UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2015
or
¨ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For transition period from
to
.
Commission File Number: 001-31918
IDERA
PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
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Delaware |
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04-3072298 |
(State or other jurisdiction of
incorporation or organization) |
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(I.R.S. Employer
Identification No.) |
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167 Sidney Street
Cambridge, Massachusetts |
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02139 |
(Address of principal executive offices) |
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(Zip code) |
(617) 679-5500
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer |
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¨ |
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Accelerated filer |
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x |
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Non-accelerated filer |
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¨ (Do not check if a smaller reporting company) |
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Smaller reporting company |
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¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes ¨ No x
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Common Stock, par value $.001 per share |
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118,122,662 |
Class |
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Outstanding as of July 15, 2015 |
IDERA PHARMACEUTICALS, INC.
FORM 10-Q
INDEX
IMO® and Idera® are our trademarks. All other trademarks and service marks appearing in this Quarterly Report on Form 10-Q are the property of their respective owners.
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933,
as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact, included or incorporated in this report regarding our strategy, future operations, clinical trials,
collaborations, intellectual property, cash resources, financial position, future revenues, projected costs, prospects, plans, and objectives of management are forward-looking statements. The words believes, anticipates,
estimates, plans, expects, intends, may, could, should, potential, likely, projects, continue, will, and
would and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We cannot guarantee that we actually will achieve the plans, intentions or
expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. There are a number of important factors that could cause our actual results to differ materially from those indicated
or implied by forward-looking statements. These important factors include those set forth below under Part II, Item 1A Risk Factors. These factors and the other cautionary statements made in this Quarterly Report on Form 10-Q should
be read as being applicable to all related forward-looking statements whenever they appear in this Quarterly Report on Form 10-Q. In addition, any forward-looking statements represent our estimates only as of the date that this Quarterly Report on
Form 10-Q is filed with the Securities and Exchange Commission and should not be relied upon as representing our estimates as of any subsequent date. We do not assume any obligation to update any forward-looking statements. We disclaim any intention
or obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
ii
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
IDERA PHARMACEUTICALS, INC.
CONDENSED BALANCE SHEETS
(UNAUDITED)
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(In thousands, except per share amounts) |
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June 30, 2015 |
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December 31, 2014 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
36,369 |
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$ |
19,971 |
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Short-term investments |
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39,368 |
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21,256 |
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Prepaid expenses and other current assets |
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1,602 |
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1,203 |
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Total current assets |
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77,339 |
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42,430 |
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Long-term investments |
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30,567 |
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7,344 |
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Property and equipment, net |
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1,575 |
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1,306 |
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Restricted cash and other assets |
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350 |
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346 |
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Total assets |
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$ |
109,831 |
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$ |
51,426 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
2,845 |
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$ |
2,458 |
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Accrued expenses |
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3,411 |
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4,460 |
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Current portion of note payable |
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247 |
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128 |
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Total current liabilities |
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6,503 |
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7,046 |
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Note payable, net of current portion |
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636 |
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742 |
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Other liabilities |
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183 |
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236 |
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Total liabilities |
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7,322 |
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8,024 |
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Commitments and contingencies |
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Stockholders equity: |
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Preferred stock, $0.01 par value, Authorized 5,000 shares |
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Series E convertible preferred stock, Designated zero shares and 424 shares at June 30, 2015 and December 31,
2014, respectively; Issued and outstanding zero shares |
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Series A convertible preferred stock, Designated 1,500 shares; Issued and outstanding
1 share |
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Common stock, $0.001 par value, Authorized 280,000 shares; Issued and outstanding 118,110 and 94,829
shares at June 30, 2015 and December 31, 2014, respectively |
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118 |
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95 |
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Additional paid-in capital |
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579,194 |
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494,850 |
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Accumulated deficit |
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(476,726 |
) |
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(451,526 |
) |
Accumulated other comprehensive loss |
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(77 |
) |
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(17 |
) |
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Total stockholders equity |
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102,509 |
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43,402 |
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Total liabilities and stockholders equity |
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$ |
109,831 |
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$ |
51,426 |
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The accompanying notes are an integral part of these financial statements.
1
IDERA PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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(In thousands, except per share amounts) |
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2015 |
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2014 |
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2015 |
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2014 |
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Alliance revenue |
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$ |
5 |
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$ |
38 |
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$ |
39 |
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$ |
41 |
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Operating expenses: |
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Research and development |
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8,960 |
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5,637 |
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17,680 |
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12,570 |
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General and administrative |
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3,821 |
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2,730 |
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7,658 |
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4,773 |
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Total operating expenses |
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12,781 |
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8,367 |
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25,338 |
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17,343 |
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Loss from operations |
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(12,776 |
) |
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(8,329 |
) |
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(25,299 |
) |
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(17,302 |
) |
Other income (expense): |
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Investment income, net |
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48 |
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16 |
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62 |
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31 |
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Foreign currency exchange gain |
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9 |
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5 |
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37 |
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2 |
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Net loss |
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(12,719 |
) |
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(8,308 |
) |
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(25,200 |
) |
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(17,269 |
) |
Preferred stock dividends |
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118 |
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303 |
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Net loss applicable to common stockholders |
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$ |
(12,719 |
) |
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$ |
(8,426 |
) |
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$ |
(25,200 |
) |
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$ |
(17,572 |
) |
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Basic and diluted net loss per common share applicable to common stockholders
(Note 13) |
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$ |
(0.11 |
) |
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$ |
(0.10 |
) |
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$ |
(0.23 |
) |
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$ |
(0.22 |
) |
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Shares used in computing basic and diluted net loss per common share applicable to common stockholders |
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118,002 |
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82,961 |
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111,570 |
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79,509 |
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Net loss |
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$ |
(12,719 |
) |
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$ |
(8,308 |
) |
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$ |
(25,200 |
) |
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$ |
(17,269 |
) |
Other comprehensive (loss) gain: |
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Unrealized (loss) gain on available-for-sale securities |
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(78 |
) |
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(1 |
) |
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(60 |
) |
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10 |
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Comprehensive loss |
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$ |
(12,797 |
) |
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$ |
(8,309 |
) |
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$ |
(25,260 |
) |
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$ |
(17,259 |
) |
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The accompanying notes are an integral part of these financial statements.
2
IDERA PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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Six Months Ended June 30, |
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(In thousands) |
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2015 |
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2014 |
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Cash Flows from Operating Activities: |
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Net loss |
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$ |
(25,200 |
) |
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$ |
(17,269 |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
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Stock-based compensation |
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2,869 |
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1,320 |
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Depreciation and amortization expense |
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213 |
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78 |
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Amortization of investment premiums |
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199 |
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96 |
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Issuance of common stock for services rendered |
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60 |
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36 |
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Non-employee stock option expense |
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495 |
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(3 |
) |
Changes in operating assets and liabilities: |
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Prepaid expenses and other current assets |
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(399 |
) |
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38 |
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Accounts payable, accrued expenses, and other liabilities |
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(806 |
) |
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1,947 |
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Net cash used in operating activities |
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(22,569 |
) |
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(13,757 |
) |
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Cash Flows from Investing Activities: |
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Purchases of available-for-sale securities |
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(56,196 |
) |
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(2,619 |
) |
Maturities of available-for-sale securities |
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13,602 |
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|
2,000 |
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Sales of available-for-sale securities |
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999 |
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Purchases of property and equipment |
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(376 |
) |
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(533 |
) |
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Net cash used in investing activities |
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(41,971 |
) |
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(1,152 |
) |
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Cash Flows from Financing Activities: |
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Proceeds from equity financings, net of issuance costs |
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80,599 |
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37,202 |
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Dividends paid |
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(463 |
) |
Proceeds from exercise of common stock warrants and options and employee stock purchases |
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|
343 |
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6,780 |
|
Payments on capital lease |
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(4 |
) |
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(2 |
) |
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Net cash provided by financing activities |
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80,938 |
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43,517 |
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Net increase in cash and cash equivalents |
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16,398 |
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28,608 |
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Cash and cash equivalents, beginning of period |
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19,971 |
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26,278 |
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Cash and cash equivalents, end of period |
|
$ |
36,369 |
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$ |
54,886 |
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|
The accompanying notes are an integral part of these financial statements.
3
IDERA PHARMACEUTICALS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 2015
(UNAUDITED)
(1) Organization
Idera Pharmaceuticals, Inc. (Idera or the Company) is a clinical-stage biopharmaceutical company
focused on the discovery, development and commercialization of novel therapeutics for oncology and rare diseases. The Company uses two distinct proprietary drug discovery technology platforms to design and develop drug candidates, its Toll-like
receptor (TLR) targeting technology and its third-generation antisense program, which was previously referred to as its GSO program. The Company developed these platforms based on its scientific expertise and pioneering work with
synthetic oligonucleotides as therapeutic agents. Using its TLR targeting technology, the Company designs synthetic oligonucleotide-based drug candidates to act by modulating the activity of specific TLRs. In addition, using its third-generation
antisense technology, the Company is developing drug candidates to turn off the messenger RNA (mRNA) associated with disease causing genes. The Company believes that its third-generation antisense technology may potentially reduce the
immunotoxicity and increase the potency of earlier generation antisense and RNA interference (RNAi) technologies.
Idera is
currently conducting a Phase 1/2 clinical trial of IMO-8400 in patients with Waldenströms macroglobulinemia and Phase 1/2 clinical trial of IMO-8400 in patients with diffuse large B-cell lymphoma (DLBCL) who harbor the MYD88
L265P oncogenic mutation. The Company is planning to initiate clinical development of IMO-8400 for the treatment of rare diseases and has selected dermatomyositis and Duchenne muscular dystrophy (DMD) as the first non-cancer rare
diseases for which it plans to develop IMO-8400. The Company believes it can develop and commercialize therapies on its own in these disease indications, which are characterized by small, well-defined patient populations with serious unmet medical
needs.
The Company is also evaluating a second novel synthetic oligonucleotide antagonist of TLR7, TLR8 and TLR9, IMO-9200, as a drug
candidate for potential use in inflammatory bowel disease (IBD). The Company has conducted a Phase 1 clinical trial of subcutaneously injected IMO-9200 in healthy subjects and preclinical studies using an oral administration of IMO-9200 in mouse
models of colitis. The company is currently reviewing its strategic options in relation to the advancement of IMO-9200, as IBD falls outside of the core focus of oncology and rare diseases.
The Company is also planning to initiate a clinical trial of IMO-2125, administered intra-tumorally, in combination with ipilimumab, a CTLA4
antibody, in patients with metastatic melanoma, and a Phase 1/2 clinical trial involving either IMO-2055 or IMO-2125 in combination with a checkpoint inhibitor for a selected oncology target. IMO-2125 and IMO-2055 are novel synthetic oligonucleotide
agonists of TLR-9.
The Company is also developing its third-generation antisense drug candidates to specifically address challenges
associated with earlier generation antisense and RNAi technologies. Although currently used technologies to silence RNA have demonstrated the ability to inhibit the expression of disease-associated proteins, the Company believes that to reach their
full therapeutic potential, gene silencing technologies need to achieve an improved therapeutic index with efficient systemic delivery without using a delivery technology, reduced immunotoxicity and increased potency. The Company is currently
undertaking an analysis of oncology and rare disease indications for development of drug candidates generated from its third-generation antisense technology. The Company is currently conducting disease model studies and plans to begin
investigational new drug application (IND)-enabling development programs in each of the first two disease indications selected for further development in its third-generation antisense program in the second half of 2015.
As of June 30, 2015, the Company had an accumulated deficit of $476,726,000. The Company expects to incur substantial operating losses in
future periods. The Company does not expect to generate significant product revenue, sales-based milestones or royalties until the Company successfully completes development and obtains marketing approval for drug candidates, either alone or in
collaborations with third parties, which the Company expects will take a number of years. In order to commercialize its drug candidates, the Company needs to complete clinical development and comply with comprehensive regulatory requirements.
The Company is subject to a number of risks and uncertainties similar to those of other companies of the same size within the biotechnology
industry, such as uncertainty of clinical trial outcomes, uncertainty of additional funding, and history of operating losses.
4
(2) New Accounting Pronouncements - Recently Issued
In May 2014, the Financial Accounting Standards Board (the FASB) issued Accounting Standards Update
(ASU) No. 2014-09 Revenue from Contracts with Customers (Topic 606). This ASU requires an entity to recognize revenue from the transfer of promised goods or services to customers in an amount that reflects the consideration
to which the entity expects to be entitled in exchange for those goods or services. In particular, this ASU addresses contracts with more than one performance obligation, as well as the accounting for some costs to obtain or fulfill a contract with
a customer, and provides for additional disclosures with respect to revenues and cash flows arising from contracts with customers. This ASU will be effective for fiscal years beginning after December 15, 2016. Early adoption of this ASU is not
permitted. The Company is currently evaluating the effect that the adoption of this ASU will have on its financial statements.
In August
2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties about an Entitys Ability to Continue as a Going Concern (ASU 2014-15). ASU 2014-15 amends FASB ASC 205-40 Presentation of Financial Statements Going
Concern, by providing guidance on determining when and how reporting entities must disclose going-concern uncertainties in their financial statements, including requiring management to perform interim and annual assessments of an entitys
ability to continue as a going concern within one year of the date of issuance of the entitys financial statements and providing certain disclosures if there is substantial doubt about the entitys ability to continue as a going concern.
ASU 2014-15 will be effective for fiscal years beginning after December 15, 2016 and for interim periods thereafter. Early adoption of ASU 2014-15 is permitted. The Company is currently evaluating the effect that the adoption of ASU 2014-15
will have on its financial statements.
(3) Unaudited Interim Financial Statements
The accompanying unaudited financial statements included herein have been prepared by the Company in accordance with United
States Generally Accepted Accounting Principles (U.S. GAAP) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC). Accordingly, certain information and
footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments, consisting of normal recurring
adjustments, and disclosures considered necessary for a fair presentation of interim period results have been included. Interim results for the six months ended June 30, 2015 are not necessarily indicative of results that may be expected for
the year ending December 31, 2015. For further information, refer to the financial statements and footnotes thereto included in the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2014, which was filed with
the SEC on March 12, 2015.
(4) Financial Instruments
The fair value of the Companys financial instruments is determined and disclosed in accordance with the three-tier
fair value hierarchy specified in Note 6, Fair Value of Assets and Liabilities. The Company is required to disclose the estimated fair values of its financial instruments. The Companys financial instruments consist of cash,
cash equivalents, available-for-sale investments, receivables and a note payable. The estimated fair values of these financial instruments approximate their carrying values as of June 30, 2015 and December 31, 2014. As of June 30,
2015 and December 31, 2014, the Company did not have any derivatives, hedging instruments or other similar financial instruments except for the note issued under the Companys loan and security agreement, which is discussed in Note 5(a) to
the financial statements included in the Companys Annual Report on Form 10-K for the year ended December 31, 2014, including put and call features which the Company determined are clearly and closely associated with the debt host and do
not require bifurcation as a derivative liability, or the fair value of the feature is immaterial.
(5) Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of 90 days or less when purchased to be cash
equivalents. Cash and cash equivalents at June 30, 2015 and December 31, 2014 consisted of cash, commercial paper and money market funds. As of June 30, 2015, the Company had an unsettled investment purchase trade amounting to
approximately $938,000 included in long-term investments and accounts payable because the cash was not deducted from the Companys account until July 2015.
(6) Fair Value of Assets and Liabilities
The Company measures fair value at the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date using assumptions that market participants would use in pricing the asset or liability (the inputs) into a three-tier fair value hierarchy. This fair value hierarchy
gives the highest priority (Level 1) to quoted prices in active markets for identical assets or liabilities and the lowest priority (Level 3) to unobservable inputs in which little or no market data exists, requiring companies to
develop their own assumptions. Observable inputs that do not meet the criteria of Level 1, and include quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets and liabilities in markets that are
not active, are categorized as Level 2. Level 3 inputs are those that reflect the Companys estimates about the assumptions market participants would use in pricing the asset or liability, based on the best information available in
the circumstances. Valuation techniques for assets and liabilities measured using Level 3 inputs may include unobservable inputs such as
5
projections, estimates and managements interpretation of current market data. These unobservable Level 3 inputs are only utilized to the extent that observable inputs are not available
or cost-effective to obtain. The Company applies ASU No. 2011-04, Fair Value Measurement (Topic 820), in its fair value measurements and disclosures.
The table below presents the assets and liabilities measured and recorded in the financial statements at fair value on a recurring basis at
June 30, 2015 and December 31, 2014 categorized by the level of inputs used in the valuation of each asset and liability.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
Total |
|
|
Quoted Prices in Active Markets for Identical Assets or Liabilities (Level
1) |
|
|
Significant Other Observable Inputs (Level 2) |
|
|
Significant Unobservable Inputs (Level 3) |
|
June 30, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
29,773 |
|
|
$ |
29,773 |
|
|
$ |
|
|
|
$ |
|
|
Other cash equivalents commercial paper |
|
|
5,498 |
|
|
|
|
|
|
|
5,498 |
|
|
|
|
|
Short-term investments commercial paper |
|
|
13,957 |
|
|
|
|
|
|
|
13,957 |
|
|
|
|
|
Short-term investments corporate bonds |
|
|
19,097 |
|
|
|
|
|
|
|
19,097 |
|
|
|
|
|
Short-term investments municipal bonds |
|
|
6,314 |
|
|
|
|
|
|
|
6,314 |
|
|
|
|
|
Long-term investments corporate bonds |
|
|
28,161 |
|
|
|
|
|
|
|
28,161 |
|
|
|
|
|
Long-term investments municipal bonds |
|
|
2,406 |
|
|
|
|
|
|
|
2,406 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
105,206 |
|
|
$ |
29,773 |
|
|
$ |
75,433 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
17,156 |
|
|
$ |
17,156 |
|
|
$ |
|
|
|
$ |
|
|
Other cash equivalents commercial paper |
|
|
2,500 |
|
|
|
|
|
|
|
2,500 |
|
|
|
|
|
Short-term investments commercial paper |
|
|
4,494 |
|
|
|
|
|
|
|
4,494 |
|
|
|
|
|
Short-term investments certificate of deposit |
|
|
500 |
|
|
|
|
|
|
|
500 |
|
|
|
|
|
Short-term investments corporate bonds |
|
|
14,357 |
|
|
|
|
|
|
|
14,357 |
|
|
|
|
|
Short-term investments municipal bonds |
|
|
1,905 |
|
|
|
|
|
|
|
1,905 |
|
|
|
|
|
Long-term investments corporate bonds |
|
|
7,344 |
|
|
|
|
|
|
|
7,344 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
48,256 |
|
|
$ |
17,156 |
|
|
$ |
31,100 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Level 1 assets consist of money market funds, which are actively traded daily. The Level 2
assets consist of corporate bond, commercial paper, certificate of deposit and municipal bond investments whose fair value may not represent actual transactions of identical securities. The fair value of corporate and municipal bonds is generally
determined from quoted market prices received from pricing services based upon quoted prices from active markets and/or other significant observable market transactions at fair value. The fair value of commercial paper is generally determined based
on the relationship between the investments discount rate and the discount rates of the same issuers commercial paper available in the market which may not be actively traded daily. The fair value of certificates of deposit approximates
carrying value. Since these fair values may not be based upon actual transactions of identical securities, they are classified as Level 2. Since any investments are classified as available-for-sale securities, any unrealized gains or losses are
recorded in accumulated other comprehensive income or loss within stockholders equity on the balance sheet. The Company did not elect to measure any other financial assets or liabilities at fair value at June 30, 2015 or December 31,
2014.
(7) Investments
The Companys available-for-sale investments at fair value consisted of the following at June 30, 2015 and
December 31, 2014:
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2015 |
|
|
|
Cost |
|
|
Gross Unrealized (Losses) |
|
|
Gross Unrealized Gains |
|
|
Estimated Fair Value |
|
|
|
(In thousands) |
|
Short-term investments commercial paper |
|
$ |
13,949 |
|
|
$ |
|
|
|
$ |
8 |
|
|
$ |
13,957 |
|
Short-term investments corporate bonds |
|
|
19,102 |
|
|
|
(9 |
) |
|
|
4 |
|
|
|
19,097 |
|
Short-term investments municipal bonds |
|
|
6,317 |
|
|
|
(3 |
) |
|
|
|
|
|
|
6,314 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total short-term investments |
|
|
39,368 |
|
|
|
(12 |
) |
|
|
12 |
|
|
|
39,368 |
|
Long-term investments corporate bonds |
|
|
28,238 |
|
|
|
(77 |
) |
|
|
|
|
|
|
28,161 |
|
Long-term investments municipal bonds |
|
|
2,406 |
|
|
|
|
|
|
|
|
|
|
|
2,406 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term investments |
|
|
30,644 |
|
|
|
(77 |
) |
|
|
|
|
|
|
30,567 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments |
|
$ |
70,012 |
|
|
$ |
(89 |
) |
|
$ |
12 |
|
|
$ |
69,935 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2014 |
|
|
|
Cost |
|
|
Gross Unrealized (Losses) |
|
|
Gross Unrealized Gains |
|
|
Estimated Fair Value |
|
|
|
(In thousands) |
|
Short-term investments commercial paper |
|
$ |
4,493 |
|
|
$ |
|
|
|
$ |
1 |
|
|
$ |
4,494 |
|
Short-term investments certificate of deposit |
|
|
500 |
|
|
|
|
|
|
|
|
|
|
|
500 |
|
Short-term investments corporate bonds |
|
|
14,364 |
|
|
|
(7 |
) |
|
|
|
|
|
|
14,357 |
|
Short-term investments municipal bonds |
|
|
1,906 |
|
|
|
(1 |
) |
|
|
|
|
|
|
1,905 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total short-term investments |
|
|
21,263 |
|
|
|
(8 |
) |
|
|
1 |
|
|
|
21,256 |
|
Long-term investments corporate bonds |
|
|
7,354 |
|
|
|
(10 |
) |
|
|
|
|
|
|
7,344 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term investments |
|
|
7,354 |
|
|
|
(10 |
) |
|
|
|
|
|
|
7,344 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments |
|
$ |
28,617 |
|
|
$ |
(18 |
) |
|
$ |
1 |
|
|
$ |
28,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company had no realized gains or losses from available-for-sale securities in the three months ended
June 30, 2015 and 2014. There were no losses or other-than-temporary declines in value included in Investment income, net on the Companys condensed statements of operations and comprehensive loss for any securities for the six
months ended June 30, 2015 and 2014. The Company had no auction rate securities as of June 30, 2015 and December 31, 2014. See Note 4, Financial Instruments, and Note 6, Fair Value of Assets and Liabilities for
additional information related to the Companys investments.
(8) Property and Equipment
At June 30, 2015 and December 31, 2014, net property and equipment at cost consisted of the following:
|
|
|
|
|
|
|
|
|
(In thousands) |
|
June 30, 2015 |
|
|
December 31, 2014 |
|
Leasehold improvements |
|
$ |
581 |
|
|
$ |
525 |
|
Laboratory equipment and other |
|
|
4,197 |
|
|
|
3,884 |
|
|
|
|
|
|
|
|
|
|
Total property and equipment, at cost |
|
|
4,778 |
|
|
|
4,409 |
|
Less: accumulated depreciation |
|
|
3,203 |
|
|
|
3,103 |
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
$ |
1,575 |
|
|
$ |
1,306 |
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense on property and equipment was approximately $110,000 and $47,000 in the
three months ended June 30, 2015 and 2014, respectively, and approximately $203,000 and $78,000 in the six months ended June 30, 2015 and 2014, respectively.
7
(9) Restricted Cash
As part of the Companys lease arrangement for its office and laboratory facility in Cambridge, Massachusetts, the
Company is required to restrict cash held in a certificate of deposit securing a line of credit for the lessor. As of June 30, 2015 and December 31, 2014, the restricted cash amounted to $311,000 held in certificates of deposit securing a
line of credit for the lessor.
(10) Exton Office Lease
On April 1, 2015, the Company entered into a lease of approximately 4,300 square feet of office space in Exton,
Pennsylvania. The term of the lease ends on April 30, 2020, with one five-year renewal option exercisable by the Company. The Company classifies the lease as an operating lease. Future minimum commitments as of June 30, 2015 under the
Companys Exton office lease agreement are approximately:
|
|
|
|
|
December 31, |
|
Operating Lease |
|
|
|
(In thousands) |
|
2015 |
|
$ |
50 |
|
2016 |
|
|
76 |
|
2017 |
|
|
78 |
|
2018 |
|
|
81 |
|
2019 |
|
|
83 |
|
2020 |
|
|
28 |
|
|
|
|
|
|
|
|
$ |
396 |
|
|
|
|
|
|
(11) Comprehensive Loss
Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions
and other events and circumstances from non-owner sources. Comprehensive loss for the six months ended June 30, 2015 and 2014 is comprised of reported net loss and any change in net unrealized gains and losses on investments during each period,
which is included in accumulated other comprehensive gain (loss) on the accompanying balance sheets. The Company applies ASU No. 2011-05, Comprehensive Income by presenting the components of net income and other comprehensive income
as one continuous statement.
The following table includes the changes in the accumulated balance of the component of other comprehensive
gain (loss) for the six months ended June 30, 2015 and 2014:
|
|
|
|
|
|
|
|
|
(In thousands) |
|
Six Months Ended June 30, 2015 |
|
|
Six Months Ended June 30, 2014 |
|
Accumulated unrealized loss on available-for-sale securities at beginning of period |
|
$ |
(17 |
) |
|
$ |
(7 |
) |
Change during the period |
|
|
(60 |
) |
|
|
10 |
|
|
|
|
|
|
|
|
|
|
Accumulated unrealized (loss) gain on available-for-sale securities at end of period |
|
$ |
(77 |
) |
|
$ |
3 |
|
|
|
|
|
|
|
|
|
|
(12) Stock-Based Compensation
The Company recognizes all stock-based payments to employees and directors as expense in the statements of operations and
comprehensive loss based on their fair values. The Company records compensation expense over an awards requisite service period, or vesting period, based on the awards fair value at the date of grant. The Companys policy is to
charge the fair value of stock options as an expense, adjusted for forfeitures, on a straight-line basis over the vesting period, which is generally four years for employees and three years for directors.
The Company recorded charges of $1,523,000 and $785,000 in its statements of operations and comprehensive loss for the three months ended
June 30, 2015 and 2014, respectively, and $2,869,000 and $1,320,000 in its statements of operations and comprehensive loss for the six months ended June 30, 2015 and 2014, respectively, for stock-based compensation expense attributable to
stock-based payments made to employees and directors. The stock-based compensation for the three and six months ended June 30, 2015 includes approximately $329,000 for the recognition of additional cost associated with the acceleration of
vesting and extension of the exercise period of a retiring directors stock options due to a modification. The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. The following
assumptions apply to the options to purchase 2,034,000 and 2,116,000 shares of common stock granted to employees and directors during the six months ended June 30, 2015 and 2014, respectively:
8
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
2015 |
|
|
2014 |
|
Average risk free interest rate |
|
|
1.3 |
% |
|
|
1.6 |
% |
Expected dividend yield |
|
|
|
|
|
|
|
|
Expected lives (years) |
|
|
4.3 |
|
|
|
4.8 |
|
Expected volatility |
|
|
92.0 |
% |
|
|
83.0 |
% |
Weighted average grant date fair value of options granted during the period (per share) |
|
$ |
2.61 |
|
|
$ |
2.61 |
|
Weighted average exercise price of options granted during the period (per share) |
|
$ |
3.92 |
|
|
$ |
4.01 |
|
The expected lives and the expected volatility of the options granted during the six months ended
June 30, 2015 and 2014 are based on historical experience. All options granted during the six months ended June 30, 2015 and 2014 were granted at exercise prices equal to the fair market value of the common stock on the dates of grant.
(13) Net Loss per Common Share Applicable to Common Stockholders
For the three and six months ended June 30, 2015 and 2014, basic and diluted net loss per common share applicable to
common stockholders is computed using the weighted average number of shares of common stock outstanding during the period. Diluted net loss per common share applicable to common stockholders is the same as basic net loss per common share applicable
to common stockholders as the effects of the Companys potential common stock equivalents are antidilutive. Total antidilutive securities were 74,628,647 and 80,016,676 for the six months ended June 30, 2015 and 2014, respectively, and
consist of stock options, preferred stock and warrants.
For the three months ended June 30, 2014, net loss per common share
applicable to common stockholders reflects $118,000 in dividends accrued on shares of the Series E convertible preferred stock (Series E preferred stock). For the six months ended June 30, 2014, net loss per common share applicable
to common stockholders reflects $303,000 in dividends accrued on shares of the Companys Series D convertible preferred stock (Series D preferred stock) and the Series E preferred stock. There were no dividends accrued on the Series
D preferred stock and Series E preferred stock during the three and six months ended June 30, 2015 because the Series D preferred stock and Series E preferred stock were converted to common stock during February 2014 and December 2014,
respectively.
(14) Common Stock Warrant and Option Exercises and Employee Stock Purchases
The Company issued 265,558 and 3,364,033 shares of common stock and received total proceeds of $343,000 and $6,780,000 for
warrant and stock option exercises and employee stock purchases under the Companys 1995 Employee Stock Purchase Plan during the six months ended June 30, 2015 and June 30, 2014, respectively, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2015 |
|
|
Six Months Ended June 30, 2014 |
|
(In thousands) |
|
Shares |
|
|
Proceeds |
|
|
Shares |
|
|
Proceeds |
|
Warrant exercises |
|
|
|
|
|
$ |
|
|
|
|
3,044 |
|
|
$ |
5,990 |
|
Stock option exercises |
|
|
255 |
|
|
|
311 |
|
|
|
315 |
|
|
|
780 |
|
Employee stock purchases |
|
|
11 |
|
|
|
32 |
|
|
|
5 |
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
266 |
|
|
$ |
343 |
|
|
|
3,364 |
|
|
$ |
6,780 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
(15) Related Party Transactions
February 2014 Conversion of Series D Preferred Stock
On January 10, 2014, the Company notified Pillar Pharmaceuticals I, L.P. (Pillar I), an investment partnership managed by one
of the Companys directors and significant stockholders and the holder of all 1,124,260 shares of the Companys issued and outstanding Series D preferred stock, of its intention to redeem the Series D preferred stock on February 10,
2014 in accordance with the terms of the Certificate of Designations, Preferences and Rights of Series D Preferred Stock (the Series D Certificate of Designations). Following this notice, Pillar I had the right to convert its Series D
preferred stock into shares of the Companys common stock at any time prior to the close of business on February 9, 2014. On February 6, 2014, Pillar I converted such shares into 6,266,175 shares of the Companys common stock in
accordance with the terms of the Series D Certificate of Designations. As a result of the conversion, no shares of the Companys Series D preferred stock remain outstanding.
On March 28, 2014, the Company filed a Certificate of Elimination of Number of Shares of Preferred Stock Designated as Series D
Convertible Preferred Stock with the State of Delaware Secretary of State which eliminated the designation of the shares of Series D preferred stock.
December 2014 Conversion of Series E Preferred Stock
In December 2014, the holders of Series E preferred stock converted such shares into 8,484,840 shares of common stock in accordance with the
terms of the Certificate of Designations, Preferences and Rights of Series E Preferred Stock. As a result of this conversion, no shares of Series E preferred stock remain outstanding.
On March 12, 2015, the Company filed a Certificate of Elimination of Number of Shares of Preferred Stock Designated as Series E
Convertible Preferred Stock with the State of Delaware Secretary of State which eliminated the designation of the shares of Series E preferred stock.
Director Stock Purchases
The Company issued 15,472 and 8,546 shares of common stock in lieu of director board and committee fees of approximately $60,000 and $36,000
pursuant to the Companys director compensation program during the six months ended June 30, 2015 and 2014, respectively.
See
also Note 16, Registration Rights Agreement, and Note 17, Financing for additional information on related party transactions.
(16) Registration Rights Agreement
On February 9, 2015, the Company entered into a registration rights agreement with investment funds (the Selling
Stockholders) affiliated with Baker Bros. Advisors LP and two members of the Companys board of directors, relating to the registration for resale of the shares of the Companys common stock held by the Selling Stockholders,
including the shares of the Companys common stock that may be issued upon the exercise of warrants held by the Selling Stockholders (collectively, the Registrable Shares).
Under the registration rights agreement, the Company has agreed to file a registration statement on Form S-3 with the SEC within 60 days after
demand by any of the Selling Stockholders, to register for resale the Registrable Shares. The Company has agreed to use its reasonable best efforts to cause the registration statement to become effective as promptly as practicable after filing, and
to remain effective until the shares being registered thereunder have been sold or may be sold freely without limitations or restrictions as to volume or manner of sale pursuant to Rule 144. The registration rights agreement contains customary
covenants and agreements by the Company and customary indemnification obligations of the Company and the Selling Stockholders.
(17) Financing
February 19, 2015 Follow-on Underwritten Public Offering
On February 19, 2015, the Company closed a follow-on underwritten public offering, in which it sold 23,000,000 shares of common stock at a
price to the public of $3.75 per share for aggregate gross proceeds of $86.3 million. The net proceeds to the Company from the offering, after deducting underwriters discounts and commissions and other offering costs and expenses were $80.6
million. Investment funds affiliated with Baker Bros. Advisors LP and two members of the Companys board of directors purchased 5,333,333 shares in this offering at the $3.75 per share purchase price.
10
On February 19, 2015, Baker Bros. Advisors LP and certain of its affiliated funds (which
include the Selling Stockholders) (collectively, Baker Brothers) held 6,965,432 shares of the Companys common stock, warrants to purchase up to 20,316,327 shares of the Companys common stock at an exercise price of $0.47 per
share and pre-funded warrants to purchase up to 22,151,052 shares of the Companys common stock at an exercise price of $0.01 per share.
February 10, 2014 Follow-on Underwritten Public Offering
On February 10, 2014, the Company closed a follow-on underwritten public offering, in which it sold 7,867,438 shares of common stock at a
price to the public of $4.00 per share and pre-funded warrants to purchase up to 2,158,750 shares of common stock at a price to the public of $3.99 per share for aggregate gross proceeds of $40.1 million. The pre-funded warrants have an exercise
price of $0.01 per share and will expire if not exercised by February 10, 2021. The net proceeds to the Company from the offering, after deducting underwriters discounts and commissions and other offering costs and expenses and excluding
the proceeds of the exercise of the pre-funded warrants, if any, were approximately $37.2 million.
(18) Subsequent Events
The Company considers events or transactions that occur after the balance sheet date but prior to the issuance of the
financial statements to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure.
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Overview
We are a clinical-stage
biopharmaceutical company focused on the discovery, development and commercialization of novel therapeutics for oncology and rare diseases. We use two distinct proprietary drug discovery technology platforms to design and develop drug candidates,
our Toll-like receptor, or TLR, targeting technology and our third-generation antisense technology, which was previously referred to as our GSO technology. We developed these platforms based on our scientific expertise and pioneering work with
synthetic oligonucleotides as therapeutic agents. Using our TLR targeting technology, we design synthetic oligonucleotide-based drug candidates to act by modulating the activity of specific TLRs. In addition, using our third-generation antisense
technology, we are developing drug candidates to turn off the messenger RNA, or mRNA, associated with disease causing genes. We believe that our third-generation antisense technology may potentially reduce the immunotoxicity and increase the potency
of earlier generation antisense and RNA interference, or RNAi, technologies.
Our business strategy focuses on the development of drug
candidates for oncology and rare diseases, as we believe we can develop and commercialize targeted therapies on our own in disease indications characterized by small, well-defined patient populations with serious unmet medical needs. To the extent
we seek to develop drug candidates for broader disease indications, we plan to explore potential collaborative alliances to support late-stage development and commercialization.
TLR Modulation Technology Platform
TLRs
play a central role in the innate immune system by regulating signaling cascades that stimulate inflammation. As a result, we believe TLRs are potential therapeutic targets for the treatment of a broad range of diseases. Using our chemistry-based
platform, we have designed TLR antagonists and agonists to act by modulating the activity of targeted TLRs. A TLR antagonist is a compound that inhibits an immune response by downregulating the activity of the targeted TLR. A TLR agonist is a
compound that stimulates an immune response by increasing the activity of the targeted TLR.
Our TLR antagonist lead drug candidates are
IMO-8400 and IMO-9200, which are both antagonists of TLR7, TLR8 and TLR9. We also have created compounds that are agonists of TLR3, TLR7, TLR8 or TLR9. Our TLR agonist lead drug candidates are IMO-2055 and IMO-2125, which are both agonists of TLR9.
11
We are evaluating IMO-8400, a novel synthetic oligonucleotide antagonist of TLR7, TLR8, and TLR9,
for the treatment of certain genetically defined forms of B-cell lymphoma and for the treatment of rare diseases. We are also evaluating IMO-9200, a novel synthetic oligonucleotide antagonist of TLR7, TLR8, and TLR9, for the treatment of
inflammatory bowel disease, or IBD. In addition, we are planning to advance our TLR9 agonist, IMO-2125, into clinical development for intratumoral injection in combination with ipilimumab, a CTLA4 antibody, in patients with metastatic melanoma and a
Phase 1/2 clinical trial involving either IMO-2055 or IMO-2125 in combination with a checkpoint inhibitor for a selected oncology target.
IMO-8400 Development Program in Genetically Defined Forms of B-cell Lymphoma
We are developing IMO-8400 for the treatment of certain B-cell lymphomas in which the MYD88 L265P oncogenic mutation is present. Oncogenic
mutations are changes in the DNA of tumor cells that promote the survival and proliferation of tumor cells. MYD88 is an adaptor protein in the TLR signaling pathway that mediates TLR signaling.
We believe, based on independent research and our own preclinical research, that the inhibition of specific TLRs may be a useful approach in
the treatment of certain B-cell lymphomas in which the MYD88 L265P oncogenic mutation is present. In independent research reported by investigators from the National Cancer Institute at the American Association for Cancer Research Annual Meeting in
2013, it was shown that the MYD88 L265P oncogenic mutation over-activated TLR7 and TLR9-mediated signaling and that inhibition of TLR7 and TLR9 promoted tumor cell death in preclinical models.
In December 2014, we announced that the U.S. Food and Drug Administration, or the FDA, had granted orphan drug designation for IMO-8400 for
the treatment of Waldenströms macroglobulinemia. In April 2015, we announced that the FDA had granted orphan drug designation for IMO-8400 for the treatment of diffuse large B-cell lymphoma, or DLBCL. Orphan drug designation is granted by
the FDA Office of Orphan Products Development to drugs intended to treat a rare disease or condition that affects fewer than 200,000 individuals annually in the United States. This designation provides certain incentives, including eligibility for
federal grants, research and development tax credits, a waiver of Prescription Drug User Fee Act filing fees and a seven-year marketing exclusivity period, once the product is approved and as long as orphan drug designation is maintained.
Phase 1/2 Clinical Trial of IMO-8400 in Waldenströms Macroglobulinemia. In 2014, we initiated patient treatment in our
ongoing open-label, dose-escalation Phase 1/2 clinical trial of IMO-8400 in patients with Waldenströms macroglobulinemia who have relapsed after or were refractory to prior therapy. Objectives of the trial include evaluation of safety and
tolerability of escalating IMO-8400 dose levels and assessment of IMO-8400 clinical activity using disease-specific international guidelines for classifying clinical response. In this trial, we are evaluating doses of 0.6, 1.2 and 2.4 mg/kg per week
administered as subcutaneous injections for 24 weeks. For the 2.4 mg/kg dose level, we are administering IMO-8400 in two doses of 1.2 mg/kg per week. We expected to enroll up to approximately 30 patients in this trial. Patients who complete 24 weeks
of IMO-8400 treatment are eligible to enroll in an on-going open-ended extension protocol to evaluate the long-term safety, tolerability, and clinical activity of IMO-8400 in patients with Waldenströms macroglobulinemia. We have enrolled
the targeted number of patients at each of the three dose levels to fulfill the requirements for dose escalation. We currently expect to have data from this trial in the fourth quarter of 2015.
Phase 1/2 Clinical Trial of IMO-8400 in Diffuse Large B-cell Lymphoma. We are also conducting an open-label, dose-escalation Phase
1/2 clinical trial of IMO-8400 in patients with DLBCL who have relapsed after or were refractory to prior therapy. With the concurrence of the FDA Center for Devices and Radiological Health, we plan to enroll in this trial only those patients with
tumors that are positive for the presence of the MYD88 L265P oncogenic mutation. Objectives of the trial include evaluation of safety and tolerability of escalating IMO-8400 dose levels and assessment of IMO-8400 clinical activity using
disease-specific international guidelines for classifying clinical response. In this trial, we plan to evaluate escalating doses of 0.6, 1.2 and 2.4 mg/kg per week, administered as subcutaneous injections for as long as the patient may be deriving
clinical benefit from the treatment. For each dose level, we plan to administer IMO-8400 subcutaneously in equally divided doses given twice per week. We may enroll up to 30 patients in this dose-ranging trial. We have activated all 13 planned
clinical sites and initiated screening of potential trial participants for the MYD88 L265P oncogenic mutation. The initial patient enrolled in the trial began IMO-8400 treatment in April 2015. We plan to complete this trial and have the data
available during 2016. In this trial, we plan to use a prototype companion diagnostic we developed under our collaboration agreement with Abbott Molecular, Inc., or Abbott Molecular, to identify patients with the MYD88 L265P oncogenic mutation.
We believe that Waldenströms macroglobulinemia and DLBCL in patients with the MYD88 L265P oncogenic mutation are rare diseases with
serious unmet medical needs, based on prevalence of the indications and our understanding of the current treatment paradigms. If we observe sufficient tolerability and a therapeutic effect in either or both of our Phase 1/2 clinical trials, we plan
to meet with regulatory authorities to discuss the possibility of an accelerated clinical development and regulatory path for the applicable
12
program. We cannot predict whether or when any of our drug candidates will prove effective or safe in humans, if we will be able to participate in FDA expedited review and approval programs,
including breakthrough and fast track designation, or if they will receive regulatory approval.
Application of TLR Agonists in
Immuno-Oncology
We have completed and are conducting additional preclinical studies to characterize potential combination regimens
with various checkpoint inhibitors and our TLR9 agonists. In June 2015, we entered into a strategic clinical research alliance with MD Anderson Cancer Center to advance clinical development of intratumoral TLR9 agonists in combination with
checkpoint inhibitors. We intend to initiate the first trial of the research alliance to assess the safety and efficacy of IMO-2125, administered intra-tumorally, in combination with ipilimumab, a CTLA4 antibody, in patients with metastatic
melanoma. We expect to initiate this first clinical trial in the fourth quarter of 2015. We are also planning a Phase 1/2 clinical trial involving either IMO-2055 or IMO-2125 in combination with a checkpoint inhibitor for a selected oncology target.
IMO-8400 Development Program in Rare Diseases
We are planning to initiate clinical development of IMO-8400 for the treatment of rare diseases by the end of 2015. We have selected
dermatomyositis and Duchenne muscular dystrophy, or DMD, as the first non-cancer rare diseases for which we plan to develop IMO-8400. We selected these indications for development based on the reported role of TLRs in the pathogenesis of the disease
states, clinical feasibility including ease of patient identification, availability of endpoints for regulatory approval and commercial potential. We anticipate commencing clinical development in these two indications by initiating a Phase 2
clinical trial in dermatomyositis by the end of 2015 and a Phase 2 clinical trial in DMD in 2016.
We believe that we demonstrated proof
of concept for our approach of using TLRs to inhibit the over-activation of specific TLRs for the treatment of psoriasis in a randomized, double-blind, placebo-controlled Phase 2 clinical trial of IMO-8400 that we conducted in patients with moderate
to severe plaque psoriasis, a well-characterized autoimmune disease. In this trial, we evaluated IMO-8400 at four subcutaneous dose levels of 0.075, 0.15, 0.3, and 0.6 mg/kg, versus placebo, administered once weekly for 12 weeks in 46 patients. The
trial met its primary objective as IMO-8400 was well tolerated at all dose levels with no treatment-related discontinuations, treatment-related serious adverse events or dose reductions. The trial also met its secondary objective of demonstrating
clinical activity in psoriasis patients, as assessed by the Psoriasis Area Severity Index. In March 2015, we presented the complete data from the Phase 2 trial of IMO-8400 in patients with moderate to severe plaque psoriasis at the annual meeting of
the American Academy of Dermatology. With our focus on rare diseases, we do not currently plan to conduct further clinical development of IMO-8400 for the treatment of psoriasis.
IMO-8400 Development Program for Dermatomyositis. We are finalizing our clinical trial plan for a Phase 2 clinical trial of
IMO-8400 in dermatomyositis and anticipate initiating this trial in the fourth quarter of 2015. If this clinical trial is successful, we may evaluate the potential of IMO-8400 to treat additional forms of myositis.
IMO-8400 Development Program for Duchenne Muscular Dystrophy. We are conducting additional preclinical studies of TLR antagonist drug
candidates in DMD models and are working in collaboration with Parent Project Muscular Dystrophy, a leading U.S. patient advocacy organization, on the design of a clinical development program for IMO-8400 in DMD. We anticipate initiating a Phase 2
clinical trial of IMO-8400 in DMD in 2016.
Program in Autoimmune Diseases
IMO-9200 for Autoimmune Disease. We have developed a second novel synthetic oligonucleotide antagonist of TLR7, TLR8, and TLR9,
IMO-9200, as a drug candidate for potential use in selected autoimmune disease indications. In May 2015, we completed and reported top-line data from a Phase 1 clinical trial of subcutaneously administered IMO-9200 in healthy subjects. We have also
completed and presented data during the 2015 Digestive Disease Week Conference from preclinical studies of orally administered IMO-9200 in models of IBD, including Crohns Disease and ulcerative colitis. In these preclinical studies, the
results demonstrated the potential for orally dosed IMO-9200 as a treatment for IBD. As our company is focused on drug development specifically in oncology and rare diseases, we are currently reviewing our various strategic options related to the
future development of IMO-9200.
Third-generation Antisense Technology to Target RNA
We are currently undertaking an analysis of oncology and rare disease indications for development of drug candidates generated from our
third-generation antisense technology. Our key considerations in identifying disease indications in our third-generation antisense program include: strong evidence that the disease is caused by a specific protein; clear criteria to identify a target
patient
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population; biomarkers for early assessment of clinical proof of concept; a targeted therapeutic mechanism for action; and unmet medical need to allow for a rapid development path to approval. We
are currently conducting disease model studies and plan to begin investigational new drug application, or IND, enabling development programs in each of the first two disease indications selected for further development in our third-generation
antisense program in the second half of 2015.
Accumulated Deficit
As of June 30, 2015, we had an accumulated deficit of $476,726,000. We expect to incur substantial operating losses in future periods. We
do not expect to generate product revenue, sales-based milestones or royalties from our development programs until we successfully complete development and obtain marketing approval for drug candidates, either alone or in collaborations with third
parties, which we expect will take a number of years. In order to commercialize our drug candidates, we need to complete clinical development and comply with comprehensive regulatory requirements.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
This managements discussion and analysis of financial condition and results of operations is based on our financial statements, which
have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates and
judgments, including those related to stock-based compensation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form
the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
We regard an accounting estimate or assumption underlying our financial statements as a critical accounting estimate where:
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the nature of the estimate or assumption is material due to the level of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change; and
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the impact of the estimates and assumptions on financial condition or operating performance is material. |
Our significant accounting policies are described in Note 2 of the notes to our financial statements in our Annual Report on
Form 10-K for the year ended December 31, 2014. Not all of these significant policies, however, fit the definition of critical accounting policies and estimates. We believe that our accounting policy relating to stock-based compensation,
as described under the caption Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations Critical Accounting Policies and Estimates in our Annual Report on Form 10-K for the year ended
December 31, 2014, fits the description of critical accounting estimates and judgments. There were no changes in this policy during the six months ended June 30, 2015.
RESULTS OF OPERATIONS
Three and Six Months Ended
June 30, 2015 and 2014
Research and Development Expenses
Research and development expenses increased by $3,323,000, or 59%, from $5,637,000 for the three months ended June 30, 2014, to $8,960,000
for the three months ended June 30, 2015. Research and development expenses increased by $5,110,000, or 41%, from $12,570,000 for the six months ended June 30, 2014 to $17,680,000 for the six months ended June 30, 2015. In the
following table, research and development expenses are set forth in the following five categories which are discussed beneath the table:
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Three Months Ended June 30, (in thousands) |
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Percentage Increase |
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Six Months Ended June 30, (in thousands) |
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Percentage Increase |
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2015 |
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2014 |
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(Decrease) |
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2015 |
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2014 |
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(Decrease) |
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IMO-8400 external development expense |
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$ |
1,851 |
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$ |
1,407 |
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32 |
% |
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$ |
3,938 |
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$ |
3,840 |
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3 |
% |
IMO-9200 external development expense |
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599 |
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2,265 |
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% |
Companion diagnostic external development expense |
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252 |
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500 |
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(50 |
)% |
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588 |
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1,300 |
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(55 |
)% |
Other drug development expense |
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4,139 |
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1,885 |
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120 |
% |
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6,711 |
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4,409 |
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52 |
% |
Basic discovery expense |
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2,119 |
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1,845 |
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15 |
% |
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4,178 |
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3,021 |
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38 |
% |
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$ |
8,960 |
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$ |
5,637 |
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59 |
% |
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$ |
17,680 |
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$ |
12,570 |
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41 |
% |
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IMO-8400 External Development Expenses. These expenses include external expenses that we have
incurred in connection with IMO-8400 since October 2012, when we commenced clinical development of IMO-8400. These external expenses include payments to independent contractors and vendors for drug development activities conducted after the
initiation of IMO-8400 clinical development but exclude internal costs such as payroll and overhead expenses. Since October 2012, we have incurred approximately $15,276,000 in IMO-8400 external development expenses through June 30, 2015,
including costs associated with our Phase 1 clinical trial in healthy subjects, our Phase 2 clinical trial in patients with psoriasis, preparation for and conduct of our ongoing Phase 1/2 clinical trial in patients with Waldenströms
macroglobulinemia and our ongoing Phase 1/2 clinical trial in patients with DLBCL, the manufacture of additional drug substance for use in our ongoing and planned clinical trials, as well as additional nonclinical studies and associated costs
incurred in connection with our dermatomyositis program.
IMO-8400 external development expenses increased in the three and six months
ended June 30, 2015, as compared to the three and six months ended June 30, 2014. The increases in IMO-8400 external development expenses during the 2015 periods were primarily due to higher costs incurred in connection with our Phase 1/2
clinical trial in patients with Waldenströms macroglobulinemia and our Phase 1/2 clinical trial in patients with DLBCL harboring the MYD88 L265P oncogenic mutation, higher costs incurred in connection with the manufacture of additional
drug substance for use in our ongoing and planned clinical trials, and associated costs incurred in connection with our dermatomyositis program which was initiated after the corresponding 2014 periods. The increases in IMO-8400 external development
expenses during the three and six months ended June 30, 2015 were partially offset by lower costs associated with long-term nonclinical safety studies conducted during the 2014 periods.
We expect our IMO-8400 external development expenses to increase during the remainder of 2015, as compared to the corresponding 2014 periods,
as we plan to continue our Phase 1/2 clinical trial in patients with Waldenströms macroglobulinemia and our Phase 1/2 clinical trial in patients with DLBCL harboring the MYD88 L265P oncogenic mutation, initiate a Phase 2 clinical trial in
patients with dermatomyositis, prepare for a Phase 2 clinical trial in patients with DMD, and continue manufacturing activities and nonclinical safety studies.
IMO-9200 External Development Expenses. These expenses include external expenses that we have incurred in connection with IMO-9200
since October 2014, when we commenced clinical development of IMO-9200. These external expenses include payments to independent contractors and vendors for drug development activities conducted after the initiation of IMO-9200 clinical development
but exclude internal costs such as payroll and overhead expenses. We have incurred approximately $3,928,000 in IMO-9200 external development expenses from October 2014 through June 30, 2015, including costs associated with our Phase 1 clinical
trial in healthy subjects, the manufacture of additional drug substance for use in our ongoing and planned clinical trials and additional nonclinical studies. We classified the IMO-9200 external development expenses incurred prior to October 2014 in
other drug development expenses.
Companion Diagnostic External Development Expenses. These expenses include external expenses
associated with our collaboration with Abbott Molecular for the development of a companion diagnostic for identification of patients with B-cell lymphoma harboring the MYD88 L265P oncogenic mutation incurred since January 2014 when development of
the companion diagnostic commenced. We have incurred approximately $2,816,000 in companion diagnostic external development expenses from January 2014 through June 30, 2015, including costs associated with start-up activities, the development of
an assay as the prototype of the companion diagnostic, introduction and use of the assay in our ongoing Phase 1/2 clinical trial in patients with DLBCL harboring the MYD88 L265P oncogenic mutation, and the expected submission by Abbott Molecular of
an Investigational Device Exemption with the FDA Center for Devices and Radiological Health.
