<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 10, 1999.
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM F-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PEPTIDE THERAPEUTICS GROUP PLC
(Exact name of registrant as specified in its charter)
N/A
(Translation of registrant's name into English)
<TABLE>
<S> <C> <C>
ENGLAND AND WALES 2834 N/A
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) Number)
</TABLE>
321 CAMBRIDGE SCIENCE PARK, MILTON ROAD, CAMBRIDGE, CB4 4WG, ENGLAND
011-44-1223-423-333
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------
DR. JOHN BROWN
CHIEF EXECUTIVE
PEPTIDE THERAPEUTICS GROUP PLC
321 CAMBRIDGE SCIENCE PARK, MILTON ROAD
CAMBRIDGE, CB4 4WG, ENGLAND
011-44-1223-423-333
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
WITH COPIES TO:
MICHAEL LYTTON, ESQ. JOHN M. WESTCOTT, JR. ESQ.
STANLEY KELLER, ESQ. HALE AND DORR LLP
PAUL KINSELLA, ESQ. 60 STATE STREET
PALMER & DODGE LLP BOSTON, MASSACHUSETTS 02109
ONE BEACON STREET (617) 526-6000
BOSTON, MASSACHUSETTS 02108
(617) 573-0100
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
As soon as practicable after the Registration Statement becomes effective and
all other conditions to the merger described in the enclosed prospectus and
proxy statement have been satisfied or waived.
------------------------------
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
AMOUNT TO BE AGGREGATE AMOUNT OF REGISTRATION
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED REGISTERED(1) OFFERING PRICE(2) FEE(3)
<S> <C> <C> <C>
Ordinary shares, nominal value 10 pence each....... 11,410,000 $12,200,000 $982
</TABLE>
(1) Based on the product of (a) 20,000,000, the maximum number of shares of
common stock, par value $.001 per share of OraVax, Inc. that would be
outstanding immediately prior to the merger of OraVax and a subsidiary of
Peptide, less shares held by OraVax and its subsidiaries and Peptide and its
affiliates and (b) an exchange ratio of .5705 Peptide ordinary shares for
each OraVax share.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rules 457(f)(1) and 457(c) thereunder based on $.61, the average
of the high and low sale price per share of OraVax common stock on February
3, 1999 and 20,000,000, the maximum number of OraVax shares to be exchanged
in the merger.
(3) Pursuant to Securities Act Rule 457(b), the fee has been reduced by $2,410,
which was paid previously with the filing of preliminary proxy material by
OraVax in connection with the merger.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED FEBRUARY 10, 1999
THE INFORMATION IN THIS PROSPECTUS/PROXY STATEMENT IS NOT COMPLETE AND MAY BE
CHANGED. PEPTIDE MAY NOT ISSUE ITS ORDINARY SHARES IN THE MERGER UNTIL THE
REGISTRATION STATEMENT CONTAINING THIS PROSPECTUS/PROXY STATEMENT IS DECLARED
EFFECTIVE BY THE SECURITIES AND EXCHANGE COMMISSION. THIS PROSPECTUS/PROXY
STATEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT A SOLICITATION
OF AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
<PAGE>
ORAVAX, INC.
38 SIDNEY STREET
CAMBRIDGE, MASSACHUSETTS 02139
(617) 494-1339
, 1999
Dear Stockholder:
The board of directors of OraVax has unanimously approved a merger in which
OraVax will become a wholly-owned subsidiary of Peptide Therapeutics Group plc.
If the merger is completed, you will receive a portion of a Peptide ordinary
share for each share of OraVax common stock you own. The precise portion of a
Peptide ordinary share which you will receive will depend on the market value of
Peptide ordinary shares just prior to completion of the merger, as described in
the accompanying prospectus/proxy statement.
We cannot complete the merger unless the holders of OraVax common stock
adopt the merger agreement. We will hold a special meeting of OraVax
stockholders to vote on the merger agreement. The date, time and place of the
special meeting are as follows:
, 1999
10:00 a.m., local time
Offices of Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING, PLEASE TAKE THE TIME TO VOTE BY COMPLETING AND MAILING THE ENCLOSED
PROXY CARD TO US. IF YOU SIGN, DATE AND MAIL YOUR PROXY CARD WITHOUT INDICATING
HOW YOU WISH TO VOTE, YOUR PROXY WILL BE COUNTED AS A VOTE IN FAVOR OF THE
MERGER AGREEMENT. IF YOU FAIL TO RETURN YOUR CARD, THE EFFECT WILL BE A VOTE
AGAINST THE MERGER AGREEMENT.
The accompanying prospectus/proxy statement gives you detailed information
about the proposed merger. In addition, you may obtain other information about
OraVax from documents filed with the SEC. We encourage you to read this entire
document carefully. PLEASE PAY PARTICULAR ATTENTION TO THE "RISK FACTORS"
SECTION BEGINNING ON PAGE WHICH DESCRIBES CERTAIN RISKS THAT YOU SHOULD
CONSIDER IN DECIDING WHETHER TO VOTE IN FAVOR OF THE MERGER AGREEMENT.
