CELGENE CORPORATION
CERTIFICATE OF DESIGNATION
OF
SERIES B CONVERTIBLE
PREFERRED STOCK
(Pursuant to Section 151 of the Delaware General Corporation Law)
We, Sol J. Barer and Robert C. Butler, the President and the
Secretary, respectively, of Celgene Corporation, a Delaware corporation, in
accordance with the provisions of Section 103 of the Delaware General
Corporation Law do hereby certify that:
1. The name of the corporation (hereinafter called the "Company") is
CELGENE CORPORATION, a corporation duly organized and existing under the laws of
the State of Delaware.
2. The Certificate of Incorporation (as amended) authorizes the
issuance of 5,000,000 shares of Preferred Stock of a par value of $.01 each and
expressly vests in the Board of Directors of the Company the authority provided
therein to issue any or all of said shares in one or more series and by
resolution to establish the designation, number, full or limited voting powers,
or the denial of voting powers, preferences and relative, participating,
optional, and other special rights and the qualifications, limitations,
restrictions, and other distinguishing characteristics of each series to be
issued.
3. The following is a true and correct copy of certain resolutions
duly adopted by the Board of Directors of the Company on May 30, 1997, which
constituted all necessary action on the part of the Company for adoption of such
resolutions.
RESOLVED, that a series of Preferred Stock, par value $.01 per share,
of the Company is hereby created and the designation, number of shares, powers,
preferences, rights, qualifications, limitations, and restrictions thereof (in
addition to any provisions set forth in the Certificate of Incorporation of the
Company which are applicable to the preferred stock of all classes and series)
are as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series B Convertible Preferred Stock" (the "Series B Convertible
Preferred Stock") and the number of shares constituting the Series B Convertible
Preferred Stock (the "Shares") shall be Twenty Thousand (20,000); 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 to a number less
than the number of shares then outstanding.
Section 2. Rank. All Series B Convertible Preferred Stock shall rank
(i) senior to the Common Stock, par value $.01 per share (the "Common Stock"),
of the Company, now or hereafter issued, as to payment of dividends and
distribution of assets upon liquidation, dissolution, or winding up of the
Company, whether voluntary or involuntary, and (ii) senior to the Series A
Convertible Preferred Stock, par value $.01 per share, of the Company, now or
hereafter issued, both as to payment of dividends and distributions of assets
upon liquidation, dissolution, or winding up of the Company, whether voluntary
or involuntary.
Section 3. Dividends. Each Series B Convertible Preferred Stock will
bear dividends, when, as and if declared by the Board of Directors at the higher
of (i) a rate of 9% of the Original Series B Issue Price (as defined in Section
4(a) below) per annum, compounded quarterly, or (ii) the total of all cash
dividends paid in any one calendar year per share of Common Stock, multiplied by
the number of Conversion Shares into which a share of Series B Convertible
Preferred Stock is convertible on December 31 of such calendar year. Dividends
on the Series B Convertible Preferred Stock shall accrue cumulatively, whether
or not declared, and shall be added to the Liquidation Preference as hereinafter
provided.