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During the three and six months ended June 30, 2015, our companion diagnostic external
development expenses reflect costs associated with the continued development of the assay and use of the assay in our ongoing Phase 1/2 clinical trial in patients with DLBCL harboring the MYD88 L265P oncogenic mutation. During the three and six
months ended June 30, 2014, our companion diagnostic external development expenses reflect costs associated with start-up activities and the initiation of development of an assay as the prototype of the companion diagnostic.
Other Drug Development Expenses. These expenses include external expenses associated with preclinical development of identified
compounds in anticipation of advancing these compounds into clinical development. In addition, these expenses include internal costs, such as payroll and overhead expenses, associated with preclinical development and products in clinical
development. The external expenses associated with preclinical compounds include payments to contract vendors for manufacturing and the related stability studies, preclinical studies, including animal toxicology and pharmacology studies, and
professional fees. Other drug development expenses also include costs associated with compounds that were previously being developed but are not currently being developed.
The increase in other drug development expenses in the three and six months ended June 30, 2015, as compared to the three and six months
ended June 30, 2014, was primarily due to additional headcount associated with our expanded drug development programs, higher stock-based compensation costs, higher consulting costs, the manufacture of IMO-2055 drug supplies and costs
associated with IMO-2125, which we plan to use in our immuno-oncology program, during the three and six months ended June 30, 2015. The increase in other drug development expenses during the three and six months ended June 30, 2015 was
partially offset by higher costs of preclinical studies and manufacturing activities that were incurred during the three and six months ended June 30, 2014 to support the IND submission for IMO-9200. Costs associated with the clinical
development of IMO-9200 since October 2014 are included in IMO-9200 external development expenses.
Basic Discovery
Expenses. These expenses include our internal and external expenses relating to our discovery efforts with respect to our TLR-targeted programs, including agonists and antagonists of TLR3, TLR7, TLR8 and TLR9, and our third-generation
antisense program. These expenses reflect payments for laboratory supplies, external research, and professional fees, as well as payroll and overhead expenses.
The increase in basic discovery expenses in the three and six months ended June 30, 2015, as compared to the three and six months ended
June 30, 2014, was primarily due to increases in stock-based compensation and external research. The increase in basic discovery expenses in the six-month period is also attributable to an increase in cash compensation. The increase in basic
discovery expenses during the three and six months ended June 30, 2015 was partially offset by a decrease in the cost of laboratory supplies.
We do not know if we will be successful in developing any drug candidate from our research and development programs. At this time, and without
knowing the results from our ongoing and planned clinical trials of IMO-8400, our planned clinical trial of IMO-2125, administered intra-tumorally, in combination with ipilimumab, a CTLA4 antibody, in patients with metastatic melanoma, a planned
Phase 1/2 clinical trial involving either IMO-2055 or IMO-2125 in combination with a checkpoint inhibitor for a selected oncology target and our planned IND-enabling development programs in each of the first two disease indications selected for
development in our third-generation antisense program, we cannot reasonably estimate or know the nature, timing, and costs of the efforts that will be necessary to complete the remainder of the development of, or the period, if any, in which
material net cash inflows may commence from, any drug candidate from our research and development programs. Moreover, the clinical development of any drug candidate from our research and development programs is subject to numerous risks and
uncertainties associated with the duration and cost of clinical trials, which vary significantly over the life of a project as a result of unanticipated events arising during clinical development.
In addition to the expected increase in IMO-8400 external development expenses in 2015, we expect additional external development expenses as
a result of our planned initiation of a clinical trial of IMO-2125, administered intra-tumorally, in combination with ipilimumab, during the fourth quarter of 2015.
General and Administrative Expenses
General and administrative expenses increased by $1,091,000, or 40%, from $2,730,000 in the three months ended June 30, 2014, to
$3,821,000 in the three months ended June 30, 2015 and increased by $2,885,000, or 60%, from $4,773,000 in the six months ended June 30, 2014 to $7,658,000 in the six months ended June 30, 2015. General and administrative expenses
consist primarily of salary expense, stock compensation expense, consulting fees and professional legal fees associated with our patent applications and maintenance, our corporate regulatory filing requirements, our corporate legal matters, and our
business development initiatives.
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The increase in general and administrative expenses during the three and six months ended
June 30, 2015, as compared to the three and six months ended June 30, 2014, was primarily due to higher stock-based compensation costs primarily attributable to options granted after May 31, 2014, higher cash compensation costs,
including additional headcount to support our drug development programs, the hiring of a new Chief Executive Officer in December 2014, the accrual of incentive compensation, and higher insurance costs. The increase in general and administrative
expenses during the three and six months ended June 30, 2015 was partially offset by a decrease in recruiting expenses. We expect general and administrative expenses to increase during the remainder of 2015, as compared to 2014, due to
additional headcount to support our drug development programs.
Investment Income, Net
Investment income, net increased by $32,000, from $16,000 in the three months ended June 30, 2014 to $48,000 in the three months ended
June 30, 2015, and increased by $31,000, from $31,000 in the six months ended June 30, 2014 to $62,000 in the six months ended June 30, 2015, in each case primarily due to an increase in interest income resulting from an increase in
investment balances, including corporate debt securities, in 2015 resulting from our follow-on underwritten public offering in February 2015 and warrant and option exercises since June 30, 2014. The increase in interest income during the three
and six months ended June 30, 2015, as compared to the corresponding 2014 periods, was partially offset by an increase in interest expense on our note payable which we incurred pursuant to our loan and security agreement with Oxford Finance LLC
executed on September 30, 2014.
Preferred Stock Dividends
The $118,000 in preferred stock dividends in the three months ended June 30, 2014 reflects dividends accrued on shares of our Series E
convertible preferred stock, or Series E preferred stock. The $303,000 in preferred stock dividends in the six months ended June 30, 2014 reflects dividends accrued on shares of our Series D convertible preferred stock, or Series D preferred
stock, and our Series E preferred stock. There were no dividends accrued on our Series D preferred stock and Series E preferred stock during the three and six months ended June 30, 2015 because the Series D preferred stock and Series E
preferred stock were converted to common stock during February 2014 and December 2014, respectively.
Net Loss Applicable to Common Stockholders
As a result of the factors discussed above, our net loss applicable to common stockholders was $12,719,000 for the three months ended
June 30, 2015, compared to $8,426,000 for the three months ended June 30, 2014 and $25,200,000 for the six months ended June 30, 2015 compared to $17,572,000 for the six months ended June 30, 2014. Since January 1, 2001, we
have primarily been involved in the development of our TLR pipeline. From January 1, 2001 through June 30, 2015, we incurred losses of $216,533,000. We also incurred net losses of $260,193,000 prior to December 31, 2000 during which
time we were primarily involved in the development of antisense technology. Since our inception, we had an accumulated deficit of $476,726,000 through June 30, 2015. We expect to continue to incur substantial operating losses in the future.
LIQUIDITY AND CAPITAL RESOURCES
Sources of Liquidity
We require cash to fund our operating expenses and to make capital expenditures. Historically, we have funded our cash requirements primarily
through the following:
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sale of common stock, preferred stock and warrants and warrant exercises; |
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debt financing, including capital leases; |
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license fees, research funding and milestone payments under collaborative and license agreements; and |
February 19, 2015 Follow-on Underwritten Public Offering
On February 19, 2015, we closed a follow-on underwritten public offering, in which we sold 23,000,000 shares of common stock at a price to
the public of $3.75 per share for aggregate gross proceeds of $86.3 million. The net proceeds to us from the offering, after deducting underwriters discounts and commissions and other offering costs and expenses were $80.6 million.
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Cash Flows
Six Months Ended June 30, 2015
As of June 30, 2015, we had approximately $106,304,000 in cash, cash equivalents and investments, a net increase of approximately
$57,733,000 from December 31, 2014. Net cash used in operating activities totaled $22,569,000 during the six months ended June 30, 2015, reflecting our $25,200,000 net loss, as adjusted for non-cash income and expenses, including
stock-based compensation, depreciation and amortization. Net cash used in operating activities also reflects changes in our prepaid expenses and accounts payable, accrued expenses and other liabilities.
The $41,971,000 net cash used in investing activities during the six months ended June 30, 2015 reflects the purchase of $56,196,000 of
available-for-sale securities, which are investments that we do not have the positive intent to hold to maturity at the time of purchase, the maturity of $13,602,000 of available-for-sale securities, the sale of $999,000 of available-for-sale
securities, and payments for the purchase of $376,000 in property and equipment.
The $80,938,000 net cash provided by financing
activities during the six months ended June 30, 2015 primarily reflects $80,599,000 in net proceeds from our follow-on underwritten public offering of our common stock in February 2015 and $343,000 in net proceeds from employee stock purchases
under our 1995 Employee Stock Purchase Plan, or ESPP, and the exercise of common stock options.
Six Months Ended June 30, 2014
As of June 30, 2014, we had approximately $64,734,000 in cash, cash equivalents and investments, a net increase of approximately
$29,142,000 from December 31, 2013. Net cash used in operating activities totaled $13,757,000 during the six months ended June 30, 2014, reflecting our $17,269,000 net loss, as adjusted for non-cash income and expenses, including
stock-based compensation and depreciation and amortization. Net cash used in operating activities also reflects changes in our prepaid expenses and accounts payable, accrued expenses and other liabilities.
The net cash used in investing activities during the six months ended June 30, 2014 reflects the purchase of $2,619,000 of
available-for-sale securities, the maturity of $2,000,000 of available-for-sale securities, and payments for the purchase of $533,000 in property and equipment.
The $43,517,000 net cash provided by financing activities during the six months ended June 30, 2014 primarily reflects $37,302,000 in net
proceeds from our follow-on underwritten public offering of our securities in February 2014, which were partially offset by $100,000 in payments related to our 2013 financings, and $6,780,000 in net proceeds from the exercise of common stock options
and warrants and employee stock purchases under our 1995 ESPP which were partially offset by dividends paid on our Series D preferred stock and our Series E preferred stock.
Funding Requirements
We
have incurred operating losses in all fiscal years since our inception except 2002, 2008 and 2009, and we had an accumulated deficit of $476,726,000 at June 30, 2015. We expect to incur substantial operating losses in future periods. These
losses, among other things, have had and will continue to have an adverse effect on our stockholders equity, total assets and working capital. We have received no revenues from the sale of drugs. As of July 15, 2015, substantially all of
our revenues have been from collaboration and license agreements. We have devoted substantially all of our efforts to research and development, including clinical trials, and we have not completed development of any drugs. Because of the numerous
risks and uncertainties associated with developing drugs, we are unable to predict the extent of any future losses, whether or when any of our products will become commercially available or when we will become profitable, if at all.
We do not expect to generate significant additional funds internally until we successfully complete development and obtain marketing approval
for products, either alone or in collaboration with third parties, which we expect will take a number of years. In addition, we have no committed external sources of funds.
We had cash, cash equivalents and investments of approximately $106,304,000 at June 30, 2015. We believe that, based on our current
operating plan, our existing cash, cash equivalents and investments will enable us to fund our operations into the first quarter of 2017. Specifically, we believe that our available funds will be sufficient to enable us to:
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complete our ongoing Phase 1/2 clinical trial of IMO-8400 in patients with Waldenströms macroglobulinemia and our ongoing Phase 1/2 clinical trial of IMO-8400 in patients with DLBCL harboring the MYD88 L265P
oncogenic mutation; |
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initiate a Phase 1/2 clinical trial of IMO-2125, administered intra-tumorally, in combination with ipilimumab, a CTLA4 antibody, in patients with metastatic melanoma and a Phase 1/2 clinical trial involving either
IMO-2055 or IMO-2125 in combination with a checkpoint inhibitor for a selected oncology target and complete at least one of these trials; |
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initiate a Phase 2 clinical trial of IMO-8400 in patients with dermatomyositis and a Phase 2 clinical trial of IMO-8400 in patients with DMD; |
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review our strategic options for the development of IMO-9200; and |
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conduct disease model studies and begin IND-enabling development programs in each of the first two disease indications selected for further development in our third-generation antisense program. |
We expect that we will require substantial additional funds to complete the clinical trials that we plan to initiate and to conduct any
additional research and development of our TLR drug candidates or third-generation antisense technology, including preclinical testing and clinical trials of our drug candidates, and to fund our operations. We are seeking and expect to continue to
seek additional funding through collaborations, the sale or license of assets or financings of equity or debt securities. We believe that the key factors that will affect our ability to obtain funding are:
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the results of our clinical and preclinical development activities in our genetically defined forms of B-cell lymphoma and rare disease programs, our immuno-oncology program, and our third-generation antisense program
and our ability to advance our drug candidates and third-generation antisense technology on the timelines anticipated; |
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the cost, timing, and outcome of regulatory reviews; |
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competitive and potentially competitive products and technologies and investors receptivity to our drug candidates and the technology underlying them in light of competitive products and technologies;
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the receptivity of the capital markets to financings by biotechnology companies generally and companies with drug candidates and technologies such as ours specifically; and |
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our ability to enter into additional collaborations with biotechnology and pharmaceutical companies and the success of such collaborations. |
In addition, increases in expenses or delays in clinical development may adversely impact our cash position and require additional funds or
further cost reductions.
Financing may not be available to us when we need it or may not be available to us on favorable or acceptable
terms or at all. We could be required to seek funds through collaborative alliances or through other means that may require us to relinquish rights to some of our technologies, drug candidates or drugs that we would otherwise pursue on our own. In
addition, if we raise additional funds by issuing equity securities, our then existing stockholders will experience dilution. The terms of any financing may adversely affect the holdings or the rights of existing stockholders. An equity financing
that involves existing stockholders may cause a concentration of ownership. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt,
making capital expenditures or declaring dividends, and are likely to include rights that are senior to the holders of our common stock. Any additional debt or equity financing may contain terms which are not favorable to us or to our stockholders,
such as liquidation and other preferences, or liens or other restrictions on our assets. As discussed in Note 10 to the financial statements appearing in our Annual Report on Form 10-K for the year ended December 31, 2014 that was filed with
the Securities and Exchange Commission on March 12, 2015, additional equity financings may also result in cumulative changes in ownership over a three-year period in excess of 50% which would limit the amount of net operating loss and tax
credit carryforwards that we may utilize in any one year.
If we are unable to obtain adequate funding on a timely basis or at all, we
will be required to terminate, modify or delay preclinical or clinical trials of one or more of our drug candidates, significantly curtail or terminate discovery or development programs for new drug candidates or relinquish rights to portions of our
technology, drug candidates and/or products.
Contractual Obligations
During the six months ended June 30, 2015, there were no material changes outside the ordinary course of our business to our contractual
obligations as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2014, except for a lease of approximately 4,300 square feet of office space in Exton, Pennsylvania that we entered into on April 1, 2015. The Exton
office lease term continues through April 30, 2020, with one five-year renewal option exercisable by us. We classify the lease as an operating lease. Future minimum commitments as of June 30, 2015 under our Exton office lease agreement are
approximately:
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December 31, |
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Operating Lease |
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(In thousands) |
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2015 |
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$ |
50 |
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2016 |
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76 |
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2017 |
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78 |
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2018 |
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81 |
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2019 |
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83 |
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2020 |
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28 |
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$ |
396 |
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As of June 30, 2015, we had no off-balance sheet arrangements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As of June 30, 2015, all material assets and liabilities are in U.S. dollars, which is our functional currency.
We maintain investments in accordance with our investment policy. The primary objectives of our investment activities are to preserve
principal, maintain proper liquidity to meet operating needs and maximize yields. Although our investments are subject to credit risk, our investment policy specifies credit quality standards for our investments and limits the amount of credit
exposure from any single issue, issuer or type of investment. We regularly review our investment holdings in light of the then current economic environment. We do not own auction rate securities or derivative financial investment instruments in our
investment portfolio. At June 30, 2015, all of our invested funds were invested in two money market funds and commercial paper, classified in cash and cash equivalents on the accompanying balance sheet, corporate bonds, municipal bonds and
commercial paper classified in short-term investments, and corporate bonds and municipal bonds classified in long-term investments.
Based
on a hypothetical ten percent adverse movement in interest rates, the potential losses in future earnings, fair value of risk sensitive financial instruments, and cash flows are immaterial, although the actual effects may differ materially from the
hypothetical analysis.
ITEM 4. CONTROLS AND PROCEDURES.
(a) Evaluation of Disclosure Controls and Procedures. Our management, with the participation of our principal executive officer and
principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act) as of June 30,
2015. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our
management necessarily applied its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, our principal executive officer and principal financial officer concluded that as of June 30,
2015, our disclosure controls and procedures were (1) designed to ensure that material information relating to us is made known to our principal executive officer and principal financial officer by others, particularly during the period in
which this report was prepared, and (2) effective, in that they provide reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commissions rules and forms.
(b) Changes in Internal
Controls. No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended June 30, 2015 that has materially affected, or is
reasonably likely to materially affect, our internal control over financial reporting.
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PART II OTHER INFORMATION
ITEM 1A. RISK FACTORS.
RISK FACTORS
Investing in our securities involves a high degree of risk. You should carefully consider the risks and uncertainties described below in
addition to the other information included or incorporated by reference in this Quarterly Report on Form 10-Q before purchasing our common stock. Our business, financial condition and results of operations could be materially and adversely
affected by any of these and currently unknown risks or uncertainties. In that case, the market price of our common stock could decline, and you may lose all or part of your investment in our securities.
Risks Relating to Our Financial Results and Need for Financing
We will need additional financing, which may be difficult to obtain. Our failure to obtain necessary financing or doing so on unattractive terms could
result in the termination of our operations and the sale and license of our assets or otherwise adversely affect our research and development programs and other operations.
We had cash, cash equivalents and investments of approximately $106.3 million at June 30, 2015. We believe that, based on our current
operating plan, our existing cash, cash equivalents and investments will enable us to fund our operations into the first quarter of 2017. Specifically, we believe that our available funds will be sufficient to enable us to:
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complete our ongoing Phase 1/2 clinical trial of IMO-8400 in patients with Waldenströms macroglobulinemia and our ongoing Phase 1/2 clinical trial of IMO-8400 in patients with DLBCL harboring the MYD88 L265P
oncogenic mutation; |
|
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initiate a Phase 1/2 clinical trial of IMO-2125, administered intra-tumorally, in combination with ipilimumab, a CTLA4 antibody, in patients with metastatic melanoma and a Phase 1/2 clinical trial involving either
IMO-2055 or IMO-2125 in combination with a checkpoint inhibitor for a selected oncology target and complete at least one of these trials; |
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initiate a Phase 2 clinical trial of IMO-8400 in patients with dermatomyositis and a Phase 2 clinical trial of IMO-8400 in patients with DMD; |
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review our strategic options for the development of IMO-9200; and |
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conduct disease model studies and begin IND-enabling development programs in each of the first two disease indications selected for further development in our third-generation antisense program. |
We expect that we will require substantial additional funds to complete the clinical trials that we plan to initiate and to conduct any
additional research and development of our TLR drug candidates or third-generation antisense technology, including preclinical testing and clinical trials of our drug candidates, and to fund our operations. We are seeking and expect to continue to
seek additional funding through collaborations, the sale or license of assets or financings of equity or debt securities. We believe that the key factors that will affect our ability to obtain funding are:
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the results of our clinical and preclinical development activities in our genetically defined forms of B-cell lymphoma and rare disease programs, our immuno-oncology program, and our third-generation antisense program
and our ability to advance our drug candidates and third-generation antisense technology on the timelines anticipated; |
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the cost, timing, and outcome of regulatory reviews; |
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competitive and potentially competitive products and technologies and investors receptivity to our drug candidates and the technology underlying them in light of competitive products and technologies;
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the receptivity of the capital markets to financings by biotechnology companies generally and companies with drug candidates and technologies such as ours specifically; and |
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our ability to enter into additional collaborations with biotechnology and pharmaceutical companies and the success of such collaborations. |
In addition, increases in expenses or delays in clinical development may adversely impact our cash position and require additional funds or
further cost reductions.
Financing may not be available to us when we need it or may not be available to us on favorable or acceptable
terms or at all. We could be required to seek funds through collaborative alliances or through other means that may require us to relinquish rights to some of our technologies, drug candidates or drugs that we would otherwise pursue on our own. In
addition, if we raise additional funds by issuing equity securities, our then existing stockholders will experience dilution. The terms of any financing may adversely
21
affect the holdings or the rights of existing stockholders. An equity financing that involves existing stockholders may cause a concentration of ownership. Debt financing, if available, may
involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, and are likely to include rights that are senior to the
holders of our common stock. Any additional debt or equity financing may contain terms which are not favorable to us or to our stockholders, such as liquidation and other preferences, or liens or other restrictions on our assets. As discussed in
Note 10 to the financial statements appearing in our Annual Report on Form 10-K for the year ended December 31, 2014 that was filed with the Securities and Exchange Commission on March 12, 2015, additional equity financings may also result
in cumulative changes in ownership over a three-year period in excess of 50% which would limit the amount of net operating loss and tax credit carryforwards that we may utilize in any one year.
If we are unable to obtain adequate funding on a timely basis or at all, we will be required to terminate, modify or delay preclinical or
clinical trials of one or more of our drug candidates, significantly curtail or terminate discovery or development programs for new drug candidates or relinquish rights to portions of our technology, drug candidates and/or products.
We have incurred substantial losses and expect to continue to incur losses. We will not be successful unless we reverse this trend.
We have incurred losses in every year since our inception, except for 2002, 2008, and 2009 when our recognition of revenues under license and
collaboration agreements resulted in our reporting net income for those years. As of June 30, 2015, we had an accumulated deficit of $476.7 million. Since January 1, 2001, we have primarily been involved in the development of our TLR
pipeline. From January 1, 2001 to June 30, 2015, we incurred losses of $216.5 million. We incurred losses of $260.2 million prior to December 31, 2000, during which time we were primarily involved in the development of
non-TLR-targeted antisense technology. These losses, among other things, have had and will continue to have an adverse effect on our stockholders equity, total assets, and working capital.
We have never had any products of our own available for commercial sale and have received no revenues from the sale of drugs. As of
June 30, 2015, substantially all of our revenues have been from collaborative and license agreements. We have devoted substantially all of our efforts to research and development, including clinical trials, and have not completed development of
any drug candidates. Because of the numerous risks and uncertainties associated with developing drugs, we are unable to predict the extent of any future losses, whether or when any of our drug candidates will become commercially available, or when
we will become profitable, if at all. We expect to incur substantial operating losses in future periods.
Risks Relating to Our
Business, Strategy and Industry
We are depending heavily on the development of TLR-targeted drug candidates for the treatment of certain
genetically defined forms of B-cell lymphoma and rare diseases and in our immuno-oncology program and on the development of our third-generation antisense technology. If we terminate the development of any of our programs or any of our drug
candidates in such programs, are unable to successfully develop and commercialize any of our drug candidates, or experience significant delays in doing so, our business may be materially harmed.
We have invested a significant portion of our time and financial resources in the development of TLR-targeted clinical stage lead drug
candidates as part of our rare disease program. In the future, we intend to invest a significant portion of our time and financial resources in the development of our TLR-targeted candidates for the treatment of certain genetically defined forms of
B-cell lymphoma and rare diseases and in our immuno-oncology program. We also plan to invest substantial time and resources to further advance the development of drug candidates under our third-generation antisense program. For instance:
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we are conducting a Phase 1/2 clinical trial of IMO-8400 in patients with Waldenströms macroglobulinemia and a Phase 1/2 clinical trial of IMO-8400 in patients with DLBCL harboring the MYD88 L265P
oncogenic mutation; |
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we are planning to conduct a Phase 1/2 clinical trial of IMO-2125, administered intra-tumorally, in combination with ipilimumab, a CTLA4 antibody, in patients with metastatic melanoma and a Phase 1/2 clinical trial
involving either IMO-2055 or IMO-2125 in combination with a checkpoint inhibitor for a selected oncology target; |
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we are planning to conduct a Phase 2 clinical trial of IMO-8400 in patients with dermatomyositis and a Phase 2 clinical trial of IMO-8400 in patients with DMD; |
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we conducted a Phase 1 clinical trial of IMO-9200 in healthy subjects and are reviewing our strategic options related to the future development of IMO-9200; and |
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we are planning to conduct disease model studies and begin IND-enabling development programs in each of the first two disease indications selected for further development in our third-generation antisense program.
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We anticipate that our ability to generate product revenues will depend heavily on the successful
development and commercialization of our TLR drug candidates in our genetically defined forms of B-cell lymphoma, rare disease and immuno-oncology programs, and the successful identification, development and commercialization of drug candidates in
our third-generation antisense program.
Our ability to generate product revenues under our collaboration with Merck & Co. and
under any other collaboration that we enter into with respect to our other programs, will depend on the development and commercialization of the drug candidates being developed.
Our efforts, and the efforts of Merck & Co., to develop and commercialize these compounds are at an early stage and are subject to
many challenges. We have experienced setbacks with respect to our programs for IMO-2055, including:
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In April 2011, we chose to delay initiation of our planned 12-week Phase 2 randomized clinical trial of IMO-2125 plus ribavirin in treatment-naïve, genotype 1 hepatitis C virus, or HCV, patients based on
observations of lymphoproliferative malignancies in an ongoing 26-week chronic nonclinical toxicology study of IMO-2125 in rodents. We subsequently completed a 39-week chronic nonclinical toxicology study of IMO-2125 in non-human primates in which
there were no similar observations. |
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In July 2011, Merck KGaA, Darmstadt, Germany, or Merck KGaA, a former collaborator, informed us that, based on increased incidence of neutropenia and electrolyte imbalances reported in its Phase 1 clinical trial of
IMO-2055 in combination with cisplatin/5-FU and cetuximab in patients with first-line squamous cell carcinoma of the head and neck, or SCCHN, and subsequent re-evaluation of its clinical development program, Merck KGaA had determined that it would
not conduct further clinical development of IMO-2055. In May 2012, we announced that in a Phase 2 clinical trial of IMO-2055 in combination with cetuximab in patients with second-line SCCHN, the combination of IMO-2055 and cetuximab did not meet the
primary endpoint of the trial. |
We are conducting multiple clinical trials of IMO-8400 in different indications. If patients
in any of these trials experience adverse safety events, we may be required to delay, discontinue or modify all of our clinical trials of IMO-8400.
We are seeking and expect to continue to seek to enter into collaborative alliances with pharmaceutical companies to advance our TLR
antagonist candidates in broader autoimmune disease indications and with respect to applications of our third-generation antisense technology program. Our previous setbacks with respect to our programs for IMO-2125, and IMO-2055 could negatively
impact our ability to license any of such compounds to a third party.
Our ability to successfully develop and commercialize these drug
candidates, or other potential candidates, will depend on our ability to overcome these recent challenges and on several factors, including the following:
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the drug candidates demonstrating activity in clinical trials; |
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the drug candidates demonstrating an acceptable safety profile in nonclinical toxicology studies and during clinical trials; |
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timely enrollment in clinical trials of IMO-8400 and other drug candidates, which may be slower than anticipated, potentially resulting in significant delays; |
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satisfying conditions imposed on us and/or our collaborators by the FDA or equivalent foreign regulatory authorities regarding the scope or design of clinical trials; |
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the ability to demonstrate to the satisfaction of the FDA, or equivalent foreign regulatory authorities, the safety and efficacy of the drug candidates through current and future clinical trials; |
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timely receipt of necessary marketing approvals from the FDA and equivalent foreign regulatory authorities; |
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the ability to combine our drug candidates and the drug candidates being developed by Merck & Co. and any other collaborators safely and successfully with other therapeutic agents; |
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achieving and maintaining compliance with all regulatory requirements applicable to the products; |
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establishment of commercial manufacturing arrangements with third-party manufacturers; |
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the successful commercial launch of the drug candidates, assuming FDA approval is obtained, whether alone or in combination with other products; |
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acceptance of the products as safe and effective by patients, the medical community, and third-party payors; |
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competition from other companies and their therapies; |
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changes in treatment regimens; |
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the strength of our intellectual property portfolio in the United States and abroad; and |
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a continued acceptable safety and efficacy profile of the drug candidates following marketing approval. |
We are developing drug candidates for use in the treatment of certain genetically defined forms of B-cell lymphoma. Our approach for the treatment of
these genetically defined B-cell lymphomas is novel and may not result in any approved and marketable products.
We are in the
early stages of developing our program in genetically defined forms of B-cell lymphoma, an area in which we have little experience. In connection with this program, we are focusing our efforts on the research and development of TLR antagonist drug
candidates for use in the treatment of certain genetically defined forms of B-cell lymphoma. The scientific evidence to support the feasibility of developing drug candidates for this use is both preliminary and limited. We have conducted preclinical
studies in human lymphoma cell lines that carry the MYD88 L265P oncogenic mutation to evaluate our TLR antagonists as a potential approach to the treatment of certain genetically defined forms of B-cell lymphoma. Although the preliminary results of
our preclinical studies have been promising, it is unknown whether these results are indicative of results that may be obtained in our clinical trials. Therefore, we do not know if our approach of inhibiting TLRs to treat patients with genetically
defined forms of B-cell lymphoma will be successful or if we will ever succeed in obtaining regulatory approval to market any product for this purpose. In addition, in the event that our development efforts for such a drug candidate progress towards
commercialization, we likely will need to develop companion diagnostics for such drug candidate. We have no experience in developing companion diagnostics and will be dependent on the efforts of third-party collaborators to successfully develop and
commercialize these companion diagnostics on our behalf. In May 2014, we entered into an agreement with Abbott Molecular to develop a companion diagnostic for identification of patients with B-cell lymphoma harboring the MYD88 L265P oncogenic
mutation. We cannot assume that the program under this agreement will be successful.
We are in the early stages of developing our third-generation
antisense program, which is a novel technology, and our efforts may not be successful or result in any approved and marketable products.
We are in the early stages of developing our third-generation antisense technology program, and the scientific evidence to support the
feasibility of developing drugs based on this technology is preliminary. Further, neither we nor any other company has received regulatory approval to market therapeutics utilizing third-generation antisense drug candidates.
The future success of our third-generation antisense technology program depends on our success in identifying and developing marketable
products based on such technology. Although the results of our preclinical studies to date have been supportive of the viability of this technology, it is unknown whether these results are indicative of results that may be obtained in any
future clinical trials that we may conduct. We are currently undertaking an analysis of priority oncology and rare disease indications and development strategies to determine next steps in developing our third-generation antisense technology,
and are currently conducting disease model studies and plan to begin IND-enabling development programs in each of the first two disease indications selected for further development in our third-generation antisense program in the second half of
2015. However, many steps must be successfully achieved prior to the declaration of a third-generation antisense drug candidate and the initiation of clinical development. Given the level of uncertainty of our ability to successfully
achieve these many steps and the uncertainty of the drug discovery and clinical development processes in general, there can be no assurance that we will succeed in developing any marketable product as a result of our efforts with respect to our
third-generation antisense technology program.
If we experience delays or difficulties in the enrollment of patients in clinical trials, our
receipt of necessary regulatory approvals could be delayed or prevented.
We may not be able to initiate or continue clinical
trials for our drug candidates if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA or similar regulatory authorities outside the United States. In particular, because
there are a limited number of patients with Waldenströms macroglobulinemia or patients with DLBCL harboring the MYD88 L265P oncogenic mutation, and a limited number of patients with dermatomyositis, DMD, or other rare diseases having
indications for which we may determine to develop our TLR antagonists, our ability to enroll eligible patients in any clinical trials for these indications may be limited or may result in slower enrollment than we anticipate. In addition, the
relapsed or refractory DLBCL patients that we are seeking to enroll in our Phase 1/2 clinical trial of IMO-8400 typically have late stage disease, which confers a very poor prognosis. As a result, some patients, who screen positive for the MYD88
L265P based on tumor tissue testing, may experience rapid deterioration that precludes them from meeting study eligibility criteria and they are unable to enroll into the trial. If enrolled, the disease in these patients may be too advanced for them
to derive any clinically meaningful benefit from treatment or for their participation in the study to contribute meaningful data to the clinical trial. In addition, some of our competitors have ongoing clinical trials for drug candidates that treat
the same indications as our drug candidates, and patients who would otherwise be eligible for our clinical trials may instead enroll in clinical trials of our competitors drug candidates.
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Patient enrollment is affected by other factors including:
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the severity of the disease under investigation; |
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the eligibility criteria for the trial in question; |
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the perceived risks and benefits of the TLR antagonist drug candidates under study; |
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the efforts to facilitate timely enrollment in clinical trials; |
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the availability of competing clinical trials or other therapies; |
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the patient referral practices of physicians; |
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the ability to monitor patients adequately during and after treatment; and |
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the proximity and availability of clinical trial sites for prospective patients. |
Our
inability to enroll a sufficient number of patients for our clinical trials would result in significant delays and could require us to abandon one or more clinical trials altogether. Enrollment delays in our clinical trials may result in increased
development costs for our drug candidates, which would cause the value of our company to decline and limit our ability to obtain additional financing.
If our clinical trials are unsuccessful, or if they are delayed or terminated, we may not be able to develop and commercialize our drug candidates.
In order to obtain regulatory approvals for the commercial sale of our drug candidates, we are required to complete extensive
clinical trials in humans to demonstrate the safety and efficacy of our drug candidates. Clinical trials are lengthy, complex, and expensive processes with uncertain results. We may not be able to complete any clinical trial of a potential product
within any specified time period. Moreover, clinical trials may not show our potential products to be both safe and efficacious. The FDA or other equivalent foreign regulatory agencies may not allow us to complete these trials or commence and
complete any other clinical trials.
The results from preclinical testing of a drug candidate that is under development may not be
predictive of results that will be obtained in human clinical trials. In addition, the results of early human clinical trials may not be predictive of results that will be obtained in larger scale, advanced stage clinical trials. Furthermore,
interim results of a clinical trial do not necessarily predict final results, and failure of any of our clinical trials can occur at any stage of testing. Companies in the biotechnology and pharmaceutical industries, including companies with greater
experience in preclinical testing and clinical trials than we have, have suffered significant setbacks in clinical trials, even after demonstrating promising results in earlier trials. Moreover, effects seen in nonclinical studies, even if not
observed in clinical trials, may result in limitations or restrictions on clinical trials. Numerous unforeseen events may occur during, or as a result of, preclinical testing, nonclinical testing or the clinical trial process that could delay or
inhibit the ability to receive regulatory approval or to commercialize drug products.
Only one TLR-targeted drug, imiquimod, which is
marketed as Aldara® and Zyclara® by Meda AB, Graceway Pharmaceuticals LLC, and iNova Pharmaceuticals (Australia) Pty Limited has been
approved by the FDA. Other companies developing drugs targeted to TLRs have experienced setbacks in clinical trials. For example in 2007, Coley Pharmaceutical Group, which since has been acquired by Pfizer, Inc., discontinued four clinical trials
for PF-3512676, its investigational TLR9 agonist compound, in combination with cytotoxic chemotherapy in cancer, and suspended its development of Actilon®, a TLR9 agonist, for HCV infection.
In July 2007, Anadys Pharmaceuticals, Inc. and its partner Novartis discontinued the development of ANA975, the investigational TLR7 agonist compound for HCV infection. Dynavax announced in May 2008 discontinuation of the clinical development
program for TOLAMBA®, an investigational vaccine which contained a TLR9 agonist adjuvant, and in February 2013 Dynavax announced receipt of a Complete Response Letter from FDA regarding its
Biological License Application for HEPLISAV®, which is an investigational hepatitis B vaccine that contains a TLR9 agonist adjuvant. These setbacks may result in enhanced scrutiny by
regulators or institutional review boards, or IRBs, of clinical trials of our drug candidates, including our TLR-targeted drug candidates, which could result in regulators or IRBs prohibiting the commencement of clinical trials, requiring additional
nonclinical studies as a precondition to commencing clinical trials or imposing restrictions on the design or scope of clinical trials that could slow enrollment of trials, increase the costs of trials or limit the significance of the results of
trials. Such setbacks could also adversely impact the desire of investigators to enroll patients in, and the desire of patients to enroll in, clinical trials of our drug candidates.
Other events that could delay or inhibit conduct of our clinical trials include:
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regulators or IRBs may not authorize us to commence a clinical trial or conduct a clinical trial at a prospective trial site; |
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nonclinical or clinical data may not be readily interpreted, which may lead to delays and/or misinterpretation; |
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our nonclinical tests, including toxicology studies, or clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional nonclinical testing or
clinical trials or we may abandon projects that we expect may not be promising; |
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the rate of enrollment or retention of patients in our clinical trials may be lower than we expect; |
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we might have to suspend or terminate our clinical trials if the participating subjects experience serious adverse events or undesirable side effects or are exposed to unacceptable health risks; |
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regulators or IRBs may hold, suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements, issues identified through inspections of manufacturing or clinical trial
operations or clinical trial sites, or if, in their opinion, the participating subjects are being exposed to unacceptable health risks; |
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regulators may hold or suspend our clinical trials while collecting supplemental information on, or clarification of, our clinical trials or other clinical trials, including trials conducted in other countries or trials
conducted by other companies; |
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we, along with our collaborators and subcontractors, may not employ, in any capacity, persons who have been debarred under the FDAs Application Integrity Policy, or similar policy under foreign regulatory
authorities. Employment of such debarred persons, even if inadvertent, may result in delays in the FDAs or foreign equivalents review or approval of our drug candidates, or the rejection of data developed with the involvement of such
person(s); |
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we or our contract manufacturers may be unable to manufacture sufficient quantities of our drug candidates for use in clinical trials; |
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the cost of our clinical trials may be greater than we currently anticipate; and |
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our drug candidates may not cause the desired effects or may cause undesirable side effects or our drug candidates may have other unexpected characteristics. |
We do not know whether clinical trials will begin as planned, will need to be restructured or will be completed on schedule, if at all.
Significant clinical trial delays also could allow our competitors to bring products to market before we do and impair our ability to commercialize our drug candidates.
Delays in commencing clinical trials of potential products could increase our costs, delay any potential revenues, and reduce the probability that a
potential product will receive regulatory approval.
Our drug candidates and our collaborators drug candidates will require
preclinical and other nonclinical testing and extensive clinical trials prior to submission of any regulatory application for commercial sales. In conducting clinical trials, we cannot be certain that any planned clinical trial will begin on time,
if at all. Delays in commencing clinical trials of potential products could increase our drug candidate development costs, delay any potential revenues, and reduce the probability that a potential product will receive regulatory approval.
Commencing clinical trials may be delayed for a number of reasons, including delays in:
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manufacturing sufficient quantities of drug candidate that satisfy the required quality standards for use in clinical trials; |
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demonstrating sufficient safety to obtain regulatory approval for conducting a clinical trial; |
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reaching an agreement with any collaborators on all aspects of the clinical trial; |
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reaching agreement with contract research organizations, if any, and clinical trial sites on all aspects of the clinical trial; |
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resolving any objections from the FDA or any regulatory authority on an IND or proposed clinical trial design; |
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obtaining IRB approval for conducting a clinical trial at a prospective site; and |
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enrolling patients in order to commence the clinical trial. |
The technologies on which we rely are
unproven and may not result in any approved and marketable products.
Our technologies or therapeutic approaches are relatively new
and unproven. We have focused our efforts on the research and development of RNA- and DNA-based compounds, or oligonucleotides, targeted to TLRs and on third-generation antisense drug candidates. Neither we nor any other company have obtained
regulatory approval to market such compounds as therapeutic drugs, and no such products currently are being marketed. The results of preclinical studies with TLR-targeted compounds may not be indicative of results that may be obtained in clinical
trials, and results we have obtained in the clinical trials we have conducted to date may not be predictive of results in subsequent large-scale clinical trials. Further, the chemical and pharmacological properties of RNA- and DNA-based compounds
targeted to TLRs or of third-generation antisense drug candidates may not be fully recognized in preclinical studies and small-scale clinical trials, and such compounds may interact with human biological systems in unforeseen, ineffective or harmful
ways that we have not yet identified.
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Moreover, only one oligonucleotide drug,
Kynamro®, has been approved by the FDA for marketing in the United States since 1998. As such, oligonucleotides as a chemical class of drug candidates have limited precedence for successful
late-stage development and regulatory approval. As we progress our oligonucleotide drug candidates into Phase 2 clinical trials involving patients with severe disease and as we conduct long-term nonclinical toxicology studies, we expect to encounter
an increased risk of generating clinical adverse events and nonclinical toxicology study results that will require careful interpretation. In animal toxicology studies, we have observed adverse treatment-related effects on serum complement as well
as evidence of adverse kidney, vascular, and heart pathology in longer term dosing of animals with our oligonucleotide compounds, which we believe are consistent with data previously generated with other third party oligonucleotides. Given the
limited experience in assessing the relevance of oligonucleotide-related adverse animal toxicology findings to humans, the clinical and regulatory context for interpreting the significance of such events and results is not well established.
As a result of these factors, we may never succeed in obtaining regulatory approval to market any product. Furthermore, the commercial success
of any of our drug candidates for which we may obtain marketing approval from the FDA or other regulatory authorities will depend upon their acceptance by patients, the medical community, and third-party payors as clinically useful, safe, and
cost-effective. In addition, if products being developed by our competitors have negative clinical trial results or otherwise are viewed negatively, the perception of our technologies and market acceptance of our drug candidates could be impacted
negatively.
Our setbacks with respect to our TLR-targeted compounds, together with the setbacks experienced by other companies developing
TLR-targeted compounds, may result in a negative perception of our technology and our TLR-targeted compounds, impact our ability to obtain marketing approval of these drug candidates and adversely affect acceptance of our technology and our
TLR-targeted compounds by patients, the medical community and third-party payors.
Our efforts to educate the medical community on our
potentially unique approaches may require greater resources than would be typically required for products based on conventional technologies or therapeutic approaches. The safety, efficacy, convenience, and cost-effectiveness of our drug candidates
as compared to competitive products will also affect market acceptance.
We face substantial competition, which may result in others discovering,
developing or commercializing drugs before or more successfully than us.
We are developing our TLR-targeted drug candidates for
use in the treatment of certain genetically defined forms of B-cell lymphoma and rare diseases and in our immuno-oncology program. One of our drug candidates, IMO-8400, is in clinical development for the treatment of certain genetically defined
forms of B-cell lymphoma, including Waldenströms macroglobulinemia and DLBCL harboring the MYD88 L265P oncogenic mutation. We plan to initiate clinical trials of IMO-8400 in dermatomyositis and DMD. We are also planning to conduct Phase
1/2 clinical trial of IMO-2125, administered intra-tumorally, in combination with ipilimumab, a CTLA4 antibody, in patients with metastatic melanoma and a Phase 1/2 clinical trial of either IMO-2055 or IMO-2125 in combination with a checkpoint
inhibitor for a selected oncology target in our immuno-oncology program. Finally, we are seeking and expect to continue to seek to enter into collaborative alliances with pharmaceutical companies to advance our TLR antagonist candidates in broader
autoimmune disease indications. For all of these disease areas, there are many other companies, public and private, that are actively engaged in discovery, development, and commercializing products and technologies that may compete with our drug
candidates and programs, including TLR-targeted compounds as well as non-TLR-targeted therapeutics.
We are developing IMO-8400 for the
treatment of certain genetically defined forms of B-cell lymphoma. There are currently no drugs specifically approved for the treatment of Waldenströms macroglobulinemia or DLBCL harboring the MYD88 L265P oncogenic mutation other than
ibrutinib, which is marketed as Imbruvica® by Pharmacyclics, Inc. and was approved in January 2015 for the treatment of Waldenströms macroglobulinemia in the United States.
Currently, patients with any form of non-Hodgkin lymphoma are most often treated with the monoclonal antibody rituximab and/or with one or more chemotherapeutic agents. Rituximab is co-marketed in the United States by Biogen Idec Inc. and Genentech
Inc. and Hoffmann-La Roche, and Chugai Pharmaceutical Co., Ltd. in territories outside the United States. We are aware of additional compounds in development for the treatment of genetically defined forms of B-cell lymphoma, including an inhibitor
of interleukin-1 receptor-associated kinase 4, which is being developed by Nimbus Discovery, Inc.
Our principal competitor developing TLR
antagonist targeted compounds for rare diseases is Dynavax. In addition, we are aware that other companies including Dynavax, InDex Pharmaceuticals AB, Mologen AG, BioLineRx Ltd., Innate Immunotherapeutics Ltd., VentiRx Pharmaceuticals Inc.,
Telormedix S.A., Gilead Sciences Inc., GlaxoSmithKline plc, AstraZeneca plc and Hoffmann-La Roche are developing TLR agonists for various indications, some of which are in the field of oncology.
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Many of the drug development programs in dermatomyositis are focusing on expanding the use of
drugs approved in different indications through investigator sponsored studies such as the ongoing studies of the monoclonal antibodies, belimumab and tocilizumab. In addition, Novartis is developing a competitive anti-inflammatory approach with its
new investigational drug, BAF312, a sphingosine-1-phosphate receptor modulator aimed at inhibiting the migration of lymphocytes to the location of inflammation. We are not aware of other new chemical or molecular entities being developed for the
treatment of dermatomyositis.
Competitors with respect to our DMD program include ReveraGen and Catabasis, both whom are pursuing novel
anti-inflammatory approaches for the treatment of DMD. ReveraGen is conducting a Phase 1 healthy volunteer study and Catabasis initiated a Phase 2 clinical trial in DMD patients in June 2015. In addition, Sarepta Therapeutics Inc. and BioMarin
Pharmaceuticals Inc. (following its acquisition of Prosensa Holding N.V.), each have RNA-based drug candidates targeted at treating genetically defined subsets of DMD in late stage development. PTC Therapeutics, Inc. also has a drug candidate
targeted at treating a genetically defined subset of DMD that is conditionally approved for the treatment of DMD in Europe, and is currently being evaluated in a Phase 3 clinical trial. We believe that these dystrophin replacement therapeutic
approaches, as well as other therapeutic approaches being pursued for the treatment of DMD, including anti-inflammatory, muscle blood flow, reducing fibrosis, increasing muscle mass, supporting muscle integrity and cardioprotective approaches being
pursued by multiple companies, have the potential to be complementary to our TLR antagonist approach.
Immuno-oncology, which utilizes a
patients own immune system to combat cancer, is currently an active area of research for biotechnology and pharmaceutical companies. Interest in immuno-oncology is driven by recent efficacy data in cancers with historically bleak outcomes and
the potential to achieve a cure or functional cure for some patients. As such, our efforts in this field will be competitive with a wide variety of different approaches. Any one of these competitive approaches may result in the development of novel
technologies that are more effective, safer or less costly than any that we are developing. In addition, Dynavax is conducting a Phase 1/2 clinical trial of an investigational TLR9 agonist in combination with checkpoint inhibitors.
We are also developing third-generation antisense drug candidates that we have created using our proprietary technology, to inhibit the
production of disease-associated proteins by targeting RNA. We also face competition from other companies working to develop novel drugs using technologies that may compete with our third-generation antisense technology. We are aware of multiple
companies that are developing technologies that use oligonucleotide-based compounds to inhibit the production of disease associated proteins. These technologies include, but are not limited to, antisense technology as well as RNAi. In the field of
antisense technologies, we compete with multiple companies, including Isis and its partners. Isis is currently marketing an antisense drug, Kynamro, and has several antisense drug candidates in clinical trials. In the field of RNAi, our primary
competition is with Alnylam and its partners. Alnylam is currently developing multiple RNAi-based technologies and has several drug candidates in clinical trials. Any of the competing companies may develop gene-silencing technologies more rapidly
and more effectively than us, and antisense technology and RNAi may become the preferred technology for drugs that target RNA in order to inhibit the production of disease-associated proteins.
Some of these potentially competitive products have been in development or commercialized for years, in some cases by large, well established
pharmaceutical companies. Many of the marketed products have been accepted by the medical community, patients, and third-party payors. Our ability to compete may be affected by the previous adoption of such products by the medical community,
patients, and third-party payors. Additionally, in some instances, insurers and other third-party payors seek to encourage the use of generic products, which makes branded products, such as our drug candidates, potentially less attractive, from a
cost perspective, to buyers.
We recognize that other companies, including large pharmaceutical companies, may be developing or have plans
to develop products and technologies that may compete with ours. Many of our competitors have substantially greater financial, technical, and human resources than we have. In addition, many of our competitors have significantly greater experience
than we have in undertaking preclinical studies and human clinical trials of new pharmaceutical products, obtaining FDA and other regulatory approvals of products for use in health care and manufacturing, and marketing and selling approved products.
Our competitors may discover, develop or commercialize products or other novel technologies that are more effective, safer or less costly than any that we are developing. Our competitors may also obtain FDA or other regulatory approval for their
products more rapidly than we may obtain approval for ours.
We anticipate that the competition with our drug candidates and technologies
will be based on a number of factors including product efficacy, safety, availability, and price. The timing of market introduction of our drug candidates and competitive products will also affect competition among products. We expect the relative
speed with which we can develop products, complete the clinical trials and approval processes, and supply commercial quantities of the products to the market to be important competitive factors. Our competitive position will also depend upon our
ability to attract and retain qualified personnel, to obtain patent protection or otherwise develop proprietary products or processes, protect our intellectual property, and to secure sufficient capital resources for the period between technological
conception and commercial sales.
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Competition for technical and management personnel is intense in our industry, and we may not be able to
sustain our operations or grow if we are unable to attract and retain key personnel.
Our success is highly dependent on the
retention of principal members of our technical and management staff, including Mr. Vincent Milano and Dr. Sudhir Agrawal. Mr. Milano serves as our President and Chief Executive Officer, and Dr. Agrawal serves as our President of
Research.
We are a party to employment agreements with Mr. Milano and Dr. Agrawal. Mr. Milanos employment agreement
is terminable upon 15 days prior written notice at the election of either party and immediately in the event of a termination for cause (as defined therein). Dr. Agrawals employment agreement expires on October 19, 2017, but
automatically extends annually for additional one-year periods. This agreement may be terminated by us or Dr. Agrawal for any reason or no reason at any time upon notice to the other party. We do not carry key man life insurance for
Mr. Milano or Dr. Agrawal.
Furthermore, our future growth will require hiring a number of qualified technical and management
personnel. Accordingly, recruiting and retaining such personnel in the future will be critical to our success. There is intense competition from other companies and research and academic institutions for qualified personnel in the areas of our
activities. If we are not able to continue to attract and retain, on acceptable terms, the qualified personnel necessary for the continued development of our business, we may not be able to sustain our operations or growth.
Regulatory Risks
We are subject to
comprehensive regulatory requirements, which are costly and time consuming to comply with; if we fail to comply with these requirements, we could be subject to adverse consequences and penalties.
The testing, manufacturing, labeling, advertising, promotion, export, and marketing of our drug candidates are subject to extensive regulation
by governmental authorities in Europe, the United States, and elsewhere throughout the world.
In general, submission of materials
requesting permission to conduct clinical trials may not result in authorization by the FDA or any equivalent foreign regulatory agency to commence clinical trials. Further, permission to continue ongoing trials may be withdrawn by the FDA or other
regulatory agencies at any time after initiation, based on new information available after the initial authorization to commence clinical trials or for other reasons. In addition, submission of an application for marketing approval to the relevant
regulatory agency following completion of clinical trials may not result in the regulatory agency approving the application if applicable regulatory criteria are not satisfied, and may result in the regulatory agency requiring additional testing or
information.
Even if we obtain regulatory approval for any of our drug candidates, we will be subject to continual requirements of and
review by the FDA and other regulatory authorities. These requirements include submissions of safety and other post-marketing information and reports, registration and listing requirements, current Good Manufacturing Practices, or cGMP, requirements
relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents, and requirements regarding the distribution of samples to physicians, advertising and promotion, and recordkeeping. Even if
marketing approval of a drug candidate is granted, the approval may be subject to limitations on the indicated uses for which the product may be marketed or to the conditions of approval, including the requirement to implement a risk evaluation and
mitigation strategy. If any of our drug candidates receives marketing approval, the accompanying label may limit the approved use of our drug in this way, which could limit sales of the product. For example, new cancer drugs frequently are indicated
only for patient populations that have not responded to an existing therapy or have relapsed.
Both before and after approval is obtained,
failure to comply with regulatory requirements, or discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, may result in:
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the regulatory agencys delay in approving, or refusal to approve, an application for marketing of a product or a supplement to an approved application; |
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total or partial suspension of any ongoing clinical trials; |
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restrictions on our drug candidates or the marketing or manufacturing of our drug candidates; |
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withdrawal of our drug candidates from the market; |
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voluntary or mandatory product recalls; |
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suspension or withdrawal of regulatory approvals; |
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product seizure or detention; |
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refusal to permit the import or export of our drug candidates; |
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injunctions or the imposition of civil penalties; and |
The regulatory requirements and policies may change and additional
government regulations may be enacted for which we may also be required to comply. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United
States or in other countries. If we or any current or future collaborator are not able to maintain regulatory compliance, we or such collaborator, as applicable, will not be permitted to market our future products and our business will suffer.
We may not be able to obtain marketing approval for products resulting from our development efforts.
