which default interest shall be payable on demand. Payment shall be made in lawful tender of the United States to the Holder by the method and at the address specified for such purpose by the Holder from time to time.

 

1. DEFINITIONS

For purposes hereof, the following definitions shall apply:

 

(a) Additional Shares of Common Stock has the meaning attributed to it in Section 3(f) of this Note.

 

(b) Adjustment Events means (1) any reclassification or change of Common Stock (other than a change in par value, as a result of a Subdivision or Combination), (2) any consolidation, merger or mandatory share exchange of the Company with or into another corporation (other than a merger or mandatory share exchange with another corporation in which the Company is a continuing corporation and which does not result in any reclassification or change other than a change in par value or as a result of a Subdivision or Combination).

 

(c) Affiliate means, in respect of any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person or any of its subsidiaries, and the term “control” (including the terms “controlled by” and “under common control with”) means having, directly or indirectly, the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities or by contract or otherwise.

Execution Copy

 

(d) Affiliation Agreement means that certain Affiliation Agreement dated as of the date hereof by and among the Company, Ipsen S.A., a French société anonyme and Suraypharm, a French société par actions simplifiée.

 

(e) Aggregate Consideration has the meaning attributed to it in Section 3(d) of this Note.

 

(f) The terms beneficial owner, beneficial ownership and beneficially own have the meanings attributed to them in the Affiliation Agreement.

 

(g) Board means the Board of Directors of the Company.

 

(h) Business Day means a day, other than Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by applicable law to close.

 

(i) Capital Lease means any lease that is required to be capitalized on the balance sheet of the lessee in accordance with generally accepted accounting principles.

 

(j) Combination has the meaning attributed to in Section 4(c) of this Note.

 

(k) Common Stock means the Company’s common stock with a par value of $0.001 per share.

 

(l) Conversion Amount means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion plus (2) accrued and unpaid interest on such principal amount at the interest rates provided in this Note to the Conversion Date plus (3) Default Interest, if any, on the interest referred to in the immediately preceding clause (2).

 

(m) Conversion Date has the meaning attributed to it in Section 2(a) of this Note.

 

(n) Conversion Price means $7.41, as adjusted pursuant to Sections 3 and 4 of this Note.

 

(o) Convertible Notes has the meaning attributed to it in the Purchase Agreement.

 

(p) Convertible Securities has the meaning attributed to it in Section 3(e) of this Note.

 

(q) Covenant Defeasance has the meaning attributed to it in Section 8.1(c) of this Note.

 

(r) Default has the meaning attributed to it in Section 11 of this Note.

 

(s) Default Interest means the interest payable at the Default Rate in respect of this Note as provided herein.

Execution Copy

 

(t) Default Rate means the rate of interest that is the greater of (i) 5.52% and (ii) 3% over the applicable Libor Rate.

 

(u) Disposition means the sale, lease or other disposition of any property by any Person.

 

(v) EBITDA means, for any period, the sum, for the Company and its subsidiaries (determined on a consolidated basis without duplication in accordance with GAAP), of the following: (i) net income for such period plus (ii) Interest Expense for such period, together with any original issue discount to the extent deducted in calculating net income plus (iii) income taxes for such period plus (iv) depreciation and amortization (to the extent deducted in computing net income) for such period.

 

(w) Effective Price has the meaning attributed to it in Section 3(g) of this Note.

 

(x) Guaranty, with respect to any Person, means all obligations of such Person guaranteeing or in effect guaranteeing any Indebtedness (“primary obligations”) of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, including obligations incurred through an agreement, contingent or otherwise, by such Person (a) to purchase such primary obligation or any property or assets constituting security therefor, (b) to advance or supply funds (i) for the purchase or payment of such primary obligation or (ii) to maintain working capital or equity capital, or otherwise to advance or make available funds for the purchase or payment of such primary obligation, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (d) otherwise to assure the owner of such primary obligation against loss in respect thereof; provided that the term “Guaranty” shall not include any endorsement of a matured instrument for collection or deposit in the ordinary course of business. The amount of any Guaranty shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guaranty is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith. The verb “Guarantee” shall have a correlative meaning.

 

(y) Increlex License has the meaning attributed to it in the Purchase Agreement.

 

(z) Indebtedness, with respect to any Person, means all items (other than capital stock, capital surplus, retained earnings, obligations payable in capital stock of such Person and deferred credits) which in accordance with generally accepted accounting principles would be included in determining total liabilities as shown on the liability side of a balance sheet of such Person as at the date of which Indebtedness is to be determined. The term “Indebtedness” shall also include, whether or not so reflected, (i) indebtedness, obligations and liabilities secured by

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any Lien on property of such Person whether or not the indebtedness secured thereby shall have been assumed by such Person, (ii) the amount that would appear on the liabilities side of a balance sheet of such Person as at the date of determination in respect of rentals under Capital Leases, (iii) obligations of such Person to pay the deferred purchase price or acquisition price of property or services, other than trade accounts payable (other than for borrowed money) arising in the ordinary course of business, (iv) payment obligations with respect to interest rate swaps, currency swaps and similar obligations, and (v) all Guaranties of any of the above. Notwithstanding the foregoing, in determining the indebtedness of any Person, there shall be included all indebtedness of such Person deemed to be extinguished under generally accepted accounting principles but for which such Person remains legally liable. The amount of any limited recourse Indebtedness shall be equal to the principal amount of such limited recourse debt for which such Person provides credit support of any kind is liable as a guarantor or otherwise.

 

(aa) Indemnitees has the meaning attributed to it in Section 12 of this Note.

 

(bb) Interest Expense means, for any period, the sum, for the Company and its subsidiaries (determined on a consolidated basis without duplication in accordance with GAAP), of the following: (i) all cash interest in respect of Indebtedness (including, without limitation, the interest component of any payments in respect of Capital Lease Obligations) accrued during such period (whether or not actually paid during such period) plus (ii) the net amount payable (or minus the net amount receivable) under the Interest Rate Protection Agreements during such period (whether or not actually paid or received during such period).

 

(cc) Investor has the meaning attributed to it in the Affiliation Agreement.

 

(dd) Investor Directors has the meaning attributed to it in the Affiliation Agreement.

 

(ee) Libor Rate shall mean, for any date, the rate appearing on Page 3750 of the Dow Jones Markets Service (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Holder from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, on such date with a three-month maturity. In the event that such rate is not available at such time for any reason, then the Libor Rate shall be the arithmetic average of the rates (rounded upwards, if necessary, to the next 1/16 of 1%) at which dollar deposits of $5,000,000 and for a maturity of three months are offered by the principal London office of Barclays Bank plc in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, on such date.

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(ff) Lien means any lien, pledge, mortgage, deed of trust, security interest, attachment, easement or other similar encumbrance of any kind.

 

(gg) Losses has the meaning attributed to in Section 12 of this Note.

 

(hh) Material Adverse Effect means a material adverse change in, or a material adverse effect upon (i) the operations, business, assets, properties, liabilities or financial condition of the Company and its subsidiaries taken as a whole or (ii) the ability of the Company to make any payments due in respect of this Note.

 

(ii) Maturity Date has the meaning attributed to it in Section 2(a) of this Note.

 

(jj) Net Indebtedness means as of any date (i) Indebtedness as of such date minus (ii) cash and cash equivalents held by the Company as of such date.

 

(kk) New Note has the meaning attributed to in Section 4(a) of this Note.

 

(ll) Note Adjustment Factor means a fraction, the numerator of which is the total number of shares outstanding immediately after the relevant Subdivision, Combination or Stock Dividend, and the denominator of which is the total number of shares existing immediately prior to such event.

 

(mm) Note Conversion Shares has the meaning attributed to it in Section 2(a) of this Note.

 

(nn) Note Ledger has the meaning attributed to it in Section 2(c) of this Note.

 

(oo) Notice of Conversion means a notice to the Company of the Holder’s intention to convert all or a portion of this Note in accordance, such notice to be consistent with the form of notice attached as Annex A to this Note.

 

(pp) Opinion of Counsel has the meaning attributed to it in Section 8.1(d)(iv) of this Note.

 

(qq) Ownership Trigger has the meaning attributed to it in Section 2(a) of this Note.

 

(rr) Permitted Indebtedness means (i) Indebtedness of the Company hereafter incurred in the ordinary course of business, (ii) Indebtedness listed on Schedule 1(rr) hereto, (iii) Indebtedness of the Company in respect of obligations under Capital Leases and other purchase money indebtedness, in each case incurred to finance expenditures that, in accordance with generally accepted accounting principles, are included in “capital expenditures,” “additions to property, plant or equipment” or comparable items in the financial statements of the Company incurred in the ordinary course of business, not to exceed One Million Dollars ($1,000,000) at any time outstanding, (iv) trade payables arising in the ordinary course of business, (v) Guarantees of Indebtedness permitted hereunder, (vi) loans by the Company or wholly-owned subsidiaries of the Company made in the

Execution Copy

ordinary course of business to the Company’s subsidiaries not to exceed, in the aggregate and at any time, One Million Dollars ($1,000,000) of principal amount outstanding, (vii) loans by the Company’s subsidiaries to the Company, (viii) payment obligations with respect to interest rate swaps, currency swaps and similar obligations entered into in the ordinary course of business and not for speculative or trading purposes, (ix) Indebtedness in respect of performance, bid, surety, indemnity, appeal bonds, completion guarantees and other obligations of like nature and Guarantees and or obligations as an account party in respect of the face amount of trade letters of credit in respect thereof (including worker’s compensation claims, environmental remediation and other environmental matters and obligations in connection with self-insurance or similar requirements), in each such case to the extent provided in the ordinary course of business, (x) subordinated indebtedness, (xi) Indebtedness of a Person existing at the time such Person becomes a subsidiary of the Company and not in contemplation thereof, provided such Indebtedness is repaid (and the commitments thereunder terminated) not later than 180 days following the date on which such Person becomes a subsidiary, and (x) Indebtedness of the Company as an account party or applicant in respect of letters of credit issued to landlords in an aggregate and at any time, One Million Dollars ($1,000,000) of principal amount outstanding.

 

(ss) Permitted Investments means (i) investments made in accordance with the Company’s investment policy, attached hereto as Schedule 1(ss)(1), (ii) investments of subsidiaries or the Company in or to other subsidiaries that are not wholly owned not to exceed $250,000 in the aggregate in any calendar year, (iii) investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of business, (iv) investments received as consideration in connection with a permitted disposition of any assets or received in satisfaction of judgments not to exceed $2,000,000, and (v) loans, advances or ownership existing on the date of this Note and set forth in Schedule 1(ss)(2) hereto.

 

(tt) Permitted Liens means (i) any Lien for taxes, assessments or governmental charges or levies not yet due or payable or being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with generally accepted accounting principles applied on a consistent basis, (ii) any statutory Lien and Liens of carriers, warehousemen, mechanics, materialmen, repairmen and suppliers and other Liens imposed by law or pursuant to customary reservations or retentions of title, in each case, arising in the ordinary course of business by operation of law with respect to a liability that is not past due or which is being contested in good faith by appropriate proceedings and for which reserves have been established in accordance with GAAP, (iii) Liens securing equipment subject to Capital Leases that qualify as Permitted Indebtedness above, which Liens are in favor of the party from whom the Company is leasing the equipment, (iv) Liens existing on the date hereof and set

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forth in Schedule 1(tt) hereto, (v) pledges or deposits in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other social security legislation, (vi) easements, rights-of-way, restrictions and other similar encumbrances affecting real property which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the applicable Person, (vii) Liens securing judgments for the payment of money (or appeal or other surety bonds relating to such judgments) not constituting an Event of Default, (viii) leases or subleases granted to others not interfering in any material respect with the Company’s business, (ix) any interest of title of a lessor under, and Liens arising from UCC financing statements (or equivalent filings, registrations or agreements in foreign jurisdictions) relating to, leases permitted hereunder, (x) normal and customary rights of setoff upon deposits of cash in favor of banks or other depository institutions, (xi) Liens of a collection bank arising under Section 4–210 of the Uniform Commercial Code on items in the course of collection, (xii) Liens of sellers of goods arising under Article 2 of the Uniform Commercial Code or similar provisions of applicable law in the ordinary course of business, covering only the goods sold and securing only the unpaid purchase price for such goods and related expenses, (xiii) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods, or (xiv) Liens solely on deposits, advances, contractual payments, including implementation allowances or escrows made or paid by any loan party or any subsidiary to or with customers, clients or landlords in the ordinary course of business, provided that, such deposits, advances, contractual payments, implementation allowances or escrows do not, in the aggregate and at any one time, exceed One Million Dollars ($1,000,000).

 

(uu) Permitted Transfer means the (i) Disposition of obsolete or worn out property or property no longer used or useful in the conduct of business, whether now owned or hereafter acquired, in the ordinary course of business, (ii) Disposition of inventory in the ordinary course of business, (iii) Disposition of equipment or real property in the ordinary course of business to the extent that (x) such property is exchanged for credit against the purchase price of similar replacement property or is otherwise reinvested in the business of the Company or its subsidiaries or (y) the proceeds of such disposition are applied within 180 days to the purchase price of similar replacement property or is otherwise reinvested in the business of the Company and its subsidiaries, (iv) Disposition of assets by any subsidiary of the Company to the Company, (v) the granting of a non-exclusive license or sublicense by the Company and its subsidiaries of software, trademarks, patents and other intellectual property in the ordinary course of business, and which do not materially interfere with the business of the Company and its subsidiaries taken as a whole or otherwise conflict with any contract or license to which the Company or any of its subsidiaries are bound, and only to the extent that such grant does not require the Holder’s consent pursuant to Section 8.1(a), (vi) Dispositions of cash equivalents and (vi) liquidation, winding up or dissolution of a subsidiary of the Company that has no operations or revenues.

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(vv) Person means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof.

 

(ww) Purchase Agreement means that certain Stock Purchase and Master Transaction Agreement dated as of July 18, 2006 by and between the Company and Ipsen, S.A., a French société anonyme.

 

(xx) Reference Price means $4.75.

 

(yy) Registration Rights Agreement has the meaning attributed to it in the Purchase Agreement.

 

(zz) Rights has the meaning attributed to it in the Rights Agreement.

 

(aaa) Rights Agreement has the meaning attributed to it in the Affiliation Agreement.

 

(bbb) Somatuline Autogel License has the meaning attributed to it in the Purchase Agreement.

 

(ccc) Stock Dividend means a payment by the Company of a dividend or other distribution in Common Stock to all holders of Common Stock.

 

(ddd) Subdivision has the meaning attributed to in Section 4(b) of this Note.

 

(eee) Tax means any tax (whether income, documentary, sales, stamp, registration, issue, capital, property, excise or otherwise), duty, assessment, levy, impost, fee, compulsory loan, charge or withholding.

 

(fff) Transaction Documents has the meaning attributed to it in the Purchase Agreement.

 

(ggg) Trigger Price has the meaning attributed to it in Section 3(a) of this Note.

 

(hhh) Triggering Sale has the meaning attributed to it in the Affiliation Agreement.

 

(iii) Trustee has the meaning attributed to it in Section 8.1(d)(i) of this Note.

 

(jjj) Trustee Account has the meaning attributed to it in Section 8.1(d)(i) of this Note.

 

(kkk) Warrant has the meaning attributed to it in the Purchase Agreement.

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2. PAYMENT; CONVERSION OF NOTE

 

(a) The entire principal balance of this Note, together with interest accrued thereon, shall be immediately due and payable, in cash, on the date which is the later of (i) the date that is the fifth anniversary of the date hereof and (ii) two years following the date on which the Holder provides notice to the Company that it will not convert this Note in full (the Maturity Date); provided however, that such amount will become due and payable, at the option of the Holder, by notice to the Company upon the occurrence of and at any time after an Ownership Trigger. For purposes of this Note, an Ownership Trigger shall occur if, after the date hereof, (x) the provisions of Section 3 of the Affiliation Agreement remain in effect and (1) any Person or “group” (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) (other than the Holder or its Affiliates) that is not already the beneficial owner of more than 9.9% of the then outstanding Common Stock acquires beneficial ownership of greater than 9.9% of the then outstanding Common Stock, or (2) any Person or “group” (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) (other than the Holder or its Affiliates) currently beneficially owning greater than 9.9% of the outstanding Common Stock increases the percentage of the outstanding Common Stock currently beneficially owned by such Person or group; or (y) the provisions of Section 3 of the Affiliation Agreement shall cease to be effective and any Person or “group” (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) (other than the Holder or its Affiliates) acquires beneficial ownership of greater than 50% of the then outstanding Common Stock. All payments made in respect of the Notes shall be made on a pari passu basis. The Company shall not be permitted to prepay any interest or principal due under the Note without the prior written consent of the Holder. The Holder shall have the right, at its option, at any time from and after the date of this Note, to convert the principal amount of this Note and all accrued interest thereon, or any portion of such principal amount and interest, into that number of fully paid and nonassessable shares of Common Stock (as such shares shall then be constituted) determined pursuant to this Section 2. The number of shares of Common Stock to be issued upon each conversion of this Note (the Note Conversion Shares) shall be determined by dividing the Conversion Amount by the Conversion Price in effect on the date (the Conversion Date) a Notice of Conversion is delivered to the Company by the Holder by facsimile or other reasonable means of communication dispatched prior to 5:00 p.m., New York Time.

 

(b) The Company (i) shall promptly irrevocably instruct its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this Note.

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(c) Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Company unless the entire unpaid principal amount of this Note is so converted. Rather, records showing the principal amount converted (or otherwise repaid) and the date of such conversion or repayment shall be maintained on a ledger in a form to be reasonably acceptable to the Company and the Holder (the Note Ledger) (a copy of which shall be delivered to the Company or transfer agent with each Notice of Conversion). It is specifically contemplated that the Company hereof shall act as the calculation agent for conversions and repayments. In the event of any dispute or discrepancies, such records maintained by the Company shall be controlling and determinative in the absence of manifest error. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following a conversion of a portion of this Note, the principal amount represented by this Note will be the amount indicated on the Note Ledger (which may be less than the amount stated on the face hereof).

 

(d) The Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name other than that of the Holder (or in street name), and the Company shall not be required to issue or deliver any such shares or other securities or property unless and until the Person or Persons (other than the Holder or the custodian in whose street name such shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Company the amount of any such tax or shall have established to the satisfaction of the Company that such tax has been paid.

 

(e) Upon receipt by the Company of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Company defaults on its obligations under this Section 2, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Company’s obligation to issue and deliver the certificates for shares of Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any Person or any action by the Holder to enforce the same, any failure or delay in the enforcement of any other obligation of the Company to the Holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Company, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection

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with such conversion. The date of receipt (including receipt via telecopy) of such Notice of Conversion shall be the Conversion Date so long as it is received before 5:00 p.m., New York Time, on such date.

 

3. PRICE-BASED ANTI-DILUTION ADJUSTMENT OF CONVERSION PRICE

 

(a) If at any time or from time to time after the date hereof, the Company issues or sells, or is deemed by the express provisions of this Section 3 to have issued or sold, Additional Shares of Common Stock, other than as provided in Sections 4(a)-4(d) below, for an Effective Price less than the lower of (i) the Reference Price or (ii) the then effective Conversion Price (such lower amount, the Trigger Price), then and in each such case, the then effective Conversion Price shall be reduced, as of the opening of business on the date of such issue or sale, to a price determined in accordance with the following formula:

 

A

   =    B x    [C + (D/E)]
            [C + F]

For the purposes of this clause (a) and clause (g), the following definitions shall apply:

A = the Conversion Price in effect immediately after such issue or sale of Additional Shares of Common Stock.

B = the Conversion Price in effect immediately prior to such issue or sale of Additional Shares of Common Stock.

C = the number of shares of Common Stock Outstanding (as defined in clause (b) below) immediately prior to such issue or sale of Additional Shares of Common Stock.

D = the Aggregate Consideration received in exchange for such Additional Shares of Common Stock.

E = the Trigger Price.

F = the number of such Additional Shares of Common Stock so issued or sold.

 

(b) For the purposes of Section 3(a), the number of shares of Common Stock deemed to be outstanding (Common Stock Outstanding)as of a given date shall be the sum of (A) the number of shares of Common Stock outstanding, plus (B) the number of shares of Common Stock into which the then outstanding Convertible Notes could be converted if fully converted on the day immediately preceding the given date, plus (C) the number of shares of Common Stock which are issuable upon the exercise of the Warrant on the day immediately preceding the given date.

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(c) No adjustment shall be made to the Conversion Price under this Section 3 in an amount less than one cent per share. Any adjustment required by this Section 3 shall be rounded to the nearest one cent ($0.01) per share. Any adjustment otherwise required by this Section 3 that is not required to be made due to the preceding two sentences shall be included in any subsequent adjustment to the Conversion Price.

 

(d) For the purpose of making any adjustment required under this Section 3, the aggregate consideration received by the Company for any issue or sale of securities (the Aggregate Consideration) shall be defined as: (A) to the extent it consists of cash, be computed at the gross amount of cash received by the Company before deduction of any underwriting or similar commissions, compensation or concessions paid or allowed by the Company in connection with such issue or sale and without deduction of any expenses payable by the Company, (B) to the extent it consists of property other than cash, be computed at the fair value of that property as determined in good faith by the Board, and (C) if Additional Shares of Common Stock, Convertible Securities or rights or options to purchase either Additional Shares of Common Stock or Convertible Securities are issued or sold together with other stock or securities or other assets of the Company for a consideration which covers both, be computed as the portion of the consideration so received that may be reasonably determined in good faith by the Board (in a manner consistent with comparable activities such as valuing stock options for accounting purposes) to be allocable to such Additional Shares of Common Stock, Convertible Securities or rights or options.

 

(e) For the purpose of the adjustment required under this Section 3, if the Company issues or sells (x) capital stock, options, warrants, purchase rights or other securities convertible into, Additional Shares of Common Stock, other than the Rights (such convertible stock or securities being herein referred to as Convertible Securities), or (y) rights (other than the Rights) or options for the purchase of Additional Shares of Common Stock or Convertible Securities and if the Effective Price of such Additional Shares of Common Stock is less than the Conversion Price, in each case the Company shall be deemed to have issued at the time of the issuance of such rights or options or Convertible Securities the maximum number of Additional Shares of Common Stock issuable upon exercise or conversion thereof and to have received as consideration for the issuance of such shares an amount equal to the total amount of the consideration, if any, received by the Company for the issuance of such rights or options or Convertible Securities plus:

 

  (i) in the case of such rights or options, the minimum amounts of consideration, if any, payable to the Company upon the exercise of such rights or options; and

 

  (ii) in the case of Convertible Securities, the minimum amounts of consideration, if any, payable to the Company upon the conversion thereof (other than by cancellation of liabilities or obligations evidenced by such

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Convertible Securities); provided that if the minimum amounts of such consideration cannot be ascertained, but are a function of antidilution or similar protective clauses, the Company shall be deemed to have received the minimum amounts of consideration without reference to such clauses.

 

  (iii) If the minimum amount of consideration payable to the Company upon the exercise or conversion of rights, options or Convertible Securities is reduced over time or on the occurrence or non-occurrence of specified events other than by reason of antidilution or similar protective adjustments, the Effective Price shall be recalculated using the figure to which such minimum amount of consideration is reduced; provided however, that if the minimum amount of consideration payable to the Company upon the exercise or conversion of such rights, options or Convertible Securities is subsequently increased, the Effective Price shall be again recalculated using the increased minimum amount of consideration payable to the Company upon the exercise or conversion of such rights, options or Convertible Securities.
 
  (iv) No further adjustment of the Conversion Price, as adjusted upon the issuance of such rights, options or Convertible Securities, shall be made as a result of the actual issuance of Additional Shares of Common Stock or the exercise of any such rights or options or the conversion of any such Convertible Securities. If any such rights or options or the conversion privilege represented by any such Convertible Securities shall expire without having been exercised, the Conversion Price as adjusted upon the issuance of such rights, options or Convertible Securities shall be subsequently adjusted to the Conversion Price which would have been in effect had an adjustment been made on the basis that the only Additional Shares of Common Stock so issued were the Additional Shares of Common Stock, if any, actually issued or sold on the exercise of such rights or options or rights of conversion of such Convertible Securities, and such Additional Shares of Common Stock, if any, were issued or sold for the consideration actually received by the Company upon such exercise, plus the consideration, if any, actually received by the Company for the granting of all such rights or options, whether or not exercised, plus the consideration received for issuing or selling the Convertible Securities actually converted, plus the consideration, if any, actually received by the Company (other than by cancellation of liabilities or obligations evidenced by such Convertible Securities) on the conversion of such Convertible Securities.

 

(f) For the purpose of making any adjustment to the Conversion Price under this Section 3, Additional Shares of Common Stock shall mean all shares of Common Stock issued by the Company or deemed to be issued pursuant to this Section 3, other than:

 

  (i) shares of Common Stock issued upon conversion of the Convertible Notes;

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  (ii) shares of Common Stock or Convertible Securities issued after the date hereof to employees, officers or directors of, or consultants to, the Company or any subsidiary pursuant to stock purchase or stock option plans or other arrangements that are approved by the Board (provided that such consultants receive no more than 75,000 shares of Common Stock in aggregate per calendar year and the issuance of such shares to such consultants shall be for services and in amounts that are consistent with past issuances);

 

  (iii) shares of Common Stock issued pursuant to the exercise of Convertible Securities outstanding as of the date hereof, including the Warrant; or

 

  (iv) shares of Common Stock or Convertible Securities issued in connection with any stock split, stock dividend or recapitalization by the Company.

References to Common Stock in the subsections of this clause (f) shall mean all shares of Common Stock issued by the Company or deemed to be issued pursuant to this Section 3.

 

(g) The Effective Price shall mean the price at which Additional Shares of Common Stock are issued or sold and shall be determined in accordance with the following formula:

Effective Price = (D)/(F)

where D and F have the meaning given to them in Section 3(a) above.

 

(h) In the event that the number of shares of Additional Shares of Common Stock or the Effective Price cannot be ascertained at the time of issuance, such Additional Shares of Common Stock shall be deemed issued immediately upon the occurrence of the first event that makes such number of shares or the Effective Price, as applicable, ascertainable.

 

4. FURTHER ADJUSTMENTS TO CONVERSION PRICE

The Conversion Price and the Note Conversion Shares shall be subject to further adjustment from time to time upon the happening of certain events as follows:

 

(a) Reclassification, Consolidation, Merger, Mandatory Share Exchange, Sale or Transfer. Upon the occurrence of any Adjustment Events while any outstanding principal amount of this Note or any accrued interest thereon remains capable of being converted pursuant to Section 2 above, the Holder may in its sole discretion require the Company, or any successor or purchasing corporation, as the case may be, without payment of any additional consideration therefor, to execute and

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deliver to the Holder anew note which shall be upon terms no less favorable to the Holder than those then applicable to this Note (a New Note) and upon conversion of the principal amount of the New Note and all accrued interest thereon or conversion of any portion of such principal amount and interest, the Holder shall receive in lieu of each share of Common Stock theretofore issuable upon such conversion of this Note, the kind and amount of shares of stock, other securities, money or property receivable upon such Adjustment Event by the holder of one share of Common Stock issuable upon such conversion of this Note had this Note been converted in such manner immediately prior to such Adjustment Event. Such new Note shall provide for adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in Sections 3 and 4 hereto. Prior to such request for a New Note, this Note shall be convertible for such number of shares for which the New Note would be convertible.

 

(b) Subdivision of Shares. If, while any outstanding principal amount of this Note or any accrued interest thereon remains capable of being converted pursuant to Section 2 above, the Company shall subdivide its Common Stock (a Subdivision), then as of the effective date of such Subdivision, or, if the Company shall take a record of holders of its Common Stock for the purpose of so subdividing, as of such record date, whichever is earlier, the Conversion Price in effect on such date shall be adjusted by dividing such Conversion Price by the Note Adjustment Factor applicable to such Subdivision.

 

(c) Combination of Shares. If, while any outstanding principal amount of this Note or any accrued interest thereon remains capable of being converted pursuant to Section 2 above, the Company shall combine its Common Stock (a Combination), then as of the effective date of such Combination, or, if the Company shall take a record of holders of its Common Stock for the purpose of so combining, as of such record date, whichever is earlier, the Conversion Price in effect on such date shall be adjusted by dividing such Conversion Price by the Note Adjustment Factor applicable to such Combination.

 

(d) Stock Dividends. If, while any outstanding principal amount of this Note or any accrued interest thereon remains capable of being converted pursuant to Section 2 above, the Company shall pay a Stock Dividend, then as of the date the Company shall take a record of the holders of its Common Stock for the purpose of receiving such dividend or other distribution (or if no such record is taken, as at the date of such payment or other distribution), the Conversion Price in effect on such date shall be adjusted by dividing such Conversion Price by the Note Adjustment Factor applicable to such Stock Dividend; provided that the provisions of this clause (d) shall not apply under any of the circumstances for which an adjustment is provided in clauses (a), (b) or (c).

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5. NOTICE OF ADJUSTMENTS

Whenever the Conversion Price shall be adjusted pursuant to Sections 3 or 4 hereof, the Company shall promptly prepare a certificate signed by its Chief Executive Officer or Chief Financial Officer setting forth in reasonable detail the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated (including a description of the basis on which the Company’s Board of Directors made any determination hereunder), and the Conversion Price after giving effect to such adjustment, and shall promptly cause copies of such certificate to be sent by overnight courier to the Holder.

 

6. ISSUANCE OF STOCK ON CONVERSION

Upon conversion of this Note as set forth in Section 2 above, the Company at its expense will cause to be issued, in the name of and delivered to the Holder, a certificate or certificates for, or, to the extent the Note Conversion Shares are not restricted securities, make deposit with the Depository Trust Company via book-entry, the number of shares of Common Stock to which the Holder shall be entitled on such conversion together with any other securities and property, if any, to which the Holder is entitled on such conversion under the terms of this Note. The Company shall not issue any fraction of a share of Common Stock upon any conversion. If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall calculate and pay a cash adjustment in respect of such fraction.

 

7. REPRESENTATIONS AND WARRANTIES

Except as set forth on the Disclosure Schedule attached hereto, the Company represents and warrants that the following are true as of the date hereof: (a) as of the date hereof, all outstanding Indebtedness of the Company is listed on Schedule 1(rr) attached hereto; (b) no outstanding Indebtedness of the Company will be senior to the Indebtedness evidenced by this Note other than Indebtedness that is collaterally secured (and then only to the extent of such collateral security); (c) except as set forth on Schedule 7(c) hereto, there are no financing statements on file naming the Company as debtor; (d) upon conversion of this Note, the Note Conversion Shares will be duly authorized, validly issued, fully paid and nonassessable assuming that such amendment does not otherwise provide for assessment, and upon issuance, will be free of any taxes, liens and encumbrances related to the issuance thereof and will not be subject to the preemptive rights or other similar rights of stockholders of the Company; and (e) the Company’s payment obligations under this Note rank at least pari passu, without preference or priority, with all other unsecured Indebtedness of the Company

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8. COVENANTS

 

8.1 Negative Covenants

 

(a) Unless the Holder shall otherwise consent in writing, the Company hereby covenants and agrees with the Holder that it will not (and will cause its subsidiaries not to) until the earlier of: (i) payment in full by the Company to the Holder of the principal and any outstanding interest payable in respect of this Note, or (ii) the date of completion of a Triggering Sale and the occurrence of the Covenant Defeasance in compliance with the provisions of Sections 8.1(c) and 8.1(d):

 

  (i) make, or permit any subsidiary to make, any loan or advance to, or own any stock or other securities of, any subsidiary or other corporation, partnership, or other entity unless it is wholly owned by the Company other than Permitted Investments;

 

  (ii) adopt any plan or arrangement for the dissolution or liquidation of the Company;

 

  (iii) enter into any material transaction or contract unless the transaction or contract would reflect the execution of a board-approved budget and would not be reasonably anticipated to increase future budgets (i) beyond current projections, or (ii) where no current projections have been formally prepared, beyond reasonably anticipated growth based on the Company’s recent operating performance;

 

  (iv) directly or indirectly acquire, sell, lease or otherwise dispose of any property or assets other than in its ordinary course of business; provided that, the Company shall not in any event acquire, sell, lease, or dispose of any property or assets with an aggregate value exceeding Five Million Dollars ($5,000,000) without the Investor’s written consent unless it is a Permitted Transfer;

 

  (v) merge into or consolidate with any other Person other than with the Company;

 

  (vi) establish or approve an operating budget with anticipated research and development spending per calendar year in excess of the sum of (i) Twenty Five Million Dollars ($25,000,000) (with such research and development spending being determined on a GAAP basis) plus (ii) the amounts approved by the Joint Steering Committee established under the Somatuline Autogel License for spending related to the products of Ipsen, S.A. or its Affiliates;

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  (vii) enter into any transaction or agreement that would be reasonably likely to require an increase to research and development spending that would cause such spending to exceed the aggregate amount specified in Section 8.1(a)(vi) hereof;

 

  (viii) incur capital expenditures (on a GAAP basis) of more than Two Million Dollars ($2,000,000) in any given calendar year;

 

  (ix) make any investment, through the direct or indirect holding of securities or otherwise, other than Permitted Investments;

 

  (x) incur any Indebtedness (including extensions, renewals or refinancings and drawdowns under existing facilities), other than (i) Indebtedness evidenced by the Convertible Notes, and (ii) Permitted Indebtedness; provided that, with respect to (ii), if following the incurrence of such Permitted Indebtedness, the total Indebtedness exceeds Two Million Five Hundred Thousand Dollars ($2,500,000) (excluding trade payables in the ordinary course of business that are not more than 90 days past due), then such Permitted Indebtedness shall not be permitted unless immediately prior and after giving effect to the incurrence of such Permitted Indebtedness, the Company’s ratio of Net Indebtedness to EBITDA shall not exceed 1 to 1;

 

  (xi) change the principal business of the Company, enter new lines of business (if such business or businesses are material to the Company or its subsidiaries), or exit the current line of business of the Company; provided that the Company shall be permitted to make reasonable extensions, developments or expansions to the business of the Company;

 

  (xii) declare or pay any cash dividend on or redeem or repurchase any of its capital stock, directly or indirectly, until the Note has been converted or paid in its entirety as provided herein, other than acquisitions of Common Stock by the Company pursuant to agreements which permit the Company to repurchase such shares upon termination of services to the Company;

 

  (xiii) create, incur, assume or permit to exist, any Liens on any of its properties or assets whether now owned or hereafter acquired, other than Permitted Liens;

 

  (xiv) prepay or pay any Indebtedness except for trade payables incurred in the ordinary course of the Company’s business and Permitted Indebtedness; or
 
  (xv) permit any of its subsidiaries to enter into any agreement or contractual or other restriction (other than customary limitations imposed by corporate law or similar statutes) restricting the ability of such subsidiary to pay dividends out of profits or make any other similar distributions of profits to the Company or any of its subsidiaries that owns outstanding shares of capital stock or similar equity interests of such subsidiary.

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(b) Notwithstanding the foregoing, in the event that any action set forth in this Section 8.1 is approved by the Board, including the affirmative vote of the Investor Directors, the Company shall as soon as reasonably practicable following such approval, provide the Holder with written notice of such approval and unless the Holder, within ten (10) Business Days after receipt of such notice, notifies the Company in writing that it does not consent to such action, the Holder’s written consent to such action shall be deemed to have been given.

 

(c) Notwithstanding the foregoing, in the event that a Triggering Sale occurs, the Company may, subject to the terms and conditions set forth herein, elect to provide for the defeasance of its obligations with respect to certain covenants contained in this Note by delivering written notice to the Holder, which notice (i) shall be given not later than 30 days prior to the intended date for the deposit of funds contemplated by Section 8.1(d) and (ii) shall state that the Company wishes to provide for the defeasance of certain of its obligations in accordance with Sections 8.1(c), 8.1(d), 8.1(e) and 8.1(f) and that such defeasance shall be subject to the terms and conditions set forth in Sections 8.1(d), 8.1(e) and 8.1(f). Upon satisfaction of the conditions set forth in Section 8.1(d), the Company shall be released from its obligations under Section 8.1(a) (other than its obligations under Sections 8.1(a)(ii), 8.1(a)(v) and 8.1(a)(xi) (in so far as such Section 8.1(a)(xi) relates to changing the principal place of business of the Company) with respect to this Note (the Covenant Defeasance) and this Note shall thereafter be deemed not to be outstanding for the purposes of any direction, waiver, consent or declaration or act of the Holder (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed outstanding for all other purposes hereunder. For this purpose, such Covenant Defeasance means that, with respect to this Note, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default under Section 11, but, except as specified above, the remainder of this Note shall be unaffected thereby. Notwithstanding the foregoing, the Company shall be released from its obligations under Section 8.1(a)(v) only if it meets the merger conditions set forth in Section 8.1(g) (the Merger Conditions).