Section 4. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up
of the Company, either voluntary or involuntary, or the sale of substantially
all of the assets of the Company (an "Event"), the holders of Shares shall be
entitled to receive out of the assets of the Company, whether such assets
constitute stated capital or surplus of any nature, an amount per share of
Series B Convertible Preferred Stock equal to the sum of (i) $1,000 for each
outstanding Share (the "Original Series B Issue Price") and (ii) an amount equal
to the accrued but unpaid dividends on such Share (such amount being referred to
herein as the "Accretion") (the Original Series B Issue Price and Accretion
collectively, the "Liquidation Preference"), and no more, before any payment
shall be made or any assets distributed to the holders of Common Stock or any
other class or series of the Company's capital stock ranking junior as to
liquidation rights to the Series B Convertible Preferred Stock (collectively,
the "Junior Liquidation Stock"); provided, however, that such rights shall
accrue to the holders of Series B Convertible Preferred Stock only in the event
that the Company's payments with respect to the liquidation preference of the
holders of capital stock of the Company ranking senior as to liquidation rights
to the Series B Convertible Preferred Stock (the "Senior Liquidation Stock") are
fully met. After the liquidation preferences of the Senior Liquidation Stock are
fully met, the entire assets of the Company available for distribution shall be
distributed ratably among the holders of the Series B Convertible Preferred
Stock and any other class or series of the Company's
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capital stock having parity as to liquidation rights with the Series B
Convertible Preferred Stock (the "Parity Liquidation Stock") in proportion to
the respective preferential amounts to which each is entitled (but only to the
extent of such preferential amounts). After payment in full of the Liquidation
Preference of the shares of the Series B Convertible Preferred Stock and the
Parity Liquidation Stock, if assets remain in the Company, they shall be
distributed ratably to holders of Series B Convertible Preferred Stock (on an
as-converted basis) and to holders of Junior Liquidation Stock in accordance
with the Company's Certificate of Incorporation including any duly adopted
Certificate(s) of Designation.
(b) Upon consummation of a consolidation, reorganization or
merger (whether or not the Company is the surviving entity) in which the
stockholders of the Company immediately prior to the consolidation,
reorganization or merger do not continue to own more than 50% of the voting
power of the surviving entity, the holder of Shares will be entitled to cash in
the amount of the Liquidation Preference and the Shares will be automatically
converted to the securities to which the holders of Shares would have been
entitled had the Shares been converted immediately prior to the consummation of
such consolidation, reorganization or merger.
Section 5. Conversion. Except as otherwise provided in Section 10, the
recordholders of the Series B Convertible Preferred Stock shall have conversion
rights as follows:
(a) Right to Convert. The record holder of the Series B
Convertible Preferred Stock shall be entitled to convert the shares of Preferred
Stock held by such holder into fully-paid and nonassessable shares of the Common
Stock at the Conversion Rate, as follows:
Conversion Rate = Original Series B Issue Price + Accretion
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Conversion Price
The Conversion Price shall equal $6.50 (the "Initial Conversion
Price"); provided, however, that the Conversion Price may be reset on each Reset
Date in accordance with the following two paragraphs.
A "Reset Date" shall mean one or more of the following dates, if on
any such date(s) the average Closing Price (as defined below) for the ten (10)
trading days ending on such Reset Date is lower than the Initial Conversion
Price (or the Conversion Price as reset in accordance with this paragraph):
(i) the dates of the Second Closing, Third Closing or Fourth Closing
(all as defined in the Securities Purchase Agreement dated June
9, 1997 between the Company and certain investors);
(ii) June 1, 1998; and
(iii) July 9, 2002, with respect to the Shares of Preferred Stock that
have not been redeemed pursuant to Section 6 below.
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Upon the occurrence of a Reset Date, the Conversion Price shall
thereafter equal the average Closing Price for the ten (10) trading days ending
on such Reset Date(s); provided, however, that if the Conversion Price in effect
on any Date of Conversion is lower than the Floor Price in effect on such Date
of Conversion, then the Conversion Price shall equal the Floor Price for such
Date of Conversion. For conversions occurring prior to June 2, 1998, the Floor
Price shall be $6.00; for conversions occurring on a Date of Conversion on or
after June 2, 1998 and prior to June 2, 1999, the Floor Price shall be $5.00;
for conversions occurring on a Date of Conversion on or after June 2, 1999 and
prior to June 9, 2002, the Floor Price shall be 55% of the Initial Conversion
Price. For conversions occurring on a Conversion Date on or after June 9, 2002,
there shall be no Floor Price.