All of the drug candidates that we are developing, or may develop in the future, will require additional research and development, extensive
preclinical studies, nonclinical testing, clinical trials, and regulatory approval prior to any commercial sales. This process is lengthy, often taking a number of years, is uncertain, and is expensive. Since our inception, we have conducted
clinical trials of a number of compounds and are planning to initiate clinical trials for a number of additional disease indications. Specifically, we are currently:
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conducting a Phase 1/2 clinical trial of IMO-8400 in patients with Waldenströms macroglobulinemia and a Phase 1/2 clinical trial of IMO-8400 in patients with DLBCL harboring the MYD88 L265P
oncogenic mutation; |
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planning to conduct a Phase 1/2 clinical trial of IMO-2125, administered intra-tumorally, in combination with ipilimumab, a CTLA4 antibody, in patients with metastatic melanoma and a Phase 1/2 clinical trial involving
either IMO-2055 or IMO-2125 in combination with a checkpoint inhibitor for a selected oncology target; |
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planning to conduct a Phase 2 clinical trial of IMO-8400 in patients with dermatomyositis and a Phase 2 clinical trial of IMO-8400 in patients with DMD; |
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reviewing our strategic options for the development of IMO-9200; and |
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planning to conduct disease model studies and begin IND-enabling development programs in each of the first two disease indications selected for further development in our third-generation antisense program.
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The FDA and other regulatory authorities may not approve any of our potential products for any indication.
We may need to address a number of technological challenges in order to complete development of our drug candidates. Moreover, these products
may not be effective in treating any disease or may prove to have undesirable or unintended side effects, unintended alteration of the immune system over time, toxicities or other characteristics that may preclude our obtaining regulatory approval
or prevent or limit commercial use. If we do not obtain necessary regulatory approvals, our business will be adversely affected.
We may not be able
to obtain orphan drug exclusivity for applications of our TLR antagonist drug candidates.
Regulatory authorities in some
jurisdictions, including the United States and Europe, may designate drugs for relatively small patient populations as orphan drugs. Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is a drug intended to treat a
rare disease or condition, which is generally defined as a patient population of fewer than 200,000 individuals annually in the United States.
Generally, if a product with an orphan drug designation subsequently receives the first marketing approval for the indication for which it has
such designation, the product is entitled to a period of marketing exclusivity, which precludes the European Medicines Agency, or EMA, or the FDA from approving another marketing application for the same drug for that time period. The applicable
period is seven years in the United States and ten years in Europe. The European exclusivity period can be reduced to six years if a drug no longer meets the criteria for orphan drug designation or if the drug is sufficiently profitable so that
market exclusivity is no longer justified. Orphan drug exclusivity may be lost if the FDA or EMA determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet
the needs of patients with the rare disease or condition.
The FDA has granted us orphan drug designation for IMO-8400 for the treatment
of Waldenströms macroglobulinemia and the treatment of DLBCL. However, there can be no assurance that we will obtain orphan drug exclusivity for Waldenströms macroglobulinemia, DLBCL or any other disease indications for which
we develop IMO-8400 or our other drug candidates. Even if
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we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs can be approved for the same condition. Even
after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if the FDA concludes that the later drug is clinically superior in that it is shown to be safer, more effective or makes a major contribution to
patient care.
A fast track designation by the FDA may not actually lead to a faster development or regulatory review or approval process.
We intend to seek fast track designation for some applications of our drug candidates. If a drug is intended for the treatment of
a serious or life-threatening condition and the drug demonstrates the potential to address unmet medical needs for this condition, the drug sponsor may apply for FDA fast track designation. The FDA has broad discretion whether or not to grant this
designation, so even if we believe a particular drug candidate is eligible for this designation, we cannot assure you that the FDA would decide to grant it. Even if we do receive fast track designation, we may not experience a faster development
process, review or approval compared to conventional FDA procedures. The FDA may withdraw fast track designation if it believes that the designation is no longer supported by data from our clinical development program.
A breakthrough therapy designation by the FDA for any application of our drug candidates may not lead to a faster development or regulatory review or
approval process, and it does not increase the likelihood that those drug candidates will receive marketing approval.
We may seek
a breakthrough therapy designation for some applications of our drug candidates. A breakthrough therapy is defined as a drug that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or
condition, and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical
development. For drugs and biologics that have been designated as breakthrough therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while
minimizing the number of patients placed in ineffective control regimens. Drugs designated as breakthrough therapies by the FDA are also eligible for accelerated approval.
Designation as a breakthrough therapy is within the discretion of the FDA. Accordingly, even if we believe an application of one of our drug
candidates meets the criteria for designation as a breakthrough therapy, the FDA may disagree and instead determine not to make such designation. In any event, the receipt of a breakthrough therapy designation for a drug candidate may not result in
a faster development process, review or approval compared to drugs considered for approval under conventional FDA procedures and does not assure ultimate approval by the FDA. In addition, even if one or more of our drug candidates qualify as
breakthrough therapies, the FDA may later decide that the products no longer meet the conditions for qualification or decide that the time period for FDA review or approval will not be shortened.
If we are unable to successfully develop companion diagnostics for our drug candidates intended for the treatment of genetically defined forms of B-cell
lymphoma, or experience significant delays in doing so, we may not achieve marketing approval or realize the full commercial potential of these drug candidates.
We plan to develop companion diagnostics for our TLR antagonist drug candidates in our genetically defined forms of B-cell lymphoma program. We
expect that, at least in some cases, the FDA and similar regulatory authorities outside the United States may require the development and regulatory approval of a companion diagnostic as a condition to approving our TLR antagonist drug candidates
specifically for the treatment of patients with a genetically defined form of B-cell lymphoma. We do not have experience or capabilities in developing or commercializing diagnostics and plan to rely on third parties or collaborators to perform these
functions. In May 2014, we entered into an agreement with Abbott Molecular for the development and potential commercialization of a companion diagnostic for use with IMO-8400 with respect to our identification of patients with B-cell lymphoma
harboring the MYD88 L265P oncogenic mutation in our genetically defined forms of B-cell lymphoma program. We may enter into similar agreements for our other drug candidates and possible expansion indications for IMO-8400. Companion diagnostics are
subject to regulation by the FDA and similar regulatory authorities outside the United States as medical devices and require separate regulatory approval prior to commercialization.
If we, any third parties that we engage to assist us or any of our collaborators are unable to successfully develop companion diagnostics for
our TLR antagonist drug candidates, or experience delays in doing so:
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the development of our TLR antagonist drug candidates may be adversely affected if we are unable to appropriately select patients for enrollment in our clinical trials; |
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our TLR antagonist drug candidates may not receive marketing approval if their safe and effective use depends on a companion diagnostic; and |
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we may not realize the full commercial potential of any TLR antagonist drug candidates that receive marketing approval if, among other reasons, we are unable to appropriately identify patients with the specific
oncogenic mutation targeted by our TLR antagonist drug candidates. |
If any of these events were to occur, our business would
be harmed, possibly materially.
We have only limited experience in regulatory affairs and our drug candidates are based on new technologies; these
factors may affect our ability or the time we require to obtain necessary regulatory approvals.
We have only limited experience in
filing the applications necessary to obtain regulatory approvals. Moreover, the products that result from our research and development programs will likely be based on new technologies and new therapeutic approaches that have not been extensively
tested in humans. The regulatory requirements governing these types of products may be more rigorous than for conventional drugs. As a result, we may experience a longer regulatory process in connection with obtaining regulatory approvals of any
product that we develop.
Failure to obtain regulatory approval in jurisdictions outside the United States will prevent us from marketing our
products abroad.
We intend to market our products, if approved, in markets outside the United States, which will require separate
regulatory approvals and compliance with numerous and varying regulatory requirements. The approval procedures vary among such markets and may involve requirements for additional testing, and the time required to obtain approval may differ from that
required to obtain FDA approval. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other
foreign countries or by the FDA. The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all.
Risks Relating to Collaborators
Our existing collaborations and any collaborations we enter into in the future may not be successful.
Historically, an important element of our business strategy has included entering into collaborative alliances with corporate collaborators,
primarily large pharmaceutical companies, for the development, commercialization, marketing, and distribution of some of our drug candidates. In December 2006, we entered into an exclusive license and research collaboration with Merck & Co.
to research, develop, and commercialize vaccine products containing our TLR7, TLR8 and TLR9 agonists in the fields of cancer, infectious diseases, and Alzheimers disease. In December 2007, we entered into an exclusive, worldwide license
agreement with Merck KGaA to research, develop, and commercialize products containing our TLR9 agonists for treatment of cancer, excluding cancer vaccines. Additionally, in May 2014, we entered into a development and commercialization agreement with
Abbott Molecular for the development of an in vitro companion diagnostic for use in our clinical development programs to treat certain genetically defined forms of B-cell lymphoma with IMO-8400.
Any collaboration that we enter into may not be successful. For instance, in July 2011, Merck KGaA informed us that it had determined not to
conduct further clinical development of IMO-2055, and in November 2011, we entered into an agreement with Merck KGaA terminating our collaboration with them. The success of our collaborative alliances, if any, will depend heavily on the efforts and
activities of our collaborators. Our existing collaborations and any potential future collaborations have risks, including the following:
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our collaborators may control the development of the drug candidates being developed with our technologies and compounds including the timing of development; |
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our collaborators may control the development of the companion diagnostic to be developed for use in conjunction with our drug candidates including the timing of development; |
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our collaborators may control the public release of information regarding the developments, and we may not be able to make announcements or data presentations on a schedule favorable to us; |
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disputes may arise in the future with respect to the ownership of rights to technology developed with our collaborators; |
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disagreements with our collaborators could delay or terminate the research, development or commercialization of products, or result in litigation or arbitration; |
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we may have difficulty enforcing the contracts if any of our collaborators fail to perform; |
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our collaborators may terminate their collaborations with us, which could make it difficult for us to attract new collaborators or adversely affect the perception of us in the business or financial communities;
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our collaboration agreements are likely to be for fixed terms and subject to termination by our collaborators in the event of a material breach or lack of scientific progress by us; |
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our collaborators may have the first right to maintain or defend our intellectual property rights and, although we would likely have the right to assume the maintenance and defense of our intellectual property rights if
our collaborators do not, our ability to do so may be compromised by our collaborators acts or omissions; |
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our collaborators may challenge our intellectual property rights or utilize our intellectual property rights in such a way as to invite litigation that could jeopardize or invalidate our intellectual property rights or
expose us to potential liability; |
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our collaborators may not comply with all applicable regulatory requirements, or may fail to report safety data in accordance with all applicable regulatory requirements; |
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our collaborators may change the focus of their development and commercialization efforts. Pharmaceutical and biotechnology companies historically have re-evaluated their priorities following mergers and consolidations,
which have been common in recent years in these industries. For example, we have a strategic partnership with Merck & Co., which merged with Schering-Plough Corporation, which has been involved with certain TLR-targeted research and
development programs. Although the merger has not affected our partnership with Merck & Co. to date, management of the combined company could determine to reduce the efforts and resources that the combined company will apply to its
strategic partnership with us or terminate the strategic partnership. The ability of our drug candidates to reach their potential could be limited if our collaborators decrease or fail to increase spending relating to such drug candidates;
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our collaborators may under fund or not commit sufficient resources to the testing, marketing, distribution or development of our drug candidates; and |
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our collaborators may develop alternative products either on their own or in collaboration with others, or encounter conflicts of interest or changes in business strategy or other business issues, which could adversely
affect their willingness or ability to fulfill their obligations to us. |
Given these risks, it is possible that any
collaborative alliance into which we enter may not be successful. Collaborations with pharmaceutical companies and other third parties often are terminated or allowed to expire by the other party. For example, effective as of February 2010, Novartis
terminated the research collaboration and option agreement that we entered into with it in May 2005, and in November 2011, we entered into an agreement with Merck KGaA terminating our collaboration with them. In addition, Merck & Co. may
terminate its license and research collaboration agreement by giving us 90 days advance notice. The termination or expiration of our agreement with Merck & Co. or Abbott Molecular or any other collaboration agreement that we enter into in
the future may adversely affect us financially and could harm our business reputation.
If we are unable to establish additional collaborative
alliances, our business may be materially harmed.
Collaborators provide the necessary resources and drug development experience to
advance our compounds in their programs. We are seeking and expect to continue to seek to enter into collaborative alliances with pharmaceutical companies to advance our TLR antagonist candidates in broader autoimmune disease indications. We are
also seeking and expect to continue to seek to enter into collaborative alliances with pharmaceutical companies with respect to applications of our third-generation antisense technology program.
Upfront payments and milestone payments received from collaborations help to provide us with the financial resources for our internal research
and development programs. Our internal programs are focused on developing TLR-targeted drug candidates for the potential treatment of certain genetically defined forms of B-cell lymphoma and autoimmune diseases and on third-generation antisense drug
candidates. We believe that additional resources will be required to advance compounds in all of these areas. If we do not reach agreements with additional collaborators in the future, we may not be able to obtain the expertise and resources
necessary to achieve our business objectives, our ability to advance our compounds will be jeopardized and we may fail to meet our business objectives.
We may have difficulty establishing additional collaborative alliances, particularly with respect to our TLR-targeted drug candidates and
technology and our third-generation antisense technology. For example, potential partners may note that our TLR collaborations with Novartis and with Merck KGaA have been terminated. Potential partners may also be reluctant to establish
collaborations with respect to IMO-2125, IMO-2055, and our other TLR-targeted drug candidates, given our setbacks with respect to these drug candidates. Additionally, in the event we seek collaborations for our third-generation antisense program,
any potential collaborators may not be willing to enter into a collaboration with us due to the early stage of this technology. We also face, and expect to continue to face, significant competition in seeking appropriate collaborators.
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Even if a potential partner were willing to enter into a collaborative alliance with respect to
our TLR-targeted compounds or technology or our third-generation antisense technology, the terms of such a collaborative alliance may not be on terms that are favorable to us. Moreover, collaborations are complex and time consuming to negotiate,
document, and implement. We may not be successful in our efforts to establish and implement collaborations on a timely basis.
Risks
Relating to Intellectual Property
If we are unable to obtain and maintain patent protection for our discoveries, the value of our technology
and products will be adversely affected.
Our patent positions, and those of other drug discovery companies, are generally
uncertain and involve complex legal, scientific, and factual questions. Our ability to develop and commercialize drugs depends in significant part on our ability to:
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obtain and maintain valid and enforceable patents; |
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obtain licenses to the proprietary rights of others on commercially reasonable terms; |
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operate without infringing upon the proprietary rights of others; |
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prevent others from infringing on our proprietary rights; and |
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protect our trade secrets. |
We do not know whether any of our patent applications or those
patent applications that we license will result in the issuance of any patents. Our issued patents and those that may be issued in the future, or those licensed to us, may be challenged, invalidated, held unenforceable, narrowed in the course of a
post-issuance proceeding or circumvented, and the rights granted thereunder may not provide us proprietary protection or competitive advantages against competitors with similar technology. Moreover, intellectual property laws may change and
negatively impact our ability to obtain issued patents covering our technologies or to enforce any patents that issue. Because of the extensive time required for development, testing, and regulatory review of a potential product, it is possible
that, before any of our products can be commercialized, any related patent may expire or remain in force for only a short period following commercialization, thus reducing any advantage provided by the patent.
Because patent applications in the United States and many foreign jurisdictions are typically not published until 18 months after filing, or
in some cases not at all, and because publications of discoveries in the scientific literature often lag behind actual discoveries, neither we nor our licensors can be certain that we or they were the first to make the inventions claimed in issued
patents or pending patent applications, or that we or they were the first to file for protection of the inventions set forth in these patent applications.
As of July 15, 2015, we owned more than 45 U.S. patents and patent applications and more than 80 patents and patent applications
throughout the rest of the world for our TLR-targeted immune modulation technologies. These patents and patent applications include claims covering the chemical compositions of matter and methods of use of our IMO compounds, such as IMO-8400,
IMO-9200, IMO-2055 and IMO-2125, as well as other compounds. As of July 15, 2015, all of our intellectual property covering immune modulatory compositions and methods of their use is based on discoveries made solely by us. These patents expire
at various dates ranging from 2017 to 2031. With respect to IMO-8400, we have an issued U.S. patent that covers the chemical composition of matter of IMO-8400 and certain methods of its use that has a statutory expiration date in 2031. With respect
to IMO-9200, we have a U.S. patent application that covers the chemical composition for IMO-9200 and methods of its use, which we would expect to expire, if issued, at the earliest in 2034. With respect to IMO-2055, we have issued patents that cover
the chemical composition of matter of IMO-2055 and certain methods of its use, including in combination with marketed cancer products, with the composition claims expiring in 2023. With respect to IMO-2125, we have an issued U.S. patent that covers
the chemical composition of matter of IMO-2125 and methods of its use that will expire in 2026.
As of July 15, 2015, we owned two
issued U.S. patents, four pending U.S. patent applications and nine foreign patent applications related to our third-generation antisense compounds and methods of their use. The issued patents covering our third-generation antisense technologies
have a statutory expiration date in 2030.
In addition to our TLR-targeted and third-generation antisense patent portfolios, we are the
owner of or hold licenses to patents and patent applications related to antisense technology. As of July 15, 2015, our antisense patent portfolio included more than 15 U.S. patents and more than 55 patents throughout the rest of the world.
These antisense patents and patent applications include novel compositions of matter, the use of these compositions for various genes, sequences and therapeutic targets, and oral and other routes of administration. Some of the patents and patent
applications in our antisense portfolio were in-licensed. These in-licensed patents expire at various dates through 2021.
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Third parties may own or control patents or patent applications and require us to seek licenses, which
could increase our development and commercialization costs, or prevent us from developing or marketing products.
Although we have
many issued patents and pending patent applications in the United States and other countries, we may not have rights under certain third-party patents or patent applications related to our compounds under development. Third parties may own or
control these patents and patent applications in the United States and abroad. In particular, we are aware of certain third-party U.S. patents that contain claims related to TLR modulation as well as antisense technology. Although we do not believe
any of our TLR or antisense compounds under development infringe any valid claim of these patents, we cannot be assured that the holder of such patents would not seek to assert such patents against us or, if the holder did, that the courts would not
interpret the claims of such patents more broadly than we believe appropriate and determine that we are in infringement of such patents. In addition, there may be other patents and patent applications related to our products of which we are not
aware. Therefore, in some cases, in order to develop, manufacture, sell or import some of our products, we or our collaborators may choose to seek, or be required to seek, licenses under third-party patents issued in the United States and abroad or
under third-party patents that might issue from U.S. and foreign patent applications. In such an event, we would be required to pay license fees or royalties or both to the licensor. If licenses are not available to us on acceptable terms, we or our
collaborators may not be able to develop, manufacture, sell or import these products.
We may become involved in expensive patent litigation or
other proceedings, which could result in our incurring substantial costs and expenses or substantial liability for damages, require us to stop our development and commercialization efforts or result in our patents being invalidated, interpreted
narrowly or limited.
There has been substantial litigation and other proceedings regarding patent and other intellectual property
rights in the biotechnology industry. We may become a party to various types of patent litigation or other proceedings regarding intellectual property rights from time to time even under circumstances where we are not practicing and do not intend to
practice any of the intellectual property involved in the proceedings.
Other patent office proceedings include oppositions,
reexaminations, supplemental examinations and inter partes reviews involving our patents or the patents of third parties. We may initiate such proceedings or have such proceedings brought against us. An adverse determination in any such
proceeding, or in litigation, could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or products and compete directly with us, without payment to us, or result in our inability to manufacture
or commercialize products without infringing third-party patent rights. In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from collaborating with us to
license, develop or commercialize current or future drug candidates. An adverse determination in a proceeding involving a patent in our portfolio could result in the loss of protection or a narrowing in the scope of protection provided by that
patent.
The cost to us of any patent litigation or other proceeding, even if resolved in our favor, could be substantial. Some of our
competitors may be able to sustain the cost of such litigation or proceedings more effectively than we can because of their substantially greater financial resources. If any patent litigation or other proceeding is resolved against us, we or our
collaborators may be enjoined from developing, manufacturing, selling or importing our drugs without a license from the other party and we may be held liable for significant damages. We may not be able to obtain any required license on commercially
acceptable terms or at all. In a patent office proceeding, such as an opposition, reexamination or inter partes review, our patents may be narrowed or invalidated.
Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on
our ability to compete in the marketplace. Patent litigation and other proceedings may also absorb significant management time.
Risks
Relating to Product Manufacturing, Marketing and Sales, and Reliance on Third Parties
Because we have limited manufacturing experience, and no
manufacturing facilities or infrastructure, we are dependent on third-party manufacturers to manufacture drug candidates for us. If we cannot rely on third-party manufacturers, we will be required to incur significant costs and devote significant
efforts to establish our own manufacturing facilities and capabilities.
We have limited manufacturing experience and no
manufacturing facilities, infrastructure or clinical or commercial scale manufacturing capabilities. In order to continue to develop our drug candidates, apply for regulatory approvals, and ultimately commercialize products, we need to develop,
contract for or otherwise arrange for the necessary manufacturing capabilities.
We currently rely upon third parties to produce material
for nonclinical and clinical testing purposes and expect to continue to do so in the future. We also expect to rely upon third parties to produce materials that may be required for the commercial production of our drug candidates, if approved. Our
current and anticipated future dependence upon others for the manufacture of our drug candidates may adversely affect our future profit margins and our ability to develop drug candidates and commercialize any drug candidates on a timely and
competitive basis. We currently do not have any long term supply contracts.
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There are a limited number of manufacturers that operate under the FDAs cGMP regulations
capable of manufacturing our drug candidates. As a result, we may have difficulty finding manufacturers for our drug candidates with adequate capacity for our needs. If we are unable to arrange for third-party manufacturing of our drug candidates on
a timely basis, or to do so on commercially reasonable terms, we may not be able to complete development of our drug candidates or market them.
Reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured drug candidates ourselves, including:
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reliance on the third party for regulatory compliance and quality assurance; |
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the possibility of breach of the manufacturing agreement by the third party because of factors beyond our control; |
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the possibility of termination or nonrenewal of the agreement by the third party, based on its own business priorities, at a time that is costly or inconvenient for us; |
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the potential that third-party manufacturers will develop know-how owned by such third party in connection with the production of our drug candidates that becomes necessary for the manufacture of our drug candidates;
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reliance upon third-party manufacturers to assist us in preventing inadvertent disclosure or theft of our proprietary knowledge. |
Any contract manufacturers with which we enter into manufacturing arrangements will be subject to ongoing periodic, unannounced inspections by
the FDA, or foreign equivalent, and corresponding state and foreign agencies or their designees to ensure compliance with cGMP requirements and other governmental regulations and corresponding foreign standards. For example, one of our contract
manufacturers notified us that it had received a cGMP warning letter from the FDA in February 2011. This contract manufacturer no longer manufactures drug product for us. Any failure by our third-party manufacturers to comply with such requirements,
regulations or standards could lead to a delay in the conduct of our clinical trials, or a delay in, or failure to obtain, regulatory approval of any of our drug candidates. Such failure could also result in sanctions being imposed, including fines,
injunctions, civil penalties, delays, suspension or withdrawal of approvals, product seizures or recalls, imposition of operating restrictions, total or partial suspension of production or distribution, or criminal prosecution.
Additionally, contract manufacturers may not be able to manufacture our drug candidates at a cost or in quantities necessary to make them
commercially viable. As of July 15, 2015, our third-party manufacturers have met our manufacturing requirements, but we cannot be assured that they will continue to do so. Furthermore, changes in the manufacturing process or procedure,
including a change in the location where the drug substance or drug product is manufactured or a change of a third-party manufacturer, may require prior FDA review and approval in accordance with the FDAs cGMP and New Drug
Application/biologics license application regulations. Contract manufacturers may also be subject to comparable foreign requirements. This review may be costly and time-consuming and could delay or prevent the launch of a drug candidate. The FDA or
similar foreign regulatory agencies at any time may also implement new standards, or change their interpretation and enforcement of existing standards for manufacture, packaging or testing of products. If we or our contract manufacturers are unable
to comply, we or they may be subject to regulatory action, civil actions or penalties.
We have no experience selling, marketing or distributing
products and no internal capability to do so.
If we receive regulatory approval to commence commercial sales of any of our drug
candidates, we will face competition with respect to commercial sales, marketing, and distribution. These are areas in which we have no experience. To market any of our drug candidates directly, we would need to develop a marketing and sales force
with technical expertise and with supporting distribution capability. In particular, we would need to recruit experienced marketing and sales personnel. Alternatively, we could engage a pharmaceutical or other healthcare company with an existing
distribution system and direct sales force to assist us. However, to the extent we entered into such arrangements, we would be dependent on the efforts of third parties. If we are unable to establish sales and distribution capabilities, whether
internally or in reliance on third parties, our business would suffer materially.
If third parties on whom we rely for clinical trials do not
perform as contractually required or as we expect, we may not be able to obtain regulatory approval for or commercialize our drug candidates and our business may suffer.
We do not have the ability to independently conduct the clinical trials required to obtain regulatory approval for our drug candidates. We
depend on independent clinical investigators, contract research organizations, and other third-party service providers in the conduct of the clinical trials of our drug candidates and expect to continue to do so. We have contracted with contract
research organizations to manage our ongoing Phase 1/2 clinical trial of IMO-8400 in patients with Waldenströms macroglobulinemia, our ongoing Phase 1/2 clinical trial of IMO-8400 in patients with DLBCL harboring the MYD88 L265P
oncogenic mutation, and our planned clinical trial of IMO-2125, administered intra-tumorally, in combination with ipilimumab, a CTLA4 antibody, in patients with metastatic melanoma and expect to contract with such organizations for future clinical
trials. We rely heavily on these parties for
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successful execution of our clinical trials, but do not control many aspects of their activities. We are responsible for ensuring that each of our clinical trials is conducted in accordance with
the general investigational plan and protocols for the trial. Moreover, the FDA and foreign regulatory agencies require us to comply with certain standards, commonly referred to as good clinical practices, and applicable regulatory requirements, for
conducting, recording, and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity, and confidentiality of clinical trial participants are protected. Our reliance on
third parties that we do not control does not relieve us of these responsibilities and requirements. Third parties may not complete activities on schedule, or at all, or may not conduct our clinical trials in accordance with regulatory requirements
or our stated protocols. If these third parties fail to carry out their obligations, we may need to enter into new arrangements with alternative third parties. This could be difficult, costly or impossible, and our preclinical studies or clinical
trials may need to be extended, delayed, terminated or repeated, and we may not be able to obtain regulatory approval in a timely fashion, or at all, for the applicable drug candidate, or to commercialize such drug candidate being tested in such
studies or trials. If we seek to conduct any of these activities ourselves in the future, we will need to recruit appropriately trained personnel and add to our research, clinical, quality and corporate infrastructure.
Failure of our third-party collaborators to successfully commercialize companion diagnostics developed for use with any TLR antagonist drug candidates
that we develop with respect to our genetically defined forms of B-cell lymphoma program could harm our ability to commercialize these TLR antagonist drug candidates.
Some of the TLR antagonist drug candidates that we develop with respect to our genetically defined forms of B-cell lymphoma program will
necessitate the use of companion diagnostics. We do not plan to develop companion diagnostics internally and, as a result, we will be dependent on the efforts of our third-party collaborators to successfully commercialize these companion
diagnostics. Our collaborators:
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may not perform their obligations as expected; |
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may encounter production difficulties that could constrain the supply of the companion diagnostics; |
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may have difficulties gaining acceptance of the use of the companion diagnostics in the clinical community; |
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may not pursue commercialization of any companion diagnostics that achieve regulatory approval; |
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may elect not to continue or renew commercialization programs based on changes in the collaborators strategic focus or available funding, or external factors, such as an acquisition, that divert resources or
create competing priorities; |
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may not commit sufficient resources to the marketing and distribution of such companion diagnostics; and |
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may terminate their relationship with us. |
If companion diagnostics for use with our
genetically defined forms of B-cell lymphoma TLR antagonist drug candidates fail to gain market acceptance, our ability to derive revenues from sales of these TLR antagonist drug candidates could be harmed. If our collaborators fail to commercialize
these companion diagnostics, we may not be able to enter into arrangements with another diagnostic company to obtain supplies of an alternative diagnostic test for use in connection with genetically defined forms of B-cell lymphoma TLR antagonist
drug candidates or do so on commercially reasonable terms, which could adversely affect and delay the development or commercialization of these TLR antagonist drug candidates.
The commercial success of any drug candidates that we may develop will depend upon the degree of market acceptance by physicians, patients, third-party
payors, and others in the medical community.
Any products that we ultimately bring to the market, if they receive marketing
approval, may not gain market acceptance by physicians, patients, third-party payors or others in the medical community. For example, current cancer treatments like chemotherapy and radiation therapy are well established in the medical community,
and doctors may continue to rely on these treatments. If our products do not achieve an adequate level of acceptance, we may not generate product revenue and we may not become profitable. The degree of market acceptance of our products, if approved
for commercial sale, will depend on a number of factors, including:
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the prevalence and severity of any side effects, including any limitations or warnings contained in the products approved labeling; |
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the efficacy and potential advantages over alternative treatments; |
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the ability to offer our drug candidates for sale at competitive prices; |
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relative convenience and ease of administration; |
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the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies; |
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the strength of marketing and distribution support and the timing of market introduction of competitive products; and |
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publicity concerning our products or competing products and treatments. |
Even if a potential
product displays a favorable efficacy and safety profile, market acceptance of the product will not be known until after it is launched. Our efforts to educate patients, the medical community, and third-party payors on the benefits of our drug
candidates may require significant resources and may never be successful. Such efforts to educate the marketplace may require more resources than are required by conventional technologies marketed by our competitors.
If we are unable to obtain adequate reimbursement from third-party payors for any products that we may develop or acceptable prices for those products,
our revenues and prospects for profitability will suffer.
Most patients rely on Medicare, Medicaid, private health insurers, and
other third-party payors to pay for their medical needs, including any drugs we may market. If third-party payors do not provide adequate coverage or reimbursement for any products that we may develop, our revenues and prospects for profitability
will suffer. Congress enacted a limited prescription drug benefit for Medicare recipients in the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. While the program established by this statute may increase demand for our
products if we were to participate in this program, our prices will be negotiated with drug procurement organizations for Medicare beneficiaries and are likely to be lower than we might otherwise obtain. Non-Medicare third-party drug procurement
organizations may also base the price they are willing to pay on the rate paid by drug procurement organizations for Medicare beneficiaries or may otherwise negotiate the price they are willing to pay.
A primary trend in the United States healthcare industry is toward cost containment. In addition, in some foreign countries, particularly the
countries of the European Union, the pricing of prescription pharmaceuticals is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take six months or longer after the receipt of regulatory
marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost effectiveness of our drug candidates or products to other available therapies. The
conduct of such a clinical trial could be expensive and result in delays in commercialization of our drug candidates. These further clinical trials would require additional time, resources, and expenses. If reimbursement of our products is
unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our prospects for generating revenue, if any, could be adversely affected and our business may suffer.
In March 2010, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act became law. These health
care reform laws are intended to broaden access to health insurance; reduce or constrain the growth of health care spending, especially Medicare spending; enhance remedies against fraud and abuse; add new transparency requirements for health care
and health insurance industries; impose new taxes and fees on certain sectors of the health industry; and impose additional health policy reforms. Among the new fees is an annual assessment on makers of branded pharmaceuticals and biologics, under
which a companys assessment is based primarily on its share of branded drug sales to federal health care programs. Such fees could affect our future profitability. Although it is too early to determine the effect of the new health care
legislation on our future profitability and financial condition, the new law appears likely to continue the pressure on pharmaceutical pricing, especially under the Medicare program, and may also increase our regulatory burdens and operating costs.
Third-party payors are challenging the prices charged for medical products and services, and many third-party payors limit reimbursement
for newly-approved health care products. These third-party payors may base their coverage and reimbursement on the coverage and reimbursement rate paid by carriers for Medicare beneficiaries. Furthermore, many such payors are investigating or
implementing methods for reducing health care costs, such as the establishment of capitated or prospective payment systems. Cost containment pressures have led to an increased emphasis on the use of cost-effective products by health care providers.
In particular, third-party payors may limit the indications for which they will reimburse patients who use any products that we may develop. Cost control initiatives could limit the price we might establish for products that we or our current or
future collaborators may develop or sell, which would result in lower product revenues or royalties payable to us.
We face a risk of product
liability claims and may not be able to obtain insurance.
Our business exposes us to the risk of product liability claims that is
inherent in the manufacturing, testing, and marketing of human therapeutic drugs. We face an inherent risk of product liability exposure related to the testing of our drug candidates in human clinical trials and will face an even greater risk if we
commercially sell any products. Regardless of merit or eventual outcome, liability claims and product recalls may result in:
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decreased demand for our drug candidates and products; |
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damage to our reputation; |
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regulatory investigations that could require costly recalls or product modifications; |
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withdrawal of clinical trial participants; |
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costs to defend related litigation; |
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substantial monetary awards to clinical trial participants or patients, including awards that substantially exceed our product liability insurance, which we would then have to pay using other sources, if available, and
would damage our ability to obtain liability insurance at reasonable costs, or at all, in the future; |
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the diversion of managements attention away from managing our business; and |
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the inability to commercialize any products that we may develop. |
Although we have product
liability and clinical trial liability insurance that we believe is adequate, this insurance is subject to deductibles and coverage limitations. We may not be able to obtain or maintain adequate protection against potential liabilities. If we are
unable to obtain insurance at acceptable cost or otherwise protect against potential product liability claims, we will be exposed to significant liabilities, which may materially and adversely affect our business and financial position. These
liabilities could prevent or interfere with our commercialization efforts.
Risks Relating to Ownership of Our Common Stock
Our corporate governance structure, including provisions in our certificate of incorporation and by-laws and Delaware law, may prevent a change in
control or management that stockholders may consider desirable.
Section 203 of the Delaware General Corporation Law and our
certificate of incorporation and by-laws contain provisions that might enable our management to resist a takeover of our company or discourage a third party from attempting to take over our company. These provisions include:
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a classified board of directors; |
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limitations on the removal of directors; |
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limitations on stockholder proposals at meetings of stockholders; |
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the inability of stockholders to act by written consent or to call special meetings; and |
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the ability of our board of directors to designate the terms of and issue new series of preferred stock without stockholder approval. |
In addition, Section 203 of the Delaware General Corporation Law imposes restrictions on our ability to engage in business combinations
and other specified transactions with significant stockholders. These provisions could have the effect of delaying, deferring or preventing a change in control of us or a change in our management that stockholders may consider favorable or
beneficial. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors and take other corporate actions. These provisions could also limit the price that investors might be
willing to pay in the future for shares of our common stock.
We have two significant securityholders. If these securityholders choose to act
together, they could exert substantial influence over our business. In addition, in connection with any merger, consolidation or sale of all or substantially all of our assets, they would be entitled to receive consideration in excess of their
reported beneficial ownership of our common stock.
As of April 15, 2015, Baker Bros. Advisors LP, and certain of its
affiliated funds, which we refer to collectively as Baker Brothers, held 6,970,902 shares of our common stock, warrants to purchase up to 20,316,327 shares of our common stock at an exercise price of $0.47 per share and pre-funded warrants to
purchase up to 22,151,052 shares of our common stock at an exercise price of $0.01 per share. In addition, two members of our board of directors are affiliates of Baker Brothers. Under the terms of the warrants and pre-funded warrants issued to
Baker Brothers, Baker Brothers is not permitted to exercise such warrants to the extent that such exercise would result in Baker Brothers (and its affiliates) beneficially owning more than 4.999% of the number of shares of our common stock
outstanding immediately after giving effect to the issuance of shares of common stock issuable upon exercise of such warrants. Baker Brothers has the right to increase this beneficial ownership limitation in its discretion on 61 days prior
written notice to us, provided that in no event is Baker Brothers permitted to exercise such warrants to the extent that such exercise would result in Baker Brothers (and its affiliates) beneficially owning more than 19.99% of the number of shares
of our common stock outstanding or the combined voting power of our securities outstanding immediately after giving effect to the issuance of shares of common stock issuable upon exercise of such warrants. After giving effect to the 4.999%
beneficial ownership limitation currently in effect with respect to the warrants and pre-funded warrants held by Baker Brothers, as of July 15, 2015, and based on the securities held by Baker Brothers as of April 15, 2015, Baker Brothers
beneficially owned 6.0% of our outstanding common stock. If the warrants and pre-funded warrants held by Baker Brothers could be exercised without this limitation, then as of July 15, 2015, and based on the securities held by Baker Brothers as
of April 15, 2015, Baker Brothers would have beneficially owned 30.8% of our common stock.
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On February 9, 2015, we entered into a registration rights agreement with Baker Brothers, pursuant to which we are obligated to file a registration statement to register for resale the
shares of our common stock (including shares issuable upon the exercise of warrants) held by Baker Brothers.
As of April 15, 2015,
entities affiliated with Pillar Invest Corporation, which we refer to collectively as the Pillar Investment Entities, held 18,679,730 shares of our common stock and warrants to purchase up to 14,795,490 shares of our common stock at exercise prices
ranging from $0.47 per share to $1.46 per share. In addition, one member of our board of directors is an affiliate of the Pillar Investment Entities. The Pillar Investment Entities are subject to contractual limitations that limit their ability to
exercise any securities held by them that are exercisable into shares of our common stock to the extent that such exercise would result in the Pillar Investment Entities (and their affiliates) beneficially owning more than 19.99% of the number of
shares of our common stock outstanding or the combined voting power of our securities outstanding immediately after giving effect to the issuance of shares of common stock issuable upon exercise of such securities. After giving effect to the 19.99%
beneficial ownership limitation currently in effect with respect to the securities held by the Pillar Investment Entities, as of July 15, 2015, the Pillar Investment Entities beneficially owned 19.99% of our outstanding common stock. If the
warrants held by the Pillar Investment Entities could be exercised without these limitations, then as of July 15, 2015, and based on the securities held by Pillar Investment Entities as of April 15, 2015, the Pillar Investment Entities
would have beneficially owned 25.3% of our common stock.
Although there are contractual limitations on the beneficial ownership of Baker
Brothers and the Pillar Investment Entities, which we refer to collectively as our significant securityholders, if our significant securityholders were to exercise their warrants for common stock and were to choose to act together, they could be
able to exert substantial influence over our business. This concentration of voting power could delay, defer or prevent a change of control, entrench our management and the board of directors or delay or prevent a merger, consolidation, takeover or
other business combination involving us on terms that other stockholders may desire. In addition, conflicts of interest could arise in the future between us, on the one hand, and either or both of our significant securityholders on the other hand,
concerning potential competitive business activities, business opportunities, the issuance of additional securities and other matters. Furthermore in the event of a sale of our company, whether by merger, sale of all or substantially all of our
assets or otherwise, our significant securityholders would be entitled to receive, with respect to each share of common stock issuable upon exercise of the warrants then held by them and without regard to the beneficial ownership limitations imposed
on the conversion or exercise of such securities, the same amount and kind of securities, cash or property as they would have been entitled to receive if such securities had been converted into or exercised for shares of our common stock immediately
prior to such sale of our company. Because the significant securityholders would receive this sale consideration with respect to warrants not included in their reported beneficial ownership of our common stock, in the event of a sale of our company,
they would be entitled to receive a significantly larger portion of the total proceeds distributable to the holders of our securities than is represented by their reported beneficial ownership of our common stock.
Our stock price has been and may in the future be extremely volatile. In addition, because our common stock has historically been traded at low volume
levels, our investors ability to trade our common stock may be limited. As a result, investors may lose all or a significant portion of their investment.
Our stock price has been volatile. During the period from January 1, 2014 to July 15, 2015, the closing sales price of our common
stock ranged from a high of $6.59 per share to a low of $1.96 per share. The stock market has also experienced periods of significant price and volume fluctuations and the market prices of biotechnology companies in particular have been highly
volatile, often for reasons that have been unrelated to the operating performance of particular companies. The market price for our common stock may be influenced by many factors, including:
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timing and results of nonclinical studies and clinical trials of our drug candidates or those of our competitors; |
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the regulatory status of our drug candidates; |
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failure of any of our drug candidates, if approved, to achieve commercial success; |
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the success of competitive products or technologies; |
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regulatory developments in the United States and foreign countries; |
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our success in entering into collaborative agreements; |
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developments or disputes concerning patents or other proprietary rights; |
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the departure of key personnel; |
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our ability to maintain the listing of our common stock on The Nasdaq Capital Market or an alternative national securities exchange; |
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variations in our financial results or those of companies that are perceived to be similar to us; |
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the terms of any financing consummated by us; |
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changes in the structure of healthcare payment systems; |
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market conditions in the pharmaceutical and biotechnology sectors and issuance of new or changed securities analysts reports or recommendations; and |
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general economic, industry, and market conditions. |
In addition, our common stock has
historically been traded at low volume levels and may continue to trade at low volume levels. As a result, any large purchase or sale of our common stock could have a significant impact on the price of our common stock and it may be difficult for
investors to sell our common stock in the market without depressing the market price for the common stock or at all.
As a result of the
foregoing, investors may not be able to resell their shares at or above the price they paid for such shares. Investors in our common stock must be willing to bear the risk of fluctuations in the price of our common stock and the risk that the value
of their investment in our stock could decline.
Because we do not intend to pay dividends on our common stock, investor returns will be limited to
any increase in the value of our stock.
We have never declared or paid any cash dividends on our common stock. In addition, under
the terms of our loan and security agreement with Oxford Finance LLC, we are required to obtain the prior written consent of Oxford Finance LLC in order to declare or pay a cash dividend on our common stock in an amount in excess of $500,000 in any
fiscal year. We currently intend to retain all available funds and any future earnings to support our operations and finance the growth and development of our business and do not anticipate declaring or paying any cash dividends on our common stock
for the foreseeable future. Any return to stockholders will therefore be limited to the appreciation of their stock, if any.
ITEM 6. EXHIBITS.
The list of Exhibits filed as part of this Quarterly Report on Form 10-Q is set forth on the Exhibit Index immediately preceding such Exhibits
and is incorporated herein by this reference.
41
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
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IDERA PHARMACEUTICALS, INC. |
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Date: August 6, 2015 |
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/s/ Vincent J. Milano |
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Vincent J. Milano |
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President and Chief Executive Officer
(Principal Executive Officer) |
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Date: August 6, 2015 |
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/s/ Louis J. Arcudi, III |
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Louis J. Arcudi, III |
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Chief Financial Officer |
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(Principal Financial and Accounting Officer) |
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Exhibit Index
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Exhibit No. |
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3.1 |
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Restated Certificate of Incorporation of the Registrant, as amended. |
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10.1* |
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Amendment to Idera Pharmaceuticals, Inc. 2013 Stock Incentive Plan, as amended. |
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10.2 |
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Employment Letter, dated June 5, 2015, by and between Idera Pharmaceuticals, Inc. and Mark J. Casey. |
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31.1 |
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Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14 and 15d-14, as adopted pursuant to Section 302 of Sarbanes-Oxley Act of 2002. |
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31.2 |
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Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14 and 15d-14, as adopted pursuant to Section 302 of Sarbanes-Oxley Act of 2002. |
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32.1 |
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Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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32.2 |
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Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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101.INS |
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XBRL Instance Document |
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101.SCH |
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XBRL Taxonomy Extension Schema |
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101.CAL |
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XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF |
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XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB |
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XBRL Taxonomy Extension Labels Linkbase Document |
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101.PRE |
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XBRL Taxonomy Extension Presentation Linkbase Document |
* |
Incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed on June 11, 2015 (SEC File No. 001-31918). |
43
Exhibit 3.1
RESTATED
CERTIFICATE OF
INCORPORATION
OF
HYBRIDON,
INC.
Hybridon, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware,
does hereby certify as follows:
1. The Corporation filed its original Certificate of Incorporation with the Secretary of State of Delaware
on May 25, 1989, which Certificate of Incorporation was amended by a Certificate of Amendment of Certificate of Incorporation filed on February 21, 1990, and amended and restated by a Restated Certificate of Incorporation filed on
June 5, 1990. A Restated Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on November 20, 1990, which Restated Certificate of Incorporation was amended by a Certificate of Amendment of Restated
Certificate of Incorporation filed on October 16, 1991, a Certificate of Amendment of Restated Certificate of Incorporation filed on March 3, 1992, a Certificate of Amendment of Restated Certificate of Incorporation filed on March 23,
1992, a Certificate of Amendment of Restated Certificate of Incorporation filed on October 23, 1992, a Certificate of Amendment of Restated Certificate of Incorporation filed on February 12, 1993, a Certificate of Amendment of Restated
Certificate of Incorporation filed on June 17, 1993, a Certificate of Amendment of Restated Certificate of Incorporation filed on July 13, 1993, a Certificate of Amendment of Restated Certificate of Incorporation filed on September 9,
1994, a Certificate of Amendment of Restated Certificate of Incorporation filed on July 7, 1995, a Certificate of Amendment of Restated Certificate of Incorporation filed on December 19, 1995, and a Certificate of Retirement of Stock filed
on even date herewith.
2. At a meeting of the Board of Directors of the Corporation, a resolution was duly adopted, pursuant to Sections
141(f) and 245 of the General Corporation Law of the State of Delaware, setting forth a Restated Certificate of Incorporation of the Corporation and declaring said Restated Certificate of Incorporation advisable. The resolution setting forth the
Restated Certificate of Incorporation is as follows:
RESOLVED: That the Restated Certificate of Incorporation of the Corporation, as amended,
be and hereby is amended and restated in its entirety so that the same shall read as follows:
FIRST: The name of the Corporation is:
Hybridon, Inc.
SECOND: The address of its registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company.
THIRD: The nature of
the business or purposes to be conducted or promoted by the Corporation is as follows:
To engage in any lawful act or
activity for which corporations may be organized under the General Corporation Law of Delaware.
FOURTH: The total number of shares of all
classes of stock which the Corporation shall have authority to issues is One Hundred Million (100,000,000) shares of Common Stock, $.001 par value per share (Common Stock), and (ii) Five Million ($5,000,000) shares of Preferred
Stock, $.01 par value per share (Preferred Stock), which may be issued from time to time in one or more series as set forth in Part B of this Articles FOURTH.
The following is a statement of the designations and the powers, privileges and rights, and the qualifications, limitations or
restrictions thereof in respect of each class of capital stock of the Corporation.
1. General. The voting, dividend and liquidation
rights of the holders of the Common Stock are subject to and qualified by the rights of the holders of the Preferred Stock of any series as may be designated by the Board of Directors upon any issuance of the Preferred Stock of any series.
2. Voting. The holders of the Common Stock are entitled to one vote for each share held at all meetings of stockholders
(and written actions in lieu of meetings). There shall be no cumulative voting.
The number of authorized shares of Common
Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the stock of the Corporation entitled to vote, irrespective of the provisions of
Section 242(b)(2) of the General Corporation Law of Delaware.
3. Dividends. Dividends may be declared and paid
on the Common Stock from funds lawfully available therefor as and when determined by the Board of Directors and subject to any preferential dividend rights of any then outstanding Preferred Stock.
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4. Liquidation. Upon the dissolution or liquidation of the Corporation,
whether voluntary or involuntary, holders of Common Stock will be entitled to receive all assets of the Corporation available for distribution to its stockholders, subject to any preferential rights of any then outstanding Preferred Stock.
Preferred Stock may be issued from time to time in one
or more series, each of such series to have such terms as stated or expressed herein and in the resolution or resolutions providing for the issue of such series adopted by the Board of Directors of the Corporation as hereinafter provided. Any shares
of Preferred Stock which may be redeemed, purchased or acquired by the Corporation may be reissued except as otherwise provided by law. Different series of Preferred Stock shall not be construed to constitute different classes of shares for the
purposes of voting by classes unless expressly provided.
Authority is hereby expressly granted to the Board of Directors
from time to time to issue the Preferred Stock in one or more series, and in connection with the creation of any such series, by resolution or resolutions providing for the issue of the shares thereof, to determine and fix such voting powers, full
or limited, or no voting powers, and such designations, preferences and relative participating, optional or other special rights, and qualifications, limitations or restrictions thereof, including without limitation thereof, dividend rights,
conversion rights, redemption privileges and liquidation preferences, as shall be stated and expressed in such resolutions, all to the full extent now or hereafter permitted by the General Corporation Law of Delaware. Without limiting the generality
of the foregoing, the resolutions providing for issuance of any series of Preferred Stock may provide that such series shall be superior or rank equally or be junior to the Preferred Stock of any other series to the extent permitted by law. Except
as otherwise specifically provided in this Certificate of Incorporation, no vote of the holders of the Preferred Stock or Common Stock shall be a prerequisite to the issuance of any shares of any series of the Preferred Stock authorized by and
complying with the conditions of the Certificate of Incorporation, the right to have such vote being expressly waived by all present and future holders of the capital stock of the Corporation.
FIFTH: The name and mailing address of the sole incorporator are as follows:
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Name |
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Mailing Address |
David P. Johst |
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60 State Street |
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Boston, MA 02109 |
SIXTH: In furtherance of and not in limitation of powers conferred by statute, it is further provided:
1. Election of directors need not be by written ballot.
2. The Board of Directors is expressly authorized to adopt, amend or repeal the By-Laws of the
Corporation.
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SEVENTH: Whenever a compromise or arrangement is proposed between this corporation and its
creditors or any class of them and/or between this corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this corporation or of any
creditor or stockholder thereof, or on the application of any receiver or receivers appointed for this corporation under the provisions of section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any
receiver or receivers appointed for this corporation under the provisions of section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation,
as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation,
as the case may be, agree to any compromise or arrangement and to any promise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on
all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this corporation, as the case may be, and also on this corporation.
EIGHTH: Except to the extent that the General Corporation Law of the State of Delaware prohibits the elimination or limitation of liability of
directors for breaches of fiduciary duty, no director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty as a director, notwithstanding any provision of law
imposing such liability. No amendment to or repeal of this provision shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring
prior to such amendment.
NINTH: 1. Action, Suits And Proceedings Other than by or in the Right of the Corporation. The Corporation
shall indemnify each person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the
right of the Corporation), by reason of the fact that he is or was, or has agreed to become, a director or officer of the Corporation, or is or was serving, or has agreed to serve, at the request of the Corporation, as a director, officer or trustee
of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (including any employee benefit plan) (all such persons being referred to hereafter as an Indemnitee), or by reason of any
action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys fees) judgment, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such
action, suit or proceeding and any appeal therefrom, if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption
that the person did not act in good faith and in a manner which he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that
his conduct was unlawful. Notwithstanding anything to the contrary in this Article, except as set forth in Section 6 below, the Corporation shall not indemnify an Indemnitee seeking indemnification in connection with a proceeding (or part
thereof) initiated by the Indemnitee unless the initiation thereof was approved by the Board of Directors of the Corporation.
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2. Actions or Suits By or in the Right of the Corporation. The Corporation shall indemnify
any Indemnitee who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was, or has
agreed to become, a director or officer of the Corporation, or is or was serving, or has agreed to serve, at the request of the Corporation, as a director, officer or trustee of, or in a similar capacity with, another corporation, partnership, joint
venture, trust or other enterprise (including any employee benefit plan), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys fees) and amounts paid in settlement
actually and reasonably incurred by him or on his behalf in connection with such action, suit or proceeding and any appeal therefrom, if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of
the Corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery of
Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of such liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses (including attorneys fees) which the Court of Chancery of Delaware or such other court shall deem proper.
3. Indemnification For Expenses Of Successful Party. Notwithstanding the other provisions of this Article, to the extent that an
Indemnitee has been successful, on the merits or otherwise, in defense of any action, suit or proceeding referred to in Sections 1 and 2 of this Article, or in defense of any claim, issue or matter therein, or on appeal from any such action, suit or
proceeding, he shall be indemnified against all expenses (including attorneys fees) actually and reasonably incurred by him or on his behalf in connection therewith. Without limiting the foregoing, if any action, suit or proceeding is disposed
of, on the merits or otherwise (including a disposition without prejudice), without (i) the disposition being adverse to the Indemnitee, (ii) an adjudication that the Indemnitee was liable to the Corporation, (iii) a plea of guilty or
nolo contendere by the Indemnitee, (iv) an adjudication that the Indemnitee did not act in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and (v) with respect to
any criminal proceeding, an adjudication that the Indemnitee had reasonable cause to believe his conduct was unlawful, the Indemnitee shall be considered for the purposes hereof to have been wholly successful with respect thereto.
