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Exhibit 4.3  


 
 

METABASIS THERAPEUTICS, INC.
  
    AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT    
    


        This Amended and Restated Investors' Rights Agreement is made as of July 18, 2000 (the "Effective Date") by and among Metabasis Therapeutics, Inc.,
a Delaware corporation (the "Company") and the investors listed on Exhibit A hereto, including, without limitation, SICOR Inc., a Delaware corporation ("SICOR"), and Sankyo
Company, Ltd., a Japanese corporation ("Sankyo"), each of which is herein referred to as an "Investor." 


 
 

RECITALS    
    


        WHEREAS, certain Investors are holders of shares of the Company's Series A Preferred Stock, Series B Preferred Stock or securities and/or debt
convertible there into (the "Prior Parties") and possess registration rights, information rights and other rights pursuant to that certain Investor Rights Agreement dated as of December 18,
1997, as amended on June 30, 1999 between the Company, SICOR, Sankyo and such Prior Parties (the "Prior Agreement"); and 



        WHEREAS,
the undersigned Prior Parties desire to amend and restate in its entirety the Prior Agreement and to accept the rights created pursuant hereto in lieu of the rights granted to
them under the Prior Agreement; and 


        WHEREAS,
certain other Investors are parties to the Series C Preferred Stock Purchase Agreement dated as of July 18, 2000 between the Company and such Investors (the
"Purchase Agreement"), such Investors' obligations under which are conditioned upon, among other things, the execution and delivery of this Agreement by such Investors, holders of in excess of
sixty-seven percent (67%) of the shares held by the Prior Parties, the Company and SICOR: 



        NOW,
THEREFORE, in consideration of the mutual promises and covenants set forth herein, the parties to the Prior Agreement hereby agree that the Prior Agreement shall be superseded and
replaced in its entirety by this Agreement, and the parties hereto further agree as follows: 


        1.    Information Rights.    



        1.1    Financial Information.    



        (a)   The
Company shall deliver to each Investor who continues to hold shares of Series A Preferred Stock ("Series A Preferred Stock") of the Company (or the
common stock of the Company ("Common Stock") into which the shares of Series A Preferred Stock have been converted), shares of Series B Preferred Stock ("Series B Preferred
Stock") of the Company (or the Common Stock into which the shares of Series B Preferred Stock have been converted) or shares of Series C Preferred Stock ("Series C Preferred
Stock") of the Company (or the Common Stock into which shares of Series C Preferred Stock have been converted) (in each case as adjusted for any stock split, stock dividends, combinations,
recapitalizations and the like with respect to such shares), and as long as such Investor or a principal, partner or manager of such Investor, is not employed by or an officer or director of a
competitor of the Company, audited financial statements, prepared in accordance with United States generally accepted accounting principles ("GAAP"),
consistently applied, and setting forth in comparative form the figures for the previous year, all in reasonable detail, of the Company, as soon as practicable after the end of each fiscal year of the
Company and in any event within 90 days after the close of each fiscal year. 


        (b)   The
Company shall deliver to each Investor who continues to hold shares of Series A, Series B or Series C Preferred Stock (or the Common Stock into
which shares of Series A, Series B or Series C Preferred Stock have been converted) (as adjusted for any stock split, stock dividends, combinations, recapitalizations and the like
with respect to such 







 





shares),
and as long as such Investor or a principal, partner or manager of such Investor, is not employed by or an officer or director of a competitor of the Company, within 30 days after each
quarter, unaudited quarterly financial statements prepared in accordance with GAAP, consistently applied. 


        (c)   The
Company will deliver to each Investor who continues to hold Series A or Series B Preferred Stock (or the Common Stock into which shares of
Series A or Series B Preferred Stock have been
converted) (as adjusted for any stock split, stock dividends, combinations, recapitalizations and the like with respect to such shares) within 30 days prior to the beginning of each fiscal
year, a capitalization summary, annual budget and operating plans for such fiscal year (and as soon as available, any subsequent revisions thereto), and within 30 days after each month, monthly
unaudited financial statements with comparisons against the Company's operating plan; provided, however, that to the extent that the Company reasonably
concludes that disclosure of the specific budget/operating plan line items, corresponding dollar amounts and comparisons would provide the holders of Series A and Series B Preferred
Stock (or the Common Stock into which shares of Series A or Series B Preferred Stock have been converted) (as adjusted for any stock split, stock dividends, combinations,
recapitalizations and the like with respect to such shares) with competitively sensitive information regarding the Company's allocation of resources, the Company shall not be obligated to disclose
such information to the holders of Series A or Series B Preferred Stock on a line-item basis but shall disclose such information on an aggregate basis. 


        (d)   The
Company shall deliver to each Investor who continues to hold at least 1,000,000 shares of Series C Preferred Stock (or 1,000,000 shares of the Common Stock
into which shares of Series C Preferred Stock have been converted or a combination of such Series C Preferred Stock and Common Stock) (as adjusted for any stock split, stock dividends,
combinations, recapitalizations and the like with respect to such shares), and as long as such Investor or a principal, partner or manager of such Investor, is not employed by or an officer or
director of a competitor of the Company within 30 days prior to the beginning of the Company's next fiscal year, a copy of the Company's annual operating plan for the next fiscal year, and
within 30 days after each month, monthly unaudited financial statements with comparisons against the Company's annual operating plan. 


        (e)   For
purposes of this Section 1.1, a "competitor of the Company" means any entity that engages in the business of human therapeutic drug development, research,
distribution or related business (the "Business"), provided that, the Board of Directors of the Company may in their reasonable and good faith
discretion exempt any individual entity from such definition through board action that defines the duration and scope of such exemption. 




        1.2    Inspection Rights.    Each Investor shall have the right to visit and inspect any of the properties of the
Company or any of its subsidiaries, and to discuss the affairs, finances and accounts of the Company or any of its subsidiaries with its officers, and to review such information as is reasonably
requested all at such reasonable times and as often as may be reasonably requested; provided, however, that the Company shall not be obligated under
this Section 1.2 with respect to a competitor of the Company or with respect to information which the Board of Directors determines in good faith is confidential and should not, therefore, be
disclosed, unless the Investor first executes and delivers a confidentiality agreement with the Company in form and substance reasonably satisfactory to the Board of Directors; provided further that,
whenever requested, the Investor shall sign an agreement satisfactory to the Company stating that the Investor shall hold all such information in confidence. 



        1.3    Confidentiality of Records.    Each Investor hereby represents, warrants and covenants that it shall maintain
in confidence, and shall not use or disclose without the prior written consent of 



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the
Company, any information identified in writing as confidential that is furnished to it by the Company in connection with this Agreement. This obligation of confidentiality shall not apply,
however, to any information (i) in the public domain through no unauthorized act or failure to act by the Investor, (ii) lawfully disclosed to the Investor by a third party who possessed
such information without any obligation of confidentiality, (iii) known to the Investor at the time of disclosure by the Company, as evidenced by written records of the Investor in existence at
the time of the disclosure in question or (iv) which has been independently developed by employees or other agents of, or independent contractors hired by, the Investor without access to the
information described in the first sentence of this Section 1.3 or (v) that is required to be disclosed pursuant to applicable law or stock exchange regulations. Each Investor further
covenants that it shall return to the Company all tangible materials in the possession of such Investor, or affiliates of such Investor containing such information upon request by the Company. Each
Investor agrees that it will restrict access to the confidential information of the Company among its officers, directors, employees, financial and legal advisors and to those persons with a need to
use such information and who are parties to agreements with such Investor to maintain such information as confidential (or otherwise subject to obligations to maintain such information as
confidential). 