 

(d) The following shall be the conditions to the application of Section 8.1(c):

 

  (i) the Company must irrevocably deposit or cause to be deposited to an account (the Trust Account) to be held with a financial institution reasonably acceptable to the Holder and the Company that shall act as trustee for the Holder (the Trustee), as trust funds in trust, specifically

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pledged as security for, and dedicated solely to, the benefit of the Holder, cash, United States government securities, or a combination thereof, in such amounts sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay and discharge the principal of, premium, if any, and interest then due or known to be due on this Note on the Maturity Date of such principal (and premium, if any) or installment of interest;

 

  (ii) the Company has delivered evidence reasonably acceptable to the Holder that no Default has occurred and is continuing on the date of such deposit and, insofar as an event of bankruptcy under Section 11(h) is concerned, at any time after the date of such deposit until the 91st day after the date of such deposit;

 

  (iii) such Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, this Note or any other material agreement or instrument to which the Company is a party or by which it is bound;
 
  (iv) the Company shall have delivered to the Holder a written legal opinion (which may be subject to customary exceptions), from legal counsel that is reasonably acceptable to the Holder (an Opinion of Counsel), to the effect that the Holder will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at that same times as would have been the case if such Covenant Defeasance had not occurred;

 

  (v) the Company must have delivered to the Holder a certificate signed by an authorized officer of the Company and an Opinion of Counsel, each stating that all conditions precedent to the Covenant Defeasance have been complied with; and

 

  (vi) the Company shall have delivered documentation reasonably acceptable to the Holder providing for the creation of the trust contemplated by this Sections 8.1(d), the appointment of the Trustee and the terms of the trust and the creation and perfection of the security interest referred to in Section 8.1(d)(i).

 

(e) Any money and United States government securities deposited in the Trust Account pursuant to Section 8.1(d)(i) in respect of this Note shall be held in trust and applied by the Company, in accordance with the provisions of this Note and the other Transaction Documents, to the payment to the Holder of this Note and of all sums due and to become due thereon in respect of principal, premium, if any, and interest.

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(f) If the Trustee is unable to apply any money or United States government securities in accordance with Section 8.1(e) by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company’s obligations under this Note shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.1(d)(i), until such time as the Trustee or the Holder is permitted to apply all such money and United States government securities in accordance with Section 8.1(e). The Company hereby waives, until the indefeasible payment in full of the Note, any right of subrogation or contribution it may have, whether arising by contract or law (including any such right arising under the US Federal Bankruptcy Code) or otherwise, by reason of any payment of principal of, or premium, if any, or interest on this Note following the reinstatement of its obligations hereunder.

 

(g) The following conditions shall be applicable to the application of Section 8.1(c) in respect of the Merger Conditions:

 

  (i) the surviving entity of the merger or consolidation is organized under the laws of the United States, any state thereof or the District of Columbia or the European Union (as of April 20, 2004);

 

  (ii) the Holder receives 30 days’ prior notice of the merger or consolidation;

 

  (iii) the Holder receives an Opinion of Counsel to the effect that, after giving effect to the merger or consolidation, the Company will not be required to withhold or deduct in respect of any payments under this Note or, prior to giving effect to such merger or consolidation, the Holder receives a satisfactory indemnification indemnifying it for any withholding or deduction in respect of any Tax on payments made hereunder; and

 

  (iv) the surviving entity delivers to the Holder a certified copy of its charter documents and an assumption agreement reasonably acceptable to the Holder pursuant to which the Holder irrevocably and unconditionally assumes all of the obligations of the Company under this Note and any agreement delivered thereunder, including the documentation relating to the trust provided for in Section 8.1(d).

 

8.2 Affirmative Covenants

 

The Company hereby covenants and agrees that it shall:

 

(a) give written notice to the Holder upon the occurrence of a Default or any event but for the giving of notice or lapse of time, or both, would constitute a Default within five (5) Business Days of such event;

 

(b) comply in all material respects with all applicable laws (whether federal, state or local and whether statutory, administrative or judicial or other) and with every

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applicable lawful governmental order (whether administrative or judicial) except in such instances in which (i) such law or governmental order is being contested in good faith by appropriate proceedings or (ii) the failure to comply therewith would not be reasonably be expected to have a Material Adverse Effect;

 

(c) keep adequate and proper records and books of account, in which complete and correct entries will be made consistent with the Company’s past practice, reflecting all financial transactions of the Company;

 

(d) maintain and preserve its existence, rights and privileges, and obtain, maintain and preserve any permits, licenses, authorizations and approvals that are necessary in the proper conduct of its business except to the extent that the failure to do so would not reasonably be expected to have a Material Adverse Effect; and

 

(e) maintain sufficient available shares for the issuance of the Note Conversion Shares and cause the Note Conversion Shares to be (i) validly issued, fully paid and nonassessable (ii) free from all taxes, liens and encumbrances with respect to the issue thereof and (iii) not subject to any required consent, any preemptive rights or other similar rights of stockholders of the Company that have not been duly waived at such time as this Note is converted into the Note Conversion Shares.

 

9. NO IMPAIRMENT

The Company shall not intentionally take or omit any action which would impair the rights and privileges of this Note set forth herein or the rights and privileges of the Holder of this Note.

 

10. REPLACEMENT NOTE; NOTE TRANSFER

 

(a) In the event that the Holder notifies the Company that this Note has been lost, stolen or destroyed, a replacement Note identical in all respects to the original Note shall be issued by the Company to the Holder.

 

(b) The Company shall keep at its principal executive office a register for the registration and registration of transfers of Notes. The name and address of each holder of one or more Notes, each transfer thereof and the name and address of each transferee of one or more Notes shall be registered in such register. Prior to due presentment for registration of transfer, the Person in whose name any Note shall be registered shall be deemed and treated as the owner and holder thereof for all purposes hereof, and the Company shall not be affected by any notice or knowledge to the contrary. The Company shall give to any holder of a Note that is an Institutional Investor promptly upon request therefore, a complete and correct copy of the names and addresses of all registered holders of the Notes.

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(c) Upon surrender of any Note at the principal executive office of the Company for registration of transfer or exchange (and in the case of a surrender for registration of transfer, duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of such Note or his attorney duly authorized in writing and accompanied by the address for notices of each transferee of such Note or part thereof), the Company shall execute and deliver, at the Company’s expense, one or more new Notes in exchange therefore, in an aggregate principal amount equal to the unpaid principal amount of the surrendered Note.

 

11. EVENTS OF DEFAULT

If any of the following shall occur (each a Default):

 

(a) the Company shall fail to pay any principal or interest in respect of this Note and such failure continues for five (5) Business Days following written notice thereof from the Holder to the Company specifying such failure;

 

(b) any representation or warranty made by the Company in this Note or any other Transaction Document shall have been incorrect in any material respect when made,

 

(c) the Company shall fail to perform or observe any covenant or agreement contained in this Note or any other Transaction Document to be performed or observed by it and such failure shall remain unremedied for a period of (i) thirty (30) calendar days after the Holder has been informed thereof and the Company has received notice of such failure, or (ii) thirty (30) calendar days after the occurrence thereof if the Holder has not been informed thereof in accordance with the terms hereof;

 

(d) any default or event of default (howsoever described) shall occur under any other Note after giving effect to any applicable grace or cure period;

 

(e) (i) the Company or any of its subsidiaries shall fail to pay any Indebtedness for borrowed money in excess of $250,000 (other than the Indebtedness evidenced by the Notes), including any interest or premium thereon, when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) and such failure shall continue after the applicable grace or cure period, if any, specified in the agreement or instrument relating to such Indebtedness, (ii) any other event shall occur and shall continue after the applicable grace or cure period, if any, specified in such agreement or instrument, if the effect of such event is to accelerate, or to permit the acceleration of, the maturity of such Indebtedness for borrowed money in excess of the Threshold; or any such Indebtedness for borrowed money in excess of the Threshold shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof, or (iii) as a consequence of the occurrence or continuation of any event or condition (other

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than the passage of time), the Company or any subsidiary has become obligated to purchase or repay such Indebtedness for borrowed money before its regular maturity or before its regularly scheduled dates of payment in an aggregate outstanding principal amount in excess of the Threshold (or its equivalent in the relevant currency of payment), or one or more Persons have the right to require the Company or any subsidiary so to purchase or repay such Indebtedness;

 

(f) this Note shall for any reason fail or cease to rank at least pari passu in right of payment to all other Indebtedness with the Company’s most senior debt other than (i) any senior debt of the Company set forth in Schedule 11(f) hereto, and (ii) Permitted Indebtedness secured by Permitted Liens that is collaterally secured (and then only to the extent of such collateral security);

 

(g) the Company or any of its subsidiaries shall be generally not paying its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or

 

(h) any proceeding shall be instituted by or against the Company or any of its subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution, liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for the Company or for any substantial part of its property and such proceeding shall remain undismissed or unstayed for a period of sixty (60) days, or the Company shall take any action to authorize or effect any of the actions set forth above in this clause (h);

then the Holder may (1) declare all amounts due hereunder (including without limitation, principal, interest and all other amounts due hereunder) to be immediately due and payable, whereupon all amounts due under this Note shall become and shall be forthwith due and payable, without diligence, presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived, and (2) exercise any and all of its other rights under applicable law and hereunder, provided that upon the occurrence of a Default in clause (g) or (h) above (as to the Company), all amounts due hereunder (including, without limitation, principal, interest and all other amounts due hereunder) shall automatically become immediately due and payable without notice to the Company and the Holder shall have the right to exercise any and all of its other rights under applicable law and hereunder.

 

12. INDEMNIFICATION

The Company hereby agrees to indemnify and hold harmless the Holder and its respective Affiliates, directors, officers, partners, employees and other agents and representatives (Indemnitees) from and against any and all liabilities, judgments, claims,

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settlements, losses, damages, reasonable fees (including attorneys’, accountants’ and other experts’ fees and disbursements), liens, taxes, penalties, obligations and expenses (collectively, Losses) incurred or suffered by any such Person or entity arising from, by reason of or in connection with any misrepresentation or breach of any representation, warranty or covenant of the Company contained in this Note or other document delivered by the Company pursuant to or in connection with this Note (other than the Purchase Agreement, the Somatuline Autogel License, the Increlex License, the Registration Rights Agreement and the Affiliation Agreement) or otherwise in connection with or as a result of or related to the execution, delivery or performance of this Note or the transactions contemplated hereby other than any Losses caused by the gross negligence or willful misconduct of the Indemnitees. The indemnification provisions of this Section 12 shall survive repayment in full of this Note. For the avoidance of doubt, the provisions of this Section 12 shall be without prejudice to any remedies to which the parties to any of the other Transaction Documents may be entitled thereunder at law or in equity, including for any breach or non-performance of any representation, warranty, covenant or covenant contained therein.

 

13. SET-OFF; DEDUCTION; WITHHOLDING

If provision is required to by law or regulation of the United States for withholding of Taxes with respect to any amounts payable by the Company to the Holder pursuant to this Agreement, the Company shall promptly pay such Tax on behalf of the Holder to the proper governmental authority and the Company shall promptly furnish the Holder with a certificate of Taxes deducted under such withholding tax laws. The Company shall have the right to offset any such Tax actually paid from any payment due to the Holder. The Company and the Holder shall cooperate with each other in obtaining any exemption from or reduced rate of Tax available under any applicable law or tax treaty.

The obligations of the Company under this Section 13 shall survive the payment or transfer of this Note and the provisions of this Section 13 shall also apply to successive transferees of this Note.

 

14. MISCELLANEOUS

 

(a) All notices, requests, consents and other communications hereunder shall be in writing, shall be delivered by facsimile (with receipt confirmed by telephone) or nationally recognized overnight express courier postage prepaid, and shall be deemed given when so mailed and shall be delivered as addressed as follows:

 

  (i) if to the Company, to:

Tercica, Inc.

2000 Sierra Point Parkway, Suite 400

Brisbane, California 94005

United States of America

Attention: General Counsel

Facsimile: +1 650 238 1520

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with a copy (which shall not constitute notice) to:

Cooley Godward LLP

Five Palo Alto Square

3000 El Camino Real

Palo Alto

California 94306

United States of America

Attention: Suzanne Sawochka Hooper

Facsimile: +1 650 849 7400

or to such other person, at such other place or to such other facsimile number as the Company shall designate to the Holder

in writing; and

 

  (ii)if to the Holder, to:

Ipsen S.A

42, rue du Docteur Blanche

75016 Paris

France

Attention: General Counsel

Facsimile: +33 1 4496 1188

with a copy (which shall not constitute notice) to:

Freshfields Bruckhaus Deringer LLP

520 Madison Avenue, 34th Floor

New York, NY 10022

United States of America

Attention: Matthew Jacobson, Esq.

Facsimile: +1 212 277 4001

or to such other person, at such other place or to such other facsimile number as the Holder shall designate to the Company in writing.

 

(b) No failure on the part of the Holder to exercise, and no delay in exercising, any right, power, privilege or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof by the Holder preclude any other or further exercise thereof or the exercise of any other right, power, privilege or remedy of the Holder. All rights, powers, privileges and remedies hereunder and under applicable law are cumulative and not exclusive. No amendment or waiver of any provision of this Note, nor consent to any departure by the Company therefrom, shall in any event be effective unless the same shall be in writing and signed by the Holder, and then such waiver or consent shall be effective only in the specific instance and For the specific purpose for which given.

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(c) Any provision hereof which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction.

 

(d) The Company hereby (i) irrevocably submits to the exclusive jurisdiction of any New York State or Federal court located in the Borough of Manhattan in the City of New York in any action or proceeding arising out of or relating to this Note, (ii) waives any defense based on doctrines of venue or forum non conveniens, or similar rules or doctrines, (iii) irrevocably agrees that all claims in respect of such an action or proceeding may be heard and determined in such New York State or Federal court; and (iv) irrevocably agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), return receipt requested, postage prepaid and specifying next day or two-day delivery, to the Company at its address set forth in Section 14(a) or at such other address of which the Holder shall have been notified pursuant thereto.

 

(e) This Note shall be construed in accordance with, and this Note and all matters arising out of or relating in any way whatsoever to this Note (whether in contract, tort, or otherwise) shall be governed by, the law of the State of New York.

 

(f) The Company promises to pay all costs and expenses, including, without limitation, reasonable attorneys’ fees and expenses, incurred by the Holder in connection with the enforcement or collection of this Note, including, without limitation, in connection with the foreclosure of Collateral, regardless of whether any action is instituted. The obligations of the Company under this Section 14(f) shall survive repayment in full of this Note.

 

(g) This Note and the rights and obligations hereunder shall not be assigned, delegated, or otherwise transferred (whether by operation of law, by contract, or otherwise) without the prior written consent of the other party hereto; provided that the Holder may, without obtaining the prior written consent of the Company, assign, delegate, or otherwise transfer its rights and obligations hereunder to any Affiliate of the Holder. Any attempted assignment, delegation or transfer in violation of this Section 14(g) shall be void and of no force or effect.

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IN WITNESS WHEREOF, the Company has caused this Note to be signed on the date first set forth above.

 

TERCICA, INC.
By:  

 

Name:  
Title:  

The undersigned acknowledges and agrees to the terms of this Note.

 

IPSEN, S.A.
By:  

 

Name:  
Title:  

[Signature Page to First Senior Convertible Promissory Note]

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ANNEX A

FORM OF NOTICE OF CONVERSION

 

To:    Tercica, Inc.
   2000 Sierra Point Parkway, Suite 400
   Brisbane, California 94005
   USA

Attn:   General Counsel

TERCICA, INC.

First Senior Convertible Promissory Note

convertible into shares of Tercica, Inc.’s common stock

Any term used in this Notice of Conversion and not otherwise defined shall have the meaning set forth in the Tercica, Inc. First Senior Convertible Promissory Note (the Note) for the principal sum of $25,037,000 issued to Ipsen, S.A., a French société anonyme, and dated October 13, 2006. The undersigned, being the holder of the Note, hereby irrevocably elects that a Conversion Amount of $[            ] [(comprised of a principal amount of $[            ], accrued and unpaid interest on such principal amount at the interest rates provided in the Note to the Conversion Date of $[            ] and Default Interest on such accrued and unpaid interest of $[            ])]1 be converted into fully paid and non assessable shares of Common Stock in accordance with the terms and conditions of the Note. In accordance with the terms of the Note, by dividing the above Conversion Amount by a Conversion Price of $[    ] (such price being the Conversion Price in effect on the date of this Notice of Conversion), the undersigned has calculated that [            ] shares of Common Stock (the Conversion Shares) are issuable upon such conversion.

The undersigned requests that stock certificates for the Conversion Shares be issued and delivered to the undersigned at the address set forth below.

In accordance with Section 2(c) of the Note, attached hereto as Exhibit A is the updated Note Ledger, recording the principal amount of the Note to be converted pursuant to this Notice of Conversion and the outstanding principal amount of the Note following such conversion.

Dated:                                    

Signature of Registered Holder

1 Only include if the Conversion Amount includes any accrued and unpaid interest on the principal amount to be converted or any Default Interest on such accrued and unpaid interest

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Name of Registered Holder (Print)

 

Address

 

 

 

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Schedule (rr)

Permitted Indebtedness

 

  •   Letter of Credit of $340,000 to Clarendon Hills Investors, LLC related to Sierra Point Office lease

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Schedule (ss)(1)

Tercica, Inc.

Investment Policy

The following is the TERCICA, INC. Investment Policy. This document establishes specific guidelines for the investment of TERCICA corporate surplus cash. “Surplus cash” is defined as cash in corporate accounts not immediately required for working capital, capital investment, debt repayment or to meet other outstanding near-term financial obligations. At a minimum, this document shall be reviewed every six months, or at the time of change in the senior or financial management of the company, by the Chief Executive Officer, and the Chief Financial Officer. The major categories covered by this document are:

I. Objectives

II. Liquidity and Maturities Guidelines

III. Investment Restrictions

IV. Concentration Limits

V. Minimum Acceptable Credit Quality

VI. Marketability

VII. Trade Guidelines

VIII. Treasury Advisor

IX. Investment Performance

X. Fiduciary Discretion

I. OBJECTIVES

The primary objective of this policy is to comply with the Security and Exchange Commission proposed rules of the Investment Company Act of 1993. As such, it is acknowledged that the funds invested in TERCICA are intended for the working capital requirements of the company’s primary business of research and product development.

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The secondary objective is to obtain above-market returns versus industry averages. In meeting these two objectives, the Chief Financial Officer and CAO shall maintain systems and procedures that ensure the:

 

  a. Preservation of capital,

 

  b. Anticipation of liquidity requirements,

 

  c. Diversification of investments to minimize the risk and inappropriate concentrations of investments with any one entity,

 

  d. Fiduciary control of cash and investments.

Revised (05/03/06)

II. LIQUIDITY AND MATURITIES GUIDELINES

Surplus cash is invested under a plan to provide adequate liquidity for company operations without any loss of principal. Under this plan, daily liquidity is essential. As such, periodic updates shall be reviewed with the company’s Treasury Advisor (as defined in section VII.) not less than on a quarterly basis. Specific restrictions on liquidity are:

 

a. At least $500,000 must be available each business day until 10:30 a.m. Pacific Standard time,

 

b. At least 5% of funds available with 7 days notice,

 

c. Maximum Maturities will not exceed 12 months with weighted average Maturities to be maintained at 6 months or less (for securities which have put dates, reset dates, or are traded based on their average maturity, or average life, the put date, reset date, or average maturity or average life will be used, instead of the final maturity date, for maturity guideline purposes),

 

d. Repositioning of these securities before their maturity, generating small gains or losses, is permitted for managing liquidity requirements only. Any repositioning of securities causing a gain or loss must be pre-approved by the CFO for fiduciary control purposes.

III. INVESTMENT RESTRICTIONS

Investments shall be made in the context of the following investment guidelines:

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Eligible Investments:

 

a. Direct obligations of the U.S. Treasury, including bills, notes and bonds,

 

b. Obligations issued or guaranteed by agencies or instrumentality’s of the U.S. governments,

 

c. Bank obligation, including certificates of deposit, banknote time deposits and bankers acceptances.

 

d. Corporate obligations, including intermediate term notes, commercial paper (foreign and domestic issues) and floating rate notes.

 

e. Repurchase agreements collaterized at a minimum of 102% with U.S. Treasury securities or other securities rates “AAA” or equivalent that would be permitted by this policy,

 

f. Money market funds over $1 billion in assets, with an historical constant dollar net asset value, consisting of acceptable securities as stated above are appropriate for investing, as long as the fund’s manager has been in business over five years, has name recognition, and has performance that is easily tracked,

 

g. Taxable and tax exempt Municipal Securities, municipal notes, commercial paper, taxable and tax-exempt auction rate floaters, floating rate notes; Municipal Notes, and Bonds,

 

h. U.S. and dollar denominated International corporate debt of all types is acceptable as long as the issuer meets credit rating and marketability guidelines,

 

i. Derivative instruments are ineligible as investments. This would cover all investments where the value is based on an underlying variable causing the coupon and/or the maturity value to be unknown for the life of the security, at the time of purchase,

 

j. Asset-Backed Securities

 

k. Trends for a given company or industry must be reviewed periodically with Tercica by the Treasury Advisor and adjustments in percentage positions made accordingly. Should an investment held in TERCICA portfolio fall short of prescribed guidelines, notification from its Treasury Advisors are expected to be made to the CFO or CAO within 2 business days.

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IV. CONCENTRATION LIMITS

Diversification of the portfolio will be a tool for minimizing risk while maintaining liquidity. They following parameters will be adhered to in managing the portfolio:

 

a. Obligations of the U.S. Government and have no concentration limits, No more than 50% of the portfolio shall be invested in any single GSE/Federal Agency securities at time of purchase,

 

b. A maximum of 5% will be invested in any one issuer except for the U.S. Government at time of purchase,

 

c. No more than 10% of the portfolio in entities or issuers of any one country other than the U.S,

 

d. U.S. bank and insurance company securities (CDs, commercial paper, BA’s, etc.), must not in total exceed 60% of the portfolio. Holdings of one issuer cannot exceed 5% of the total portfolio at the time of purchase,

 

e. No investment will be permitted in common stocks, preferred stocks, options (put or calls), commodities, foreign securities, futures or mutual funds whose underlying securities are ineligible investments according to this investment policy.

V. MINIMUM ACCEPTABLE CREDIT QUALITY

The obligor must be rated in the rating category as indicated below by at least one of the Nationally Recognized Statistical Rating Organizations (NRSROs) for municipal securities and at least two for non-municipal securities. Non-rated, pre-refunded issues may be purchased if collateralized by U.S. Treasuries /Agencies.

 

     S&P    Moody’s    Fitch

Minimum Short Term Rating

    A-1/SP-1    P-1/MIG-1    F-1

Minimum Long Term Rating

    A-    A3    A-

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VI. MARKETABILITY

All securities are to be purchased through investment banking and brokerage firms of high quality and reputation, with a history of making markets for the securities in which we invest. In the unlikely event that securities must be sold before their maturity, the securities must be easily re-marketed. To accomplish this, the securities must be conventional “products” with strong name recognition.

VII. TRADE GUIDELINES

All purchases and sales will be executed at the best net price with the principal dealers and banks in the particular securities. U.S. Government, U.S. Federal Agency and repurchase agreement securities brokers will be limited to the list of Primary Government Securities Dealers published by the Federal Reserve Bank. All securities purchased will be in the name of the account of the nominee name of the custodian bank.

VIII. TREASURY ADVISOR

The company shall establish a relationship with a Treasury Advisor to assist in the administration of these guidelines. The Treasury Advisor shall have the responsibility of:

 

a. Adherence to TERCICA Investment Policy,

 

b. Discretionary Authority to make investment decisions on a discretionary basis regarding all assets placed under its jurisdiction. Such “discretion” includes decisions to buy, hold and sell securities (including cash equivalents) in amounts and proportions that are reflective of the Treasury Advisor’s current investment strategy within the guidelines set forth in this policy,

 

c. Communication:

 

  1. With TERCICA on a timely basis of major changes in its investment outlook, investment strategy, asset allocation, and other matters affecting its investment policies or philosophy,

 

  2. Whenever the Treasury Advisor believes that any particular guideline should be altered or deleted, it will be the Treasury Advisor’s responsibility to initiate written communications with TERCICA expressing its views and recommendations,

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d. Reporting:

 

  1. Timely notices of transaction activity as well as monthly performance reports.

 

  2. Any information needs to assist TERCICA in conduction an evaluation of portfolio management will be expected on a timely basis.

 

e. Compliance with Appropriate Legislation:

 

  1. The Treasury Advisor is responsible for strict compliance with federal and state law as it pertains to its duties and responsibilities as a fiduciary.

 

  2. The Treasury Advisor shall be registered under the Investment Advisory Act of 1940.

The company shall review the performance of the Treasury Advisor as noted in section IX.

 

IX. INVESTMENT PERFORMANCE

The Treasury Advisor will issue a quarterly investment performance analysis using time-weighted measures. At a minimum, a quarterly meeting will be held with the CFO or CAO to review performance figures.

X. FIDUCIARY DISCRETION

The CFO is responsible for securing and managing investments and cash for operations and has full discretion to invest any excess capital subject to strict adherence to these guidelines

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Schedule (ss)(2)

Permitted Investments

 

  •   Loan to Employee of $35,000

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Schedule (tt)

Permitted Liens

 

  •   Letter of Credit of $340,000 to Clarendon Hills Investors, LLC related to Sierra Point Office lease

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Schedule 7(c)

Financing Statements

None.

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Schedule 11(f)

Senior Debt

None.

EX-99.5 3 dex995.htm WARRANT ENTERED INTO BETWEEN IPSEN AND THE COMPANY Warrant entered into between Ipsen and the Company

Exhibit 5

WARRANT

THE SECURITIES EVIDENCED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION WHICH IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION, IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS, AND IN THE CASE OF A TRANSACTION EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION, UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT AND SUCH OTHER APPLICABLE LAWS.

October 13, 2006

A. Warrant (this Warrant) to purchase up to such number of shares of Common Stock (the Warrant Shares) consisting of the greater of: (i) Four Million Nine Hundred Forty-Eight Thousand Seven Hundred Ninety-Five (4,948,795) shares (the Baseline Amount); or (ii) the sum of the Baseline Amount plus the Variable Amount. For the purposes of this paragraph, the Variable Amount shall be determined in accordance with the following formula:

Variable Amount = a + b + c – d – e

where:

 

  •   a = such number of shares of Common Stock that equals two-thirds of the number of shares of Common Stock issued (or underlying options, warrants or similar instruments issued, which underlying shares shall be deemed issued at the time the option or other instrument is issued) by the Company after June 30, 2006 and prior to the First Closing (other than shares actually issued pursuant to options, warrants or similar instruments outstanding as of June 30, 2006);

 

  •   b = such number of shares of Common Stock that equals two-thirds of the number of shares of Common Stock issued (or underlying options, warrants or similar instruments issued, which underlying shares shall be deemed issued at the time the option or other instrument is issued) by the Company after the date hereof in connection with strategic transactions

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involving the Company and other entities (including without limitation, joint venture, licensing, collaboration, manufacturing, development, marketing or distribution arrangements) if the right of first offer set forth in Section 5 of the Affiliation Agreement is not applicable to such issuance;

 

  •   c = such number of shares of Common Stock that equals two-thirds of the number of shares of Common Stock issued (or underlying options, warrants or similar instruments issued, which underlying shares shall be deemed issued at the time the option or other instrument is issued) by the Company to raise proceeds for paying amounts due and payable under the Convertible Notes pursuant to Sections 3(v)(ii) and 5.2 of the Affiliation Agreement;

 

  •   d = such number of shares of Common Stock acquired (or underlying options, warrants or similar instruments acquired, which underlying shares shall be deemed acquired at the time the option or other instrument is acquired) by the Investor from Persons other than the Company after the date hereof, following which the Investor and its Affiliates beneficially own less than or equal to 40% of the Investor Diluted Common; and

 

  •   e = such number of shares of Common Stock into which interest accrued to date on the Convertible Notes has converted or could be converted into Common Stock.

B. In consideration for the Investor agreeing to enter into that certain Stock Purchase and Master Transaction Agreement, dated as of the date hereof, between the Investor and the Company (the Stock Purchase Agreement), the Company hereby agrees that the Investor or any other Warrant Holder (as defined below) is entitled, on the terms and conditions set forth below, to purchase from the Company at any time during the Exercise Period (as defined below) up to the number of Warrant Shares defined in paragraph A above in fully paid and nonassessable shares of Common Stock at the Exercise Price (hereinafter defined), as the same may be adjusted from time to time pursuant to Section 6 hereof. The resale of the shares of Common Stock or other securities issuable upon exercise or exchange of this Warrant is subject to the provisions of the Registration Rights Agreement. Capitalized terms used herein and not otherwise defined shall have the meanings given them in the Stock Purchase Agreement.

 

1. DEFINITIONS

Additional Shares of Common Stock shall have the meaning assigned to it in Section 6(f)(vi).

Adjustment Events shall mean (1) any reclassification or change of Common Stock (other than a change in par value, as a result of a Subdivision or Combination or in connection with an Excluded Merger or Sale), (2) any consolidation, merger or

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mandatory share exchange of the Company with or into another corporation (other than a merger or mandatory share exchange with another corporation in which the Company is a continuing corporation and which does not result in any reclassification or change other than a change in par value or as a result of a Subdivision or Combination), other than an Excluded Merger or Sale.

Affiliate shall mean any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by, or is under direct or indirect common control with any other Person. For the purposes of this definition, “control,” when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the term “controls” and “controlled” have meanings correlative to the foregoing.

Affiliation Agreement means that certain Affiliation Agreement dated as of the date of this Warrant between the Company, Investor and Suraypharm, a French société par actions simplifiée.

Aggregate Consideration shall have the meaning assigned to it in Section 6(f)(iv).

Aggregate Exercise Price shall have the meaning assigned to it in Section 2(a).

Baseline Amount shall have the meaning assigned to it in paragraph A of this Warrant.

Cashless Exercise shall have the meaning assigned to it in Section 2(c).

Closing Price as of any particular day shall mean the closing price per share of the Company’s Common Stock as reported by Bloomberg L.P. on such day.

Combination shall have the meaning assigned to it in Section 6(c).

Common Stock shall mean the common stock, par value $0.001 per share, of the Company.

Common Stock Outstanding shall have the meaning assigned to it in Section 6(f)(ii).

Company shall mean Tercica, Inc.

Convertible Notes shall mean the First Convertible Note, the Second Convertible Note and the Third Convertible Note, as those terms are defined in the Stock Purchase Agreement.

Convertible Securities shall have the meaning assigned to it in Section 6(f)(v).

Effective Price shall have the meaning assigned to it in Section 6(f)(vii).

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Excluded Merger or Sale shall mean a transaction involving (A) sale of all or substantially all of the assets of the Company, or (B) any merger, consolidation or similar transaction where the consideration payable to the stockholders of the Company by the acquiring Person consists substantially entirely of cash or where the acquiring Person does not agree to assume the obligations of the Company under any outstanding warrants (including this Warrant).

Exercise Date shall have the meaning assigned to it in Section 2(a).

Exercise Notice shall have the meaning assigned to it in Section 2(a).

Exercise Period shall mean that period beginning upon the First Closing Date and continuing until the expiration of the five-year period thereafter, subject to earlier termination in accordance with Section 6 hereof.

Exercise Price shall mean $7.41, as adjusted in accordance with Section 6 hereof.

First Closing shall have the meaning assigned to it in the Stock Purchase Agreement.

Investor shall mean Ipsen, S.A., a French société anonyme.

Investor Diluted Common shall mean the aggregate of (i) the then-outstanding Common Stock plus (ii) the then-unexercised Warrant Shares plus (iii) the then-unconverted Note Shares; provided that for purposes of the definition of Investor Diluted Common, the Investor and its Affiliates (A) shall be deemed to beneficially own Note Shares under any unissued Convertible Notes if the Milestone Payment may still be achieved under the terms of the Somatuline Autogel License; (B) shall be deemed to be the beneficial owner only of the Baseline Amount of the Warrant Shares; and (C) shall not be deemed to beneficially own the shares of Company’s capital stock subject to the Voting Agreements.

Liquidating Dividend shall mean a distribution by the Company of its assets or evidences of indebtedness to the holders of its Common Stock as a dividend in liquidation or by way of return of capital or other than as a dividend payable out of earnings or surplus legally available for dividends under applicable law or any distribution to such holders made in respect of the sale of all or substantially all of the Company’s assets (other than under the circumstances provided for in Sections 6(a)-(d)).

Liquidating Dividend Adjustment Amount shall mean the kind and amount of such Liquidating Dividend per share of Common Stock multiplied by the number of Warrant Shares that, on the record date for such Liquidating Dividend, are issuable upon such exercise of the Warrant (with no further adjustment under Section 6 hereof being made following any event which causes a subsequent adjustment in the number of Warrant Shares issuable upon exercise hereof).

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Milestone Payment shall have the meaning assigned to it in the Somatuline Autogel License.

New Warrant shall have the meaning assigned to it in Section 6(a)(i).

Note Shares shall have the meaning assigned to it in the Stock Purchase Agreement.

Per Share Warrant Value shall mean the difference resulting from subtracting the Exercise Price from the average of the Closing Prices on each of the ten Trading Days immediately preceding an Exercise Date (as defined in Section 2(a)).

Person shall mean an individual, a corporation, a partnership, a limited liability company, an association, a trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

Principal Market shall mean the Nasdaq Global Market, the Nasdaq Capital Market, the American Stock Exchange or the New York Stock Exchange, whichever is at the time the principal trading exchange or market for the Common Stock.

Reference Price shall mean $4.75.

Rights shall have the meaning assigned to it in the Rights Agreement.

Rights Agreement shall have the meaning assigned to it in the Affiliation Agreement.

Securities shall have the meaning assigned to it in Section 5(a).

SEC shall mean the United States Securities and Exchange Commission.

Somatuline Autogel License has the meaning assigned to it in the Stock Purchase Agreement.

Stock Dividend shall mean a payment by the Company of a dividend or other distribution in the Common Stock of the Company to all holders of the Common Stock of the Company.

Stock Purchase Agreement shall have the meaning assigned to it in paragraph B of this Warrant.

Subdivision shall have the meaning assigned to it in Section 6(b).

Trading Day shall mean any day other than a Saturday or a Sunday on which the Principal Market is open for trading in equity securities.

Transfer shall have the meaning assigned to it in Section 13(d) hereof.

Trigger Price shall have the meaning assigned to it in Section 6(f)(i).

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Variable Amount shall have the meaning assigned to it in paragraph A of this Warrant.

Voting Agreements shall have the meaning assigned to it in the Stock Purchase Agreement.

Warrant Adjustment Factor shall mean a fraction, the numerator of which is the total number of shares of Common Stock outstanding immediately after the relevant Subdivision, Combination or Stock Dividend, and the denominator of which is the total number of shares of Common Stock existing immediately prior to such event.

Warrant Holder shall mean the Investor or any permitted assignee or permitted transferee of this Warrant pursuant to Section 13(d).

Warrant Shares shall have the meaning assigned to it in paragraph A of this Warrant.

 

2. EXERCISE

 

(a) Method of Exercise. This Warrant may be exercised in whole or in part (but not as to a fractional share of Common Stock), at any time and from time to time during the Exercise Period, by the Warrant Holder by surrender of this Warrant, with the form of exercise attached hereto as Exhibit A completed and duly executed by the Warrant Holder (the Exercise Notice), to the Company at the address set forth in Section 10.4 of the Stock Purchase Agreement, accompanied by payment of the Exercise Price multiplied by the number of Warrant Shares for which this Warrant is being exercised (the Aggregate Exercise Price). The latter of the date on which the Exercise Notice or payment of the Exercise Price (unless this Warrant is exercised in accordance with Section 2(c) below) is received by the Company in accordance with this clause (a) shall be deemed an “Exercise Date”. In the event this Warrant is exercised in accordance with Section 2(c) below, the date on which the Exercise Notice is received by the Company in accordance with this clause (a) shall be deemed an “Exercise Date”. All partial exercises shall first be credited against the Baseline Amount, and following a partial exercise, further exercises shall be effected by subsequent delivery of one or more Exercise Notices.

 

(b) Payment of Aggregate Exercise Price. Subject to paragraph (c) below, payment of the Aggregate Exercise Price shall be made by wire transfer of immediately available funds to an account designated by the Company. If the amount of the payment received by the Company is less than the Aggregate Exercise Price, the Warrant Holder will be notified of the deficiency and shall make payment in that amount within three (3) Trading Days. In the event the payment exceeds the Aggregate Exercise Price, the Company will refund the excess to the Warrant Holder within five (5) Trading Days of receipt.