In the event that the Company does not file a Registration Statement
as required by Section 2.a. of the Registration Rights Agreement dated as of
June 9, 1997, within the period therein specified, then the Conversion Price for
all outstanding Series B Convertible Preferred Stock shall be reset to equal the
average Closing Price for the ten trading days beginning on a date that is the
first day after the date that the Securities and Exchange Commission declares
effective such Registration Statement, if such average Closing Price is lower
than the Conversion Price then in effect. The Conversion Price, as adjusted by
this paragraph, shall remain subject to the Floor Price as set forth in the
preceding paragraph.
"Closing Price" shall mean the closing price of the Company's Common
Stock as reported by the Nasdaq National Market System (or, if not reported by
Nasdaq, as reported by such other exchange or market where traded).
No fractional shares of Common Stock shall be issued upon conversion
of this Series B Convertible Preferred Stock. In lieu of any fractional share of
Common Stock to which the Investor would otherwise be entitled, the Company
shall round up to the nearest whole share of Common Stock.
(b) Mechanics of Conversion. In order to convert Series B
Convertible Preferred Stock into shares of Common Stock, the holder shall (i)
fax a copy of the fully executed notice of conversion in the form attached
hereto ("Notice of Conversion") (together with a copy of the first page of each
certificate to be converted) to the Company at the office of the Company and to
American Stock Transfer & Trust Company (the "Exchange Agent") that such holder
elects to convert the same, which notice shall specify the number of shares of
Series B Convertible Preferred Stock to be converted and shall contain a
calculation of the Conversion Rate prior to Midnight, New York City time on the
Date of Conversion specified on the Notice of Conversion and (ii) surrender the
original certificate or certificates therefor, duly endorsed, and the original
Notice of Conversion, no later than Midnight (New York City Time) the next
business day, to a common courier for overnight delivery or 2-day delivery (if
overseas) to the Exchange Agent.
The Company shall issue and deliver or cause to be issued and
delivered within three (3) business days after delivery to the Exchange Agent of
such certificates, to such holder of Series B Convertible Preferred Stock at the
address of the Holder on the books of the Company, a
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certificate for the number of shares of Common Stock to which the Holder shall
be entitled as provided in Section 5(a) above. The date on which conversion
occurs (the "Date of Conversion") shall be deemed to be the date set forth in
such Notice of Conversion, provided (i) that the advance copy of the Notice of
Conversion is faxed to the Company and the Exchange Agent before midnight, New
York City time, on the Date of Conversion and (ii) that the stock certificates
(the "Preferred Stock Certificates") representing the Series B Convertible
Preferred Stock to be converted (or reasonable indemnity reasonably acceptable
to the Company with respect to any lost, stolen or destroyed certificate) are
received by the Exchange Agent within five (5) business days thereafter. The
person or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on such date. If the original Series B
Convertible Preferred Stock Certificates to be converted (or reasonable
indemnity) are not received by the Exchange Agent or the Company within five (5)
business days after the Date of Conversion, the Company may, at its option,
treat the Notice of Conversion as null and void.
(c) Reservation of Stock Issuable Upon Conversion. The Company
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the Series B Convertible Preferred Stock, such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
then outstanding shares of Series B Convertible Preferred Stock; and if at any
time the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of Series B
Convertible Preferred Stock, the Company will take such corporate action as may
be necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purpose.
(d) Automatic Conversion. Each outstanding share of Series B
Convertible Preferred Stock (other than an Excess Share, as defined in Section
10) shall automatically be converted (the "Automatic Conversion") into Common
Stock on the later of (a) June 2, 1998 or (b) the date on which the Company
receives a letter from the United States Food & Drug Administration granting
accelerated approval of the Company's New Drug Application to market Synovir for
the AIDS/cachexia indication, at the Conversion Price in effect on the date of
such automatic conversion; provided, however, that Automatic Conversion shall
not occur prior to June 2, 1999 unless the average Closing Price for the 15
trading days prior to the date of automatic conversion is equal to or above the
Floor Price then in effect. Notwithstanding any of the above, but subject to
Section 10 below (i) any shares of Series B Convertible Preferred Stock
outstanding on June 2, 1999 shall be automatically converted into Common Stock
on any date on or after June 2, 1999 on which the average Closing Price for the
15 preceding trading days is greater than 200% of the Conversion Price then in
effect, at the Conversion Price in effect on the date of such automatic
conversion, and (ii) no shares of Series B Convertible Preferred Stock shall
convert pursuant to this Section 5(d) if, on the date conversion would otherwise
occur pursuant to this Section 5(d), the Common Stock is not listed for
quotation and trading on the Nasdaq National Market; provided, however, that
such conversion shall occur pursuant to this Section 5(d) on such date
thereafter, if any, as the Common Stock shall become listed for quotation and
trading on the Nasdaq National Market.