4. Notification and Defense of Claim. As a condition precedent to his right to be indemnified, the Indemnitee must notify the
Corporation in writing as soon as practicable of any action, suit, proceeding or investigation involving him for which indemnity will or could be sought. With respect to any action, suit, proceeding or investigation of which the Corporation is so
notified, the Corporation will be entitled to participate therein at its own expense and/or to assume the defense thereof at its own expense, with legal counsel reasonably acceptable to the Indemnitee. After notice from the Corporation to the
Indemnitee of its election so to assume such defense, the Corporation shall not be liable to the Indemnitee for any legal or other expenses subsequently incurred by the Indemnitee in connection with such claim, other than as provided below in this
Section 4. The Indemnitee shall have the right to employ his own counsel in connection with such claim, but the fees and expenses of such counsel incurred after notice from the Corporation of its assumption of the defense thereof shall be at
the expense of the Indemnitee unless (i) the employment of counsel by the Indemnitee has been authorized by the
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Corporation, (ii) counsel to the Indemnitee shall have reasonably concluded that there may be a conflict of interest or position on any significant issue between the Corporation and the
Indemnitee in the conduct of the defense of such action or (iii) the Corporation shall not in fact have employed counsel to assume the defense of such action, in each of which cases the fees and expenses of counsel for the Indemnitee shall be
at the expense of the Corporation, except as otherwise expressly provided by this Article. The Corporation shall not be entitled, without the consent of the Indemnitee, to assume the defense of any claim brought by or in the right of the Corporation
or as to which counsel for the Indemnitee shall have reasonably made the conclusion provided for in clause (ii) above.
5. Advance of Expenses. Subject to the provisions of Section 6 below, in the event that the Corporation does not
assume the defense pursuant to Section 4 of this Article of any action, suit, proceeding or investigation of which the Corporation receives notice under this Article, any expenses (including attorneys fees) incurred by an Indemnitee in
defending a civil or criminal action, suit, proceeding or investigation or any appeal therefrom shall be paid by the Corporation in advance of the final disposition of such matter, provided, however, that the payment of such expense
incurred by an Indemnitee in advance of the final disposition of such matter shall be made only upon receipt of an undertaking by or on behalf of the Indemnitee to repay all amounts so advanced in the event that it shall ultimately be determined
that the Indemnitee is not entitled to be indemnified by the Corporation as authorized in this Article. Such undertaking may be accepted without reference to the financial ability of such person to make such repayment.
6. Procedure for Indemnification. In order to obtain indemnification or advancement of expenses pursuant to
Section 1, 2, 3 or 5 of this Article, the Indemnitee shall submit to the Corporation a written request, including in such request such documentation and information as is reasonably available to the Indemnitee and is reasonably necessary to
determine whether and to what extent the Indemnitee is entitled to indemnification or advancement of expenses. Any such indemnification or advancement of expenses shall be made promptly, and in any event within 60 days after receipt by the
Corporation of the written request of the Indemnitee, unless with respect to requests under Section 1, 2 or 5 the Corporation determines, by clear and convincing evidence, within such 60-day period that
the Indemnitee did not meet the applicable standard of conduct set forth in Section 1 or 2, as the case may be. Such determination shall be made in each instance by (a) a majority vote of a quorum of the directors of the Corporation
consisting of persons who are not at that time parties to the action, suit or proceeding in question (disinterested directors), (b) if no such quorum is obtainable, a majority vote of a committee of two or more disinterested
directors, (c) a majority vote of a quorum of the outstanding shares of stock of all classes entitled to vote for directors, voting as a single class, which quorum shall consist of stockholders who are not at that time parties to the action,
suit or proceeding in question, (d) independent legal counsel (who may be regular legal counsel to the Corporation), or (e) a court of competent jurisdiction.
7. Remedies. The right to indemnification or advances as granted by this Article shall be enforceable by the Indemnitee
in any court of competent jurisdiction if the Corporation denies such request, in whole or in part, or if no disposition thereof is made within the 60-day period referred to above in Section 6. Unless
otherwise provided by law, the burden of proving that the Indemnitee is not entitled to indemnification or advanced of expenses under this Article
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shall be on the Corporation. Neither the failure of the Corporation to have made a determination prior to the commencement of such action that indemnification is proper in the circumstances
because the Indemnitee has met the applicable standard of conduct, nor an actual determination by the Corporation pursuant to Section 6 that the Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the Indemnitee has not met the applicable standard of conduct. The Indemnitees expenses (including attorneys fees) incurred in connection with successfully establishing his right to indemnification, in whole or
in part, in any such proceeding shall also be indemnified by the Corporation.
8. Subsequent Amendment. No
amendment, termination or repeal of this Article or of the relevant provisions of the General Corporation Law of Delaware or any other applicable laws shall affect or diminish in any way the rights of any Indemnitee to indemnification under the
provisions hereof with respect to any action, suit, proceeding or investigation arising out of or relating to any actions, transactions or facts occurring prior to the final adoption of such amendment, termination or repeal.
9. Other Rights. The indemnification and advancement of expenses provided by this Article shall not be deemed exclusive
of any other rights to which an Indemnitee seeking indemnification or advancement of expenses may be entitled under any law (common or statutory), agreement or vote of stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in any other capacity while holding office for the Corporation, and shall continue as to an Indemnitee who has ceased to be a director or officer, and shall inure to the benefit of the estate, heirs, executors and
administrators of the Indemnitee. Nothing contained in this Article shall be deemed to prohibit, and the Corporation is specifically authorized to enter into, agreements with officers and directors providing indemnification rights and procedures
different from those set forth in this Article. In addition, the Corporation may, to the extent authorized from time to time by its Board of Directors, grant indemnification rights to other employees or agents of the Corporation or other persons
serving the Corporation and such rights may be equivalent to, or greater or less than, those set forth in this Article.
10. Partial Indemnification. If an Indemnitee is entitled under any provision of this Article to indemnification by the
Corporation for some or a portion of the expenses (including attorneys fees), judgments, fines or amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with any action, suit, proceeding or
investigation and any appeal, therefrom but not, however, for the total amount thereof, the Corporation shall nevertheless indemnify the Indemnitee for the portion of such expenses (including attorneys fees), judgments, fines or amounts paid
in settlement to which the Indemnitee is entitled.
11. Insurance. The Corporation may purchase and maintain
insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise (including any employee benefit plan) against any expense,
liability or loss incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the General Corporation law of
Delaware.
12. Merger or Consolidation. If the Corporation is merged into or consolidated with another corporation
and the Corporation is not the surviving corporation, the surviving corporation shall assume the obligations of the Corporation under this Article with respect to any action, suit, proceeding or investigation arising out of or relating to any
actions, transactions or facts occurring prior to the date of such merger or consolidation.
- 7 -
13. Savings Clause. If this Article or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each Indemnitee as to any expenses (including attorneys fees) judgments, fines and amounts paid in settlement in connection
with any action, suit, proceeding or investigation, whether civil, criminal or administrative, including an action by or in the right of the Corporation, to the fullest extent permitted by any applicable portion of this Article that shall not have
been invalidated and to the fullest extent permitted by applicable law.
14. Definitions. Terms used herein and
defined in Section 145(h) and Section 145(i) of the General Corporation Law of Delaware shall have the respective meanings assigned to such terms in such Section 145(h) and Section 145(i).
15. Subsequent Legislation. If the General Corporation Law of Delaware is amended after adoption of this Article to
expand further the indemnification permitted to Indemnitees, then the Corporation shall indemnify such persons to the fullest extent permitted by the General Corporation Law of Delaware, as so amended.
TENTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute and this Restated Certificate of Incorporation, and all rights conferred upon stockholders herein are granted subject to this reservation.
ELEVENTH: This Article is inserted for the management of the business and for the conduct of the affairs of the Corporation and shall not
become effective until the closing of the sale of shares of Common Stock in an underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, resulting in at least $10,000,000 of gross
proceeds to the Corporation (a Public Offering).
1. Number of Directors. The number of directors of the
Corporation shall not be less than three. The exact number of directors within the limitations specified in the preceding sentence shall be fixed from time to time by, or in the manner provided in, the Corporations By-Laws.
2. Classes of Directors. The Board of Directors shall be and is divided
into three classes: Class I, Class II and Class III. No one class shall have more than one director more than any other class. If a fraction is contained in the quotient arrived at by dividing the designated number of directors by three, then, if
such fraction is one-third, the extra director shall be a member of Class II, and if such fraction is two-thirds, one of the extra directors shall be a member of Class I
and one of the extra directors shall be a member of Class II, unless otherwise provided from time to time by resolution adopted by the Board of Directors.
3. Election of Directors. Elections of directors need not be by written ballot except as and to the extent provided in
the By-Laws of the Corporation.
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4. Terms of Office. Each director shall serve for a term ending on the
date of the third annual meeting following the annual meeting at which such director was elected; provided, that each initial director in Class I shall serve for a term ending on the date of the annual meeting in 1996; each initial director
in Class II shall serve for a term ending on the date of the annual meeting in 1997; and each initial director in Class III shall serve for a term ending on the date of the annual meeting in 1998; and provided further, that the term of each
director shall be subject to the election and qualification of his successor and to his earlier death, resignation or removal.
5. Allocation of Directors Among Classes in the Event of Increases or Decreases in the Number of Directors. In the event
of any increase or decrease in the authorized number of directors, (i) each director then serving as such shall nevertheless continue as a director of the class of which he is a member and (ii) the newly created or eliminated directorships
resulting from such increase or decrease shall be apportioned by the Board of Directors among the three classes of directors so as to ensure that no one class has more than one director more than any other class. To the extent possible, consistent
with the foregoing rule, any newly created directorships shall be added to those classes whose terms of office are to expire at the latest dates following such allocation, and any newly eliminated directorships shall be subtracted from those classes
whose terms of offices are to expire at the earliest dates following such allocation, unless otherwise provided from time to time by resolution adopted by the Board of Directors.
6. Quorum; Action at Meeting. A majority of the directors at any time in office shall constitute a quorum for the
transaction of business. In the event one or more of the directors shall be disqualified to vote at any meeting, then the required quorum shall be reduced by one for each director so disqualified, provided that in no case shall less than one-third of the number of directors fixed pursuant to Section 1 above constitute a quorum. If at any meeting of the Board of Directors there shall be less than such a quorum, a majority of those present may
adjourn the meeting from time to time. Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present shall be regarded as the act of the Board of Directors unless a greater number is
required by law, by the By-Laws of the Corporation or by this Restated Certificate of Incorporation.
7. Removal. Directors of the Corporation may be removed only for cause by the affirmative vote of the holders of at
least two-thirds of the shares of the capital stock of the Corporation issued and outstanding and entitled to vote.
8. Vacancies. Any vacancy in the Board of Directors, however occurring, including a vacancy resulting from an
enlargement of the board, shall be filled only by a vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director. A director elected to fill a vacancy shall be elected to hold office until the next
election of the class for which such director shall have been chosen, subject to the election and qualification of his successor and to his earlier death, resignation or removal.
9. Stockholder Nominations and Introduction of Business, Etc. Advance notice of stockholder nominations for election of
directors and other business to be brought by stockholders before a meeting of stockholders shall be given in the manner provided by the By-Laws of the Corporation.
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10. Amendments to Article. Notwithstanding any other provisions of law,
this Restated Certificate of Incorporation or the By-Laws of the Corporation, and notwithstanding the fact that a lesser percentage may be specified by law, the affirmative vote of the holders of at least
seventy-five percent (75%) of the shares of capital stock of the Corporation issued and outstanding and entitled to vote shall be required to amend or repeal, or to adopt any provision inconsistent with, this Article ELEVENTH.
TWELFTH: Until the closing of a Public Offering, any action which is required to be taken or which may be taken at any annual or special
meeting of stockholders of the Corporation may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote on such action were present and voted. Effective upon the closing of a Public Offering, stockholders of the
Corporation may not take any action by written consent in lieu of a meeting. Notwithstanding any other provisions of law, the Restated Certificate of Incorporation or the By-Laws of the Corporation, and
notwithstanding the fact that a lesser percentage may be specified by law, the affirmative vote of the holders of at least seventy-five percent (75%) of the shares of capital stock of the Corporation issued and outstanding and entitled to vote
shall be required to amend or repeal, or to adopt any provision inconsistent with, this Article TWELFTH.
THIRTEENTH: Effective upon the
closing of a Public Offering, special meetings of stockholders may be called at any time by only the Chief Executive Officer (or if there is no Chief Executive Officer, the President) or the Board of Directors. Business transacted at any special
meeting of stockholders shall be limited to matters relating to the purpose or purposes stated in the notice of meeting. Notwithstanding any other provision of law, this Restated Certificate of Incorporation or the
By-Laws of the Corporation, as amended, and notwithstanding the fact that a lesser percentage may be specified by law, the affirmative vote of the holders of at least seventy-five percent (75%) of the
shares of capital stock of the Corporation issued and outstanding and entitled to vote shall be required to amend or repeal, or to adopt any provision inconsistent with this Article THIRTEENTH.
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IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be affixed hereto and this
Restated Certificate of Incorporation to be signed by its Chairman this 28th March, 1996.
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HYBRIDON, INC. |
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By: |
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/s/ E. Andrews Grinstead, III |
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Chairman |
[Corporate Seal]
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CERTIFICATE OF AMENDMENT
OF RESTATED
CERTIFICATE OF
INCORPORATION
OF HYBRIDON, INC.
Pursuant to Section 242 of the General
Corporation Law of the State of Delaware
HYBRIDON, INC.
(the Corporation), organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify as follows:
By written action of the Board of Directors of the Corporation, dated October 20, 1997, the Board of Directors duly adopted resolutions
pursuant to Sections 141(f) and 242 of the General Corporation Law of the State of Delaware setting forth an amendment to the Restated Certificate of Incorporation of the Corporation, as amended, and declaring said amendment to be advisable. The
stockholders of the Corporation duly approved, pursuant to said Section 242, said proposed amendment at a Special Meeting of Stockholders held on November 18, 1997. The resolution setting forth the amendment to the Restated Certificate of
Incorporation is as follows:
RESOLVED: |
That, subject to stockholder approval, the following paragraph be inserted prior to the first paragraph of Article FOURTH of the Certificate of Incorporation: |
That upon the filing date of the Certificate of Amendment of Restated Certificate of Incorporation of the Corporation
(the Effective Date), a one-for-five reverse split of the Corporations Common Stock (as defined below) shall become effective, such that each five
shares of Common Stock outstanding and held of record by each stockholder of the Corporation (including treasury shares) immediately prior to the Effective Date shall represent one share of Common Stock from and after the Effective Date.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be executed by its Chairman of the Board of Directors,
President and Chief Executive Officer this 10th day of December, 1997.
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HYBRIDON, INC. |
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By: |
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/s/ E. Andrews Grinstead, III |
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E. Andrews Grinstead, III |
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Chairman of the Board of Directors,
President and Chief Executive Officer |
CERTIFICATE OF DESIGNATION
for
SERIES A CONVERTIBLE PREFERRED
STOCK
of
HYBRIDON, INC.
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
HYBRIDON INC., a corporation organized and existing under the laws of the State of Delaware (the Corporation), does hereby certify
that pursuant to the authority conferred on the board of directors of the Corporation (the Board of Directors) by the Restated Certificate of Incorporation, as amended (the Certificate of Incorporation) of the Corporation and
in accordance with Section 151 of the General Corporation Law of the State of Delaware, the Board of Directors adopted the following resolution establishing a series of 1,500,000 shares of preferred stock of the Corporation designated as
Series A Convertible Preferred Stock:
RESOLVED, that pursuant to the authority conferred on the Board of
Directors by the Certificate of Incorporation, a series of preferred stock, par value $.01 per share, of the Corporation is hereby established and created, and that the designation and number of shares thereof and the voting and other powers,
preferences and relative participating, optional or other special rights of, the shares of such series and the qualifications, limitations and restrictions thereof are as follows:
Series A Convertible Preferred Stock
1. Designation and Amount and Definitions. (a) There shall be a series of Preferred Stock designated as Series A Convertible
Preferred Stock and the number of shares constituting such series shall be 1,500,000. Such series is referred to herein as the Series A Preferred Stock. Notwithstanding any other provision in this Certificate of Designation of the
Series A Preferred Stock (the Certificate of Designation) to the contrary, such series shall be senior to the common stock, par value $.001 per share of the Corporation (the Common Stock) with respect to dividends and the
distribution of assets upon liquidation, dissolution or winding up. Such number of shares may be increased or decreased by resolution of the Board of Directors, subject to the provisions of Section 7 hereof; provided, however, that no decrease
shall reduce the number of shares of Series A Preferred Stock to fewer than the number of shares then issued and outstanding.
(b) As used
in this Certificate of Designation, except as otherwise provided in Subsection 4(c), the following terms shall have the following meanings:
(i) The Closing Bid Price for any security for each trading day shall be the reported per share closing bid price
of such security regular way on the Stock Market on such trading day, or, if there were no transactions on such trading day, the average of the reported closing bid and asked prices, regular way, of such security on the relevant Stock Market on such
trading day.
(ii) Fair Market Value of any asset (including any security) means
the fair market value thereof as mutually determined by the Corporation and the holders of a majority of the Series A Preferred Stock then outstanding. If the Corporation and the holders of a majority of the Series A Preferred Stock then outstanding
are unable to reach agreement on any valuation matter, such valuation shall be submitted to and determined by a nationally recognized independent investment bank selected by the Board of Directors and the holders of a majority of the Series A
Preferred Stock then outstanding (or, if such selection cannot be agreed upon promptly, or in any event within ten days, then such valuation shall be made by a nationally recognized independent investment banking firm selected by the American
Arbitration Association in New York City in accordance with its rules), the costs of which valuation shall be paid for by the Corporation.
(iii) Market Price shall mean the average Closing Bid Price for twenty (20) consecutive trading days, ending
with the trading day prior to the date as of which the Market Price is being determined (with appropriate adjustments for subdivisions or combinations of shares effected during such period), provided that if the prices referred to in the definition
of Closing Bid Price cannot be determined on any trading day, the Closing Bid Price for such trading day will be deemed to equal Fair Market Value of such security on such trading day.
(iv) Registered Holders shall mean, at any time, the holders of record of the Series A Preferred Stock.
(v) The Stock Market shall mean, with respect to any security, the principal national securities exchange on which
such security is listed or admitted to trading or, if such security is not listed or admitted to trading on any national securities exchange, shall mean The Nasdaq National Market System (NNM) or The Nasdaq SmallCap Market
(SCM and, together with NNM, Nasdaq) or, if such security is not quoted on Nasdaq, shall mean the OTC Bulletin Board or, if such security is not quoted on the OTC Bulletin Board, shall mean the
over-the-counter market as furnished by any NASD member firm selected from time to time by the Corporation for that purpose.
(vi) A trading day shall mean a day on which the relevant Stock Market is open for the transaction of business.
2. Dividends and Distributions. (a) The holders, as of the Dividend Record Date (as defined below), of the Series A Preferred
Stock shall be entitled to receive semi-annual dividends on their respective shares of Series A Preferred Stock (aggregating, for this purpose, all shares of Series A Preferred Stock held of record or, to the Corporations knowledge,
beneficially by such holder), payable, at the option of the Corporation, in cash or additional shares of Series A Preferred Stock, at the rate of 6.5% per annum (computed on the basis of a 360-day year of
twelve 30 day months) of the Dividend Base Amount (as defined below),
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payable semi-annually in arrears; provided that, to the extent the declaration or payment of such dividend is prohibited by applicable law, such dividend need not be paid but shall nevertheless
accrue and shall be paid promptly when applicable law permits. Such dividends shall accrue from the date of issuance of such share and shall be paid semi-annually on April 1 and October 1 of each year or, if any such day is not a business
day, on the next succeeding business day. Such dividends shall be paid, at the election of the Corporation, either in cash or additional duly authorized, fully paid and non assessable shares of Series A Preferred Stock. In calculating the number of
shares of Series A Preferred Stock to be paid with respect to each dividend, the Series A Preferred Stock shall be valued at $100.00 per share (subject to appropriate adjustment to reflect any stock split, combination, reclassification or
reorganization of the Series A Preferred Stock). Notwithstanding the foregoing, the Corporation shall not be required to issue fractional shares of Series A Preferred Stock; the Corporation may elect, in its sole discretion, independently for each
holder, whether such number of shares (on an aggregated basis) will be rounded to the nearest whole share (with .5 of a share rounded upward) or whether such holder will be given cash in lieu of any fractional shares. The Dividend Base
Amount of a share of Series A Preferred Stock shall be $100.00 plus all accrued but unpaid dividends (subject to appropriate adjustment to reflect any stock split, combination, reclassification or reorganization of the Series A Preferred
Stock). The Dividend Record Date shall mean, for each semi-annual dividend, the March 15 or September 15, as the case may be, immediately preceding the dividend payment date.
(b) In addition to the foregoing, subject to the rights of the holders of any shares of any series or class of capital stock ranking prior, and
superior to, or pari passu with, the shares of Series A Preferred Stock with respect to dividends, the holders of shares of Series A Preferred Stock shall be entitled to receive, as, when and if declared by the Board of Directors, out of assets
legally available for that purpose, dividends or distributions in cash, stock or otherwise.
(c) The Corporation shall not declare any
dividend or distribution on any Junior Stock (as defined below) of the Corporation unless all dividends required by Section 2(a) have been or contemporaneously are declared and paid, or declared and a sum sufficient for the payment thereof set
apart for such payment, on the Series A Preferred Stock.
(d) [Reserved]
(e) All dividends or distributions declared upon the Series A Preferred Stock shall be declared pro rata per share.
(f) Any reference to distribution contained in this Section 2 shall not be deemed to include any distribution made in
connection with or in lieu of any Liquidation Event (as defined below).
(g) No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on the Series A Preferred Stock which may be in arrears (it being understood that this provision does not alter the Corporations obligations under Section 2(a)).
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(h) So long as any shares of the Series A Preferred Stock are outstanding, no dividends, except
as described in the next succeeding sentence, shall be declared or paid or set apart for payment on any class or series of stock of the Corporation ranking, as to dividends, on a parity with the Series A Preferred Stock, for any period unless all
dividends have been or contemporaneously are declared and paid, or declared and a sum sufficient for the payment thereof set apart for such payment, on the Series A Preferred Stock. When dividends are not paid in full or a sum sufficient for such
payment is not set apart, as aforesaid, upon the shares of the Series A Preferred Stock and any other class or series of stock ranking on a parity as to dividends with the Series A Preferred Stock, all dividends declared upon such other stock shall
be declared pro rata so that the amounts of dividends per share declared on the Series A Preferred Stock and such other stock shall in all cases bear to each other the same ratio that accrued dividends per share on the shares of the Series A
Preferred Stock and on such other stock bear to each other.
(i) So long as any shares of the Series A Preferred Stock are outstanding, no
other stock of the Corporation ranking on a parity with the Series A Preferred Stock as to dividends or upon liquidation, dissolution or winding up shall be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or
made available for a sinking fund or otherwise for the purchase or redemption of any shares of any such stock) by the Corporation unless the dividends, if any, accrued on all outstanding shares of the Series A Preferred Stock shall have been paid or
set apart for payment.
(j) Junior Stock shall mean the Common Stock and any shares of preferred stock of any series or class
of the Corporation, whether presently outstanding or hereafter issued, which are junior to the shares of Series A Preferred Stock with respect to (i) the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding
up of the Corporation, (ii) dividends or (iii) voting.
3. Liquidation Preference. (a) In the event of a
(i) liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, (ii) a sale or other disposition of all or substantially all of the assets of the Corporation or (iii) any consolidation, merger,
combination, reorganization or other transaction in which the Corporation is not the surviving entity or shares of Common Stock constituting in excess of 50% of the voting power of the Corporation are exchanged for or changed into stock or
securities of another entity, cash and/or any other property (a Merger Transaction) (items (i), (ii) and (iii) of this sentence being collectively referred to as a Liquidation Event), after payment or provision for
payment of debts and other liabilities of the Corporation, the holders of the Series A Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, whether such
assets are capital, surplus, or earnings, before any payment or declaration and setting apart for payment of any amount shall be made in respect of any Junior Stock of the Corporation, an amount equal to the Dividend Base Amount at such time;
provided, however, in the case of a Merger Transaction, such payment may be made in cash, property (valued as provided in Subsection 3(b)) and/or securities (valued as provided in Subsection 3(b)) of the entity surviving such Merger Transaction. In
the case of property or in the event that any such securities are subject to an investment letter or other similar restriction on transferability, the value of such property or securities shall be determined by agreement between the Corporation and
the holders of a majority of the Series A Preferred Stock then outstanding. If upon any Liquidation Event, whether voluntary or involuntary, the assets to be distributed to
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the holders of the Series A Preferred Stock shall be insufficient to permit the payment to such shareholders of the full preferential amounts aforesaid, then all of the assets of the Corporation
to be distributed shall be so distributed ratably to the holders of the Series A Preferred Stock on the basis of the number of shares of Series A Preferred Stock held. Notwithstanding item (iii) of the first sentence of this Subsection 3(a),
any consolidation, merger, combination, reorganization or other transaction in which the Corporation is not the surviving entity but the stockholders of the Corporation immediately prior to such transaction own in excess of 50% of the voting power
of the corporation surviving such transaction and own amongst themselves such interest in substantially the same proportions as prior to such transaction, shall not be considered a Liquidation Event provided that the surviving corporation shall make
appropriate provisions to ensure that the terms of this Certificate of Designation survive any such transaction. All shares of Series A Preferred Stock shall rank as to payment upon the occurrence of any Liquidation Event senior to the Common Stock
and, unless the terms of such series shall provide otherwise, senior to all other series of the Corporations preferred stock.
(b)
Any securities or other property to be delivered to the holders of the Series A Preferred Stock pursuant to Subsection 3(a) hereof shall be valued as follows:
(i) Securities not subject to an investment letter or other similar restriction on free marketability:
(A) If actively traded on a Stock Market, the per share value shall be deemed to be the Market Price of such securities as of
the third day prior to the date of valuation.
(B) If not actively traded on a Stock Market, the value shall be the Fair
Market Value of such securities.
(ii) For securities for which there is an active public market but which are subject to
an investment letter or other restrictions on free marketability, the value shall be the Fair Market Value thereof, determined by discounting appropriately the per share Market Price thereof.
(iii) For all other securities, the value shall be the Fair Market Value thereof.
4. Conversion.
(a)
Right of Conversion. Commencing after the expiration of 12 months following the Alternative Equity Closing Date (as hereinafter defined), but not prior thereto, the shares of Series A Preferred Stock shall be convertible, in whole or in part,
at the option of the holder thereof and upon notice to the Corporation as set forth in Subsection 4(b), into fully paid and nonassessable shares of Common Stock and such other securities and property as hereinafter provided. The initial conversion
price per share of Common Stock (the Conversion Price), shall be equal to the product of 2.125 multiplied by the per share price (the Stated Common Price) of Common Stock sold by the Corporation in connection with the
Alternative Equity Offering (as such term is defined in the Corporations Offer to Exchange dated February 6, 1998 (the Original Offer to Exchange), as amended by the Amendment thereto (the Amendment)
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dated March 30, 1998 (collectively, the Offer to Exchange)) and shall be subject to adjustment as provided herein. The rate at which each share Series A Preferred Stock is
convertible at any time into Common Stock (the Conversion Rate) shall be determined by dividing the then existing Conversion Price (determined in accordance with this Section 4, including the last paragraph hereof) into the Dividend
Base Amount.
The Corporation shall prepare a certificate signed by the Chairman or President, and by the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary, of the Corporation setting forth the Conversion Rate as of the date of the closing of the Alternative Equity Offering (the Alternative Equity Closing Date), showing in reasonable
detail the facts upon which such Conversion Rate is based, and such certificate shall forthwith be filed with the transfer agent of the Series A Preferred Stock.
(b) Conversion Procedures. Any holder of shares of Series A Preferred Stock desiring to convert such shares into Common Stock shall
surrender the certificate or certificates evidencing such shares of Series A Preferred Stock at the office of the transfer agent for the Series A Preferred Stock, which certificate or certificates, if the Corporation shall so require, shall be duly
endorsed to the Corporation or in blank, or accompanied by proper instruments of transfer to the Corporation or in blank, accompanied by irrevocable written notice to the Corporation that the holder elects so to convert such shares of Series A
Preferred Stock and specifying the name or names (with address) in which a certificate or certificates evidencing shares of Common Stock are to be issued. The Corporation need not deem a notice of conversion to be received unless the holder complies
with all the provisions hereof. The Corporation will instruct the transfer agent (which may be the Corporation) to make a notation of the date that a notice of conversion is received, which date of receipt shall be deemed to be the date of receipt
for purposes hereof.
The Corporation shall, as soon as practicable after such deposit of certificates evidencing shares of Series A
Preferred Stock accompanied by the written notice and compliance with any other conditions herein contained, deliver at such office of such transfer agent to the person for whose account such shares of Series A Preferred Stock were so surrendered,
or to the nominee or nominees of such person, certificates evidencing the number of full shares of Common Stock to which such person shall be entitled as aforesaid, subject to Section 4(d). Subject to the following provisions of this paragraph,
such conversion shall be deemed to have been made as of the date of such surrender of the shares of Series A Preferred Stock to be converted, and the person or persons entitled to receive the Common Stock deliverable upon conversion of such Series A
Preferred Stock shall be treated for all purposes as the record holder or holders of such Common Stock on such date; provided, however, that the Corporation shall not be required to convert any shares of Series A Preferred Stock while the stock
transfer books of the Corporation are closed for any purpose, but the surrender of Series A Preferred Stock for conversion during any period while such books are so closed shall become effective for conversion immediately upon the reopening of such
books as if the surrender had been made on the date of such reopening, and the conversion shall be at the conversion rate in effect on such date. No adjustments in respect of any dividends on shares surrendered for conversion or any dividend on the
Common Stock issued upon conversion shall be made upon the conversion of any shares of Series A Preferred Stock.
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The Corporation shall at all times, reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of the shares of Series A Preferred Stock, such number of shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares
of the Series A Preferred Stock.
All notices of conversion shall be irrevocable; provided, however, that if the Corporation has
sent notice of an event pursuant to Subsection 4(g) hereof, a holder of Series A Preferred Stock may, at its election, provide in its notice of conversion that the conversion of its shares of Series A Preferred Stock shall be contingent upon the
occurrence of the record date or effectiveness of such event (as specified by such holder), provided that such notice of conversion is received by the Corporation prior to such record date or effective date, as the case may be.
(c) Adjustment of Conversion Rate and Conversion Price.
(i) As used in this Subsection 4(c), the following terms shall have the following meanings:
Capital Stock of any Person means the Common Stock or Preferred Stock of such Person. Unless otherwise
stated herein or the context otherwise requires, Capital Stock means Capital Stock of the Corporation;
Common Stock of any Person other than the Corporation means the common equity (however designated),
including, without limitation, common stock or partnership or membership interests of, or participation or interests in such Person (or equivalents thereof). Common Stock of the Corporation means the Common Stock, par value $.001
per share, of the Corporation, any successor class or classes of common equity (however designated) of the Corporation into or for which such Common Stock may hereafter be converted, exchanged or reclassified and any class or classes of common
equity (however designated) of the Corporation which may be distributed or issued with respect to such Common Stock or successor class of classes to holders thereof generally. Unless otherwise stated herein or the context requires otherwise,
Common Stock means Common Stock of the Corporation;
Current Market Price means, when
used with respect to any security as of any date, the last sale price, regular way, or, in case no such sale takes place on such date, the average of the closing bid and asked prices, regular way, of such security in either case as reported for
consolidated transactions on the New York Stock Exchange or, if such security is not listed or admitted to trading on the New York Stock Exchange, as reported for consolidated transactions with respect to securities listed on the principal national
securities exchange on which such security is listed or admitted to trading or, if such security is not listed or admitted to trading on any national securities exchange, as reported on the Nasdaq National Market, or, if such security is not listed
or admitted to trading on the Nasdaq National Market, as reported on the Nasdaq SmallCap Market, or if such security is not listed or admitted to trading on any national securities exchange or the
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Nasdaq National Market or the Nasdaq SmallCap Market, the average of the high bid and low asked prices of such security in the
over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotations System or such other system then in use or, if such
security is not quoted by any such organization, the average of the closing bid and asked prices of such security furnished by an NASD member firm selected by the Corporation. If such security is not quoted by any such organization and no such NASD
member firm is able to provide such prices, the Current Market Price of such security shall be the Fair Market Value thereof;
Fair Market Value means, at any date as to any asset, Property or right (including without limitation,
Capital Stock of any Person, evidence of indebtedness or other securities, but excluding cash), the fair market value of such item as determined in good faith by the Board of Directors, whose determination shall be conclusive; provided, however,
that such determination is described in an Officers Certificate filed with the transfer agent and that, if there is a Current Market Price for such item on such date, Fair Market Value means such Current Market Price
(without giving effect to the last sentence of the definition thereof);
GAAP means, as of any date,
generally accepted accounting principles in the United States and does not include any interpretations or regulations that have been proposed but that have not become effective;
Officer means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the
President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary, any Assistant Secretary or any Vice President of such Person;
Officers Certificate means a certificate signed on behalf of the Corporation by two Officers, one of
whom must be the Chairman of the Board, the President, the Treasurer or a Vice-President of the Corporation;
Person means any individual, corporation, partnership, association, trust or any other entity or
organization, including a government or political subdivision or any agency or instrumentality thereof;
Preferred
Stock of any Person means the class or classes of equity, ownership or participation interests (however designated) in such Person, including, without limitation, stock, share, partnership and membership interests, which are preferred as
to the payment of dividends or distributions by, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of, such Person (or equivalent thereof) over interests of any other class of interests of such Person.
Unless otherwise stated herein or the context otherwise requires, Preferred Stock means Preferred Stock of the Corporation;
Property of any Person means any and all types of real, personal, tangible, intangible or mixed property
owned by such Person whether or not included on the most recent consolidated balance sheet of such Person in accordance with GAAP;
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Subsidiary of a Person on any date means any other Person of
whom such Person owns, directly or indirectly through a Subsidiary or Subsidiaries of such Person, Capital Stock with voting power, acting independently and under ordinary circumstances, entitling such person to elect a majority of the board of
directors or other governing body of such other Person. Unless otherwise stated herein or the context otherwise requires, Subsidiary means a Subsidiary of the Corporation.
(ii) If the Corporation shall (i) pay a dividend or other distribution, in Common Stock, on any class of Capital Stock of
the Corporation, (ii) subdivide the outstanding Common Stock into a greater number of shares by any means or (iii) combine the outstanding Common Stock into a smaller number of shares by any means including, without limitation, a reverse
stock split), then in each such case the Conversion Price in effect immediately prior thereto shall be adjusted so that the Registered Holder of any shares of Series A Preferred Stock thereafter surrendered for conversion shall be entitled to
receive the number of shares of Common Stock that such Registered Holder would have owned or have been entitled to receive upon the happening of such event had such Series A Preferred Stock been converted immediately prior to the relevant record
date or, if there is no such record date, the effective date of such event. An adjustment made pursuant to this Paragraph 4(c)(ii) shall become effective immediately after the record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately after the effective date of such subdivision or combination, as the case may be.
(iii) If the Corporation shall (i) issue or distribute (at a price per share less than the Current Market Price per share
of such Capital Stock on the date of such issuance or distribution) Capital Stock generally to holders of Common Stock or to holders of any class or series of Capital Stock which is convertible into or exchangeable or exercisable for Common Stock
(excluding an issuance or distribution of Common Stock described in Paragraph 4(c)(ii)) or (ii) issue or distribute generally to such holders rights, warrants, options or convertible or exchangeable securities entitling the holder thereof to
subscribe for, purchase, convert into or exchange for Capital Stock at a price per share less than the Current Market Price per share of such Capital Stock on the date of issuance or distribution, then, in each such case, at the earliest of
(A) the date the Corporation enters into a firm contract for such issuance or distribution, (B) the record date for the determination of stockholders entitled to receive any such Capital Stock or any such rights, warrants, options or
convertible or exchangeable securities or (C) the date of actual issuance or distribution of any such Capital Stock or any such rights, warrants, options or convertible or exchangeable securities, the Conversion Price shall be reduced by
multiplying the Conversion Price in effect immediately prior to such earliest date by:
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(A) if such Capital Stock is Common Stock, a fraction the numerator of which is
the number of shares of Common Stock outstanding, on such earliest date plus the number of shares of Common Stock which could be purchased at the Current Market Price per share of Common Stock on the date of such issuance or distribution with the
aggregate consideration (based on the Fair Market Value thereof) received or receivable by the Corporation either (A) in connection with such issuance or distribution or (B) upon the conversion, exchange, purchase or subscription of all
such rights, warrants, options or convertible or exchangeable securities (the Aggregate Consideration), and the denominator of which is the number of shares of Common Stock outstanding on such earliest date plus the number of
shares of Common Stock to be so issued or distributed or to be issued upon the conversion, exchange, purchase or subscription of all such rights, warrants, options or convertible or exchangeable securities; or
(B) if such Capital Stock is other than Common Stock, a fraction the numerator of which is the Current Market Price per share
of Common Stock on such earliest date minus an amount equal to (A) the difference between (1) the Current Market Price per share of such Capital Stock multiplied by the number of shares of such Capital Stock to be so issued and
(2) the Aggregate Consideration, divided by (B) the number of shares of Common Stock outstanding on such date, and the denominator of which is the Current Market Price per share of Common Stock on such earliest date.
Such adjustment shall be made successively whenever any such Capital Stock, rights, warrants, options or convertible or exchangeable securities
are so issued or distributed. In determining whether any rights, warrants, options or convertible or exchangeable securities entitle the holders thereof to subscribe for, purchase, convert into or exchange for shares of such Capital Stock at less
than such Current Market Price, there shall be taken into account the Fair Market Value of any consideration received or receivable by the Corporation for such rights, warrants, options or convertible or exchangeable securities. If any right,
warrant, option or convertible or exchangeable security, the issuance of which resulted in an adjustment in the Conversion Price pursuant to this Paragraph 4(c)(iii), shall expire and shall not have been exercised, the Conversion Price shall
immediately upon such expiration be recomputed to the Conversion Price which would have been in effect if such right, warrant, option or convertible or exchangeable securities had never been distributed or issued. Notwithstanding anything contained
in this paragraph to the contrary, (i) the issuance of Capital Stock upon the exercise of such rights, warrants or options or the conversion or exchange of such convertible or exchangeable securities will not cause an adjustment in the
Conversion Price if no such adjustment would have been required at the time such right, warrant, option or convertible or exchangeable security was issued or distributed; provided, however, that, if the consideration payable upon such
exercise, conversion or exchange and/or the Capital Stock receivable thereupon
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are changed after the time of the issuance or distribution of such right, warrant, option or convertible or exchangeable security then such change shall be deemed to be the expiration thereof
without having been exercised and the issuance or distribution of new options, rights, warrants or convertible or exchangeable securities and (ii) the issuance of convertible preferred stock of the Corporation as a dividend on convertible
preferred stock of the Corporation will not cause an adjustment in the Conversion Price if no such adjustment would have been required at the time such underlying convertible preferred stock was issued (or as a result of any subsequent modification
to the terms thereof) and the conversion provisions of such convertible stock so issued as a dividend are the same as in such underlying convertible preferred stock.
Notwithstanding any contained in this Certificate of Designation to the contrary, options, rights or warrants issued or
distributed by the Corporation, including options, rights or warrants distributed prior to the date of filing of this Certificate of Designation, to holders of Common Stock generally which, until the occurrence of a specified event or events (a
Trigger Event), (i) are deemed to be transferred with Common Stock, (ii) are not exercisable and (iii) are also issued on a pro rata basis with respect to future issuances of Common Stock, shall be deemed not to
have been issued or distributed for purposes of this Subsection 4(c) (and no adjustment to the Conversion Price under this Subsection 4(c) will be required) until the occurrence of the earliest Trigger Event. Upon the occurrence of a Trigger Event,
such options, rights or warrants shall continue to be deemed not to have been issued or distributed for purposes of this Subsection 4(c) (and no adjustment to the Conversion Price under this Subsection 4(c) will be required) if and for so long as
each Registered Holder who thereafter converts such Registered Holders Series A Preferred Stock shall be entitled to receive upon such conversion, in addition to the shares of Common Stock issuable upon such conversion, a number of such
options, rights or warrants, as the case may be, equal to the number of options, rights or warrants to which a holder of the number of shares of Common Stock equal to the number of shares of Common Stock issuable upon conversion of such Registered
Holders Series A Preferred Stock is entitled to receive at the time of such conversion in accordance with the terms and provisions of, and applicable to, such options, rights or warrants. Upon the expiration of any such options, rights or
warrants or at such time, if any, as a Registered Holder is not entitled to receive such options, rights or warrants upon conversion of such Registered Holders Series A Preferred Stock, an adjustment (if any is required) to the Conversion
Price shall be made in accordance with this Paragraph 4(c)(iii) with respect to the issuance of all such options, rights and warrants as of the date of issuance thereof, but subject to the provisions of the preceding paragraph, if any such option,
right or warrant, including any such options right or warrants distributed prior to the date of filing of this Certificate of Designation, are subject to events, upon the occurrence of which such options, rights or warrants become exercisable to
purchase different securities, evidence of indebtedness, cash, Properties or other assets or different amounts thereof, then, subject to the preceding provision of this paragraph, the date of the occurrence of any and each such event shall be deemed
to be the date of distribution and record
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date with respect to new options, right or warrants with such new purchase rights (and a termination or expiration of the existing options, rights or warrants without exercise thereof). In
addition, in the event of any distribution (or deemed distribution) of options, rights or warrants, or any Trigger Event or other event of the type described in the preceding sentence, that required (or would have required but for the provisions of
Paragraph 4(c)(vi) or this paragraph) an adjustment to the Conversion Price under this Subsection 4(c) and such options, rights or warrants shall thereafter have been redeemed or repurchased without having been exercised, then the Conversion Price
shall be adjusted upon such redemption or repurchase to give effect to such distribution, Trigger Event or other event, as the case may, as though it had instead been a cash distribution, equal on a per share basis to the result of the aggregate
redemption or repurchase price received by holders of such options, rights or warrants divided by the number of shares of Common Stock outstanding as of the date of such repurchase or redemption, made to holders of Common Stock generally as of the
date of such redemption or repurchase.
(iv) If the Corporation shall pay or distribute, as a dividend or otherwise,
generally to holders of Common Stock or any class or series of Capital Stock which is convertible into or exercisable or exchangeable for Common Stock any assets, Properties or rights (including, without limitation, evidences of indebtedness of the
Corporation, any Subsidiary or any other Person, cash or Capital Stock or other securities of the Corporation, any Subsidiary or any other Person, but excluding payments and distributions as described in Paragraphs 4(c)(ii) or (iii), dividends and
distributions in connection with a Liquidation Event and distributions consisting solely of cash described in Paragraph 4(c)(v)), then in each such case the Conversion Price shall be reduced by multiplying the Conversion Price in effect immediately
prior to the date of such payment or distribution by a fraction, the numerator of which is the Current Market Price per share of Common Stock on the record date for the determination of stockholders entitled to receive such payment or distribution
less the Fair Market Value per share of Common Stock on such record date of the assets, Properties or rights so paid or distributed, and the denominator of which is the Current Market Price per share of Common Stock on such record date. Such
adjustment shall become effective immediately after such record date. For purposes of this Paragraph 4(c)(iv), such Fair Market Value per share shall equal the aggregate Fair Market Value on such record date of the assets, Properties or rights so
paid or distributed divided by the number of shares of Common Stock outstanding on such record date. For all purposes of this Certificate of Designation, adjustments to any securitys conversion or exercise price pursuant to such
securitys original terms shall not be deemed a distribution or dividend to holders thereof.
(v) If the Corporation
shall, by dividend or otherwise, make a distribution (other than in connection with the liquidation, dissolution or winding up of the Corporation in its entirety), generally to holders of Common Stock or any class or series of Capital Stock which is
convertible into or exercisable or exchangeable for Common Stock, consisting solely of cash where (x) the sum of (i) the
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aggregate amount for such cash plus (ii) the aggregate amount of all cash so distributed (by dividend or otherwise) to such holders within the
12-month period ending on the record date for determining stockholder entitled to receive such distribution with respect to which no adjustment has been made to the Conversion Price pursuant to this Paragraph
4(c)(v) exceeds (y) 10% of the result of the multiplication of (1) the Current Market Price per share of Common Stock on such record date times (2) the number of shares of Common Stock outstanding on such record date, then the
Conversion Price shall be reduced, effective immediately prior to the opening of business on the day following such record date, by multiplying the Conversion Price in effect immediately prior to the close of business on the day prior to such record
date by a fraction, the numerator of which is the Current Market Price per share of Common Stock on such record date less the aggregate amount of cash per share so distributed and the denominator of which is such Current Market Price; provided,
however, that, if the aggregate amount of cash per share is equal to or greater than such Current Market Price, then, in lieu of the foregoing adjustment, adequate provisions shall be made so that each Registered Holder shall have the right to
receive upon conversion (with respect to each share of Common Stock issued upon such conversion and in addition to the Common Stock issuable upon conversion) the aggregate amount of cash per share such Registered Holder would have received had such
Registered Holders Series A Preferred Stock been converted immediately prior to such record date. In no event shall the Conversion Price be increased pursuant to this Paragraph 4(c)(v); provided, however, that if such distribution is
not so made, the Conversion Price shall be adjusted to be the Conversion Price which would have been in effect if such distribution had not been declared. For purposes of this Paragraph 4(c)(v), such aggregate amount of cash per share shall equal
such sum divided by the number of shares of Common Stock outstanding on such record date.
(vi) The provisions of this
Subsection 4(c) shall similarly apply to all successive events of the type described in this Subsection 4(c). Notwithstanding anything contained herein to the contrary, no adjustment in the Conversion Price shall be required unless such adjustment
would require an increase or decrease of at least 1% in the Conversion Price then in effect; provided, however, that any adjustments which by reason of this Paragraph 4(c)(vi) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section 4 shall be made by the Corporation and shall be made to the nearest cent or to the nearest one hundredth of a share, as the case may be, and the transfer agent shall
be entitled to rely conclusively thereon. Except as provided in this Section 4, no adjustment in the Conversion Price will be made for the issuance of Common Stock or any securities convertible into or exchangeable for Common Stock or carrying
the right to purchase Common Stock or any securities so convertible or exchangeable.
(vii) Whenever the Conversion Price
is adjusted as provided herein, the Corporation shall promptly file with the transfer agent an Officers Certificate setting forth the Conversion Price in effect after such adjustment and setting forth
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a brief statement of the facts requiring such adjustment. Promptly after delivery of such Officers Certificate, the Corporation shall give or cause to be given to each Registered Holder a
notice of such adjustment of the Conversion Price setting forth the adjusted Conversion Price and the date on which such adjustment becomes effective.
(viii) Notwithstanding anything contained herein to the contrary, in any case in which this Subsection 4(c) provides that an
adjustment in the Conversion Price shall become effective immediately after a record date for an event, the Corporation may defer until the occurrence of such event (i) issuing to the Registered Holder of any Series A Preferred Stock converted
after such record date and before the occurrence of such event the additional shares of Common Stock issuable upon such conversion by reason of the adjustment required by such event over and above the number of shares of Common Stock issuable upon
such conversion before giving effect to such adjustment and (ii) paying to such Registered Holder any amount in cash in lieu of any fractional share of Common Stock pursuant to Subsection 4(d).
(ix) Notwithstanding any other provision hereof, no adjustment to the Conversion Price shall be made upon the issuance or
exercise or conversion of (1) options or warrants to purchase, in the aggregate, up to 25% of the securities sold in the offerings of securities of the Corporation described in the Original Offer to Exchange or any options or warrants described
in the Amendment in respect of the Alternative Equity Offering, in each case issued to (or to the designee of) any placement agent or financial advisor (such options or warrants, the Offering Warrants), (2) any equity securities or
warrants of the Corporation (including, without limitation, the Series A Preferred Stock, warrants and equity securities underlying warrants) issued in exchange for 9% Convertible Subordinated Notes due 2004 (the 9% Notes) of the
Corporation or accrued interest thereon or pursuant to the conversion or exercise provisions thereof, (3) any warrants issued in connection with the offerings described in the Original Offer to Exchange or the Amendment (collectively, the
Offering), (4) any warrants issued to Forum Capital Markets, LLC (Forum) in exchange for or in addition to, or any amendment to, any warrants held by Forum, in each case, pursuant to a letter agreement dated
January 5, 1998, between the Corporation and Forum, and any other warrants to purchase Common Stock or shares of Common Stock issued to Forum or its designee, (5) any Series A Preferred Stock issued in the Offering, (6) any Capital
Stock issued or cash paid as dividends on the Series A Preferred Stock or (7) any Capital Stock issued or cash paid upon the mandatory conversion or redemption of any Series A Preferred Stock in accordance with Section 5 of this
Certificate of Designation.
(d) No Fractional Shares. No fractional shares or scrip representing fractional shares of Common Stock
shall be issued upon conversion of Series A Preferred Stock. If more than one certificate evidencing shares of Series A Preferred Stock shall be surrendered for conversion at one time by the same holder, the number of full shares issuable upon
conversion thereof shall be computed on the basis of the aggregate number of shares of Series A Preferred
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Stock so surrendered. Instead of any fractional share of Common Stock which would otherwise be issuable upon conversion of such aggregate number of shares of Series A Preferred Stock, the
Corporation may elect, in its sole discretion, independently for each holder, whether such number of shares of Common Stock will be rounded to the nearest whole share (with a .5 of a share rounded upward) or whether such holder will be given cash,
in lieu of any fractional share, in an amount equal to the same fraction of the Market Price of the Common Stock as of the close of business on the day of conversion.
(e) [Reserved]
(f)
Reservation of Shares; Transfer Taxes, Etc. The Corporation shall at all times reserve and keep available, out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting the conversion of the Series A Preferred
Stock, such number of shares of its Common Stock free of preemptive rights as shall be sufficient to effect the conversion of all shares of Series A Preferred Stock from time to time outstanding. The Corporation shall use its best efforts from time
to time, in accordance with the laws of the State of Delaware to increase the authorized number of shares of Common Stock if at any time the number of shares of authorized, unissued and unreserved Common Stock shall not be sufficient to permit the
conversion of all the then-outstanding shares of Series A Preferred Stock.
The Corporation shall pay any and all issue or other taxes
(excluding any income taxes) that may be payable in respect of any issue or delivery of shares of Common Stock on conversion of the Series A Preferred Stock. The Corporation shall not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the issue or delivery of Common Stock (or other securities or assets) in a name other than that in which the shares of Series A Preferred Stock so converted were registered, and no such issue or delivery shall be
made unless and until the person requesting such issue has paid to the Corporation the amount of such tax or has established, to the satisfaction of the Corporation, that such tax has been paid or need not be paid.
(g) Prior Notice of Certain Events. In case:
(i) the Corporation shall declare any dividend (or any other distribution); or
(ii) the Corporation shall authorize the granting to the holders of Common Stock of rights or warrants to subscribe for or
purchase any shares of stock of any class or of any other rights or warrants; or
(iii) of any reclassification of Common
Stock (other than a subdivision or combination of the outstanding Common Stock, or a change in par value, or from par value to no par value, or from no par value to par value); or
(iv) of any consolidation or merger to which the Corporation is a party and for which approval of any stockholders of the
Corporation shall be required, or of the sale or transfer of all or substantially all of the assets of the Corporation or of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or other property; or
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(v) of any Liquidation Event;
then the Corporation shall cause to be filed with the transfer agent for the Series A Preferred Stock, and shall cause to be mailed to the Registered Holders,
at their last addresses as they shall appear upon the stock transfer books of the Corporation, at least 20 days prior to the applicable record date hereinafter specified, a notice stating (x) the date on which a record (if any) is to be taken
for the purpose of such dividend. distribution or granting of rights or warrants or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, rights or warrants are to
be determined and a description of the cash, securities or other property to be received by such holders upon such dividend, distribution or granting of rights or warrants or (y) the date on which such reclassification, consolidation, merger,
sale, transfer, share exchange or Liquidation Event is expected to become effective, the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such exchange or Liquidation Event and the consideration, including securities or other property, to be received by such holders upon such exchange; provided, however, that no failure to mail such notice or any
defect therein or in the mailing thereof shall affect the validity of the corporate action required to be specified in such notice.
(h)
Other Changes in Conversion Rate. The Corporation from time to time may increase the Conversion Rate by any amount for any period of time if the period is at least 20 days and if the increase is irrevocable during the period. Whenever the
Conversion Rate is so increased, the Corporation shall mail to the Registered Holders a notice of the increase at least 15 days before the date the increased Conversion Rate takes effect, and such notice shall state the increased Conversion Rate and
the period it will be in effect.
The Corporation may make such increases in the Conversion Rate, in addition to those required or allowed
by this Section 4, as shall be determined by it, as evidenced by a resolution of the Board of Directors, to be advisable in order to avoid or diminish any income tax to holders of Common Stock resulting from any dividend or distribution of
stock or issuance of rights or warrants to purchase or subscribe for stock or from any event treated as such for income tax purposes.
Notwithstanding anything to the contrary herein, in no case shall the Conversion Price be adjusted to an amount less than $.001 per share, the
current par value of the Common Stock into which the Series A Preferred Stock is convertible.
(i) Ambiguities/Errors. The Board of
Directors of the Corporation shall have the power to resolve any ambiguity or correct any error in the provisions relating to the convertibility of the Series A Preferred Stock, and its actions in so doing shall be final and conclusive.