        1.4    Termination of Covenants.    Except as required by law, the rights set forth in Sections 1.1 and 1.2 shall
terminate and be of no further force or effect upon the closing of a Qualified IPO, as defined below, of the Company's Common Stock pursuant to an effective registration statement filed by the Company
under the Securities Act of 1933, as amended (the "Securities Act"), or on the date the Company otherwise becomes subject to the reporting requirements under Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), whichever first occurs. Furthermore, for purposes of the holders of Series A and Series B Preferred Stock, the rights
set forth in Sections 1.2 and 1.3 shall also terminate upon the later to occur of (i) January 10, 2005 or (ii) the date on which Sankyo, and its affiliates (taken as a whole)
cease to own fifty (50%) of the outstanding Series A Preferred Stock and Series B Preferred Stock (or shares of Common Stock received on conversion thereof), collectively, by virtue of
the exercise of the Exchange Right, as defined below, or otherwise. 


        1.5    Use of Proceeds.    The Company shall use the proceeds from the sale of Common Stock sold pursuant to the Stock
Purchase Agreement, dated December 18, 1997, by and among the Company, SICOR and Sankyo solely (i) in connection with the Company's obligations under the Amended and Restated
Collaborative Research and Development and License Agreement, dated as of June 30, 1999, (the "R&D Agreement"), between the Company and Sankyo,
(ii) for general working capital purposes, but not for the repayment of debt and (iii) to pay $2,250,000 payable to SICOR pursuant to the terms of the Asset and Liability Transfer
Agreement dated as of December 17, 1997 between the Company and SICOR. The covenants of the Company contained in this Section 1.5 shall expire and terminate upon the expiration of the
Research Program Term (as defined in the R&D Agreement). 




        2.    Registration Rights.    The Company and the Investors covenant and agree as follows: 



        2.1    Definitions.    For purposes of this Section 2: 



        (a)   The
terms "register," "registered," and
"registration" refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities
Act, and the declaration or ordering of effectiveness of such registration statement or document. 


        (b)   The
term "Registrable Securities" means (i) the shares of Common Stock issuable or issued upon conversion of the
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock and (ii) any other shares of Common Stock of the Company issued as (or issuable upon the
conversion or exercise of any warrant, right or other security which is issued 




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as)
a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares listed in (i); or (iii) other shares of Common Stock acquired by a holder of
Registrable Securities; provided, however, that the foregoing definition shall exclude in all cases any Registrable Securities sold by a person in a
transaction in which his or her rights under this Agreement are not assigned. Notwithstanding the foregoing, Common Stock or other securities shall only be treated as Registrable Securities if and so
long as they have not been (A) sold to or through a broker or dealer or underwriter in a public distribution or a public securities transaction, or (B) sold in a transaction exempt from
the registration and prospectus delivery requirements of the Securities Act under Section 4(l) thereof so that all transfer restrictions, and restrictive legends with respect thereto, if any,
are removed upon the consummation of such sale. 


        (c)   The
number of shares of "Registrable Securities then outstanding" shall be determined by the number of shares of Common
Stock outstanding which are, and the number of shares of Common Stock issuable pursuant to then exercisable or convertible securities which are, Registrable Securities;  provided, however, that the
foregoing definition shall exclude in all cases any securities sold by a person in a transaction in which his or her rights
under this Agreement are not assigned, and any securities that have been (A) sold to or through a broker or dealer or underwriter in a public distribution or a public securities transaction, or
(B) sold in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(l) thereof so that all transfer restrictions, and
restrictive legends with respect thereto, if any, are removed upon the consummation of such sale. 


        (d)   The
term "Series A Holder" means any person owning or having the right to acquire (i) the shares of Common
Stock issuable or issued upon conversion of the Series A Preferred Stock and (ii) any other shares of Common Stock of the Company issued as (or issuable upon the conversion or exercise
of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares listed in (i). 


        (e)   The
term "Series B Holder" means any person owning or having the right to acquire (i) the shares of Common
Stock issuable or issued upon conversion of the Series B Preferred Stock and (ii) any other shares of Common Stock of the Company issued as (or issuable upon the conversion or exercise
of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares listed in (i). 



        (f)    The
term "Series C Holder" means any person owning or having the right to acquire (i) the shares of Common
Stock issuable or issued upon conversion of the Series C Preferred Stock and (ii) any other shares of Common Stock of the Company issued as (or issuable upon the conversion or exercise
of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares listed in (i). 


        (g)   The
term "Form S-3" means such form under the Securities Act as in effect on the date hereof or any
successor form under the Securities Act. 


        (h)   The
term "SEC" means the Securities and Exchange Commission of the United States. 


        (i)    The
term "Qualified IPO" means a firm commitment underwritten public offering by the Company of shares of its Common
Stock pursuant to a registration statement on Form S-1 under the Securities Act, in which the public offering price per share of Common Stock is at least $3.00 (as adjusted for
stock splits, stock dividends, combinations, recapitalizations and 




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the
like) and the gross proceeds to the Company are not less than $25,000,000 (net of underwriting discounts and commissions). 




        2.2    Request for Registration.    



        (a)   If
the Company shall receive at any time at least six (6) months after the effective date of the first registration statement for a public offering of securities
of the Company (other than a registration statement relating either to the sale of securities to employees of the Company pursuant to a stock option, stock purchase or similar plan or an SEC
Rule 145 transaction), a written request from the holders of a majority of the Registrable Securities held by the Series A Holders, Series B Holders and the Series C
Holders, on an as-converted basis and including any shares of Common Stock held by Series A, Series B and C Holders resulting from conversion of their respective Preferred
Stock, that the Company file a registration statement under the Securities Act covering Registrable Securities, then the Company shall, within ten (10) days of the receipt thereof, give
written notice of such request to all Series A Holders, Series B Holders and Series C Holders and shall, subject to the limitations of subsection 2.2(b), use commercially
reasonable efforts to effect as soon as practicable,
and in any event within 90 days of the receipt of such request, the registration under the Securities Act of all Registrable Securities which the Series A Holders, Series B
Holders and Series C Holders request to be registered within twenty (20) days of the mailing of such notice by the Company in accordance with the terms hereof;  provided, however, that the
Company shall not be obligated to effect such registration if the Series A Holders, Series B Holders and
Series C Holders together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities
(if any) at an aggregate price to the public (net of any underwriter's discounts and commissions) of less than $5,000,000. 