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(e) Adjustment to Conversion Price. In computing the Conversion
Price for purposes of Section 5(a):
(i) If, prior to the conversion of all of the Series B
Convertible Preferred Stock, the number of outstanding shares of Common Stock is
adjusted by a stock split, stock dividend, or other similar event, the
Conversion Price shall be proportionately adjusted.
(ii) If, prior to the conversion of all Series B Convertible
Preferred Stock, there shall be any merger, consolidation, exchange of shares,
recapitalization, reorganization, or other similar event, as a result of which
shares of Common Stock shall be changed into the same or a different number of
shares of the same or another class or classes of stock or securities of the
Company or another entity, then the holders of Series B Convertible Preferred
Stock shall thereafter have the right to purchase and receive upon conversion of
Series B Convertible Preferred Stock, upon the basis and upon the terms and
conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore issuable upon conversion, such shares of stock and/or
securities as may be issued or payable with respect to or in exchange for the
number of shares of Common Stock immediately theretofore purchasable and
receivable upon the conversion of Series B Convertible Preferred Stock held by
such Holders had the Holders converted their Series B Preferred to Common
immediately prior to such merger, consolidation, exchange of shares,
recapitalization or reorganization, and in any such case appropriate provisions
shall be made with respect to the rights and interests of the Holders of the
Series B Convertible Preferred Stock to the end that the provisions hereof
(including, without limitation, provisions for adjustment of the Conversion
Price and of the number of shares issuable upon conversion of the Series B
Convertible Preferred Stock) shall thereafter be applicable, as nearly as may be
practicable in relation to any shares of stock or securities thereafter
deliverable upon the conversion of Series B Convertible Preferred Stock. The
Company shall not effect any transaction described in this subsection 5(e)
unless the resulting successor or acquiring entity (if not the Company) assumes
by written instrument the obligation to deliver to the Holders of the Series B
Convertible Preferred Stock such shares of stock and/or securities as, in
accordance with the foregoing provisions, the Holders of the Series B
Convertible Preferred Stock may be entitled to purchase.
Section 6. Redemption. At the option of the Company, any Shares of
Preferred Stock outstanding on June 9, 2002 may be redeemed on that date by the
Company at a redemption price equal to (i) the Original Series B Issue Price,
and (ii) the Accretion. Notice of redemption shall be given not more than 60 nor
less than 30 days prior to June 9, 2002. The number of Shares from each holder
that are to be redeemed shall be in the same proportion as the total number of
Shares to be redeemed bears to the total number of Shares then outstanding.
Section 7. Voting Rights.
(a) Except as otherwise provided in Section 10 below, each share
of Series B Convertible Preferred Stock issued and outstanding shall have the
number of votes equal to the number of shares of Common Stock into which it
shall have been convertible as of the record date
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of the stockholders' meeting at which action is proposed to be taken or for any
stockholder action to be taken by written consent. Except as otherwise provided
in this Section 7 or as otherwise required by law, the holders of Series B
Preferred Stock and the holders of Common Stock shall vote together as one class
upon all matters submitted to stockholders for a vote.