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(c) Cashless Exercise. The Warrant Holder may in its sole discretion, as an alternative to payment of the Aggregate Exercise Price upon exercise in accordance with paragraph (b) above, elect to effect a cashless exercise by so indicating on the Exercise Notice and including a calculation of the number of Warrant Shares to be issued upon such exercise in accordance with the terms hereof (a Cashless Exercise). In the event of a Cashless Exercise, the Warrant Holder shall receive that number of shares of Common Stock determined by (i) multiplying the number of Warrant Shares for which this Warrant is being exercised by the Per Share Warrant Value, and (ii) dividing the product by the average of the Closing Prices on each of the ten Trading Days immediately preceding the Exercise Date, rounded to the nearest whole share. Upon a cashless exercise of some or all of this Warrant, the number of Warrant Shares remaining available for purchase hereunder shall be reduced by the number of Warrant Shares exercised in such cashless exercise (which shall be applied first against the Baseline Amount), under the foregoing formula (notwithstanding that number of shares issued to the Warrant Holder upon such cashless exercise shall be less than the number of Warrant Shares exercised).

 

(d) Variable Amount. The Variable Amount shall continue to be calculated throughout the Exercise Period and, to the extent the Variable Amount increases such that additional shares of Common Stock become available for exercise hereunder following any prior exercises of the Warrant, the Warrant shall remain exercisable for such additional shares for the remainder of the Exercise Period. The Company shall cooperate with reasonable requests of the Holder to determine or confirm the number of Warrant Shares purchasable at any time pursuant to the Variable Amount.

 

3. DELIVERY OF WARRANT SHARES

 

(a) Subject to the terms and conditions of this Warrant, as soon as practicable after the exercise of this Warrant in full or in part, and in any event within ten (10) Trading Days thereafter, the Company at its expense will cause to be issued in the name of and delivered to the Warrant Holder, or as the Warrant Holder may lawfully direct, a certificate or certificates for, or, if and only to the extent the Warrant Shares are not restricted securities, make deposit with the Depositary Trust Company via book-entry of, the number of validly issued, fully paid and non-assessable Warrant Shares to which the Warrant Holder shall be entitled on such exercise, together with any other stock or other securities or property (including cash, where applicable) to which the Warrant Holder is entitled upon such exercise in accordance with the provisions hereof.

 

(b) This Warrant may not be exercised as to fractional shares of Common Stock. In the event that the exercise of this Warrant, in full or in part, would result in the issuance of any fractional share of Common Stock, then in such event the Warrant Holder shall receive the number of shares rounded to the nearest whole share.

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4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY

 

(a) The Warrant Shares, when issued in accordance with the terms hereof, will be duly authorized and, when paid for or issued in accordance with the terms hereof, shall be validly issued, fully paid and non-assessable.

 

(b) The Company shall take all commercially reasonable action and proceedings as may be required and permitted by applicable law, rule and regulation for the legal and valid issuance of this Warrant and the Warrant Shares to the Warrant Holder.

 

(c) The Company has authorized and reserved for issuance to the Warrant Holder the requisite number of shares of Common Stock to be issued pursuant to this Warrant. The Company shall at all times reserve and keep available, solely for issuance and delivery as Warrant Shares hereunder, such shares of Common Stock as shall from time to time be issuable as Warrant Shares.

 

(d) From the date hereof through the last date on which this Warrant is exercisable, the Company shall use commercially reasonable efforts to cause the Common Stock to remain listed or quoted on the Principal Market.

 

(e) The Company shall make all filings and disclosures necessary under the Securities Act and Exchange Act, and shall make such filings and disclosures in compliance in all material respects with the Securities Act, Exchange Act, and all regulations therein; provided that any failure by the Company to comply with this Section 4(e) shall be deemed to be a breach of this Warrant if, and only if, such failure would reasonably be considered material by a stockholder of the Company.

 

5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR

 

(a) The Investor is knowledgeable, sophisticated and experienced in making, and is qualified to make, decisions with respect to investments in securities including the Warrant and the Warrant Shares issuable upon exercise of the Warrant (the Securities) and has requested, received, reviewed and considered all information it deems relevant in making an informed decision to acquire the Securities.

 

(b) The Investor is acquiring the Securities for its own account for investment only and with no present intention of distributing any of such Securities, or any arrangement or understanding with any other persons regarding the distribution of such Securities within the meaning of Section 2(11) of the Securities Act.

 

(c) The Investor will not, directly or indirectly, offer or Transfer (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of) any of the Securities except in compliance with this Warrant, the Securities Act, applicable state securities laws and the respective rules and regulations promulgated thereunder.

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(d) The Investor is an “accredited investor” within the meaning of Regulation D under the Securities Act. The Investor understands that its acquisition of the Securities has not been registered under the Securities Act or registered or qualified under any state securities laws in reliance on specific exemptions therefrom, which exemptions may depend upon, among other things, the bona fide nature of the Investor’s investment intent as expressed herein.

 

6. ADJUSTMENTS

The Exercise Price and the number of Warrant Shares issuable upon exercise of the Warrant, shall be subject to adjustment from time to time upon the happening of certain events as follows:

 

(a) Reclassification, Consolidation, Merger, Mandatory Share Exchange, Sale or Transfer.

 

  (i) Upon the occurrence of and as a condition to the Company’s ability to cause any Adjustment Event while this Warrant is unexpired and not exercised in full, the Warrant Holder may in its sole discretion require the Company, or any successor or purchasing corporation, as the case may be, without payment of any additional consideration therefor, to execute and deliver to the Warrant Holder a new warrant which shall be exercisable by the Warrant Holder upon terms not less favorable to the Warrant Holder than those then applicable to this Warrant (a New Warrant) and upon exercise of the New Warrant, the Warrant Holder shall receive in lieu of each share of Common Stock theretofore issuable upon exercise of this Warrant, the kind and amount of shares of stock, other securities, money or property receivable upon such Adjustment Event by the holder of one share of Common Stock issuable upon exercise of this Warrant had this Warrant been exercised immediately prior to such Adjustment Event. Such new Warrant shall provide for adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 6. Prior to such request for a New Warrant, this Warrant shall be exercisable for such number of shares for which the New Warrant would be exercisable.

 

  (ii) In the event of an Excluded Merger or Sale in which the surviving, successor or purchasing Person does not agree to assume the obligations under this Warrant, the Company shall deliver a notice to the Warrant Holder at least 10 days before the consummation of such Excluded Merger or Sale and the Warrant Holder may exercise this Warrant at any time before the consummation of such Excluded Merger or Sale (and such exercise may be made contingent upon the consummation of such Excluded Merger or Sale). Any portion of this Warrant that has not been exercised before consummation of such Excluded Merger or Sale shall terminate and expire, and shall no longer be outstanding.

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(b) Subdivision of Shares. If the Company, at any time while this Warrant is unexpired and not exercised in full, shall subdivide its Common Stock (a Subdivision), then as of the effective date of such Subdivision, or, if the Company shall take a record of holders of its Common Stock for the purpose of so subdividing, as of such record date, whichever is earlier, (i) the Exercise Price shall be adjusted by dividing the Exercise Price by the Warrant Adjustment Factor applicable to such Subdivision, and (ii) the number of Warrant Shares for which this Warrant is exercisable at such time shall be adjusted by multiplying the number of Warrant Shares for which this Warrant is exercisable at such time by the Warrant Adjustment Factor applicable to such Subdivision.

 

(c) Combination of Shares. If the Company, at any time while this Warrant is unexpired and not exercised in full, shall combine its Common Stock (a Combination), then as of the effective date of such Combination, or, if the Company shall take a record of holders of its Common Stock for the purpose of so combining, as of such record date, whichever is earlier, (i) the Exercise Price shall be adjusted by dividing the Exercise Price by the Warrant Adjustment Factor applicable to such Combination, and (ii) the number of Warrant Shares for which this Warrant is exercisable at such time shall be adjusted by multiplying the number of Warrant Shares for which this Warrant is exercisable at such time by the Warrant Adjustment Factor applicable to such Combination.

 

(d) Stock Dividends. If the Company, at any time while this Warrant is unexpired and not exercised in full, shall pay a Stock Dividend, then as of the date the Company shall take a record of the holders of its Common Stock for the purpose of receiving such dividend or other distribution (or if no such record is taken, as at the date of such payment or other distribution), (i) the Exercise Price shall be adjusted by dividing the Exercise Price by the Warrant Adjustment Factor applicable to such Stock Dividend, and (ii) the number of Warrant Shares for which this Warrant is exercisable at such time shall be adjusted by multiplying the number of Warrant Shares for which this Warrant is exercisable at such time by the Warrant Adjustment Factor applicable to such Stock Dividend; provided that the provisions of this subsection (d) shall not apply under any of the circumstances for which an adjustment is provided in subsections (a),(b), or (c).

 

(e) Liquidating Dividends, Etc. If the Company, at any time while this Warrant is unexpired and not exercised in full, makes a Liquidating Dividend, then the Warrant Holder shall be entitled to receive upon exercise of this Warrant in addition to the Warrant Shares receivable in connection therewith, and without payment of any consideration other than the Exercise Price, a Liquidating Dividend Adjustment Amount, and an appropriate provision therefor shall be made a part of any such Liquidating Dividend. The value of a Liquidating Dividend that is paid other than in cash shall be determined in good faith by the Board of Directors of the Company. Notwithstanding the foregoing, in the event of a proposed Liquidating Dividend made in respect of the sale of all or substantially all of the Company’s assets, the Company shall deliver a notice to

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the Warrant Holder at least 10 days before the consummation of such event, the Warrant Holder may exercise this Warrant at any time before the consummation of such event (and such exercise may be made contingent upon the consummation of such event), and any portion of this Warrant that has not been exercised before consummation of such event shall terminate and expire, and shall no longer be outstanding.

 

(f) Price-Based-Antidilution.

 

  (i) If at any time or from time to time after the date hereof, the Company issues or sells, or is deemed by the express provisions of this Section 6(f) to have issued or sold, Additional Shares of Common Stock other than as provided in Sections 6(a)-(e) above, for an Effective Price less than the lower of (i) the Reference Price or (ii) the then-effective Exercise Price (such lower amount, the Trigger Price), then and in each such case, the then effective Exercise Price shall be reduced, as of the opening of business on the date of such issue or sale, to a price determined in accordance with the following formula:

 

A

   =   B x   [C + (D/E)]
     

    [C + F]

For the purposes of this Section 6(f)(i) and Section 6(f)(vii), the following definitions shall apply:

 

  •   A = the Exercise Price in effect immediately after such issue or sale of Additional Shares of Common Stock.

 

  •   B = the Exercise Price in effect immediately prior to such issue or sale of Additional Shares of Common Stock.

 

  •   C = the number of shares of Common Stock Outstanding (as defined in Section 6(f)(ii) below) immediately prior to such issue or sale of Additional Shares of Common Stock.

 

  •   D = the Aggregate Consideration received in exchange for such Additional Shares of Common Stock.

 

  •   E = the Trigger Price.

 

  •   F = the number of such Additional Shares of Common Stock so issued or sold.

 

  (ii) For the purposes of Section 6(f)(i), the number of shares of Common Stock deemed to be outstanding (Common Stock Outstanding) as of a given date shall be the sum of (A) the number of shares of Common Stock outstanding, plus (B) the number of shares of Common Stock into which

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the then outstanding Convertible Notes could be converted if fully converted on the day immediately preceding the given date, plus (C) the number of Warrant Shares which are issuable upon the exercise of the Warrant on the day immediately preceding the given date.

 

  (iii) No adjustment shall be made to the Exercise Price under this Section 6(f) in an amount less than one cent per share. Any adjustment required by this Section 6(f) shall be rounded to the nearest one cent ($0.01) per share. Any adjustment otherwise required by this Section 6(f) that is not required to be made due to the preceding two sentences shall be included in any subsequent adjustment to the Exercise Price.

 

  (iv) For the purpose of making any adjustment required under this Section 6(f), the aggregate consideration received by the Company for any issue or sale of securities (the Aggregate Consideration) shall be defined as: (A) to the extent it consists of cash, be computed at the gross amount of cash received by the Company before deduction of any underwriting or similar commissions, compensation or concessions paid or allowed by the Company in connection with such issue or sale and without deduction of any expenses payable by the Company, (B) to the extent it consists of property other than cash, be computed at the fair value of that property as determined in good faith by the Board, and (C) if Additional Shares of Common Stock, Convertible Securities or rights or options to purchase either Additional Shares of Common Stock or Convertible Securities are issued or sold together with other stock or securities or other assets of the Company for a consideration which covers both, be computed as the portion of the consideration so received that may be reasonably determined in good faith by the Board (in a manner consistent with its comparable activities, such as valuing stock options for accounting purposes) to be allocable to such Additional Shares of Common Stock, Convertible Securities or rights or options.

 

  (v) For the purpose of the adjustment required under this Section 6(f), if the Company issues or sells (A) capital stock, options, warrants, purchase rights or other securities convertible into, Additional Shares of Common Stock, other than the Rights (such convertible stock or securities being herein referred to as Convertible Securities), or (B) rights (other than the Rights) or options for the purchase of Additional Shares of Common Stock or Convertible Securities and if the Effective Price of such Additional Shares of Common Stock is less than the Exercise Price, in each case the Company shall be deemed to have issued at the time of the issuance of such rights or options or Convertible Securities the maximum number of Additional Shares of Common Stock issuable upon exercise or conversion thereof and to have received as consideration for the issuance of such shares an amount equal to the total amount of the consideration, if any, received by the Company for the issuance of such rights or options or Convertible Securities plus:

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  (A) in the case of such rights or options, the minimum amounts of consideration, if any, payable to the Company upon the exercise of such rights or options; and

 

  (B) in the case of Convertible Securities, the minimum amounts of consideration, if any, payable to the Company upon the conversion thereof (other than by cancellation of liabilities or obligations evidenced by such Convertible Securities); provided that if the minimum amounts of such consideration cannot be ascertained, but are a function of anti-dilution or similar protective clauses, the Company shall be deemed to have received the minimum amounts of consideration without reference to such clauses.

 

  (C) If the minimum amount of consideration payable to the Company upon the exercise or conversion of rights, options or Convertible Securities is reduced over time or on the occurrence or non-occurrence of specified events other than by reason of antidilution or similar protective adjustments, the Effective Price shall be recalculated using the figure to which such minimum amount of consideration is reduced; provided however, that if the minimum amount of consideration payable to the Company upon the exercise or conversion of such rights, options or Convertible Securities is subsequently increased, the Effective Price shall be again recalculated using the increased minimum amount of consideration payable to the Company upon the exercise or conversion of such rights, options or Convertible Securities.

 

  (D) No further adjustment of the Exercise Price, as adjusted upon the issuance of such rights, options or Convertible Securities, shall be made as a result of the actual issuance of Additional Shares of Common Stock or the exercise of any such rights or options or the conversion of any such Convertible Securities. If any such rights or options or the conversion privilege represented by any such Convertible Securities shall expire without having been exercised, the Exercise Price as adjusted upon the issuance of such rights, options or Convertible Securities shall be subsequently adjusted to the Exercise Price which would have been in effect had an adjustment been made on the basis that the only Additional Shares of Common Stock so issued were the Additional Shares of Common Stock, if any, actually issued or sold on the exercise of such rights or options or rights of conversion of such Convertible Securities, and such Additional Shares of Common Stock, if any, were issued or sold for the consideration actually received by the

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Company upon such exercise, plus the consideration, if any, actually received by the Company for the granting of all such rights or options, whether or not exercised, plus the consideration received for issuing or selling the Convertible Securities actually converted, plus the consideration, if any, actually received by the Company (other than by cancellation of liabilities or obligations evidenced by such Convertible Securities) on the conversion of such Convertible Securities.

 

  (vi) For the purpose of making any adjustment to the Exercise Price under this Section 6(f), Additional Shares of Common Stock shall mean all shares of Common Stock issued by the Company or deemed to be issued pursuant to this Section 6(f), other than:

 

  (A) shares of Common Stock issued upon conversion of the Convertible Notes;

 

  (B) shares of Common Stock or Convertible Securities issued after the date hereof to employees, officers or directors of, or consultants to, the Company or any subsidiary pursuant to stock purchase or stock option plans or other arrangements that are approved by the Board (provided that such consultants receive no more than 75,000 shares of Common Stock in aggregate per calendar year and the issuance of such shares to such consultants shall be for services and in amounts that are consistent with past issuances);

 

  (C) shares of Common Stock issued pursuant to the exercise of Convertible Securities outstanding as of the date hereof, including the Warrant; or

 

  (D) shares of Common Stock or Convertible Securities issued in connection with any stock split, stock dividend or recapitalization by the Company.

References to Common Stock in the sub-clauses of this Section 6(f) shall mean all shares of Common Stock issued by the Company or deemed to be issued pursuant to this Section 6(f).

 

  (vii) The Effective Price shall mean the price at which Additional Shares of Common Stock are issued or sold and shall be determined in accordance with the following formula:

    Effective Price = (D)/(F)

where D and F have the meaning given them in Section 6(f)(i) above.

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  (viii) In the event that the number of shares of Additional Shares of Common Stock or the Effective Price cannot be ascertained at the time of issuance, such Additional Shares of Common Stock shall be deemed issued immediately upon the occurrence of the first event that makes such number of shares or the Effective Price, as applicable, ascertainable.

 

  (ix) Upon any reduction of the Exercise Price pursuant to the provisions of this Section 6(f), the number of Warrant Shares constituting the Baseline Amount on the date of the event triggering this Section 6(f) shall be increased by the proportion equal to B divided by the A (as those terms are defined in Section 6(f)(i) above.

 

7. NOTICE OF ADJUSTMENTS

Whenever the Exercise Price or number of Warrant Shares shall be adjusted pursuant to Section 6 hereof, the Company shall promptly prepare a certificate signed by its Chief Executive Officer or Chief Financial Officer setting forth in reasonable detail the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated (including a description of the basis on which the Company’s Board of Directors made any determination hereunder), and the Exercise Price and number of Warrant Shares purchasable at that Exercise Price after giving effect to such adjustment, and shall promptly cause copies of such certificate to be sent by overnight courier to the Warrant Holder.

 

8. NO IMPAIRMENT

The Company will not, by amendment of its Certificate of Incorporation or Bylaws or through any reorganization, transfer of assets, consolidation, merger, dissolution or issue or sale of securities, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Warrant Holder against impairment. Without limiting the generality of the foregoing, the Company (a) will not increase the par value of any Warrant Shares above the amount payable therefor on such exercise, and (b) will take all such action as may be reasonably necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares on the exercise of this Warrant.

 

9. RIGHTS AS STOCKHOLDER

Except as set forth in Section 6 above, prior to the exercise of this Warrant, the Warrant Holder shall not be entitled to any rights as a stockholder of the Company with respect to the Warrant Shares, including (without limitation) the right to vote such shares, receive dividends or other distributions thereon or be notified of stockholder meetings.

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10. REPLACEMENT OF WARRANT

Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of the Warrant and, in the case of any such loss, theft or destruction of the Warrant, upon delivery of an indemnity agreement or security reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, on surrender and cancellation of such Warrant, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.

 

11. CHOICE OF LAW

This Warrant shall be construed under the laws of the State of New York.

 

12. ENTIRE AGREEMENT; AMENDMENTS

Except for any written instrument concurrent or subsequent to the date hereof executed by the Company and the Investor, this Warrant, the Stock Purchase Agreement and the other Transaction Documents (as defined in the Stock Purchase Agreement) contain the entire understanding of the parties with respect to the matters covered hereby and thereby. No provision of this Warrant may be waived or amended other than by a written instrument signed by the party against whom enforcement of any such amendment or waiver is sought.

 

13. RESTRICTED SECURITIES

 

(a) Registration or Exemption Required. This Warrant has been issued in a transaction exempt from the registration requirements of the Securities Act in reliance upon the provisions of Section 4(2) thereof and Regulation D thereof, and/or upon such other exemption from the registration requirements of the Securities Act as may be available with respect to this Warrant. This Warrant and the Warrant Shares issuable upon exercise of this Warrant may not be resold except pursuant to an effective registration statement or an exemption to the registration requirements of the Securities Act and applicable state laws. The Company shall have no obligation to register the Warrant or the Warrant Shares except as explicitly set forth in the Registration Rights Agreement.

 

(b) Legend. Any new or replacement Warrants issued pursuant to Section 6, Section 10 hereof and, unless a registration statement has been declared effective by the SEC in accordance with the Securities Act with respect thereto, any Warrant Shares issued upon exercise hereof, shall bear the following legend:

“THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE

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SECURITIES ACT AND SUCH OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION WHICH IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION, IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS, AND IN THE CASE OF A TRANSACTION EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION, UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT AND SUCH OTHER APPLICABLE LAWS.”

 

 

(c) No Other Legend or Stock Transfer Restrictions. No legend other than the one specified in Section 13(b) has been or shall be placed on the share certificates representing the Warrant Shares and no other instructions or “stop transfer orders” (so called “stock transfer restrictions”) or other restrictions have been or shall be given to the Company’s transfer agent with respect thereto other than as expressly set forth in this Section 13.

 

(d) Assignment. Assuming the conditions of Section 13(a) above regarding registration or exemption have been satisfied, the Warrant Holder may sell, transfer, assign, pledge or otherwise dispose of this Warrant (each of the foregoing, a Transfer) but only in whole to an Affiliate of the Warrant Holder. The Warrant Holder shall deliver a written notice to the Company, substantially in the form of the Assignment attached hereto as Exhibit B, indicating the Person to whom the Warrant shall be Transferred. The Company shall effect the Transfer within ten (10) days, and shall deliver to the transferee designated by the Warrant Holder a Warrant of like tenor and terms for the same number of shares. In connection with and as a condition of any such proposed Transfer, the Company may require (i) the Warrant Holder to provide an opinion of counsel to the Warrant Holder in form and substance reasonably satisfactory to the Company to the effect that the proposed Transfer complies with all applicable federal and state securities laws, and (ii) any such Transferee to provide customary representations and warranties attendant to the acquisition of unregistered securities, including without limitation the Transferee’s investment intent and status as an “accredited investor” within the meaning of Regulation D.

 

(e) Investor’s Compliance. Nothing in this Section 13 shall affect in any way the Investor’s obligations under any agreement to comply with all applicable securities laws upon resale of Common Stock.

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14. NOTICES

All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be given in accordance with Section 10.4 of the Stock Purchase Agreement.

 

15. MISCELLANEOUS

This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision.

IN WITNESS WHEREOF, this Warrant was duly executed by the undersigned, thereunto duly authorized, as of the date first set forth above.

 

TERCICA, INC.

By:

  

 

Name:

  

Title:

  

Investor acknowledges and agrees to the terms and conditions of this Warrant.

 

IPSEN, S.A.

By:

  

 

Name:

  

Title:

  

[Signature Page to Warrant]

EXHIBIT A TO THE WARRANT

EXERCISE FORM

TERCICA, INC.

The undersigned hereby irrevocably exercises the right to purchase              shares of Common Stock of Tercica, Inc., a Delaware corporation, evidenced by the attached Warrant, and (CIRCLE EITHER (i) or (ii)) (i) tenders herewith payment of the Aggregate Exercise Price with respect to such shares in full, in the amount of $            , in cash, by certified or official bank check or by wire transfer for the account of the Company, or (ii) elects, pursuant to Section 2(c) of the Warrant, to convert such Warrant into shares of Common Stock of Tercica, Inc. on a cashless exercise basis, all in accordance with the conditions and provisions of said Warrant, and, in accordance with the calculations attached hereto, has calculated that              shares of Common Stock of Tercica are issuable upon such cashless exercise.

The undersigned requests that stock certificates for such Warrant Shares be issued, and a Warrant representing any unexercised portion hereof be issued, pursuant to this Warrant, in the name of the registered Warrant Holder and delivered to the undersigned at the address set forth below.

 

Dated:                                     

 

 

Signature of Registered Holder

Name of Registered Holder (Print)

 

Address

 

[Signature Page to Warrant]

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EXHIBIT B TO THE WARRANT

ASSIGNMENT

(To be executed by the registered Warrant Holder desiring to transfer the Warrant)

FOR VALUED RECEIVED, the undersigned Warrant Holder of the attached Warrant hereby sells, assigns and transfers unto the persons below named the right to purchase              shares of Common Stock of Tercica, Inc. (the Company) evidenced by the attached Warrant and does hereby irrevocably constitute and appoint              as attorney to transfer the said Warrant on the books of the Company, with full power of substitution in the premises.

 

Dated:                                          

 

Signature

 

Fill in for new Registration of Warrant:

 

Name

 

Address

 

Please print name and address of assignee

(including zip code number)

 EX-99.6 4 dex996.htm AFFILIATION AGREEMENT Affiliation Agreement

Exhibit 6

October 13, 2006

TERCICA, INC.,

IPSEN, S.A.

and

SURAYPHARM

 

AFFILIATION AGREEMENT

 

 

CONTENTS

 

SECTION        PAGE
1.      Definitions    1
2.      Board Representation    7
   2.1   Role of the Board    7
   2.2   Size of Board    8
   2.3   Appointment of Initial Investor Directors    8
   2.4   Elections of Directors    8
   2.5   Board Observer Rights    10
   2.6   Committees    11
   2.7   Independent Director Nominations    12
   2.8   Indemnification and D&O Insurance    13
   2.9   Duration of Obligations Relating to the Board    14
   2.10   Corporate Opportunities’ Waiver    14
3.      Matters Requiring Investor Approval    15
4.      CEO Termination Consultation    19
5.      Issue of New Securities    20
   5.1   Right of First Offer    20
   5.2   Proceeds of Additional Securities Issued in Connection with the Repayment of the Convertible Notes    22
6.      Financial Reporting Covenants    22
   6.1   Reporting Information    22
   6.2   Purchase Accounting    23
   6.3   Variable Amount Notification; Dilution Amount Notification    23
   6.4   Deadlines for Reporting Information    24
7.      Covenants of the Investor    25
   7.1   Lock-up Period    25
   7.2   Restriction on Block Transfers    26
   7.3   Compliance with Securities Laws    26
   7.4   Compulsory Acquisition    26

   7.5    The Standstill Period    26
   7.6    The Regulated Purchase Period    27
8.       Miscellaneous    28
   8.1    Effectiveness of Agreement.    28
   This Agreement shall become effective upon the Effective Date.    28
   8.2    Assignment    28
   8.3    Governing Law    28
   8.4    Counterparts    29
   8.5    Titles and Subtitles    29
   8.6    Notices    29
   8.7    Costs of Enforcement    30
   8.8    Amendments and Waivers    30
   8.9    Severability    31
   8.10    Entire Agreement    31
   8.11    Delays or Omissions    31
   8.12    No Limitation on Stockholder Rights    31
   8.13    Seeking Approval of Certificate of Incorporation Amendments and Bylaw Amendments    31
   8.14    Specific Performance, Injunctive and Other Equitable Relief    32
Annex A THE STRATEGIC PLANNING COMMITTEE CHARTER    1

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THIS AFFILIATION AGREEMENT (this Agreement) is made effective as of the Effective Date, by and between: (1) TERCICA, INC., a Delaware corporation with its principal office at 2000 Sierra Point Parkway, Suite 400, Brisbane, California 94005, USA (the Company); (2) SURAYPHARM, a Société par Actions Simplifiée organized under the laws of France with its registered address at 42, rue du Docteur Blanche, 75016 Paris, France (the Investor), which is an assignee of Ipsen (as defined below) under the Purchase Agreement (as defined below) and the purchaser of the Shares (as defined therein); and, solely for purposes of Sections 2.7, 2.9, 2.10, 7 and 8 hereof, (3) IPSEN, S.A., a société anonyme organized under the laws of France with its registered address at 42, rue du Docteur Blanche, 75016 Paris, France (Ipsen).

RECITALS

WHEREAS, the Company and Ipsen are parties to the Stock Purchase and Master Transaction Agreement, dated as of July 18, 2006 (the Purchase Agreement); and

WHEREAS, in order to induce the Company to enter into the Purchase Agreement and to induce Ipsen or its assignee to invest funds in the Company pursuant to the Purchase Agreement, Ipsen, the Investor and the Company hereby agree that this Agreement shall govern the rights of the Investor to recommend new directors to the Board of Directors of the Company (the Board), to participate in future equity offerings by the Company and certain other matters as set forth in this Agreement.

NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:

1. DEFINITIONS

For purposes of this Agreement:

Affiliate means, in respect of any Person, any other Person that is directly or indirectly controlling, controlled by or under common control with such Person or any of its Subsidiaries, and the term “control” (including the terms “controlled by” and “under common control with”) means having, directly or indirectly, the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities or by contract or otherwise.

Associate shall have the meaning ascribed to it in Rule 12b-2 of the Exchange Act.

Baseline Amount shall have the meaning ascribed to in the Warrant.

A Person shall be deemed the beneficial owner of and to have acquired beneficial ownership of, and shall be deemed to beneficially own any, securities that such Person or any of such Person’s Affiliates or Associates is deemed to “beneficially own” (or which are deemed to be beneficially owned by any Person deemed to be part of a “group” with such person), each within the meaning of Rule 13d-3 of the Exchange Act. Notwithstanding anything in this definition of beneficial ownership to the contrary, the

 

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phrase, “then-outstanding,” when used with reference to a Person’s beneficial ownership of securities of the Company, shall mean the number of such securities then issued and outstanding together with the number of such securities not then actually issued and outstanding which such Person would be deemed to beneficially own hereunder.

Board shall have the meaning set forth in the recitals.

Bylaw Amendments shall have the meaning ascribed to it in the Purchase Agreement.

Business Day shall have the meaning ascribed to it in the Purchase Agreement.

Certificate of Incorporation Amendments shall have the meaning ascribed to it in the Purchase Agreement.

Common Stock shall mean shares of the Company’s common stock, par value $0.001 per share.

Company shall have the meaning set forth in the preamble.

Company’s Stockholders’ Meeting shall have the meaning ascribed to it in the Purchase Agreement.

Confidential Information shall mean all material non-public written or verbal information regarding the Company provided to or learned by an Investor Observer in connection with such Investor Observer’s attendance, or an invitation to attend, any meeting of the Board or committee thereof.

Consultation Notice means a notice from Ipsen or an Affiliate thereof to the Company stating its desire to explore a potential acquisition of shares of the Company’s capital stock from other stockholders, and the terms upon which Ipsen or an Affiliate thereof requests that the Company and the Board support and recommend to the Company’s stockholders such an acquisition.

Convertible Notes means, collectively, the First Convertible Note, the Second Convertible Note and the Third Convertible Note.

DGCL means the Delaware General Corporate Law.

Dilution Amount means: (a) two-thirds of the aggregate number of shares of Common Stock (or Common Stock underlying options, warrants or other Common Stock purchase rights) issued after June 30, 2006 to employees or directors of the Company or to consultants of the Company or any of its Subsidiaries pursuant to any plan, agreement, or arrangement approved by the Board (other than shares actually issued pursuant to options, warrants or other Common Stock purchase rights outstanding as of June 30, 2006), minus (b) two-thirds of the aggregate number of shares of Common Stock (or Common Stock underlying options, warrants or other Common Stock purchase rights) covered by clause (a) above which, as at the date of the offers made by the Investor or its

 

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Affiliates pursuant to subclause (d) in the definition of Permitted Offers and Acquisitions, (i) are subject to vesting requirements that cannot as at such date be met; and (ii) have been repurchased by the Company or can no longer be issued pursuant to the original option or similar instrument.

Directors mean the members of the Board.

Dollars or $ means dollars in lawful currency of the United States of America.

EBITDA shall have the meaning ascribed to it in the First Convertible Note.

Effective Date means the date of the First Closing.

Exchange Act shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

First Closing shall have the meaning ascribed to it in the Purchase Agreement.

First Closing Date shall have the meaning ascribed to it in the Purchase Agreement.

First Convertible Note shall have the meaning ascribed to it in the Purchase Agreement.

GAAP shall mean U.S. generally accepted accounting principles.

IFRS shall have the meaning ascribed to it in Section 6.1(f) of this Agreement.

IFRS Review Opinion shall have the meaning ascribed to it in Section 6.4(a) of this Agreement.

Increlex License has the meaning ascribed to it in the Purchase Agreement.

Indebtedness shall have the meaning ascribed to it in the First Convertible Note.

Independent Director means a Director who is independent for purposes of the listing standards of the Nasdaq Global Market (or such other listing standards that may be applicable to the Company from time to time).

Indication Notice shall have the meaning ascribed to it in Section 5.1(b) of this Agreement.

Investor shall have the meaning set forth in the preamble.

Investor Directors means those Directors that the Investor is entitled to designate pursuant to Section 2 of this Agreement.

Investor Observer shall have the meaning ascribed to it in Section 2.5(a) of this Agreement.

 

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Investor’s Percentage Interest means the percentage of the Company’s actually issued and outstanding stock entitled to vote generally in any election of Directors, of which the ability to vote or control, directly or indirectly, by proxy or otherwise, is held in the aggregate by the Investor and its Affiliates, excluding in all cases shares of the Company’s capital stock issuable, but not actually issued, upon conversion or exercise of the Convertible Notes or the Warrant. Notwithstanding the foregoing, for the purpose of determining the Investor’s Percentage Interest, the shares of the Company’s capital stock subject to the Voting Agreements shall not in any event be deemed to constitute any portion of the Investor’s Percentage Interest.

Ipsen shall have the meaning set forth in the preamble.

Law shall have the meaning ascribed to it in the Purchase Agreement.

Management Director means a Director who is also an employee of the Company or any other Director designated as such by the Nominating Committee in accordance with Section 2.4 of this Agreement.

Milestone Payment shall have the meaning ascribed to it in the Somatuline Autogel License.

Net Indebtedness shall have the meaning ascribed to it in the First Convertible Note.

New Securities shall mean, collectively, any equity securities of the Company, whether now authorized or not, or rights, options, or warrants to purchase said equity securities, or securities of any type whatsoever that are, or may become, convertible into or exchangeable into or exercisable for said equity securities.

Nominating Committee means the current Corporate Governance and Nominating Committee of the Board, or such other nominating committee of the Board as described in Section 2.6 of this Agreement, which committee may be a standalone committee or part of a broader governance committee.

Non-Investor Director means a Director who is not an Investor Director.

Note Shares shall have the meaning ascribed to it in the Purchase Agreement.

Offer Notice shall have the meaning ascribed to in Section 5.1(a) of this Agreement.

Permitted Indebtedness shall have the meaning ascribed to it in the First Convertible Note.

Permitted Investments shall have the meaning ascribed to it in the First Convertible Note.

Permitted Offers and Acquisitions means any of (a) offers to acquire or acquisitions of securities, rights or options following which the Investor and its Affiliates beneficially

 

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own less than or equal to forty percent of the aggregate of (i) the then-outstanding Common Stock plus (ii) the then-unexercised Warrant Shares plus (iii) the then-unconverted Note Shares; provided that for purposes of this subclause (a), the Investor and its Affiliates (A) shall be deemed to beneficially own Note Shares under any unissued Convertible Notes if the Milestone Payment may still be achieved under the terms of the Somatuline Autogel License; (B) shall be deemed to be the beneficial owner only of the Baseline Amount of the Warrant Shares; and (C) shall not be deemed to beneficially own the shares of Company’s capital stock subject to the Voting Agreements; (b) offers to acquire or acquisitions following the offer to acquire, the acquisition or publication of intent or interest in acquiring beneficial ownership of more than 9.9 percent of the then-outstanding Common Stock by any Person or “group” (within the meaning of Section 13(d)(3) of the Exchange Act) that is not already the beneficial owner of more than 9.9 percent of the then-outstanding Common Stock if, and only if, (A) such acquisition by such Person or group would result in a distribution of Rights under the Rights Agreement or (B) so long as the provisions of Section 3 hereof remain in effect, the Rights Agreement shall have been amended, terminated, waived or modified without the consent of the Investor; (c) offers to acquire or acquisitions following the offer to acquire, the acquisition or publication of intent or interest in acquiring of shares of Common Stock by a Person or “group” (within the meaning of Section 13(d)(3) of the Exchange Act) currently beneficially owning more than 9.9 percent of the outstanding Common Stock that would increase the percentage of the outstanding Common Stock currently beneficially owned by such Person or group if, and only if, (A) such acquisition by such Person or group would result in a distribution of Rights under the Rights Agreement or (B) so long as the provisions of Section 3 hereof remain in effect, the Rights Agreement shall have been amended, terminated, waived or modified without the consent of the Investor; and (d) offers to acquire from all stockholders of the Company (though not necessarily all shares of all stockholders) or acquisitions conditioned upon or following such offers (A) initiated at least thirty but not more than 120 days following delivery of an Consultation Notice by the Investor to the Company, and (B) which follow a period of at least thirty days during which the Investor or an Affiliate of the Investor discusses with the Board in good faith the terms upon which it would propose to consummate such acquisition, and (C) in connection with which the Investor or an Affiliate of the Investor exercises the Warrant, or commits to exercise the Warrant prior to its expiration, for the unexercised Baseline Amount and converts or commits to convert any issued and outstanding Convertible Notes in full and commits to convert any unissued Convertible Notes prior to their maturity upon issuance in accordance with the terms of the Purchase Agreement and the Somatuline Autogel License (provided that such commitments to effect such exercise and conversion shall only become effective and irrevocable upon completion of the acquisitions by the Investor and its Affiliates of the Common Stock, as contemplated by subparagraph (D) of this subclause (d)), as applicable, and (D) which result in, either individually or in aggregate with other offers or acquisitions that are a condition to completion of the acquisition, the beneficial ownership by the Investor and its Affiliates of at least such number of shares of Common Stock that equals (i) such number of shares as would result in the Investor and Affiliates owning sixty percent of the then-outstanding Common

 

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Stock (such beneficial ownership to be calculated as if all of the Convertible Notes, whether issued as at the relevant date or not, have been issued and converted and the Warrant has been exercised in full for the maximum number of shares for which such Warrant can be exercised at the time of such measurement) minus (ii) the Dilution Amount; provided that, for purposes of this subclause (d), (i) in the event that the Investor and its Affiliates does not accept all shares tendered in a tender offer or other offer pursuant to this subclause (d), then the Investor or its Affiliates will purchase stock from all participating stockholders of the Company on a pro rata basis based on each stockholder’s ownership interest in the Company (it being understood that the Purchaser may enter into agreements that are not part of any such offer but that are conditioned upon such offer provided that purchases of shares pursuant thereto are pro rata based on the stockholder party’s ownership interest in the Company) and (ii) if following completion of such acquisitions by the Investor and its Affiliates, the Investor and its Affiliates gain control of the Board such that they have the power to direct or cause the direction of the management and policies of the Board, the Investor shall not, and shall cause that its Affiliates shall not, cause the Board to waive any commitments entered into by the Investor or any of the Investor’s Affiliates in accordance with subparagraph (C) of this subclause (d).