        (b)   If
the Series A Holders, Series B Holders and Series C Holders initiating the registration request hereunder ("Initiating
Holders") intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made
pursuant to this Section 2.2 and the Company shall include such information in the written notice referred to in subsection 2.2(a). The underwriter will be selected by the Company subject to
the prior written consent of a majority of the then outstanding Registrable Securities proposed to be included in such registration, which consent shall not be unreasonably withheld;  provided, however, that no such consent shall be required if the Company selects a nationally recognized underwriter in the United States with
demonstrable, pharmaceutical and/or biotechnology industry-specific expertise and experience. In such event, the right of any Series A Holder, Series B Holder or Series C Holder
to include Registrable Securities in such registration shall be conditioned upon such Series A Holder's, Series B Holder's or Series C Holder's participation in such underwriting
and the inclusion of such Series A Holder's, Series B Holder's or Series C Holder's Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in
interest of the Initiating Holders and such Series A Holder, Series B Holder or Series C Holder to the extent provided herein. All Series A Holders, Series B Holders
and Series C Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in subsection 2.5(e)) enter into an underwriting agreement
in customary form (including the indemnities from the Company as set forth in Section 2.10) with the underwriter or underwriters selected for such underwriting. Notwithstanding any other
provision of this Section 2.2, if the underwriter advises the Initiating Holders in writing that marketing factors require a limitation or the exclusion of the number of shares to be
underwritten, then the Initiating Holders shall so advise all Series A Holders, Series B Holders and Series C Holders of Registrable Securities which would otherwise participate
in 




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the
underwritten offering pursuant hereto, and, in the case of a limitation, of the number of shares of Registrable Securities that may be included in the underwriting shall be allocated among all
Series A Holders, Series B Holders and Series C Holders (as applicable), including the Initiating Holders, in proportion (as nearly as practicable) to the amount of Registrable
Securities of the Company owned by each Series A Holder, Series B Holder and Series C Holder (as applicable); provided, however,  that the shares of Registrable Securities to be included
in such underwriting shall not be reduced in number or completely excluded unless all other securities, are first
entirely excluded from the underwriting. No such reduction shall reduce the securities being offered by the Company for its own account to be included in the registration and underwriting, and in no
event shall the amount of Registrable Securities of the selling Series A, Series B or Series C Holders included in the registration be reduced below twenty-five (25%)
of the total amount of securities included in such registration, unless such offering is the initial public offering of the Company's Common Stock under the Securities Act, in which event any or all
of the Registrable Securities of the Series A, Series B or Series C Holders may be excluded in accordance with this Section 2.2(b). 


        (c)   Notwithstanding
the foregoing, if the Company shall furnish to the Initiating Holders requesting a registration statement pursuant to this Section 2.2, a
certificate signed by the President of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its
stockholders for such registration statement to be filed at such time and it is therefore essential to defer the filing of such registration statement, the Company shall have the right to defer such
filing for a period of not more than 90 days after receipt of the request of the Initiating Holders; provided, however, that the Company may not
utilize this right more than once in any twelve-month period. 


        (d)   In
addition, the Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to this Section 2.2: 



        (i)    After
the Company has effected two (2) registrations pursuant to this Section 2.2 and such registrations have been declared or ordered effective (excluding
any such registration in which the amount of the Registrable Securities of the selling Series A, Series B or Series C Holders included therein shall have been reduced by
twenty-five percent (25%) or more to accomodate the inclusion of the securities being offered by the Company pursuant to Section 2.2(b)), or within six (6) months of the
effective date of another registration; 


        (ii)   During
the period of one hundred eighty (180) days following the effective date of a registration subject to Section 2.3 hereof; 



        (iii)  If
the Initiating Holders propose to dispose of shares of Registrable Securities that may be currently registered on Form S-3 pursuant to a request
made pursuant to Section 2.4 below; provided, however, that if the Company so refuses to effect a registration by the Series A Holders,
Series B Holders and Series C Holders pursuant to this Section 2.2(d)(iii), they shall be entitled to an additional registration pursuant to Section 2.4 for each such
registration so refused; or 


        (iv)  If
the Company delivers notice to the Initiating Holders within thirty (30) days of a registration request pursuant to this Section 2.2 stating the
Company's intent to file an initial public offering within ninety (90) days at the date of such notice. 





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        2.3    Company Registration.    If (but without any obligation to do so) the Company proposes to register (including
for this purpose a registration effected by the Company for stockholders other than the Series A Holders, Series B Holders or Series C Holders) any of its securities under the
Securities Act in connection with the public offering of such securities solely for cash (other than a registration relating solely to the sale of securities to participants in a Company stock plan or
a transaction covered by Rule 145 under the Securities Act, a registration in which the only stock being registered is Common Stock issuable upon conversion of debt securities which are also
being registered, or any registration on any form which does not include substantially the same information as would be required to be included in a registration statement covering the sale of the
Registrable Securities), the Company shall, at such time, promptly give each Series A Holder, and Series B Holders and Series C Holder written notice of such registration. Upon
the written request of each Holder given within twenty (20) days after mailing of such notice by the Company in accordance with the terms hereof, the Company shall, subject to the provisions of
Section 2.8, cause to be registered under the Securities Act all of the Registrable Securities that each such holder has requested to be registered. 


        2.4    Form S-3 Registration.    In case the Company shall receive from Series A Holders,
Series B Holders and Series C Holders of the Registrable Securities then outstanding a written request or requests that the Company effect a registration on Form S-3
and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by such holder or holders, the Company will: 



        (a)   promptly
give written notice of the proposed registration, and any related qualification or compliance, to all other Series A Holders, Series B Holders and
Series C Holders; and 


        (b)   as
soon as practicable, effect such registration and all such qualifications and compliances as may be so requested and as would permit or facilitate the sale and
distribution of all or such portion of such Series A, Series B or Series C Holder's or Holders' Registrable Securities as are specified in such request, together with all or such
portion of the Registrable Securities of any other Series A, Series B or Series C Holder or Holders (as the case may be) joining in such request as are specified in a written
request given within 15 days after receipt of such written notice from the Company; provided, however, that the Company shall not be obligated to
effect any such registration, qualification or compliance, pursuant to this Section 2.4: (i) if Form S-3 is not available for such offering by the Series A,
Series B or Series C Holders; (ii) if the Series A, Series B or Series C Holders, together with the holders of any other securities of the Company entitled to
inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) at an aggregate price to the public (net of any underwriters' discounts or commissions) of
less than $500,000; (iii) if the Company shall furnish to the Series A, Series B or Series C Holders a certificate signed by the President of the Company stating that in
the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such Form S-3 Registration to be effected
at such time, in which event the Company shall have the right to defer the filing of the Form S-3 registration statement for a period of not more than 90 days after receipt
of the request of the Series A, Series B or Series C Holder or Holders under this Section 2.4; provided, however, that the
Company shall not utilize this right more than once in any twelve month period; (iv) if the Company has, within the twelve (12) month period preceding the date of such request, already
effected two (2) registrations on Form S-3 for such holders pursuant to this Section 2.4 or within six (6) months of the effective date of another registration;
(v) in any particular jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration,
qualification or compliance; or (vi) during the period ending one 




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hundred
eighty (180) days after the effective date of a registration statement subject to Section 2.3. 


        (c)   Subject
to the foregoing, the Company shall file a registration statement covering the Registrable Securities and other securities so requested to be registered
as soon as practicable after receipt of the request or requests of the Series A, Series B and Series C Holders. Registrations effected pursuant to this Section 2.4 shall
not be counted as demands for registration or registrations effected pursuant to Sections 2.2 or 2.3, respectively. 


        (d)   If
the registration is to be underwritten, the underwriter will be selected by the Company subject to the prior written consent of a majority of the holders of the then
outstanding Registrable Securities proposed to be included in such registration, which consent shall not be unreasonably withheld; provided, however,  that no such consent shall be required if the
Company selects a nationally recognized underwriter in the United States with demonstrable, pharmaceutical and/or biotechnology
industry-specific expertise and experience. 