(b) Except as otherwise provided in Section 10 below, until such
time after December 10, 1998 as there are outstanding shares of Series B
Preferred Stock having an aggregate Original Series B Issue Price of less than
$2,000,000:
(i) The holders representing 75% or more of the outstanding
shares of Series B Preferred Stock (other than those which are subject to
Section 10(c)(ii) below), voting as a single class, will be required: (a) to
authorize the incurrence of indebtedness (except for trade payables, lease
financing and other indebtedness incurred in the ordinary course of business),
(b) to authorize the issuance of securities having a preference over, or on a
parity with, the Series B Convertible Preferred or to increase the number of
authorized shares of Series B Preferred, (c) to reclassify any Common Stock or
other securities of the Company into shares or debt (except for trade payables,
lease financing and other indebtedness incurred in the ordinary course of
business) having a preference or priority superior to or on parity with the
Series B Convertible Preferred Stock, or (d) alter or change the rights,
preferences or privileges in its shares of Series B Convertible Preferred or
otherwise amend the Certificate of Incorporation of the Company in either case
whether by merger, consolidation or otherwise so as to adversely affect such
shares.
(ii) The holders representing a majority of the outstanding
shares of Series B Preferred Stock (other than those which are subject to
Section 10(c)(ii) below), voting as a single class, will be required: (a) to
effect a sale or transfer of all or substantially all of the Company's assets or
to effect a merger which results in the holders of the Company's capital stock
prior to the transaction owning less than 50% of the voting power of the
Company's capital stock after the transaction; (b) to declare any dividend or
make any other distribution other than as contemplated herein; (c) to acquire
for more than $5,000,000 in cash or Celgene securities, assets or stock in any
other company; or (d) to enter into any corporate event that could be considered
a "liquidation" or sale of the Company (except for bankruptcy).
Section 8. Status of Redeemed or Converted Stock. In the event any
shares of Series B Convertible Preferred Stock shall be converted or redeemed
pursuant to Section 5 or Section 6 hereof, the shares so converted or redeemed
shall be canceled, shall return to the status of authorized but unissued
Preferred Stock of no designated series, and shall not be issuable by the
Company as Series B Convertible Preferred Stock.
Section 9. No Sinking Fund. The shares of Series B Convertible
Preferred Stock shall not be subject to the operation of a purchase, retirement
or sinking fund.
Section 10. Restrictions on Conversions and Voting Rights.
Notwithstanding anything set forth elsewhere herein, if at any time the
percentage beneficial ownership of LGT Asset Management, Inc. ("LGT") (as
determined in accordance with Regulation 13D-G under the Securities
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Exchange Act of 1934, as may be amended from time to time) of the total
outstanding Common Stock of the Company (the "LGT Beneficial Ownership") exceeds
20% (the "Series B Percentage Restriction"), then the following provisions shall
apply with respect to those shares of Series B Convertible Preferred Stock which
are beneficially owned by LGT and which exceed the Series B Percentage
Restriction (each, an "Excess Share"):
(a) No Excess Share shall (i) be convertible pursuant to Section
5(a) hereof, or (ii) be automatically converted pursuant to the Automatic
Conversion set forth in Section 5(d) hereof;
(b) No Excess Share shall be entitled to vote in an election for
directors of the Company pursuant to the voting rights set forth in Section 7(a)
hereof;
(c) Upon the occurrence of an Automatic Conversion under Section
5(d), (i) the Conversion Rate for each Excess Share shall be fixed at the
Conversion Rate (subject to antidilution adjustments as provided for herein)
(the "Fixed Rate") in effect on the date of such Automatic Conversion and
thereafter such Excess Shares may be converted only, if at all, at such Fixed
Rate; (ii) no Excess Share shall be entitled to the voting rights set forth in
Section 7(b); and (iii) no Excess Share shall accrue dividends pursuant to
Section 3 but shall retain all previously accrued dividends;
(d) Each Excess Share shall continue to accrue liquidation
preference pursuant to Section 4 (whether or not there is an Automatic
Conversion);
(e) Following the passage of any consecutive 75 calendar day
period (the "75-Day Period") during which the LGT Beneficial Ownership is below