5. Mandatory Conversion and Redemption. (a) At any time after the expiration of 12 months after the Alternative Equity Closing
Date, the Corporation at its option, may cause the Series A Preferred Stock to be converted in whole or in part, on a pro rata basis, into fully paid and nonassessable shares of Common Stock using a conversion price equal to 200% of the
Stated Common Price if the Closing Bid Price (or, if the price referenced in the
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definition of Closing Bid Price cannot be determined, the Fair Market Value) of the Common Stock shall have equalled or exceeded 250% of the Conversion Price for at least 20 trading days in any
30 consecutive trading day period ending three days prior to the date of notice of conversion (such event, the Market Trigger). Any shares of Series A Preferred Stock so converted shall be treated as having been surrendered by the holder
thereof for conversion pursuant to Section 4 on the date of such mandatory conversion (unless previously converted at the option of the holder).
(b) At any time after April 1, 2000, the Corporation, at its option, may redeem the Series A Preferred Stock for cash equal to the
Dividend Base Amount at such time, if the Market Trigger has occurred in the period ending three days prior to the date of notice of redemption (unless previously converted at the option of the holder).
(c) No greater than 60 nor fewer than 20 days prior to the date of any such mandatory conversion or redemption, notice by first class mail,
postage prepaid, shall be given to the holders of record of the Series A Preferred Stock to be converted or redeemed, addressed to such holders at their last addresses as shown on the stock transfer books of the Corporation. Each such notice shall
specify the date fixed for conversion or redemption, the place or places for surrender of shares of Series A Preferred Stock and the then effective Conversion Rate pursuant to Section 4.
Any notice which is mailed as herein provided shall be conclusively presumed to have been duly given by the Corporation on the date deposited
in the mail, whether or not the holder of the Series A Preferred Stock receives such notice; and failure properly to give such notice by mail, or any defect in such notice, to the holders of the shares to be converted or redeemed shall not affect
the validity of the proceedings for the conversion or redemption of any other shares of Series A Preferred Stock. On or after the date fixed for conversion or redemption (the Take-Out Date) as
stated in such notice, each holder of shares called to be converted or redeemed shall surrender the certificate evidencing such shares to the Corporation at the place designated in such notice for conversion or redemption. After the mailing of such
notice, but before the Take-Out Date as stated therein, all rights whatsoever with respect to the shares so called for conversion or redemption (except the right of the holders to convert such shares pursuant
to Section 4 and to have such shares converted or redeemed, as the case may be, upon surrender of their certificates therefor, pursuant to this Section 5) shall terminate. On or after the Take-Out
Date, notwithstanding that the certificates evidencing any shares properly called for conversion or redemption shall not have been surrendered, such shares shall no longer be deemed outstanding and all rights whatsoever with respect to the shares so
called for conversion or redemption (except the right of the holders to have such shares converted or redeemed, as the case may be, upon surrender of their certificates therefor, pursuant to this Section 5) shall terminate.
6. Outstanding Shares. For purposes of this Certificate of Designation, a share of Series A Preferred Stock, when issued, shall be
deemed outstanding except (i) from the date, or the deemed date, of surrender of certificates evidencing shares of Series A Preferred Stock, all shares of Series A Preferred Stock converted into Common Stock or redeemed pursuant to
Section 5 and (ii) from the date of registration of transfer, all shares of Series A Preferred Stock held of record by the Corporation or any subsidiary of the Corporation.
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7. Class Voting Rights. The Corporation shall not, without the affirmative vote or consent
of the holders of at least 50% of all outstanding Series A Preferred Stock, voting separately as a class, (i) amend, alter or repeal any provision of the Certificate of Incorporation or the Bylaws of the Corporation so as adversely to affect
the relative rights, preferences, qualifications, limitations or restrictions of the Series A Preferred Stock (it being understood that the issuance of securities ranking prior to, or pari passu with, the Series A Preferred Stock
(A) upon a Liquidation Event or (B) with respect to the payment of dividends or distributions shall not be considered adversely to affect such relative rights, preferences, qualifications, limitations or restrictions); or
(ii) authorize or issue, or increase the authorized amount of, Series A Preferred Stock, other than Series A Preferred Stock issuable in connection with the Offering, issuable in exchange for 9% Notes or accrued interest thereon or issuable as
dividends on Series A Preferred Stock.
8. Status of Acquired Shares. Shares of Series A Preferred Stock received upon conversion
or redemption pursuant to Section 4 or Section 5 or otherwise acquired by the Corporation will be restored to the status of authorized but unissued shares of Preferred Stock, without designation as to class, and may thereafter be issued,
but not as shares of Series A Preferred Stock.
9. Preemptive Rights. The Series A Preferred Stock is not entitled to any
preemptive or subscription rights in respect of any securities of the Corporation.
10. Severability of Provisions. Whenever
possible, each provision hereof shall be interpreted in a manner as to be effective and valid under applicable law, but if any provision hereof is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating or otherwise adversely affecting the remaining provisions hereof. If a court of competent jurisdiction should determine that a provision hereof would be valid or enforceable if a
period of time were extended or shortened or a particular percentage were increased or decreased, then such court may make such changes as shall be necessary to render the provision in question effective and valid under applicable law.
11. Restrictions on Change of Control. Notwithstanding anything to the contrary contained in this Certificate of Designation, without
the prior written consent of the Corporation, so long as any 9% Notes remain outstanding under that certain Indenture dated as of March 26, 1997 (as amended, the Indenture) in respect of the 9% Notes, no holder of Series A Preferred
Stock shall have voting rights granted hereunder, be entitled to receive any voting securities of the Corporation pursuant hereto or be entitled to exercise any of the conversion rights set forth herein (each, a Restricted Event), to the
extent that any such Restricted Event could, in the Corporations reasonable judgment, either alone or in conjunction with other issuances or holdings of capital stock, warrants or convertible securities of the Corporation, result in a Change
of Control (as defined in the Indenture).
[Signature page follows]
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IN WITNESS WHEREOF, E. Andrews Grinstead, III, President and Chief Executive Officer of the
Corporation, acting for and on behalf of the Corporation, has hereunto subscribed his name this 5th day of May, 1998.
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HYBRIDON, INC. |
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By: |
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/s/ E. Andrews Grinstead, III |
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Name: E. Andrews Grinstead, III |
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Title: President and Chief Executive Officer |
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CERTIFICATE OF AMENDMENT OF RESTATED CERTIFICATE OF
INCORPORATION
OF
HYBRIDON, INC.
It is hereby certified that:
1. The name of the corporation (hereinafter called the Corporation) is Hybridon, Inc.
2. The Certificate of Incorporation of the Corporation is hereby amended by inserting a new sentence at the end of paragraph 4 of Subsection A
of Articles FOURTH thereof so that said paragraph as so amended shall read as follows:
4. LIQUIDATION. Upon the
dissolution or liquidation of the Corporation, whether voluntary or involuntary, holders of Common Stock will be entitled to receive all assets of the Corporation available for distribution to its stockholders, subject to any preferential rights of
any then outstanding Preferred Stock. Notwithstanding the foregoing, and notwithstanding any amendments to, or resolutions of the Board of Directors in connection with, this Certificate of Incorporation, the transaction between the Corporation and
Boston Biosystems, Inc. pursuant to that certain Asset Purchase Agreement of June 29, 2000, shall not constitute a dissolution or liquidation of the Corporation such as would entitle any holder of the Series A Preferred Stock to a preferred
distribution.
3. Paragraph 3 of the Certificate of Designation of the Corporation shall be amended by inserting a new sentence at
the end of the paragraph such that said paragraph shall read as follows:
3(c) Notwithstanding the foregoing, and
notwithstanding any amendments to, or resolutions of the Board of Directors in connection with, this Certificate of Incorporation or Certificate of Designation, the transaction between the Corporation and Boston Biosystems, Inc. pursuant to that
certain Asset Purchase Agreement dated as of June 29, 2000, shall not constitute a Liquidation Event of the Corporation such as would entitle any holder of any series of Series A Preferred Stock to any preferred distribution.
4. Every other Article and provision in the Certificate of Incorporation of the Corporation remains in full force and effect.
5. The amendment of the Certificate of Incorporation herein certified has been duly adopted in accordance with the provisions of
Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be duly signed by
its President this 19 day of September, 2000.
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HYBRIDON, INC. |
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By: |
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/s/ Robert G. Andersen |
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Robert G. Andersen, Vice President and
CFO |
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CERTIFICATE OF DESIGNATION
for
SERIES B CONVERTIBLE PREFERRED
STOCK
of
HYBRIDON, INC.
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
HYBRIDON, INC., a corporation organized and existing under the laws of the State of Delaware (the Corporation), does hereby
certify that pursuant to the authority conferred on the board of directors of the Corporation (the Board of Directors) by the Restated Certificate of Incorporation, as amended (the Certificate of Incorporation) of the
Corporation and in accordance with Section 151 of the General Corporation Law of the State of Delaware, the Board of Directors adopted the following resolution establishing a series of 85,000 shares of preferred stock of the Corporation
designated as Series B Convertible Preferred Stock:
RESOLVED, that pursuant to the authority conferred on the
Board of Directors by the Certificate of Incorporation, a series of preferred stock, par value $.01 per share, of the Corporation is hereby established and created, and that the designation and number of shares thereof and the voting and other
powers, preferences and relative participating, optional or other special rights of, the shares of such series and the qualifications, limitations and restrictions thereof are as follows:
Series B Convertible Preferred Stock
1. Designation and Amount and Definitions. (a) There shall be a series of Preferred Stock designated as Series B Convertible
Preferred Stock and the number of shares constituting such series shall be 85,000. Such series is referred to herein as the Series B Preferred Stock. Notwithstanding any other provision in this Certificate of Designation of the
Series B Preferred Stock (the Certificate of Designation) to the contrary, such series shall be senior to the common stock, par value $.001 per share of the Corporation (the Common Stock), and the Series A Convertible
Preferred Stock, $.01 par value per share, of the Corporation (the Series A Preferred Stock), with respect to dividends and the distribution of assets upon liquidation, dissolution or winding up. Such number of shares may be increased or
decreased by resolution of the Board of Directors, subject to the provisions of Section 7 hereof; provided, however, that no decrease shall reduce the number of shares of Series B Preferred Stock to fewer than the number of shares then issued
and outstanding.
(b) As used in this Certificate of Designation, except as otherwise provided in Subsection 4(c), the following terms
shall have the following meanings:
(i) Closing Bid Price for any security for each trading day shall be the
reported per share closing bid price of such security regular way on the Stock Market on such trading day, or, if there were no transactions on such trading day, the average of the reported closing bid and asked prices, regular way, of such security
on the relevant Stock Market on such trading day.
(ii) Fair Market Value of any asset (including any security) means
the fair market value thereof as mutually determined by the Corporation and the holders of a majority of the Series B Preferred Stock then outstanding. If the Corporation and the holders of a majority of the Series B Preferred Stock then outstanding
are unable to reach agreement on any valuation matter, such valuation shall be submitted to and determined by a nationally recognized independent investment bank selected by the Board of Directors and the holders of a majority of the Series B
Preferred Stock then outstanding (or, if such selection cannot be agreed upon promptly, or in any event within ten (10) days, then such valuation shall be made by a nationally recognized independent investment banking firm selected by the
American Arbitration Association in New York City in accordance with its rules), the costs of which valuation shall be paid for by the Corporation.
(iii) Market Price shall mean the average Closing Bid Price for twenty (20) consecutive trading days, ending
with the trading day prior to the date as of which the Market Price is being determined (with appropriate adjustments for subdivisions or combinations of shares effected during such period), provided that if the prices referred to in the definition
of Closing Bid Price cannot be determined on any trading day, the Closing Bid Price for such trading day will be deemed to equal Fair Market Value of such security on such trading day.
(iv) Registered Holders shall mean, at any time, the holders of record of the Series B Preferred Stock.
(v) Stock Market shall mean, with respect to any security, the principal national securities exchange on which such
security is listed or admitted to trading or, if such security is not listed or admitted to trading on any national securities exchange, shall mean The Nasdaq National Market System (NNM) or The Nasdaq SmallCap Market (SCM
and, together with NNM, Nasdaq) or, if such security is not quoted on Nasdaq, shall mean the OTC Bulletin Board or, if such security is not quoted on the OTC Bulletin Board, shall mean the over-the-counter market as furnished by any NASD member firm selected from time to time by the Corporation for that purpose.
(vi) Trading Day shall mean a day on which the relevant Stock Market is open for the transaction of business.
2. Dividends and Distributions. (a) The holders, as of the Dividend Record Date (as defined below), of the Series B Preferred Stock shall
be entitled to receive semi-annual dividends on their respective shares of Series B Preferred Stock (aggregating, for this purpose, all shares of Series B Preferred Stock held of record or, to the Corporations knowledge, beneficially by such
holder), payable, at the option of the Corporation, in cash or additional shares of Series B Preferred Stock, at the rate of 8% per annum (computed on the basis of a 360-day year of twelve 30 day months)
of the Dividend Base Amount (as defined below), payable semi-annually in arrears; provided that, to the extent the declaration or payment of such dividend is prohibited by applicable law, such dividend need not be paid but shall nevertheless accrue
and
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shall be paid promptly when applicable law permits. Such dividends shall accrue (i) from March 6, 2001 for shares of Series B Preferred Stock issued within thirty days of the date of
the filing of this Certificate of Designation, or (ii) from the date of issuance for shares of Series B Preferred Stock issued after thirty days from the date of filing of this Certificate of Designation, and shall be paid semi-annually on
April 1 and October 1 of each year or, if any such day is not a business day, on the next succeeding business day. Such dividends shall be paid, at the election of the Corporation, either in cash or additional duly authorized, fully paid
and non assessable shares of Series B Preferred Stock. In calculating the number of shares of Series B Preferred Stock to be paid with respect to each dividend, the Series B Preferred Stock shall be valued at $100.00 per share (subject to
appropriate adjustment to reflect any stock split, combination, reclassification or reorganization of the Series B Preferred Stock). Notwithstanding the foregoing, the Corporation shall not be required to issue fractional shares of Series B
Preferred Stock; the Corporation may elect, in its sole discretion, independently for each holder, whether such number of shares (on an aggregated basis) will be rounded to the nearest whole share (with .5 of a share rounded upward) or whether such
holder will be given cash in lieu of any fractional shares. The Dividend Base Amount of a share of Series B Preferred Stock shall be $100.00 plus all accrued but unpaid dividends (subject to appropriate adjustment to reflect any stock
split, combination, reclassification or reorganization of the Series B Preferred Stock). The Dividend Record Date shall mean, for each semi-annual dividend, the March 15 or September 15, as the case may be, immediately
preceding the dividend payment date.
(b) In addition to the foregoing, subject to the rights of the holders of any shares of any series or
class of capital stock ranking prior, and superior to, or pari passu with, the shares of Series B Preferred Stock with respect to dividends, and prior to the rights of the holders of Common Stock, Series A Preferred Stock and any other series or
class of capital stock, the holders of shares of Series B Preferred Stock shall be entitled to receive, as, when and if declared by the Board of Directors, out of assets legally available for that purpose, dividends or distributions in cash, stock
or otherwise.
(c) The Corporation shall not declare or pay any dividend or distribution on any Junior Stock (as defined below) of the
Corporation unless all dividends required by Section 2(a) have been or contemporaneously are declared and paid, or declared and a sum sufficient for the payment thereof set apart for such payment, on the Series B Preferred Stock
(d) [Reserved]
(e) All dividends
or distributions declared upon the Series B Preferred Stock shall be declared pro rata per share.
(f) Any reference to
distribution contained in this Section 2 shall not be deemed to include any distribution made in connection with or in lieu of any Liquidation Event (as defined below).
(g) No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Series B Preferred
Stock which may be in arrears (it being understood that this provision does not alter the Corporations obligations under Section 2(a)).
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(h) So long as any shares of the Series B Preferred Stock are outstanding, no dividends, except
as described in the next succeeding sentence, shall be declared or paid or set apart for payment on any class or series of stock of the Corporation ranking, as to dividends, on a parity with the Series B Preferred Stock, for any period unless all
dividends have been or contemporaneously are declared and paid, or declared and a sum sufficient for the payment thereof set apart for such payment, on the Series B Preferred Stock. When dividends are not paid in full or a sum sufficient for such
payment is not set apart, as aforesaid, upon the shares of the Series B Preferred Stock and any other class or series of stock ranking on a parity as to dividends with the Series B Preferred Stock, all dividends declared upon such other stock shall
be declared pro rata so that the amounts of dividends per share declared on the Series B Preferred Stock and such other stock shall in all cases bear to each other the same ratio that accrued dividends per share on the shares of the Series B
Preferred Stock and on such other stock bear to each other.
(i) So long as any shares of the Series B Preferred Stock are outstanding, no
other stock of the Corporation ranking on a parity with the Series B Preferred Stock as to dividends or upon liquidation, dissolution or winding up shall be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or
made available for a sinking fund or otherwise for the purchase or redemption of any shares of any such stock) by the Corporation unless the dividends, if any, accrued on all outstanding shares of the Series B Preferred Stock shall have been paid or
set apart for payment.
(j) Junior Stock shall mean the Common Stock, Series A Preferred Stock, and any shares of preferred
stock of any series or class of the Corporation, whether presently outstanding or hereafter issued, which are junior to the shares of Series B Preferred Stock with respect to (i) the distribution of assets on any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, (ii) dividends or (iii) voting.
3. Liquidation Preference.
(a) In the event of a (i) liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, (ii) a sale or other disposition of all or substantially all of the assets of the Corporation or (iii) any
consolidation, merger, combination, reorganization or other transaction in which the Corporation is not the surviving entity or shares of Common Stock constituting in excess of 50% of the voting power of the Corporation are exchanged for or changed
into stock or securities of another entity, cash and/or any other property (a Merger Transaction) (items (i), (ii) and (iii) of this sentence being collectively referred to as a Liquidation Event), after payment or
provision for payment of debts and other liabilities of the Corporation, the holders of the Series B Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders,
whether such assets are capital, surplus, or earnings, before any payment or declaration and setting apart for payment of any amount shall be made in respect of any Junior Stock of the Corporation, an amount equal to the Dividend Base Amount at such
time; provided, however, in the case of a Merger Transaction, such payment may be made in cash, property (valued as provided in Subsection 3(b)) and/or securities (valued as provided in Subsection 3(b)) of the entity surviving such Merger
Transaction. In the case of property or in the event that any such securities are subject to an investment letter or other similar restriction on transferability, the value of such property or securities shall be determined by agreement between the
Corporation and the holders of a majority of the Series B Preferred Stock then outstanding. If upon any Liquidation Event, whether voluntary or involuntary, the assets to be distributed to
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the holders of the Series B Preferred Stock shall be insufficient to permit the payment to such shareholders of the full preferential amounts aforesaid, then all of the assets of the Corporation
to be distributed shall be so distributed ratably to the holders of the Series B Preferred Stock on the basis of the number of shares of Series B Preferred Stock held. Notwithstanding item (iii) of the first sentence of this Subsection 3(a),
any consolidation, merger, combination, reorganization or other transaction in which the Corporation is not the surviving entity but the stockholders of the Corporation immediately prior to such transaction own in excess of 50% of the voting power
of the corporation surviving such transaction and own amongst themselves such interest in substantially the same proportions as prior to such transaction, shall not be considered a Liquidation Event provided that the surviving corporation shall make
appropriate provisions to ensure that the terms of this Certificate of Designation survive any such transaction. All shares of Series B Preferred Stock shall rank as to payment upon the occurrence of any Liquidation Event senior to the Common Stock,
the Series A Preferred Stock, and, unless the terms of such series shall provide otherwise, senior to all other series of the Corporations preferred stock.
(b) Any securities or other property to be delivered to the holders of the Series B Preferred Stock pursuant to Subsection 3(a) hereof shall be
valued as follows:
(i) Securities not subject to an investment letter or other similar restriction on free marketability:
(A) If actively traded on a Stock Market, the per share value shall be deemed to be the Market Price of such securities as
of the third day prior to the date of valuation.
(B) If not actively traded on a Stock Market, the value shall be the Fair
Market Value of such securities.
(ii) For securities for which there is an active public market but which are subject to
an investment letter or other restrictions on free marketability, the value shall be the Fair Market Value thereof, determined by discounting appropriately the per share Market Price thereof.
(iii) For all other securities, the value shall be the Fair Market Value thereof.
4. Conversion.
(a) Right of
Conversion. The shares of Series B Preferred Stock are convertible, in whole or in part, at the option of the holder thereof and upon notice to the Corporation as set forth in Subsection 4(b), into fully paid and nonassessable shares of Common Stock
and such other securities and property as hereinafter provided. The initial conversion price per share of Common Stock (the Conversion Price), shall be $.50, subject to adjustment as provided herein. The rate at which each share of
Series B Preferred Stock is convertible at any time into Common Stock (the Conversion Rate) shall be determined by dividing the then existing Conversion Price (determined in accordance with this Section 4, including the last
paragraph hereof) into the Dividend Base Amount.
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(b) Conversion Procedures. Any holder of shares of Series B Preferred Stock desiring to convert
such shares into Common Stock shall surrender the certificate or certificates evidencing such shares of Series B Preferred Stock at the office of the transfer agent for the Series B Preferred Stock, which certificate or certificates, if the
Corporation shall so require, shall be duly endorsed to the Corporation or in blank, or accompanied by proper instruments of transfer to the Corporation or in blank, accompanied by irrevocable written notice to the Corporation that the holder elects
so to convert such shares of Series B Preferred Stock and specifying the name or names (with address) in which a certificate or certificates evidencing shares of Common Stock are to be issued. The Corporation need not deem a notice of conversion to
be received unless the holder complies with all the provisions hereof. The Corporation will instruct the transfer agent (which may be the Corporation) to make a notation of the date that a notice of conversion is received, which date of receipt
shall be deemed to be the date of receipt for purposes hereof.
The Corporation shall, as soon as practicable after such deposit of
certificates evidencing shares of Series B Preferred Stock accompanied by the written notice and compliance with any other conditions herein contained, deliver at such office of such transfer agent to the person for whose account such shares of
Series B Preferred Stock were so surrendered, or to the nominee or nominees of such person, certificates evidencing the number of full shares of Common Stock to which such person shall be entitled as aforesaid, subject to Section 4(d). Subject
to the following provisions of this paragraph, such conversion shall be deemed to have been made as of the date of such surrender of the shares of Series B Preferred Stock to be converted, and the person or persons entitled to receive the Common
Stock deliverable upon conversion of such Series B Preferred Stock shall be treated for all purposes as the record holder or holders of such Common Stock on such date; provided, however, that the Corporation shall not be required to convert any
shares of Series B Preferred Stock while the stock transfer books of the Corporation are closed for any purpose, but the surrender of Series B Preferred Stock for conversion during any period while such books are so closed shall become effective for
conversion immediately upon the reopening of such books as if the surrender had been made on the date of such reopening, and the conversion shall be at the conversion rate in effect on such date. No adjustments in respect of any dividends on shares
surrendered for conversion or any dividend on the Common Stock issued upon conversion shall be made upon the conversion of any shares of Series B Preferred Stock.
The Corporation shall at all times, reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the
purpose of effecting the conversion of the shares of Series B Preferred Stock, such number of shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Series B Preferred Stock.
All notices of conversion shall be irrevocable; provided, however, that if the Corporation has sent notice of an event pursuant to Subsection
4(g) hereof, a holder of Series B Preferred Stock may, at its election, provide in its notice of conversion that the conversion of its shares of Series B Preferred Stock shall be contingent upon the occurrence of the record date or effectiveness of
such event (as specified by such holder), provided that such notice of conversion is received by the Corporation prior to such record date or effective date, as the case may be.
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(c) Adjustment of Conversion Rate and Conversion Price.
(i) As used in this Subsection 4(c), the following terms shall have the following meanings:
Capital Stock of any Person means the Common Stock or Preferred Stock of such Person. Unless otherwise stated
herein or the context otherwise requires, Capital Stock means Capital Stock of the Corporation; Common Stock of any Person other than the Corporation means the common equity (however designated), including, without
limitation, common stock or partnership or membership interests of, or participation or interests in such Person (or equivalents thereof).
Common Stock of the Corporation means the Common Stock, par value $.001 per share, of the Corporation, any
successor class or classes of common equity (however designated) of the Corporation into or for which such Common Stock may hereafter be converted, exchanged or reclassified and any class or classes of common equity (however designated) of the
Corporation which may be distributed or issued with respect to such Common Stock or successor class of classes to holders thereof generally. Unless otherwise stated herein or the context requires otherwise, Common Stock means Common
Stock of the Corporation;
Current Market Price means, when used with respect to any security as of any date,
the last sale price, regular way, or, in case no such sale takes place on such date, the average of the closing bid and asked prices, regular way, of such security in either case as reported for consolidated transactions on the New York Stock
Exchange or, if such security is not listed or admitted to trading on the New York Stock Exchange, as reported for consolidated transactions with respect to securities listed on the principal national securities exchange on which such security is
listed or admitted to trading or, if such security is not listed or admitted to trading on any national securities exchange, as reported on the Nasdaq National Market, or, if such security is not listed or admitted to trading on the Nasdaq National
Market, as reported on the Nasdaq SmallCap Market, or if such security is not listed or admitted to trading on any national securities exchange or the Nasdaq National Market or the Nasdaq SmallCap Market, the average of the high bid and low asked
prices of such security in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotations System or such other
system then in use or, if such security is not quoted by any such organization, the average of the closing bid and asked prices of such security furnished by an NASD member firm selected by the Corporation. If such security is not quoted by any such
organization and no such NASD member firm is able to provide such prices, the Current Market Price of such security shall be the Fair Market Value thereof;
Fair Market Value means, at any date as to any asset, Property or right (including without limitation, Capital
Stock of any Person, evidence of indebtedness or other securities, but excluding cash), the fair market value of such
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item as determined in good faith by the Board of Directors, whose determination shall be conclusive; provided, however, that such determination is described in an Officers Certificate filed
with the transfer agent and that, if there is a Current Market Price for such item on such date, Fair Market Value means such Current Market Price (without giving effect to the last sentence of the definition thereof);
GAAP means, as of any date, generally accepted accounting principles in the United States and does not include any
interpretations or regulations that have been proposed but that have not become effective;
Officer means, with
respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary, any Assistant Secretary or
any Vice President of such Person;
Officers Certificate means a certificate signed on behalf of the
Corporation by two Officers, one of whom must be the Chairman of the Board, the President, the Treasurer or a Vice-President of the Corporation;
Person means any individual, corporation, partnership, association, trust or any other entity or organization,
including a government or political subdivision or any agency or instrumentality thereof;
Preferred Stock of
any Person means the class or classes of equity, ownership or participation interests (however designated) in such Person, including, without limitation, stock, share, partnership and membership interests, which are preferred as to the payment of
dividends or distributions by, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of, such Person (or equivalent thereof) over interests of any other class of interests of such Person. Unless otherwise
stated herein or the context otherwise requires, Preferred Stock means Preferred Stock of the Corporation;
Property of any Person means any and all types of real, personal, tangible, intangible or mixed property owned by
such Person whether or not included on the most recent consolidated balance sheet of such Person in accordance with GAAP;
Subsidiary of a Person on any date means any other Person of whom such Person owns, directly or indirectly through
a Subsidiary or Subsidiaries of such Person, Capital Stock with voting power, acting independently and under ordinary circumstances, entitling such person to elect a majority of the board of directors or other governing body of such other Person.
Unless otherwise stated herein or the context otherwise requires, Subsidiary means a Subsidiary of the Corporation.
(ii) If the Corporation shall (i) pay a dividend or other distribution, in Common Stock, on any class of Capital Stock of
the Corporation, subdivide the outstanding Common Stock into a greater number of shares by any means or (iii)
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combine the outstanding Common Stock into a smaller number of shares by any means including, without limitation, a reverse stock split), then in each such case the Conversion Price in effect
immediately prior thereto shall be adjusted so that the Registered Holder of any shares of Series B Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock that such Registered Holder
would have owned or have been entitled to receive upon the happening of such event had such Series B Preferred Stock been converted immediately prior to the relevant record date or, if there is no such record date, the effective date of such event.
An adjustment made pursuant to this Paragraph 4(c)(ii) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the
effective date of such subdivision or combination, as the case may be.
(iii) If the Corporation shall (i) issue or
distribute (at a price per share less than the Current Market Price per share of such Capital Stock on the date of such issuance or distribution) Capital Stock generally to holders of Common Stock or to holders of any class or series of Capital
Stock which is convertible into or exchangeable or exercisable for Common Stock (excluding an issuance or distribution of Common Stock described in Paragraph 4(c)(ii)) or (ii) issue or distribute generally to such holders rights, warrants,
options or convertible or exchangeable securities entitling the holder thereof to subscribe for, purchase, convert into or exchange for Capital Stock at a price per share less than the Current Market Price per share of such Capital Stock on the date
of issuance or distribution, then, in each such case, at the earliest of (A) the date the Corporation enters into a firm contract for such issuance or distribution, (B) the record date for the determination of stockholders entitled to
receive any such Capital Stock or any such rights, warrants, options or convertible or exchangeable securities or (C) the date of actual issuance or distribution of any such Capital Stock or any such rights, warrants, options or convertible or
exchangeable securities, the Conversion Price shall be reduced by multiplying the Conversion Price in effect immediately prior to such earliest date by:
(A) if such Capital Stock is Common Stock, a fraction the numerator of which is the number of shares of Common Stock
outstanding, on such earliest date plus the number of shares of Common Stock which could be purchased at the Current Market Price per share of Common Stock on the date of such issuance or distribution with the aggregate consideration (based on the
Fair Market Value thereof) received or receivable by the Corporation either (A) in connection with such issuance or distribution or (B) upon the conversion, exchange, purchase or subscription of all such rights, warrants, options or
convertible or exchangeable securities (the Aggregate Consideration), and the denominator of which is the number of shares of Common Stock outstanding on such earliest date plus the number of shares of Common Stock to be so issued or
distributed or to be issued upon the conversion, exchange, purchase or subscription of all such rights, warrants, options or convertible or exchangeable securities; or
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(B) if such Capital Stock is other than Common Stock, a fraction the numerator of
which is the Current Market Price per share of Common Stock on such earliest date minus an amount equal to (A) the difference between (1) the Current Market Price per share of such Capital Stock multiplied by the number of shares of such
Capital Stock to be so issued and (2) the Aggregate Consideration, divided by (B) the number of shares of Common Stock outstanding on such date, and the denominator of which is the Current Market Price per share of Common Stock on such
earliest date.
Such adjustment shall be made successively whenever any such Capital Stock, rights, warrants, options or convertible or
exchangeable securities are so issued or distributed. In determining whether any rights, warrants, options or convertible or exchangeable securities entitle the holders thereof to subscribe for, purchase, convert into or exchange for shares of such
Capital Stock at less than such Current Market Price, there shall be taken into account the Fair Market Value of any consideration received or receivable by the Corporation for such rights, warrants, options or convertible or exchangeable
securities. If any right, warrant, option or convertible or exchangeable security, the issuance of which resulted in an adjustment in the Conversion Price pursuant to this Paragraph 4(c)(iii), shall expire and shall not have been exercised, the
Conversion Price shall immediately upon such expiration be recomputed to the Conversion Price which would have been in effect if such right, warrant, option or convertible or exchangeable securities had never been distributed or issued.
Notwithstanding anything contained in this paragraph to the contrary, (i) the issuance of Capital Stock upon the exercise of such rights, warrants or options or the conversion or exchange of such convertible or exchangeable securities will not
cause an adjustment in the Conversion Price if no such adjustment would have been required at the time such right, warrant, option or convertible or exchangeable security was issued or distributed; provided, however, that, if the consideration
payable upon such exercise, conversion or exchange and/or the Capital Stock receivable thereupon are changed after the time of the issuance or distribution of such right, warrant, option or convertible or exchangeable security then such change shall
be deemed to be the expiration thereof without having been exercised and the issuance or distribution of new options, rights, warrants or convertible or exchangeable securities and (ii) the issuance of convertible preferred stock of the
Corporation as a dividend on convertible preferred stock of the Corporation will not cause an adjustment in the Conversion Price if no such adjustment would have been required at the time such underlying convertible preferred stock was issued (or as
a result of any subsequent modification to the terms thereof) and the conversion provisions of such convertible stock so issued as a dividend are the same as in such underlying convertible preferred stock.
Notwithstanding any contained in this Certificate of Designation to the contrary, options, rights or warrants issued or
distributed by the Corporation, including options, rights or warrants distributed prior to the date of filing of this Certificate of Designation, to holders of Common Stock generally which, until the
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occurrence of a specified event or events (a Trigger Event), (i) are deemed to be transferred with Common Stock, (ii) are not exercisable and (iii) are also issued on a
pro rata basis with respect to future issuances of Common Stock, shall be deemed not to have been issued or distributed for purposes of this Subsection 4(c) (and no adjustment to the Conversion Price under this Subsection 4(c) will be required)
until the occurrence of the earliest Trigger Event. Upon the occurrence of a Trigger Event, such options, rights or warrants shall continue to be deemed not to have been issued or distributed for purposes of this Subsection 4(c) (and no adjustment
to the Conversion Price under this Subsection 4(c) will be required) if and for so long as each Registered Holder who thereafter converts such Registered Holders Series B Preferred Stock shall be entitled to receive upon such conversion, in
addition to the shares of Common Stock issuable upon such conversion, a number of such options, rights or warrants, as the case may be, equal to the number of options, rights or warrants to which a holder of the number of shares of Common Stock
equal to the number of shares of Common Stock issuable upon conversion of such Registered Holders Series B Preferred Stock is entitled to receive at the time of such conversion in accordance with the terms and provisions of, and applicable to,
such options, rights or warrants. Upon the expiration of any such options, rights or warrants or at such time, if any, as a Registered Holder is not entitled to receive such options, rights or warrants upon conversion of such Registered
Holders Series B Preferred Stock, an adjustment (if any is required) to the Conversion Price shall be made in accordance with this Paragraph 4(c)(iii) with respect to the issuance of all such options, rights and warrants as of the date of
issuance thereof, but subject to the provisions of the preceding paragraph, if any such option, right or warrant, including any such options right or warrants distributed prior to the date of filing of this Certificate of Designation, are subject to
events, upon the occurrence of which such options, rights or warrants become exercisable to purchase different securities, evidence of indebtedness, cash, Properties or other assets or different amounts thereof, then, subject to the preceding
provision of this paragraph, the date of the occurrence of any and each such event shall be deemed to be the date of distribution and record date with respect to new options, right or warrants with such new purchase rights (and a termination or
expiration of the existing options, rights or warrants without exercise thereof). In addition, in the event of any distribution (or deemed distribution) of options, rights or warrants, or any Trigger Event or other event of the type described in the
preceding sentence, that required (or would have required but for the provisions of Paragraph 4(c)(vi) or this paragraph) an adjustment to the Conversion Price under this Subsection 4(c) and such options, rights or warrants shall thereafter have
been redeemed or repurchased without having been exercised, then the Conversion Price shall be adjusted upon such redemption or repurchase to give effect to such distribution, Trigger Event or other event, as the case may, as though it had instead
been a cash distribution, equal on a per share basis to the result of the aggregate redemption or repurchase price received by holders of such options, rights or warrants divided by the number of shares of Common Stock outstanding as of the date of
such repurchase or redemption, made to holders of Common Stock generally as of the date of such redemption or repurchase.
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(iv) If the Corporation shall pay or distribute, as a dividend or otherwise,
generally to holders of Common Stock or any class or series of Capital Stock which is convertible into or exercisable or exchangeable for Common Stock any assets, Properties or rights (including, without limitation, evidences of indebtedness of the
Corporation, any Subsidiary or any other Person, cash or Capital Stock or other securities of the Corporation, any Subsidiary or any other Person, but excluding payments and distributions as described in Paragraphs 4(c)(ii) or (iii), dividends and
distributions in connection with a Liquidation Event and distributions consisting solely of cash described in Paragraph 4(c)(v)), then in each such case the Conversion Price shall be reduced by multiplying the Conversion Price in effect immediately
prior to the date of such payment or distribution by a fraction, the numerator of which is the Current Market Price per share of Common Stock on the record date for the determination of stockholders entitled to receive such payment or distribution
less the Fair Market Value per share of Common Stock on such record date of the assets, Properties or rights so paid or distributed, and the denominator of which is the Current Market Price per share of Common Stock on such record date. Such
adjustment shall become effective immediately after such record date. For purposes of this Paragraph 4(c)(iv), such Fair Market Value per share shall equal the aggregate Fair Market Value on such record date of the assets, Properties or rights so
paid or distributed divided by the number of shares of Common Stock outstanding on such record date. For all purposes of this Certificate of Designation, adjustments to any securitys conversion or exercise price pursuant to such
securitys original terms shall not be deemed a distribution or dividend to holders thereof.
(v) If the Corporation
shall, by dividend or otherwise, make a distribution (other than in connection with the liquidation, dissolution or winding up of the Corporation in its entirety), generally to holders of Common Stock or any class or series of Capital Stock which is
convertible into or exercisable or exchangeable for Common Stock, consisting solely of cash where (x) the sum of (i) the aggregate amount for such cash plus (ii) the aggregate amount of all cash so distributed (by dividend or
otherwise) to such holders within the 12-month period ending on the record date for determining stockholder entitled to receive such distribution with respect to which no adjustment has been made to the
Conversion Price pursuant to this Paragraph 4(c)(v) exceeds (y) 10% of the result of the multiplication of (1) the Current Market Price per share of Common Stock on such record date times (2) the number of shares of Common Stock
outstanding on such record date, then the Conversion Price shall be reduced, effective immediately prior to the opening of business on the day following such record date, by multiplying the Conversion Price in effect immediately prior to the close
of business on the day prior to such record date by a fraction, the numerator of which is the Current Market Price per share of Common Stock on such record date less the aggregate amount of cash per share so distributed and the denominator of which
is such Current Market Price; provided, however, that, if
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the aggregate amount of cash per share is equal to or greater than such Current Market Price, then, in lieu of the foregoing adjustment, adequate provisions shall be made so that each Registered
Holder shall have the right to receive upon conversion (with respect to each share of Common Stock issued upon such conversion and in addition to the Common Stock issuable upon conversion) the aggregate amount of cash per share such Registered
Holder would have received had such Registered Holders Series B Preferred Stock been converted immediately prior to such record date. In no event shall the Conversion Price be increased pursuant to this Paragraph 4(c)(v); provided, however,
that if such distribution is not so made, the Conversion Price shall be adjusted to be the Conversion Price which would have been in effect if such distribution had not been declared. For purposes of this Paragraph 4(c)(v), such aggregate amount of
cash per share shall equal such sum divided by the number of shares of Common Stock outstanding on such record date.
(vi)
The provisions of this Subsection 4(c) shall similarly apply to all successive events of the type described in this Subsection 4(c). Notwithstanding anything contained herein to the contrary, no adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease of at least 1% in the Conversion Price then in effect; provided, however, that any adjustments which by reason of this Paragraph 4(c)(vi) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations under this Section 4 shall be made by the Corporation and shall be made to the nearest cent or to the nearest one hundredth of a share, as the case may be, and the
transfer agent shall be entitled to rely conclusively thereon. Except as provided in this Section 4, no adjustment in the Conversion Price will be made for the issuance of Common Stock or any securities convertible into or exchangeable for
Common Stock or carrying the right to purchase Common Stock or any securities so convertible or exchangeable.
(vii)
Whenever the Conversion Price is adjusted as provided herein, the Corporation shall promptly file with the transfer agent an Officers Certificate setting forth the Conversion Price in effect after such adjustment and setting forth a brief
statement of the facts requiring such adjustment. Promptly after delivery of such Officers Certificate, the Corporation shall give or cause to be given to each Registered Holder a notice of such adjustment of the Conversion Price setting forth
the adjusted Conversion Price and the date on which such adjustment becomes effective.
(viii) Notwithstanding anything
contained herein to the contrary, in any case in which this Subsection 4(c) provides that an adjustment in the Conversion Price shall become effective immediately after a record date for an event, the Corporation may defer until the occurrence of
such event (i) issuing to the Registered Holder of any Series B Preferred Stock converted after such record date and before the occurrence of such event the additional shares of Common Stock issuable upon such conversion by reason of the
adjustment required by such event over and above the number of shares of Common Stock issuable upon such conversion before giving effect to such adjustment and (ii) paying to such Registered Holder any amount in cash in lieu of any fractional
share of Common Stock pursuant to Subsection 4(d).
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(ix) Notwithstanding any other provision hereof, no adjustment to the Conversion
Price shall be made upon the issuance or exercise or conversion of (1) any Capital Stock issued or cash paid as dividends on the Series B Preferred Stock, or (2) any Capital Stock issued or cash paid upon the mandatory conversion or
redemption of any Series B Preferred Stock in accordance with Section 5 of this Certificate of Designation.
(d) No Fractional Shares.
No fractional shares or scrip representing fractional shares of Common Stock shall be issued upon conversion of Series B Preferred Stock. If more than one certificate evidencing shares of Series B Preferred Stock shall be surrendered for conversion
at one time by the same holder, the number of full shares issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of Series B Preferred Stock so surrendered. Instead of any fractional share of Common Stock
which would otherwise be issuable upon conversion of such aggregate number of shares of Series B Preferred Stock, the Corporation may elect, in its sole discretion, independently for each holder, whether such number of shares of Common Stock will be
rounded to the nearest whole share (with a .5 of a share rounded upward) or whether such holder will be given cash, in lieu of any fractional share, in an amount equal to the same fraction of the Market Price of the Common Stock as of the close of
business on the day of conversion.
(e) [Reserved]
(f) Reservation of Shares; Transfer Taxes, Etc. The Corporation shall at all times reserve and keep available, out of its authorized and
unissued shares of Common Stock, solely for the purpose of effecting the conversion of the Series B Preferred Stock, such number of shares of its Common Stock free of preemptive rights as shall be sufficient to effect the conversion of all shares of
Series B Preferred Stock from time to time outstanding. The Corporation shall use its best efforts from time to time, in accordance with the laws of the State of Delaware to increase the authorized number of shares of Common Stock if at any time the
number of shares of authorized, unissued and unreserved Common Stock shall not be sufficient to permit the conversion of all the then-outstanding shares of Series B Preferred Stock.
The Corporation shall pay any and all issue or other taxes (excluding any income taxes) that may be payable in respect of any issue or delivery
of shares of Common Stock on conversion of the Series B Preferred Stock. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue or delivery of Common Stock (or other
securities or assets) in a name other than that in which the shares of Series B Preferred Stock so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Corporation
the amount of such tax or has established, to the satisfaction of the Corporation, that such tax has been paid or need not be paid.
(g)
Prior Notice of Certain Events. In case:
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(i) the Corporation shall declare any dividend (or any other distribution); or
(ii) the Corporation shall authorize the granting to the holders of Common Stock or the Series A Preferred Stock of rights
or warrants to subscribe for or purchase any shares of stock of any class or of any other rights or warrants; or
(iii) of
any reclassification of Common Stock (other than a subdivision or combination of the outstanding Common Stock, or a change in par value, or from par value to no par value, or from no par value to par value); or
(iv) of any consolidation or merger to which the Corporation is a party and for which approval of any stockholders of the
Corporation shall be required, or of the sale or transfer of all or substantially all of the assets of the Corporation or of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or other property; or
(v) of any Liquidation Event;
then the Corporation shall cause to be filed with the transfer agent for the Series B Preferred Stock, and shall cause to be mailed to the Registered Holders,
at their last addresses as they shall appear upon the stock transfer books of the Corporation, at least twenty (20) days prior to the applicable record date hereinafter specified, a notice stating (x) the date on which a record (if any) is
to be taken for the purpose of such dividend, distribution or granting of rights or warrants or, if a record is not to be taken, the date as of which the holders of Common Stock or Series A Preferred Stock of record to be entitled to such dividend,
distribution, rights or warrants are to be determined and a description of the cash, securities or other property to be received by such holders upon such dividend, distribution or granting of rights or warrants or (y) the date on which such
reclassification, consolidation, merger, sale, transfer, share exchange or Liquidation Event is expected to become effective, the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property deliverable upon such exchange or Liquidation Event and the consideration, including securities or other property, to be received by such holders upon such exchange; provided, however, that no failure to
mail such notice or any defect therein or in the mailing thereof shall affect the validity of the corporate action required to be specified in such notice.
(h) Other Changes in Conversion Rate. The Corporation from time to time may increase the Conversion Rate by any amount for any period of time
if the period is at least 20 days and if the increase is irrevocable during the period. Whenever the Conversion Rate is so increased, the Corporation shall mail to the Registered Holders a notice of the increase at least 15 days before the date the
increased Conversion Rate takes effect, and such notice shall state the increased Conversion Rate and the period it will be in effect.
The
Corporation may make such increases in the Conversion Rate, in addition to those required or allowed by this Section 4, as shall be determined by it, as evidenced by a resolution of the Board of Directors, to be advisable in order to avoid or
diminish any income tax to holders of Common Stock resulting from any dividend or distribution of stock or issuance of rights or warrants to purchase or subscribe for stock or from any event treated as such for income tax purposes.
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Notwithstanding anything to the contrary herein, in no case shall the Conversion Price be
adjusted to an amount less than $.001 per share, the current par value of the Common Stock into which the Series B Preferred Stock is convertible.
(i) Ambiguities/Errors. The Board of Directors of the Corporation shall have the power to resolve any ambiguity or correct any error in the
provisions relating to the convertibility of the Series B Preferred Stock, and its actions in so doing shall be final and conclusive.
5.
Mandatory Conversion and Redemption. (a) In the event the Corporation causes the Series A Preferred Stock to be converted in whole or in part, into fully paid and nonassessable shares of Common Stock, then the Corporation shall also convert the
Series B Preferred Stock, in whole or in part, on a pro rata basis among holders of the Series B Preferred Stock, into fully paid and nonassessable shares of Common Stock using a conversion price of $.50. Any shares of Series B Preferred Stock so
converted shall be treated as having been surrendered by the holder thereof for conversion pursuant to Section 4 on the date of such mandatory conversion (unless previously converted at the option of the holder).
(b) If, at any time, the Corporation redeems the Series A Preferred Stock, the Corporation may, at its option, redeem the Series B Preferred
Stock, in whole or in part, on a pro rata basis among holders of the Series B Preferred Stock.
(c) No greater than 60 nor fewer than 20
days prior to the date of any such mandatory conversion or redemption, notice by first class mail, postage prepaid, shall be given to the holders of record of the Series B Preferred Stock to be converted or redeemed, addressed to such holders at
their last addresses as shown on the stock transfer books of the Corporation. Each such notice shall specify the date fixed for conversion or redemption, the place or places for surrender of shares of Series B Preferred Stock and the then effective
Conversion Rate pursuant to Section 4.
Any notice which is mailed as herein provided shall be conclusively presumed to have been duly
given by the Corporation on the date deposited in the mail, whether or not the holder of the Series B Preferred Stock receives such notice; and failure properly to give such notice by mail, or any defect in such notice, to the holders of the shares
to be converted or redeemed shall not affect the validity of the proceedings for the conversion or redemption of any other shares of Series B Preferred Stock. On or after the date fixed for conversion or redemption (the Take-Out Date) as stated in such notice, each holder of shares called to be converted or redeemed shall surrender the certificate evidencing such shares to the Corporation at the place designated in such
notice for conversion or redemption. After the mailing of such notice, but before the Take-Out Date as stated therein, all rights whatsoever with respect to the shares so called for conversion or redemption
(except the right of the holders to convert such shares pursuant to Section 4 and to have such shares converted or redeemed, as the case may be, upon surrender of their certificates therefor, pursuant to this Section 5) shall terminate. On
or after the
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Take-Out Date, notwithstanding that the certificates evidencing any shares properly called for conversion or redemption shall not have been surrendered,
such shares shall no longer be deemed outstanding and all rights whatsoever with respect to the shares so called for conversion or redemption (except the right of the holders to have such shares converted or redeemed, as the case may be, upon
surrender of their certificates therefor, pursuant to this Section 5) shall terminate.
6. Outstanding Shares. For purposes of this
Certificate of Designation, a share of Series B Preferred Stock, when issued, shall be deemed outstanding except (i) from the date, or the deemed date, of surrender of certificates evidencing shares of Series B Preferred Stock, all shares of
Series B Preferred Stock converted into Common Stock or redeemed pursuant to Section 5 and (ii) from the date of registration of transfer, all shares of Series B Preferred Stock held of record by the Corporation or any subsidiary of the
Corporation.
7. Class Voting Rights. The Corporation shall not, without the affirmative vote or consent of the holders of at least 50% of
all outstanding Series B Preferred Stock, voting separately as a class, (i) amend, alter or repeal any provision of the Certificate of Incorporation or the Bylaws of the Corporation so as to adversely affect the relative rights, preferences,
qualifications, limitations or restrictions of the Series B Preferred Stock; (ii) authorize or issue, or increase the authorized amount of, Series B Preferred Stock, other than Series B Preferred Stock issuable in exchange for 8% Notes or
accrued interest thereon or issuable as dividends on Series B Preferred Stock; or (iii) issue securities ranking prior to, or pari passu with the Series B Preferred Stock.
8. Status of Acquired Shares. Shares of Series B Preferred Stock received upon conversion or redemption pursuant to Section 4 or
Section 5 or otherwise acquired by the Corporation will be restored to the status of authorized but unissued shares of Preferred Stock, without designation as to class, and may thereafter be issued, but not as shares of Series B Preferred
Stock.
9. Preemptive Rights. The Series B Preferred Stock is not entitled to any preemptive or subscription rights in respect of any
securities of the Corporation.
10. Severability of Provisions. Whenever possible, each provision hereof shall be interpreted in a manner
as to be effective and valid under applicable law, but if any provision hereof is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without
invalidating or otherwise adversely affecting the remaining provisions hereof. If a court of competent jurisdiction should determine that a provision hereof would be valid or enforceable if a period of time were extended or shortened or a particular
percentage were increased or decreased, then such court may make such changes as shall be necessary to render the provision in question effective and valid under applicable law.
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IN WITNESS WHEREOF, Sudhir Agrawal, President and Acting Chief Executive Officer of the
Corporation, acting for and on behalf of the Corporation, has hereunto subscribed his name this 15 day of March, 2001.
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HYBRIDON, INC. |
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By: |
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/s/ Sudhir Agrawal |
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Name: Sudhir Agrawal |
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Title: President and Acting Chief Executive
Officer |
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HYBRIDON, INC.
CERTIFICATE OF ELIMINATION
OF
NUMBER OF SHARES OF PREFERRED STOCK
DESIGNATED AS
SERIES B CONVERTIBLE PREFERRED STOCK
Hybridon, Inc., a Delaware corporation (the Corporation), pursuant to authority conferred upon the Board of Directors of the
Corporation by the Corporations Restated Certificate of Incorporation, as amended (the Certificate of Incorporation), and in accordance with the provisions of Section 151(g) of the General Corporation Law of the State of
Delaware (the Delaware Law), certifies that the Board of Directors of the Corporation duly adopted the following resolution:
RESOLVED: |
That no shares of the Corporations Series B Convertible Preferred Stock (the Series B Preferred Stock) are outstanding and no shares of Series B Preferred Stock will be issued subject to the
Certificate of Designation dated March 28, 2001 with respect to such series (the Series B Certificate of Designation); and that the proper officers of the Corporation be and hereby are authorized and directed in the name and on
behalf of the Corporation to execute and file a certificate with the Secretary of State of the State of Delaware pursuant to Section 151(g) of the Delaware Law setting forth the text of this resolution, upon the filing and effectiveness of
which all matters are set forth in the Series B Certificate of Designation shall be deemed to have been eliminated from the Certificate of Incorporation and the 85,000 shares of Preferred Stock previously designated as Series B Preferred Stock shall
resume their status as undesignated shares of Preferred Stock available for future issuance in accordance with the Certificate of Incorporation. |
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be affixed hereto and this Certificate to be signed by its Chief Executive Officer this
10th day of December, 2001.
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HYBRIDON, INC. |
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By: |
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/s/ Stephen R. Seiler |
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Stephen R. Seiler |
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Chief Executive Officer |
CERTIFICATE OF DESIGNATIONS
OF
SERIES C JUNIOR PARTICIPATING
PREFERRED STOCK
OF
HYBRIDON,
INC.