        2.5    Obligations of the Company.    Whenever required under this Section 2 to effect the registration of any
Registrable Securities, the Company shall, as expeditiously as reasonably possible: 



        (a)   Prepare
and file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to
become effective, and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for up to one hundred twenty
(120) days. 


        (b)   Prepare
and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as
may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement for up to one hundred twenty
(120) days. 


        (c)   Furnish
to the Series A Holders, Series B Holders and/or Series C Holders (as the case may be) such numbers of copies of a prospectus, including a
preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable
Securities owned by them. 


        (d)   Use
its best efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as
shall be reasonably requested by the Series A Holders, Series B Holders and Series C Holders, provided that the Company shall not
be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. 



        (e)   In
the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form (including the
indemnities from the Company as set forth in Section 2.10), with the managing underwriter of such offering. Each Series A, Series B or Series C Holder participating in such
underwriting shall also enter into and perform its obligations under such an agreement. 


        (f)    Notify
each Series A Holder, Series B Holder and Series C Holder of Registrable Securities covered by such registration statement at any time when a
prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in
effect, 




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includes
an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the
circumstances then existing. In such event, the Company shall use all reasonable efforts to amend promptly the registration statement to conform the prospectus to the requirement of the Securities Act
and applicable regulations. 


        (g)   Cause
all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange on which similar securities issued by the Company are then
listed. 


        (h)   Provide
a transfer agent and registrar for all Registrable Securities registered pursuant hereunder and a CUSIP number for all such Registrable Securities, in each case
not later than the effective date of such registration. 


        (i)    Use
its best efforts to furnish, at the request of any Series A Holder, Series B Holder and Series C Holder requesting registration of Registrable
Securities pursuant to this Section 2, on the date that such Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to this
Section 2, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date that the registration statement with respect to
such securities becomes effective, (i) an opinion, dated such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given
to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Series A Holders, Series B Holders and Series C Holders requesting
registration of Registrable Securities and (ii) a letter dated such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Series A Holders, Series B Holders and/or
Series C Holders requesting registration of Registrable Securities. 




        2.6    Furnish Information.    It shall be a condition precedent to the obligations of the Company to take any action
pursuant to this Section 2 with respect to the Registrable Securities of any selling Series A Holder, Series B Holder or Series C Holder that such holder shall furnish to
the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be required to effect the registration of such
holder's Registrable Securities. The Company shall have no obligation with respect to any registration requested pursuant to Section 2.2 or Section 2.4 of this Agreement if, as a result
of the application of the preceding sentence, the number of shares or the anticipated aggregate offering price of the Registrable Securities to be included in the registration does not equal or exceed
the number of shares or the anticipated aggregate offering price required to originally trigger the Company's obligation to initiate such registration as specified in subsection 2.2(a) or subsection
2.4(b)(2), whichever is applicable. 


        2.7    Expenses of Registration.    



        (a)    Demand Registration.    All expenses other than underwriting discounts and commissions, incurred in connection
with two (2) demand registrations, pursuant to Section 2.2, including (without limitation) all registration, filing and qualification fees, printers' and accounting fees, fees and
disbursements of counsel for the Company, and the reasonable fees and disbursements (not to exceed $30,000) of one counsel for the selling Series A Holders, Series B Holders and
Series C Holders (as applicable) selected by them (collectively "Registration Expenses") shall be borne by the Company,  provided, however, that if the
Series A Holders, Series B Holders or Series C Holders (as applicable) bear the Registration
Expenses for any registration proceeding begun pursuant to Section 2.2 and subsequently withdrawn by registering shares therein, such registration proceeding shall not be counted as a requested 




9





 


registration
pursuant to Section 2.2 hereof; in the event that such withdrawal is based upon material adverse information relating to the Company that is different from the information known or
available (upon request from the Company or otherwise) to the Series A Holders, Series B Holders or Series C Holders requesting registration at the time of their request for
registration under Section 2.2, such registration shall not be treated as a counted registration for purposes of Section 2.2 hereof, even though the Series A Holders,
Series B Holders or Series C Holders (as applicable) do not bear the Registration Expenses for such registration. 


        (b)    Company Registration.    All expenses other than underwriting discounts and commissions incurred in connection
with registrations, filings or qualifications of Registrable Securities pursuant to Section 2.3 for each Series A, Series B or Series C Holder (which right may be assigned
as provided in Section 2.12), including (without limitation) all registration, filing, and qualification fees, printers' and accounting fees, fees and disbursements of counsel for the Company
and the reasonable fees and disbursements (not to exceed $30,000) of one counsel for the selling Series A, Series B and Series C Holders selected by them shall be borne by the
Company. 


        (c)    Registration on Form S-3.    All expenses other than underwriting discounts and commissions
incurred in connection with two (2) registrations requested pursuant to Section 2.4, including (without limitation) all registration, filing, qualification, printers' and accounting fees
and the reasonable fees and disbursements (not to exceed $30,000) of one counsel for the selling Series A, Series B and Series C Holders selected by them shall be borne by the
Company. 




        2.8    Underwriting Requirements.    In connection with any offering involving an underwriting of shares of the
Company's capital stock, the Company shall not be required under Section 2.3 to include any of the Series A Holders', Series B Holders' or Series C Holders' securities in
such underwriting unless they accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by it (or by other persons entitled to select the underwriters),
provided that such agreement does not require indemnification by any of them except to the extent contemplated by Section 2.10 hereof. If the total amount of securities, including Registrable
Securities, requested by the Series A Holders, Series B Holders or Series C Holders to be included in such offering exceeds the amount of securities sold that the underwriters
determine in their sole discretion is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters determine in their sole discretion will not jeopardize the success of the offering. The Company will include in such registration (i) first, the
securities the Company proposes to sell for its own account; (ii) second, to the extent that the number of securities the Company proposes to sell is less than the number of securities which
the Company has been advised can be sold in such offering, such number of Registrable Securities which the Series A Holders, Series B Holders and Series C Holders have requested
to be included in such registration pursuant to Section 2.3 hereof; provided, however, in no event will shares of any other selling stockholder
be included in such registration which would reduce the number of shares which have been requested to be included by the Series A, Series B and Series C Holders (or completely
exclude the shares held by Series A, Series B and C Holders) without the written consent of a majority of the then outstanding Registrable Securities proposed to be sold in the offering;
and (iii) third, to the extent that the number of securities which are to be included in such registration pursuant to clauses (i) and (ii) is, in the aggregate, less than the
number of securities which the Company has been advised can be sold in such offering, such number of other securities requested to be included in the offering for the account of any holders not
contractually entitled to registration which, in the opinion of the underwriters, is compatible with the success of the offering. The number of Registrable Securities included in such registration
statement shall be 



10





 

allocated
pro rata among the holders of Registrable Securities based on the number of Registrable Securities held by each of them or in such other proportions as shall mutually be agreed to by them,
but in no event shall any shares being sold by such a holder exercising a demand registration right similar to that granted in Section 2.2 or 2.4 be excluded from such offering. For purposes of
the preceding sentence concerning apportionment, for any selling stockholder which is a holder of Registrable Securities and which is a partnership or corporation, the partners, retired partners and
stockholders of such holder, or the estates and family members of any such partners and retired partners and any trusts for the benefit of any of the foregoing persons shall be deemed to be a single
"selling stockholder" and any pro-rata reduction with respect to such "selling stockholder"
shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such "selling
stockholder," as defined in this sentence. In no event shall the amount of Registrable Securities the Series A, Series B or Series C Holders request to be
included in the registration pursuant to Section 2.3 be reduced below twenty-five (25%) of the total amount of securities included in such registration, unless such offering is the
initial public offering of the Company's Common Stock under the Securities Act, in which event any or all of the Registrable Securities of the Series A, Series B or Series C
Holders may be excluded in accordance with this Section 2.8. 