On behalf of the board of directors of OraVax, I urge you to vote in favor
of the merger agreement.
Lance K. Gordon, Ph.D.
President and Chief Executive Officer
NEITHER THE SEC NOR ANY STATE SECURITIES REGULATORS HAS APPROVED THE ORDINARY
SHARES TO BE ISSUED IN THE MERGER OR DETERMINED THAT THIS PROSPECTUS/PROXY
STATEMENT IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This prospectus/proxy statement is dated , 1999, and is first
being mailed to stockholders on or about , 1999.
<PAGE>
ORAVAX, INC.
38 SIDNEY STREET
CAMBRIDGE, MASSACHUSETTS 02139
(617) 494-1339
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 1999
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of OraVax,
will be held at the offices of Hale and Dorr LLP, 60 State Street, Boston,
Massachusetts 02109, on , 1999, at 10:00 a.m., local time, for the
following purposes:
(1) To adopt a merger agreement which provides for:
- the acquisition of OraVax by Peptide Therapeutics Group plc; and
- the conversion of each share of OraVax common stock into a portion of a
Peptide ordinary share (as determined by the share exchange formula in the
merger agreement).
A copy of the merger agreement is attached as Annex A to the accompanying
proxpectus/proxy statement.
(2) To transact such other business as may properly come before the meeting or
any adjournment or postponement thereof.
Only holders of OraVax common stock at the close of business on ,
1999 are entitled to notice of, and to vote at, the meeting and any adjournments
or postponements thereof.
Adoption of the merger agreement requires the affirmative vote of the
holders of a majority of the outstanding shares of OraVax common stock entitled
to vote at the meeting. The executive officers and directors of OraVax and
certain of their affiliates, who in the aggregate held approximately % of the
outstanding shares as of the record date, have agreed to vote to adopt the
merger agreement.
UNDER DELAWARE LAW, STOCKHOLDERS OF ORAVAX HAVE CERTAIN RIGHTS OF APPRAISAL
IN CONNECTION WITH THE MERGER AS DESCRIBED IN THE ACCOMPANYING PROSPECTUS/PROXY
STATEMENT.
Information regarding the merger, the merger agreement, OraVax, Peptide and
related matters is contained in the accompanying prospectus/proxy statement and
the annexes thereto, which are incorporated by reference herein and form a part
of this notice.
By Order of the Board of Directors
Lance K. Gordon, Ph.D.
President and Chief Executive Officer
Cambridge, Massachusetts
, 1999
IMPORTANT
WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY CARD AND PROMPTLY MAIL IT IN THE ENCLOSED ENVELOPE
IN ORDER TO ASSURE REPRESENTATION OF YOUR SHARES AT THE SPECIAL MEETING. NO
POSTAGE NEED BE AFFIXED IF THE PROXY CARD IS MAILED IN THE UNITED STATES.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Summary.................................................................................................... 1
Forward-Looking Statements May Prove Inaccurate............................................................ 6
Summary Financial Information.............................................................................. 7
Unaudited Pro Forma Condensed Consolidated Balance Sheet and Statements of Operations...................... 11
Comparative Per Share Data................................................................................. 15
Comparative Market Price and Dividend Information.......................................................... 16
Comparative Market Price Information..................................................................... 16
Comparative Dividend Information......................................................................... 17
Exchange Rates........................................................................................... 17
Risk Factors............................................................................................... 18
Risks Relating to Peptide................................................................................ 18
Risks Relating to OraVax................................................................................. 21
Risks Relating to the Merger............................................................................. 23
The Special Meeting........................................................................................ 27
General.................................................................................................. 27
Matters to be Considered at the Special Meeting.......................................................... 27
Record Date; Voting Rights; Voting at the Meeting........................................................ 27
Voting of Proxies........................................................................................ 27
Solicitation of Proxies.................................................................................. 28
Background and Reasons for the Merger...................................................................... 28
Background of the Merger................................................................................. 28
OraVax's Reasons for the Merger; Recommendation of the OraVax Board of Directors......................... 32
Opinion of Financial Advisor to the Board of Directors................................................... 33
Interests of Certain Persons in the Merger............................................................... 37
Peptide's Reasons for the Merger......................................................................... 38
Management After The Merger................................................................................ 40
Executive Officers and Directors......................................................................... 40
Compensation of Directors and Executive Officers......................................................... 42
Options to Purchase Securities From Peptide.............................................................. 43
The Merger and the Merger Agreement........................................................................ 44
Structure of the Merger.................................................................................. 44
Effective Time and Effects of the Merger................................................................. 44
Merger Consideration..................................................................................... 44
No Fractional Peptide Ordinary Shares.................................................................... 45
Exchange of Share Certificates........................................................................... 45
Treatment of OraVax Common Stock Options and Warrants.................................................... 45
Representations and Warranties........................................................................... 46
Certain Covenants........................................................................................ 47
Conditions to the Merger................................................................................. 49
Amendments; Waivers...................................................................................... 50
No Solicitation by OraVax................................................................................ 50
Termination of the Merger Agreement...................................................................... 50
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Termination Fees and Expenses............................................................................ 51
Federal Securities Law Consequences...................................................................... 52
Deregistration of OraVax Shares; Listing of Peptide Ordinary Shares...................................... 52
Appraisal Rights......................................................................................... 52
Covenant Not to Sell Peptide Ordinary Shares............................................................. 54
Accounting Treatment..................................................................................... 54
Arrangements with PMC and OraVax......................................................................... 54
Description of Bridge Loan............................................................................... 56
Peptide Shareholder Materials............................................................................ 57
Material Tax Consequences.................................................................................. 58
General.................................................................................................. 58
United States Federal Income Tax Consequences............................................................ 59
United States Federal Income Tax Consequences of the Ownership of Peptide Ordinary Shares................ 59
U.K. Tax Consequences of Owning Peptide Ordinary Shares.................................................. 61
Description of Peptide..................................................................................... 64