Hybridon, Inc., a corporation organized and existing under the laws of the State of Delaware (hereinafter called the Corporation), hereby
certifies that the following resolution was adopted by the Board of Directors of the Corporation at a meeting duly called and held on December 10, 2001:
RESOLVED: That pursuant to the authority granted to and vested in the Board of Directors of the Corporation (hereinafter called the Board) in
accordance with the provisions of the Certificate of Incorporation, as amended, the Board hereby creates a series of Preferred Stock, $.01 par value per share (the Preferred Stock), of the Corporation and hereby states the designation
and number of shares, and fixes the relative rights, preferences and limitations thereof as follows:
Series C Junior Participating
Preferred Stock:
Section 1. Designation and Amount. The shares of such series shall be designated as Series C Junior
Participating Preferred Stock (the Series C Preferred Stock) and the number of shares constituting the Series C Preferred Stock shall be one hundred thousand (100,000). Such number of shares may be increased or decreased by
resolution of the Board prior to issuance; provided, that no decrease shall reduce the number of shares of Series C 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 Corporation convertible into Series C 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 Series C Preferred Stock with respect to dividends, the holders of shares of Series C Preferred Stock, in preference to the holders of Common Stock, par value $.001 per share (the Common Stock), of the Corporation, and of any other
junior stock, shall be entitled to receive, when, as and if declared by the Board out of funds of the Corporation legally available for the payment of dividends, quarterly dividends payable in cash on the last day of each fiscal quarter of the
Corporation in each year (each such date being referred to herein as a Quarterly Dividend Payment Date), commencing on the first Quarterly
Dividend Payment Date after the first issuance of a share or fraction of a share of Series C Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of
(a) $10 or (b) subject to the provision for adjustment hereinafter set forth, 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the
Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series C Preferred Stock. In the event the
Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision, 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 Series C 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. In the event the Corporation shall at any time declare or pay any dividend on the Series C Preferred Stock payable in shares of Series C Preferred Stock, or
effect a subdivision, combination or consolidation of the outstanding shares of Series C Preferred Stock (by reclassification or otherwise than by payment of a dividend in shares of Series C Preferred Stock) into a greater or lesser number of shares
of Series C Preferred Stock, then in each such case the amount to which holders of shares of Series C Preferred Stock were entitled immediately prior to such event under clause (b) of the first sentence of this Section 2(A) shall be
adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Series C Preferred Stock that were outstanding immediately prior to such event and the denominator of which is the number of shares of Series C
Preferred Stock outstanding immediately after such event.
(B) The Corporation shall declare a dividend or distribution on the Series C
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) and the Corporation shall pay such dividend or
distribution on the Series C Preferred Stock before the dividend or distribution declared on the Common Stock is paid or set apart; 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 $10 per share on the Series C Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series C 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 Series C Preferred Stock entitled to receive a quarterly dividend and
before such Quarterly Dividend
- 2 -
Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest.
Dividends paid on the shares of Series C 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 may fix a record date for the determination of holders of shares of Series C 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.
Section 3. Voting Rights. The holders of shares of Series C Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each share of Series C Preferred Stock shall entitle the holder thereof to
1,000 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision,
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 Series C 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. In the event the Corporation shall at any time declare or pay any dividend on the
Series C Preferred Stock payable in shares of Series C Preferred Stock, or effect a subdivision, combination or consolidation of the outstanding shares of Series C Preferred Stock (by reclassification or otherwise than by payment of a dividend in
shares of Series C Preferred Stock) into a greater or lesser number of shares of Series C Preferred Stock, then in each such case the number of votes per share to which holders of shares of Series C Preferred Stock were entitled immediately prior to
such event shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Series C Preferred Stock that were outstanding immediately prior to such event and the denominator of which is the number of
shares of Series C Preferred Stock outstanding immediately after such event.
(B) Except as otherwise provided herein, in the Certificate
of Incorporation or by law, the holders of shares of Series C Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters
submitted to a vote of stockholders of the Corporation.
(C) (i) If at any time dividends on any Series C Preferred Stock shall be in
arrears in an amount equal to six quarterly dividends thereon, the holders of the Series C Preferred Stock, voting as a separate series from all other series of Preferred Stock and classes of capital stock, shall be entitled to elect two members of
the Board in addition to any Directors elected by any other series, class or classes of securities and the authorized number of Directors will automatically be increased by two. Promptly thereafter, the Board of the Corporation shall, as soon as may
be practicable, call a special meeting of holders of Series C Preferred Stock for the purpose of electing such members of the Board. Such special meeting shall in any event be held within 45 days of the occurrence of such arrearage.
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(ii) During any period when the holders of Series C Preferred Stock, voting as a separate series,
shall be entitled and shall have exercised their right to elect two Directors, then, and during such time as such right continues, (a) the then authorized number of Directors shall be increased by two, and the holders of Series C Preferred
Stock, voting as a separate series, shall be entitled to elect the additional Directors so provided for, and (b) each such additional Director shall not be a member of any existing class of the Board, but shall serve until the next annual
meeting of stockholders for the election of Directors, or until his successor shall be elected and shall qualify, or until his right to hold such office terminates pursuant to the provisions of this Section 3(C).
(iii) A Director elected pursuant to the terms hereof may be removed with or without cause by the holders of Series C Preferred Stock entitled
to vote in an election of such Director.
(iv) If, during any interval between annual meetings of stockholders for the election of
Directors and while the holders of Series C Preferred Stock shall be entitled to elect two Directors, there is no such Director in office by reason of resignation, death or removal, then, promptly thereafter, the Board shall call a special meeting
of the holders of Series C Preferred Stock for the purpose of filling such vacancy and such vacancy shall be filled at such special meeting. Such special meeting shall in any event be held within 45 days of the occurrence of such vacancy.
(v) At such time as the arrearage is fully cured, and all dividends accumulated and unpaid on any shares of Series C Preferred Stock
outstanding are paid, and, in addition thereto, at least one regular dividend has been paid subsequent to curing such arrearage, the term of office of any Director elected pursuant to this Section 3(C), or his successor, shall automatically
terminate, and the authorized number of Directors shall automatically decrease by two, the rights of the holders of the shares of the Series C Preferred Stock to vote as provided in this Section 3(C) shall cease, subject to renewal from time to
time upon the same terms and conditions, and the holders of shares of the Series C Preferred Stock shall have only the limited voting rights elsewhere herein set forth.
(D) Except as set forth herein, or as otherwise provided by law, holders of Series C 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 Series C Preferred Stock as provided in Section 2 are
in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series C Preferred Stock outstanding shall have been paid in full, the Corporation shall not:
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(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 Series C 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 Series C Preferred Stock, except dividends paid ratably on the Series C Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the
total amounts to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series C Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of
any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series C Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration any shares of Series C Preferred Stock, or any shares of stock
ranking on a parity with the Series C Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board) to all holders of such shares upon such terms as the Board, 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 Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock
of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series C Preferred Stock purchased or otherwise acquired by the Corporation 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 Certificate of Incorporation, or in any other Certificate of Designations creating a series of Preferred Stock or any similar stock or as otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation, dissolution or winding up of the Corporation, 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 Series C Preferred Stock unless, prior thereto, the holders of shares of Series C Preferred Stock shall have received $1,000 per share, plus an
- 5 -
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 Series C Preferred Stock shall
be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 1,000 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 Series C Preferred Stock, except distributions made ratably on the Series C 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.
(B)
Neither the consolidation, merger or other business combination of the Corporation with or into any other corporation nor the sale, lease, exchange or conveyance of all or any part of the property, assets or business of the Corporation shall be
deemed to be a liquidation, dissolution or winding up of the Corporation for purposes of this Section 6.
(C) In the event the
Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision, 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 Series C Preferred Stock were entitled immediately prior to such
event under the proviso in clause (1) of paragraph (A) of this Section 6 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. In the event the Corporation shall at any time declare or pay any dividend on the Series C Preferred Stock payable in
shares of Series C Preferred Stock, or effect a subdivision, combination or consolidation of the outstanding shares of Series C Preferred Stock (by reclassification or otherwise than by payment of a dividend in shares of Series C Preferred Stock)
into a greater or lesser number of shares of Series C Preferred Stock, then in each such case the aggregate amount to which holders of shares of Series C Preferred Stock were entitled immediately prior to such event under the proviso in clause
(1) of paragraph (A) of this Section 6 shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Series C Preferred Stock that were outstanding immediately prior to such event and
the denominator of which is the number of shares of Series C Preferred Stock outstanding immediately after such event.
Section 7.
Consolidation, Merger, etc. Notwithstanding anything to the contrary contained herein, in case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for
or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series C 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 1,000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In
the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision, combination or consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than
- 6 -
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 Series C 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. In the event the Corporation shall at any time declare or pay any dividend on the Series C Preferred Stock payable in shares of Series C
Preferred Stock, or effect a subdivision, combination or consolidation of the outstanding shares of Series C Preferred Stock (by reclassification or otherwise than by payment of a dividend in shares of Series C Preferred Stock) into a greater or
lesser number of shares of Series C Preferred Stock, then in each such case the amount set forth in the first sentence of this Section 7 with respect to the exchange or change of shares of Series C Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of shares of Series C Preferred Stock that were outstanding immediately prior to such event and the denominator of which is the number of shares of Series C Preferred Stock
outstanding immediately after such event.
Section 8. No Redemption. The shares of Series C Preferred Stock shall not be redeemable.
Section 9. Rank. The Series C 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 Preferred Stock issued either before or after the issuance of the Series C Preferred Stock (including, without limitation, the Series A Convertible Preferred Stock $.01 par value, of the Company
established pursuant to the Certificate of Designation for Series A Convertible preferred Stock dated May 5, 1998), unless the terms of any such series shall provide otherwise.
Section 10. Amendment. At such time as any shares of Series C Preferred Stock are outstanding, the Certificate of Incorporation, as
amended, of the Corporation shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of the Series C 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 Series C Preferred Stock, voting together as a single class.
Section 11. Fractional Shares. Series C Preferred Stock may be issued in fractions of a share which shall entitle the holder, in
proportion to such holders fractional shares, to exercise voting rights, receive dividends, participate in distributions and have the benefit of all other rights of holders of Series C Preferred Stock.
- 7 -
IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf of the Corporation by
its Chief Executive Officer this 10th day of December, 2001.
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HYBRIDON, INC. |
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By: |
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/s/ Stephen R. Seiler |
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Name: Stephen R. Seiler |
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Title: Chief Executive Officer |
- 8 -
CERTIFICATE OF CORRECTION
OF
CERTIFICATE OF
DESIGNATION FOR
SERIES A CONVERTIBLE PREFERRED STOCK
OF
HYBRIDON, INC.
Hybridon, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
1. The name of the corporation is Hybridon, Inc.
2. A Certificate of Designation for Series A Convertible Preferred Stock of Hybridon, Inc. (the Certificate of Designation) was
filed with the Secretary of State of the State of Delaware on May 6, 1998, and the Certificate of Designation requires correction was permitted by Section 103(f) of the General Corporation Law of the State of Delaware.
3. The Certificate of Designation was an inaccurate record of the corporate action taken in the Section 7 thereof incorrectly provided as
follows:
7. Class Voting Rights. The Corporation shall not, without the affirmative vote or consent of the holders of at least 50%
of all outstanding Series A Preferred Stock, voting separately as a class, (i) amend, alter or repeal any provisions of the Certificate of Incorporation or the Bylaws of the Corporation so as adversely to affect the relative rights,
preferences, qualifications, limitations or restrictions of the Series A Preferred Stock (it being understood that the issuance of securities ranking prior to, or pari passu with, the Series A Preferred Stock (A) upon a Liquidation Event or
(B) with respect to the payment of dividends or distributions shall not be considered adversely to affect such relative rights, preferences, qualifications, limitations or restrictions); or (ii) authorize or issue, or increase the
authorized amount of, Series A Preferred Stock, other than Series A Preferred Stock issuable in connection with the Offering, issuable in exchange for 9% Notes or accrued interest thereon or issuable as dividends on Series A Preferred Stock.
4. As corrected hereby, Section 7 of the Certificate of Designation shall provide as follows:
7. Voting Rights. Except as provided herein or required by law or by the Certificate of Incorporation of the Corporation, the holders of
shares of Series A Preferred Stock shall not be entitled to vote on any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of stockholders of the Corporation (or by written action of stockholders
in lieu of a meeting). The Corporation shall not, without the affirmative vote or consent of the holders of at least 50% of all outstanding Series A Preferred Stock, voting separately as a class, (i) amend, alter or repeal any provision of the
Certificate of Incorporation or the Bylaws of the Corporation so as adversely to affect the relative rights, preferences, qualifications, limitations or restrictions of the Series A Preferred Stock (it being understood that the issuance of
securities ranking prior to, or pari passu with, the Series A Preferred Stock (A) upon a Liquidation Event or (B) with respect to the payment of dividends of distributions shall
not be considered adversely to affect such relative rights, preferences, qualifications, limitations or restrictions); or (ii) authorize or issue, or increase the authorized amount of,
Series A Preferred Stock, other than Series A Preferred Stock issuable in connection with the Offering, issuable in exchange for 9% Notes or accrued interest thereon or issuable as dividends on Series A Preferred Stock.
IN WITNESS WHEREOF, Hybridon, Inc. has caused this Certificate of Designation to be signed by its Chief Financial Officer this 13th day of May 2002.
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HYBRIDON, INC. |
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By: |
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/s/ Robert Andersen |
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Robert G. Andersen |
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Chief Financial Officer |
- 2 -
CERTIFICATE OF AMENDMENT
TO THE
RESTATED
CERTIFICATE OF INCORPORATION
OF
HYBRIDON, INC.
Hybridon,
Inc. (hereinafter called the Corporation), organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify as follows:
At a meeting of the Board of Directors of the Corporation a resolution was duly adopted, pursuant to Section 242 of the General
Corporation Law of the State of Delaware, setting forth an amendment to the Restated Certificate of Incorporation of the Corporation, as amended to date (the Certificate of Incorporation), and declaring said amendment to be advisable.
The stockholders of the Corporation duly approved said proposed amendment in accordance with Section 242 of the General Corporation Law of the State of Delaware at a meeting of stockholders held on June 19, 2002. The resolution setting
forth the amendment is as follows:
RESOLVED: |
That the first paragraph of Article FOURTH of the Certificate of Incorporation be and hereby is amended and restated in its entirety so that the same shall read as follows: |
FOURTH. The total number of shares of all classes of stock which the Corporation shall have authority to issue is (i) One Hundred
Fifty Million (150,000,000) shares of Common Stock, $.001 par value per share (Common Stock), and (ii) Five Million (5,000,000) shares of Preferred Stock, $.01 par value per share (Preferred Stock), which may
be issued from time to time in one or more series as set forth in Part B of this Article FOURTH.
IN WITNESS WHEREOF, the
Corporation has caused this Certificate of Amendment to be signed by its Chief Executive Officer on this 10th day of July, 2002.
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HYBRIDON, INC. |
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/s/ Stephen R. Seiler |
Name: Stephen R. Seiler |
Title: Chief Executive Officer |
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE
OF INCORPORATION
OF
HYBRIDON, INC.
Hybridon,
Inc. (hereinafter called the Corporation), organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify as follows:
By action of the Board of Directors of the Corporation at a meeting a resolution was duly adopted, pursuant to Section 242 of the General
Corporation Law of the State of Delaware, setting forth amendments to the Certificate of Incorporation of the Corporation and declaring said amendments to be advisable. The stockholders of the Corporation duly approved said proposed amendments at a
meeting in accordance with Section 242 of the General Corporation Law of the State of Delaware. The resolutions setting forth the amendments are as follows:
RESOLVED: |
That Section 2(a) of the Certificate of Designation of the Series A Convertible Preferred Stock of the Corporation filed on May 6, 1998 is hereby amended by deleting the reference to 6.5% therein
and inserting in lieu thereof 1.0%. |
RESOLVED: |
That Section 3(a) of the Certificate of Designation of the Series A Convertible Preferred Stock of the Corporation filed on May 6, 1998 is hereby amended by deleting the first sentence of Section 3(a) in
its entirety and inserting in lieu thereof the following sentence: |
3. Liquidation Preference. (a) In the
event of a (i) liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, (ii) a sale or other disposition of all or substantially all of the assets of the Corporation or (iii) any consolidation,
merger, combination, reorganization or other transaction in which the Corporation is not the surviving entity or shares of Common Stock constituting in excess of 50% of the voting power of the Corporation are exchanged for or changed into stock or
securities of another entity, cash and/or any other property (a Merger Transaction) (items (i), (ii) and (iii) of this sentence being collectively referred to as a Liquidation Event), after payment or provision for
payment of debts and other liabilities of the Corporation, the holders of the Series A Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, whether such
assets are capital, surplus, or earnings, before any payment or declaration and setting apart for payment of any amount shall be made in respect of any Junior Stock of the Corporation, an amount equal to $1.00 per share (subject to appropriate
adjustment in the event of any stock split, stock dividend, combination or other similar recapitalization affecting the Series A Preferred Stock), plus any dividends declared or accrued but unpaid on such shares; provided, however, in the case of a
Merger Transaction, such payment may be made in cash, property (valued as provided in Subsection 3(b)) and/or securities (valued as provided in Subsection 3(b)) of the entity surviving such Merger Transaction.
RESOLVED: |
That Section 4(a) of the Certificate of Designation of the Series A Convertible Preferred Stock of the Corporation filed on May 6, 1998 is hereby amended by deleting the first paragraph of Section 4(a) in
its entirety and inserting in lieu thereof the following paragraph: |
(a) Right of Conversion. Commencing after the expiration of 12 months following the
Alternative Equity Closing Date (as hereinafter defined), but not prior thereto, the shares of Series A Preferred Stock shall be convertible, in whole or in part, at the option of the holder thereof and upon notice to the Corporation as set forth in
Subsection 4(b), into fully paid and nonassessable shares of Common Stock and such other securities and property as hereinafter provided. The initial conversion price per share of Common Stock (the Conversion Price), shall be equal to
the product of 2.125 multiplied by the per share price (the Stated Common Price) of Common Stock sold by the Corporation in connection with the Alternative Equity Offering (as such term is defined in the Corporations Offer to
Exchange dated February 6, 1998 (the Original Offer to Exchange), as amended by the Amendment thereto (the Amendment) dated March 30, 1998 (collectively, the Offer to Exchange)) and shall be subject to
adjustment as provided herein. The rate at which each share of Series A Preferred Stock is convertible at any time into Common Stock (the Conversion Rate) shall be determined by dividing the then existing Conversion Price (determined in
accordance with this Section 4, including the last paragraph hereof) into the Dividend Base Amount; provided, however, that, during the period beginning on the date of the filing of this Certificate of Amendment and ending on the date 60 days
after the date of the filing of this Certificate of Amendment (the Early Conversion Period), the Conversion Rate shall be determined by dividing the Conversion Price (in effect as of the first day of the Early Conversion Period) into an
amount equal to 125% of the Dividend Base Amount. For illustrative purposes only, if the Conversion Price equals $4.25 and the Dividend Base Amount equals $100.00, then each share of Series A Preferred Stock will be convertible into 23.53 shares of
Common Stock ($100.00 ÷ $4.25); provided, however, that during the Early Conversion Period, each share of Series A Preferred Stock will be convertible into 29.41 shares of Common Stock ($125.00 ÷ $4.25).
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed by its authorized officer on the 4th day of December, 2003.
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By: |
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/s/ Stephen R. Seiler |
Name: |
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Stephen R. Seiler |
Title: |
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Chief Executive Officer |
- 2 -
CERTIFICATE OF INCREASE
OF
SERIES C JUNIOR PARTICIPATING
PREFERRED STOCK
OF
HYBRIDON,
INC.
(Pursuant to Section 151(g) of the
Delaware General Corporation Law)
Hybridon, Inc., a corporation organized and existing under the Delaware General Corporation Law (the Corporation) does hereby
certify:
FIRST: |
In a Certificate of Designations filed with the Secretary of State of the State of Delaware on December 10, 2001, pursuant to Section 151 of the Delaware General Corporation Law, the Corporation was authorized
to issue 100,000 shares of Series C Junior Participating Preferred Stock as a series of the Corporations authorized Preferred Stock, par value $.01 per share; and |
SECOND: |
The board of directors of the Corporation, by resolution adopted June 22, 2003, duly authorized and directed that the number of shares of the Corporations Series C Junior Participating Preferred Stock be
increased from 100,000 shares to 150,000 shares. |
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Increase to be signed by its duly authorized officer this 4th day of December, 2003.
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By: |
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/s/ Stephen R. Seiler |
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Name: Stephen R. Seiler |
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Title: Chief Executive Officer |
CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF
INCORPORATION
OF
HYBRIDON,
INC.
Hybridon, Inc. (hereinafter called the Corporation), organized and existing under and by virtue of the General
Corporation Law of the State of Delaware, does hereby certify as follows:
At a meeting of the Board of Directors of the Corporation a
resolution was duly adopted, pursuant to Section 242 of the General Corporation Law of the State of Delaware, setting forth an amendment to the Restated Certificate of Incorporation of the Corporation, as amended to date (the Certificate
of Incorporation), and declaring said amendment to be advisable. The stockholders of the Corporation duly approved said proposed amendment in accordance with Section 242 of the General Corporation Law of the State of Delaware at a meeting
of stockholders held on June 24, 2004. The resolution setting forth the amendment is as follows:
RESOLVED: |
That the first paragraph of Article FOURTH of the Certificate of Incorporation be and hereby is amended and restated in its entirety so that the same shall read as follows: |
FOURTH. The total number of shares of all classes of stock which the Corporation shall have authority to issue is
(i) One Hundred Eighty Five Million (185,000,000) shares of Common Stock, $.001 par value per share (Common Stock), and (ii) Five Million (5,000,000) shares of Preferred Stock, $.01 par value per share
(Preferred Stock), which may be issued from time to time in one or more series as set forth in Part B of this Article FOURTH.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed by its Chief Executive Officer on this 25th day of
June 2004.
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HYBRIDON, INC. |
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/s/ Stephen R. Seiler |
Name: Stephen R. Seiler |
Title: Chief Executive Officer |
CERTIFICATE OF INCREASE
OF
SERIES C JUNIOR PARTICIPATING
PREFERRED STOCK
OF
HYBRIDON,
INC.
(Pursuant to Section 151(g) of the
Delaware General Corporation Law)
Hybridon, Inc., a corporation organized and existing under the Delaware General Corporation Law (the Corporation) does hereby
certify:
FIRST: |
In a Certificate of Designations filed with the Secretary of State of the State of Delaware on December 10, 2001, pursuant to Section 151 of the Delaware General Corporation Law, the Corporation was authorized
to issue 100,000 shares of Series C Junior Participating Preferred Stock as a series of the Corporations authorized Preferred Stock, par value $.01 per share; |
SECOND: |
In a Certificate of Increase filed with the Secretary of State of the State of Delaware on December 4, 2003, pursuant to Section 151 of the Delaware General Corporation Law, the number of authorized shares of
the Corporations Series C Junior Participating Preferred Stock was increased from 100,000 to 150,000; and |
THIRD: |
The board of directors of the Corporation, by resolution adopted March 15, 2005, duly authorized and directed that the number of authorized shares of the Corporations Series C Junior Participating Preferred
Stock be increased from 150,000 shares to 185,000 shares. |
IN WITNESS WHEREOF, the Corporation has caused this Certificate
of Increase to be signed by its duly authorized officer this 24th day of March, 2005.
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By: |
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/s/ Sudhir Agrawal |
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Name: Sudhir Agrawal, D. Phil |
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Title: Chief Executive Officer, President and Chief Scientific Officer |
CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF
INCORPORATION
OF
HYBRIDON,
INC.
Hybridon, Inc. (hereinafter called the Corporation), organized and existing under and by virtue of the General
Corporation Law of the State of Delaware, does hereby certify as follows:
At a meeting of the Board of Directors of the Corporation a
resolution was duly adopted, pursuant to Section 242 of the General Corporation Law of the State of Delaware, setting forth an amendment to the Restated Certificate of Incorporation of the Corporation, as amended to date (the Certificate
of Incorporation), and declaring said amendment to be advisable. The stockholders of the Corporation duly approved said proposed amendment in accordance with Section 242 of the General Corporation Law of the State of Delaware at a meeting
of stockholders held on June 15, 2005. The resolution setting forth the amendment is as follows:
RESOLVED: |
That the first paragraph of Article FOURTH of the Certificate of Incorporation be and hereby is amended and restated in its entirety so that the same shall read as follows: |
FOURTH. The total number of shares of all classes of stock which the Corporation shall have authority to issue is (i) Two Hundred
Million (200,000,000) shares of Common Stock, $.001 par value per share (Common Stock), and (ii) Five Million (5,000,000) shares of Preferred Stock, $.01 par value per share (Preferred Stock), which may be
issued from time to time in one or more series as set forth in Part B of this Article FOURTH.
IN WITNESS WHEREOF, the Corporation
has caused this Certificate of Amendment to be signed by its Chief Executive Officer on this 17th day of June 2005.
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HYBRIDON, INC. |
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/s/ Sudhir Agrawal |
Name: Sudhir Agrawal |
Title: Chief Executive Officer |
CERTIFICATE OF INCREASE
OF
SERIES C JUNIOR PARTICIPATING
PREFERRED STOCK
OF
HYBRIDON,
INC.
(Pursuant to Section 151(g) of the
Delaware General Corporation Law)
Hybridon, Inc., a corporation organized and existing under the Delaware General Corporation Law (the Corporation) does hereby
certify:
FIRST: |
In a Certificate of Designations filed with the Secretary of State of the State of Delaware on December 10, 2001, pursuant to Section 151 of the Delaware General Corporation Law, the Corporation was authorized
to issue 100,000 shares of Series C Junior Participating Preferred Stock as a series of the Corporations authorized Preferred Stock, par value $.01 per share; |
SECOND: |
In a Certificate of Increase filed with the Secretary of State of the State of Delaware on December 4, 2003, pursuant to Section 151 of the Delaware General Corporation Law, the number of authorized shares of
the Corporations Series C Junior Participating Preferred Stock was increased from 100,000 to 150,000; |
THIRD: |
In a Certificate of Increase filed with the Secretary of State of the State of Delaware on March 24, 2005, pursuant to Section 151 of the Delaware General Corporation Law, the number of authorized shares of
the Corporations Series C Junior Participating Preferred Stock was increased from 150,000 to 185,000; and |
FOURTH: |
The board of directors of the Corporation, by resolution adopted March 15, 2005, duly authorized and directed that, effective as of June 15, 2005, the number of authorized shares of the Corporations
Series C Junior Participating Preferred Stock be increased from 185,000 shares to 200,000 shares. |
IN WITNESS WHEREOF, the
Corporation has caused this Certificate of Increase to be signed by its duly authorized officer this 21st day of June 2005.
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By: |
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/s/ Robert G. Andersen |
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Name: Robert G. Andersen |
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Title: Chief Financial Officer |
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
IDERA PHARMACEUTICALS,
INC.
(a Delaware corporation)
INTO
HYBRIDON, INC.
(a Delaware corporation)
Pursuant to Section 253 of the General Corporation Law of the State of Delaware, Hybridon, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware (the Corporation), does hereby certify:
FIRST:
That the Corporation was incorporated on May 25, 1989, pursuant to the General Corporation Law of the State of Delaware.
SECOND: That
the Corporation owns all of the outstanding shares of the capital stock of Idera Pharmaceuticals, Inc., a corporation incorporated on August 24, 2005, pursuant to the General Corporation Law of the State of Delaware (the
Subsidiary).
THIRD: That on September 9, 2005, the Board of Directors of the Corporation, acting by written consent in
accordance with Section 141(f) of the General Corporation Law of the State of Delaware, duly adopted the following resolutions and determined to merge the Subsidiary into the Corporation and change the Corporations corporate name to
Idera Pharmaceuticals, Inc. on the conditions set forth in such resolutions:
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RESOLVED: |
That, the Corporation shall, pursuant to Section 253 of the Delaware Code, merge into itself Idera Pharmaceuticals, Inc., a wholly owned subsidiary of the Corporation (the Subsidiary), and shall assume
all of the Subsidiarys liabilities and obligations (the Merger); and that upon the effectiveness of the Merger, the Corporations corporate name shall be changed to Idera Pharmaceuticals, Inc. |
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RESOLVED: |
That the Corporation, as the sole stockholder of the Subsidiary, be and hereby is authorized to take such actions as are necessary or appropriate to effect the Merger. |
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RESOLVED: |
That the Chief Executive Officer and the Chief Financial Officer of the Corporation (the Proper Officers) be, and either acting singly,
hereby is authorized and directed in the name and on behalf of the Corporation to prepare, execute and file with the Secretary of State of the State of Delaware a Certificate of |
|
Ownership and Merger setting forth a copy of the resolutions to merge the Subsidiary into the Corporation and to assume the liabilities and obligations of said Subsidiary and to change the
Corporations corporate name to Idera Pharmaceuticals, Inc. upon the effectiveness of the Merger; and that the execution and filing thereof be conclusive evidence of such approval and the authorization therefor by the Board of
Directors of the Corporation. |
FOURTH: That the Merger of Subsidiary into the Corporation be effective as of
September 12, 2005 at 4:01 p.m. (ET).
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by its authorized
officer this 12th day of September, 2005.
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HYBRIDON, INC. |
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By: |
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/s/ Sudhir Agrawal |
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Name: Sudhir Agrawal |
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Title: Chief Executive Officer and President |
- 2 -
CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF
INCORPORATION
OF
IDERA
PHARMACEUTICALS, INC.
Idera Pharmaceuticals, Inc. (hereinafter called the Corporation), organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, does hereby certify as follows:
By action of the Board of Directors of
the Corporation at a meeting held on April 12, 2006, the Board of Directors of the Corporation duly adopted a resolution, pursuant to Section 242 of the General Corporation Law of the State of Delaware, setting forth an amendment to the
Restated Certificate of Incorporation of the Corporation, as amended to date (the Certificate of Incorporation), and declaring said amendment to be advisable. The stockholders of the Corporation duly approved said proposed amendment in
accordance with Section 242 of the General Corporation Law of the State of Delaware at a meeting of stockholders held on June 7, 2006. The resolution setting forth the amendment is as follows:
RESOLVED: |
That the first paragraph of Article FOURTH of the Certificate of Incorporation be and hereby is amended and restated in its entirety so that the same shall read as follows: |
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FOURTH. That, effective at 5:00 p.m., eastern time, on the filing date of this Certificate of Amendment of Restated Certificate of Incorporation, as amended, (the Effective Time), a one-for-eight reverse stock split of the Corporations Common Stock (as defined below) shall become effective, pursuant to which each eight shares of Common Stock
outstanding and held of record by each stockholder of the Corporation (including treasury shares) immediately prior to the Effective Time shall be reclassified and combined into one share of Common Stock automatically and without any action by the
holder thereof upon the Effective Time and shall represent one share of Common Stock from and after the Effective Time. No fractional shares of Common Stock shall be issued as a result of such reclassification and combination. In lieu of any
fractional shares to which the stockholder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the average of the high and low trading prices of the Common Stock on the American Stock Exchange during
regular trading hours for the five trading days immediately preceding the Effective Time. |
The total number of shares of all classes of stock which the Corporation shall have authority to
issue is (i) Forty Million (40,000,000) shares of Common Stock, $.001 par value per share (Common Stock), and (ii) Five Million (5,000,000) shares of Preferred Stock, $.01 par value per share (Preferred
Stock), which may be issued from time to time in one or more series as set forth in Part B of this Article FOURTH.
IN WITNESS
WHEREOF, the Corporation has caused this Certificate of Amendment to be signed by its duly authorized officer this 29th day of June 2006.
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IDERA PHARMACEUTICALS, INC. |
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By: |
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/s/ Robert G. Andersen |
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Robert G. Andersen |
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Chief Financial Officer, Vice President
Operations |
- 2 -
CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF
INCORPORATION
OF
IDERA
PHARMACEUTICALS, INC.
Idera Pharmaceuticals, Inc. (hereinafter called the Corporation), organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, does hereby certify as follows:
By action of the Board of Directors of
the Corporation at a meeting held on March 18, 2008, the Board of Directors of the Corporation duly adopted a resolution, pursuant to Section 242 of the General Corporation Law of the State of Delaware, setting forth an amendment to the
Restated Certificate of Incorporation of the Corporation, as amended to date (the Certificate of Incorporation), and declaring said amendment to be advisable. The stockholders of the Corporation duly approved said proposed amendment in
accordance with Section 242 of the General Corporation Law of the State of Delaware at a meeting of stockholders held on June 4, 2008. The resolution setting forth the amendment is as follows:
RESOLVED: That the first paragraph of Article FOURTH of the Certificate of Incorporation be and hereby is amended and restated in its entirety
so that the same shall read as follows:
FOURTH. The total number of shares of all classes of stock which the Corporation shall have
authority to issue is (i) Seventy Million (70,000,000) shares of Common Stock, $.001 par value per share (Common Stock), and (ii) Five Million (5,000,000) shares of Preferred Stock, $.01 par value per share
(Preferred Stock), which may be issued from time to time in one or more series as set forth in Part B of this Article FOURTH.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed by its duly authorized officer this 2nd day of July
2008.
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IDERA PHARMACEUTICALS, INC. |
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By: |
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/s/ Louis J. Arcudi, III |
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Name: Louis J. Arcudi, III |
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Title: Chief Financial Officer |
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
SERIES D PREFERRED
STOCK
OF
IDERA
PHARMACEUTICALS, INC.
(Pursuant to Section 151 of
the Delaware General Corporation Law)
Idera Pharmaceuticals, Inc. (the Corporation), a corporation organized and existing under the laws of the State of
Delaware, hereby certifies that, pursuant to authority conferred on its Board of Directors (the Board) by the Restated Certificate of Incorporation of the Corporation, as amended, the following resolution was adopted by the Board
at a meeting duly called and held on November 4, 2011, which resolution remains in full force and effect on the date hereof:
RESOLVED, that
there is hereby created and established a series of the Corporations authorized Preferred Stock (the Preferred Stock) having a par value of $0.01 per share, which series shall be designated as Series D Convertible
Preferred Stock (the Series D Preferred Stock) and shall consist of 1,124,260 shares. The shares of Series D Preferred Stock shall have the voting powers, designations, preferences and other special rights, and
qualifications, limitations and restrictions thereof set forth below:
1. Dividends.
1.1 Each holder of Series D Preferred Stock shall be entitled to receive, with respect to each share of Series D Preferred Stock then
outstanding and held by such holder of Series D Preferred Stock, dividends, commencing from the date of issuance of such share of Series D Preferred Stock, at the rate of seven percent (7%) per annum (on the basis of a 360 day year) of the
Series D Original Issue Price (as defined below) (the Series D Preferred Dividends). The Series D Preferred Dividends shall be cumulative, whether or not earned or declared, shall be paid quarterly in arrears on the last day of
December, March, June and September (a Quarterly Dividend Payment Date) in each year that Series D Preferred Stock is outstanding, with the first Quarterly Dividend Payment Date being December 31, 2011, and shall be prorated
for periods shorter than one quarter. The rights of a holder of Series D Preferred Stock as Series D Preferred Dividends shall rank senior to the rights of the Corporations Series A Convertible Preferred Stock as to dividends. The Series D
Preferred Dividends shall be paid to each holder of Series D Preferred Stock in cash out of legally available funds or, at the Corporations election, through the issuance of such number of shares of the Corporations Common Stock, par
value $0.001 per share (the Common Stock) (rounded down to the nearest whole share with any fractional shares being issued in cash in an amount equal to the Market Price (as defined in Section 4.2 below) of such fractional
share of Common Stock) determined by dividing the amount of the total accrued but unpaid dividends
then outstanding on such holders shares of Series D Preferred Stock by the Market Price then in effect (which for this purpose may not be less than $1.46 per share, subject to appropriate
adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Common Stock); provided, however, that (i) the Corporation may not pay such dividends in shares of
Common Stock on or prior to December 31, 2014, (ii) the Corporation may not issue shares of Common Stock in excess of that number of shares of Common Stock which, upon giving effect to such issuance, would cause (a) the aggregate
number of shares of Common Stock beneficially owned by a holder of Series D Preferred Stock and its affiliates and any other persons whose beneficial ownership of Common Stock would be aggregated with the holders for purposes of
Section 13(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act), to exceed 19.99% of the total number of issued and outstanding shares of Common Stock of the Corporation following such issuance, or
(b) the combined voting power of the securities of the Corporation beneficially owned by a holder of Series D Preferred Stock and its affiliates and any other persons whose beneficial ownership of Common Stock would be aggregated with the
holders for purposes of Section 13(d) of the Exchange Act to exceed 19.99% of the combined voting power of all of the securities of the Corporation then outstanding following such issuance, unless, in either case, the Corporation obtains
the requisite stockholder approval under NASDAQ Marketplace Rule 5635(b) (the Issuance Limitation), in which case, the Issuance Limitation under this clause (ii) shall no longer apply to the payment of dividends hereunder and
(iii) if clause (ii) shall in fact limit the issuance of any shares of Common Stock in payment of a given dividend, then the Corporations election to pay such dividend in shares of Common Stock shall be ineffective to the extent of
such limitation and such dividend shall instead thereupon be paid in cash by the Corporation out of legally available funds. Any election by the Corporation to pay Series D Preferred Dividends in cash or shares of Common Stock shall be made
uniformly with respect to all outstanding shares of Series D Preferred Stock for a given dividend period. For purposes of this Section 1.1 the aggregate number of shares of Common Stock or voting securities beneficially owned by a holder of
Series D Preferred Stock and its affiliates and any other persons whose beneficial ownership of Common Stock would be aggregated with the holders for purposes of Section 13(d) of the Exchange Act, shall include the shares of Common Stock
to be issued as part of such dividend payment, but shall exclude the number of shares of Common Stock which would be issuable upon exercise or conversion of the unexercised, non-converted or non-cancelled portion of any other securities of the Corporation that do not have voting power (including without limitation any securities of the Corporation which would entitle the holder thereof to acquire at any
time Common Stock, including without limitation any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive,
Common Stock), subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the holder or any of its affiliates and other persons whose beneficial ownership of Common Stock would be aggregated
with the holders for purposes of Section 13(d) of the Exchange Act.
1.2 Notwithstanding the foregoing, if any Series D
Preferred Dividend is not paid by the Corporation within five trading days following a Quarterly Dividend Payment Date, such Series D Preferred Dividend shall continue to accrue and the Corporation shall be obligated to pay the holders a late fee
with respect to such Series D Preferred Dividend, which shall be paid by the Corporation in cash, at the rate of sixteen percent (16%) per annum (or such lesser
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rate permitted by applicable law) (the Dividend Late Fee), and shall accrue daily from the applicable Quarterly Dividend Payment Date through and including the date the
Corporation pays such Series D Preferred Dividend plus the Dividend Late Fee in full (which amount shall be paid as liquidated damages and not as a penalty); provided however, that no Dividend Late Fee shall accrue or be owed with respect to
any Series D Preferred Dividend (i) that the Corporation is not permitted to pay under Delaware law or (ii) to be paid in cash that is not paid at a time when the Corporation has less than $10 million of cash and cash equivalents as of the
applicable Quarterly Dividend Payment Date as certified in writing by the Corporation to the holders.
1.3 The Corporation shall not
declare, pay or set aside any dividends on shares of any other class or series of capital stock of the Corporation (other than dividends on shares of Common Stock payable in shares of Common Stock and dividends on the Series A Convertible Preferred
Stock in accordance with Section 2(a) of the Certificate of Designations for the Series A Convertible Preferred Stock) unless the holders of the Series D Preferred Stock then outstanding shall first receive, or simultaneously receive, a
dividend on each outstanding share of Series D Preferred Stock in an amount at least equal to the sum of (i) the amount of the aggregate dividends then accrued on such share of Series D Preferred Stock and not previously paid and
(ii) (A) in the case of a dividend on Common Stock or any class or series that is convertible into Common Stock, that dividend per share of Series D Preferred Stock as would equal the product of (1) the dividend payable on each share
of such class or series determined, if applicable, as if all shares of such class or series had been converted into Common Stock and (2) the number of shares of Common Stock issuable upon conversion of a share of Series D Preferred Stock, in
each case calculated on the record date for determination of holders entitled to receive such dividend or (B) in the case of a dividend on any class or series that is not convertible into Common Stock, at a rate per share of Series D Preferred
Stock determined by (1) dividing the amount of the dividend payable on each share of such class or series of capital stock by the original issuance price of such class or series of capital stock (subject to appropriate adjustment in the event
of any stock dividend, stock split, combination or other similar recapitalization with respect to such class or series) and (2) multiplying such fraction by an amount equal to the Series D Original Issue Price; provided that, if the
Corporation declares, pays or sets aside, on the same date, a dividend on shares of more than one class or series of capital stock of the Corporation, the dividend payable to the holders of Series D Preferred Stock pursuant to this
Section 1.3 shall be calculated based upon the dividend on the class or series of capital stock that would result in the highest Series D Preferred Stock dividend.
1.4 The Series D Original Issue Price shall mean $8.1375 per share, subject to appropriate adjustment in the event of any
stock dividend, stock split, combination or other similar recapitalization with respect to the Series D Preferred Stock.
2.
Liquidation, Dissolution or Winding Up.
2.1 Payments to Holders of Series D Preferred Stock. In the event of any voluntary
or involuntary liquidation, dissolution or winding up of the Corporation, the holders of shares of Series D Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its
stockholders before any payment shall be made to the holders of Common Stock, Series A Convertible Preferred Stock or any other class of capital stock of the Corporation ranking junior to the Series D Preferred Stock as to liquidation,
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by reason of their ownership thereof, an amount per share equal to the greater of (i) the Series D Original Issue Price, plus any dividends accrued or declared but unpaid thereon, or
(ii) such amount per share as would have been payable with respect to such share had all shares of Series D Preferred Stock been converted into Common Stock pursuant to Section 4 immediately prior to such liquidation, dissolution or
winding up. If upon any such liquidation, dissolution or winding up of the Corporation, the assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series D Preferred Stock the
full amount to which they shall be entitled under this Subsection 2.1, the holders of shares of Series D Preferred Stock shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts
which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.
2.2 Payments to Holders of Common Stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, after the payment of all preferential amounts required to be paid to the holders of shares of Series D Preferred Stock and subject to any other distribution that may be required with respect to any other series of Preferred Stock, the
remaining assets of the Corporation available for distribution to its stockholders shall be distributed among the holders of shares of Common Stock and any class or series of capital stock that participates with the Common Stock in such
distributions.
3. Voting. On any matter presented to the stockholders of the Corporation for their action or consideration at any
meeting of stockholders of the Corporation, each holder of outstanding shares of Series D Preferred Stock shall be entitled to cast a number of votes equal to the number of whole shares of Common Stock into which the shares of Series D Preferred
Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter. Except as provided by law or by the other provisions of the Certificate of Incorporation, holders of Series D Preferred
Stock shall vote together with the holders of Common Stock as a single class.
4. Optional Conversion.
The holders of the Series D Preferred Stock shall have conversion rights as follows (the Conversion Rights):
4.1 Right to Convert.
4.1.1 Conversion Ratio. Each share of Series D Preferred Stock shall be convertible, at the option of the holder thereof, at any time
and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Series D Original Issue Price by the Series D
Conversion Price (as defined below) in effect at the time of conversion. The Series D Conversion Price shall initially be equal to $1.6275. Such initial Series D Conversion Price, and the rate at which shares of Series D Preferred
Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below. Notwithstanding the foregoing, the Corporation shall not effect any conversion of such holders Series D Preferred Stock and such holder shall
not be entitled to convert its shares of Series D Preferred Stock for a
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number of shares of Common Stock in excess of that number of shares of Common Stock which, upon giving effect to such conversion, would cause (a) the aggregate number of shares of Common
Stock beneficially owned by a holder of Series D Preferred Stock and its affiliates and any other persons whose beneficial ownership of Common Stock would be aggregated with the holders for purposes of Section 13(d) of the Exchange Act to
exceed 19.99% of the total number of issued and outstanding shares of Common Stock of the Corporation (including for such purpose the shares of Common Stock issuable upon conversion of the Series D Preferred Stock) following such conversion, or
(b) the combined voting power of the securities of the Corporation beneficially owned by a holder of Series D Preferred Stock and its affiliates and any other persons whose beneficial ownership of Common Stock would be aggregated with the
holders for purposes of Section 13(d) of the Exchange Act to exceed 19.99% of the combined voting power of all of the securities of the Corporation then outstanding following such conversion, unless, in either case, the Corporation
obtains the requisite stockholder approval under NASDAQ Marketplace Rule 5635(b) unless the Corporation obtains the requisite stockholder approval under NASDAQ Marketplace Rule 5635(b), in which case, this limitation under this Section 4.1.1
shall no longer apply to the holder. For purposes of this Section 4.1.1, the aggregate number of shares of Common Stock or voting securities beneficially owned by the holder and its affiliates and any other persons whose beneficial ownership of
Common Stock would be aggregated with the holders for purposes of Section 13(d) of the Exchange Act shall include the shares of Common Stock issuable upon the conversion of the Series D Preferred Stock with respect to which such
determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon exercise or conversion of the unexercised, non-converted or
non-cancelled portion of any other securities of the Corporation that do not have voting power (including without limitation any securities of the Corporation which would entitle the holder thereof to acquire
at any time Common Stock, including without limitation any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to
receive, Common Stock), subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the holder or any of its affiliates and other persons whose beneficial ownership of Common Stock would be
aggregated with the holders for purposes of Section 13(d) of the Exchange Act.
4.1.2 Termination of Conversion Rights.
In the event of a notice of redemption of any shares of Series D Preferred Stock pursuant to Section 5 or 6, the Conversion Rights of the shares designated for redemption shall terminate at the close of business on the last full
day preceding the date fixed for redemption, unless the redemption price is not fully paid on such redemption date, in which case the Conversion Rights for such shares shall continue until such price is paid in full. In the event of a liquidation,
dissolution or winding up of the Corporation, the Conversion Rights shall terminate at the close of business on the last full day preceding the date fixed for the payment of any such amounts distributable on such event to the holders of Series D
Preferred Stock.
4.2 Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Series D
Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the Market Price of a share of Common Stock. Whether or not fractional shares
would be issuable upon such conversion shall be determined on the basis of the total number of
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shares of Series D Preferred Stock the holder is at the time converting into Common Stock and the aggregate number of shares of Common Stock issuable upon such conversion. The Market
Price of the Common Stock shall be determined as follows: if the Common Stock is listed on a national securities exchange or another nationally recognized trading system, the Market Price per share of Common Stock shall be deemed to be the
greater of (a) the 20 consecutive trading day average closing price per share of the Corporations common stock ending on the trading day immediately prior to the date of determination and (b) the closing price of the
Corporations common stock on the trading day immediately prior to the date of determination; and if the Common Stock is not listed on a national securities exchange or another nationally recognized trading system, the Market Price per share of
Common Stock shall be deemed to be the amount most recently determined by the Board of Directors of the Corporation to represent the fair market value per share of the Common Stock (including without limitation a determination for purposes of
granting Common Stock options or issuing Common Stock under any plan, agreement or arrangement with employees of the Company). Upon request of a holder of Series D Preferred Stock, the Board of Directors (or a representative thereof) shall, as
promptly as reasonably practicable but in any event not later than 10 days after such request, notify the holder of the Market Price and furnish the holder with reasonable documentation of the Boards determination of such Market Price.
Notwithstanding the foregoing, if the Board has not made such a determination within the three-month period prior to the date of determination, then the Board shall make, and shall provide or cause to be provided to the holder notice of, a
determination of the Market Price within 15 days of a request by the holder that it do so.
4.3 Mechanics of Conversion.
4.3.1 Notice of Conversion. In order for a holder of Series D Preferred Stock to voluntarily convert shares of Series D Preferred Stock
into shares of Common Stock, such holder shall surrender the certificate or certificates for such shares of Series D Preferred Stock (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate
affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate), at the office of the
transfer agent for the Series D Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent), together with written notice that such holder elects to convert all or any number of the shares of
the Series D Preferred Stock represented by such certificate or certificates and, if applicable, any event on which such conversion is contingent. Such notice shall state such holders name or the names of the nominees in which such holder
wishes the certificate or certificates for shares of Common Stock to be issued. If required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form
satisfactory to the Corporation, duly executed by the registered holder or his, her or its attorney duly authorized in writing. The close of business on the date of receipt by the transfer agent (or by the Corporation if the Corporation serves as
its own transfer agent) of such certificates (or lost certificate affidavit and agreement) and notice shall be the time of conversion (the Conversion Time), and the shares of Common Stock issuable upon conversion of the shares
represented by such certificate shall be deemed to be outstanding of record as of such date. The Corporation shall, as soon as practicable after the Conversion Time, (i) issue and deliver to such holder of Series D Preferred Stock, or to his,
her or its nominees, a certificate or certificates for the number of full shares of Common Stock
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issuable upon such conversion in accordance with the provisions hereof and a certificate for the number (if any)
of the shares of Series D Preferred Stock represented by the surrendered certificate that were not converted into Common Stock, (ii) pay in cash such amount as provided in Subsection 4.2 in lieu of any fraction of a share of Common Stock
otherwise issuable upon such conversion and (iii) pay all accrued or declared but unpaid dividends on the shares of Series D Preferred Stock converted.
4.3.2 Reservation of Shares. The Corporation shall at all times when the Series D Preferred Stock shall be outstanding, reserve and
keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Series D Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to
effect the conversion of all outstanding Series D Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series D
Preferred Stock, the Corporation shall 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 purposes, including, without limitation,
engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to the Certificate of Incorporation. Before taking any action which would cause an adjustment reducing the Series D Conversion Price below the then par
value of the shares of Common Stock issuable upon conversion of the Series D Preferred Stock, the Corporation will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally
issue fully paid and nonassessable shares of Common Stock at such adjusted Series D Conversion Price.
4.3.3 Effect of Conversion.
All shares of Series D Preferred Stock which shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate at the Conversion
Time, except only the right of the holders thereof to receive shares of Common Stock in exchange therefor, to receive payment in lieu of any fraction of a share otherwise issuable upon such conversion as provided in Subsection 4.2 and to
receive payment of any dividends accrued or declared but unpaid thereon. Any shares of Series D Preferred Stock so converted shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take
such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Series D Preferred Stock accordingly.
4.3.4 No Further Adjustment. Upon any such conversion, no adjustment to the Series D Conversion Price shall be made for any declared
but unpaid dividends on the Series D Preferred Stock surrendered for conversion or on the Common Stock delivered upon conversion.
4.3.5
Taxes. The Corporation shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery of shares of Common Stock upon conversion of shares of Series D Preferred Stock pursuant to this
Section 4. The Corporation shall not, however, 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 in a name other than that in which the shares of
Series D Preferred Stock so converted were registered, and no
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such issuance or delivery shall be made unless and until the person or entity requesting such issuance has paid to the Corporation the amount of any such tax or has established, to the
satisfaction of the Corporation, that such tax has been paid.
4.4 Adjustments to Series D Conversion Price for Diluting Issues.
4.4.1 Special Definitions. For purposes of this Article Fourth, the following definitions shall apply:
(a) Option shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or
Convertible Securities.
(b) Series D Original Issue Date shall mean the date on which the first share of Series D
Preferred Stock was issued.
(c) Convertible Securities shall mean any evidences of indebtedness, shares or other
securities directly or indirectly convertible into or exchangeable for Common Stock, but excluding Options.
(d) Additional
Shares of Common Stock shall mean all shares of Common Stock issued (or, pursuant to Subsection 4.4.3 below, deemed to be issued) by the Corporation after the Series D Original Issue Date, other than (1) the following shares of
Common Stock and (2) shares of Common Stock deemed issued pursuant to the following Options and Convertible Securities (clauses (1) and (2), collectively, Exempted Securities):
|
(i) |
shares of Common Stock, Options or Convertible Securities issued as a dividend or distribution on Series D Preferred Stock; |
|
(ii) |
shares of Common Stock, Options or Convertible Securities issued by reason of a dividend, stock split, split-up or other distribution on shares of Common Stock that is covered by
Subsection 4.5, 4.6, 4.7 or 4.8; |
|
(iii) |
shares of Common Stock or Options issued to employees or directors of, or consultants or advisors to, the Corporation or any of its subsidiaries pursuant to a plan, agreement or arrangement approved by the Board of
Directors of the Corporation; |
|
(iv) |
shares of Common Stock or Convertible Securities actually issued upon the exercise of Options or shares of Common Stock actually issued upon the conversion or exchange of Convertible Securities, in each case provided
such issuance is pursuant to the terms of such Option or Convertible Security; |
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|
(v) |
shares of Common Stock, Options or Convertible Securities issued as payments of interest on notes or other indebtedness of the Company; |
|
(vi) |
shares of Common Stock, Options or Convertible Securities issued to banks, equipment lessors or other financial institutions, or to real property lessors, pursuant to a debt financing, equipment leasing or real property
leasing transaction approved by the Board of Directors of the Corporation; |
|
(vii) |
shares of Common Stock, Options or Convertible Securities issued to suppliers or third party service providers in connection with the provision of goods or services, including placement agents, pursuant to transactions
approved by the Board of Directors of the Corporation; |
|
(viii) |
shares of Common Stock, Options or Convertible Securities issued pursuant to the acquisition of another corporation by the Corporation by merger, purchase of substantially all of the assets or other reorganization or to
a joint venture agreement, provided, that such issuances are approved by the Board of Directors of the Corporation; or |
|
(ix) |
shares of Common Stock, Options or Convertible Securities issued in connection with sponsored research, collaboration, technology license, development, marketing or other similar agreements or strategic partnerships
approved by the Board of Directors of the Corporation. |
4.4.2 No Adjustment of Series D Conversion Price. No
adjustment in the Series D Conversion Price shall be made as the result of the issuance or deemed issuance of Additional Shares of Common Stock if the Corporation receives written notice from the Requisite Holders agreeing that no such adjustment
shall be made as the result of the issuance or deemed issuance of such Additional Shares of Common Stock. The term Requisite Holders shall mean the holders of at least a majority of the then outstanding shares of Series D Preferred
Stock.