        2.9    Delay of Registration.    No Holder shall have any right to obtain or seek an injunction restraining or
otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2. 



        2.10    Indemnification.    In the event any Registrable Securities are included in a registration statement under
this Section 2: 



        (a)   To
the extent permitted by law, the Company will indemnify and hold harmless each Series A, Series B and Series C Holder, its partners, officers and
directors, its legal counsel, its accountants, any underwriter (as defined in the Securities Act) for such holder and each person, if any, who controls such holder or underwriter within the meaning of
the Securities Act or the Exchange Act, against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations
(collectively a "Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact
required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act,
any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law; and the Company will pay to each such holder, partner, officer,
director, underwriter or controlling person, as incurred, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability,
or action; provided, however, that the indemnity agreement contained in this subsection 2.10(a) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable to
any holder, underwriter or controlling person for any such loss, claim, damage, liability, or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and
in conformity with written information furnished expressly for use in connection with such registration by any such holder, underwriter or controlling person. 




11





 


        (b)   To
the extent permitted by law, each selling Series A, Series B and Series C Holder will indemnify and hold harmless the Company, each of its
directors, each of its officers who has signed the registration statement, each person, if any, who controls the Company within the meaning of the Securities Act, its legal counsel, its accountants,
any underwriter, any other holder selling securities in such registration statement and any controlling person of any such underwriter or other holder, against any losses, claims, damages, or
liabilities (joint or several) to which any of the foregoing persons may become subject, under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such holder expressly for use in connection with such registration; and each such holder will reimburse any legal or other expenses
reasonably incurred by any person intended to be indemnified pursuant to this subsection 2.10(b), in connection with investigating or defending any such loss, claim, damage, liability, or action if it
is judicially determined that there was such a violation; provided, however, that the indemnity agreement contained in this subsection 2.10(b) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the holder, which consent shall not be unreasonably
withheld; provided, that in no event shall any indemnity under this subsection 2.10(b) exceed the net proceeds from the offering received by such
holder, except in the case of willful fraud by such holder. 


        (c)   Promptly
after receipt by an indemnified party under this Section 2.10 of notice of the commencement of any action (including any governmental action), such
indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.10, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly
noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with
all other indemnified parties which may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the reasonable fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of
any such action, if materially prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 2.10, but the
omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 2.10. 


        (d)   If
the indemnification provided for in this Section 2.10 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to
any loss, liability, claim, damage or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall, to the extent permitted by applicable
law, contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage, or expense in such proportion as is appropriate to reflect the relative
fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage or expense
as well as any other relevant equitable considerations; provided, that in no event shall any contribution by a holder under this Subsection 2.10(d)
exceed the net proceeds from the offering received by such holder, except in the case of willful fraud by such holder. 




12





 





The
relative fault of the indemnifying party and of the indemnified party shall be determined by a court of law by reference to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement or omission. 



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


        (f)    The
obligations of the Company and Series A, Series B and Series C Holders under this Section 2.10 shall survive the completion of any
offering of Registrable Securities in a registration statement under this Section 2, and otherwise. 



        (g)   No
indemnifying party, in the defense of any such claim or litigation, shall, except with the consent of each indemnified party, consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such
claim or litigation. 




        2.11    Reports Under Exchange Act.    With a view to making available to the Series A, Series B and
Series C Holders the benefits of Rule 144 promulgated under the Securities Act and any other rule or regulation of the SEC that may at any time permit a holder to sell securities of the
Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to: 



        (a)   make
and keep public information available, as those terms are understood and defined in SEC Rule 144, at all times after ninety (90) days after the
effective date of the first registration statement filed by the Company for the offering of its securities to the general public so long as the Company remain subject to the periodic reporting
requirements under Sections 13 or 15(d) of the Exchange Act; 


        (b)   take
such action, including the voluntary registration of its Common Stock under Section 12 of the Exchange Act, as is necessary to enable the Series A,
Series B and Series C Holders to utilize Form S-3 for the sale of their Registrable Securities; 


        (c)   file
with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and 


        (d)   furnish
to any Series A, Series B or Series C Holder, so long as the holder owns any Registrable Securities, forthwith upon request (i) a
written statement by the Company that it has complied with the reporting requirements of SEC Rule 144 (at any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), or that it qualifies as a registrant
whose securities may be resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company and such
other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in
availing any Series A, Series B or Series C Holder of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such
form. 




        2.12    Assignment of Registration Rights.    The rights to cause the Company to register Registrable Securities
pursuant to this Section 2 may be assigned (but only with all related 



13





 

obligations)
by a Series A, Series B or Series C Holder to (i) a transferee or assignee of at least 50,000 shares of such securities, (ii) a transferee or assignee
of all of such Registrable Securities held by such transferring holder, if less than 50,000 shares, or (iii) a general partner, limited partner, retired partner, member or retired member,
affiliate, parent or majority-owned subsidiary of the transferee, provided the Company is, within a reasonable time after such transfer, furnished with
written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned; and provided,
further, that such assignment shall be effective only if immediately following such transfer the further disposition of such securities by the transferee or assignee is
restricted under the Securities Act. For the purposes of determining the number of shares of Registrable Securities held by a transferee or assignee, the holdings of transferees and assignees of a
partnership who are partners or retired partners of such partnership (including spouses and ancestors, lineal descendants and siblings of such partners or spouses who acquire Registrable Securities by
gift, will or intestate succession) shall be aggregated together and with the partnership; provided that all assignees and transferees who would not qualify individually for assignment of registration
rights shall have a single attorney-in-fact for the purpose of exercising any rights, receiving notices or taking any action under Section 2. 


        2.13    Limitations on Subsequent Registration Rights.    From and after the Effective Date, the Company shall not,
without the prior written consent of the holders of 662/3% of the then outstanding Registrable Securities, enter into any agreement with any holder or prospective holder of any
securities of the Company which would allow such holder or prospective holder to include such securities in any registration filed under Section 2.2 hereof, unless under the terms of such
agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of his securities will not reduce the amount of the Registrable
Securities of the Series A, Series B or Series C Holders which is included. 


        2.14    "Market Stand-Off" Agreement.    Each holder of Registrable Securities hereby agrees that, during
the period of duration (up to, but not exceeding, 180 days) specified by the Company and an underwriter of Common Stock or other securities of the Company, following the effective date of a
registration statement of the Company filed under the Securities Act, it shall not, to the extent requested by the Company and such underwriter, directly or indirectly sell, offer to sell, contract to
sell (including, without limitation, any short sale), grant any option to purchase or otherwise transfer or dispose of (other than to donees who agree to be similarly bound) any securities of the
Company held by it at any time during such period except Common Stock included in such registration; provided, however, that: 



        (a)   such
agreement shall be applicable only to the first such registration statement of the Company which covers Common Stock (or other securities) to be sold on its behalf
to the public in an underwritten offering; and 


        (b)   all
officers, directors, and key employees of the Company, all five-percent security holders, and all other persons with registration rights (whether or not
pursuant to this Agreement) enter into similar agreements. 