Permitted Transfer shall have the meaning ascribed to it in the First Convertible Note.

Person means any individual or any corporation, limited liability company, partnership, trust, association or other entity of any kind.

Purchase Agreement shall have the meaning set forth in the recitals.

Publicly Available Securities shall have the meaning ascribed to in Section 5.1(c) of this Agreement.

Regulated Purchase Period shall mean that period beginning upon the expiration of the Standstill Period and expiring on the fourth anniversary of such date.

Reporting Information shall have the meaning ascribed to it in Section 6.1 of this Agreement.

Rights shall have the meaning ascribed to it in the Rights Agreement.

Rights Agreement means that certain Rights Agreement, to be effective as of the First Closing Date, by and between the Company and Computershare Trust Company, N.A.

SEC means the United States Securities Exchange Commission.

Second Closing Date shall have the meaning ascribed to it in the Purchase Agreement.

Second Convertible Note shall have the meaning ascribed to it in the Purchase Agreement.

 

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Securities Act means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

Series A Junior Participating Preferred means the Series A Junior Participating Preferred Stock, par value $0.001 per share, of the Company having the designations and the powers, preferences and rights, and the qualifications, limitations and restrictions set forth in the Form of Certificate of Designation attached to the Rights Agreement as Exhibit A thereto.

Somatuline Autogel License has the meaning ascribed to it in the Purchase Agreement.

Standstill Period shall mean that period commencing on the First Closing (as defined in the Purchase Agreement) and expiring on the first anniversary of the date of the First Closing.

Subsidiary means any corporation or other organization, whether incorporated or unincorporated, of which (i) at least fifty percent (50%) of the securities (or other interests having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions with respect to such corporation or other organization) is directly or indirectly owned or controlled by the relevant Person or (ii) the relevant Person (or any other Subsidiary of the relevant Person) is a general partner.

Third Convertible Note shall have the meaning ascribed to it in the Purchase Agreement.

Transaction Documents shall have the meaning ascribed to it in the Purchase Agreement.

Triggering Sale means a sale or other transfer of Common Stock by the Investor or its Affiliates to non-Affiliates of the Investor which, aggregated with previous sales or other transfers of Common Stock by the Investor and its Affiliates to non-Affiliates of the Investor, exceeds five percent of the Company’s outstanding Common Stock as of the date of the most recent sale or other such transfer.

Voting Agreements shall have the meaning ascribed to in the Purchase Agreement.

Warrant shall have the meaning ascribed to in the Purchase Agreement.

Warrant Shares shall have the meaning ascribed to in the Purchase Agreement.

2. BOARD REPRESENTATION

2.1 Role of the Board

Subject to the provisions of this Agreement and the other Transaction Documents and the Company’s Certificate of Incorporation and Bylaws, the fundamental policies and strategic direction of the Company shall be determined by the Board as provided in this Section 2.

 

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2.2 Size of Board

At and after the First Closing, the Board shall be comprised of nine Directors. The number of such Directors may be increased only in accordance with Sections 2.4(e) and 3(m) of this Agreement.

2.3 Appointment of Initial Investor Directors

Immediately following the First Closing, the Board shall elect Jean-Luc Belingard and Christophe Jean as Directors, each of whom has been designated as an initial Investor Director by the Investor (unless either such individual is unable or unwilling to serve, in which case the Company shall elect a substitute nominated by the Investor).

2.4 Elections of Directors

 

(a) Except as otherwise provided herein, at all times from and after the First Closing, the slate of Directors nominated and recommended by the Company shall be nominated as follows (it being understood that such nomination shall include any nomination of any incumbent Director for reelection to the Board):

 

  (i) the Nominating Committee shall recommend the nomination of no more than two Management Directors, one of which shall be the chief executive officer of the Company;

 

  (ii) the Investor shall have the right to designate two Investor Directors, each of whom shall be recommended for nomination by the Nominating Committee, by giving notice of the identity of the Investor Directors to be recommended for nomination at least (A) 90 days prior to each annual meeting of stockholders at which Directors will stand for election or (B) 30 days prior to the date on which the Company sends a notice for any other meeting of its stockholders at which Persons have been nominated for election as Directors (the Company having given the Investor 30 days prior written notice of its intention to send such a notice), and upon the failure to deliver such notice in subclauses (A) or (B) above, the incumbent Investor Directors shall be recommended for nomination;

 

  (iii) the Nominating Committee shall recommend for nomination the remaining Directors, each of whom (A) shall have an outstanding reputation for personal integrity and distinguished achievement in areas relevant to the Company (in applying the foregoing criteria the Nominating Committee shall be guided by the quality of the individuals currently serving as directors of the Company, the Investor and Ipsen) and (B) shall be an Independent Director; and

 

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  (iv) the Board shall nominate for election each of the individuals so recommended for nomination by the Nominating Committee and recommend their election to stockholders of the Company.

 

(b) Notwithstanding anything in the foregoing Section 2.4(a) to the contrary, at any time that the Investor’s Percentage Interest is less than 15 percent but at least 10 percent, the Directors shall be nominated as set forth in paragraph (a) above except that the Investor shall have the right to designate for nomination only one Investor Director. So long as the Investor satisfies the ownership thresholds in this Section 2.4(b), the Company will in all instances nominate the Investor Directors that the Investor has, in accordance with this Section 2.4, designated for nomination and include the names of such nominees in the Company’s proxy statement for any meeting for the election of Directors (or any supplement thereto), together with such information about their nominations as the Investor reasonably requests and include such Persons on all ballots with equal prominence to other director nominees.

 

(c) Notwithstanding Sections 2.4(a) or 2.7 hereof, if at any time the Investor and its Affiliates beneficially own 60 percent or more of the then-outstanding Common Stock, (i) the Investor shall be entitled to nominate or recommend to the Company for nomination an unlimited number of further Directors (or if any then-applicable provisions of the DGCL, the Securities Act, the Exchange Act or the rules and regulations thereunder or of the SEC or the primary exchange upon which the Company is then-listed, or other applicable Law, prevent the nomination of such number of further Directors, up to such maximum lesser number of further Directors as are permitted by such provisions) at any meeting or action for the election of the Directors by notifying the Company in writing the names of such nominees, (ii) the Company agrees that following receipt of such notification it shall call, as soon as reasonably practicable and in accordance with the Company’s bylaws and certificate of incorporation, a special meeting of the stockholders of the Company for the purposes of electing such nominees as Directors and (iii) the Company shall include the names of all such nominees in the Company’s proxy statement for any such meeting (or any supplement thereto), together with such information about their nominations as the Investor reasonably requests and include such Persons on all ballots with equal prominence to other director nominees.

 

(d) The Investor and the Nominating Committee, respectively, shall have the right to designate any replacement for a Director designated for nomination or recommended for nomination by the Company in accordance with this Section 2.4 by the Investor or the Nominating Committee, respectively, upon the death, resignation, retirement, disqualification or removal from office for other cause of such Director. Such replacement for any Independent Director shall also be an Independent Director conforming to the standard set forth in clause (A) of Section 2.4(a)(iii) hereof. The Board shall elect each person so designated.

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(e) Without limiting the generality of Section 2.4(a) of this Agreement, in the event that at any time after the First Closing the number of Investor Directors on the Board differs from the number that the Investor has the right to designate pursuant to this Section 2.4, (i) if the number of Investor Directors exceeds such number, the Investor shall at the request of the Company promptly take all appropriate action to cause to resign that number of Investor Directors as is required to make the remaining number of such Investor Directors conform to this Section 2.4 or (ii) if the number of Investor Directors otherwise is less than such number, the Company shall take all necessary action to create sufficient vacancies on the Board to permit the Investor to designate the full number of Investor Directors which it is entitled (and wishes) to designate pursuant to this Section 2.4 (such action to include expanding the size of the Board, seeking the resignation or removal of Directors or, at the request of the Investor, calling a special meeting of the stockholders of the Company for the purpose of removing Directors to create such vacancies to the extent permitted by applicable law). Upon the creation of any vacancy pursuant to the preceding sentence, the Investor shall designate the person to fill such vacancy in accordance with this Section 2.4, and the Board shall elect each person so designated.

2.5 Board Observer Rights

 

(a) The Investor Directors shall have the right to invite one representative of the Investor or an Affiliate of the Investor, who is a member of Ipsen’s Executive Committee, to attend, but not vote, as an observer (the Investor Observer) at the open portion of each meeting of the Board, including telephonic meetings.

 

(b) Notwithstanding Section 2.5(a) of this Agreement, the Investor Observer may be excluded from access to any meetings of the Board or portion thereof if: (i) any Investor Director has excluded himself or herself due to a conflict of interest; or (ii) a majority of the Non-Investor Directors determines, in good faith, that such exclusion is reasonably necessary so as not to have a material adverse effect on the attorney client privilege between the Company and its counsel. The decision of the Non-Investor Directors with respect to the privileged or confidential nature of such information shall be final and binding.

 

(c) The Investor hereby agrees that it will not, and will instruct any Investor Observer to not, use (other than for purposes of managing its investment in, or commercial relationship with, the Company) or disclose any Confidential Information to any third party (other than the Investor’s Affiliates and the officers, directors and employees of the Investor and such Affiliates, who shall each be subject to confidentiality obligations to the Investor), other than Confidential Information that: (i) subsequent to its disclosure, becomes publicly available to the Investor, the Investor’s Affiliates or any Investor Observer without any violation of this Agreement by the Investor, the Investor’s Affiliates or any Investor Observer; (ii) becomes legally available to the Investor, the Investor’s Affiliates or any Investor Observer on a non-confidential basis from any third party, the disclosure of which

 

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does not violate any contractual or legal obligation such third party has to the Company with respect to such information; (iii) is independently acquired or developed by the Investor, the Investor’s Affiliates or any Investor Observer; (iv) is required to be disclosed by the Investor, the Investor’s Affiliates or any Investor Observer pursuant to law or by order of court of competent jurisdiction, pursuant to the requirements of a stock exchange, bank regulatory or other governmental or regulatory authority or to obtain tax or other clearances or consent of any relevant authority, provided that in the event of a court ordered disclosure or required disclosure by a stock exchange, the Investor will use its reasonable efforts to notify the Company within 15 days prior to such disclosure; or (v) information that is explicitly approved for release by prior written authorization of the Company. The Investor shall be responsible for any breach of this Section 2.5(c) by any of the Investor’s Affiliates or any of the officers, directors or employees of the Investor or such Affiliates.

2.6 Committees

 

(a) Subject to the general oversight and authority of the full Board, the Board shall establish, empower and maintain the committees of the Board contemplated by this Section 2.6.

 

(b) The following committees shall be established, empowered and maintained by the Board at all times during the term of this Agreement:

 

  (i) an Audit Committee comprised of Independent Directors, each of whom shall satisfy the criteria for independence set forth in Rule 10A-3(b)(1) of the Exchange Act;

 

  (ii) a Nominating Committee, responsible, among other things, for recommending the nomination of Directors in accordance with Section 2.4 of this Agreement;

 

  (iii) a Strategic Planning Committee having a charter that includes the items set forth in Annex A hereto and comprised of one Management Director (who shall be the chief executive officer of the Company), each Investor Director and two Independent Directors (who shall be designated by a majority of the Independent Directors);

 

  (iv) a Compensation Committee comprised of at least two Independent Directors, with responsibilities substantially similar to those of the current Compensation Committee of the Company; and

 

  (v) such other committees as the Board deems necessary or desirable; provided that such committees are established in compliance with the terms of this Agreement.

 

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(c) An Investor Director shall be entitled to attend, as a non-voting participant, all meetings of the Compensation Committee and shall receive written notice of the time and place of all such meetings (such notice to be received at the same time as members of such committee receive notice of such meetings) and copies of all documents provided to the members of such committee at or in connection with such meetings.

 

(d) No action by any committee of the Board shall be valid unless taken at a meeting for which adequate notice has been duly given or waived by the members of such committee. Such notice shall include a description of the general nature of the business to be transacted at the meeting, and no other business may be transacted at such meeting unless all members of the committee are present and consent to the consideration of such other business. Any committee member unable to participate in person at any meeting shall be given the opportunity to participate by telephone. The Board or, to the extent so permitted under applicable Law, the remaining committee members shall designate an Investor Director, Independent Director or Management Director to replace any absent or disqualified Investor Director member, Independent Director member or Management Director member, respectively, of any committee. In the event that any Investor Director or Independent Director ceases to serve on any committee of the Board and, after a reasonable time, no successor to such Director is designated in accordance with the terms hereof to serve on such committee, the number of members of such committee may be reduced if such reduction does not (and no such reduction is intended to) result in a change of the relative authorities within such committee among the Investor Directors (taken as a group), the Independent Directors (taken as a group) and the Management Directors (taken as a group). Each of the committees established by the Board pursuant to this Section 2.6 shall establish such other rules and procedures for its operation and governance (consistent with the terms of this Agreement) as it shall see fit and may seek such consultation and advice as to matters within its purview as it shall require.

2.7 Independent Director Nominations

In the event that the Investor provides notice to the Company, such notice to be provided at least (i) 90 days prior to the first anniversary of the date on which the prior year’s annual meeting of the stockholders of the Company was held or (ii) 30 days prior to the date on which the Company sends a notice for any other meeting of its stockholders at which Persons have been nominated for election as Independent Directors (the Company having given the Investor 45 days prior written notice of its intention to send such a notice), that it seeks to recommend the nomination of Independent Directors at such upcoming meeting of the stockholders of the Company that have not been nominated for election by the Board, the Company shall include the names of such nominees in the Company’s proxy statement for such meeting (or any supplement thereto), together with such information about their nominations as the Investor reasonably requests and include such Persons on all ballots with equal prominence to other director nominees, on the following basis:

 

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(a) until such time as Section 2.7(b) applies, one such nominee pursuant to notice received by the Company from the Investor after the Company’s 2007 annual meeting of its stockholders;

 

(b) until such time as 2.7(c) applies, two such nominees pursuant to notice received by the Company from the Investor after the Company’s 2008 annual meeting of its stockholders; and

 

(c) four such nominees pursuant to notice received by the Company from the Investor after the Company’s 2009 annual meeting of its stockholders, such entitlement applying in relation to all annual meetings of the Company’s stockholders or other meetings of its stockholders at which Persons have been nominated for election as Independent Directors that are held after the Company’s 2009 annual meeting of its stockholders.

All nominees recommended by the Investor pursuant to this Section 2.7 hereof shall (i) in the reasonable opinion of the Investor acting in good faith, satisfy the requirements of Section 2.4(a)(iii)(A) hereof and (ii) not be an Affiliate, director, employee or officer of the Investor or a director, employee or officer of any of the Investor’s Affiliates. Nothing in this Section 2.7 shall prevent the Company from nominating additional Independent Directors. Except as set forth in Sections 2.4(a)(ii), 2.4(c) and 2.7 hereof, the Investor and Ipsen agree that neither they nor any of their Affiliates will nominate any further Persons for election as Directors at any time at which the Investor is entitled to recommend the nomination of Independent Directors pursuant to this Section 2.7.

2.8 Indemnification and D&O Insurance

 

(a) Subject to availability on reasonable terms and at a reasonable cost, for so long as any Investor Director remains on the Board, the Company shall maintain directors’ and officers’ liability insurance with an insurer which maintains a rating of not less than A- by Fitch or A.M. Best with at least the current level of coverage and, in addition, shall consult in good faith with the Investor with respect to (i) the renewal of existing policies and (ii) side A excess terms and conditions coverage in a minimum amount that is reasonably satisfactory to the Investor. Nothing herein shall restrict the Board from obtaining additional side A excess terms and conditions coverage.

 

(b) In the event that the Company or any of its successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers or conveys all or substantially all of its properties and assets to any Person, then, and in each such case, to the extent necessary, proper provision shall be made so that the successors and assigns of the Company assume the obligations of the Company with respect to indemnification of members of the Board as in effect immediately prior to such transaction, whether in the Company’s Bylaws, Certificate of Incorporation, or elsewhere, as the case may be.

 

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(c) The Company shall indemnify the Investor Directors to the full extent allowed by law.

2.9 Duration of Obligations Relating to the Board

 

(a) The provisions of Section 2 of this Agreement (other than Section 2.7 for which the provisions in Section 2.9(b) shall apply) shall terminate upon the Investor’s Percentage Interest falling below ten percent; provided that, the provisions of Section 2.8 hereof shall continue until expiration of the longest relevant statute of limitations.

 

(b) The provisions of Section 2.7 of this Agreement shall terminate upon the Investor’s Percentage Interest falling below 15 percent.

 

(c) In the event of a Triggering Sale, the provisions of Section 2.7(c) hereof shall terminate and the number of Independent Director nominees that the Investor is entitled to recommend pursuant to Sections 2.7(a) and 2.7(b) hereof shall be amended so that such entitlement shall be for the lesser of (i) two such nominees and (ii) such number of nominees that the Investor is entitled to recommend at the time of the Triggering Sale.

2.10 Corporate Opportunities’ Waiver

 

(a) Except as Ipsen may otherwise agree in writing, neither Ipsen nor any of its Affiliates nor any of its or their respective directors, officers or employees shall be liable to the Company or the Company’s stockholders for breach of any fiduciary duty by reason of any activities of Ipsen or any of Ipsen’s Affiliates or of such Person’s participation therein. In the event that Ipsen or any of its Affiliates acquires knowledge of a potential transaction or matter that may be a corporate opportunity for both Ipsen (or any of its Affiliates) and the Company, Ipsen and its Affiliates shall have no duty to communicate or offer such corporate opportunity to the Company and shall not be liable to the Company or the Company’s stockholders for breach of any fiduciary duty as a stockholder of the Company or controlling person of a stockholder by reason of the fact that Ipsen or any of Ipsen’s Affiliates pursues or acquires such corporate opportunity for itself, directs such corporate opportunity to another Person or entity, or does not communicate information regarding, or offer, such corporate opportunity to the Company.

 

(b) In the event that a director, officer or employee of the Company who is also a director, officer or employee of Ipsen or any of Ipsen’s Affiliates acquires knowledge, other than solely as a result of his or her position as a director, officer or employee of the Company, of a potential transaction or matter that may be a corporate opportunity for the Company and Ipsen or any of Ipsen’s Affiliates (whether such potential transaction or matter is proposed by a third party or is conceived of by such director, officer or employee of the Company), such

 

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director, officer or employee shall be entitled to offer such corporate opportunity to the Company or to Ipsen or any of Ipsen’s Affiliates as such director, officer or employee deems appropriate under the circumstances in his sole discretion, and no such director, officer or employee shall be liable to the Company or the Company’s stockholders for breach of any fiduciary duty or duty of loyalty or failure to act in (or not opposed to) the best interests of the Company or the derivation of any improper personal benefit by reason of the fact that (i) such director, officer or employee offered such corporate opportunity to Ipsen or any of Ipsen’s Affiliates (rather than the Company) or did not communicate information regarding such corporate opportunity to the Company or (ii) Ipsen or any of Ipsen’s Affiliates pursues or acquires such corporate opportunity for itself or directs such corporate opportunity to another person or does not communicate information regarding such corporate opportunity to the Company. To the fullest extent permitted by Section 122(17) of the DGCL, the Company hereby renounces any interest or expectancy of the Company in, or in being offered an opportunity to participate in, (i) any such corporate opportunity, and (ii) any other potential transaction or matter that may be a corporate opportunity for the Company and Ipsen or any of Ipsen’s Affiliates of which Ipsen or any of Ipsen’s Affiliates acquire knowledge, except to the extent that a director, officer or employee of Ipsen or any of Ipsen’s Affiliates acquires such knowledge solely as a result of his or her position as a director, officer or employee of the Company.

 

(c) The foregoing provisions of this Section 2.10 shall expire on the date on which Ipsen and its Affiliates shall no longer be entitled to designate at least one nominee for director to the Board pursuant to the provisions of Section 2.4 hereof and no Person who is a Director or officer of the Company is also a director or officer of Ipsen or any of Ipsen’s Affiliates. Neither such expiration, nor the alteration, amendment, change or modification of any provision of this Section 2.10 inconsistent with any provision of this Section 2.10 shall eliminate or reduce the effect of this Section 2.10 in respect of any matter occurring, or any cause of action, suit or claim that, but for this Section 2.10, would accrue or arise, prior to such expiration, alteration, amendment, repeal or adoption.

 

(d) For the purposes of this Section 2.10 only, “Company” shall mean the Company and all corporations, partnerships, joint ventures, associations and other entities in which the Company beneficially owns (directly or indirectly) fifty percent or more of the outstanding voting stock, voting power or similar voting interests.

3. MATTERS REQUIRING INVESTOR APPROVAL

Unless the Investor shall otherwise consent in writing, the Company hereby covenants and agrees with the Investor that it will not (and will cause its Subsidiaries not to) until the earlier of (i) five years from the First Closing Date if at that time the Convertible Notes have not been converted in full; or (ii) the date of completion of a Triggering Sale (and absent the occurrence of the events in clauses (i) or (ii) of this Section 3, the obligations of the Company set forth in this Section 3 shall continue indefinitely):

 

(a) make, or permit any Subsidiary to make, any loan or advance to, or own any stock or other securities of, any Subsidiary or other corporation, partnership, or other entity unless it is wholly owned by the Company other than Permitted Investments;

 

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(b) adopt any plan or arrangement for the dissolution or liquidation of the Company;

 

(c) enter into any material transaction or contract unless the transaction or contract would reflect the execution of a board-approved budget and would not be reasonably anticipated to increase future budgets beyond current projections or, where no current projections have been formally prepared, beyond reasonably anticipated growth based on the Company’s recent operating performance;

 

(d) directly or indirectly acquire, sell, lease or otherwise dispose of any property or assets other than in its ordinary course of business; provided that the Company shall not in any event acquire, sell, lease or dispose of any property or assets with an aggregate value exceeding Five Million Dollars ($5,000,000) without the Investor’s written consent unless it is a Permitted Transfer;

 

(e) merge into or consolidate with any other Person other than with the Company;

 

(f) establish or approve an operating budget with anticipated research and development spending per calendar year in excess of the sum of (i) Twenty Five Million Dollars ($25,000,000) (with such research and development spending being determined on a GAAP basis) plus (ii) the amounts approved by the Joint Steering Committee established under the Somatuline Autogel License for spending related to the products of Ipsen or its Affiliates;

 

(g) enter into any transaction or agreement that would be reasonably likely to require an increase to research and development spending that would cause such spending to exceed the aggregate amount specified in Section 3(f) hereof;

 

(h) incur capital expenditures (on a GAAP basis) of more than Two Million Dollars ($2,000,000) in any given calendar year;

 

(i) make any investment, through the direct or indirect holding of securities or otherwise, other than Permitted Investments;

 

(j) incur any Indebtedness (including extensions, renewals or refinancings and drawdowns under existing facilities), other than (i) Indebtedness evidenced by the Convertible Notes, and (ii) Permitted Indebtedness; provided that, with respect to (ii), if following the incurrence of such Permitted Indebtedness, the total Indebtedness exceeds Two Million Five Hundred Thousand Dollars ($2,500,000) (excluding trade payables in the ordinary course of business that are not more than 90 days past due), then such Permitted Indebtedness shall not be permitted unless immediately prior and after giving effect to the incurrence of such Permitted Indebtedness, the Company’s ratio of Net Indebtedness to EBITDA shall not exceed 1 to 1;

 

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(k) change the principal business of the Company, enter new lines of business (if such business or businesses are material to the Company or its Subsidiaries), or exit the current line of business of the Company; provided that the Company shall be permitted to make reasonable extensions, developments or expansions to the business of the Company;

 

(l) declare or pay any cash dividend on or redeem or repurchase any of its capital stock, directly or indirectly, other than acquisitions of Common Stock by the Company pursuant to agreements which permit the Company to repurchase such shares upon termination of services to the Company;

 

(m) except as required by any law, rule, regulation or listing standard to which the Company is subject or as contemplated by this Agreement, increase or decrease the authorized number of directors constituting the Board or any committee thereof;

 

(n) deregister the Common Stock under the Exchange Act;

 

(o) amend, alter or repeal any provision of the Certificate of Incorporation or Bylaws of the Company;

 

(p) enter into any transaction or agreement that would reasonably be determined, or is reasonably likely, to result in competition with any business (other than any businesses to which the Investor and its Affiliates devote de minimis resources) of the Investor or its Affiliates carried on anywhere in the world at the time that such transaction or agreement is entered into by the Company or any of its Subsidiaries;

 

(q) hire a new chief executive officer;

 

(r) change the Company’s fiscal year;

 

(s) adopt, implement, amend, redeem, waive or otherwise terminate or cause to come into effect or fail to apply any takeover defense measures, including without limitation any stockholder rights plan or similar plan or device, including the Rights Agreement, or any change of control provisions in contracts that would reasonably be expected to have a material impact on the Company’s operations, prospects or financial condition or the value of the holding of the Investor or the Investor’s Affiliates in the Company in the event that the Investor and its Affiliates were to increase their aggregate holdings in the Company; provided that notwithstanding the foregoing, the Investor hereby provides its consent to the execution and delivery of the Rights Agreement and the consummation of the transactions contemplated thereby;

 

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(t) support, recommend or endorse any offer by any Person or “group” (within the meaning of Section 13(d)(3) of the Exchange Act) to acquire either (i) the beneficial ownership of more than 9.9 percent of the then-outstanding Common Stock where such Person or group is not already the beneficial owner of more than 9.9 percent of the then-outstanding Common Stock or (ii) any shares of Common Stock where such Person or group currently beneficially owns more than 9.9 percent of the outstanding Common Stock and where such acquisition would increase the percentage of the outstanding Common Stock currently beneficially owned by such Person or group, unless (A) the Company has at least 30 days prior to such support, recommendation or endorsement being given by the Company, notified the Investor and Ipsen in writing of its intention to give such support, recommendation or endorsement and such notice shall set forth in reasonable detail the terms of such offer and any conditions upon which the Company shall give such support, recommendation or endorsement and (B) for the duration of such 30 day period the Board has used its reasonable best efforts to discuss and negotiate with Ipsen in good faith the terms of an alternative offer by Ipsen and/or its Affiliates;

 

(u) other than with respect to the Series A Junior Participating Preferred, create any additional class or series of shares of stock unless the same ranks junior to the Common Stock with respect to the distribution of assets on the liquidation, dissolution or winding up of the Company and with respect to the payment of dividends and redemption rights, or increase the authorized number of shares of Common Stock or increase the authorized number of shares of any additional class or series of shares of stock unless the same ranks junior to the Common Stock with respect to the distribution of assets on the liquidation, dissolution or winding up of the Company and with respect to the payment of dividends and redemption rights, or create or authorize any obligation or security convertible into shares of any class or series of stock, unless in favor of the Investor, unless the same ranks junior to the Common Stock with respect to the distribution of assets on the liquidation, dissolution or winding up of the Company and with respect to the payment of dividends and redemption rights;

 

(v) issue, sell, pledge, grant, transfer or otherwise dispose of (or authorize the issuance, sale, pledge, grant, transfer or other disposition) in respect of (A) any shares of the Company’s capital stock or any other securities convertible into or exchangeable or exercisable for any shares of such capital stock (or derivative securities thereof), or (B) any options, warrants or other rights of any kind to acquire any shares of such capital stock, or any other ownership interest (including, without limitation, any phantom interest) of the Company, other than:

 

  (i) issues or sales of shares of the Company’s capital stock the proceeds of which will be used solely for general working capital and research and development purposes, provided that such issues or sales (A) are made only after the second anniversary of the Effective Date and (B) do not exceed in aggregate Twenty Five Million Dollars ($25,000,000) in cash

 

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(except in respect of New Securities issued pursuant to Section 5.1(d)(iii) in connection with strategic transactions involving the Company and other entities, in which case in value) in any three year period;

 

  (ii) issues or sales of shares of the Company’s capital stock after January 1, 2007, the proceeds of which shall be reserved for potential repayment of the Convertible Notes, provided that such issues and sales are made, and the proceeds of which are maintained, in compliance with Section 5.2 of this Agreement;

 

  (iii) issues or sales pursuant to options, warrants or other Common Stock grants or purchase rights issued or to be issued after the date hereof to employees or directors of the Company or any of its Subsidiaries or to consultants of the Company or any of its Subsidiaries (provided that such consultants are not granted options, warrants or other rights exercisable for more than, or Shares of Common Stock greater than, 75,000 shares of Common Stock in aggregate per year and the issuance of such options, warrants, other rights or shares to such consultants shall be for services and in amounts that are consistent with past issuances) pursuant to any plan, agreement, or arrangement approved by the Board; and

 

  (iv) issues or sales pursuant to any rights or agreements, options, warrants or convertible securities outstanding as of the date of this Agreement; or

 

(w) grant to any party or issue any security the terms of which contain any preemptive right.

Notwithstanding the foregoing, in the event that any action set forth in this Section 3 is approved by the Board, including the affirmative vote of the Investor Directors, the Company shall as soon as reasonably practicable following such approval, provide the Investor with written notice of such approval and unless the Investor, within ten (10) Business Days after receipt of such notice, notifies the Company in writing that it does not consent to such action, the Investor’s written consent to such action shall be deemed to have been given.

4. CEO TERMINATION CONSULTATION

Prior to a termination or removal of the chief executive officer of the Company, the Company shall, for so long as the provisions of Section 3 are in effect, provide notice to the Investor of such proposed termination or removal and allow the Investor or an Affiliate of the Investor to send a representative to a meeting of the Board for consultation regarding the reasons for such proposed termination or removal.

 

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5. ISSUE OF NEW SECURITIES

5.1 Right of First Offer

Subject to the terms and conditions specified in this Section 5, and applicable securities laws, in the event the Company proposes to offer or sell any New Securities prior to the earlier of (i) five years from the First Closing Date if at that time the Convertible Notes have not been converted in full and (ii) the date of completion of a Triggering Sale (and absent the occurrence of the events in clauses (i) or (ii) above of this Section 5.1, the obligations of the Company and the rights of the Investor and the Investor’s Affiliates set forth in this Section 5 shall continue indefinitely), the Company shall first make an offering of such New Securities to the Investor in accordance with the following provisions of this Section 5. The Investor shall be entitled to apportion the right of first offer hereby granted it among itself and its Affiliates in such proportions as it deems appropriate.

 

(a) The Company shall deliver a notice, in accordance with the provisions of Section 8.6 hereof, (the Offer Notice) to the Investor stating (i) its bona fide intention to offer such New Securities, (ii) the number of such New Securities to be offered and sold, and (iii) the price (or in the case of a proposed public offering the minimum and maximum price in a range not to exceed the greater of $2.00 or 20 percent of the closing price of the Common Stock on the trading day prior to the date of the Offer Notice (the Public Offer Price Range)) and terms, if any, upon which it proposes to offer such New Securities.

 

(b) By written notification received by the Company, within ten (10) calendar days after mailing of the Offer Notice, the Investor may elect to purchase or obtain, at the price and on the terms specified in the Offer Notice (or, in the case of a proposed public offering, at the public offering price), up to that portion of such New Securities which equals (1) the number of shares of Common Stock deemed issued and held by the Investor, which shall include all securities issuable to the Investor upon conversion of the Convertible Notes, exercise of the Warrant for the number of Warrant Shares for which the Warrant is then-exercisable, or otherwise exercisable or exchangeable for, shares of Common Stock) divided by (2) the total number of shares of Common Stock of the Company then outstanding (assuming full conversion and exercise of the Convertible Notes, the Warrant for the number of Warrant Shares for which the Warrant is then-exercisable and any other vested and in-the-money convertible or exercisable securities), multiplied by (3) the number of New Securities being issued; provided that in the case of a proposed public offering such written notice of the Investor (i) may specify an alternative price range to that of the Public Offer Price Range at which the Investor elects to purchase or obtain such portion of such New Securities so long as such alternative price range falls within the Public Offer Price Range, (ii) may specify varying amounts of such portion of such New Securities that the Investor elects to purchase at various prices that fall within the Public Offer Price Range or such alternative price range and (iii) shall constitute a non-binding indication of

 

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its intention to purchase such portion of such New Securities within the Public Offer Price Range or such alternative price range (an Indication Notice) and the Investor shall be under no obligation to provide any commitment regarding its Indication Notice until such time as all participants in the public offering irrevocably commit. For purposes of this Section 5.1(b), “in-the-money” shall mean that the exercise or conversion price per share of such convertible or exercisable securities exceeds the closing sale price of the Common Stock, as reported by Bloomberg L.P., on the date of the Offer Notice. In the case of a non-public offering, in no event shall an election by the Investor pursuant to this Section 5.1(b) to purchase or obtain up to such portion of such New Securities commit it to purchase more than its pro rata share (as determined above) of the New Securities sold without the Investor’s consent.

 

(c) The Company may, during the ninety (90) day period following the expiration of the period provided in Section 5.1(b) hereof, offer the remaining unsubscribed portion of such New Securities (or in the case of a proposed public offering the portion of such New Securities for which the Investor has not indicated an interest pursuant to Section 5.1(b) above) (collectively, the Publicly Available Securities) to any Person or Persons at a price not less than, and upon terms no more favorable to the offeree than, those specified in the Offer Notice. If the Company does not enter into an agreement for the sale of the Publicly Available Securities within such period, or if such agreement is not consummated within thirty (30) days of the execution thereof, the right provided hereunder shall be deemed to be revived and such Publicly Available Securities shall not be offered unless first reoffered to the Investor in accordance with this Section 5.

 

(d) The right of first offer in this Section 5 shall not be applicable to (i) shares of Common Stock and/or options, warrants or other Common Stock purchase rights and the Common Stock issued pursuant to such options, warrants or other rights issued or to be issued after the date hereof to employees or directors of the Company, consultants of the Company or any of its Subsidiaries (provided that such consultants are not granted options, warrants or other rights exercisable for more than, or shares of Common Stock greater than, 75,000 shares of Common Stock in aggregate per year and the issuance of such options, warrants, other rights or shares to such consultants shall be for services and in amounts that are consistent with past issuances) pursuant to any plan, agreement, or arrangement approved by the Board; (ii) shares of Common Stock issued or issuable pursuant to any rights or agreements, options, warrants or convertible securities outstanding as of the date of this Agreement and stock issued pursuant to any such rights or agreements granted after the date of this Agreement, so long as the right of first offer established by this Section 5 was complied with, waived, or was inapplicable pursuant to any provision of this Section 5.1(d) with respect to the initial sale or grant by the Company of such rights or agreements; (iii) any New Securities issued in connection with strategic transactions involving the Company and other entities, including without limitation, joint venture, licensing,

 

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collaboration, manufacturing, development, marketing or distribution arrangements, if (A) the consideration to be paid therefor shall not consist solely of cash and (B) the Company and the Investor shall not, after a period of good faith negotiation, reasonably agree on the price to be paid by the Investor for such New Securities in the exercise of the Investor’s right of first offer hereunder; provided that any issuances pursuant to this subclause (iii) shall be without prejudice to any obligation of the Company to obtain the Investor’s consent for such issuances in accordance with Section 3(v) hereof; and (iv) any New Securities issued in connection with any stock split, stock dividend or recapitalization by the Company.