4.4.3 Deemed Issue of Additional Shares of Common Stock.
(a) If the Corporation at any time or from time to time after the Series D Original Issue Date shall issue any Options or Convertible
Securities (excluding Options or Convertible Securities which are themselves Exempted Securities) or shall fix a record date for the determination of holders of any class of securities entitled to receive any such
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Options or Convertible Securities, then the maximum number of shares of Common Stock (as set forth in the instrument relating thereto, assuming the satisfaction of any conditions to
exercisability, convertibility or exchangeability but without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options
therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on
such record date.
(b) If the terms of any Option or Convertible Security, the issuance of which resulted in an adjustment to the Series D
Conversion Price pursuant to the terms of Subsection 4.4.4, are revised as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments
to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (1) any increase or decrease in the number of shares of Common Stock issuable upon the exercise, conversion and/or
exchange of any such Option or Convertible Security or (2) any increase or decrease in the consideration payable to the Corporation upon such exercise, conversion and/or exchange, then, effective upon such increase or decrease becoming
effective, the Series D Conversion Price computed upon the original issue of such Option or Convertible Security (or upon the occurrence of a record date with respect thereto) shall be readjusted to such Series D Conversion Price as would have
obtained had such revised terms been in effect upon the original date of issuance of such Option or Convertible Security. Notwithstanding the foregoing, no readjustment pursuant to this clause (b) shall have the effect of increasing the
Series D Conversion Price to an amount which exceeds the lower of (i) the Series D Conversion Price in effect immediately prior to the original adjustment made as a result of the issuance of such Option or Convertible Security, or (ii) the
Series D Conversion Price that would have resulted from any issuances of Additional Shares of Common Stock (other than deemed issuances of Additional Shares of Common Stock as a result of the issuance of such Option or Convertible Security) between
the original adjustment date and such readjustment date.
(c) If the terms of any Option or Convertible Security (excluding Options or
Convertible Securities which are themselves Exempted Securities), the issuance of which did not result in an adjustment to the Series D Conversion Price pursuant to the terms of Subsection 4.4.4 (either because the consideration per share
(determined pursuant to Subsection 4.4.5) of the Additional Shares of Common Stock subject thereto was equal to or greater than the Series D Conversion Price then in effect, or because such Option or Convertible Security was issued before the
Series D Original Issue Date), are revised after the Series D Original Issue Date as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic
adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (1) any increase in the number of shares of Common Stock issuable upon the exercise, conversion or exchange
of any such Option or Convertible Security or (2) any decrease in the consideration payable to the Corporation upon such exercise, conversion or exchange, then such Option or Convertible Security, as so amended or adjusted, and the Additional
Shares of Common Stock subject thereto (determined in the manner provided in Subsection 4.4.3(a)) shall be deemed to have been issued effective upon such increase or decrease becoming effective.
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(d) Upon the expiration or termination of any unexercised Option or unconverted or unexchanged
Convertible Security (or portion thereof) which resulted (either upon its original issuance or upon a revision of its terms) in an adjustment to the Series D Conversion Price pursuant to the terms of Subsection 4.4.4, the Series D Conversion
Price shall be readjusted to such Series D Conversion Price as would have obtained had such Option or Convertible Security (or portion thereof) never been issued.
(e) If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or
the consideration payable to the Corporation upon such exercise, conversion and/or exchange, is calculable at the time such Option or Convertible Security is issued or amended but is subject to adjustment based upon subsequent events, any adjustment
to the Series D Conversion Price provided for in this Subsection 4.4.3 shall be effected at the time of such issuance or amendment based on such number of shares or amount of consideration without regard to any provisions for subsequent
adjustments (and any subsequent adjustments shall be treated as provided in clauses (b) and (c) of this Subsection 4.4.3). If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option
or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, cannot be calculated at all at the time such Option or Convertible Security is issued or amended, any adjustment to the Series D
Conversion Price that would result under the terms of this Subsection 4.4.3 at the time of such issuance or amendment shall instead be effected at the time such number of shares and/or amount of consideration is first calculable (even if
subject to subsequent adjustments), assuming for purposes of calculating such adjustment to the Series D Conversion Price that such issuance or amendment took place at the time such calculation can first be made.
4.4.4 Adjustment of Series D Conversion Price Upon Issuance of Additional Shares of Common Stock. In the event the Corporation shall at
any time after the Series D Original Issue Date issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Subsection 4.4.3), without consideration or for a consideration per share
less than $1.46 (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Common Stock), then the Series D Conversion Price shall be reduced, concurrently
with such issue, to a price (calculated to the nearest one-hundredth of a cent) determined in accordance with the formula below; provided, however that in no event shall the Series D Conversion Price
hereunder be reduced under this Section 4.4.4 to a price that is less than $1.46 (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Common
Stock):
CP2 = CP1* (A + B)
÷ (A + C).
For purposes of the foregoing formula, the following definitions shall apply:
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(a) CP2 shall mean the
Series D Conversion Price in effect immediately after such issue of Additional Shares of Common Stock
(b) CP1 shall mean the Series D Conversion Price in effect immediately prior to such issue of Additional Shares of Common Stock;
(c) A shall mean the number of shares of Common Stock outstanding immediately prior to such issue of Additional Shares of Common
Stock (treating for this purpose as outstanding all shares of Common Stock issuable upon exercise of Options outstanding immediately prior to such issue or upon conversion or exchange of Convertible Securities (including the Series D Preferred
Stock) outstanding (assuming exercise of any outstanding Options therefor) immediately prior to such issue);
(d) B shall mean
the number of shares of Common Stock that would have been issued if such Additional Shares of Common Stock had been issued at a price per share equal to CP1 (determined by dividing the
aggregate consideration received by the Corporation in respect of such issue by CP1); and
(e) C shall mean the number of such Additional Shares of Common Stock issued in such transaction.
4.4.5 Determination of Consideration. For purposes of this Subsection 4.4, the consideration received by the Corporation for the
issue of any Additional Shares of Common Stock shall be computed as follows:
(a) Cash and Property: Such consideration shall:
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(i) |
insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation, excluding amounts paid or payable for accrued interest; |
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(ii) |
insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in good faith by the Board of Directors of the Corporation; and
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(iii) |
in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation for consideration which covers both, be the proportion of such consideration so
received, computed as provided in clauses (i) and (ii) above, as determined in good faith by the Board of Directors of the Corporation. |
(b) Options and Convertible Securities. The consideration per share received by the Corporation for Additional Shares of Common Stock
deemed to have been issued pursuant to Subsection 4.4.3, relating to Options and Convertible Securities, shall be determined by dividing
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(i) |
the total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth
in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Corporation upon the exercise of such Options or the conversion or exchange of such Convertible
Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by |
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(ii) |
the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of
such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities.
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4.4.6 Multiple Closing Dates. In the event the Corporation shall issue on more than one date Additional Shares of
Common Stock that are a part of one transaction or a series of related transactions and that would result in an adjustment to the Series D Conversion Price pursuant to the terms of Subsection 4.4.4, and such issuance dates occur within a
period of no more than 90 days from the first such issuance to the final such issuance, then, upon the final such issuance, the Series D Conversion Price shall be readjusted to give effect to all such issuances as if they occurred on the date of the
first such issuance (and without giving effect to any additional adjustments as a result of any such subsequent issuances within such period).
4.5 Adjustment for Stock Splits and Combinations. If the Corporation shall at any time or from time to time after the Series D Original
Issue Date effect a subdivision of the outstanding Common Stock, the Series D Conversion Price in effect immediately before that subdivision shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of
each share of such series shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding. If the Corporation shall at any time or from time to time after the Series D Original Issue Date combine the
outstanding shares of Common Stock, the Series D Conversion Price in effect immediately before the combination shall be proportionately increased so that the number of shares of
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Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock outstanding. Any adjustment
under this subsection shall become effective at the close of business on the date the subdivision or combination becomes effective.
4.6
Adjustment for Certain Dividends and Distributions. In the event the Corporation at any time or from time to time after the Series D Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common
Stock entitled to receive, a dividend or other distribution payable on the Common Stock in additional shares of Common Stock, then and in each such event the Series D Conversion Price in effect immediately before such event shall be decreased as of
the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Series D Conversion Price then in effect by a fraction:
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(1) |
the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and |
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(2) |
the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares
of Common Stock issuable in payment of such dividend or distribution. |
Notwithstanding the foregoing, (a) if such record date shall
have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Series D Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter
the Series D Conversion Price shall be adjusted pursuant to this subsection as of the time of actual payment of such dividends or distributions; and (b) no such adjustment shall be made if the holders of Series D Preferred Stock simultaneously
receive a dividend or other distribution of shares of Common Stock in a number equal to the number of shares of Common Stock as they would have received if all outstanding shares of Series D Preferred Stock had been converted into Common Stock on
the date of such event.
4.7 Adjustments for Other Dividends and Distributions. In the event the Corporation at any time or from
time to time after the Series D Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation (other than
a distribution of shares of Common Stock in respect of outstanding shares of Common Stock) or in other property and the provisions of Section 1 do not apply to such dividend or distribution, then and in each such event the holders of
Series D Preferred Stock shall receive, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities or other property in an amount equal to the amount of such securities or other property
as they would have received if all outstanding shares of Series D Preferred Stock had been converted into Common Stock on the date of such event.
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4.8 Adjustment for Merger or Reorganization, etc. If there shall occur any reorganization,
recapitalization, reclassification, consolidation or merger involving the Corporation in which the Common Stock (but not the Series D Preferred Stock) is converted into or exchanged for securities, cash or other property (other than a transaction
covered by Subsections 4.4, 4.6 or 4.7), then, following any such reorganization, recapitalization, reclassification, consolidation or merger, each share of Series D Preferred Stock shall thereafter be convertible in lieu of the
Common Stock into which it was convertible prior to such event into the kind and amount of securities, cash or other property which a holder of the number of shares of Common Stock of the Corporation issuable upon conversion of one share of Series D
Preferred Stock immediately prior to such reorganization, recapitalization, reclassification, consolidation or merger would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good
faith by the Board of Directors of the Corporation) shall be made in the application of the provisions in this Section 4 with respect to the rights and interests thereafter of the holders of the Series D Preferred Stock, to the end that
the provisions set forth in this Section 4 (including provisions with respect to changes in and other adjustments of the Series D Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any
securities or other property thereafter deliverable upon the conversion of the Series D Preferred Stock.
4.9 Certificate as to
Adjustments. Upon the occurrence of each adjustment or readjustment of the Series D Conversion Price pursuant to this Section 4, the Corporation at its expense shall, as promptly as reasonably practicable but in any event not later
than 10 days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Series D Preferred Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of
securities, cash or other property into which the Series D Preferred Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, as promptly as reasonably practicable after the
written request at any time of any holder of Series D Preferred Stock (but in any event not later than 10 days thereafter), furnish or cause to be furnished to such holder a certificate setting forth (i) the Series D Conversion Price then in
effect, and (ii) the number of shares of Common Stock and the amount, if any, of other securities, cash or property which then would be received upon the conversion of Series D Preferred Stock.
4.10 Notice of Record Date. In the event:
(a) the Corporation shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon
conversion of the Series D Preferred Stock) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of capital stock of any class or any other
securities, or to receive any other security; or
(b) of any capital reorganization of the Corporation, any reclassification of the Common
Stock of the Corporation, or any consolidation or merger of the Corporation; or
(c) of the voluntary or involuntary dissolution,
liquidation or winding-up of the Corporation,
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then, and in each such case, the Corporation will send or cause to be sent to the holders of the Series D
Preferred Stock a notice specifying, as the case may be, (i) the record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii) the effective date on which such
reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is proposed to take place, and the time, if any is to be fixed, as of which the holders of record of
Common Stock (or such other capital stock or securities at the time issuable upon the conversion of the Series D Preferred Stock) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities
or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up, and the amount per share and character of such exchange
applicable to the Series D Preferred Stock and the Common Stock. Such notice shall be sent at least 10 days prior to the record date or effective date for the event specified in such notice.
5. Redemption by Corporation.
5.1 Redemption. Shares of Series D Preferred Stock may be redeemed by the Corporation out of funds lawfully available therefor at a
price equal to the Series D Original Issue Price per share, plus all accrued or declared but unpaid dividends thereon (the Redemption Price), at any time after November 4, 2013, if the closing sales price of the Common Stock
for 20 or more trading days in a period of 30 consecutive trading days is equal to or greater than 200% of the Series D Conversion Price, provided that the Corporation provides written notice of such redemption to each holder of Series D Preferred
Stock within 30 days of the end of such 30 consecutive trading day period (the Redemption Notice). The Corporation shall send the Redemption Notice to each holder of record of Series D Preferred Stock not less than 30 days prior
to the date fixed by the Corporation for such redemption (the Redemption Date). The Redemption Notice shall state:
(a)
the Redemption Date and the Redemption Price;
(b) the date upon which the holders right to convert such shares terminates (as
determined in accordance with Subsection 4.1); and
(c) that the holder is to surrender to the Corporation, in the manner and at
the place designated, his, her or its certificate or certificates representing the shares of Series D Preferred Stock to be redeemed.
5.2
Surrender of Certificates; Payment. On or before the Redemption Date, each holder of shares of Series D Preferred Stock, unless such holder has exercised his, her or its right to convert such shares as provided in Section 4, shall
surrender the certificate or certificates representing such shares (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation
to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation, in the manner and at the place designated in the Redemption Notice,
and thereupon the Redemption Price for such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof.
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5.3 Rights Subsequent to Redemption. If the Redemption Notice shall have been duly given,
and if on the Redemption Date the Redemption Price payable upon redemption of the shares of Series D Preferred Stock is paid or tendered for payment or deposited with an independent payment agent so as to be available therefor in a timely manner,
then notwithstanding that the certificates evidencing any of the shares of Series D Preferred Stock so called for redemption shall not have been surrendered, dividends with respect to such shares of Series D Preferred Stock shall cease to accrue
after such Redemption Date and all rights with respect to such shares shall forthwith after the Redemption Date terminate, except only the right of the holders to receive the Redemption Price without interest upon surrender of their certificate or
certificates therefor.
6. Fundamental Change Redemption.
6.1 Fundamental Change. Upon the occurrence of a Fundamental Change, each holder of shares of Series D Preferred Stock may, at its sole
option, require the Corporation to purchase all or a portion of its shares of Series D Preferred Stock (the Fundamental Change Redemption) at a price equal to Redemption Price. A Fundamental Change shall mean any of
the following events:
(a) any person or group (each term as defined in the Exchange Act) that is not an affiliate
of any holder of shares of Series D Preferred Stock becoming the beneficial owner (as defined in the Exchange Act) of voting securities of the Corporation, representing 66 2/3% or more of the outstanding voting securities of the
Corporation (treating all securities convertible or exchangeable into or exercisable for shares of Common Stock as having been fully converted, exchanged and exercised, without regard to any exercise, conversion or exchange limitations therein)
other than in connection with a transaction described in clause (d) below;
(b) the recapitalization or reclassification of the
Common Stock of the Corporation;
(c) a sale of all or substantially all of the assets of the Corporations assets to a person that
is not an affiliate of any holder of shares of Series D Preferred Stock; or
(d) a merger, consolidation, business combination or similar
transaction the result of which a person or group (each as defined in the Exchange Act) that is not an affiliate of any holder of shares of Series D Preferred Stock owns voting securities representing 66 2/3% or more of the
outstanding voting securities of the surviving entity upon completion of such transaction.
6.2 Exercise of Fundamental Change
Redemption Option. The Company shall send a written notice (the Fundamental Change Notice) to each holder of shares of Series D Preferred Stock of (i) the occurrence of a Fundamental Change described in Subsection
6.1(a) above, within 10 days of the Corporations becoming aware of the occurrence of such Fundamental Change, and (ii) a Fundamental Change described in Subsection 6.1(b)-(d) above,
in accordance with Section 4.10. The Fundamental Change Notice shall describe the
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Fundamental Change and state that each holder of shares of Series D Preferred Stock has the right to require a Fundamental Change Redemption. In order to require a Fundamental Change Redemption,
a holder of Series D Preferred Stock must deliver written notice to the Corporation requesting the Fundamental Change Redemption within five days after the date of the Fundamental Change Notice and stating the number of shares of Series D Preferred
Stock to be redeemed. Unless prohibited by Delaware law governing distributions to stockholders, the Corporation shall redeem the shares of Series D Preferred Stock requested to be redeemed at a price equal to the Redemption Price and on a date to
be fixed by the Corporation which shall not be more than 30 days from the date of the last timely delivered Fundamental Change Redemption request. If, on the date of the Fundamental Change Redemption, Delaware law governing distributions to
stockholders prevents the Corporation from redeeming all shares of Series D Preferred Stock to be redeemed, the Corporation shall ratably redeem the maximum number of shares that it may redeem consistent with such law, and shall redeem the remaining
shares as soon as it may lawfully do so under such law.
6.3 Redemption Notice. Following receipt of a timely request for a
Fundamental Change Redemption by a holder of Series D Preferred Stock, the Corporation shall send written notice of the mandatory redemption to the holder stating:
(a) the date fixed for the Fundamental Redemption (the Fundamental Redemption Date) and the Redemption Price;
(b) the date upon which the holders right to convert such shares terminates (as determined in accordance with Subsection 4.1);
and
(c) that the holder is to surrender to the Corporation, in the manner and at the place designated, his, her or its certificate or
certificates representing the shares of Series D Preferred Stock to be redeemed.
6.4 Surrender of Certificates; Payment. On or
before the Fundamental Redemption Date, each holder of shares of Series D Preferred Stock to be redeemed on such Redemption Date, unless such holder has exercised his, her or its right to convert such shares as provided in Section 4,
shall surrender the certificate or certificates representing such shares (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the
Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation, in the manner and at the place designated in the notice
from the Corporation, and thereupon the Redemption Price for such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof. In the event less than all of the shares of Series D
Preferred Stock represented by a certificate are redeemed, a new certificate representing the unredeemed shares of Series D Preferred Stock shall promptly be issued to such holder.
6.5 Rights Subsequent to Redemption. If on the Fundamental Redemption Date the Redemption Price payable upon redemption of the shares of
the Series D Preferred Stock to be redeemed on such Redemption Date is paid or tendered for payment or deposited with an independent payment agent so as to be available therefor in a timely manner, then
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notwithstanding that the certificates evidencing any of the shares of Series D Preferred Stock so called for redemption shall not have been surrendered, dividends with respect to such shares of
Series D Preferred Stock shall cease to accrue after such Redemption Date and all rights with respect to such shares shall forthwith after the Fundamental Redemption Date terminate, except only the right to the holders to receive the Redemption
Price without interest upon surrender of their certificate or certificates therefor.
6.6 Fundamental Change and Dividends. Upon the
occurrence of a Fundamental Change as described in Subsection 6.1(c)-(d), the Companys obligation to pay Series D Preferred Dividends shall terminate.
7. Redeemed or Otherwise Acquired Shares. Any shares of Series D Preferred Stock that are redeemed or otherwise acquired by the
Corporation or any of its subsidiaries shall be automatically and immediately cancelled and retired and shall not be reissued, sold or transferred. Neither the Corporation nor any of its subsidiaries may exercise any voting or other rights granted
to the holders of Series D Preferred Stock following redemption.
8. Waiver. Any of the rights, powers, preferences and other terms
of the Series D Preferred Stock set forth herein may be waived on behalf of all holders of Series D Preferred Stock by the affirmative written consent or vote of the Requisite Holders.
9. Notices. Any notice required or permitted to be given to a holder of shares of Series D Preferred Stock shall be mailed, postage
prepaid, to the post office address last shown on the records of the Corporation, or given by electronic communication in compliance with the provisions of the General Corporation Law, and shall be deemed sent upon such mailing or electronic
transmission.
IN WITNESS WHEREOF, this Certificate of Designations has been executed by a duly authorized officer of this
corporation on this 4th day of November, 2011.
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By: |
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/s/ Sudhir Agrawal |
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Chief Executive Officer |
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CERTIFICATE OF AMENDMENT
TO THE
RESTATED
CERTIFICATE OF INCORPORATION
OF
IDERA PHARMACEUTICALS, INC.
Idera Pharmaceuticals, Inc. (hereinafter called the Corporation), organized and existing under and by virtue of the General
Corporation Law of the State of Delaware, does hereby certify as follows:
By action of the Board of Directors of the Corporation at a
meeting held on March 27, 2012, the Board of Directors of the Corporation duly adopted a resolution, pursuant to Section 242 of the General Corporation Law of the State of Delaware, setting forth an amendment to the Restated Certificate of
Incorporation of the Corporation, as amended to date (the Certificate of Incorporation), and declaring said amendment to be advisable. The stockholders of the Corporation duly approved said proposed amendment in accordance with
Section 242 of the General Corporation Law of the State of Delaware at a meeting of stockholders held on June 12, 2012. The resolution setting forth the amendment is as follows:
RESOLVED: That the first paragraph of Article FOURTH of the Certificate of Incorporation be and hereby is amended and restated in
its entirety so that the same shall read as follows:
FOURTH. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is (i) One Hundred Forty Million (140,000,000) shares of Common Stock, $.001 par value per share (Common Stock), and (ii) Five Million (5,000,000) shares of Preferred
Stock, $.01 par value per share (Preferred Stock), which may be issued from time to time in one or more series as set forth in Part B of this Article FOURTH.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed by its duly authorized officer this 13th day of
June, 2012.
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IDERA PHARMACEUTICALS, INC. |
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By: |
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/s/ Sudhir Agrawal |
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Chief Executive Officer |
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
SERIES E PREFERRED
STOCK
OF
IDERA PHARMACEUTICALS, INC.
(Pursuant to Section 151 of
the Delaware General Corporation Law)
Idera Pharmaceuticals, Inc. (the Corporation), a corporation organized and existing under the laws of the State of
Delaware, hereby certifies that, pursuant to authority conferred on its Board of Directors (the Board) by the Restated Certificate of Incorporation of the Corporation, as amended (the Certificate of
Incorporation), the following resolution was adopted by the Board at a meeting duly called and held on November 9, 2012, which resolution remains in full force and effect on the date hereof:
RESOLVED, that there is hereby created and established a series of the Corporations authorized Preferred Stock (the Preferred
Stock) having a par value of $0.01 per share, which series shall be designated as Series E Convertible Preferred Stock (the Series E Preferred Stock) and shall consist of 424,242 shares. The shares of Series
E Preferred Stock shall have the voting powers, designations, preferences and other special rights, and qualifications, limitations and restrictions thereof set forth below:
1. Dividends.
1.1 Each
holder of Series E Preferred Stock shall be entitled to receive with respect to each share of Series E Preferred Stock then outstanding and held by such holder of Series E Preferred Stock, dividends, commencing from the date of issuance of such
share of Series E Preferred Stock, at the Initial Dividend Rate (as defined below) per annum (on the basis of a 360 day year) of the Series E Original Issue Price (as defined below) (the Series E Preferred Dividends); provided,
however, that subject to and effective upon the filing with the Delaware Secretary of State of the amendment to the Certificate of Designations, Preferences and Rights of Series D Preferred Stock (the Series D Certificate of
Designations, with the amendment thereto being referred to as the Amendment to Series D Certificate of Designations) as described in Section 5.11(B) of that certain Convertible Preferred Stock and Warrant Purchase
Agreement, dated November 9, 2012, between the Corporation and the purchasers of the Series E Preferred Stock therein (the Series E Purchase Agreement), the dividend rate provided for in this Section 1.1 shall be
increased from the Initial Dividend Rate to the rate of eight percent (8%) per annum (on the basis of a 360 day year) of the Series E Original Issue Price. The Series E Preferred Dividends shall be cumulative, whether or not earned or declared,
shall be paid quarterly in arrears on the last day of March, June, September and December (a Quarterly Dividend Payment Date) in each year that Series E Preferred Stock is outstanding, with the first Quarterly Dividend Payment
Date being March 31, 2013, and shall be prorated for periods shorter than one
quarter. Notwithstanding the foregoing, if, as of any Quarterly Dividend Payment Date at which the dividend rate is the Initial Dividend Rate, there are no shares of the Corporations Series
D Convertible Preferred Stock outstanding, then the dividend payable on such Quarterly Dividend Payment Date shall be calculated and paid at a rate of eight percent (8%) per annum (on the basis of a 360 day year) of the Series E Original Issue
Price. In the event that the Amendment to Series D Certificate of Designations is filed with the Delaware Secretary of State and the dividend rate with respect to the Series E Preferred Dividends is increased pursuant to this Section 1.1, the
Series E Preferred Dividends paid on the first Quarterly Dividend Payment Date after such filing and increase shall be paid at the increased rate. In the event that the Amendment to Series D Certificate of Designations is submitted to the
stockholders of the Corporation as contemplated by Section 5.11 of the Series E Purchase Agreement and the Amendment to Series D Certificate of Designations is not approved, then the holders of the Series E Preferred Stock shall no longer be
entitled to any Series E Preferred Dividends under this Section 1.1 and the Corporation shall have no further obligation to pay the Series E Preferred Dividends under this Section 1.1; provided, however, the Corporation shall not submit
the Amendment to the Series D Certificate of Designations to the stockholders if there are no shares of Series D Preferred Stock then outstanding. The rights of a holder of Series E Preferred Stock to Series E Preferred Dividends shall rank senior
to the rights of the Corporations Series A Convertible Preferred Stock and Series D Convertible Preferred Stock as to dividends. The Series E Preferred Dividends shall be paid to each holder of Series E Preferred Stock in cash out of legally
available funds. The term Initial Dividend Rate shall mean four and six tenths percent (4.6%) or such other percentage approved by the Corporation and by the holders of at least a majority of then outstanding shares of Series
E Preferred Stock, with such approval given in writing or by vote at a meeting, consenting or voting (as the case may be) as a separate class.
1.2 Notwithstanding the foregoing, if any Series E Preferred Dividend is not paid by the Corporation within five trading days following a
Quarterly Dividend Payment Date, such Series E Preferred Dividend shall continue to accrue and the Corporation shall be obligated to pay the holders a late fee with respect to such Series E Preferred Dividend, which shall be paid by the Corporation
in cash, at the rate of sixteen percent (16%) per annum (or such lesser rate permitted by applicable law) (the Dividend Late Fee), and shall accrue daily from the applicable Quarterly Dividend Payment Date through and
including the date the Corporation pays such Series E Preferred Dividend plus the Dividend Late Fee in full (which amount shall be paid as liquidated damages and not as a penalty); provided however, that no Dividend Late Fee shall accrue or
be owed with respect to any Series E Preferred Dividend that the Corporation is not permitted to pay under Delaware law.
1.3 The
Corporation shall not declare, pay or set aside any dividends on shares of any other class or series of capital stock of the Corporation (other than dividends on shares of the Corporations Common Stock, par value $0.001 per share (the
Common Stock) payable in shares of Common Stock, dividends on the Series A Convertible Preferred Stock in accordance with Section 2(a) of the Certificate of Designations, Preferences and Rights of Series A Convertible
Preferred Stock (the Series A Certificate of Designations), dividends on the Series D Convertible Preferred Stock in accordance with Section 1.1 of the Series D Certificate of
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Designations and such dividends on other series or classes of the capital stock of the Corporation as are approved for this exclusion by the holders of at least a majority of the then outstanding
shares of Series E Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) as a separate class, unless the holders of the Series E Preferred Stock then outstanding shall first receive, or simultaneously
receive, a dividend on each outstanding share of Series E Preferred Stock in an amount at least equal to the sum of (i) the amount of the aggregate dividends then accrued on such share of Series E Preferred Stock and not previously paid and
(ii) (A) in the case of a dividend on Common Stock or any class or series that is convertible into Common Stock, that dividend per share of Series E Preferred Stock as would equal the product of (1) the dividend payable on each share
of such class or series determined, if applicable, as if all shares of such class or series had been converted into Common Stock and (2) the number of shares of Common Stock issuable upon conversion of a share of Series E Preferred Stock, in
each case calculated on the record date for determination of holders entitled to receive such dividend or (B) in the case of a dividend on any class or series that is not convertible into Common Stock, at a rate per share of Series E Preferred
Stock determined by (1) dividing the amount of the dividend payable on each share of such class or series of capital stock by the original issuance price of such class or series of capital stock (subject to appropriate adjustment in the event
of any stock dividend, stock split, combination or other similar recapitalization with respect to such class or series) and (2) multiplying such fraction by an amount equal to the Series E Original Issue Price; provided that, if the
Corporation declares, pays or sets aside, on the same date, a dividend on shares of more than one class or series of capital stock of the Corporation, the dividend payable to the holders of Series E Preferred Stock pursuant to this
Section 1.3 shall be calculated based upon the dividend on the class or series of capital stock that would result in the highest Series E Preferred Stock dividend.
1.4 The Series E Original Issue Price shall mean $14.00 per share, subject to appropriate adjustment in the event of any
stock dividend, stock split, combination or other similar recapitalization with respect to the Series E Preferred Stock.
2.
Liquidation, Dissolution or Winding Up; Sale of the Corporation.
2.1 Payments to Holders of Series E Preferred Stock Upon
Liquidation.
2.1.1 In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the
holders of shares of Series E Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders before any payment shall be made to the holders of Common Stock, Series A
Convertible Preferred Stock, Series D Convertible Preferred Stock or any other class of capital stock of the Corporation ranking junior to the Series E Preferred Stock as to liquidation, by reason of their ownership thereof, an amount per share
equal to the greater of (i) the Series E Original Issue Price, plus any dividends accrued or declared but unpaid thereon, and (ii) such amount per share as would have been payable with respect to such share had all shares of Series E
Preferred Stock been converted into Common Stock pursuant to Subsection 4 immediately prior to such liquidation, dissolution or winding up disregarding for these purposes the limitations on conversion due to beneficial ownership set forth in
Subsection 4.1.2.
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2.1.2 If upon any such liquidation, dissolution or winding up of the Corporation, the assets of
the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series E Preferred Stock the full amount to which they shall be entitled under this Subsection 2.1, the holders of shares of
Series E Preferred Stock shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all
amounts payable on or with respect to such shares were paid in full.
2.2 Payments to Holders of Common Stock Upon Liquidation. In
the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, after the payment of all preferential amounts required to be paid to the holders of shares of Series E Preferred Stock and subject to any other
distribution that may be required with respect to any other series of Preferred Stock, the remaining assets of the Corporation available for distribution to its stockholders shall be distributed among the holders of shares of Common Stock and any
class or series of capital stock that participates with the Common Stock in such distributions.
2.3 Sale of the Corporation.
2.3.1 In the event of a Sale of the Corporation (as defined below) after payment shall be made to the holders of Series A Convertible
Preferred Stock, Series D Convertible Preferred Stock and any other class of capital stock of the Corporation ranking senior to the Series E Preferred Stock upon a Sale of the Corporation, the remaining assets of the Corporation available for
distribution to its stockholders shall be distributed among the holders of the shares of Series E Preferred Stock and Common Stock pro rata based on the number of shares held by each such holder, treating for this purpose all such securities as if
they had been converted to Common Stock pursuant to the terms of the Certificate of Incorporation immediately prior to such Sale of the Corporation disregarding for these purposes the limitations on conversion due to beneficial ownership set forth
in Subsection 4.1.2.
2.3.2 The term Sale of the Corporation shall mean each of the following events: (a) a merger
or consolidation in which (i) the Corporation is a constituent party or (ii) a subsidiary of the Corporation is a constituent party and the Corporation issues shares of its capital stock pursuant to such merger or consolidation (except in
the case of clause (i) and (ii), any such merger or consolidation involving the Corporation or a subsidiary in which the shares of capital stock of the Corporation outstanding immediately prior to such merger or consolidation continue to
represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock of (y) the surviving or resulting
corporation or (z) if the surviving or resulting corporation is a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation; or
(b) the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Corporation or any subsidiary of the Corporation of all or substantially all the assets of the Corporation
and its subsidiaries taken as a whole, or the sale or disposition (whether by merger or otherwise) of one or more subsidiaries of the Corporation if substantially all of the assets of the
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Corporation and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition is to a wholly owned
subsidiary of the Corporation. For the purposes of clarity, a Sale of the Corporation shall not be deemed to be a liquidation, dissolution or winding up of the Corporation for the purposes of this Section 2.
3. Voting.
3.1 Unless and
until the stockholders of the Corporation approve the Nasdaq Proposal (as defined by and in accordance with Section 5.11(B) of the Series E Purchase Agreement), the holders of the Series E Preferred Stock shall have no voting rights with
respect to any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of stockholders of the Corporation or otherwise, except as otherwise required by applicable law or regulation. Subject to and
effective upon the date that the stockholders of the Corporation approve the Nasdaq Proposal, on any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of stockholders of the Corporation, each
holder of outstanding shares of Series E Preferred Stock shall be entitled to cast a number of votes equal to the lesser of (a) the number of whole shares of Common Stock into which the shares of Series E Preferred Stock held by such holder are
convertible as of the record date for determining stockholders entitled to vote on such matter and (b) the product of the Voting Adjustment Percentage (as defined below) multiplied by the number of whole shares of Common Stock into which the
shares of Series E Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter. Except as provided by law or by the other provisions of the Certificate of Incorporation,
holders of Series E Preferred Stock shall vote together, as a single class, with the holders of Common Stock, Series D Convertible Preferred Stock and any other series or class of the stock of the Corporation that votes together with the holders of
Common Stock. The Voting Adjustment Percentage is determined in accordance with the formula below:
For purposes of the foregoing formula, the following definitions shall apply:
(a) A shall mean the number of shares of Common Stock then issued and outstanding plus the number of shares of Common Stock then
issuable upon conversion of the Series D Preferred Stock then issued and outstanding and any other series of Preferred Stock (other than the Series E Preferred Stock) then issued and outstanding, and entitled to vote on any matter presented to the
stockholders of the Corporation for their action or consideration at any meeting of stockholders of the Corporation;
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(b) B shall mean the number of shares of Common Stock then issued and outstanding
plus the number of shares of Common Stock then issuable upon conversion of the Series D Preferred Stock then issued and outstanding and any other series of Preferred Stock (other than the Series E Preferred Stock) then issued and outstanding, and
entitled to vote on any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of stockholders of the Corporation, in each case held by any holders of Series E Preferred Stock or an affiliate of any
holders of Series E Preferred Stock;
(c) C shall mean the number of shares of Common Stock then issuable upon conversion of
the Series E Preferred Stock then issued and outstanding; and
(d) X shall mean the Voting Adjustment Percentage.
3.2 Series E Preferred Stock Protective Provisions. At any time when at least 84,849 shares of Series E Preferred Stock (subject to
appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series E Preferred Stock) are outstanding, the Corporation shall not, either directly or indirectly by
amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or the Certificate of Incorporation) the written consent or affirmative vote of the holders of at least 51% of the then
outstanding shares of Series E Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) as a separate class, and any such act or transaction entered into without such consent or vote shall be null and void
ab initio, and of no force or effect:
3.2.1 amend, alter or repeal any provision of the Certificate of Incorporation or bylaws of the
Corporation in a manner that adversely and uniquely affects the powers, preferences or rights of the Series E Preferred Stock;
3.2.2
purchase or redeem (or permit any subsidiary to purchase or redeem) or pay or declare any dividend or make any distribution on, any shares of capital stock of the Corporation other than (i) redemptions of or dividends or distributions on the
Series A Preferred Stock and Series D Preferred Stock, (ii) dividends or other distributions payable on the Common Stock solely in the form of additional shares of Common Stock, (iii) repurchases of stock from former employees, officers,
directors, consultants or other persons who performed services for the Corporation or any subsidiary in connection with the cessation of such employment or service at the lower of the original purchase price or the then-current fair market value
thereof pursuant to agreements between such persons and the Corporation or (iv) redemptions under Subsection 5 below; or
3.2.3
recapitalize or reclassify any of the Common Stock.
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4. Optional Conversion.
The holders of the Series E Preferred Stock shall have conversion rights as follows (the Conversion Rights):
4.1 Right to Convert.
4.1.1 Termination of Conversion Rights. In the event of a notice of redemption of any shares of Series E Preferred Stock pursuant to
Subsection 5, the Conversion Rights of the shares designated for redemption shall terminate at the close of business on the last full day preceding the date fixed for redemption, unless the redemption price is not fully paid on such
redemption date, in which case the Conversion Rights for such shares shall continue until such price is paid in full. In the event of a liquidation, dissolution or winding up of the Corporation or a Sale of the Corporation, the Conversion Rights
shall terminate at the close of business on the last full day preceding the date fixed for the payment of any such amounts distributable on such event to the holders of Series E Preferred Stock.
4.1.2 Conversion Ratio. Each share of Series E Preferred Stock shall be convertible, at the option of the holder thereof, at any time
and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Series E Original Issue Price by the Series E
Conversion Price (as defined below) in effect at the time of conversion. The Series E Conversion Price shall initially be equal to $0.70. Such initial Series E Conversion Price, and the rate at which shares of Series E Preferred
Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below. Notwithstanding the foregoing, the Corporation shall not effect any conversion of such holders Series E Preferred Stock and such holder shall
not be entitled to convert its shares of Series E Preferred Stock for a number of shares of Common Stock in excess of that number of shares of Common Stock which, upon giving effect to such conversion, would cause (a) the aggregate number of
shares of Common Stock beneficially owned by a holder of Series E Preferred Stock and its affiliates and any other persons whose beneficial ownership of Common Stock would be aggregated with the holders for purposes of Section 13(d) of
the Securities Exchange Act of 1934, as amended (the Exchange Act) to exceed 19.99% of the total number of issued and outstanding shares of Common Stock of the Corporation (including for such purpose the shares of Common Stock
issuable upon conversion of the Series E Preferred Stock) following such conversion, or (b) the combined voting power of the securities of the Corporation beneficially owned by a holder of Series E Preferred Stock and its affiliates and any
other persons whose beneficial ownership of Common Stock would be aggregated with the holders for purposes of Section 13(d) of the Exchange Act to exceed 19.99% of the combined voting power of all of the securities of the Corporation then
outstanding following such conversion, unless, in either case, the stockholders of the Corporation approve the Nasdaq Proposal, in which case, the 19.99% limitation under clause (a) and clause (b) of this Section 4.1.2 shall be
increased, with respect to any holder of Series E Preferred Stock, to 35% for purposes of both clause (a) and clause (b) of this Section 4.1.2. For purposes of this Section 4.1.2, the aggregate number of shares of
Common Stock or voting securities beneficially owned by the holder and its affiliates and any other persons whose beneficial ownership of Common Stock would be aggregated with the holders for purposes of Section 13(d) of the
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Exchange Act shall include the shares of Common Stock issuable upon the conversion of the Series E Preferred Stock with respect to which such determination is being made, but shall exclude the
number of shares of Common Stock which would be issuable upon exercise or conversion of the unexercised, non-converted or non-cancelled portion of any other securities
of the Corporation that do not have voting power (including without limitation any securities of the Corporation which would entitle the holder thereof to acquire at any time Common Stock, including without limitation any debt, preferred stock,
right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock), subject to a limitation on conversion or exercise analogous to
the limitation contained herein beneficially owned by the holder or any of its affiliates and other persons whose beneficial ownership of Common Stock would be aggregated with the holders for purposes of Section 13(d) of the Exchange Act.
4.2 Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Series E Preferred Stock. In
lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the Market Price of a share of Common Stock. Whether or not fractional shares would be issuable upon
such conversion shall be determined on the basis of the total number of shares of Series E Preferred Stock the holder is at the time converting into Common Stock and the aggregate number of shares of Common Stock issuable upon such conversion. The
Market Price of the Common Stock shall be determined as follows: if the Common Stock is listed on a national securities exchange or another nationally recognized trading system, the Market Price per share of Common Stock shall be
deemed to be the greater of (a) the 20 consecutive trading day average closing price per share of the Common Stock ending on the trading day immediately prior to the date of determination and (b) the closing price of the Common Stock on
the trading day immediately prior to the date of determination; and if the Common Stock is not listed on a national securities exchange or another nationally recognized trading system, the Market Price per share of Common Stock shall be deemed to be
the amount most recently determined by the Board to represent the fair market value per share of the Common Stock (including without limitation a determination for purposes of granting Common Stock options or issuing Common Stock under any plan,
agreement or arrangement with employees of the Corporation). Upon request of a holder of Series E Preferred Stock, the Board (or a representative thereof) shall, as promptly as reasonably practicable but in any event not later than 10 days after
such request, notify the holder of the Market Price and furnish the holder with reasonable documentation of the Boards determination of such Market Price. Notwithstanding the foregoing, if the Board has not made such a determination within the
three-month period prior to the date of determination, then the Board shall make, and shall provide or cause to be provided to the holder notice of, a determination of the Market Price within 15 days of a request by the holder that it do so.
4.3 Mechanics of Conversion.
4.3.1 Notice of Conversion. In order for a holder of Series E Preferred Stock to voluntarily convert shares of Series E Preferred Stock
into shares of Common Stock, such holder shall surrender the certificate or certificates for such shares of Series E Preferred Stock (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate
affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate), at the office of the
transfer agent for the Series E Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent), together with written notice that such holder elects to convert all or any number of the shares of
the Series E Preferred Stock represented by such certificate or certificates and, if applicable, any event on which such conversion is contingent. Such notice shall state such holders name or the names of the nominees in which such holder
wishes the certificate or certificates for shares of Common Stock to be issued. If required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form
satisfactory to the Corporation, duly executed by the registered holder or his, her or its attorney duly authorized in writing. The close of business on the date of receipt by the transfer agent (or by the Corporation if the Corporation serves as
its own transfer agent) of such certificates (or lost certificate affidavit and agreement) and notice shall be the time of conversion (the Conversion Time), and the shares of Common Stock issuable upon conversion of the shares
represented by such certificate shall be deemed to be outstanding of record as of such date. The Corporation shall, as soon as practicable after the Conversion Time, (i) issue and deliver to such holder of Series E Preferred Stock, or to his,
her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion in accordance with the provisions hereof and a certificate for the number (if any) of the shares of Series E Preferred
Stock represented by the surrendered certificate that were not converted into Common Stock, (ii) pay in cash such amount as provided in Subsection 4.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such
conversion and (iii) subject to applicable law, pay all accrued or declared but unpaid dividends on the shares of Series E Preferred Stock converted.
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4.3.2 Reservation of Shares. The Corporation shall at all times when the Series E
Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Series E Preferred Stock, such number of its duly authorized shares of Common Stock
as shall from time to time be sufficient to effect the conversion of all outstanding Series E Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all
then outstanding shares of the Series E Preferred Stock, the Corporation shall 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
purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to the Certificate of Incorporation. Before taking any action which would cause an adjustment reducing the
Series E Conversion Price below the then par value of the shares of Common Stock issuable upon conversion of the Series E Preferred Stock, the Corporation will take any corporate action which may, in the opinion of its counsel, be necessary in order
that the Corporation may validly and legally issue fully paid and nonassessable shares of Common Stock at such adjusted Series E Conversion Price.
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4.3.3 Effect of Conversion. All shares of Series E Preferred Stock which shall have been
surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate at the Conversion Time, except only the right of the holders thereof to
receive shares of Common Stock in exchange therefor, to receive payment in lieu of any fraction of a share otherwise issuable upon such conversion as provided in Subsection 4.2 and to receive payment of any dividends accrued or declared but
unpaid thereon. Any shares of Series E Preferred Stock so converted shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder
action) as may be necessary to reduce the authorized number of shares of Series E Preferred Stock accordingly.
4.3.4 No Further
Adjustment. Upon any such conversion, no adjustment to the Series E Conversion Price shall be made for any declared but unpaid dividends on the Series E Preferred Stock surrendered for conversion or on the Common Stock delivered upon conversion.
4.3.5 Taxes. The Corporation shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or
delivery of shares of Common Stock upon conversion of shares of Series E Preferred Stock pursuant to this Section 4. The Corporation shall not, however, 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 in a name other than that in which the shares of Series E Preferred Stock so converted were registered, and no such issuance or delivery shall be made unless and until the person or entity
requesting such issuance has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid.
4.4 Adjustment for Stock Splits and Combinations. If the Corporation shall at any time or from time to time after the Series E Original
Issue Date effect a subdivision of the outstanding Common Stock, the Series E Conversion Price in effect immediately before that subdivision shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of
each share of such series shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding. If the Corporation shall at any time or from time to time after the Series E Original Issue Date combine the
outstanding shares of Common Stock, the Series E Conversion Price in effect immediately before the combination shall be proportionately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall
be decreased in proportion to such decrease in the aggregate number of shares of Common Stock outstanding. Any adjustment under this subsection shall become effective at the close of business on the date the subdivision or combination becomes
effective.
4.5 Adjustment for Certain Dividends and Distributions. In the event the Corporation at any time or from time to time
after the Series E Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable on the Common Stock in additional shares of Common Stock,
then and in each such
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event the Series E Conversion Price in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the
close of business on such record date, by multiplying the Series E Conversion Price then in effect by a fraction:
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(1) |
the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and |
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(2) |
the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares
of Common Stock issuable in payment of such dividend or distribution. |
Notwithstanding the foregoing, (a) if such record date shall
have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Series E Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter
the Series E Conversion Price shall be adjusted pursuant to this subsection as of the time of actual payment of such dividends or distributions; and (b) no such adjustment shall be made if the holders of Series E Preferred Stock simultaneously
receive a dividend or other distribution of shares of Common Stock in a number equal to the number of shares of Common Stock as they would have received if all outstanding shares of Series E Preferred Stock had been converted into Common Stock on
the date of such event.
4.6 Adjustments for Other Dividends and Distributions. In the event the Corporation at any time or from
time to time after the Series E Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation (other than
a distribution of shares of Common Stock in respect of outstanding shares of Common Stock) or in other property and the provisions of Subsection 1 do not apply to such dividend or distribution, then and in each such event the holders of
Series E Preferred Stock shall receive, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities or other property in an amount equal to the amount of such securities or other property
as they would have received if all outstanding shares of Series E Preferred Stock had been converted into Common Stock on the date of such event.
4.7 Adjustment for Merger or Reorganization, etc. Subject to the provisions of Subsection 2.3, if there shall occur any
reorganization, recapitalization, reclassification, consolidation or merger involving the Corporation in which the Common Stock (but not the Series E Preferred Stock) is converted into or exchanged for securities, cash or other property (other than
a transaction covered by Subsections 4.5 or 4.6), then, following any such reorganization, recapitalization, reclassification, consolidation or merger, each share of Series E Preferred Stock shall thereafter be convertible in lieu of
the Common Stock into which it was convertible prior to
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such event into the kind and amount of securities, cash or other property which a holder of the number of shares of Common Stock of the Corporation issuable upon conversion of one share of Series
E Preferred Stock immediately prior to such reorganization, recapitalization, reclassification, consolidation or merger would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in
good faith by the Board) shall be made in the application of the provisions in this Section 4 with respect to the rights and interests thereafter of the holders of the Series E Preferred Stock, to the end that the provisions set forth in
this Section 4 (including provisions with respect to changes in and other adjustments of the Series E Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property
thereafter deliverable upon the conversion of the Series E Preferred Stock.
4.8 Certificate as to Adjustments. Upon the occurrence
of each adjustment or readjustment of the Series E Conversion Price pursuant to this Section 4, the Corporation at its expense shall, as promptly as reasonably practicable but in any event not later than 10 days thereafter, compute such
adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Series E Preferred Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property
into which the Series E Preferred Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, as promptly as reasonably practicable after the written request at any time of any
holder of Series E Preferred Stock (but in any event not later than 10 days thereafter), furnish or cause to be furnished to such holder a certificate setting forth (i) the Series E Conversion Price then in effect, and (ii) the number of
shares of Common Stock and the amount, if any, of other securities, cash or property which then would be received upon the conversion of Series E Preferred Stock.
4.9 Notice of Record Date. In the event:
(a) the Corporation shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon
conversion of the Series E Preferred Stock) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of capital stock of any class or any other
securities, or to receive any other security; or
(b) of any capital reorganization of the Corporation, any reclassification of the Common
Stock of the Corporation, or any consolidation or merger of the Corporation; or
(c) of the voluntary or involuntary dissolution,
liquidation or winding-up of the Corporation,
then, and in each such case, the Corporation will send or cause to
be sent to the holders of the Series E Preferred Stock a notice specifying, as the case may be, (i) the record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii) the
effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is proposed to take place, and the time, if any is to be fixed, as of
which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon the conversion of the Series E Preferred Stock) shall be entitled to exchange their shares of Common Stock (or such other capital stock
or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up, and the amount per share and
character of such exchange applicable to the Series E Preferred Stock and the Common Stock. Such notice shall be sent at least 10 days prior to the record date or effective date for the event specified in such notice.
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5. Redemption by Corporation.
5.1 Redemption. Shares of Series E Preferred Stock may be redeemed by the Corporation out of funds lawfully available therefor at a
price equal to the Series E Original Issue Price per share, plus all accrued or declared but unpaid dividends thereon (the 5.1 Redemption Price), at any time after the later of (i) November 9, 2014 and (ii) the date
that no shares of Series D Preferred Stock remain outstanding, if the closing sales price of the Common Stock for 20 or more trading days in a period of 30 consecutive trading days is equal to or greater than 400% of the Series E Conversion Price;
provided, that the Corporation provides written notice of such redemption to each holder of Series E Preferred Stock within 30 days of the end of such 30 consecutive trading day period (the 5.1 Redemption Notice). The Corporation
shall send the 5.1 Redemption Notice to each holder of record of Series E Preferred Stock not less than 30 days prior to the date fixed by the Corporation for such redemption (the 5.1 Redemption Date). The 5.1 Redemption Notice
shall state:
(a) the 5.1 Redemption Date and the 5.1 Redemption Price;
(b) the date upon which the holders right to convert such shares terminates (as determined in accordance with Subsection 4.1);
and
(c) that the holder is to surrender to the Corporation, in the manner and at the place designated, his, her or its certificate or
certificates representing the shares of Series E Preferred Stock to be redeemed pursuant to this Section 5.1.
Notwithstanding anything to the
contrary set forth in this Section 5, the Corporation may not exercise its right of redemption pursuant to this Section 5.1 with respect to any shares of Series E Preferred Stock which the holder thereof may not convert into
Common Stock pursuant to Subsection 4.1 as a result of the beneficial ownership limitations set forth therein (each such share, a Nonredeemable Series E Share and collectively, the Nonredeemable Series E
Shares).
5.2 Alternative Redemption. In the event that the Corporation exercises its redemption rights under
Subsection 5.1 but is unable to redeem all of the shares of Series E Preferred Stock in accordance with the last sentence of Subsection 5.1, then the Corporation may redeem all or a portion of the Nonredeemable Series E Shares at a
price per Nonredeemable Series E Share equal to the greater of (a) the 20 consecutive trading day average closing price per share of the Common Stock ending on the trading day immediately prior to the 5.1 Redemption Date plus any dividends
accrued or declared but unpaid thereon and (b) the Series E Conversion Price plus any dividends accrued or declared but unpaid thereon (the 5.2 Redemption Price and, together with the 5.1 Redemption Price, the
Redemption Prices); provided, that the Corporation provides written notice of such redemption to each holder of Series E Preferred Stock within 30 days following the 5.1 Redemption Date (the 5.2 Redemption
Notice and, together with the 5.1 Redemption Notice, the Redemption Notices). The Corporation shall send the 5.2 Redemption Notice to each holder of record of Series E Preferred Stock not less than 30 days prior to the
date fixed by the Corporation for such redemption (the 5.2 Redemption Date and, together with the 5.1 Redemption Date, the Redemption Dates).
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The 5.2 Redemption Notice shall state:
(a) the 5.2 Redemption Date and the 5.2 Redemption Price;
(b) the number of Nonredeemable Series E Shares (as determined in accordance with Subsection 4.1); and
(c) that the holder is to surrender to the Corporation, in the manner and at the place designated, his, her or its certificate or certificates
representing the Nonredeemable Series E Shares of Series E Preferred Stock to be redeemed pursuant to this Section 5.2.
5.3
Surrender of Certificates; Payment. On or before a Redemption Date, each holder of shares of Series E Preferred Stock to be redeemed on such Redemption Date, unless such holder has exercised his, her or its right to convert such shares as
provided in Subsection 4, shall surrender the certificate or certificates representing such shares (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement
reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation, in the manner and at the
place designated in the notice from the Corporation, and thereupon the applicable Redemption Price for such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof. In the event
less than all of the shares of Series E Preferred Stock represented by a certificate are redeemed, a new certificate representing the unredeemed shares of Series E Preferred Stock shall promptly be issued to such holder.