        In
order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to the Registrable Securities of each holder (and the shares or
securities of every other person subject to the foregoing restriction) until the end of such period, and each holder agrees that, if so requested, such holder will execute an agreement in the form
provided by the underwriter containing terms which are essentially consistent with the provisions of this Section 2.14. 


14







   
        Notwithstanding the foregoing, the obligations described in this Section 2.14 shall not apply to a registration relating solely to employee benefit plans on
Form S-1 or Form S-8 promulgated under the Securities Act or similar forms which may be promulgated in the future, or a registration relating solely to an SEC
Rule 145 transaction on Form S-4 promulgated under the Securities Act or similar forms which may be promulgated in the future. 



        2.15    Termination of Registration Rights.    No holder of Registrable Securities shall be entitled to exercise any
right provided for in this Section 2 after six (6) years following the consummation of a Qualified IPO. 




        3.    Exchange Right    



        3.1    General.    The holders of a majority of Series A Preferred Stock (or Common Stock into which the shares
of Series A Preferred Stock have been converted, collectively, the "Exchange Stock") shall have the right to exchange the Exchange Stock held by them for shares of Common Stock ("SICOR Common
Stock") of SICOR in accordance with this Section 3 (the "Exchange Right"). For purposes of this Section 3 only, "Registrable Securities" means 851,939 shares of Common Stock issuable on
conversion of the shares of the Company's Series A Preferred Stock issued to Sankyo pursuant to the Stock Purchase Agreement, dated December 18, 1997, by and among Sankyo, SICOR and the
Company. 


        3.2    Notice of Exercise.    The holders of a majority of the Exchange Stock shall have the right upon forwarding a
written notice (an "Exercise Notice") to SICOR and the Company within thirty (30) days after January 10, 2001, and each one year anniversary thereafter until and including
January 10, 2005 to elect to exchange up to twenty percent (20%) of the Exchange Stock held by the Series A Holders for shares of SICOR Common Stock ("SICOR Shares"). Each Exercise
Notice shall state that it constitutes an election hereunder and shall specify the number of Exchange Stock to be exchanged for SICOR Shares. Upon receiving any Exercise Notice, SICOR shall cause the
shares of Exchange Stock specified therein to be exchanged promptly for SICOR Shares as provided in this Section 3. An election to exchange Exchange Stock hereunder shall be irrevocable. The
failure by the Series A Holders to elect to convert Exchange Stock during any exercise period specified above shall not limit in any respect their right to exercise such right any subsequent
exercise period. For the avoidance of doubt, SICOR hereby expressly acknowledges and agrees that no corporate transaction or other event relating to the Company, including, without limitation, its
bankruptcy, insolvency or merger with or into another entity shall limit, expand or accelerate in any respect the rights of the Series A Holders hereunder. 


        3.3    SICOR Exchange Shares.    The number of SICOR Shares which a Series A Holder shall be entitled to
receive upon exercise of the Exchange Right (the "SICOR Exchange Shares") shall be determined pursuant to the following formula: 



	 	 	A	 	×	 	B
 C	 	=	 	D






Where



	D=
	Number
of SICOR Exchange Shares;



	A=
	Number
of shares of Registrable Securities held by such Series A Holder (or deemed to be held from conversion of such holder's Series A Preferred Stock) as of the date of
mailing the most recent Exercise Notice ("Exercise Date") and specified in the Exercise Notice. 




15





 


	B=
	Initially,
$7.09 (the original issue price of Series A Preferred Stock), as proportionally adjusted for any stock splits, stock combinations, stock dividends, reclassifications,
recapitalizations and the like (collectively referred to as a "Recapitalization"); and



	C=
	The
arithmetic average of the closing price for SICOR Common Stock as quoted on the Nasdaq National Market ("Nasdaq") for the twenty (20) consecutive days on which SICOR Common
Stock was traded on Nasdaq ending immediately before the Exercise Date (the "SICOR Market Price"). 




        3.4    Adjustment for Recapitalization.    If at any time during the period from the Effective Date to the most recent
Exercise Date, the SICOR Common Stock is changed into the same or a different number of shares of any class or classes of stock, by any form of Recapitalization other than (i) a subdivision or
combination of shares or stock dividend, for which no adjustment pursuant to this Section 3.4 shall be made and (ii) a merger, acquisition (whether of SICOR or another entity) or sale of
substantially all of SICOR's assets (collectively referred to as a "Reorganization"), for which adjustment shall be made pursuant to Section 3.5, each Series A Holder shall have the
right to receive upon exercise of the Exchange Right the kind and amount of stock and other securities and property receivable upon such Recapitalization by holders of the maximum number of SICOR
Common Shares into which Exchange Stock held by such Series A Holder could have been exchanged immediately prior to such Recapitalization (assuming for purposes of this Section 3.4 that
the Exchange Right was exercisable, and such exchange was completed, immediately prior to the closing of such Recapitalization), subject to further adjustment as provided with respect to such other
securities or property pursuant the terms thereof. 


        3.5    Adjustment for Reorganization.    If at any time during the period from the Effective Date to the most recent
Exercise Date, SICOR effects a Reorganization, provision shall be made so that each Series A Holder shall have the right to receive upon exercise of the Exchange Right the kind and amount of
stock and other securities and property receivable upon such Reorganization by holders of the maximum number of SICOR Common Shares into which Exchange Stock could have been exchanged immediately
prior to such Reorganization (assuming for purposes of this Section 3.5 that the Exchange Right was exercisable, and such exchange was completed, immediately prior to the closing of such
Reorganization), subject to further adjustment as provided with respect to such other securities or property pursuant to the terms thereof. 


        3.6    Certificate of Adjustment.    Within 15 days following the completion of a Recapitalization or
Reorganization, SICOR, at its expense, shall compute the adjustment required in connection therewith pursuant to Section 3.4 or Section 3.5, as applicable, and shall deliver to each
Series A Holder a certificate showing such adjustment. The certificate shall set forth in reasonable detail SICOR's calculation of the adjustment and the type and amount of other property which
would be received by the Series A Holders upon exchange of their Exchange Stock pursuant to this Section 3. 


        3.7    Exchange Mechanics.    Series A Holders shall deliver the certificate(s) representing the Exchange Stock
such Series A Holders desire to exchange pursuant to this Section 3 to SICOR, and a copy of such certificate(s) to the Company, together with the Exercise Notice. Upon receipt of the
Exercise Notice and such certificates, SICOR shall calculate the number of SICOR Exchange Shares receivable by each such Series A Holder pursuant to Section 3.3 and, within ten
(10) business days of SICOR's receipt of the Exercise Notice, deliver to each such holder (i) certificates representing such Series A Holder's SICOR Exchange Shares issued as of
the applicable Exercise Date, (ii) a reasonably detailed statement indicating such calculation pursuant to Section 3.3 (which calculation shall be binding upon such Series A
Holder in the absence of manifest mathematical error or misstatement of the closing prices for the SICOR Common Stock for purposes of calculation of the SICOR Market Price) and (iii) any cash
payable in respect of 



16





 




fractional
SICOR Exchange Shares pursuant to Section 3.9. Within ten (10) business days of SICOR's receipt of the Exercise Notice, SICOR shall deliver a written notice to the Company
(and a copy of such notice to the Series A Holders) stating the balance of shares of Exchange Stock, if any, surrendered to SICOR under this Section 3.7 that remain unexercised pursuant
to this Section 3, and within ten (10) business days of the Company's receipt of such notice, the Company shall deliver to the Series A Holder a share certificate(s) for such
balance. 