 

(e) The right of first offer set forth in this Section 5 may not be assigned or transferred except that such right is assignable by the Investor to any Affiliate of the Investor. To the extent that any New Securities are proposed to be issued in a public offering, the New Securities to be purchased by the Investor pursuant to Section 5.1(b) hereof shall be purchased in such public offering to the extent permissible under applicable securities laws or in a related private placement to the extent not so permissible.

5.2 Proceeds of Additional Securities Issued in Connection with the Repayment of the Convertible Notes

On each occasion that the Company issues or sells any shares of the Company’s capital stock pursuant to Section 3(v)(ii) hereof, the proceeds of such issue or sale shall be held in trust for the benefit of the Investor in a separate account, apart from all other funds of the Company, and shall only be released from such account (i) for the purposes of paying, upon demand of the Investor, amounts due and payable under the Convertible Notes in accordance with the terms thereof, (ii) following a Triggering Sale, in accordance with the provisions of Sections 8.1(c), (d), (e) and (f) of the Convertible Notes and (iii) to the Company following each conversion under a Convertible Note, such that following each conversion the amount remaining in such account shall be no less than the aggregate amount (if any) of principal and interest that remains unconverted under the Convertible Notes.

6. FINANCIAL REPORTING COVENANTS

6.1 Reporting Information

From the First Closing Date until the occurrence of a Triggering Sale (if any), the Company shall provide to the Investor within the deadlines specified in Section 6.4 below the following financial reporting information in relation to the Company, which together shall constitute the Reporting Information:

 

(a) the Company’s consolidated balance sheet;

 

(b) the Company’s consolidated income statement;

 

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(c) the Company’s consolidated cash flow statement;

 

(d) the Company’s statement of changes in stockholders’ equity;

 

(e) inter-company transactions and balances between the Company and any of its Subsidiaries, on the one hand, and Ipsen and its Affiliates, on the other hand;

 

(f) all relevant information relating to the Company’s accounting treatment of the Convertible Notes in the Company’s consolidated balance sheet and income statement;

 

(g) details of any restatements or presentation changes relating to the Company’s transition from GAAP to International Financial Reporting Standards (IFRS);

 

(h) a statement showing the transition between GAAP and IFRS for the Company’s consolidated balance sheet, consolidated income statement, consolidated cash flow statement and stockholders’ equity statement; and

 

(i) a statement setting out the then-current Variable Amount (as such term is defined in the Warrant), together with the calculations used by the Company to determine such Variable Amount and such other information and documentation as the Investor may reasonably request to verify such calculations, such statement and calculations to be provided on a quarterly basis.

6.2 Purchase Accounting

No later than 30 Business Days after the First Closing Date, the Company shall provide the Investor with detailed information on the valuation of its assets and liabilities, according to both GAAP and IFRS, as at the First Closing Date to enable the Investor and its Affiliates to perform its purchase accounting. No later than 10 Business Days after the end of each subsequent quarter, the Company shall provide the Investor with sufficient information regarding any material change to such valuations that have occurred as at the end of each such subsequent quarter end to enable the Investor and its Affiliates to book appropriate IFRS compliant adjustments to the fair value of such assets and liabilities.

6.3 Variable Amount Notification; Dilution Amount Notification

 

(a) No later than 10 Business Days after the end of each quarter, the Company shall provide the Investor with a statement setting out the Variable Amount (as such term is defined in the Warrant) as at such quarter end, together with the calculations used by the Company to determine such Variable Amount and such other information and documentation as the Investor may reasonably request to verify such calculations.

 

(b) No later than 5 Business Days after receipt of a written request by the Investor, the Company shall provide the Investor with a statement setting out the Dilution Amount as at the date of such request, together with the calculations used by the Company to determine such Dilution Amount and such other information and documentation as the Investor may reasonably request to verify such calculations.

 

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6.4 Deadlines for Reporting Information

 

(a) All Reporting Information for the Company’s 2005 financial year and for the first quarter and the first half of 2006 shall be prepared by the Company in accordance with IFRS and provided to the Investor prior to November 15, 2006, together with an IFRS audit opinion from the Company’s auditors on the Company’s IFRS restated financial statements (an IFRS Audit Opinion) for the 2005 financial year and an IFRS review opinion from the Company’s auditors on the Company’s IFRS restated financial statements (an IFRS Review Opinion) for the first quarter and the first half of 2006.

 

(b) All Reporting Information for the Company’s third quarter of 2006 shall be shall be prepared by the Company in accordance with GAAP and provided to the Investor no later than 15 Business Days after September 30, 2006, and the Company’s Form 10-Q and an SAS 100 Review Report from the Company’s auditors on the GAAP financial statements in such Reporting Information shall be provided to the Investor no later than 30 Business Days after September 30, 2006. All Reporting Information for the Company’s third quarter of 2006 shall be prepared by the Company in accordance with IFRS and such Reporting Information and an IFRS Review Opinion for such financial period shall be provided to the Investor by March 31, 2007.

 

(c) All Reporting Information for the Company’s full year 2006 shall be prepared by the Company in accordance with IFRS and provided to the Investor no later than 20 Business Days after December 31, 2006 and an IFRS Audit Opinion for such financial period shall be provided to the Investor no later than 32 Business Days after December 31, 2006.

 

(d) All Reporting Information for the Company’s first quarter of 2007 shall be prepared by the Company in accordance with IFRS and provided to the Investor no later than 12 Business Days after March 31, 2007 and an IFRS Review Opinion for such financial period shall be provided to the Investor no later than 27 Business Days after March 31, 2007.

 

(e) All Reporting Information for the Company’s second quarter of 2007 shall be prepared by the Company in accordance with IFRS and provided to the Investor no later than 10 Business Days after June 30, 2007 and an IFRS Review Opinion for such financial period shall be provided to the Investor no later than 25 Business Days after June 30, 2007.

 

(f) All Reporting Information for the Company’s third quarter of 2007 shall be prepared by the Company in accordance with IFRS and provided to the Investor no later than 10 Business Days after September 30, 2007 and an IFRS Review Opinion for such financial period shall be provided to the Investor no later than 25 Business Days after September 30, 2007.

 

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(g) All Reporting Information for the Company’s full year 2007 shall be prepared by the Company in accordance with IFRS and provided to the Investor no later than 12 Business Days after December 31, 2007 and an IFRS Audit Opinion for such financial period shall be provided to the Investor no later than 27 Business Days after December 31, 2007.

 

(h) After December 31, 2007:

 

  (i) all Reporting Information for the Company’s first quarter, half year and third quarter shall be prepared by the Company in accordance with IFRS and provided to the Investor no later than 10 Business Days after the end of such period and an IFRS Review Opinion for each such financial period shall be provided to the Investor no later than 25 Business Days after the end of such period; and

 

  (ii) all Reporting Information for the Company’s full year shall be prepared by the Company in accordance with IFRS and provided to the Investor no later than 12 Business Days after the end of such period and an IFRS Audit Opinion for each such financial period shall be provided to the Investor no later than 25 Business Days after the end of such period.

7. COVENANTS OF THE INVESTOR

7.1 Lock-up Period

 

(a) Without the prior written consent of the Company, the Investor shall not, nor shall it permit any of its Affiliates to, directly or indirectly, offer, sell, contract to sell, pledge or otherwise dispose of (or enter into any transaction which is designed to, or might reasonably be expected to, result in the disposition (whether by actual disposition or effective economic disposition due to cash settlement or otherwise)), or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Exchange Act with respect to, any shares of Common Stock or any securities convertible into, or exercisable or exchangeable for, such Common Stock, or publicly announce an intention to effect any such transaction, for the one-year period commencing on the date of the First Closing, other than (i) transfers to Affiliates of the Investor or (ii) the exercise or conversion of the Warrant or the Convertible Notes.

 

(b) Without the prior written consent of the Company, neither the Investor nor Ipsen shall, directly or indirectly, sell, transfer or dispose of any of the capital stock of any wholly-owned Subsidiary of Ipsen or the Investor that holds shares of Common Stock for the one-year period commencing on the date of the First

 

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Closing, other than sales or transfers to another wholly-owned Subsidiary of Ipsen or the Investor. This Section 7.1(b) shall not apply to such a sale, transfer or disposal the primary purpose of which is a bona fide sale, transfer or disposal of all or at least the part of Ipsen’s business that is reasonably related to the Somatuline Autogel License and Increlex License and not primarily the sale, transfer or disposal of the shares of Common Stock held by such Subsidiary, provided that the transferee in any such sale, transfer or disposal agrees to be bound by the terms of Section 7.1 hereof.

 

(c) Purported sales, transfers or dispositions of shares of Common Stock that are not in compliance with this Section 7.1 shall be void and shall be of no force or effect.

7.2 Restriction on Block Transfers

Without the prior written consent of the Company, the Investor shall not, nor shall it permit any of its Affiliates to, directly or indirectly, sell, transfer or dispose of any shares of Common Stock to any Person or Persons known to the Investor to be a “group” (within the meaning of Section 13(d)(3) of the Exchange Act) if, after giving effect to such sale, transfer or disposition, such Person or such group, as the case may be, would, to the Investor’s knowledge (and, in the case of a private sale, after inquiry), beneficially own more than 14.9 percent of the Company’s then-outstanding shares of Common Stock.

7.3 Compliance with Securities Laws

The Investor shall not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of) any shares of Common Stock to any Person pursuant to this Agreement except in compliance with the Securities Act, applicable state securities laws and the respective rules and regulations promulgated thereunder.

7.4 Compulsory Acquisition.

If at any time the Investor and/or its Affiliates beneficially own ninety percent or more of the then-outstanding Common Stock such that, upon all such Common Stock being held either by the Investor or an Affiliate of the Investor, the Investor or such Affiliate is entitled to effect a merger with the Company in accordance with the provisions of Section 253 of the Delaware General Corporation Law, the Investor shall, or shall cause such Affiliate to, effect such a merger with the Company.

7.5 The Standstill Period

During the Standstill Period, without the prior written consent of the Company, the Investor shall not, nor shall it permit any of its Affiliates to, nor shall Ipsen or any of its Affiliates agree, or advise, assist, encourage, propose (publicly or otherwise), provide information or provide financing to others, or permit its Affiliates to agree, or to advise, assist, encourage, propose (publicly or otherwise), provide information or provide

 

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financing to others, to, individually or collectively, directly or indirectly, acquire or offer to acquire or agree to acquire from any Person other than the Company, directly or indirectly, by purchase, by making, effecting, initiating or participating in any tender offer, exchange offer, merger, business combination, recapitalization, restructuring, liquidation, dissolution or extraordinary transaction involving the Company, through the acquisition of control of another Person, by depositing any shares of Common Stock into a voting trust or subjecting any shares of Common Stock to any arrangement or agreement with respect to the voting of such securities, by joining a partnership, limited partnership or other “group” (within the meaning of Section 13(d)(3) of the Exchange Act) or otherwise, beneficial ownership of any equity securities of the Company, or direct or indirect rights (including convertible securities) or options to acquire such beneficial ownership (or otherwise act in concert with respect to any such securities, rights or options with any Person that so acquires, offers to acquire or agrees to acquire); provided that no such acquisition, offer to acquire or agreement to acquire shall be deemed to occur solely due to (a) a stock split, reverse stock split, reclassification, reorganization or other transaction by the Company affecting any class of the outstanding capital stock of the Company generally or (b) a stock dividend or other pro rata distribution by the Company to holders of its outstanding capital stock.

7.6 The Regulated Purchase Period

During the Regulated Purchase Period, without the prior written consent of the Company, the Investor shall not, nor shall it permit any of its Affiliates to, nor shall Ipsen or any of its Affiliates agree, or advise, assist, encourage, propose (publicly or otherwise), provide information or provide financing to others, or permit its Affiliates to agree, or to advise, assist, encourage, propose (publicly or otherwise), provide information or provide financing to others, to, individually or collectively, directly or indirectly, acquire or offer to acquire or agree to acquire from any Person other than the Company, directly or indirectly, by purchase, by making, effecting, initiating or participating in any tender offer, exchange offer, merger, business combination, recapitalization, restructuring, liquidation, dissolution or extraordinary transaction involving the Company, through the acquisition of control of another Person, by depositing any shares of Common Stock into a voting trust or subjecting any shares of Common Stock to any arrangement or agreement with respect to the voting of such securities, by joining a partnership, limited partnership or other “group” (within the meaning of Section 13(d)(3) of the Exchange Act) or otherwise, beneficial ownership of any equity securities of the Company, or direct or indirect rights (including convertible securities) or options to acquire such beneficial ownership (or otherwise act in concert with respect to any such securities, rights or options with any Person that so acquires, offers to acquire or agrees to acquire) other than Permitted Offers and Acquisitions; provided that no such acquisition, offer to acquire or agreement to acquire shall be deemed to occur solely due to (a) a stock split, reverse stock split, reclassification, reorganization or other transaction by the Company affecting any class of the outstanding capital stock of the Company generally or (b) a stock dividend or other pro rata distribution by the Company to holders of its outstanding capital stock.

 

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8. MISCELLANEOUS

8.1 Effectiveness of Agreement.

This Agreement shall become effective upon the Effective Date.

8.2 Assignment

This Agreement and the rights and obligations hereunder shall not be assigned, delegated, or otherwise transferred (whether by operation of law, by contract, or otherwise) without the prior written consent of the other party hereto; provided that the Investor may, without obtaining the prior written consent of the Company, assign, delegate, or otherwise transfer its rights and obligations hereunder to any Affiliates of the Investor and following such assignment, such Affiliates shall be deemed to be an “Investor” for the purposes of this Agreement and any reference to Investor in this Agreement shall automatically be deemed to include a reference to such Affiliates (provided that in such case the Investor shall not be relieved of its obligations hereunder). The Company shall execute such acknowledgements of such assignments in such forms as the Investor may from time to time reasonably request. Any attempted assignment, delegation, or transfer in violation of this Section 8.2 shall be void and of no force or effect. Each of the Investor and any Affiliate of the Investor to whom rights and obligations hereunder have been assigned pursuant to this Section 8.2 hereby agrees and acknowledges that Ipsen is hereby appointed as its agent in connection with the exercise of its rights and remedies under this Agreement and Ipsen hereby accepts such appointment.

8.3 Governing Law

 

(a) This Agreement shall be governed by and construed in accordance with the General Corporation Law of the State of New York, without regard to its principles of conflicts of laws.

 

(b) Each party irrevocably submits to the exclusive jurisdiction of the New York Courts for the purposes of any proceeding arising out of or relating in any way whatsoever (whether in contract, tort or otherwise) to this Agreement only. Each party agrees to commence any such proceeding in the United States District Court for the Southern District of New York or if such proceeding may not be brought in such court for jurisdictional reasons, then in the Supreme Court of the State of New York, New York County. Each party further agrees that service of any process, summons, notice or document by registered or certified mail (or any substantially similar form of mail), postage paid, to such party’s respective address set forth in Section 8.6 shall be effective service of process with respect to any matters to which it has submitted to jurisdiction in this Section 8.3(b). Each party irrevocably and unconditionally waives any objection to the laying of venue of any such proceeding in any New York Court, and hereby and thereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such New York Court that any such proceeding brought in any such New York Court has been brought in an inconvenient forum, or should be dismissed or transferred on such basis.

 

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(c) EACH PARTY HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY PROCEEDING ARISING OUT OF OR RELATING IN ANY WAY WHATSOEVER (WHETHER IN CONTRACT, TORT OR OTHERWISE) TO THIS AGREEMENT ONLY.

8.4 Counterparts

This 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. This Agreement may also be executed and delivered by facsimile signature and 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.

8.5 Titles and Subtitles

The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

8.6 Notices

 

(a) if to the Company, to:

Tercica, Inc.

2000 Sierra Point Parkway, Suite 400

Brisbane, California 94005

USA

Attention: General Counsel

Facsimile: (650) 624-4940

with a copy (which shall not constitute notice) to:

Cooley Godward LLP

Five Palo Alto Square

3000 El Camino Real

Palo Alto

California 94306

United States of America

Attention: Suzanne Sawochka Hooper

Facsimile: (650) 849-7400

or to such other person, at such other place or to such other facsimile number as the Company shall designate to the Investor and Ipsen in writing; and

 

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(b) if to the Investor or Ipsen, to:

Ipsen S.A

42, rue du Docteur Blanche

75016 Paris

France

Attention: General Counsel

Facsimile: + 331 44 96 11 88

with a copy (which shall not constitute notice) to:

Freshfields Bruckhaus Deringer LLP

520 Madison Avenue, 34th Floor

New York, NY 10022

United States of America

Attention: Matthew Jacobson, Esq.

Facsimile: +1 212-277-4001

or to such other person, at such other place or to such other facsimile number as the Investor shall designate to the Company in writing. All notices, requests, consents and other communications hereunder shall be in writing and shall be delivered by facsimile (with receipt confirmed by telephone) or nationally recognized overnight express courier postage prepaid.

8.7 Costs of Enforcement

If any Party to this Agreement seeks to enforce its rights under this Agreement by legal proceedings, the non-prevailing Party shall pay all costs and expenses incurred by the prevailing Party, including, without limitation, all reasonable attorneys’ fees.

8.8 Amendments and Waivers

 

(a) Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Investor and, in respect of Sections 2.7, 2.9, 2.10, 7 and 8 of this Agreement only, Ipsen. No waivers of or exceptions to any term, condition or provision of this Agreement, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision.

 

(b) Neither the Investor nor Ipsen nor any Affiliate thereof shall seek to amend or waive the terms of this Agreement or the other Transaction Documents by seeking stockholder consent without prior approval of the then-current Board.

 

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8.9 Severability

The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision.

8.10 Entire Agreement

This Agreement, together with the other Transaction Documents, constitutes the full and entire understanding and agreement between the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties are expressly cancelled. None of the rights of the Investor or Ipsen contained herein are or shall be contingent on anything not stated herein and in particular are not contingent on the approval by the stockholders of the Company of the Bylaw Amendments or the Certificate of Incorporation Amendments.

8.11 Delays or Omissions

No delay or omission to exercise any right, power or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power or remedy of such non-breaching or non-defaulting party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

8.12 No Limitation on Stockholder Rights

Except as expressly provided herein, nothing in this Agreement shall in any way affect any stockholder’s ability to vote or act its shares of the Company’s capital stock (including without limitation nominating additional Directors or voting for different Directors, soliciting proxies or participating in solicitations).

8.13 Seeking Approval of Certificate of Incorporation Amendments and Bylaw Amendments

In the event that any of the Certificate of Incorporation Amendments or Bylaw Amendments have not been approved by the Company’s stockholders at the Company Stockholders’ Meeting, the Company shall, following the written request of the Investor, duly solicit, using all commercially reasonable efforts (including recommending to the Company’s stockholders that they give their approval), the approval of the Company’s stockholders for such Certificate of Incorporation Amendments and/or Bylaw Amendments at the Company’s next meeting of stockholders of the Company.

 

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8.14 Specific Performance, Injunctive and Other Equitable Relief

Each Party acknowledges and agrees that the other Parties would be damaged irreparably in the event any provision of this Agreement is not performed in accordance with its specific terms or otherwise is breached, so that a Party shall be entitled to injunctive relief to prevent breaches of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in addition to any other remedy to which such Party may be entitled, at law or in equity. In particular, the Company acknowledges that in the event it breaches this Agreement, money damages would be inadequate and the Investor and Ipsen would have no adequate remedy at law, so that the Investor and Ipsen shall have the right, in addition to any other rights and remedies existing in their favor, to enforce their rights and the Company’s obligations hereunder not only by action for damages but also by action for specific performance, injunctive, and/or other equitable relief.

[SIGNATURES APPEAR ON FOLLOWING PAGE]

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

TERCICA, INC.
By:  

 

Name:  
Title:  

 

SURAYPHARM
By:  

 

Name:  
Title:  

For the purposes of Sections 2.7, 2.9, 2.10, 7 and 8 hereof only,

 

IPSEN, S.A.

By:

  

 

Name:

  

Title:

  

[Signature Page to Affiliation Agreement]

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Annex A

THE STRATEGIC PLANNING COMMITTEE CHARTER

 

•   The Strategic Planning Committee’s role is to:

 

  •   review all strategic issues affecting the Company with regard to research and development, industrial, manufacturing, commercial and financial matters, and alliances and partnerships of all types;

 

  •   review and recommend to the Board an annual three-year strategic plan;

 

  •   review the Company’s operating plans and allocation of resources and their relationship to the Company’s strategic plans and make recommendations relating thereto;

 

  •   review any major investment, asset sale, restructuring, alliance or partnership projects; and

 

  •   submit reports, proposals and recommendations of all issues falling within its scope of responsibility.

 

•   The Strategic Planning Committee meets at least two times a year. Meetings are convened by the committee’s chairman.

 

•   The Strategic Planning Committee may call upon the Company’s senior executives for assistance. It may request sight of any internal reports, documents and research drawn up by the Company and commission any external technical reports at the Company’s expense, subject to the usual confidentiality undertakings.
EX-99.7 5 dex997.htm REGISTRATION RIGHTS AGREEMENT Registration Rights Agreement

Exhibit 7

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REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT (this Agreement), dated as of October 13, 2006, by and between Tercica, Inc., a Delaware corporation (the Company), Ipsen, S.A., a French société anonyme (Ipsen) and Suraypharm, a French société par actions simplifiée, a subsidiary of Ipsen (Suraypharm and, together with Ipsen and the Company, the Parties).

WHEREAS, Ipsen, Suraypharm and the Company have entered into certain investment documents including a Stock Purchase and Master Transaction Agreement, dated as of July 18, 2006 (the Purchase Agreement), and the Company has delivered, or agreed to deliver subject to specified conditions, the Warrant and the Convertible Notes (as those terms are defined in the Purchase Agreement);

WHEREAS, the Parties desire to enter into this Agreement in order to, among other things, set forth the rights of the Investors (as defined below) to cause the Company to register the Registrable Securities (as defined below) with the U.S. Securities and Exchange Commission (the SEC) for resale pursuant to the U.S. Securities Act of 1933, as amended (the Securities Act); and

WHEREAS, the execution and delivery of this Agreement is a condition to the Parties’ obligations to close the transactions contemplated by the Purchase Agreement.

NOW, THEREFORE, in consideration of the mutual promises, agreements and covenants set forth herein, the Parties hereby agree as follows:

 

Section 1. Definitions and Interpretation.

(a) Each of the following terms, when used in this Agreement, shall have the meaning set forth below:

Affiliate means, with respect to any Person, any Person that (directly or indirectly) controls, is controlled by or is under common control with such Person (and, for the purposes hereof, the term control means the power to direct the management and policies of such Person (directly or indirectly), whether through ownership of securities, by contract or otherwise (and the terms controlling and controlled have the meanings correlative to the foregoing)).

Affiliation Agreement has the meaning set forth in the Purchase Agreement.

Agreement has the meaning set forth in the preamble.

Business Day means in respect of determining a date related to registration contemplated hereunder, any day on which the principal offices of the SEC in Washington, D.C. are open to accept filings, and, in all other cases, any day on which banks are not required or authorized by applicable law to close in the City of New York.

Company has the meaning set forth in the preamble.

Company Indemnified Person has the meaning set forth in Section 5(b).

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Company Common Stock means the common stock, par value $0.001 per share, of the Company.

Effectiveness Deadline has the meaning set forth in Section 2(a).

Exchange Act means the U.S. Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

Filing Deadline has the meaning set forth in Section 2(a).

Holder means any person owning of record Registrable Securities.

Holder Indemnified Persons has the meaning set forth in Section 5(a).

Indemnified Party has the meaning set forth in Section 5(c).

Indemnifying Party has the meaning set forth in Section 5(c).

Initiating Holders has the meaning set forth in Section 2(a).

Ipsen has the meaning set forth in the preamble.

Investors shall mean Ipsen, Suraypharm and each Affiliate thereof.

IRA means that certain Amended and Restated Investors’ Rights Agreement, dated as of July 9, 2003, as amended, by and among the Company and certain of its stockholders.

IRA Registrable Securities has the meaning ascribed to the term “Registrable Securities” under the IRA.

Kingsbridge Registration means any registration pursuant to that certain Registration Rights Agreement, dated as of October 14, 2005, by and between the Company and Kingsbridge Capital Limited.

Material Event has the meaning set forth in Section 4(a)(xi).

Most Recent SEC Report has the meaning set forth in Section 2(d).

Non-Organized Sales means sales that are not Organized Sales.

Non-Organized Sale Limit has the meaning set forth in Section 2(c).

Non-Registration Period means the one-year period beginning on the second anniversary of the effectiveness of the first registration by the Company pursuant to Section 2; provided, however, that the beginning of such period shall be extended by such number of days as (i) pursuant to Section 2(a)(v), the Company is not obligated to effect a registration as a result of a public offering commenced within 90 days prior to the second anniversary of the effectiveness of such first registration (as extended by clauses (i) and (ii) of this paragraph), and (ii) if such first registration is a Shelf Registration Statement, the ability of the Initiating Holders thereof to sell

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shares thereunder is suspended pursuant to Section 4(a)(xi) prior to the second anniversary of the effectiveness of such first registration (as extended by clauses (i) and (ii) of this paragraph).

Note Shares means the shares of Company Common Stock issued upon conversion of the Convertible Notes (as such term is defined in the Purchase Agreement).

Organized Sales means any of the following: (i) any underwritten offering with a minimum aggregate offering price, net of underwriting discounts and commissions, of at least $10 million; (ii) any offering of Registrable Securities in connection with which the holders of Registrable Securities utilize a placement agent or agents with a minimum anticipated aggregate offering price, net of placement agent fees and commissions, of at least $10 million; and (iii) sales to a single purchaser or group of purchasers in a single transaction or series of related transactions with a minimum aggregate offering price of at least $5 million.

Person means any natural person, corporation, general partnership, limited partnership, limited liability company, proprietorship, other business organization, trust, union, association or governmental entity.

Purchase Agreement has the meaning set forth in the recitals to this Agreement.

register (and registered and registration) means a registration effected by preparing and filing a registration statement in compliance with the Securities Act with the SEC, and the declaration or ordering of the effectiveness by the SEC of, or automatic effectiveness of, such registration statement.

Registrable Securities means (i) the Shares, the Note Shares and the Warrant Shares, and (ii) all shares of Company Common Stock related to the Shares, the Note Shares and the Warrant Shares issued in connection with any exchange, conversion, stock split, stock dividend, distribution, recapitalization or similar event of the Company; provided, however, that Registrable Securities shall not include any of the above shares (i) sold by a person to the public either pursuant to a Registration Statement or Rule 144 under the Securities Act, (ii) sold to any person in a private transaction in which the right the cause the Company to register Registrable Securities is not assigned pursuant to Section 6, and (iii) held by a Holder during any such period that all Registrable Securities held by such Holder could be sold without restriction under Rule 144 under the Securities Act during the following ninety day period.

Registration Statement means a registration statement under the Securities Act covering the registration of all or any portion of the Registrable Securities.

Rights Holder Registration means any registration pursuant to Sections 2.5 or 2.7 of the IRA.

SEC has the meaning set forth in the recitals.

Securities Act has the meaning set forth in the recitals.

Shares means the shares of Company Common Stock issued pursuant to the Purchase Agreement.

Shelf Registration Statement has the meaning set forth in Section 2(a).

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Suspension Notice has the meaning set forth in Section 4(a)(xi).

Unrelated Registration Statement means (i) a Kingsbridge Registration; (ii) a Rights Holder Registration; (iii) any registration (A) relating to an employee benefit plan (as defined in Rule 405 under the Securities Act), or (B) relating to the issuance and sale of, or the resale of, securities issued in a transaction pursuant to Rule 145 under the Securities Act, or (iv) on any form that does not include substantially the same information as would be required to be included in a Registration Statement covering the sale of the Registrable Securities.

VLL Agreement means that certain Common Stock Agreement, dated as of January 21, 2005, as amended, by and between the Company and Venture Lending & Leasing IV, LLC.

VLL Registrable Securities has the meaning ascribed to the term “Registrable Securities” under the VLL Agreement.

Warrant Shares means the shares of Company Common Stock issued upon exercise of the Warrant (as such term is defined in the Purchase Agreement).

Withdrawn Registration has the meaning set forth in Section 2(d).

(a) Any capitalized term used in this Agreement without definition shall have the meaning assigned thereto in the Purchase Agreement.

(b) The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined.

(c) Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms.

(d) The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation.”

(e) The word “will” shall be construed to have the same meaning and effect as the word “shall.”

(f) Any definition of or reference to any contract, document, instrument or other record herein shall be construed as referring to such contract, document, instrument or other record as from time to time amended, supplemented, restated or otherwise modified.

(g) Any reference herein to any Person shall be construed to include such Person’s successors and permitted assigns.

(h) The words “herein”, “hereof” and “hereunder “, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof.

(i) Unless the context otherwise requires, all references herein to Sections shall be construed to refer to Sections of this Agreement; all references herein to the preamble and recitals shall be construed to refer to the preamble and recitals to this Agreement.

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(j) The headings and captions used in this Agreement are for convenience of reference only and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.

 

Section 2. Demand Registration Rights.

(a) The Company hereby covenants and agrees that if the Company shall receive, at any time after the one year anniversary of this Agreement, a written request from a Holder or Holders (the Initiating Holders) that the Company file a registration statement under the Securities Act covering the registration of all or any portion of Registrable Securities then held by the Initiating Holders (a Registration Statement) and the anticipated gross aggregate offering price (based on the Company’s then-current share price) is reasonably expected to exceed $10 million (or if less constitutes all of the remaining Registrable Securities), then the Company shall as soon as reasonably practicable, and in any event within 60 calendar days of the receipt of such request (the Filing Deadline), file a Registration Statement under the Securities Act covering all Registrable Securities which the Initiating Holders have requested to be registered and cause such Registration Statement to be declared effective by the SEC as soon as reasonably practicable, but in no event later than 90 calendar days of the receipt of such request (the Effectiveness Deadline); provided that in the event that the Company is informed by the SEC that the SEC will review such Registration Statement, the Effectiveness Deadline shall be extended by 60 calendar days from the date otherwise calculable hereunder). At the request of the Initiating Holders, such Registration Statement may be for an offering to be made on a delayed or continuous basis pursuant to Rule 415 under the Securities Act (a Shelf Registration Statement).

Notwithstanding this Section 2(a), the Company shall not be obligated to effect any registration pursuant to this Section 2(a): (i) in any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration, unless the Company is already subject to service in such jurisdiction and except as may be required under the Securities Act, (ii) if the request for registration occurs during the Non-Registration Period, (iii) during the period starting with the filing of, and ending on the date 180 calendar days following the date any registration requested hereunder was initially declared or automatically became effective, (iv) following the Non-Registration Period, during the period starting with the filing of, and ending on the date 180 calendar days following the final date upon which a Shelf Registration Statement was effective, or (v) during the 90 calendar day period following the closing date of a public offering by the Company. Without the consent of the Initiating Holders, the Company shall not include securities other than Registrable Securities to be sold by the Initiating Holders in any registration effected pursuant to this Section 2(a).

(b) The Company shall keep any Registration Statement filed pursuant to Section 2(a) continuously effective, supplemented and amended to the extent necessary to ensure that it is available for sales of Registrable Securities requested to be registered by the Initiating Holders, and to ensure that it conforms with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the SEC as in effect from time to time, (i) if such Registration Statement is not a Shelf Registration Statement, for a period of up to 90 days or, if earlier, until the date on which all Registrable Securities covered by such Registration Statement have been sold pursuant thereto, and (ii) if such Registration Statement is a Shelf Registration Statement, until the date on which all Registrable Securities covered by such Registration Statement have been sold pursuant thereto. Notwithstanding the foregoing, the Company shall not be required to keep any Registration Statement effective during (x) the Non-Registration Period or (y) following the Non-Registration Period, for a period exceeding six months.

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(c) As a condition to the filing of any Registration Statement filed pursuant to this Section 2, the Investors agree that so long as they collectively have beneficial ownership of ten percent or more of the outstanding Company Common Stock, the Investors will not sell shares registered pursuant to this Agreement other than through Organized Sales; provided, however, that the Investors may sell such shares through Non-Organized Sales for so long as the total number of shares sold by the Investors in all Non-Organized Sales does not exceed an aggregate of fifteen percent (15%) of the Company’s outstanding Common Stock (as measured at the time of the most recent sale) (the Non-Organized Sale Limit). Notwithstanding the foregoing, in the event that (i) the placement agent or underwriter of an Organized Sale requests reasonable lock-up agreements from stockholders of the Company other than the Investors in a manner consistent with industry practice, (ii) such other stockholders do not agree to the lock-up requested in a manner consistent with industry practice, and (iii) such Organized Sale is aborted by the Investors or the requesting underwriter or placement agent in connection with clause (ii), then the Non-Organized Sale Limit shall be increased by the number of Registrable Securities proposed to be included in such Organized Sale.

(d) The Initiating Holders shall have the right (in their sole discretion) to terminate or withdraw any registration (a Withdrawn Registration) under this Section 2 prior to the effectiveness of such registration whether or not the Company or any other Person has included securities therein, in which case the Company will no longer be required to proceed with such registration; such withdrawn registration shall not count as a registration for purposes of this Section 2 and the Initiating Holders, not the Company, shall bear any and all expenses of any registration begun under this Section 2 (including expenses of the Company) the request of which has been withdrawn by the Initiating Holders, unless (i) there is a material adverse effect on the business, assets, condition (financial or otherwise) or results of operations of the Company and its subsidiaries, taken as a whole, after the filing date of the most recent annual report or, if later, the most recent quarterly report, of the Company filed with the SEC on a Form 10-K or Form 10-Q, as the case may be, filed prior to the making of the relevant request for registration under Section 2(a) and prior to the making of the relevant request for registration under Section 2(a) (the Most Recent SEC Report) or (ii) the Most Recent SEC Report includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. If the Initiating Holders are required to bear such expenses, such expenses shall be borne by the Initiating Holders in proportion to the number of Registrable Securities for which registration was requested.

 

Section 3.

(a) Piggyback Rights. If at any time after the one year anniversary of this Agreement the Company proposes to register (whether in a primary offering pursuant to which the Company is selling securities or in a registration effected by the Company for its stockholders other than the Holders) any of its stock or other securities under the Securities Act in connection with the public offering of such securities (other than an Unrelated Registration Statement), and at such time there is not an effective Registration Statement covering all of the Registrable Securities then held by the Holders, the Company shall, at such time, promptly give the Holders written notice of such registration. Upon the written request of the Holders given within twenty (20) calendar days after mailing of such notice by the Company, the Company shall cause to be registered under the Securities Act all of the Registrable Securities that the Holders have requested to be registered; provided that if the total number of securities, including Registrable Securities requested to be

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included by the Holders in such offering, exceeds the amount of securities to be sold that the underwriters determine in their reasonable discretion is compatible with the success of the offering, then the Company shall be required to include in the offering only that amount of securities, including Registrable Securities, which the underwriters determine will not jeopardize the success of the offering; provided that the number of Registrable Securities, IRA Registrable Securities and VLL Registrable Securities to be included in such offering shall in no event be less than twenty-five percent of the total offering. The Holders, the holders of IRA Registrable Securities and the holders of VLL Registrable Securities shall share such portion of the Company’s offering allocated to selling stockholders on a pro rata basis based upon their relative ownership of the Company’s outstanding stock carrying piggyback registration rights.

(b) If the Company intends to distribute the shares registered pursuant to this Section 3 by means of an underwriting, a Holder’s right to include its Registrable Securities in such registration shall be conditioned upon such Holder’s participation in such underwriting and such Holder entering into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting, it being agreed and understood that no such underwriting agreement shall require a Holder to (i) provide representations and warranties other than in respect of the Holder’s organizational matters and its authority to enter into such underwriting agreements (and related agreements such as a custody agreement and a power of attorney), title to the shares of Company Common Stock to be sold by such Holder and information provided by such Holder for use in the Registration Statement or (ii) provide indemnification or contribution to any Person other than on the terms set forth in Section 5 below.

(c) Notwithstanding Section 9(a), for so long as the total number of IRA Registrable Securities exceeds ten percent of the outstanding Company Common Stock, the provisions of Section 3(a) may be amended or waived (either generally or in a particular instance, either retroactively or prospectively and either for a specified period of time or indefinitely), with and only with the written consent of (i) the Company, (ii) the Holders of a majority-in-interest of the Registrable Securities then held by the Holders if at the time of such amendment or waiver, the total number of Registrable Securities exceeds ten percent of the outstanding Company Common Stock, and (iii) the holders of a majority-in-interest of the then-outstanding IRA Registrable Securities (not including the “Founder Shares” as such term is defined in the IRA); provided, however, that if at the time of such amendment or waiver the total number of Registrable Securities is less than ten percent of the outstanding Company Common Stock and the written consent of the Holders of a majority-in-interest of the Registrable Securities then held by the Holders is not required to give effect to such amendment or waiver by operation of subclause (ii) of this Section 3(c), and such waiver or amendment materially and adversely affects the rights of the Holders of Registrable Securities and does not materially and adversely affect the rights of the holders of IRA Registrable Securities in the same manner, then such waiver or amendment shall require the consent of the Holders of a majority-in-interest of the Registrable Securities then held by the Holders.