5.4 Rights Subsequent to Redemption. If a Redemption Notice shall have been duly given, and if on the applicable Redemption Date the
applicable Redemption Price payable upon redemption of the shares of Series E Preferred Stock to be redeemed on such Redemption Date is paid or tendered for payment or deposited with an independent payment agent so as to be available therefor in a
timely manner, then notwithstanding that the certificates evidencing any of the shares of Series E Preferred Stock so called for redemption on such Redemption Date shall not have been surrendered, dividends with respect to such shares of Series E
Preferred Stock shall cease to accrue after such Redemption Date and all rights with respect to such shares shall forthwith after such Redemption Date terminate, except only the right of the holders to receive the applicable Redemption Price without
interest upon surrender of their certificate or certificates therefor.
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5.5 Redemption Approval. Notwithstanding anything to the contrary set forth in this
Section 5, no redemptions may be effected by the Corporation pursuant to Subsection 5.1 or Subsection 5.2 unless and until such redemption has been approved by a majority in number of the directors of the Corporation that are not affiliated
with any holder of the Series E Preferred Stock or the Warrants (as defined in the Series E Purchase Agreement) and were not elected as a director of the Corporation as a result of being nominated or submitted for consideration by any holder of the
Series E Preferred Stock or Warrants or any affiliate thereof.
6. Redeemed or Otherwise Acquired Shares. Any shares of Series E
Preferred Stock that are redeemed or otherwise acquired (including pursuant to Subsection 5.4) by the Corporation or any of its subsidiaries shall be automatically and immediately cancelled and retired and shall not be reissued, sold or
transferred. Neither the Corporation nor any of its subsidiaries may exercise any voting or other rights granted to the holders of Series E Preferred Stock following redemption.
7. Waiver. Any of the rights, powers, preferences and other terms of the Series E Preferred Stock set forth herein may be waived on
behalf of all holders of Series E Preferred Stock by the affirmative written consent or vote of the holders of at least a majority of the then outstanding Series E Preferred Stock.
8. Notices. Any notice required or permitted to be given to a holder of shares of Series E Preferred Stock shall be mailed, postage
prepaid, to the post office address last shown on the records of the Corporation, or given by electronic communication in compliance with the provisions of the General Corporation Law, and shall be deemed sent upon such mailing or electronic
transmission.
IN WITNESS WHEREOF, this Certificate of Designations has been executed by a duly authorized officer of this
corporation on this 9th day of November, 2012.
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By: |
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/s/ Sudhir Agrawal |
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Chief Executive Officer |
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IDERA PHARMACEUTICALS, INC.
CERTIFICATE OF ELIMINATION
OF NUMBER OF SHARES OF PREFERRED STOCK DESIGNATED AS SERIES C
JUNIOR PARTICIPATING PREFERRED STOCK PREFERRED STOCK
Idera Pharmaceuticals, Inc. (hereinafter called the Corporation), pursuant to the authority conferred upon the Board of Directors
of the Corporation (the Board) by the Corporations Restated Certificate of Incorporation, as amended (the Certificate of Incorporation), and in accordance with the provisions of Section 151(g) of the General Corporation
Law of the State of Delaware (the Delaware Law), certifies that the Board duly adopted the following resolution:
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RESOLVED: |
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That no shares of the Corporations Series C Junior Participating Preferred Stock (the Series C Preferred Stock) are outstanding and no shares of Series C Preferred Stock will be issued subject to the Certificate of
Designation, Preferences and Rights of Series C Preferred Stock, dated December 10, 2001, as amended, with respect to such series (the Series C Certificate of Designation); and that the Proper Officers be and hereby are authorized and
directed in the name and on behalf of the Corporation to execute and file a certificate with the Secretary of State of the State of Delaware pursuant to Section 151(g) of the Delaware Law setting forth the text of this resolution, upon the filing
and effectiveness of which all matters as set forth in the Series C Certificate of Designation shall be deemed to have been eliminated from the Restated Certificate and the 200,000 shares of Preferred Stock previously designated as Series C
Preferred Stock shall resume their status as undesignated shares of Preferred Stock available for future issuance in accordance with the Restated Certificate. |
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed by its duly
authorized officer this 17th day of June, 2013.
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IDERA PHARMACEUTICALS, INC. |
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By: |
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/s/ Sudhir Agrawal |
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Sudhir Agrawal, D. Phil. |
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Chairman of the Board of Directors, |
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President and Chief Executive Officer |
IDERA PHARMACEUTICALS, INC.
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF
SERIES D PREFERRED STOCK
Pursuant to
Section 242 of the
General Corporation Law of the State of Delaware
Idera Pharmaceuticals, Inc., a Delaware corporation (the Corporation), in accordance with Section 103 of the General
Corporation Law of the State of Delaware (the General Corporation Law), hereby certifies as follows:
A Certificate of
Designations, Preferences and Rights of Series D Preferred Stock (the Certificate of Designations) was filed with the Secretary of State of the State of Delaware on November 4, 2011 pursuant to Section 151 of the General
Corporation Law. By action of the Board of Directors of the Corporation, the Board of Directors of the Corporation duly adopted resolutions, pursuant to Section 242 of the General Corporation Law, setting forth amendments to the Certificate of
Designations and declaring said amendment to be advisable. The stockholders of the Corporation duly approved said proposed amendments in accordance with Section 242 of the General Corporation Law at a meeting of stockholders held on
July 26, 2013. The resolutions setting forth the proposed amendment are as follows:
RESOLVED, that Section 1.1 of the
Certificate of Designations be deleted in its entirety and that the following paragraph be inserted in lieu thereof:
1.1 Series D Preferred Dividends.
1.1.1 Each holder of Series D Preferred Stock shall be entitled to receive, with respect to each share of Series D Preferred
Stock then outstanding and held by such holder of Series D Preferred Stock, dividends, commencing from the date of issuance of such share of Series D Preferred Stock, at the rate of seven percent (7%) per annum (on the basis of a 360 day year)
of the Series D Original Issue Price (as defined below) (the Series D Preferred Dividends). The Series D Preferred Dividends shall be cumulative, whether or not earned or declared, shall be paid quarterly in arrears on the last
day of December, March, June and September (a Quarterly Dividend Payment Date) in each year that Series D Preferred Stock is outstanding, with the first Quarterly Dividend Payment Date being December 31, 2011, and shall be
prorated for periods shorter than one quarter. The rights of a holder of Series D Preferred Stock as Series D Preferred Dividends shall rank senior to the rights of the Corporations Series A Convertible Preferred Stock as to dividends.
1.1.2 The Series D Preferred Dividends shall be paid to each holder of Series D Preferred Stock in cash out of legally
available funds or, at the Corporations election, through the issuance of such number of shares of the Corporations Common
Stock, par value $0.001 per share (the Common Stock) (rounded down to the nearest whole share with any fractional shares being issued in cash in an amount equal to the Market
Price (as defined in Section 4.2 below) of such fractional share of Common Stock) determined by dividing the amount of the total accrued but unpaid dividends then outstanding on such holders shares of Series D Preferred Stock by the
Market Price then in effect (which for this purpose may not be less than $1.46 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Common
Stock); provided, however, that (i) the Corporation may not pay such dividends in shares of Common Stock on or prior to October 1, 2013, (ii) the Corporation may not issue shares of Common Stock in excess of that number
of shares of Common Stock which, upon giving effect to such issuance, would cause (a) the aggregate number of shares of Common Stock beneficially owned by a holder of Series D Preferred Stock and its affiliates and any other persons whose
beneficial ownership of Common Stock would be aggregated with the holders for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act), to exceed 19.99% of the total number of
issued and outstanding shares of Common Stock of the Corporation following such issuance, or (b) the combined voting power of the securities of the Corporation beneficially owned by a holder of Series D Preferred Stock and its affiliates and
any other persons whose beneficial ownership of Common Stock would be aggregated with the holders for purposes of Section 13(d) of the Exchange Act to exceed 19.99% of the combined voting power of all of the securities of the Corporation
then outstanding following such issuance, unless and until, in either case of clause (a) and clause (b) of this Section 1.1.2, the stockholders of the Corporation approve the Nasdaq Proposal (as defined by and in accordance with
Section 5.11(B) of that certain Convertible Preferred Stock and Warrant Purchase Agreement, dated November 9, 2012, between the Corporation and the Purchasers named therein), in which case, the 19.99% limitation under clause (a) and
(b) of this Section 1.1.2 shall be increased, with respect to any holder of Series D Preferred Stock, to 35% for purposes of both clause (a) and clause (b) of this Section 1.1.2, and (iii) if clause (ii) shall in
fact limit the issuance of any shares of Common Stock in payment of a given dividend, then the Corporations election to pay such dividend in shares of Common Stock shall be ineffective to the extent of such limitation and such dividend shall
instead thereupon be paid, at the Corporations election, (x) in cash by the Corporation out of legally available funds or (y) through the issuance of a number of shares of the Corporations Series F Convertible Preferred Stock,
par value $0.01 per share (the Series F Preferred Stock) equal to one-twentieth (1/20th) of the number of shares of Common Stock that the Corporation could have issued
pursuant to this Section 1.1.2 with respect to such Series D Preferred Dividends but for the limitations set forth in clause (a) and clause (b) of this Section 1.1.2.
1.1.3 Any election by the Corporation to pay Series D Preferred Dividends in cash or in shares of Common Stock or Series F
Preferred Stock shall be made uniformly with respect to all outstanding shares of Series D Preferred Stock for a given dividend period.
1.1.4 For purposes of this Section 1.1 the aggregate number of shares of Common Stock or voting securities beneficially
owned by a holder of Series D Preferred
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Stock and its affiliates and any other persons whose beneficial ownership of Common Stock would be aggregated with the holders for purposes of Section 13(d) of the Exchange Act, shall
include the shares of Common Stock to be issued as part of such dividend payment, but shall exclude the number of shares of Common Stock which would be issuable upon exercise or conversion of the unexercised, non-converted or non-cancelled portion
of any other securities of the Corporation that do not have voting power (including without limitation any securities of the Corporation which would entitle the holder thereof to acquire at any time Common Stock, including without limitation any
debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock), subject to a limitation on conversion or
exercise analogous to the limitation contained herein beneficially owned by the holder or any of its affiliates and other persons whose beneficial ownership of Common Stock would be aggregated with the holders for purposes of
Section 13(d) of the Exchange Act.
* *
*
RESOLVED, that Section 1.3 of the Certificate of Designations be deleted in its entirety and that the following
paragraph be inserted in lieu thereof:
1.3 The Corporation shall not declare, pay or set aside any dividends on
shares of any other class or series of capital stock of the Corporation (other than dividends on shares of Common Stock payable in shares of Common Stock, dividends on the Series A Convertible Preferred Stock in accordance with Section 2(a) of
the Certificate of Designations for the Series A Convertible Preferred Stock and dividends on the Series E Preferred Stock in accordance with Section 1.1 of the Certificate of Designations for the Series E Convertible Preferred Stock unless the
holders of the Series D Preferred Stock then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Series D Preferred Stock in an amount at least equal to the sum of (i) the amount of the aggregate
dividends then accrued on such share of Series D Preferred Stock and not previously paid and (ii) (A) in the case of a dividend on Common Stock or any class or series that is convertible into Common Stock, that dividend per share of Series
D Preferred Stock as would equal the product of (1) the dividend payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into Common Stock and (2) the number of
shares of Common Stock issuable upon conversion of a share of Series D Preferred Stock, in each case calculated on the record date for determination of holders entitled to receive such dividend or (B) in the case of a dividend on any class or
series that is not convertible into Common Stock, at a rate per share of Series D Preferred Stock determined by (1) dividing the amount of the dividend payable on each share of such class or series of capital stock by the original issuance
price of such class or series of capital stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to such class or series) and (2) multiplying such
fraction by an amount equal to the Series D Original Issue Price; provided that, if the Corporation declares, pays or sets aside, on the same date, a dividend on shares of more than one class or series of capital stock of the Corporation, the
dividend payable to the holders of Series D Preferred Stock pursuant to this Section 1.3 shall be calculated based upon the dividend on the class or series of capital stock that would result in the highest Series D Preferred Stock
dividend.
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RESOLVED, that Section 2.1 of the Certificate of Designations be deleted in its
entirety and that the following paragraph be inserted in lieu thereof:
2.1 Payments to Holders of Series D
Preferred Stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of shares of Series D Preferred Stock then outstanding shall be entitled to be paid out of the assets of the
Corporation available for distribution to its stockholders before any payment shall be made to the holders of Common Stock, Series A Convertible Preferred Stock or any other class of capital stock of the Corporation ranking junior to the Series D
Preferred Stock as to liquidation, by reason of their ownership thereof, an amount per share equal to such amount as would have been payable with respect to such share had all shares of Series D Preferred Stock been converted into Common Stock
pursuant to Section 4 immediately prior to such liquidation, dissolution or winding up, disregarding for these purposes the limitations on conversion due to beneficial ownership set forth in Subsection 4.1.1. If upon any such
liquidation, dissolution or winding up of the Corporation, the assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series D Preferred Stock the full amount to which they
shall be entitled under this Subsection 2.1, the holders of shares of Series D Preferred Stock shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be
payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.
* *
*
RESOLVED, that Section 4.1.1 of the Certificate of Designations be deleted in its entirety and that the following
paragraph be inserted in lieu thereof:
4.1.1 Conversion Ratio. Each share of Series D Preferred Stock shall
be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and nonassessable shares of Common Stock as is
determined by dividing the Series D Original Issue Price by the Series D Conversion Price (as defined below) in effect at the time of conversion. The Series D Conversion Price shall initially be equal to $1.6275. Such initial Series D
Conversion Price, and the rate at which shares of Series D Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below. Notwithstanding the foregoing, the Corporation shall not effect any conversion
of such holders Series D Preferred Stock and such holder shall not be entitled to convert its shares of Series D Preferred Stock for a number of shares of Common Stock in excess of that number of shares of Common Stock which, upon giving
effect to such conversion, would cause (a) the aggregate number of shares of Common Stock beneficially owned by a holder of Series D Preferred Stock and its affiliates and
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any other persons whose beneficial ownership of Common Stock would be aggregated with the holders for purposes of Section 13(d) of the Exchange Act to exceed 19.99% of the total number
of issued and outstanding shares of Common Stock of the Corporation (including for such purpose the shares of Common Stock issuable upon conversion of the Series D Preferred Stock) following such conversion, or (b) the combined voting power of
the securities of the Corporation beneficially owned by a holder of Series D Preferred Stock and its affiliates and any other persons whose beneficial ownership of Common Stock would be aggregated with the holders for purposes of
Section 13(d) of the Exchange Act to exceed 19.99% of the combined voting power of all of the securities of the Corporation then outstanding following such conversion, unless, in either case, the stockholders of the Corporation approve the
Nasdaq Proposal, in which case, the 19.99% limitation under clause (a) and clause (b) of this Section 4.1.1 shall be increased, with respect to any holder of Series D Preferred Stock, to 35% for purposes of both clause (a) and
clause (b) of this Section 4.1.1. For purposes of this Section 4.1.1, the aggregate number of shares of Common Stock or voting securities beneficially owned by the holder and its affiliates and any other persons whose beneficial
ownership of Common Stock would be aggregated with the holders for purposes of Section 13(d) of the Exchange Act shall include the shares of Common Stock issuable upon the conversion of the Series D Preferred Stock with respect to which
such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon exercise or conversion of the unexercised, non-converted or non-cancelled portion of any other securities of the Corporation that
do not have voting power (including without limitation any securities of the Corporation which would entitle the holder thereof to acquire at any time Common Stock, including without limitation any debt, preferred stock, right, option, warrant or
other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock), subject to a limitation on conversion or exercise analogous to the limitation contained
herein beneficially owned by the holder or any of its affiliates and other persons whose beneficial ownership of Common Stock would be aggregated with the holders for purposes of Section 13(d) of the Exchange Act.
* *
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RESOLVED, that Section 4.1.2 of the Certificate of Designations be deleted in its entirety and that the following
paragraph be inserted in lieu thereof:
4.1.2 Termination of Conversion Rights. In the event of a notice of
redemption of any shares of Series D Preferred Stock pursuant to Section 5, the Conversion Rights of the shares designated for redemption shall terminate at the close of business on the last full day preceding the date fixed for redemption,
unless the redemption price is not fully paid on such redemption date, in which case the Conversion Rights for such shares shall continue until such price is paid in full. In the event of a liquidation, dissolution or winding up of the Corporation
or a Sale of the Corporation (as defined in Section 6.2 below), the Conversion Rights shall terminate at the close of business on the last full day preceding the date fixed for the payment of any such amounts distributable on such event to the
holders of Series D Preferred Stock.
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RESOLVED, that Section 6 of the Certificate of Designations be deleted in its
entirety and that the following paragraph be inserted in lieu thereof:
6. Sale of the Corporation.
6.1 In the event of a Sale of the Corporation (as defined below) after payment shall be made to the holders of Series A
Convertible Preferred Stock and any other class of capital stock of the Corporation ranking senior to the Series D Preferred Stock upon a Sale of the Corporation, the remaining assets of the Corporation available for distribution to its stockholders
shall be distributed among the holders of the shares of Series D Preferred Stock, Series E Preferred Stock and Common Stock pro rata based on the number of shares held by each such holder, treating for this purpose all such securities as if they had
been converted to Common Stock pursuant to the terms of the Certificate of Incorporation immediately prior to such Sale of the Corporation disregarding for these purposes the limitations on conversion due to beneficial ownership set forth in
Subsection 4.1.1.
6.2 The term Sale of the Corporation shall mean each of the following events:
(a) a merger or consolidation in which (i) the Corporation is a constituent party or (ii) a subsidiary of the Corporation is a constituent party and the Corporation issues shares of its capital stock pursuant to such merger or
consolidation (except in the case of clause (i) and (ii), any such merger or consolidation involving the Corporation or a subsidiary in which the shares of capital stock of the Corporation outstanding immediately prior to such merger or
consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock of (y) the
surviving or resulting corporation or (z) if the surviving or resulting corporation is a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting
corporation; or (b) the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Corporation or any subsidiary of the Corporation of all or substantially all the assets of
the Corporation and its subsidiaries taken as a whole, or the sale or disposition (whether by merger or otherwise) of one or more subsidiaries of the Corporation if substantially all of the assets of the Corporation and its subsidiaries taken as a
whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition is to a wholly owned subsidiary of the Corporation. For the purposes of clarity, a Sale of the Corporation shall not
be deemed to be a liquidation, dissolution or winding up of the Corporation for the purposes of this Section 6.
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IN WITNESS WHEREOF, this Certificate of Amendment has been executed by a duly authorized officer
of the Corporation on this 26th day of July, 2013.
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IDERA PHARMACEUTICALS, INC. |
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By: |
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/s/ Sudhir Agrawal |
Name: |
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Sudhir Agrawal |
Title: |
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Chief Executive Officer |
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IDERA PHARMACEUTICALS, INC.
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF
SERIES E PREFERRED STOCK
Pursuant to
Section 242 of the
General Corporation Law of the State of Delaware
Idera Pharmaceuticals, Inc., a Delaware corporation (the Corporation), in accordance with Section 103 of the General
Corporation Law of the State of Delaware (the General Corporation Law), hereby certifies as follows:
A Certificate of
Designations, Preferences and Rights of Series E Preferred Stock (the Certificate of Designations) was filed with the Secretary of State of the State of Delaware on November 9, 2012 pursuant to Section 151 of the General
Corporation Law. By action of the Board of Directors of the Corporation, the Board of Directors of the Corporation duly adopted resolutions, pursuant to Section 242 of the General Corporation Law, setting forth amendments to the Certificate of
Designations and declaring said amendment to be advisable. The stockholders of the Corporation duly approved said proposed amendments in accordance with Section 242 of the General Corporation Law at a meeting of stockholders held on
July 26, 2013. The resolutions setting forth the proposed amendment are as follows:
RESOLVED, that Section 1.1 of the
Certificate of Designations be deleted in its entirety and the following new paragraph be inserted in lieu thereof:
1.1 Series E
Preferred Dividends.
1.1.1 Each holder of Series E Preferred Stock shall be entitled to receive with respect to each share of Series E
Preferred Stock then outstanding and held by such holder of Series E Preferred Stock, dividends, commencing from the date of issuance of such share of Series E Preferred Stock, at the Initial Dividend Rate (as defined below) per annum (on the basis
of a 360 day year) of the Series E Original Issue Price (as defined below) (the Series E Preferred Dividends); provided, however, that subject to and effective upon the filing with the Delaware Secretary of State of the amendment
to the Certificate of Designations, Preferences and Rights of Series D Preferred Stock (the Series D Certificate of Designations, with the amendment thereto being referred to as the Amendment to Series D Certificate of
Designations) as described in Section 5.11(B) of that certain Convertible Preferred Stock and Warrant Purchase Agreement, dated November 9, 2012, between the Corporation and the purchasers of the Series E Preferred Stock therein
(the Series E Purchase Agreement), the dividend rate provided for in this Section 1.1 shall be increased from the Initial Dividend Rate to the rate of eight percent (8%) per annum (on the basis of a 360 day year) of the
Series E Original Issue Price. The Series E Preferred Dividends shall be cumulative, whether or not earned or declared, shall be paid quarterly in arrears on the last day of March, June, September and December (a Quarterly Dividend Payment
Date) in each year that Series E Preferred Stock is outstanding, with the first Quarterly Dividend Payment Date being March 31, 2013, and shall
be prorated for periods shorter than one quarter. Notwithstanding the foregoing, if, as of any Quarterly Dividend Payment Date at which the dividend rate is the Initial Dividend Rate, there are
no shares of the Corporations Series D Convertible Preferred Stock outstanding, then the dividend payable on such Quarterly Dividend Payment Date shall be calculated and paid at a rate of eight percent (8%) per annum (on the basis of a
360 day year) of the Series E Original Issue Price. In the event that the Amendment to Series D Certificate of Designations is filed with the Delaware Secretary of State and the dividend rate with respect to the Series E Preferred Dividends is
increased pursuant to this Section 1.1.1, the Series E Preferred Dividends paid on the first Quarterly Dividend Payment Date after such filing and increase shall be paid at the increased rate. In the event that the Amendment to Series D
Certificate of Designations is submitted to the stockholders of the Corporation as contemplated by Section 5.11 of the Series E Purchase Agreement and the Amendment to Series D Certificate of Designations is not approved, then the holders of
the Series E Preferred Stock shall no longer be entitled to any Series E Preferred Dividends under this Section 1.1.1 and the Corporation shall have no further obligation to pay the Series E Preferred Dividends under this Section 1.1.1;
provided, however, the Corporation shall not submit the Amendment to the Series D Certificate of Designations to the stockholders if there are no shares of Series D Preferred Stock then outstanding. The rights of a holder of Series E Preferred Stock
to Series E Preferred Dividends shall rank senior to the rights of the Corporations Series A Convertible Preferred Stock and Series D Convertible Preferred Stock as to dividends. The term Initial Dividend Rate shall mean
four and six tenths percent (4.6%) or such other percentage approved by the Corporation and by the holders of at least a majority of then outstanding shares of Series E Preferred Stock, with such approval given in writing or by vote at a
meeting, consenting or voting (as the case may be) as a separate class.
1.1.2 The Series E Preferred Dividends shall be paid to each
holder of Series E Preferred Stock in cash out of legally available funds or, at the Corporations election, through the issuance of such number of shares of Common Stock (as defined in Section 1.3 below) (rounded down to the nearest whole
share with any fractional shares being issued in cash in an amount equal to the Market Price (as defined in Section 4.2 below) of such fractional share of Common Stock) determined by dividing the amount of the total accrued but unpaid dividends
then outstanding on such holders shares of Series E Preferred Stock by the Market Price then in effect (which for this purpose may not be less than $0.70 per share, subject to appropriate adjustment in the event of any stock dividend, stock
split, combination or other similar recapitalization with respect to the Common Stock); provided, however, that (i) the Corporation may not pay such dividends in shares of Common Stock on or prior to October 1, 2013,
(ii) the Corporation may not issue shares of Common Stock in excess of that number of shares of Common Stock which, upon giving effect to such issuance, would cause (a) the aggregate number of shares of Common Stock beneficially owned by a
holder of Series E Preferred Stock and its affiliates and any other persons whose beneficial ownership of Common Stock would be aggregated with the holders for purposes of Section 13(d) of the Exchange Act (as defined in
Section 4.1.2), to exceed 19.99% of the total number of issued and outstanding shares of Common Stock of the Corporation following such issuance, or (b) the combined voting power of the securities of the Corporation beneficially owned by a
holder of Series E Preferred Stock and its affiliates and any other persons whose beneficial ownership of Common Stock would be aggregated with the holders for purposes of Section 13(d) of the Exchange Act to exceed 19.99% of the combined
voting power of all of the securities of the Corporation then outstanding
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following such issuance, unless and until, in either case of clause (a) and clause (b) of this Section 1.1.2, the stockholders of the Corporation approve the Nasdaq Proposal (as
defined in Section 3.1 below), in which case, the 19.99% limitation under clause (a) and (b) of this Section 1.1.2 shall be increased, with respect to any holder of Series E Preferred Stock, to 35% for purposes of both clause
(a) and clause (b) of this Section 1.1.2, and (iii) if clause (ii) shall in fact limit the issuance of any shares of Common Stock in payment of a given dividend, then the Corporations election to pay such dividend in
shares of Common Stock shall be ineffective to the extent of such limitation and such dividend shall instead thereupon be paid, at the Corporations election, (x) in cash by the Corporation out of legally available funds or
(y) through the issuance of a number of shares of the Corporations Series F Convertible Preferred Stock, par value $0.01 per share (the Series F Preferred Stock) equal to one-twentieth (1/20th) of the number of shares of Common Stock that the Corporation could have issued pursuant to this Section 1.1.2 with respect to such Series E Preferred Dividends but for the limitations set
forth in clause (a) and clause (b) of this Section 1.1.2.
1.1.3 Any election by the Corporation to pay Series E Preferred
Dividends in cash or shares of Common Stock and/or Series F Preferred Stock shall be made uniformly with respect to all outstanding shares of Series E Preferred Stock for a given dividend period.
1.1.4 For purposes of this Section 1.1, the aggregate number of shares of Common Stock or voting securities beneficially owned by a
holder of Series E Preferred Stock and its affiliates and any other persons whose beneficial ownership of Common Stock would be aggregated with the holders for purposes of Section 13(d) of the Exchange Act, shall include the shares of
Common Stock to be issued as part of such dividend payment, but shall exclude the number of shares of Common Stock which would be issuable upon exercise or conversion of the unexercised, non-converted or non-cancelled portion of any other securities
of the Corporation that do not have voting power (including without limitation any securities of the Corporation which would entitle the holder thereof to acquire at any time Common Stock, including without limitation any debt, preferred stock,
right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock), subject to a limitation on conversion or exercise analogous to
the limitation contained herein beneficially owned by the holder or any of its affiliates and other persons whose beneficial ownership of Common Stock would be aggregated with the holders for purposes of Section 13(d) of the Exchange
Act.
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RESOLVED, that Section 2.1.1 of the Certificate of Designations be deleted in its entirety and that the following
paragraph be inserted in lieu thereof:
2.1.1 In the event of any voluntary or involuntary liquidation, dissolution or winding up of
the Corporation, the holders of shares of Series E Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders before any payment shall be made to the holders of
Common Stock, Series A Convertible Preferred Stock, Series D Convertible Preferred Stock or any other class of capital stock of the Corporation ranking junior to the Series E Preferred Stock as to liquidation, by reason of their ownership thereof,
an amount per share equal to such amount as would have been
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payable with respect to such share had all shares of Series E Preferred Stock been converted into Common Stock pursuant to Subsection 4 immediately prior to such liquidation, dissolution
or winding up disregarding for these purposes the limitations on conversion due to beneficial ownership set forth in Subsection 4.1.2.
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RESOLVED, that Section 2.3.1 of the Certificate of Designations be deleted in its entirety and that the following
paragraph be inserted in lieu thereof:
2.3.1 In the event of a Sale of the Corporation (as defined below) after payment shall be
made to the holders of Series A Convertible Preferred Stock and any other class of capital stock of the Corporation ranking senior to the Series E Preferred Stock upon a Sale of the Corporation, the remaining assets of the Corporation available for
distribution to its stockholders shall be distributed among the holders of the shares of Series E Preferred Stock, Series D Preferred Stock and Common Stock pro rata based on the number of shares held by each such holder, treating for this purpose
all such securities as if they had been converted to Common Stock pursuant to the terms of the Certificate of Incorporation immediately prior to such Sale of the Corporation disregarding for these purposes the limitations on conversion due to
beneficial ownership set forth in Subsection 4.1.2.
* *
*
IN WITNESS WHEREOF, this Certificate of Amendment has been executed by a duly authorized officer of the Corporation on this 26th
day of July, 2013.
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IDERA PHARMACEUTICALS, INC. |
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By: |
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/s/ Sudhir Agrawal |
Name: |
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Sudhir Agrawal |
Title: |
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Chief Executive Officer |
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CERTIFICATE OF AMENDMENT
TO THE
RESTATED
CERTIFICATE OF INCORPORATION
OF
IDERA PHARMACEUTICALS, INC.
Idera Pharmaceuticals, Inc. (hereinafter called the Corporation), organized and existing under and by virtue of the General
Corporation Law of the State of Delaware, does hereby certify as follows:
By action of the Board of Directors of the Corporation at a
meeting held on May 22, 2013, the Board of Directors of the Corporation duly adopted a resolution, pursuant to Section 242 of the General Corporation Law of the State of Delaware, setting forth an amendment to the Restated Certificate of
Incorporation of the Corporation, as amended to date (the Certificate of Incorporation), and declaring said amendment to be advisable. The stockholders of the Corporation duly approved said proposed amendment in accordance with
Section 242 of the General Corporation Law of the State of Delaware at a meeting of stockholders held on July 26, 2013. The resolution setting forth the amendment is as follows:
RESOLVED: That the first paragraph of Article FOURTH of the Certificate of Incorporation be and hereby is amended and restated in
its entirety so that the same shall read as follows:
FOURTH. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is (i) Two Hundred Eighty Million (280,000,000) shares of Common Stock, $.001 par value per share (Common Stock), and (ii) Five Million (5,000,000) shares of Preferred
Stock, $.01 par value per share (Preferred Stock), which may be issued from time to time in one or more series as set forth in Part B of this Article FOURTH.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed by its duly authorized officer this 26th day of
July, 2013.
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IDERA PHARMACEUTICALS, INC. |
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By: |
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/s/ Sudhir Agrawal |
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Sudhir Agrawal, D. Phil. |
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President and Chief Executive Officer |
IDERA PHARMACEUTICALS, INC.
CERTIFICATE OF ELIMINATION
OF NUMBER OF SHARES OF PREFERRED STOCK DESIGNATED AS SERIES D
CONVERTIBLE PREFERRED STOCK
Idera Pharmaceuticals, Inc. (hereinafter called the Corporation), pursuant to the authority conferred upon the Board of Directors
of the Corporation (the Board) by the Corporations Restated Certificate of Incorporation, as amended, and in accordance with the provisions of Section 151(g) of the General Corporation Law of the State of Delaware, certifies
that the Board duly adopted the following resolution:
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RESOLVED: |
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That no shares of the Corporations Series D Convertible Preferred Stock (the Series D Preferred Stock) are outstanding and no shares of Series D Preferred Stock will be issued subject to the Corporations
Certificate of Designation, Preferences and Rights of Series D Preferred Stock, dated November 4, 2011, as amended, with respect to such series (the Series D Certificate of Designation); and that the Proper Officers be and hereby
are authorized and directed in the name and on behalf of the Corporation to execute and file a certificate with the Secretary of State of the State of Delaware pursuant to Section 151(g) of the General Corporation Law of the State of Delaware
setting forth the text of this resolution, upon the filing and effectiveness of which all matters as set forth in the Series D Certificate of Designation shall be deemed to have been eliminated from the Corporations Restated Certificate of
Incorporation, as amended (the Restated Certificate) and the 1,124,260 shares of Preferred Stock previously designated as Series D Preferred Stock shall resume their status as undesignated shares of Preferred Stock available for future
issuance in accordance with the Restated Certificate. |
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed by its duly
authorized officer this 28th day of March, 2014.
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IDERA PHARMACEUTICALS, INC. |
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By: |
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/s/ Sudhir Agrawal |
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Sudhir Agrawal, D. Phil. |
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President and Chief Executive Officer |
IDERA PHARMACEUTICALS, INC.
CERTIFICATE OF ELIMINATION
OF NUMBER OF SHARES OF PREFERRED STOCK DESIGNATED AS SERIES E CONVERTIBLE PREFERRED STOCK
Idera Pharmaceuticals, Inc. (hereinafter called the Corporation), pursuant to the authority conferred upon the Board of Directors
of the Corporation (the Board) by the Corporations Restated Certificate of Incorporation, as amended, and in accordance with the provisions of Section 151(g) of the General Corporation Law of the State of Delaware, certifies
that the Board duly adopted the following resolution:
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RESOLVED: |
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That no shares of the Corporations Series E Convertible Preferred Stock (the Series E Preferred Stock) are outstanding and no shares of Series E Preferred Stock will be issued subject to the Corporations
Certificate of Designation, Preferences and Rights of Series E Preferred Stock, dated November 9, 2012, as amended, with respect to such series (the Series E Certificate of Designation); and that the Proper Officers be and hereby
are authorized and directed in the name and on behalf of the Corporation to execute and file a certificate with the Secretary of State of the State of Delaware pursuant to Section 151(g) of the General Corporation Law of the State of Delaware
setting forth the text of this resolution, upon the filing and effectiveness of which all matters as set forth in the Series E Certificate of Designation shall be deemed to have been eliminated from the Corporations Restated Certificate of
Incorporation, as amended (the Restated Certificate) and the 424,242 shares of Preferred Stock previously designated as Series E Preferred Stock shall resume their status as undesignated shares of Preferred Stock available for future
issuance in accordance with the Restated Certificate. |
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Elimination to be signed by its duly
authorized officer this 12th day of March, 2015.
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IDERA PHARMACEUTICALS, INC. |
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By: |
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/s/ Louis J. Arcudi, III |
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Louis J. Arcudi, III |
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Senior Vice President of Operations, Chief Financial Officer and Treasurer |
Exhibit 10.2
June 5, 2015
Mark J.
Casey
129 West Newton St.
Boston, MA 02118
Dear Mark:
On behalf of Idera Pharmaceuticals, Inc. (the
Company), I am pleased to confirm the following terms of your employment with the Company.
1. |
Employment. You will be employed to serve on a full time basis as the Companys Senior Vice President and General Counsel, effective as of June 29, 2015 (the Commencement
Date). You will be responsible for performing such duties as are consistent with your position, plus such other duties as may from time to time be assigned to you by the Chief Executive Officer. You shall report solely to the Chief Executive
Officer. You agree to devote your full business time, best efforts, skill, knowledge, attention and energies to the advancement of the Companys business and interests and to the performance of your duties and responsibilities as an employee of
the Company. |
2. |
Base Salary and Bonus. |
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(a) |
Your annual base salary shall be $360,000 per year and shall be payable to you at periodic intervals in accordance with the Companys payroll practices for salaried employees. Such base salary may be increased from
time to time in accordance with normal business practices and in the sole discretion of the Company. |
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(b) |
You shall be eligible to receive, for each fiscal year of the Company ending during your employment with the Company, an annual bonus of up to 40% of your annual base salary, whether pursuant to a formal bonus or
incentive plan or program of the Company or otherwise. Such bonus, if any, will be prorated based on your hire date for the first calendar year. Such bonus, if any, will be approved by the Board of Directors or the Compensation Committee of the
Board of Directors (together, the Board) in its sole discretion and will be based on both individual and Company performance objectives as developed and determined by the Company in its sole discretion. Any bonus earned by you and
approved by the Board under this Section 2(b) shall be paid to you no later than March 15th of the calendar year following the calendar year in which such bonus is earned and approved by
the Board under this Section 2. |
Mark Casey
June 5, 2016
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(c) |
All salary, bonus and other compensation payable to you pursuant to this Agreement shall be subject to applicable withholding taxes. |
3. |
Benefit Programs. You may participate in any and all benefit programs that the Company may establish and make available to its employees from time to time, provided you are eligible under (and subject to
all provisions of) the plan documents governing those programs. Such benefits may include medical, dental and retirement plans. Any benefits made available by the Company, and the rules, terms and conditions for participation in such benefit plans,
may be changed by the Company at any time and from time to time without advance notice. |
4. |
Reimbursement of Expenses. The Company shall reimburse you, in accordance with the Companys expense reimbursement policy, for all reasonable travel, entertainment and other expenses incurred or paid
by you in connection with, or related to, the performance of your duties, responsibilities or services under this Agreement, specifically including expenses for travel between offices of the Company, upon presentation by you of appropriate
documentation, expense statements, vouchers and/or such other supporting information as the Company may request and in accordance with Section 11(e) below. |
5. |
Equity. Upon the commencement of your employment with the Company, you will receive a stock option award to purchase 600,000 shares of the Companys common stock, 275,000 options of which will be
considered a non-statutory inducement grant outside the Companys 2013 Stock Incentive Plan. The exercise price will be equal to the fair market value of the Companys common stock on the Commencement Date (the Option). The
Option shall vest over four years with the first installment vesting on the first anniversary of the Commencement Date and the balance of the shares vesting in equal quarterly installments over the remaining three years. The Option shall be
evidenced by an option agreement that is consistent with the form of option agreement generally used by the Company and the terms of this letter. |
6. |
Termination of Employment Period. Your employment by the Company pursuant to this Agreement shall terminate upon the occurrence of any of the following: |
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(a) |
At the election of the Company, for Cause (as defined on Exhibit A), immediately upon written notice by the Company to you, which notice shall identify the Cause upon which the termination is based.
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(b) |
At the election of either party, upon not less than fifteen days prior written notice of termination. |
Mark Casey
June 5, 2016
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7. |
Effect of Termination. |
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(a) |
In the event your employment is terminated pursuant to Section 6(a) or 6(b), the Company shall pay to you the compensation and benefits otherwise payable you under Section 2 through the last day of your actual
employment by the Company. |
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(b) |
In the event that the Company terminates your employment with the Company at any time without Cause pursuant to Section 6(b), then, subject to Section 7(e) the Company shall also (i) continue to pay you
your then current base salary for a period of twelve (12) months, payable in accordance with and at the times contemplated by the Companys then current payroll practices and (ii) pay you any bonus earned by you and approved by the
Board prior to such termination that is then unpaid. |
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(c) |
Notwithstanding Section 7(b) above, and in lieu of any payment owed under Section 7(b), if any, in the event that the Company terminates you without Cause or you resign from employment with the Company for
Good Reason upon a Change in Control (as such terms are defined below) or within the twelve (12) month period following the Change in Control, then, subject to Section 7(e), (i) the Company shall continue to pay you your then current
base salary for a period of twelve (12) months, payable in accordance with and at the times contemplated by the Companys then current payroll practices, (ii) the Company shall pay you any bonus earned by you and approved by the Board
prior to such termination or resignation that is then unpaid and (iii) the Options shall vest in full and become immediately exercisable. |
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(d) |
Following a termination of your employment entitling you to severance payments under Section 7(b) or Section 7(c), and subject to Section 7(e), if you are eligible for and elect to continue receiving
group medical and/or dental insurance under the continuation coverage rules known as COBRA, the Company will pay the share of the premium for such coverage that it pays for active and similarly-situated employees who receive the same type of
coverage (single, family, or other) until the earlier of (i) the end of the period for which the Company is paying you your then current base salary pursuant to Section 7(b) or Section 7(c) above (as applicable, the Severance
Period) or (ii) the date your COBRA continuation coverage expires. |
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(e) |
Notwithstanding anything in this Section 7 to the contrary, the Companys obligations to make severance payments and provide benefits to you
pursuant to this Section 7 shall be contingent upon your execution of a separation and release agreement (the Release Agreement) in a form reasonably acceptable |
Mark Casey
June 5, 2016
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to the Company which Release Agreement must become irrevocable within 60 days (or such earlier date as the Release Agreement provides) following the date of your termination of employment. Such
payments and benefits shall begin to be paid or provided in the first regular payroll period beginning after the Release Agreement becomes binding on you; provided, however, that if the 60th day
after termination occurs in the calendar year following the year of your date of termination, the severance payments and benefits shall be paid or provided no earlier than January 1 of such subsequent calendar year (whether or not the Release
Agreement is executed prior to such date). You must continue to comply with the Invention, Non-Disclosure and Non-Competition Agreement referenced in Section 8 to continue to receive severance payments and benefits. The severance payments and
benefits shall constitute your sole remedy in connection with the termination of your employment in the event of a termination of your employment by the Company without Cause or by you for Good Reason. |
8. |
Invention, Non-Disclosure and Non-Competition Agreement. As a condition to your employment, you will be required to execute an Invention, Non-Disclosure and Non-Competition Agreement with the Company.
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9. |
Company Policies and Procedures. As an employee of the Company, you will be required to comply with all Company policies and procedures. Violations of the Companys policies may lead to immediate
termination of your employment. Further, the Companys premises, including all workspaces, furniture, documents and other tangible materials, and all information technology resources of the Company (including computers, data and other
electronic files, and all internet and e-mail) are subject to oversight and inspection by the Company at any time. Company employees should have no expectation of privacy with regard to any Company premises, materials, resources or information.
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10. |
Other Agreements and Governing Law. You represent that you are not bound by any employment contract, restrictive covenant or other restriction preventing you from continuing in employment with or carrying
out your responsibilities for the Company, or which is in any way inconsistent with the terms of this Agreement. Please note that this Agreement supersedes any and all prior or contemporaneous agreements, discussions and/or understandings, whether
written or oral, relating to the subject matter of this Agreement or your employment with the Company. The resolution of any disputes under this Agreement will be governed by Massachusetts law. |
11. |
Compliance with Section 409A. Subject to the provisions in this Section 11, any severance payments or benefits under this
Agreement (including under Section 7 hereof) shall begin only upon the date of your separation from service (determined as |
Mark Casey
June 5, 2016
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set forth below) which occurs on or after the date of termination of your employment. The following rules shall apply with respect to distribution of the payments and benefits, if any, to be
provided to you under this Agreement: |
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(a) |
It is intended that each installment of the severance payments and benefits provided under this Agreement shall be treated as a separate payment for purposes of Section 409A. Neither the Company nor you
shall have the right to accelerate or defer the delivery of any such payments or benefits except to the extent specifically permitted or required by Section 409A. |
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(b) |
If, as of the date of your separation from service from the Company, you are not a specified employee (within the meaning of Section 409A), then each installment of the severance payments
and benefits shall be made on the dates and terms set forth in this Agreement. |
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(c) |
If, as of the date of your separation from service from the Company, you are a specified employee (within the meaning of Section 409A), then: |
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(i) |
Each installment of the severance payments and benefits due under this Agreement that, in accordance with the dates and terms set forth herein, will in all circumstances, regardless of when the separation from service
occurs, be paid within the Short-Term Deferral Period (as hereinafter defined) shall be treated as a short-term deferral within the meaning of Treasury Regulation Section 1.409A-1(b)(4) to the maximum extent permissible under Section 409A.
For purposes of this Agreement, the Short-Term Deferral Period means the period ending on the later of the fifteenth day of the third month following the end of your tax year in which the separation from service occurs and the fifteenth
day of the third month following the end of the Companys tax year in which the separation from service occurs; and |
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(ii) |
Each installment of the severance payments and benefits due under this Agreement that is not described in Section 11(c)(i) above and that would,
absent this subsection, be paid within the six-month period following your separation from service from the Company shall not be paid until the date that is six months and one day after such separation from service (or, if earlier, your
death), with any such installments that are required to be delayed being accumulated during the six-month period and paid in a lump sum on the date that is six months and one day following your separation from service and any subsequent
installments, if any, being paid in accordance with the dates and terms set forth herein; provided, however, that the preceding provisions of this sentence |
Mark Casey
June 5, 2016
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shall not apply to any installment of severance payments and benefits if and to the maximum extent that such installment is deemed to be paid under a separation pay plan that does not provide for
a deferral of compensation by reason of the application of Treasury Regulation 1.409A-1(b)(9)(iii) (relating to separation pay upon an involuntary separation from service). Any installments that qualify for the exception under Treasury
Regulation Section 1.409A-1(b)(9)(iii) must be paid no later than the last day of your second taxable year following your taxable year in which the separation from service occurs. |
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(d) |
The determination of whether and when your separation from service from the Company has occurred shall be made in a manner consistent with, and based on the presumptions set forth in, Treasury Regulation
Section 1.409A-1(h). Solely for purposes of this Section 11(d), Company shall include all persons with whom the Company would be considered a single employer under Section 414(b) and 414(c) of the Code. |
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(e) |
All reimbursements and in-kind benefits provided under this Agreement shall be made or provided in accordance with the requirements of Section 409A to the extent that such reimbursements or in-kind benefits are
subject to Section 409A, including, where applicable, the requirements that (i) any reimbursement is for expenses incurred during your lifetime (or during a shorter period of time specified in this Agreement), (ii) the amount of
expenses eligible for reimbursement during a calendar year may not affect the expenses eligible for reimbursement in any other calendar year, (iii) the reimbursement of an eligible expense will be made on or before the last day of the calendar
year following the year in which the expense is incurred and (iv) the right to reimbursement is not subject to set off or liquidation or exchange for any other benefit. |
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(f) |
Notwithstanding anything herein to the contrary, the Company shall have no liability to you or to any other person if the payments and benefits provided hereunder that are intended to be exempt from or compliant with
Section 409A are not so exempt or compliant. |
12. |
Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of both parties and their respective successors and assigns, including any corporation with which or into which the
Company may be merged or which may succeed to its assets or business; provided, however, that your obligations to the Company are personal and shall not be assigned by you. |
13. |
Acknowledgment. You state and represent that you have had an opportunity to fully discuss and review the terms of this Agreement with an
attorney. You further state and |
Mark Casey
June 5, 2016
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represent that you have carefully read this Agreement, understand the contents herein, freely and voluntarily assent to all of the terms and conditions hereof, and sign your name of your own free
act. |
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(a) |
No delay or omission by the Company in exercising any right under this Agreement shall operate as a waiver of that or any other right. A waiver or consent given by the Company on any one occasion shall be effective only
in that instance and shall not be construed as a bar to or waiver of any right on any other occasion. |
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(b) |
The captions of the sections of this Agreement are for convenience of reference only and in no way define, limit or affect the scope or substance of any section of this Agreement. |
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(c) |
In case any provision of this Agreement shall be invalid, illegal or otherwise unenforceable, the validity, legality and enforceability of the remaining provisions shall in no way be affected or impaired thereby.
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If this Agreement correctly sets forth the initial terms under which you will be employed by the Company, please sign the enclosed
duplicate of this Agreement in the space provided below, along with the enclosed Invention, Non-Disclosure and Non-Competition Agreement, and return them to me.
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Very truly yours, |
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/s/ Vincent J. Milano |
Vincent J. Milano |
Chief Executive Officer |
The foregoing correctly sets forth the terms of my employment with Idera Pharmaceuticals, Inc. I am not relying on any
representations other than as set forth above.
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/s/ Mark Casey Mark Casey |
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Date: 6/10/2015 |
EXHIBIT A
Definitions
The following terms
shall have the following definitions for purposes of this Agreement:
(a) |
Cause shall mean (i) a material breach of any material term of this Agreement, (ii) a plea of guilty or nolo contendere to, or conviction of, a felony offense, (iii) repeated unexplained or
unjustified absence, or refusals to carry out the lawful directions of the Board or (iv) material breach of a fiduciary duty owed to the Company under this Agreement, provided that any action or inaction described by (i), (iii) or (iv),
above, shall not be the basis of a termination of your employment with the Company for Cause unless the Company provided you with at least 20 days advance written notice specifying in reasonable detail the conduct in need of being cured
and such conduct was not cured within the notice period or prior to termination. |
(b) |
Change in Control shall mean the occurrence of any of the following events: (i) a change in the composition of the Board over a period of thirty-six consecutive months or less such that a majority of the
members of the Board ceases to be comprised of individuals who are Continuing Members; for such purpose, a Continuing Member shall mean an individual who is a member of the Board on the date of this Agreement and any successor of a
Continuing Member who is elected to the Board or nominated for election by action of a majority of Continuing Members then serving on the Board; (ii) any merger or consolidation that results in the voting securities of the Company outstanding
immediately prior thereto representing (either by remaining outstanding or by being converted into voting securities of the surviving or acquiring entity) less than 60% of the combined voting power of the voting securities of the Company or such
surviving or acquiring entity outstanding immediately after such merger or consolidation; (iii) any sale of all or substantially all of the assets of the Company; (iv) the complete liquidation or dissolution of the Company; or (v) the
acquisition of beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of securities of the Company representing 50% or more of the combined voting power of the Companys then outstanding securities (other than
through a merger or consolidation or an acquisition of securities directly from the Company) by any person, as such term is used in Sections 13(d) and 14(d) of the Exchange Act, other than the Company, any trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportion as their ownership of stock of the Company; provided however
that, where applied to compensation subject to Section 409A of the Internal Revenue Code and the guidance issued thereunder (Section 409A), any acceleration of or change in payment shall only apply (if required by Section 409A)
if the Change in Control is also a change in control event described in Treasury Regulation 1.409A-3(i)(5). |
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(c) |
Good Reason shall mean any action on the part of the Company not consented to by you in writing having the following effect or effects: (i) a material reduction in your base salary; (ii) a material
diminution in your duties, responsibilities or authority as set forth in Section 1 of this Agreement, (iii) the Company requires you to permanently relocate and work full-time from its Cambridge, Massachusetts location (or such other
location not located in the Philadelphia, Pennsylvania area that is more than 50 miles from the location you are then performing your ongoing and regular services) or (iv) the Company relocates it headquarters to a location that makes it
unreasonable for you to commute to the Companys headquarters two business days per week. You must (A) give notice to the Company of your intention to resign for Good Reason within 90 days after the occurrence of the event (or series of
events) that you assert entitle you to resign for Good Reason, (B) state in that notice the condition that you consider to provide you with Good Reason to resign, (C) provide the Company with at least 30 days after you deliver your notice
to cure the condition and (D) if the condition is not cured, resign for Good Reason on or prior to the 60th day after you deliver your notice. |
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EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO EXCHANGE ACT RULES 13a-14 AND
15d-14, AS ADOPTED PURSUANT TO SECTION 302 OF SARBANES-OXLEY ACT OF 2002
I, Vincent J. Milano, certify that:
1. I have
reviewed this Quarterly Report on Form 10-Q of Idera Pharmaceuticals, Inc.;
2. Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the
registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over
financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants
internal control over financial reporting.
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Dated: August 6, 2015 |
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/s/ VINCENT J. MILANO |
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Vincent J. Milano |
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Chief Executive Officer |
EXHIBIT 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO EXCHANGE ACT RULES 13a-14 AND
15d-14, AS ADOPTED PURSUANT TO SECTION 302 OF SARBANES-OXLEY ACT OF 2002
I, Louis J. Arcudi, III certify that:
1. I
have reviewed this Quarterly Report on Form 10-Q of Idera Pharmaceuticals, Inc.;
2. Based on my knowledge, this report does not contain
any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the
registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over
financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants
internal control over financial reporting.
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Dated: August 6, 2015 |
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/s/ LOUIS J. ARCUDI, III |
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Louis J. Arcudi, III |
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Chief Financial Officer |
EXHIBIT 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS
ADOPTED
PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Idera Pharmaceuticals, Inc. (the
Company) for the period ended June 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the Report), the undersigned, Vincent J. Milano, Chief Executive Officer of the Company, hereby
certifies, pursuant to 18 U.S.C. Section 1350, that:
(1) the Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the Company.
A signed original of this written statement has been provided to Idera
Pharmaceuticals, Inc. and will be retained by Idera Pharmaceuticals, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
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Dated: August 6, 2015 |
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/s/ VINCENT J. MILANO |
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Vincent J. Milano |
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Chief Executive Officer |
EXHIBIT 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS
ADOPTED
PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Idera Pharmaceuticals, Inc. (the
Company) for the period ended June 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the Report), the undersigned, Louis J. Arcudi, III, Chief Financial Officer of the Company, hereby
certifies, pursuant to 18 U.S.C. Section 1350, that:
(1) the Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the Company.
A signed original of this written statement has been provided to Idera
Pharmaceuticals, Inc. and will be retained by Idera Pharmaceuticals, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
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Dated: August 6, 2015 |
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/s/ LOUIS J. ARCUDI, III |
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Louis J. Arcudi, III |
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Chief Financial Officer |
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