        3.8    SICOR Obligations in Respect of SICOR Exchange Shares.    SICOR at all times shall reserve and keep available,
solely for issuance and delivery upon exercise of each Series A Holder's Exchange Right, such number of SICOR Exchange Shares as may be issuable upon such exchange. SICOR, at its expense, shall
further cause a registration statement on Form S-3 registering the resale of the SICOR Exchange Shares to be filed and declared effective in accordance with applicable law as soon
as practicable following SICOR's receipt of any Exercise Notice. 



        3.9    Fractional Shares.    No fractional SICOR Exchange Shares shall be issued upon exchange of Exchange Stock. All
SICOR Exchange Shares (including fractions thereof) issuable upon exchange of Exchange Stock shall be aggregated for purposes of determining whether the exchange would result in the issuance of any
fractional share. If, after such aggregation, the exchange would result in any fractional share, SICOR shall, in lieu of issuing any fractional share, pay cash equal to the product of such fraction
multiplied by the SICOR Market Price. 


        3.10    Payment of Taxes.    SICOR will pay all taxes (other than taxes based upon income) and other governmental
charges that may be imposed with respect to the issue or delivery of SICOR Exchange Shares upon exchange of Exchange Stock. 




        4.    Right of First Offer.    



        4.1    General.    Except for (i) conversion rights applicable to the Company's Preferred Stock,
(ii) securities issued pursuant to an underwritten public offering pursuant to an effective registration statement under the Securities Act, (iii) securities issued pursuant to the
Company's acquisition of another corporation by merger, purchase of substantially all the assets or other corporate reorganization, (iv) securities issued in connection with any stock split or
stock dividend of the Company, (v) securities issued after the Effective Date to employees, officers, directors or consultants of the Company pursuant to stock purchase or stock option plans,
stock bonuses or awards, contracts or other arrangements that are approved by the Company's Board of Directors, (vi) warrants or other securities issued to financial institutions or commercial
lenders in connection with equipment financing transactions approved by the Company's Board of Directors and (vii) securities issued in connection with strategic corporate partner agreements
approved by the Company's Board of Directors, the Company will not, nor will it permit any of its subsidiaries to, authorize or issue any shares of stock of the Company of any class and will not
authorize, issue or grant any options, warrants, conversion rights or other rights to purchase or acquire any shares of stock of the Company of any class without offering the holders of
Series C Preferred Stock the right of first refusal described below. In the event the Company grants subsequent purchasers any rights of first refusal or registration rights which are, in the
good faith judgment of the Board of Directors, superior to those granted to the Series C Holders pursuant to this Agreement, then the Series C Holders shall receive such rights. 



        4.2    Right of First Refusal.    



        (a)   Each
holder of Series C Preferred Stock shall have a right of first refusal to purchase an amount of equity securities of the Company of any class or kind which
the Company proposes to sell (other than the issuance of shares contemplated by Section 4.1 above) sufficient to maintain such holder's proportionate beneficial ownership interest in the 




17





 


Company.
If the Company wishes to make any such sale of its securities, it shall give the Series C Holders written notice of the proposed sale (the "Section 4.2 Notice"). The
Section 4.2 Notice shall set forth (i) the Company's bona fide intention to offer such shares and (ii) the material terms and conditions of the proposed sale (including the number
of shares to be offered and the price, if any, for which the Company proposes to offer such shares), and shall constitute an offer to sell such securities to Series C Holders on such terms and
conditions. Any Series C Holder may accept such offer by delivering a written notice of acceptance to the Company within ten (10) days after receipt of the Section 4.2 Notice. Any
Series C Holder exercising its right of first refusal shall be entitled to participate in the purchase of such securities on a pro rata basis to the extent necessary to maintain such holder's
proportionate beneficial ownership interest in the Company (for purposes of determining the pro rata interest of the Series C Holders, any Series C Holder shall be treated as owning that
number of shares of Common Stock into which any outstanding convertible preferred stock and warrants to purchase convertible preferred stock held by them may be converted, and the Company shall be
treated as having outstanding, immediately prior to the proposed sale of equity security, all outstanding Common Stock, all outstanding options to purchase shares of Common Stock pursuant to the 1998
Stock Incentive Plan of Metabasis Therapeutics, Inc., and that amount of Common Stock into which all outstanding shares of convertible preferred stock, including all outstanding rights to
acquire or otherwise purchase such convertible preferred stock, may be converted). The Company shall promptly, in writing, inform each Series C Holder which elects to purchase its pro rata
portion of such shares of any other holder's failure to do so, in which case the holders electing to purchase such shares shall have the right to purchase all or a portion of such shares on a pro rata
basis, on terms no less favorable to the holder, for a period of ten (10) days. Such Series C Holder shall be entitled to apportion the right of first refusal hereby granted among itself
and its partners, affiliates and related parties in such proportions it deems appropriate. If the Series C Holders do not accept such offer within ten (10) days, then that portion of the
shares which is not purchased may be offered to other parties on terms no less favorable to the Company for a period of ten (10) days. 



        (b)   In
lieu of delivering Section 4.2 Notice to the Series C Holders prior to the sale of Company offered securities to third parties, as provided in
subsection 4.2(a), above the Company may elect first to sell Company offered securities to third parties and then, within thirty (30) days thereafter, offer such Series C Holders the
opportunity to purchase their pro rata portions of the Company offered securities. Such offer shall remain in effect for twenty (20) days after notice to the Series C Holders and, if
accepted, the closing of the sale of Company offered securities shall occur within thirty (30) days after the date of the acceptance notice. 




        4.3    Expiration of Right of First Refusal.    The right of first refusal granted under this Section 4 shall
expire upon the consummation of a Qualified IPO. 


        4.4    Assignment.    The right of first refusal granted under this Section 4 may be assigned (i) to a
transferee or assignee in connection with any transfer or assignment by a Series C Holder of not less than 50,000 shares of Registrable Securities, or such lesser number if such shares
constitute all of the Registrable Securities then held by such Series C Holder, or (ii) to any transferee or assignee who is a constituent, member or partner or retired partner of a
Series C Holder or the estate of such partner, or to any transferee or assignee who is a family member of the Series C Holder or a trust for the benefit of the Series C Holder or
any family member of the Series C Holder or any parent corporation or subsidiary corporation of the Series C Holder, provided that, with respect to each such transfer or assignment, the
Company be given prior 



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written
notice of the transfer, the transferee or assignee agree writing to all provisions contained in this Section 4 and that such transfer otherwise be effected in accordance with applicable
laws. 