and has continuously remained below the Series B Percentage Restriction (the
"Shortfall"), that number of Excess Shares which is equal to the difference
between the Series B Percentage Restriction and the Shortfall shall become
convertible pursuant to Section 5(a) hereof and shall become entitled to the
rights described in (a)(ii) and (b) above (each, a "Restored Share"); provided,
however, that, if an Automatic Conversion has occurred while a share of Series B
Convertible Preferred Stock was an Excess Share (whether before or during the
75-day Period), then, upon expiration of the 75-Day Period, such Excess Share
that becomes a Restored Share following the expiration of the 75-Day Period
shall be automatically converted at the Conversion Rate in effect on the date of
the Automatic Conversion;
(f) Other than as specifically set forth above, each Excess Share
shall be entitled to, and be subject to all of the powers, preferences and
relative, optional, participating, and other special rights and the
qualifications, limitations, restrictions, and other distinguishing
characteristics set forth in this Certificate of Designation; and
(g) In calculating the Series B Percentage Restriction, all
warrants issuable or issued to and held by the Series B Preferred holder
pursuant to the Securities Purchase Agreement with the Company dated of even
date herewith, and shares of Common Stock issuable pursuant to such warrants
shall be excluded from the calculation of the LGT Beneficial Ownership.
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Section 11. Participation Rights. The holders of Series B Convertible
Preferred Stock shall have the right to participate, as provided herein, in any
private placement by the Company of Common Stock or Common Stock equivalents at
a price per share below the then current trading price of Common Stock (a
"Subsequent Placement"). Each such holder shall have the right to participate in
such Subsequent Placement on a pro-rata basis, as provided herein. The Company
shall, at least ten days prior to the closing of any such Subsequent Placement,
deliver written notice to each such holder describing the proposed financing,
the terms thereof, and any and all disclosure or similar materials provided to
proposed investors in the Subsequent Placement. Each such holder shall have the
right to purchase his pro-rata share of the securities to be issued in the
Subsequent Placement on the terms thereof. Each such holder's pro-rata share of
any Subsequent Placement shall be computed as a fraction, the numerator of which
shall be the number of shares of Common Stock into which the Series B
Convertible Preferred Stock of such holder is then convertible, and the
denominator of which shall be the sum of the number of shares of Common Stock or
Common Stock equivalents to be outstanding upon completion of the Subsequent
Placement plus the number of shares of Common Stock into which all outstanding
Series B Convertible Preferred Stock is then convertible.
FURTHER RESOLVED, that the statements contained in the foregoing
resolutions creating and designating the said Series B Convertible Preferred
Stock and fixing the number, powers, preferences and relative, optional,
participating, and other special rights and the qualifications, limitations,
restrictions, and other distinguishing characteristics thereof shall, upon the
effective date of said series, be deemed to be included in and be a part of the
Certificate of Incorporation of the Company pursuant to the provisions of the
General Corporation Law of the State of Delaware.
FURTHER RESOLVED, that the officers of the Company be, and each acting
individually hereby is, authorized and directed to take all actions necessary
and advisable to effect the purpose and intent of the foregoing resolutions.
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IN WITNESS WHEREOF, Celgene Corporation has caused this certificate to
be signed by Sol J. Barer, its President, and attested by Robert C. Butler, its
Secretary, this 9th day of June, 1997.
CELGENE CORPORATION
By
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Sol J. Barer
President
Attest:
By
--------------------------
Robert C. Butler
Secretary
Each of the undersigned, the President and the Secretary,
respectively, of Celgene Corporation, a Delaware corporation, declares under
penalty of perjury that the matters set forth in this certificate are true and
correct of his own knowledge.
Executed at Warren, New Jersey on June 9, 1997.
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Sol J. Barer
President
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Robert C. Butler
Secretary