 

Section 4. Obligations of the Company; Expenses; Procedures Relating to Registration.

(a) Whenever required under this Agreement to effect the registration of any Registrable Securities, the Company shall:

(i) Prepare and file with the SEC a Registration Statement with respect to such Registrable Securities, cause such Registration Statement to become effective, and if such registration statement is a demand registration statement pursuant to Section 2 keep such registration statement effective in accordance with Section 2(b);

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(ii) Subject to Section 4(a)(xi), prepare and file with the SEC such amendments and supplements to such Registration Statement and the prospectus used in connection with such Registration Statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by such Registration Statement during the applicable effectiveness period;

(iii) As promptly as possible, furnish to the Holders such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as the Holders may reasonably request in order to facilitate the disposition of Registrable Securities owned by it;

(iv) As promptly as possible, register and qualify the securities covered by such Registration Statement under such other securities or Blue Sky laws of such jurisdictions as shall be necessary to effect the sale by the Holders of such securities; provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless (A) the Company is already subject to service in such jurisdiction or (B) required by the Securities Act;

(v) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering (subject to the Holders having also entered into and performed its obligations under such an agreement);

(vi) As promptly as possible, cause all such Registrable Securities so registered to be listed on the national securities exchange or automated quotation service on which the Company Common Stock is then listed;

(vii) Enter into all such arrangements with the transfer agent and registrar of the Company Common Stock as may be required in connection with the offer and sale of the Registrable Securities so registered and ensure that the CUSIP number for such Registrable Securities is the same as the CUSIP number for the Company Common Stock;

(viii) In the event of any underwritten public offering, cause to be furnished, on the date on which such Registrable Securities are sold to the underwriter: (i) an opinion, dated such date and addressed to the underwriters, of counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering and (ii) a comfort letter, dated such date and addressed to the underwriters, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering;

(ix) Shall not cause any other registration of Company Common Stock (or securities convertible into, or exchangeable or exercisable for, Company Common

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Stock), whether for its own account or for the account of any other Person (other than an Unrelated Registration Statement) to become effective within 90 calendar days following the completion of any Organized Sale (or such shorter period as required by the managing underwriter or placement agent);

(x) Provide the Holders, any participating underwriter and any attorney, accountant or other agent retained by the Holders or such underwriter, reasonable access, during normal business hours and upon prior notification, to appropriate officers of the Company and the Company’s subsidiaries to ask questions and to obtain information reasonably requested by any such Person and make available for inspection all financial and other records and other information, pertinent corporate documents and properties of any of the Company and its subsidiaries and affiliates as may be reasonably necessary to enable them to undertake customary due diligence; provided, however, that such Persons shall, at the Company’s request, first agree in writing with the Company that any information that is reasonably and in good faith designated by the Company as confidential at the time of delivery of such information shall be kept confidential by such Persons and shall be used solely for the purposes of exercising rights under this Agreement, unless (A) disclosure of such information is required by court or administrative order or is necessary to respond to inquiries of governmental or regulatory authorities, (B) disclosure of such information is required by law (including any disclosure requirements pursuant to federal securities laws in connection with the filing of any Registration Statement or the use of any prospectus referred to in this Agreement) or necessary to defend or prosecute a claim brought against or by any such Persons (e.g., to establish a “due diligence” defense), (C) such information becomes generally available to the public other than as a result of a disclosure or failure to safeguard by any such Person, or (D) such information becomes available to any such Person from a source other than the Company and such source is not known to be bound by a confidentiality agreement; and

(xi) In the event of: (A) the issuance by the SEC of a stop order suspending the effectiveness of a Registration Statement or the initiation of proceedings with respect to a Registration Statement under Section 8(d) or 8(e) of the Securities Act, (B) the occurrence of any event or the existence of any fact (a Material Event) as a result of which any Registration Statement shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, or any related prospectus shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or (C) the occurrence or existence of any pending corporate development that, in the reasonable discretion of the Company’s Board of Directors, would cause the failure to suspend the availability of a Registration Statement and related prospectus to be seriously detrimental to the Company and its stockholders:

(1) in the case of clause (B) above, subject to the next sentence, as promptly as practicable prepare and file, if necessary pursuant to applicable law, a post-effective amendment to such Registration Statement or a supplement to the related prospectus or any document incorporated therein by reference or file any other required document that would be incorporated by reference into such Registration Statement and related prospectus so that such Registration Statement

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does not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and such prospectus does not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, as thereafter delivered to the purchasers of the Registrable Securities being sold thereunder, and, in the case of a post-effective amendment to a Registration Statement, subject to the next sentence, use all commercially reasonable efforts to cause it to be declared effective as promptly as is practicable, and

(2) give notice to the Holders that the availability of such Registration Statement is suspended (a Suspension Notice) and, upon receipt of any Suspension Notice, the Holders agree not to sell any Registrable Securities pursuant to such Registration Statement until the Holders’ receipt of copies of the supplemented or amended prospectus provided for in clause (1) above, or until it is advised in writing by the Company that such prospectus may be used, and has received copies of any additional or supplemental filings that are incorporated or deemed incorporated by reference in such prospectus, or until the maximum number of applicable days set forth in clauses (B) or (C) in the following paragraph have passed.

The Company will use all commercially reasonable efforts to ensure that the use of the prospectus may be resumed (x) in the case of clause (A) above, as promptly as is practicable, (y) in the case of clause (B) above, as soon as, in the sole judgment of the Company, public disclosure of such Material Event would not be prejudicial to or contrary to the interests of the Company or, if necessary to avoid unreasonable burden or expense, as soon as practicable thereafter (but in no event for more than the lesser of 10 calendar days and the number of days which, aggregated with all other suspensions under clauses (B) and (C) above would result in the total number of suspended days in any twelve month period to exceed thirty (30) days) and (z) in the case of clause (C) above, as soon as in the reasonable discretion of the Company, such suspension is no longer necessary to avoid serious detriment to the Company and its stockholders (but in no event for more than the lesser of 10 calendar days and the number of days which, aggregated with all other suspensions under clauses (B) and (C) above would result in the total number of suspended days in any twelve month period to exceed thirty (30) days).

(b) In connection with any registration hereunder, the Holders shall furnish to the Company or to the managing underwriters of an offering, if any, such information regarding itself, the Registrable Securities held by it and the intended method of disposition of such securities as shall be reasonably required to effect the registration of Registrable Securities.

(c) Except as provided in Section 2(d), all expenses incurred in effecting any registration pursuant to this Agreement (including all registration, qualification and filing fees, printing expenses, escrow fees, fees and disbursements of counsel for the Company, blue sky fees and expenses, and expenses of any regular or special audits incident to or required by any such registration) shall be borne by the Company. All underwriting discounts, fees and disbursements of counsel for the Holders, brokers or other selling commissions and stock transfer taxes applicable to the sale of Registrable Securities shall be borne by the Holders.

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(d) With a view to making available to the Holders the benefits of Rule 144 under the Securities Act and any other rule or regulation of the SEC that may at any time permit the Holders to sell securities of the Company to the public without registration or pursuant to a Form S-3 Registration Statement, the Company agrees to: (i) make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times that the Company is subject to the periodic reporting requirements under Sections 13 or 15(d) of the Exchange Act, (ii) file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act and (iii) furnish to the Holders, forthwith upon request: (A) a written statement by the Company that it has complied with the reporting requirements of the Securities Act and the Exchange Act at all times after it has become subject to such reporting requirements, or that it qualifies as a registrant whose securities may be resold pursuant to a Form S-3 Registration Statement at any time after it so qualifies, (B) a copy of the most recent annual or quarterly report of the Company and such other statements, reports and other documents filed by the Company with the SEC, and (C) such other information as may be reasonably requested in availing the Holders of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to a Form S-3 Registration Statement.

(e) From the date hereof until termination of this Agreement: (i) the Company shall continue to use all commercially reasonable efforts to qualify for registration on Form S-3 Registration Statements for secondary sales and (ii) the Company shall not take any action designed to materially impair or otherwise adversely affect the rights of the Holders hereunder.

Section 5. Indemnification and Contribution. In the event any Registrable Securities are included in a Registration Statement contemplated by this Agreement:

(a) To the extent permitted by applicable law, the Company will indemnify and hold harmless the Holders, each of its officers, directors and partners, legal counsel, and accountants and each Person controlling the Holders within the meaning of Section 15 of the Securities Act, with respect to which registration has been effected pursuant to this Agreement, and each underwriter, if any, and each of its officers, directors, and each Person who controls, within the meaning of Section 15 of the Securities Act, any underwriter (the Persons referred to herein, the Holder Indemnified Persons), against all expenses, claims, losses, damages, and liabilities (or actions, proceedings, or settlements in respect thereof) arising out of or based on: (i) any untrue statement (or alleged untrue statement) of a material fact contained or incorporated by reference in any Registration Statement, or amendment thereto, or in any preliminary prospectus, final prospectus, “issuer free writing prospectus” (as defined in Rule 433 of the Securities Act), offering circular, or other document (including any related registration statement, notification, or similar document) incident to any such registration, (ii) any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of any in any preliminary prospectus, final prospectus or issuer free writing prospectus, or in any amendment or supplement thereto, in light of the circumstances under which they were made) not misleading, or (iii) any violation (or alleged violation) by the Company of applicable law (including the Securities Act, any state securities laws or any rule or regulation thereunder) applicable to the Company and relating to action or inaction required of the Company in connection with any offering covered by such registration, and the Company will reimburse each Holder Indemnified Person for any legal and any other expenses (including expenses of enforcement of obligations hereunder) incurred in connection with investigating and defending or settling any such claim, loss, damage, liability, or action; provided that the Company will not be

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liable in any such case to the extent that any such claim, loss, damage, liability, or action arises out of or is based on any untrue statement or omission based upon written information furnished to the Company by a Holder, any of such Holder’s officers, directors, partners, legal counsel or accountants, any Person controlling such Holder, such underwriter or any Person who controls any such underwriter and stated to be specifically for use therein; and provided further that the indemnity agreement contained in this Section 5(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, delayed or conditioned).

(b) To the extent permitted by law, each Holder will, if Registrable Securities held by such Holder are included in the securities as to which a registration is being effected pursuant to this Agreement, indemnify and hold harmless the Company, each of its directors, officers, partners, legal counsel, and accountants and each underwriter, if any, of the Company’s securities covered by such a registration, and each Person who controls the Company or such underwriter within the meaning of Section 15 of the Securities Act (a Company Indemnified Person), against all claims, losses, damages and liabilities (or actions, proceedings, or settlements in respect thereof) arising out of or based on: (i) any untrue statement (or alleged untrue statement) of a material fact contained or incorporated by reference in any Registration Statement, or amendment thereto, or in any preliminary prospectus, final prospectus, summary prospectus, “issuer free writing prospectus” offering circular, or other document (including any related registration statement, notification or similar document) incident to any such registration or (ii) any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of any in any preliminary prospectus, final prospectus or issuer free writing prospectus, or in any amendment or supplement thereto, in light of the circumstances under which they were made) not misleading, and will reimburse each Company Indemnified Person for any legal and any other expenses (including expenses of enforcement of obligations hereunder) incurred in connection with investigating or defending any such claim, loss, damage, liability, or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such Registration Statement , preliminary prospectus, final prospectus, summary prospectus, issuer free writing prospectus, offering circular, or other document (including any related registration statement, notification or similar document) in reliance upon and in conformity with written information furnished to the Company by such Holder, any of such Holder’s officers, directors, partners, legal counsel or accountants, and any Person controlling such Holder and stated to be specifically for use therein; provided that that the indemnity agreement contained in this Section 5(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of such Holder, which consent shall not be unreasonably withheld, delayed or conditioned; and provided further that in no event shall any indemnity under this Section 5(b) exceed the net proceeds from the offering received by such Holder (except in the case of fraud or willful misconduct by such Holder).

(c) Each Person entitled to indemnification under this Section 5 (an Indemnified Party) shall give notice to the Person required to provide indemnification under this Section 5 (an Indemnifying Party) promptly after such Indemnified Party has actual knowledge of any claim as to which indemnification may be sought hereunder, and shall permit the Indemnifying Party to assume the defense of such claim or any litigation resulting therefrom; provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or any litigation resulting therefrom, shall be approved by the Indemnified Party, which approval shall not be unreasonably

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withheld, delayed or conditioned, and the Indemnified Party may participate in such defense at such Indemnified Party’s expense; and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 5, except to the such failure is materially prejudicial. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. Each Indemnified Party shall furnish such information regarding itself or the claim in question as an Indemnifying Party may reasonably request in writing and as shall be reasonably required in connection with defense of such claim and litigation resulting therefrom.

(d) If the indemnification provided for in this Section 5 is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any loss, liability, claim, damage, or expense referred to herein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, liability, claim, damage, or expense in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party (on the one hand) and of the Indemnified Party (on the other) in connection with the statements or omissions that resulted in such loss, liability, claim, damage, or expense, as well as any other relevant equitable considerations; provided that (i) in no event shall a Holder be required to contribute any amount when combined with the amounts paid or payable by such Holder (if any) pursuant to Section 5(b) in excess of the net proceeds from the offering received by such Holder and (i) no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the Parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission.

(e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with an underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.

(f) Unless otherwise superceded by the underwriting agreement entered into in connection with an underwritten public offering, the obligations of the Company and the Holders under this Section 5 shall survive the consummation of any offering of Registrable Securities in a Registration Statement under this Agreement, and otherwise and shall survive the termination of this Agreement.

Section 6. Assignment of Registration Rights. The rights to cause the Company to register Registrable Securities pursuant to this Agreement may be transferred or assigned by the Investors to a transferee or assignee of such Registrable Securities that acquires at least 1,500,000 shares of Registrable Securities (subject to appropriate adjustment for stock splits, stock dividends, combinations, recapitalizations and other similar transactions after the date hereof). The Investors shall, within thirty (30) calendar days after such transfer or assignment, furnish the Company with written notice of the name and address of such transferee or assignee and the

Execution Copy

Registrable Securities with respect to which such registration rights are being assigned. Such transfer or assignment shall be effective only upon, and such transferee shall constitute a Holder hereunder, such transferee or assignee agreeing to be bound by and subject to the terms and conditions of this Agreement (to the extent of the obligations of the Investors hereunder).

Section 7. Limitations of Subsequent Registration Rights. For so long as the provisions of Section 3 of the Affiliation Agreement remain in effect, the Company shall not, without the prior written consent of the Ipsen, enter into any agreement or amend any existing agreement with any holder or prospective holder of any securities of the Company which would allow such holder or prospective holder: (a) to include such securities in any registration unless under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of such securities will not reduce the amount of the Registrable Securities of the Holders to be included or (b) to demand registration of any securities held by such holder or prospective holder; provided, however, that the foregoing limitation shall not apply to any holder or prospective holder of any securities of the Company acquired in connection with any issuance of securities of the Company in compliance with the provisions of Section 3(v) of the Affiliation Agreement. From and after the date the provisions of Section 3 of the Affiliation Agreement shall cease to be effective, the Company agrees that prior to effecting any registration (other than a Rights Holder Registration, a Kingsbridge Registration or a registration effected for the Holders), the Company shall provide the Holders with written notice at least 15 Business Days prior to effecting any such registration.

Section 8. Termination of Agreement. Subject to the provisions of Section 5(f), this Agreement shall terminate and be of no further force or effect in the event that there shall cease to be any Registrable Securities outstanding for a period of 90 days or more.

 

Section 9. Miscellaneous.

(a) Subject to the provisions of Section 3(c), with the written consent of (i) the Company and (ii) the Holders of a majority-in-interest of the then-outstanding Registrable Securities, the obligations of the Company and the rights of the Holders of the Registrable Securities under this Agreement may be waived or amended (either generally or in a particular instance, either retroactively or prospectively and either for a specified period of time or indefinitely).

(b) This Agreement is for the sole and exclusive benefit of the Parties and their successors and permitted assigns, and nothing herein expressed or implied shall give, or be construe to give, to any Person, other than the Parties and such successors and permitted assigns, any legal or equitable right, remedies or claims under or with respect to this Agreement or any provisions hereof.

(c) All notices, consents, waivers, and other communications required or permitted under this Agreement must be in writing and will be deemed to have been duly given when (i) delivered by hand to the Party to be notified, (ii) when sent by facsimile if sent during the normal business hours of the Party to be notified, if not, then on the next Business Day or (iii) when received by the Party to be notified, if sent by an internationally recognized overnight delivery service, specifying the soonest possible time and date of delivery, in each case to the appropriate addresses and facsimile numbers set forth below (or to such other addresses and facsimile numbers as a Party may designate by notice to the other Parties from time to time). All such notices and other communications shall be sent:

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  (A) if to the Investors, to:

Ipsen, S.A.

42, rue du Docteur Blanche

75016 Paris

France

Attention: General Counsel

Facsimile: +33 1 4496 1188

with a copy (which shall not constitute notice) to:

Freshfields Bruckhaus Deringer, LLP

520 Madison Avenue, 34th Floor

New York, NY 10022

UNITED STATES OF AMERICA

Attention: Matthew L. Jacobson, Esq.

Facsimile: +1 212 277 4001

and

 

  (B) if to the Company to:

Tercica, Inc.

2000 Sierra Point Parkway, Suite 400

Brisbane, California 94005

UNITED STATES OF AMERICA

Attention: General Counsel

Facsimile: +1 650 238 1520

with a copy (which shall not constitute notice) to:

Cooley Godward LLP

Five Palo Alto Square

3000 El Camino Real

Palo Alto, California 94306

UNITED STATES OF AMERICA

Attention: Suzanne Sawochka Hooper

Facsimile: +1 650 849 7400

(d) This Agreement may be executed in any number of counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the Parties and delivered to the other Parties. Any such counterpart may be delivered to a Party by facsimile.

(e) If any provision of this Agreement (or any portion thereof) or the application of any such provision (or any portion thereof) to any person or circumstance shall be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity,

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illegality or unenforceability shall not affect any other provision hereof (or the remaining portion thereof) or the application of such provision to any other persons or circumstances.

(f) This Agreement, the Purchase Agreement and the other documents delivered pursuant thereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and no party shall be liable or bound to any other in any manner by any oral or written representations, warranties, covenants and agreements except as specifically set forth herein and therein.

(g) This Agreement shall be construed in accordance with, and this Agreement and all matters arising out of or relating in any way whatsoever (whether in contract, tort or otherwise) to this Agreement shall be governed by, the law of the State of New York.

[SIGNATURE PAGE FOLLOWS;

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of the date first written above.

 

TERCICA, INC.

 

Name:

Title:

IPSEN, S.A.

 

Name:

Title:

SURAYPHARM

 

Name:

Title:

 EX-99.8 6 dex998.htm RIGHTS AGREEMENT Rights Agreement

Exhibit 8

 

TERCICA, INC.

and

COMPUTERSHARE TRUST COMPANY, N.A.

as Rights Agent

RIGHTS AGREEMENT

Dated as of October 13, 2006

 

TABLE OF CONTENTS

          PAGE
SECTION 1.    CERTAIN DEFINITIONS    1
SECTION 2.    APPOINTMENT OF RIGHTS AGENT    5
SECTION 3.    ISSUE OF RIGHT CERTIFICATES    5
SECTION 4.    FORM OF RIGHT CERTIFICATES    8
SECTION 5.    COUNTERSIGNATURE AND REGISTRATION    8
SECTION 6.    TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES    9
SECTION 7.    EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS    9
SECTION 8.    CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES    11
SECTION 9.    AVAILABILITY OF PREFERRED SHARES    11
SECTION 10.    PREFERRED SHARES RECORD DATE    12
SECTION 11.    ADJUSTMENT OF PURCHASE PRICE, NUMBER OF SHARES OR NUMBER OF RIGHTS    13
SECTION 12.    CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES    19
SECTION 13.    CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING POWER    20
SECTION 14.    FRACTIONAL RIGHTS AND FRACTIONAL SHARES    22
SECTION 15.    RIGHTS OF ACTION    24
SECTION 16.    AGREEMENT OF RIGHT HOLDERS    24
SECTION 17.    RIGHT CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER    24
SECTION 18.    CONCERNING THE RIGHTS AGENT    25
SECTION 19.    MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT    25
SECTION 20.    DUTIES OF RIGHTS AGENT    26
SECTION 21.    CHANGE OF RIGHTS AGENT    28
SECTION 22.    ISSUANCE OF NEW RIGHT CERTIFICATES    28
SECTION 23.    REDEMPTION    29
SECTION 24.    EXCHANGE    30
SECTION 25.    NOTICE OF CERTAIN EVENTS    32
SECTION 26.    NOTICES    32
SECTION 27.    SUPPLEMENTS AND AMENDMENTS    33
SECTION 28.    DETERMINATION AND ACTIONS BY THE BOARD OF DIRECTORS, ETC.    33

 

i.

Table Of Contents

(CONTINUED)

 

          PAGE
SECTION 29.    SUCCESSORS    34
SECTION 30.    BENEFITS OF THIS AGREEMENT    34
SECTION 31.    SEVERABILITY    35
SECTION 32.    GOVERNING LAW    35
SECTION 33.    COUNTERPARTS    35
SECTION 34.    FORCE MAJEURE    35
SECTION 35.    DESCRIPTIVE HEADINGS    35

 

ii.

RIGHTS AGREEMENT

THIS RIGHTS AGREEMENT (“Agreement”) between TERCICA, INC., a Delaware corporation (the “Company”), and COMPUTERSHARE TRUST COMPANY, N.A. (“Rights Agent”), is entered into as of this 13th day of October, 2006.

The Board of Directors of the Company (the “Board of Directors”) has authorized and declared a dividend of one preferred share purchase right (a “Right”) for each Common Share (as such term is hereinafter defined) outstanding at the close of business on October 27, 2006 (the “Record Date”), each Right representing the right to purchase one one-hundredth of a Preferred Share (as such term is hereinafter defined), upon the terms and subject to the conditions herein set forth, and has further authorized and directed the issuance of one Right with respect to each Common Share that shall become outstanding between the Record Date and the earliest to occur of the Distribution Date, the Redemption Date and the Final Expiration Date (as such terms are hereinafter defined); provided, however, that Rights may be issued with respect to Common Shares that shall become outstanding after the Distribution Date and prior to the earlier of the Redemption Date and the Final Expiration Date in accordance with the provisions of Section 22 hereof.

 

1.

Accordingly, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows:

SECTION 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the following terms have the meanings indicated:

(a) “Acquiring Person” shall mean any Person (as such term is hereinafter defined) who or that, together with all Affiliates and Associates (as such terms are hereinafter defined) of such Person, shall be the Beneficial Owner (as such term is hereinafter defined) of the Requisite Percentage. Notwithstanding the foregoing, (A) the term Acquiring Person shall not include (i) the Company, (ii) any Subsidiary (as such term is hereinafter defined) of the Company, (iii) any employee benefit or compensation plan of the Company or any Subsidiary of the Company, (iv) any entity holding Common Shares for or pursuant to the terms of any such employee benefit or compensation plan of the Company or any Subsidiary of the Company, or (v) an Excluded Stockholder (as such term is hereinafter defined) and (B) no Person shall become an “Acquiring Person” either (x) as the result of an acquisition of Common Shares by the Company that, by reducing the number of shares outstanding, increases the proportionate number of shares beneficially owned by such Person to the Requisite Percentage; provided, however, that if a Person shall become the Beneficial Owner of the Requisite Percentage by reason of share purchases by the Company and shall, following written notice from, or public disclosure by the Company of such share purchases by the Company, become the Beneficial Owner of any additional Common Shares without the prior approval of the Board of Directors and, if the Company is restricted from taking actions pursuant to Section 3 of the Affiliation Agreement, Ipsen, and shall then beneficially own more than the Requisite Percentage, then such Person shall be deemed to be an “Acquiring Person,” or (y) if the Board of Directors determines in good faith that a Person who would otherwise be an “Acquiring Person,” as defined pursuant to the foregoing provisions of this paragraph (a), has become such inadvertently, and such Person divests, as promptly as practicable (as determined in good faith by the Board of Directors), following receipt of written notice from the Company of such event, of Beneficial Ownership of a sufficient number of Common Shares so that such Person would no longer be an Acquiring Person, as defined pursuant to the foregoing provisions of this paragraph (a), then such Person shall not be deemed to be an “Acquiring Person” for any purposes of this Agreement; provided, however, that if such Person shall again become the Beneficial Owner of the Requisite Percentage, such Person shall be deemed an “Acquiring Person,” subject to the exceptions set forth in this Section 1(a).

(b) “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as in effect on the date of this Agreement; provided, however, that the limited partners of a limited partnership shall not be deemed to be Associates of such limited partnership solely by virtue of their limited partnership interests.

(c) “Affiliation Agreement” shall have the meaning ascribed to it in the Ipsen Purchase Agreement.

(d) A Person shall be deemed the “Beneficial Owner” of and shall be deemed to “beneficially own” any securities:

(i) that such Person or any of such Person’s Affiliates or Associates is deemed to beneficially own, within the meaning of Rule 13d-3 of the General Rules and Regulations under the Exchange Act as in effect on the date of this Rights Agreement (except to the extent contemplated by the provisos to Sections 1(d)(ii)(A) and 1(d)(ii)(B) hereof);

 

1.

(ii) that such Person or any of such Person’s Affiliates or Associates has (A) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities), or upon the exercise of conversion rights, exchange rights, rights (other than these Rights), warrants or options, or otherwise; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, securities (1) tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person’s Affiliates or Associates until such tendered securities are accepted for purchase or exchange or (2) acquired as a part of any employee benefit or compensation plan of the Company or any Subsidiary of the Company consistent with past practice; or (B) the right to vote pursuant to any agreement, arrangement or understanding; provided, however, that (1) with respect to Ipsen (including its Affiliates or Associates), Ipsen (including its Affiliates or Associates) shall not be deemed the Beneficial Owner of, or to beneficially own, any securities that Ipsen (including its Affiliates or Associates) has the right to vote pursuant to any Voting Agreement, and (2) a Person shall not be deemed the Beneficial Owner of, or to beneficially own, any security if the agreement, arrangement or understanding to vote such security (a) arises solely from a revocable proxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations promulgated under the Exchange Act and (b) is not also then reportable on Schedule 13D under the Exchange Act (or any comparable or successor report); or

(iii) that are beneficially owned, directly or indirectly, by any other Person with which such Person, or any of such Person’s Affiliates or Associates, has any agreement, arrangement or understanding (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities) for the purpose of acquiring, holding, voting (except to the extent contemplated by the proviso to Section 1(d)(ii)(B) hereof) or disposing of any securities of the Company.

Notwithstanding anything in this definition of Beneficial Ownership to the contrary, the phrase, “then outstanding,” when used with reference to a Person’s Beneficial Ownership of securities of the Company, shall mean the number of such securities then issued and outstanding together with the number of such securities not then actually issued and outstanding which such Person would be deemed to beneficially own hereunder.

(e) “Business Day” shall mean any day other than a Saturday, a Sunday, or a day on which banking institutions in the Commonwealth of Massachusetts are authorized or obligated by law or executive order to close.

(f) “Close of Business” on any given date shall mean 5:00 p.m., Eastern Time, on such date; provided, however, that if such date is not a Business Day it shall mean 5:00 p.m., Eastern Time, on the next succeeding Business Day.

 

2.

(g) “Common Shares” shall mean the shares of common stock, par value $0.001 per share, of the Company; provided, however, that, “Common Shares,” when used in this Agreement in connection with a specific reference to any Person other than the Company, shall mean the capital stock (or equity interest) with the greatest voting power of such other Person or, if such other Person is a Subsidiary of another Person, the Person or Persons which ultimately control such first-mentioned Person.

(h) “Convertible Notes” shall have the meaning ascribed to it in the Ipsen Purchase Agreement.

(i) “Distribution Date” shall have the meaning set forth in Section 3 hereof.

(j) “Excluded Stockholder” shall mean each of the following Persons:

(i) MPM Capital L.P. (including its Affiliates and Associates); provided, however, that MPM Capital L.P. (including its Affiliates and Associates) shall not be an Excluded Stockholder if MPM Capital L.P. (including its Affiliates and Associates) becomes the Beneficial Owner of any Common Shares other than Common Shares Beneficially Owned on October 13, 2006;

(ii) Ipsen (including its Affiliates and Associates), so long as Ipsen (including its Affiliates and Associates) does not acquire beneficial ownership of any Common Shares other than Common Shares Ipsen (including its Affiliates and Associates) (A) acquires (or has the right to acquire) beneficial ownership of directly from the Company pursuant to the Ipsen Purchase Agreement, the Affiliation Agreement, the Convertible Notes and the Warrant, and (B) acquires beneficial ownership of from Persons other than the Company pursuant to Permitted Offers and Acquisitions (any such acquisition pursuant to this subclause (B), an “Exempted Acquisition”); and

(iii) any Person (including its Affiliates and Associates) who acquires Common Shares directly from Ipsen (including its Affiliates and Associates) (an “Ipsen Transfer”); provided, however, that such Person (including its Affiliates and Associates) (an “Ipsen Transfer Holder”) shall not be an Excluded Stockholder if, after giving effect to such Ipsen Transfer, such Ipsen Transfer Holder (including its Affiliates and Associates) is or becomes the Beneficial Owner of more than 14.9% of the outstanding Common Shares without the prior approval of the Board of Directors and, if the Company is restricted from taking actions pursuant to Section 3 of the Affiliation Agreement, Ipsen.

(k) “Exempted Ipsen Transfer” shall mean any Ipsen Transfer if, following such Ipsen Transfer, the Ipsen Transfer Holder (including its Affiliates and Associates) that acquires Common Shares in such Ipsen Transfer shall qualify as an Excluded Stockholder pursuant to the terms of Section 1(j)(iii) and shall not otherwise be an Acquiring Person.

(l) “Final Expiration Date” shall have the meaning set forth in Section 7 hereof.

(m) “Interested Stockholder” shall mean any Acquiring Person or any Affiliate or Associate of an Acquiring Person, or any other Person acting directly or indirectly on behalf of or in concert with any such Acquiring Person, Affiliate or Associate.

 

3.

(n) “Ipsen” shall mean Ipsen S.A., a French société anonyme.

(o) “Ipsen Purchase Agreement” shall mean that certain Stock Purchase and Master Transaction Agreement, dated as of July 18, 2006, by and between the Company and Ipsen (as the same may be amended from time to time).

(p) “Note Shares” shall have the meaning ascribed to it in the Ipsen Purchase Agreement.

(q) “Permitted Offers and Acquisitions” shall have the meaning ascribed to it in the Affiliation Agreement.

(r) “Person” shall mean any individual, firm, corporation or other entity, and shall include any successor (by merger or otherwise) of such entity.

(s) “Preferred Shares” shall mean shares of Series A Junior Participating Preferred Stock, par value $0.001 per share, of the Company having the designations and the powers, preferences and rights, and the qualifications, limitations and restrictions set forth in the Form of Certificate of Designation attached to this Agreement as EXHIBIT A.

(t) “Purchase Price” shall have the meaning set forth in Section 7 hereof.

(u) “Redemption Date” shall have the meaning set forth in Section 7 hereof.

(v) “Requisite Percentage” with respect to any Person shall mean 9.9% or more of the Common Shares then outstanding; provided, however, that notwithstanding the foregoing, the Requisite Percentage with respect to (i) MPM Capital L.P. (including its Affiliates and Associates), until MPM Capital L.P. (including its Affiliates and Associates) shall have beneficial ownership equal to 9.9% or less, shall mean the percentage equal to the percentage beneficial ownership held solely by reason of the Common Shares held by MPM Capital L.P. (including its Affiliates and Associates) on October 13, 2006, (ii) Ipsen (including its Affiliates and Associates), until Ipsen (including its Affiliates and Associates) shall have beneficial ownership equal to 9.9% or less, shall mean the percentage equal to the percentage beneficial ownership obtained solely by reason of beneficial ownership of Common Shares acquired by Ipsen (including its Affiliates and Associates) (A) directly from the Company pursuant to the Ipsen Purchase Agreement, the Affiliation Agreement, the Convertible Notes or the Warrant and (B) in Exempted Acquisitions, and (iii) an Ipsen Transfer Holder (including its Affiliates and Associates) shall mean 14.9% or more of the Common Shares then outstanding.

(w) “Shares Acquisition Date” shall mean the first date of public announcement by the Company or an Acquiring Person that an Acquiring Person has become such; provided, however, that, if such Person is determined not to have become an Acquiring Person pursuant to clause (y) of Subsection 1(a)(B) hereof, then no Shares Acquisition Date shall be deemed to have occurred. Notwithstanding anything in this Agreement to the contrary, no Shares Acquisition Date shall be deemed to have occurred solely as a result of (i) (A) the approval, execution, delivery or amendment of the Stock Purchase Agreement, the Affiliation Agreement, any Voting Agreement or any other agreements or documents contemplated by the Stock Purchase Agreement, (B) the announcement of the Stock Purchase Agreement or the announcement of the

 

4.

closing of the transactions contemplated thereby, (C) the acceptance for payment and purchase of Common Shares pursuant to the Stock Purchase Agreement, (D) the issuance of the Convertible Notes or the Warrants pursuant to the Stock Purchase Agreement, (E) the issuance of the Note Shares or the Warrant Shares upon any conversion of the Convertible Notes or any exercise of the Warrant, respectively, (F) the acquisition of beneficial ownership of Common Shares by Ipsen (including its Affiliates and Associates) directly from the Company pursuant to the Affiliation Agreement, (G) the acquisition of beneficial ownership of Common Shares in an Exempted Acquisition for so long as Ipsen (including its Affiliates and Associates) shall remain an Excluded Stockholder, or (H) the consummation of any other transaction contemplated by the Stock Purchase Agreement; or (ii) (A) the approval, execution, delivery or amendment of the definitive agreement(s) for an Exempted Ipsen Transfer, (B) the announcement or closing of an Exempted Ipsen Transfer, (C) the acceptance for payment and purchase of Common Shares pursuant to an Exempted Ipsen Transfer, or (D) the consummation of any other transaction contemplated by the definitive agreement(s) for an Exempted Ipsen Transfer.

(x) “Subsidiary” of any Person shall mean any corporation or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by such Person.

(y) “Transaction” shall mean any merger, consolidation or sale of assets described in Section 13(a) hereof or any acquisition of Common Shares which would result in a Person becoming an Acquiring Person or a Principal Party (as such term is hereinafter defined).

(z) “Transaction Person” with respect to a Transaction shall mean (i) any Person who (x) is or will become an Acquiring Person or a Principal Party (as such term is hereinafter defined) if the Transaction were to be consummated and (y) directly or indirectly proposed or nominated a director of the Company which director is in office at the time of consideration of the Transaction, or (ii) an Affiliate or Associate of such a Person.

(aa) “Voting Agreement” shall have the meaning ascribed to it in the Ipsen Purchase Agreement.

(bb) “Warrant” shall have the meaning ascribed to it in the Ipsen Purchase Agreement.

(cc) “Warrant Shares” shall have the meaning ascribed to it in the Ipsen Purchase Agreement.

SECTION 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the Rights Agent to act as agent for the Company in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such co-Rights Agents as it may deem necessary or desirable upon ten (10) days’ prior written notice to the Rights Agent. The Rights Agent shall have no duty to supervise, and in no event be liable for, the acts or omissions of any such co-Rights Agent.

 

5.

SECTION 3. ISSUE OF RIGHT CERTIFICATES.