        5.    Miscellaneous.    



        5.1    Board Observer Rights.    The Series A Holders shall have the right to designate a representative to
attend meetings of the Company's Board of Directors in a non-voting capacity and to receive prior written notice of, and copies of all materials distributed at, all such meetings
(regardless of whether such representative attends such meetings); provided, however, that the Company shall not be obligated under this
Section 5.1 to provide information, or include such observer in discussions relating to information, which the Company determines in good faith (i) to involve an ongoing commercial
relationship, or a proposed transaction, between the Company and a third party, or (ii) to be a trade secret or to be subject to the attorney-client privilege. 


        5.2    Real Property Holding Corporation.    The Company covenants that it will operate in such that it will not
become a "United States real property holding corporation" ("USRPHC") as that term is defined in Section 897(c)(2) of the Internal Revenue Code
of 1986, as amended, and the regulation thereunder. The Company agrees to make determinations as to its status as a USRPHC, and will file statements concerning those determinations with the Internal
Revenue Service, in the manner and at the times required under Reg. § 1.897-2(h), or any supplementary or successor provision thereto. Within 30 days of a request from a
Series A Holder, Series B Holder or Series C Holder, the Company will inform the requesting party, in the manner set forth in Reg. §
1.897-2(h)(1)(iv) or any supplementary or successor provision thereto, whether that party's interest in the Company constitutes a United States real property interest (within the
meaning of Internal Revenue Code Section 897(c)(1) and the regulations thereunder) and whether the Company has provided to the Internal Revenue Service all required notices as to its USRPHC
status. 


        5.3    Waivers and Amendments.    With the written consent of the Company and the holders of more than
662/3% of the Registrable Securities the obligations of the Company and the rights of the holders of Registrable Securities under this Agreement may be waived (either generally or in a
particular instance, either retroactively or prospectively and either for a specified period of time or indefinitely), and with the same consent, the Company, when authorized by resolution of its
Board of Directors, may amend
this Agreement or enter into a supplementary agreement for the purpose of adding any provisions of this Agreement. Neither this Agreement nor any provisions hereof may be amended, changed, waived,
discharged or terminated orally, but only by a signed statement in writing evidencing the consents required pursuant to the preceding sentence. Any amendment, waiver or supplementary agreement
effected in accordance with this paragraph shall be binding upon each holder of any Registrable Securities then outstanding, each future holder of all such Registrable Securities and the Company.
Notwithstanding the foregoing, (i) the written consent of 67% of the holders of Series C Preferred Stock shall be obtained prior to any amendment or waiver of the rights, preferences or
privileges of the holders of Series C Preferred Stock contained in Sections 1 and 4 of this Agreement and this Section 5.3 and (ii) the written consent of 67% of the holders of
the Series A Preferred Stock and Series B Preferred Stock shall be obtained prior to any amendment or waiver of the rights, preferences or privileges of the holders of the
Series A Preferred Stock and the Series B Preferred Stock, as the case may be, contained in Sections 1 and 3 of this Agreement and this Section 5.3. 


        5.4    Delays or Omissions.    It is agreed that no delay or omission to exercise any right, power, or remedy accruing
to any Series A Holder, Series B Holder or Series C Holder, upon any breach, default, or noncompliance of the Company under this Agreement shall impair any such right, power, or
remedy, nor shall it be construed to be a waiver of any such breach, default, or noncompliance, or any acquiescence therein, or of any similar breach, default, or noncompliance thereafter occurring.
It is further agreed that any waiver, permit, consent, or approval of any kind 



19





 




or
character on any such holder's part of any breach, default, or noncompliance under the Agreement or any waiver on such holder's part of any provisions or conditions of this Agreement must be in
writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement, by law, or otherwise afforded to the Series A Holders,
Series B Holders or Series C Holders, shall be cumulative and not alternative. 



        5.5    Notices.    All notices and other communications required or permitted hereunder shall be in writing and,
except as otherwise noted herein, shall be deemed effectively given (i) upon personal delivery, (ii) in the case of notices being delivered to the Company, SICOR or any other Investor
except for Sankyo by any party except for Sankyo, delivery by a nationally recognized courier or upon deposit with the United States Post Office (by first class mail, postage prepaid) and
(iii) in the case of notices being delivered to or by Sankyo, delivery by an internationally recognized courier service. All communications shall be sent to the party to be notified at the
following addresses or at such other address as such party may designate by ten (10) days advance written notice to the other parties: a) if to the Company, at 9390 Towne Centre Drive,
San Diego, California 92121 attention of the Chief Executive Officer (b) if to SICOR, at                        , (c) if
to Sankyo at Hiromachi 1-2-58,
Shinagawa-ku, Tokyo, 140-8710 Japan, Attention: Dr. Yoshiki Matsui, Research Planning Department, or (d) if to any other Investor, at its respective address
listed on the signature page hereof; provided, however, that, if any such notice is to be delivered by the Company to a holder Registrable Securities,
the Company may deliver such notice to the latest address of such person shown on the Company's records. 



        5.6    Descriptive Headings.    The descriptive headings herein have been inserted for convenience only and shall not
be deemed to limit or otherwise affect the construction of any provisions hereof. 


        5.7    Governing Law.    This Agreement shall be governed by and interpreted under the laws of the State of California
as applied to agreements among California residents, made and to be performed entirely within the State of California. 



        5.8    Counterparts.    This Agreement may be executed in one or more counterparts, each of which shall for all
purposes be deemed to be an original and all of which shall constitute the same instrument, but only one of which need be produced. 


        5.9    Expenses.    If any action at law or in equity is necessary to enforce or interpret the terms of this
Agreement, the prevailing party shall be entitled to reasonable attorney's fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled. 



        5.10    Successors and Assigns.    Except as otherwise expressly provided in this Agreement, this Agreement shall
benefit and bind the successors, assigns, heirs, executors and administrators of the parties to this Agreement. 


        5.11    Entire Agreement.    This Agreement constitutes the full and entire understanding and agreement between the
parties with regard to the subject matter of this Agreement. 



        5.12    Separability; Severability.    Unless expressly provided in this Agreement, the rights of each Investor under
this Agreement are several rights, not rights jointly held with any other Investors. Any invalidity, illegality or limitation on the enforceability of this Agreement with respect to any Investor shall
not affect the validity, legality or enforceability of this Agreement with respect to the other Investors. If any provision of this Agreement is judicially determined to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining provisions shall not be affected or impaired unless the severed provision is material to the rights and benefits received by
any party hereto. In such event the parties hereto shall use reasonable commercial efforts to negotiate, in good faith, a substitute, valid and enforceable provision or agreement which most nearly
effects the intent of the parties entering into this Agreement. 


        5.13    Stock Splits.    All references to numbers of shares in this Agreement shall be appropriately adjusted to
reflect any stock dividend, split, combination or other recapitalization of shares by the Company occurring after the Effective Date. 



20





 

        IN
WITNESS WHEREOF, the parties have executed this Amended and Restated Investors' Rights Agreement on the day and year first set forth above. 



	 	 	METABASIS THERAPEUTICS, INC.
	

 	
 	

By:	

    

	 	 	Title	    

	

 	
 	

SICOR INC.
	

 	
 	

By:	

    

	 	 	Title	    

	

 	
 	

SANKYO COMPANY, LTD.
	

 	
 	

By:	

    

	 	 	Title	    





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METABASIS THERAPEUTICS, INC. AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT

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