(a) Until the earlier of the Close of Business on (i) the tenth Business Day following the Shares Acquisition Date or (ii) the tenth Business Day (or such later date as may be determined by action of the Board of Directors and, if the Company is restricted from taking actions pursuant to Section 3 of the Affiliation Agreement, Ipsen, prior to such time as any Person becomes an Acquiring Person) after the date of the commencement (determined in accordance with Rule 14d-2 under the Exchange Act) by any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company or any entity holding Common Shares for or pursuant to the terms of any such plan) of, or of the first public announcement of the intention of any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company or any entity holding Common Shares for or pursuant to the terms of any such plan) to commence, a tender or exchange offer (which intention to commence remains in effect for five Business Days after such announcement), the consummation of which would result in any Person becoming an Acquiring Person (including any such date which is after the date of this Agreement and prior to the issuance of the Rights, the earlier of such dates being herein referred to as the “Distribution Date”), (x) the Rights will be evidenced by the certificates for Common Shares registered in the names of the holders thereof (which certificates shall also be deemed to be Right Certificates) and not by separate Right Certificates, and (y) the Rights (and the right to receive Right Certificates therefor) will be transferable only in connection with the transfer of Common Shares. As soon as practicable after the Distribution Date, the Company will prepare and execute, the Rights Agent will countersign, and the Company will send or cause to be sent (and the Rights Agent will, if requested, send) by first-class, insured, postage-prepaid mail, to each record holder of Common Shares as of the Close of Business on the Distribution Date, at the address of such holder shown on the records of the Company, a Right Certificate, in substantially the form of EXHIBIT B hereto (a “Right Certificate”), evidencing one Right for each Common Share so held, subject to the adjustment provisions of Section 11 of this Rights Agreement. As of the Distribution Date, the Rights will be evidenced solely by such Right Certificates. Notwithstanding anything in this Agreement to the contrary, no Distribution Date shall be deemed to have occurred solely as a result of (i) (A) the approval, execution, delivery or amendment of the Stock Purchase Agreement, the Affiliation Agreement, any Voting Agreement or any other agreements or documents contemplated by the Stock Purchase Agreement, (B) the announcement of the Stock Purchase Agreement or the announcement of the closing of the transactions contemplated thereby, (C) the acceptance for payment and purchase of Common Shares pursuant to the Stock Purchase Agreement, (D) the issuance of the Convertible Notes or the Warrants pursuant to the Stock Purchase Agreement, (E) the issuance of the Note Shares or the Warrant Shares upon any conversion of the Convertible Notes or any exercise of the Warrant, respectively, (F) the acquisition of beneficial ownership of Common Shares by Ipsen (including its Affiliates and Associates) directly from the Company pursuant to the Affiliation Agreement, (G) the acquisition of beneficial ownership of Common Shares in an Exempted Acquisition for so long as Ipsen (including its Affiliates and Associates) shall remain an Excluded Stockholder, or (H) the consummation of any other transaction contemplated by the Stock Purchase Agreement; or (ii) (A) the approval, execution, delivery or amendment of the definitive agreement(s) for an Exempted Ipsen Transfer, (B) the announcement or closing of an Exempted Ipsen Transfer, (C) the acceptance for payment and purchase of Common Shares pursuant to an Exempted Ipsen Transfer, or (D) the consummation of any other transaction contemplated by the definitive agreement(s) for an Exempted Ipsen Transfer.

 

6.

(b) On the Record Date, or as soon as practicable thereafter, the Company will send (directly or through the Rights Agent or its transfer agent) a copy of a Summary of Rights to Purchase Preferred Shares, in substantially the form of EXHIBIT C hereto (the “Summary of Rights”), by first-class, postage-prepaid mail, to each record holder of Common Shares as of the Close of Business on the Record Date, at the address of such holder shown on the records of the Company. With respect to certificates for Common Shares outstanding as of the Record Date, until the Distribution Date, the Rights will be evidenced by such certificates registered in the names of the holders thereof. Until the Distribution Date (or the earlier of the Redemption Date and the Final Expiration Date), the surrender for transfer of any certificate for Common Shares outstanding on the Record Date shall also constitute the transfer of the Rights associated with the Common Shares represented thereby.

(c) Certificates for Common Shares which become outstanding (including, without limitation, reacquired Common Shares referred to in the last sentence of this paragraph (c)) after the Record Date but prior to the earliest of the Distribution Date, the Redemption Date or the Final Expiration Date shall have impressed on, printed on, written on or otherwise affixed to them the following legend:

This certificate also evidences and entitles the holder hereof to certain rights as set forth in a Rights Agreement between Tercica, Inc. (the “Company”) and Computershare Trust Company, N.A. as Rights Agent (the “Rights Agent”), dated as of October 13, 2006, as amended from time to time (the “Rights Agreement”), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of the Company. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. The Company will mail to the holder of this certificate a copy of the Rights Agreement without charge after receipt of a written request therefor. As described in the Rights Agreement, Rights issued to any Person who becomes an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement) and certain related persons, whether currently held by or on behalf of such Person or by any subsequent holder, shall become null and void.

With respect to such certificates containing the foregoing legend, until the Distribution Date (or, if earlier, the earlier of the Redemption Date or the Final Expiration Date), the Rights associated with the Common Shares represented by such certificates shall be evidenced by such certificates alone, and the surrender for transfer of any such certificate shall also constitute the transfer of the Rights associated with the Common Shares represented thereby. In the event that the Company purchases or acquires any Common Shares after the Record Date but prior to the Distribution Date, any Rights associated with such Common Shares shall be deemed canceled and retired so that the Company shall not be entitled to exercise any Rights associated with the Common Shares which are no longer outstanding. Notwithstanding this Section 3(c), the omission of a legend shall not affect the enforceability of any part of this Rights Agreement or the rights of any holder of the Rights.

 

7.

SECTION 4. FORM OF RIGHT CERTIFICATES .

(a) The Right Certificates (and the form of election to purchase Preferred Shares, the form of assignment and the form of certification to be printed on the reverse thereof) shall be substantially the same as EXHIBIT B hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange or quotation system on which the Rights may from time to time be listed, or to conform to usage. Subject to the provisions of Sections 7, 11 and 22 hereof, the Right Certificates shall entitle the holders thereof to purchase such number of one one-hundredths of a Preferred Share as shall be set forth therein at the Purchase Price, but the number of such one one-hundredths of a Preferred Share and the Purchase Price shall be subject to adjustment as provided herein.

(b) Any Right Certificate issued pursuant to Section 3(a) or Section 22 hereof that represents Rights which are null and void pursuant to the second paragraph of Section 11(a)(ii) hereof and any Right Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer, exchange, replacement or adjustment of any other Right Certificate referred to in this sentence, shall contain (to the extent feasible) the following legend:

The Rights represented by this Right Certificate are or were beneficially owned by a Person who was or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such terms are defined in the Rights Agreement). Accordingly, this Right Certificate and the Rights represented hereby are null and void.

The provisions of Section 11(a)(ii) hereof shall be operative whether or not the foregoing legend is contained on any such Right Certificate.

SECTION 5. COUNTERSIGNATURE AND REGISTRATION . The Right Certificates shall be executed on behalf of the Company by its Chairman of the Board of Directors, its Chief Executive Officer, its President, its Vice Chairman of the Board of Directors, its Chief Financial Officer, or any of its Vice Presidents, either manually or by facsimile signature, shall have affixed thereto the Company’s seal or a facsimile thereof, and shall be attested by the Secretary or an Assistant Secretary of the Company, either manually or by facsimile signature. The Right Certificates shall be manually countersigned by the Rights Agent and shall not be valid for any purpose unless countersigned. In case any officer of the Company who shall have signed any of the Right Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Right Certificates, nevertheless, may be countersigned by the Rights Agent and issued and delivered by the Company with the same force and effect as though the person who signed such Right Certificates had not ceased to be such officer of the Company; and any Right Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Right Certificate, shall be a proper officer of the Company to sign such Right Certificate, although at the date of the execution of this Agreement any such person was not such an officer.

 

8.

Following the Distribution Date, the Rights Agent will keep or cause to be kept, at its office designated for such purpose, books for registration and transfer of the Right Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Right Certificates, the number of Rights evidenced on its face by each of the Right Certificates and the date of each of the Right Certificates.

SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES. Subject to the provisions of Section 11(a)(ii), Section 14 and Section 24 hereof, at any time after the Close of Business on the Distribution Date, and at or prior to the Close of Business on the earlier of the Redemption Date or the Final Expiration Date, any Right Certificate or Right Certificates may be transferred, split up, combined or exchanged for another Right Certificate or Right Certificates, entitling the registered holder to purchase a like number of one one-hundredths of a Preferred Share as the Right Certificate or Right Certificates surrendered then entitled such holder to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Right Certificate or Right Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Right Certificate or Right Certificates to be transferred, split up, combined or exchanged at the office of the Rights Agent designated for such purpose. Neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any such surrendered Right Certificate until the registered holder shall have completed and signed the certificate contained in the form of assignment on the reverse side of such Right Certificate and shall have provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request. Thereupon the Rights Agent shall, subject to Section 11(a)(ii), Section 14 and Section 24 hereof, countersign and deliver to the person entitled thereto a Right Certificate or Right Certificates, as the case may be, as so requested. The Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Right Certificates.

Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Right Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and, at the Company’s request, reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Right Certificate if mutilated, the Company will issue, execute and deliver a new Right Certificate of like tenor to the Rights Agent for countersignature and delivery to the registered holder in lieu of the Right Certificate so lost, stolen, destroyed or mutilated.

Notwithstanding any other provisions hereof, the Company and the Rights Agent may amend this Rights Agreement to provide for uncertificated Rights in addition to or in place of Rights evidenced by Rights Certificates.

SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS .

(a) The registered holder of any Right Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein) in whole or in part at any time after the

 

9.

Distribution Date upon surrender of the Right Certificate, with the form of election to purchase on the reverse side thereof duly executed, to the Rights Agent at the office of the Rights Agent designated for such purpose, together with payment of the Purchase Price for each one one-hundredth of a Preferred Share (or such other number of shares or other securities) as to which the Rights are exercised, at or prior to the earliest of (i) the Close of Business on October 26, 2016 (the “Final Expiration Date”), (ii) the time at which the Rights are redeemed as provided in Section 23 hereof (the “Redemption Date”), or (iii) the time at which such Rights are exchanged as provided in Section 24 hereof.

(b) The purchase price for each one one-hundredth of a Preferred Share pursuant to the exercise of a Right shall initially be $40.00 (the “Purchase Price”) and shall be subject to adjustment from time to time as provided in Sections 11 and 13 hereof and shall be payable in lawful money of the United States of America in accordance with paragraph (c) below.

(c) Upon receipt of a Right Certificate representing exercisable Rights, with the form of election to purchase duly executed, accompanied by payment of the Purchase Price for the shares to be purchased and an amount equal to any applicable transfer tax required to be paid by the holder of such Right Certificate in accordance with Section 9 hereof by certified check, cashier’s check, bank draft or money order payable to the order of the Company, the Rights Agent shall thereupon promptly (i) (A) requisition from any transfer agent for the Preferred Shares certificates for the number of Preferred Shares to be purchased and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests, or (B) if the Company, in its sole discretion, shall have elected to deposit the Preferred Shares issuable upon exercise of the Rights hereunder into a depository, requisition from the depositary agent depositary receipts representing such number of one one-hundredths of a Preferred Share as are to be purchased (in which case certificates for the Preferred Shares represented by such receipts shall be deposited by the transfer agent with the depositary agent) and the Company hereby directs the depositary agent to comply with such request, (ii) when appropriate, requisition from the Company the amount of cash to be paid in lieu of issuance of fractional shares in accordance with Section 14 hereof, (iii) after receipt of such certificates or depositary receipts, cause the same to be delivered to or upon the order of the registered holder of such Right Certificate, registered in such name or names as may be designated by such holder and (iv) when appropriate, after receipt, deliver such cash to or upon the order of the registered holder of such Right Certificate. In the event that the Company is obligated to issue securities of the Company other than Preferred Shares (including Common Shares) of the Company pursuant to Section 11(a) hereof, the Company will make all arrangements necessary so that such other securities are available for distribution by the Rights Agent, if and when appropriate.

In addition, in the case of an exercise of the Rights by a holder pursuant to Section 11(a)(ii) hereof, the Rights Agent shall return such Right Certificate to the registered holder thereof after imprinting, stamping or otherwise indicating thereon that the rights represented by such Right Certificate no longer include the rights provided by Section 11(a)(ii) hereof, and, if fewer than all the Rights represented by such Right Certificate were so exercised, the Rights Agent shall indicate on the Right Certificate the number of Rights represented thereby which continue to include the rights provided by Section 11(a)(ii) hereof.

 

10.

(d) In case the registered holder of any Right Certificate shall exercise fewer than all the Rights evidenced thereby (other than a partial exercise of rights pursuant to Section 11(a)(ii) as described in Section 7(c) hereof), a new Right Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent to the registered holder of such Right Certificate or to his duly authorized assigns, subject to the provisions of Section 14 hereof.

(e) The Company covenants and agrees that it will cause to be reserved and kept available out of its authorized and unissued Preferred Shares or any Preferred Shares held in its treasury, the number of Preferred Shares that will be sufficient to permit the exercise in full of all outstanding Rights in accordance with this Section 7.

(f) Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder upon the occurrence of any purported exercise as set forth in this Section 7 unless such registered holder shall have (i) completed and signed the certification following the form of election to purchase set forth on the reverse side of the Rights Certificate surrendered for such exercise, (ii) tendered the Purchase Price (and an amount equal to any applicable transfer tax required to be paid by the holder of such Right Certificate in accordance with Section 9) to the Company in the manner set forth in Section 7(c), and (iii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request.

SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES. All Right Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or to any of its agents, be delivered to the Rights Agent for cancellation or in canceled form, or, if delivered or surrendered to the Rights Agent, shall be canceled by it, and no Right Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Right Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all canceled Right Certificates to the Company approximately one and one-half years after the cancellation date, or shall, at the written request of the Company, destroy such canceled Right Certificates, and in such case shall deliver a certificate of destruction thereof to the Company.

SECTION 9. AVAILABILITY OF PREFERRED SHARES. The Company covenants and agrees that so long as the Preferred Shares (and, after the time a person becomes an Acquiring Person, Common Shares or any other securities) issuable upon the exercise of the Rights may be listed on any national securities exchange or quotation system, the Company shall use its best efforts to cause, from and after such time as the Rights become exercisable, all shares reserved for such issuance to be listed on such exchange or quotation system upon official notice of issuance upon such exercise.

The Company covenants and agrees that it will take all such action as may be necessary to ensure that all Preferred Shares (or Common Shares and other securities, as the case may be) delivered upon exercise of Rights shall, at the time of delivery of the certificates for such Preferred Shares (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and nonassessable shares or other securities.

 

11.

The Company further covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and charges which may be payable in respect of the issuance or delivery of the Right Certificates or of any Preferred Shares upon the exercise of Rights. The Company shall not, however, be required to pay any transfer tax which may be payable in respect of any transfer or delivery of Right Certificates to a Person other than, or the issuance or delivery of certificates or depositary receipts for the Preferred Shares in a name other than that of, the registered holder of the Right Certificate evidencing Rights surrendered for exercise or to issue or to deliver any certificates or depositary receipts for Preferred Shares upon the exercise of any Rights until any such tax shall have been paid (any such tax being payable by the holder of such Right Certificate at the time of surrender) or until it has been established to the Company’s reasonable satisfaction that no such tax is due.

As soon as practicable after the Distribution Date, the Company shall use its best efforts to:

(i) prepare and file a registration statement under the Securities Act of 1933, as amended (the “Act”), with respect to the securities purchasable upon exercise of the Rights on an appropriate form, will use its best efforts to cause such registration statement to become effective as soon as practicable after such filing and will use its best efforts to cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Act) until the Final Expiration Date; and

(ii) use its best efforts to qualify or register the Rights and the securities purchasable upon exercise of the Rights under the blue sky laws of such jurisdictions as may be necessary or appropriate.

SECTION 10. PREFERRED SHARES RECORD DATE . Each person in whose name any certificate for Preferred Shares or other securities is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of the Preferred Shares or other securities represented thereby on, and such certificate shall be dated, the date upon which the Right Certificate evidencing such Rights was duly surrendered with the forms of election and certification duly executed and payment of the Purchase Price (and any applicable transfer taxes) was made; provided, however, that if the date of such surrender and payment is a date upon which the Preferred Shares or other securities transfer books of the Company are closed, such person shall be deemed to have become the record holder of such shares on, and such certificate shall be dated, the next succeeding Business Day on which the Preferred Shares or other securities transfer books of the Company are open. Prior to the exercise of the Rights evidenced thereby, the holder of a Right Certificate, as such, shall not be entitled to any rights of a holder of Preferred Shares for which the Rights shall be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein.

 

12.

SECTION 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER OF SHARES OR NUMBER OF RIGHTS . The Purchase Price, the number of Preferred Shares covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11.

(a)

(i) In the event the Company shall at any time after the date of this Agreement (A) declare a dividend on the Preferred Shares payable in Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine the outstanding Preferred Shares into a smaller number of Preferred Shares or (D) issue any shares of its capital stock in a reclassification of the Preferred Shares (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), except as otherwise provided in this Section 11(a), the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, and the number and kind of shares of capital stock issuable on such date, shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive the aggregate number and kind of shares of capital stock which, if such Right had been exercised immediately prior to such date and at a time when the Preferred Shares transfer books of the Company were open, such holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one Right. If an event occurs which would require an adjustment under both Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment provided for in this Section 11(a)(i) shall be in addition to, and shall be made prior to any adjustment required pursuant to Section 11(a)(ii) hereof.

(ii) Subject to Section 24 hereof and the provisions of the next paragraph of this Section 11(a)(ii), in the event any Person shall become an Acquiring Person, each holder of a Right shall, for a period of 60 days after the later of such time any Person becomes an Acquiring Person or the effective date of an appropriate registration statement filed under the Act pursuant to Section 9 hereof (provided, however that, if at any time prior to the expiration or termination of the Rights there shall be a temporary restraining order, a preliminary injunction, an injunction, or temporary suspension by the Board of Directors and, if the Company is restricted from taking actions pursuant to Section 3 of the Affiliation Agreement, Ipsen, or similar obstacle to exercise of the Rights (the “Injunction”) which prevents exercise of the Rights, a new 60-day period shall commence on the date the Injunction is removed), have a right to receive, upon exercise thereof at a price equal to the then current Purchase Price multiplied by the number of one one-hundredths of a Preferred Share for which a Right is then exercisable, in accordance with the terms of this Agreement and in lieu of Preferred Shares, such number of Common Shares as shall equal the result obtained by (A) multiplying the then current Purchase Price by the number of one one-hundredths of a Preferred Share for which a Right is then exercisable and dividing that product by (B) 50% of the then current per share market price of the Common Shares (determined pursuant to Section 11(d) hereof) on the date such Person became an Acquiring Person; provided, however, that if the transaction that would otherwise give rise to the foregoing adjustment is also subject to the provisions of Section 13 hereof, then only the provisions of

 

13.

Section 13 hereof shall apply and no adjustment shall be made pursuant to this Section 11(a)(ii). In the event that any Person shall become an Acquiring Person and the Rights shall then be outstanding, the Company shall not take any action which would eliminate or diminish the benefits intended to be afforded by the Rights.

Notwithstanding anything in this Agreement to the contrary, from and after the time any Person becomes an Acquiring Person, any Rights beneficially owned by (i) such Acquiring Person or an Associate or Affiliate of such Acquiring Person, (ii) a transferee of such Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person became such, or (iii) a transferee of such Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person’s becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom the Acquiring Person has any continuing agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which the Board of Directors has determined is part of a plan, arrangement or understanding which has as a primary purpose or effect the avoidance of this Section 11(a)(ii), shall become null and void without any further action and no holder of such Rights shall have any rights whatsoever with respect to such Rights, whether under any provision of this Agreement or otherwise. The Company shall use all reasonable efforts to insure that the provisions of this Section 11(a)(ii) and Section 4(b) hereof are complied with, but shall have no liability to any holder of Right Certificates or other Person as a result of its failure to make any determinations with respect to an Acquiring Person or its Affiliates, Associates or transferees hereunder. No Right Certificate shall be issued at any time upon the transfer of any Rights to an Acquiring Person whose Rights would be void pursuant to the preceding sentence or any Associate or Affiliate thereof or to any nominee of such Acquiring Person, Associate or Affiliate; and any Right Certificate delivered to the Rights Agent for transfer to an Acquiring Person whose Rights would be void pursuant to the preceding sentence shall be canceled.

(iii) In lieu of issuing Common Shares in accordance with Section 11(a)(ii) hereof, the Company may, if a majority of the Board of Directors then in office and, if the Company is restricted from taking actions pursuant to Section 3 of the Affiliation Agreement, Ipsen, determines that such action is necessary or appropriate and not contrary to the interests of holders of Rights, elect to (and, in the event that the Board of Directors has not exercised the exchange right contained in Section 24(c) hereof and there are not sufficient treasury shares and authorized but unissued Common Shares to permit the exercise in full of the Rights in accordance with the foregoing subparagraph (ii), the Company shall) take all such action as may be necessary to authorize, issue or pay, upon the exercise of the Rights, cash (including by way of a reduction of the Purchase Price), property, Common Shares, other securities or any combination thereof having an aggregate value equal to the value of the Common Shares which otherwise would have been issuable pursuant to Section 11(a)(ii) hereof, which aggregate value shall be determined by a nationally recognized investment banking firm selected by a majority of the Board of Directors then in office. For purposes of the preceding sentence, the value of the Common Shares shall be determined pursuant to Section 11(d) hereof. Any such election by the Board of Directors and, if the Company is restricted from taking actions pursuant to Section 3 of the Affiliation Agreement, Ipsen, must be made within 60 days following the date on which the event described in Section 11(a)(ii) hereof shall have occurred. Following the occurrence of the

 

14.

event described in Section 11(a)(ii) hereof, a majority of the Board of Directors then in office and, if the Company is restricted from taking actions pursuant to Section 3 of the Affiliation Agreement, Ipsen, may suspend the exercisability of the Rights for a period of up to 60 days following the date on which the event described in Section 11(a)(ii) hereof shall have occurred to the extent that such directors have not determined whether to exercise their rights of election under this Section 11(a)(iii). In the event of any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended.

(b) In case the Company shall fix a record date for the issuance of rights, options or warrants to all holders of Preferred Shares entitling them (for a period expiring within 45 calendar days after such record date) to subscribe for or purchase Preferred Shares (or shares having the same designations and the powers, preferences and rights, and the qualifications, limitations and restrictions as the Preferred Shares (“equivalent preferred shares”)) or securities convertible into Preferred Shares or equivalent preferred shares at a price per Preferred Share or equivalent preferred share (or having a conversion price per share, if a security convertible into Preferred Shares or equivalent preferred shares) less than the then current per share market price of the Preferred Shares (as such term is hereinafter defined) on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of Preferred Shares outstanding on such record date plus the number of Preferred Shares which the aggregate offering price of the total number of Preferred Shares and/or equivalent preferred shares so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such current market price and the denominator of which shall be the number of Preferred Shares outstanding on such record date plus the number of additional Preferred Shares and/or equivalent preferred shares to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible); provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one Right. In case such subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board of Directors, whose determination shall be described in a statement filed with the Rights Agent. Preferred Shares owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed; and in the event that such rights, options or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed.

(c) In case the Company shall fix a record date for the making of a distribution to all holders of the Preferred Shares (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing or surviving corporation) of evidences of indebtedness or assets (other than a regular quarterly cash dividend or a dividend payable in Preferred Shares) or subscription rights or warrants (excluding those referred to in Section 11(b) hereof), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the then current per share market price of the

 

15.

Preferred Shares (as such term is hereinafter defined) on such record date, less the fair market value (as determined in good faith by the Board of Directors, whose determination shall be described in a statement filed with the Rights Agent) of the portion of the assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to one Preferred Share and the denominator of which shall be such current per share market price of the Preferred Shares; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company to be issued upon exercise of one Right. Such adjustments shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the Purchase Price shall again be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed.

(d)

(i) For the purpose of any computation hereunder, the “current per share market price” of any security (a “Security” for the purpose of this Section 11(d)(i)) on any date shall be deemed to be the average of the daily closing prices per share of such Security for the 30 consecutive Trading Days (as such term is hereinafter defined) immediately prior to such date; provided, however, that in the event that the current per share market price of the Security is determined during a period following the announcement by the issuer of such Security of (A) a dividend or distribution on such Security payable in shares of such Security or securities convertible into such shares, or (B) any subdivision, combination or reclassification of such Security or securities convertible into such shares, or (C) any subdivision, combination or reclassification of such Security and prior to the expiration of 30 Trading Days after the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, then, and in each such case, the current per share market price shall be appropriately adjusted to reflect the current market price per share equivalent of such Security. The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Security is not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Security is listed or admitted to trading or as reported on the Nasdaq Global Market or, if the Security is not listed or admitted to trading on any national securities exchange or reported on the Nasdaq Global Market, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotations System (“Nasdaq”) or such other system then in use, or, if on any such date the Security is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Security selected by the Board of Directors or, if on any such date no professional market maker is making a market in the Security, the price as determined in good faith by the Board of Directors. The term “Trading Day” shall mean a day on which the principal national securities exchange on which the Security is listed or admitted to trading is open for the transaction of business or, if the Security is not listed or admitted to trading on any national securities exchange, a Business Day.

 

16.

(ii) For the purpose of any computation hereunder, the “current per share market price” of the Preferred Shares shall be determined in accordance with the method set forth in Section 11(d)(i) hereof. If the Preferred Shares are not publicly traded, the “current per share market price” of the Preferred Shares shall be conclusively deemed to be the current per share market price of the Common Shares as determined pursuant to Section 11(d)(i) hereof (appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof) multiplied by one hundred. If neither the Common Shares nor the Preferred Shares are publicly held or so listed or traded, “current per share market price” shall mean the fair value per share as determined in good faith by the Board of Directors, whose determination shall be described in a statement filed with the Rights Agent.

(e) No adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Purchase Price; provided, however, that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest one one-hundredth of a Preferred Share or one ten-thousandth of any other share or security as the case may be. Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three years from the date of the transaction which requires such adjustment or (ii) the date of the expiration of the right to exercise any Rights.

(f) If as a result of an adjustment made pursuant to Section 11(a) hereof, the holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock of the Company other than Preferred Shares, thereafter the number of such other shares so receivable upon exercise of any Right shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Preferred Shares contained in Sections 11(a) through 11(c) hereof, inclusive, and the provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the Preferred Shares shall apply on like terms to any such other shares.

(g) All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of one one-hundredths of a Preferred Share purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein.

(h) Unless the Company shall have exercised its election as provided in Section 11(i) hereof, upon each adjustment of the Purchase Price as a result of the calculations made in Section 11(b) and Section 11(c) hereof, each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of one one-hundredths of a Preferred Share (calculated to the nearest one one-millionth of a Preferred Share) obtained by (i) multiplying (x) the number of one one-hundredths of a Preferred Share covered by a Right immediately prior to this adjustment by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price.

 

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(i) The Company may elect on or after the date of any adjustment of the Purchase Price to adjust the number of Rights, in substitution for any adjustment in the number of one one-hundredths of a Preferred Share purchasable upon the exercise of a Right. Each of the Rights outstanding after such adjustment of the number of Rights shall be exercisable for the number of one one-hundredths of a Preferred Share for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one ten-thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price. The Company shall make a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made. This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Right Certificates have been issued, shall be at least 10 days later than the date of the public announcement. If Right Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Company shall, as promptly as practicable, cause to be distributed to holders of record of Right Certificates on such record date Right Certificates evidencing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Right Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Right Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Right Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein and shall be registered in the names of the holders of record of Right Certificates on the record date specified in the public announcement.

(j) Irrespective of any adjustment or change in the Purchase Price or the number of one one-hundredths of a Preferred Share issuable upon the exercise of the Rights, the Right Certificates theretofore and thereafter issued may continue to express the Purchase Price and the number of one one-hundredths of a Preferred Share which were expressed in the initial Right Certificates issued hereunder.

(k) Before taking any action that would cause an adjustment reducing the Purchase Price below one one-hundredth of the then par value, if any, of the Preferred Shares issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable Preferred Shares at such adjusted Purchase Price.

(l) In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuing to the holder of any Right exercised after such record date of the Preferred Shares and other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder’s right to receive such additional shares upon the occurrence of the event requiring such adjustment.

 

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(m) The Company covenants and agrees that, after the Distribution Date, it will not, except as permitted by Section 23 or Section 27 hereof, take (or permit any Subsidiary to take) any action the purpose of which is to, or if at the time such action is taken it is reasonably foreseeable that the effect of such action is to, materially diminish or eliminate the benefits intended to be afforded by the Rights. Any such action taken by the Company during any period after any Person becomes an Acquiring Person but prior to the Distribution Date shall be null and void unless such action could be taken under this Section 11(m) from and after the Distribution Date.

(n) Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that it in its sole discretion shall determine to be advisable in order that any consolidation or subdivision of the Preferred Shares, issuance wholly for cash of any Preferred Shares at less than the current market price, issuance wholly for cash of Preferred Shares or securities which by their terms are convertible into or exchangeable for Preferred Shares, dividends on Preferred Shares payable in Preferred Shares or issuance of rights, options or warrants referred to hereinabove in Section 11(b), hereafter made by the Company to holders of its Preferred Shares shall not be taxable to such stockholders.

(o) In the event that at any time after the date of this Agreement and prior to the Distribution Date, the Company shall (i) declare or pay any dividend on the Common Shares payable in Common Shares or (ii) effect a subdivision, combination or consolidation of the Common Shares (by reclassification or otherwise than by payment of dividends in Common Shares) into a greater or lesser number of Common Shares, then in any such case (A) the number of one one-hundredths of a Preferred Share purchasable after such event upon proper exercise of each Right shall be determined by multiplying the number of one one-hundredths of a Preferred Share so purchasable immediately prior to such event by a fraction, the numerator of which is the number of Common Shares outstanding immediately before such event and the denominator of which is the number of Common Shares outstanding immediately after such event, and (B) each Common Share outstanding immediately after such event shall have issued with respect to it that number of Rights which each Common Share outstanding immediately prior to such event had issued with respect to it. The adjustments provided for in this Section 11(o) shall be made successively whenever such a dividend is declared or paid or such a subdivision, combination or consolidation is effected.

(p) The exercise of Rights under Section 11(a)(ii) hereof shall only result in the loss of rights under Section 11(a)(ii) hereof to the extent so exercised and shall not otherwise affect the rights represented by the Rights under this Agreement, including the rights represented by Section 13 hereof.

SECTION 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES. Whenever an adjustment is made as provided in Sections 11 and 13 hereof, the Company shall promptly (a) prepare a certificate setting forth such adjustment, and a brief statement of the facts accounting for such adjustment, (b) file with the Rights Agent and with each transfer agent for the Common Shares or the Preferred Shares a copy of such certificate and (c) mail a brief summary thereof to each holder of a Right Certificate in accordance with Section 25 hereof. The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment therein contained and shall not be deemed to have knowledge of any adjustment unless and until it shall have received such certificate.

 

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SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING POWER.

(a) In the event that, following the Shares Acquisition Date or, if an event set forth in Section 3(a)(ii) occurs, the Distribution Date, directly or indirectly (x) the Company shall consolidate with, or merge with and into, any Interested Stockholder, or if in such merger or consolidation all holders of Common Stock are not treated alike, any other Person, (y) any Interested Stockholder, or if in such merger or consolidation all holders of Common Stock are not treated alike, any other Person shall consolidate with the Company, or merge with and into the Company, and the Company shall be the continuing or surviving corporation of such merger (other than, in the case of either transaction described in (x) or (y), a merger or consolidation which would result in all of the voting power represented by the securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into securities of the surviving entity) all of the voting power represented by the securities of the Company or such surviving entity outstanding immediately after such merger or consolidation and the holders of such securities not having changed as a result of such merger or consolidation), or (z) the Company shall sell, mortgage or otherwise transfer (or one or more of its subsidiaries shall sell, mortgage or otherwise transfer), in one or more transactions, assets or earning power aggregating more than 50% of the assets or earning power of the Company and its subsidiaries (taken as a whole) to any Interested Stockholder or Stockholders, or if in such transaction all holders of Common Stock are not treated alike, any other Person, (other than the Company or any Subsidiary of the Company in one or more transactions each of which individually and the aggregate does not violate Section 13(d) hereof) then, and in each such case, proper provision shall be made so that (i) each holder of a Right, other than those holders of Rights whose Rights have become null and void pursuant to Section 11(a)(ii) hereof, shall have the right to receive, upon the exercise thereof at a price equal to the then current Purchase Price multiplied by the number of one one-hundredths of a Preferred Share for which a Right is then exercisable in accordance with the terms of this Agreement and in lieu of Preferred Shares, such number of freely tradeable Common Shares of the Principal Party (as such term is hereinafter defined), free and clear of liens, rights of call or first refusal, encumbrances or other adverse claims, as shall be equal to the result obtained by (A) multiplying the then current Purchase Price by the number of one one-hundredths of a Preferred Share for which a Right is then exercisable (without taking into account any adjustment previously made pursuant to Section 11(a)(ii) hereof) and dividing that product by (B) 50% of the then current per share market price of the Common Shares of such Principal Party (determined pursuant to Section 11(d) hereof) on the date of consummation of such consolidation, merger, sale or transfer; (ii) such Principal Party shall thereafter be liable for, and shall assume, by virtue of such consolidation, merger, sale or transfer, all the obligations and duties of the Company pursuant to this Agreement; (iii) the term “Company” shall thereafter be deemed to refer to such Principal Party, it being specifically intended that the provisions of Section 11 hereof shall apply to such Principal Party; (iv) such Principal Party shall take such steps (including, but not limited to, the reservation of a sufficient number of shares of its Common Shares in accordance with Section 9 hereof) in connection with such consummation as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to its Common Shares thereafter deliverable upon the exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof shall be of no further effect.

 

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(b) “Principal Party” shall mean:

(i) in the case of any transaction described in clause (x) or (y) of Section 13(a) hereof, the Person that is the issuer of any securities into which Common Shares are converted in such merger or consolidation, and if no securities are so issued, the Person that is the other party to the merger or consolidation (or, if applicable, the Company, if it is the surviving corporation); and

(ii) in the case of any transaction described in clause (z) of Section 13(a) hereof, the Person that is the party receiving the greatest portion of the assets or earning power transferred pursuant to such transaction or transactions;

provided, however, that in any case, (1) if the Common Shares of such Person are not at such time and have not been continuously over the preceding 12-month period registered under Section 12 of the Exchange Act, and such Person is a direct or indirect Subsidiary or Affiliate of another Person the Common Shares of which are and have been so registered, “Principal Party” shall refer to such other Person; (2) if such Person is a Subsidiary, directly or indirectly, or Affiliate of more than one Person, the Common Shares of two or more of which are and have been so registered, “Principal Party” shall refer to whichever of such Persons is the issuer of the Common Shares having the greatest aggregate market value; and (3) if such Person is owned, directly or indirectly, by a joint venture formed by two or more Persons that are not owned, directly or indirectly, by the same Person, the rules set forth in (1) and (2) above shall apply to each of the chains of ownership having an interest in such joint venture as if such party were a “Subsidiary” of both or all of such joint venturers and the Principal Parties in each such chain shall bear the obligations set forth in this Section 13 in the same ratio as their direct or indirect interests in such Person bear to the total of such interests.

(c) The Company shall not consummate any such consolidation or merger, or sale or transfer of assets or earning power, unless the Principal Party shall have a sufficient number of authorized Common Shares that have not been issued or reserved for issuance to permit the exercise in full of the Rights in accordance with this Section 13 and unless prior thereto the Company and each Principal Party and each other Person who may become a Principal Party as a result of such consolidation, merger, sale or transfer shall have (i) executed and delivered to the Rights Agent a supplemental agreement providing for the terms set forth in paragraphs (a) and (b) of this Section 13 and (ii) prepared, filed and had declared and remain effective a registration statement under the Act on the appropriate form with respect to the Rights and the securities exercisable upon exercise of the Rights and further providing that, as soon as practicable after the date of any consolidation, merger, sale or transfer of assets mentioned in paragraph (a) of this Section 13, the Principal Party at its own expense will:

(i) cause the registration statement under the Act with respect to the Rights and the securities purchasable upon exercise of the Rights on an appropriate form to remain effective (with a prospectus at all times meeting the requirements of the Act) until the Final Expiration Date;

 

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(ii) use its best efforts to qualify or register the Rights and the securities purchasable upon exercise of the Rights under the blue sky laws of such jurisdictions as may be necessary or appropriate;

(iii) list the Rights and the securities purchasable upon exercise of the Rights on each national securities exchange on which the Common Shares were listed prior to the consummation of such consolidation, merger, sale or transfer of assets or on the Nasdaq Global Market if the Common Shares were listed on the Nasdaq Global Market or, if the Common Shares were not listed on a national securities exchange or the Nasdaq Global Market prior to the consummation of such consolidation, merger, sale or transfer of assets, on a national securities exchange or the Nasdaq Global Market; and

(iv) deliver to holders of the Rights historical financial statements for the Principal Party and each of its Affiliates which comply in all material respects with the requirements for registration on Form 10 under the Exchange Act.

The provisions of this Section 13 shall similarly apply to successive mergers or consolidations or sales or other transfers.

(d) After the Distribution Date, the Company covenants and agrees that it shall not (i) consolidate with, (ii) merge with or into, or (iii) sell or transfer to, in one or more transactions, assets or earning power aggregating more than 50% of the assets or earning power of the Company and its subsidiaries taken as a whole, any other Person (other than a Subsidiary of the Company in a transaction which does not violate Section 11(m) hereof), if (x) at the time of or after such consolidation, merger or sale there are any charter or bylaw provisions or any rights, warrants or other instruments or securities outstanding, agreements in effect or any other action taken which would diminish or otherwise eliminate the benefits intended to be afforded by the Rights or (y) prior to, simultaneously with or immediately after such consolidation, merger or sale, the stockholders of the Person who constitutes, or would constitute, the “Principal Party” for purposes of Section 13(a) hereof shall have received a distribution of Rights previously owned by such Person or any of its Affiliates and Associates. The Company shall not consummate any such consolidation, merger, sale or transfer unless prior thereto the Company and such other Person shall have executed and delivered to the Rights Agent a supplemental agreement evidencing compliance with this Section 13(d).

SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.

(a) The Company shall not be required to issue fractions of Rights or to distribute Right Certificates which evidence fractional Rights. In lieu of such fractional Rights, there shall be paid to the registered holders of the Right Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole Right. For the purposes of this Section 14(a), the current market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable. The closing price for any day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to

 

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trading on the New York Stock Exchange or, if the Rights are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Rights are listed or admitted to trading or as reported on the Nasdaq Global Market or, if the Rights are not listed or admitted to trading on any national securities exchange or reported on the Nasdaq Global Market, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by Nasdaq or such other system then in use or, if on any such date the Rights are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights selected by the Board of Directors. If on any such date no such market maker is making a market in the Rights, the fair value of the Rights on such date as determined in good faith by the Board of Directors shall be used.

(b) The Company shall not be required to issue fractions of Preferred Shares (other than fractions which are integral multiples of one one-hundredth of a Preferred Share) upon exercise of the Rights or to distribute certificates which evidence fractional Preferred Shares (other than fractions which are integral multiples of one one-hundredth of a Preferred Share). Fractions of Preferred Shares in integral multiples of one one-hundredth of a Preferred Share may, at the election of the Company, be evidenced by depositary receipts; provided, however, that holders of such depositary receipts shall have all of the designations and the powers, preferences and rights, and the qualifications, limitations and restrictions to which they are entitled as beneficial owners of the Preferred Shares represented by such depositary receipts. In lieu of fractional Preferred Shares that are not integral multiples of one one-hundredth of a Preferred Share, the Company shall pay to the registered holders of Right Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one Preferred Share. For the purposes of this Section 14(b), the current market value of a Preferred Share shall be the current per share market price of the Preferred Shares (as determined pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of such exercise (or, if not publicly traded, in accordance with Section 11(d)(ii) hereof).

(c) Following the occurrence of one of the transactions or events specified in Section 11 hereof giving rise to the right to receive Common Shares, capital stock equivalents (other than Preferred Shares) or other securities upon the exercise of a Right, the Company shall not be required to issue fractions of Common Shares or units of such Common Shares, capital stock equivalents or other securities upon exercise of the Rights or to distribute certificates which evidence fractional Common Shares, capital stock equivalents or other securities. In lieu of fractional Common Shares, capital stock equivalents or other securities, the Company shall pay to the registered holders of Right Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one Common Share or unit of such Common Shares, capital stock equivalents or other securities. For purposes of this Section 14(c), the current market value shall be the current per share market price (as determined pursuant to Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of such exercise and, if such capital stock equivalent is not traded, each such capital stock equivalent shall have the value of one one-hundredth of a Preferred Share.

 

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(d) The holder of a Right by the acceptance of the Right expressly waives his right to receive any fractional Rights or any fractional shares upon exercise of a Right (except as provided above).

SECTION 15. RIGHTS OF ACTION. All rights of action in respect of this Agreement, excepting the rights of action given to the Rights Agent under Sections 18 and 20 hereof, are vested in the respective registered holders of the Right Certificates (and, prior to the Distribution Date, the registered holders of the Common Shares) and any registered holder of any Right Certificate (or, prior to the Distribution Date, of the Common Shares), without the consent of the Rights Agent or of the holder of any other Right Certificate (or, prior to the Distribution Date, of the Common Shares), may, in his own behalf and for his own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, his right to exercise the Rights evidenced by such Right Certificate in the manner provided in such Right Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and will be entitled to specific performance of the obligations under, and injunctive relief against actual or threatened violations of the obligations of any Person subject to, this Agreement. Holders of Rights shall be entitled to recover the reasonable costs and expenses, including attorneys fees, incurred by them in any action to enforce the provisions of this Agreement.

SECTION 16. AGREEMENT OF RIGHT HOLDERS. Every holder of a Right, by accepting the same, consents and agrees with the Company and the Rights Agent and with every other holder of a Right that:

(a) prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of the Common Shares;

(b) after the Distribution Date, the Right Certificates are transferable (subject to the provisions of this Agreement) only on the registry books of the Rights Agent if surrendered at the principal office of the Rights Agent, duly endorsed or accompanied by a proper instrument of transfer; and

(c) the Company and the Rights Agent may deem and treat the person in whose name the Right Certificate (or, prior to the Distribution Date, the associated Common Shares certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Right Certificates or the associated Common Shares certificate made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent shall be affected by any notice to the contrary.

SECTION 17. RIGHT CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No holder, as such, of any Right Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the Preferred Shares or any other securities of the Company which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Right Certificate be construed to confer upon the holder of any Right Certificate, as such, any of the rights of a stockholder of the Company or any right to vote for the

 

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election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in Section 25 hereof), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Right Certificate shall have been exercised in accordance with the provisions hereof.

SECTION 18. CONCERNING THE RIGHTS AGENT. The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and other disbursements incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, or expense, incurred without gross negligence, bad faith or willful misconduct on the part of the Rights Agent, for anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability in the premises. The indemnity provided herein shall survive the expiration of the Rights and the termination of this Agreement.

The Rights Agent shall be protected and shall incur no liability for, or in respect of any action taken, suffered or omitted by it in connection with, its administration of this Agreement in reliance upon any Right Certificate or certificate for the Preferred Shares or Common Shares or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper person or persons, or otherwise upon the advice of counsel as set forth in Section 20 hereof. In no case will the Rights Agent be liable for special, indirect, incidental or consequential or consequential loss or damage at any kind whatsoever (including but not limited to lost profits), even if the Rights Agent has been advised of such loss or damage.

SECTION 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT. Any corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation succeeding to the shareholder services or corporate trust business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 21 hereof. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement any of the Right Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Right Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, any successor Rights Agent may countersign such Right Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement.

 

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In case at any time the name of the Rights Agent shall be changed and at such time any of the Right Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Right Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, the Rights Agent may countersign such Right Certificates either in its prior name or in its changed name; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement.

SECTION 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Right Certificates, by their acceptance thereof, shall be bound:

(a) The Rights Agent may consult with legal counsel of its choice (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion.

(b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by any one of the Chairman of the Board of Directors, the Chief Executive Officer, the President, the Chief Financial Officer, any Vice President, the Treasurer or the Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate.

(c) The Rights Agent shall be liable hereunder to the Company and any other Person only for its own gross negligence, bad faith or willful misconduct.

(d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Right Certificates (except its countersignature thereof) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only.

(e) The Rights Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Right Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Right Certificate; nor shall it be responsible for any change in the exercisability of the Rights (including the Rights becoming void pursuant to Section 11(a)(ii) hereof) or any adjustment in the terms of the Rights (including the manner, method or amount thereof) provided for in Sections 3, 11, 13, 23 or 24 hereof, or the ascertaining of the existence of facts that would require any such change or adjustment (except with respect to the exercise of Rights evidenced by Right Certificates after receipt of a certificate pursuant to Section 12 hereof describing such change or adjustment); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or

 

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reservation of any Preferred Shares to be issued pursuant to this Agreement or any Right Certificate or as to whether any Preferred Shares will, when issued, be validly authorized and issued, fully paid and nonassessable.

(f) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement.

(g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from any one of the Chairman of the Board of Directors, the Chief Executive Officer, the President, the Chief Financial Officer, any Vice President, the Secretary or the Treasurer of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered by it in good faith in accordance with instructions of any such officer or for any delay in acting while waiting for those instructions. Any application by the Rights Agent for written instructions from the Company may, at the option of the Rights Agent, set forth in writing any action proposed to be taken or omitted by the Rights Agent with respect to its duties or obligations under this Agreement and the date on and/or after which such action shall be taken or omitted and the Rights Agent shall not be liable for any action taken or omitted in accordance with a proposal included in any such application on or after the date specified therein (which date shall not be less than three Business Days after the date indicated in such application unless any such officer shall have consented in writing to an earlier date) unless, prior to taking or omitting any such action, the Rights Agent has received written instructions in response to such application specifying the action to be taken or omitted.

(h) The Rights Agent and any stockholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity.

(i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company resulting from any such act, default, neglect or misconduct, provided reasonable care was exercised in the selection and continued employment thereof.

(j) No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it.

 

27.

(k) If, with respect to any Right Certificate surrendered to the Rights Agent for exercise or transfer, the certificate attached to the form of assignment or form of election to purchase, as the case may be, has not been executed, the Rights Agent shall not take any further action with respect to such requested exercise of transfer without first consulting with the Company.

SECTION 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon 30 days’ notice in writing mailed to the Company and to each transfer agent for the Common Shares or Preferred Shares by registered or certified mail, and to the holders of the Right Certificates by first-class mail. In the event the transfer agency relationship in effect between the Company and the Rights Agent terminates, the Rights Agent will be deemed to resign automatically on the effective date of such termination and any required notice in connection therewith will be sent by the Company. The Company may remove the Rights Agent or any successor Rights Agent upon 30 days’ notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent for the Common Shares or Preferred Shares by registered or certified mail, and to the holders of the Right Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of 30 days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Right Certificate (who shall, with such notice, submit his Right Certificate for inspection by the Company), then the registered holder of any Right Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be either (a) a corporation, business trust or limited liability company organized and doing business under the laws of the United States or of any other state of the United States which is authorized under such laws to exercise corporate trust or stock transfer powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $50 million or (b) a direct or indirect wholly owned Subsidiary of such an entity or its wholly-owning parent. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent for the Common Shares or Preferred Shares, and mail a notice thereof in writing to the registered holders of the Right Certificates. Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be.

SECTION 22. ISSUANCE OF NEW RIGHT CERTIFICATES. Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Right Certificates evidencing Rights in such form as may be approved by its Board of Directors to reflect any adjustment or change in the Purchase Price and the number or kind or

 

28.

class of shares or other securities or property purchasable under the Right Certificates made in accordance with the provisions of this Agreement. In addition, in connection with the issuance or sale of Common Shares following the Distribution Date and prior to the earlier of the Redemption Date and the Final Expiration Date, the Company (a) shall with respect to Common Shares so issued or sold pursuant to the exercise of stock options or under any employee plan or arrangement in existence prior to the Distribution Date, or upon the exercise, conversion or exchange of securities, notes or debentures issued by the Company and in existence prior to the Distribution Date, and (b) may, in any other case, if deemed necessary or appropriate by the Board of Directors, issue Right Certificates representing the appropriate number of Rights in connection with such issuance or sale; provided, however, that (i) the Company shall not be obligated to issue any such Right Certificates if, and to the extent that, the Company shall be advised by counsel that such issuance would create a significant risk of material adverse tax consequences to the Company or the Person to whom such Right Certificate would be issued, and (ii) no Right Certificate shall be issued if, and to the extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof.

SECTION 23. REDEMPTION .

(a) The Rights may be redeemed by action of the Board of Directors and, if the Company is restricted from taking actions pursuant to Section 3 of the Affiliation Agreement, Ipsen, pursuant to Section 23(b) hereof and shall not be redeemed in any other manner.

(b)

(i) The Board of Directors (and, if the Company is restricted from taking actions pursuant to Section 3 of the Affiliation Agreement, Ipsen) may, at its (their) option, at any time prior to the earlier of (A) the Distribution Date, or (B) the Final Expiration Date, redeem all but not less than all of the then outstanding Rights at a redemption price of $0.001 per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such redemption price being hereinafter referred to as the “Redemption Price”), and the Company may, at its option, pay the Redemption Price in Common Shares (based on the “current per-share market price,” as such term is defined in Section 11(d) hereof, of the Common Shares at the time of redemption), cash or any other form of consideration deemed appropriate by the Board of Directors. The redemption of the Rights by the Board of Directors may be made effective at such time, on such basis and subject to such conditions as the Board of Directors in its sole discretion may establish. Notwithstanding anything contained in this Agreement to the contrary, the Rights shall not be exercisable pursuant to Section 11(a)(ii) hereof prior to the expiration or termination of the Company’s right of redemption under this Section 23(b)(i).

(ii) In addition, the Board of Directors (and, if the Company is restricted from taking actions pursuant to Section 3 of the Affiliation Agreement, Ipsen) may, at its (their) option, at any time after the time a Person becomes an Acquiring Person and after the expiration of any period during which the holder of Rights may exercise the rights under Section 11(a)(ii) hereof but prior to any event described in clause (x), (y) or (z) of the first sentence of Section 13 hereof, redeem all but not less than all of the then outstanding Rights at the Redemption Price (x) in connection with any merger, consolidation or sale or other transfer (in one transaction or in a

 

29.

series of related transactions) of assets or earning power aggregating 50% or more of the assets or earning power of the Company and its subsidiaries (taken as a whole) in which all holders of Common Shares are treated alike and not involving (other than as a holder of Common Shares being treated like all other such holders) an Interested Stockholder or a Transaction Person or (y)(A) if and for so long as the Acquiring Person is not thereafter the Beneficial Owner of the Requisite Percentage, and (B) at the time of redemption no other Persons are Acquiring Persons.

(c) Immediately upon the action of the Board of Directors ordering the redemption of the Rights pursuant to Section 23(b) hereof, and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price. The Company shall promptly give public notice of any such redemption; provided, however, that the failure to give, or any defect in, any such notice shall not affect the validity of such redemption. Within 10 days after such action of the Board of Directors ordering the redemption of the Rights pursuant to Section 23(b) hereof, the Company shall mail a notice of redemption to all the holders of the then outstanding Rights at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Shares, provided, however, that failure to give, or any defect in, any such notice shall not affect the validity of such redemption. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made. Neither the Company nor any of its Affiliates or Associates may redeem, acquire or purchase for value any Rights at any time in any manner other than that specifically set forth in this Section 23 or in Section 24 hereof, and other than in connection with the purchase of Common Shares prior to the Distribution Date.

(d) The Company may, at its option, discharge all of its obligations with respect to any redemption of the Rights by (i) issuing a press release announcing the manner of redemption of the Rights and (ii) mailing payment of the Redemption Price to the registered holders of the Rights at their last addresses as they appear on the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Shares, and upon such action, all outstanding Right Certificates shall be null and void without any further action by the Company.

SECTION 24. EXCHANGE.

(a) The Board of Directors (and, if the Company is restricted from taking actions pursuant to Section 3 of the Affiliation Agreement, Ipsen) may, at its (their) option, at any time after any Person becomes an Acquiring Person, exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become void pursuant to the provisions of Section 11(a)(ii) hereof) for Common Shares at an exchange ratio of one Common Share per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such exchange ratio being hereinafter referred to as the “Exchange Ratio”). Notwithstanding the foregoing, the Board of Directors shall not be empowered to effect such exchange at any time after any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or any such Subsidiary, or any entity holding Common Shares for or pursuant to the terms of any such plan), together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or more of the Common Shares then outstanding.

 

30.

(b) Immediately upon the action of the Board of Directors ordering the exchange of any Rights pursuant to Section 24(a) hereof and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of Common Shares equal to the number of such Rights held by such holder multiplied by the Exchange Ratio. The Company shall promptly give public notice of any such exchange; provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. The Company promptly shall mail a notice of any such exchange to all of the holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent; provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the Common Shares for Rights will be effected and, in the event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become void pursuant to the provisions of Section 11(a)(ii) hereof) held by each holder of Rights.

(c) In lieu of issuing Common Shares in accordance with Section 24(a) hereof, the Company may, if a majority of the Board of Directors then in office determines that such action is necessary or appropriate and not contrary to the interests of the holders of Rights, elect to (and, in the event that there are not sufficient treasury shares and authorized but unissued Common Shares to permit any exchange of the Rights in accordance with Section 24(a) hereof, the Company shall) take all such action as may be necessary to authorize, issue or pay, upon the exchange of the Rights, cash, property, Common Shares, other securities or any combination thereof having an aggregate value equal to the value of the Common Shares which otherwise would have been issuable pursuant to Section 24(a) hereof, which aggregate value shall be determined by a nationally recognized investment banking firm selected by a majority of the Board of Directors then in office. For purposes of the preceding sentence, the value of the Common Shares shall be determined pursuant to Section 11(d) hereof. Any election pursuant to this Section 24(c) by the Board of Directors must be made by resolution within 60 days following the date on which the event described in Section 11(a)(ii) hereof shall have occurred. Following the occurrence of the event described in Section 11(a)(ii) hereof, a majority of the Board of Directors then in office may suspend the exercisability of the Rights for a period of up to 60 days following the date on which the event described in Section 11(a)(ii) hereof shall have occurred to the extent that such directors have not determined whether to exercise their rights of exchange under this Section 24(c). In the event of any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended.

(d) The Company shall not be required to issue fractions of Common Shares or to distribute certificates which evidence fractional Common Shares. In lieu of such fractional Common Shares, the Company shall pay to the registered holders of the Right Certificates with regard to which such fractional Common Shares would otherwise be issuable an amount in cash equal to the same fraction of the current market value of a whole Common Share. For the

 

31.

purposes of this Section 24(d), the current market value of a whole Common Share shall be the closing price of a Common Share (as determined pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day immediately after the date of the first public announcement by the Company that an exchange is to be effected pursuant to this Section 24.

SECTION 25. NOTICE OF CERTAIN EVENTS.

(a) In case the Company shall propose (i) to pay any dividend payable in stock of any class to the holders of its Preferred Shares or to make any other distribution to the holders of its Preferred Shares (other than a regular quarterly cash dividend), (ii) to offer to the holders of its Preferred Shares rights or warrants to subscribe for or to purchase any additional Preferred Shares or shares of stock of any class or any other securities, rights or options, (iii) to effect any reclassification of its Preferred Shares (other than a reclassification involving only the subdivision of outstanding Preferred Shares), (iv) to effect any consolidation or merger into or with, or to effect any sale or other transfer (or to permit one or more of its Subsidiaries to effect any sale or other transfer), in one or more transactions, of 50% or more of the assets or earning power of the Company and its Subsidiaries (taken as a whole), to any other Person, (v) to effect the liquidation, dissolution or winding up of the Company, or (vi) to declare or pay any dividend on the Common Shares payable in Common Shares or to effect a subdivision, combination or consolidation of the Common Shares (by reclassification or otherwise than by payment of dividends in Common Shares), then, in each such case, the Company shall give to each holder of a Right Certificate, in accordance with Section 26 hereof, a notice of such proposed action, which shall specify the record date for the purpose of such stock dividend, or distribution of rights or warrants, or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of the Common Shares and/or the Preferred Shares, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (i) or (ii) above at least 10 days prior to the record date for determining holders of the Preferred Shares for purposes of such action, and in the case of any such other action, at least 10 days prior to the date of the taking of such proposed action or the date of participation therein by the holders of the Common Shares and/or the Preferred Shares, whichever shall be the earlier.

(b) In case the event set forth in Section 11(a)(ii) hereof shall occur, then the Company shall as soon as practicable thereafter give to each holder of a Right Certificate, in accordance with Section 26 hereof, a notice of the occurrence of such event, which notice shall describe the event and the consequences of the event to holders of Rights under Section 11(a)(ii) hereof.

SECTION 26. NOTICES. Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Right Certificate to or on the Company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows:

Tercica, Inc.

2000 Sierra Point Parkway, Suite 400

Brisbane, CA 94005

Attn: General Counsel

 

32.

Subject to the provisions of Section 21 hereof, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Right Certificate to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as follows:

Computershare Trust Company, N.A.

250 Royall Street

Canton, MA 02021

Attn: Client Administration

Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Right Certificate shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company.

SECTION 27. SUPPLEMENTS AND AMENDMENTS. Prior to the Distribution Date, the Company and the Rights Agent shall, if the Company so directs (following approval by the Board of Directors and, if the Company is restricted from taking actions pursuant to Section 3 of the Affiliation Agreement, Ipsen, supplement or amend any provision of this Agreement without the approval of any holders of the Rights. From and after the Distribution Date, the Company and the Rights Agent shall, if the Company so directs (following approval by the Board of Directors and, if the Company is restricted from taking actions pursuant to Section 3 of the Affiliation Agreement, Ipsen), from time to time supplement or amend any provision of this Agreement without the approval of any holders of Right Certificates in order to (i) cure any ambiguity, (ii) correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, or (iii) change any other provisions with respect to the Rights which the Company may deem necessary or desirable; provided, however, that no such supplement or amendment shall be made which would adversely affect the interests of the holders of Rights (other than the interests of an Acquiring Person or its Affiliates or Associates). Any supplement or amendment adopted during any period after any Person has become an Acquiring Person but prior to the Distribution Date shall become null and void unless such supplement or amendment could have been adopted by the Company from and after the Distribution Date. Any such supplement or amendment shall be evidenced by a writing signed by the Company and the Rights Agent. Upon delivery of a certificate from an appropriate officer of the Company which states that the proposed supplement or amendment is in compliance with the terms of this Section 27, the Rights Agent shall execute such supplement or amendment unless the Rights Agent shall have determined in good faith that such supplement or amendment would adversely affect its interest under this Agreement. Prior to the Distribution Date, the interests of the holders of Rights shall be deemed coincident with the interests of the holders of Common Shares.

SECTION 28. DETERMINATION AND ACTIONS BY THE BOARD OF DIRECTORS, ETC. For all purposes of this Agreement, any calculation of the number of Common Shares outstanding at any particular time, including for purposes of determining the particular percentage of such outstanding Common Shares or any other securities of which any Person is the Beneficial Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act as in effect on the date of this Agreement.

 

33.

Subject to the provisions of Section 27 and the other provisions expressly providing for the consent of Ipsen, the Board of Directors (or such other body as shall be specified in the Company’s Certificate of Incorporation) shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board of Directors, or the Company, or as may be necessary or advisable in the administration of this Agreement, including without limitation, the right and power to (i) interpret the provisions of this Agreement, and (ii) make all determinations deemed necessary or advisable for the administration of this Agreement (including a determination to redeem or not redeem the Rights or to amend the Agreement). All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions with respect to the foregoing) which are done or made by the Board of Directors (or such other body as shall be specified in the Company’s Certificate of Incorporation) in good faith, shall (x) be final, conclusive and binding on the Rights Agent and the holders of the Rights, and (y) not subject the Board of Directors (or such other body as shall be specified in the Company’s Certificate of Incorporation) to any liability to the holders of the Rights.

SECTION 29. SUCCESSORS. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder.

SECTION 30. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be construed to give to any person or corporation other than the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, the Common Shares) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, the Common Shares). Nothing in this Agreement shall be construed to give any holder of Rights or any other Person any legal or equitable rights, remedies or claims under this Agreement by virtue of (i) (A) the approval, execution, delivery or amendment of the Stock Purchase Agreement, the Affiliation Agreement, any Voting Agreement or any other agreements or documents contemplated by the Stock Purchase Agreement, (B) the announcement of the Stock Purchase Agreement or the announcement of the closing of the transactions contemplated thereby, (C) the acceptance for payment and purchase of Common Shares pursuant to the Stock Purchase Agreement, (D) the issuance of the Convertible Notes or the Warrants pursuant to the Stock Purchase Agreement, (E) the issuance of the Note Shares or the Warrant Shares upon any conversion of the Convertible Notes or any exercise of the Warrant, respectively, (F) the acquisition of beneficial ownership of Common Shares by Ipsen (including its Affiliates and Associates) directly from the Company pursuant to the Affiliation Agreement, (G) the acquisition of beneficial ownership of Common Shares in an Exempted Acquisition for so long as Ipsen (including its Affiliates and Associates) shall remain an Excluded Stockholder, or (H) the consummation of any other transaction contemplated by the Stock Purchase Agreement; or (ii) (A) the approval, execution, delivery or amendment of the definitive agreement(s) for an Exempted Ipsen Transfer, (B) the announcement or closing of an Exempted Ipsen Transfer, (C) the acceptance for payment and purchase of Common Shares pursuant to an Exempted Ipsen Transfer, or (D) the consummation of any other transaction contemplated by the definitive agreement(s) for an Exempted Ipsen Transfer.

 

34.

SECTION 31. SEVERABILITY. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated.

SECTION 32. GOVERNING LAW. This Agreement and each Right Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed entirely within such State.

SECTION 33. COUNTERPARTS. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.

SECTION 34. FORCE MAJEURE. Notwithstanding anything to the contrary contained herein, the Rights Agent shall not be liable for any delays or failures in performance resulting from acts beyond its reasonable control including, without limitation, acts of God, terrorist acts, shortage of supply, breakdowns or malfunctions, interruptions or malfunction of computer facilities, or loss of data due to power failures or mechanical difficulties with information storage or retrieval systems, labor difficulties, war, or civil unrest.

SECTION 35. DESCRIPTIVE HEADINGS . Descriptive headings of the several Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.

IN WITNESS WHEREOF, parties whereto have caused this Agreement to be duly executed, all as of the day and year first above written.

 

ATTEST:     TERCICA, INC.

 

    

 

Stephen N. Rosenfield

Executive Vice President of Legal Affairs,

General Counsel and Secretary

    

John A. Scarlett, M.D.

President and Chief Executive Officer

ATTEST:

     COMPUTERSHARE TRUST COMPANY, N.A.
By:  

 

     By:  

 

Title:  

 

     Title:  

 

 

35.

EX-99.9 7 dex999.htm CERTIFICATE OF DESIGNATION FOR SERIES A JUNIOR PARTICIPATING PREFERRED STOCK Certificate of Designation for Series A Junior Participating Preferred Stock

Exhibit 9

CERTIFICATE OF DESIGNATION

OF

SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

(Pursuant to Section 151 of the

Delaware General Corporation Law)

TERCICA, INC., a corporation organized and existing under the General Corporation Law of the State of Delaware (hereinafter called the “Company”), hereby certifies that the following resolution was adopted by the Board of Directors of the Corporation (the “Board”) as required by Section 151 of the General Corporation Law at a meeting duly called and held on August 14, 2006:

RESOLVED FURTHER, that pursuant to the authority granted to and vested in the Board in accordance with the provisions of the Company’s Amended and Restated Certificate of Incorporation as currently in effect (the “Charter”), the Board hereby creates, effective upon the Adoption Date, a series of Preferred Stock, par value $0.001 per share, of the Company and hereby states the designation and number of shares, and fixes the designations and the powers, preferences and rights, and the qualifications, limitations and restrictions thereof (in addition to the provisions set forth in the Charter, which are applicable to the Preferred Stock of all classes and series), as follows:

Series A Junior Participating Preferred Stock:

Section 1. Designation and Amount. One Million (1,000,000) shares of Preferred Stock, par value $0.001 per share, are designated “Series A Junior Participating Preferred Stock” with the designations and the powers, preferences and rights, and the qualifications, limitations and restrictions specified herein (the “Junior Preferred Stock”). Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Junior Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Company convertible into Junior Preferred Stock.

Section 2. Dividends and Distributions.

(A) Subject to the rights of the holders of any shares of any series of Preferred Stock (or any similar stock) ranking prior and superior to the Junior Preferred Stock with respect to dividends, the holders of shares of Junior Preferred Stock, in preference to the holders of

 

1

Common Stock, par value $0.001 per share (the “Common Stock”), of the Company, and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of April, July, October and January in each year (each such date being referred to herein as a “Quarterly Dividend Payment Date”), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Junior Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $l.00 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Junior Preferred Stock. In the event the Company shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Junior Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

(B) The Company shall declare a dividend or distribution on the Junior Preferred Stock as provided in paragraph (A) of this Section immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided, that in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Junior Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date.

(C) Dividends shall begin to accrue and be cumulative on outstanding shares of Junior Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Junior Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Junior Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Junior Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof.

 

2

Section 3. Voting Rights. The holders of shares of Junior Preferred Stock shall have the following voting rights:

(A) Subject to the provision for adjustment hereinafter set forth, each share of Junior Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the stockholders of the Company. In the event the Company shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Junior Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

(B) Except as otherwise provided herein, in any other Certificate of Designation creating a series of Preferred Stock or any similar stock, or by law, the holders of shares of Junior Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Company having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Company.

(C) Except as set forth herein, or as otherwise provided by law, holders of Junior Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.

Section 4. Certain Restrictions.

(A) Whenever quarterly dividends or other dividends or distributions payable on the Junior Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Junior Preferred Stock outstanding shall have been paid in full, the Company shall not:

(i) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Junior Preferred Stock;

(ii) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Junior Preferred Stock, except dividends paid ratably on the Junior Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;

 

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(iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Junior Preferred Stock, provided that the Company may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Company ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Junior Preferred Stock; or

(iv) redeem or purchase or otherwise acquire for consideration any shares of Junior Preferred Stock, or any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Junior Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.

(B) The Company shall not permit any subsidiary of the Company to purchase or otherwise acquire for consideration any shares of stock of the Company unless the Company could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner.

Section 5. Reacquired Shares. Any shares of Junior Preferred Stock purchased or otherwise acquired by the Company in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the Amended and Restated Certificate of Incorporation, or in any other Certificate of Designation creating a series of Preferred Stock or any similar stock or as otherwise required by law.

Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of the Company, no distribution shall be made (1) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Junior Preferred Stock unless, prior thereto, the holders of shares of Junior Preferred Stock shall have received $100 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, provided that the holders of shares of Junior Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount to be distributed per share to holders of shares of Common Stock, or (2) to the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Junior Preferred Stock, except distributions made ratably on the Junior Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Company shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Junior

 

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Preferred Stock were entitled immediately prior to such event under the proviso in clause (1) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

Section 7. Consolidation, Merger, Etc. In case the Company shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Junior Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Company shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Junior Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

Section 8. No Redemption. The shares of Junior Preferred Stock shall not be redeemable.

Section 9. Rank. The Junior Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets, junior to all series of any other class of the Company’s Preferred Stock.

Section 10. Amendment. The Amended and Restated Certificate of Incorporation of the Company shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of the Junior Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Junior Preferred Stock, voting together as a single class.

 

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IN WITNESS WHEREOF, the undersigned have executed this certificate as of October 16, 2006.

 

/s/ John A. Scarlett

John A. Scarlett, M.D.
President and Chief Executive Officer

/s/ Stephen N. Rosenfield

Stephen N. Rosenfield

Executive Vice President of Legal Affairs,

General Counsel and Secretary

 

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EX-99.10 8 dex9910.htm CERTIFICATE OF AMENDMENT OF AMENDED AND RESTATED CERTIFICATE OF INCORPORATION Certificate of Amendment of Amended and Restated Certificate of Incorporation

Exhibit 10

CERTIFICATE OF AMENDMENT OF

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF

TERCICA, INC.

TERCICA, INC., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “Corporation”), hereby certifies that:

FIRST: The name of the Corporation is TERCICA, INC.

SECOND: The date on which the Certificate of Incorporation of the Corporation was originally filed with the Secretary of State of the State of Delaware is December 14, 2001.

THIRD: The Board of Directors of the Corporation, acting in accordance with the provisions of Sections 141 and 242 of the General Corporation Law of the State of Delaware, adopted resolutions amending the Amended and Restated Certificate of Incorporation of the Corporation as follows:

1. A new Article XIII shall be added to the amended and restated certificate incorporation of the Corporation and shall read in its entirety as follows (with current Article XIII renumbered as Article XIV):

ARTICLE XIII

“Section 1. Relationship With Ipsen. In anticipation that Ipsen (as defined in Section 5 of this Article XIII shall remain a stockholder of the Corporation and that the Corporation (as defined in Section 5 of this Article XIII) and Ipsen may engage in the same or similar activities or lines of business and have an interest in the same areas of corporate opportunities, and in recognition of (i) the benefits to be derived by the Corporation through its contractual, corporate and business relations with Ipsen (including service of officers and directors of Ipsen as directors of the Corporation) and (ii) the difficulties attendant to any director, who desires and endeavors fully to satisfy such director’s fiduciary duties, in determining the full scope of such duties in any particular situation, the provisions of this Article XIII are set forth to regulate, define and guide the conduct of certain affairs of the Corporation as they may involve Ipsen and its officers and directors, and the powers, rights, duties and liabilities of the Corporation and its officers, directors and stockholders in connection therewith.

Section 2. Similar Business Activities. Except as Ipsen S.A., a French société anonyme may otherwise agree in writing, neither Ipsen nor any officer or director thereof shall be liable to the Corporation or its stockholders for breach of any fiduciary duty by reason of any activities of Ipsen or of such person’s participation therein. In the event that Ipsen acquires knowledge of a potential transaction or matter that may be a corporate opportunity for both Ipsen and the Corporation, Ipsen shall have no duty to communicate or offer such corporate opportunity to the Corporation and shall not be liable to the Corporation or its stockholders for breach of any fiduciary duty as a stockholder of the Corporation or controlling person of a stockholder by reason of the fact that Ipsen pursues or acquires such corporate opportunity for itself, directs such corporate opportunity to another person or entity, or does not communicate information regarding, or offer, such corporate opportunity to the Corporation.

Section 3. Corporate Opportunities. In the event that a director, officer or employee of the Corporation who is also a director, officer or employee of Ipsen acquires knowledge, other than solely

as a result of his or her position as a director, officer or employee of the Corporation, of a potential transaction or matter that may be a corporate opportunity for the Corporation and Ipsen (whether such potential transaction or matter is proposed by a third party or is conceived of by such director, officer or employee of the Corporation), such director, officer or employee shall be entitled to offer such corporate opportunity to the Corporation or Ipsen as such director, officer or employee deems appropriate under the circumstances in his sole discretion, and no such director, officer or employee shall be liable to the Corporation or its stockholders for breach of any fiduciary duty or duty of loyalty or failure to act in (or not opposed to) the best interests of the Corporation or the derivation of any improper personal benefit by reason of the fact that (i) such director, officer or employee offered such corporate opportunity to Ipsen (rather than the Corporation) or did not communicate information regarding such corporate opportunity to the Corporation or (ii) Ipsen pursues or acquires such corporate opportunity for itself or directs such corporate opportunity to another person or does not communicate information regarding such corporate opportunity to the Corporation. To the fullest extent permitted by Section 122(17) of the DGCL, the Corporation hereby renounces any interest or expectancy of the Corporation in, or in being offered an opportunity to participate in, (y) any such corporate opportunity, and (z) any other potential transaction or matter that may be a corporate opportunity for the Corporation and Ipsen of which Ipsen acquires knowledge, except to the extent that a director, officer or employee of Ipsen acquires such knowledge solely as a result of his or her position as a director, officer or employee of the Corporation.

Section 4. Deemed Consent of Stockholders. Any person or entity purchasing or otherwise acquiring any interest in any shares of capital stock of the Corporation shall be deemed to have notice of and to have consented to the provisions of this Article XIII.

Section 5 Definitions. For purposes of this Article XIII (i) the term “Corporation” shall mean the Corporation and all corporations, partnerships, joint ventures, associations and other entities in which the Corporation beneficially owns (directly or indirectly) fifty percent or more of the outstanding voting stock, voting power or similar voting interests, and (ii) the term “Ipsen” shall mean Ipsen S.A., a French société anonyme and all corporations, partnerships, joint ventures, associations and other entities (other than the Corporation, defined in accordance with clause (i) of this Section 5) that are “affiliates” (as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended) of Ipsen S.A., a French société anonyme.

Section 6 Termination; Binding Effect. Notwithstanding anything in this Certificate of Incorporation to the contrary, the foregoing provisions of this Article XIII shall expire on the date on which Ipsen shall no longer be entitled to designate at least one nominee for director to the Board of Directors pursuant to the provisions of Section 2.4 of the Affiliation Agreement and no person who is a director or officer of the Corporation is also a director or officer of Ipsen. Neither such expiration, nor the alteration, amendment, change or repeal of any provision of this Article XIII nor the adoption of any provision of this Certificate of Incorporation inconsistent with any provision of this Article XIII shall eliminate or reduce the effect of this Article XIII in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article XIII, would accrue or arise, prior to such expiration, alteration, amendment, repeal or adoption.”

2. A revised Article XIII of the amended and restated certificate of incorporation of the Corporation renumbered as Article XIV, shall be amended and restated to read in its entirety as follows:

ARTICLE XIV

“The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred

 

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upon stockholders herein are granted subject to this reservation; provided, however, that the provisions of Article VI, VII, X, XI, XII hereof and of this Article XIV may be amended, altered, changed or repealed only upon the affirmative vote of the holders of at least eighty percent (80%) of the voting power of the issued and outstanding capital stock of the Corporation entitled to vote in the election of directors.”

FOURTH: Thereafter pursuant to a resolution of the Board of Directors, this Certificate of Amendment was submitted to the stockholders of the Corporation for their approval, and was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF, said TERCICA, INC. has caused this Certificate of Amendment of Amended and Restated Certificate of Incorporation to be signed by its President and Chief Executive Officer this 12th day of October, 2006.

 

TERCICA, INC.
By:  

/s/ John A. Scarlett

  John A. Scarlett, M.D.
  President and Chief Executive Officer

 

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