General.................................................................................................. 64
Business................................................................................................. 64
Scientific Background.................................................................................... 64
Product Portfolio........................................................................................ 65
Strategic Alliances and Collaborations................................................................... 68
Technology Platforms and Research Programs............................................................... 70
Properties............................................................................................... 73
Employees................................................................................................ 74
Litigation............................................................................................... 74
Ownership of Peptide Ordinary Shares....................................................................... 75
Beneficial Ownership by Management of Peptide............................................................ 75
Beneficial Ownership of Certain Stockholders............................................................. 75
Selected Financial Information of Peptide.................................................................. 77
Peptide Management's Discussion and Analysis of Financial Condition and Results of Operations.............. 79
Overview................................................................................................. 79
Results of Operations.................................................................................... 79
Liquidity and Capital Resources.......................................................................... 81
Year 2000................................................................................................ 82
Reconciliation of U.K. GAAP to U.S. GAAP................................................................. 83
Description of OraVax's Business........................................................................... 85
General.................................................................................................. 85
Business................................................................................................. 85
Scientific Background.................................................................................... 86
Products Under Development............................................................................... 86
Manufacturing............................................................................................ 91
Patents and Proprietary Rights; Technology Agreements.................................................... 92
Government Regulation.................................................................................... 95
Employees................................................................................................ 97
Academic Consultants..................................................................................... 97
Properties............................................................................................... 97
Legal Proceedings........................................................................................ 97
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
OraVax Stock Ownership..................................................................................... 98
Stock Ownership of Certain Beneficial Owners and Management of OraVax, Inc............................... 98
Selected Financial Information of OraVax................................................................... 99
OraVax Management's Discussion and Analysis of Financial Condition and Results of Operations............... 100
Business Overview........................................................................................ 100
Results of Operations.................................................................................... 101
New Accounting Pronouncements............................................................................ 104
Bridge Financing--Pasteur Merieux Connaught.............................................................. 104
Liquidity and Capital Resources.......................................................................... 105
Nasdaq Delisting......................................................................................... 106
Year 2000 Compliance..................................................................................... 106
Description of Peptide Ordinary Shares..................................................................... 108
Dividends................................................................................................ 108
Rights in a Winding Up................................................................................... 108
Voting................................................................................................... 108
Preemptive Rights........................................................................................ 109
Variation of Rights and Share Capital.................................................................... 109
Disclosure of Interests.................................................................................. 109
Miscellaneous............................................................................................ 110
Comparison of Rights of OraVax Stockholders and Peptide Shareholders....................................... 111
Voting Rights............................................................................................ 111
Action By Written Consent................................................................................ 112
Sources and Payment of Dividends......................................................................... 112
Rights of Purchase and Redemption........................................................................ 113
Special Meeting of Shareholders.......................................................................... 113
Rights of Appraisal...................................................................................... 114
Preemptive Rights........................................................................................ 115
Amendment of Governing Instruments....................................................................... 115
Shareholder Votes on Certain Transactions................................................................ 116
Rights of Inspection..................................................................................... 117
Classification of the Board of Directors................................................................. 117
Removal of Directors..................................................................................... 118
Vacancies on the Board of Directors...................................................................... 118
Liability of Directors and Officers...................................................................... 118
Indemnification of Directors and Officers................................................................ 118
Shareholders' Suits...................................................................................... 119
Certain Provisions Relating to Share Acquisitions........................................................ 120
Anti-Takeover Provisions................................................................................. 120
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Disclosure of Interests.................................................................................. 121
Certain London Stock Exchange Listing Requirements....................................................... 122
Enforceability of Civil Liabilities........................................................................ 123
Legal Matters.............................................................................................. 123
Experts.................................................................................................... 123
Where You Can Find More Information........................................................................ 123
Index to Financial Statements of Peptide Therapeutics Group plc, OraVax, Inc. and OraVax Merieux Co. and
Merieux OraVax Co. Partnerships.......................................................................... F-1
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Annex A Restated Agreement and Plan of Acquisition, as amended
Annex B Opinion of Hambrecht & Quist
Annex C Section 262 of the Delaware General Corporation Law
Annex D Form of Voting Agreement
</TABLE>
References in this prospectus/proxy statement to "U.S. dollars", "$", or
" CENTS" are to the currency of the U.S. References to "pounds sterling",
"pounds", "L", "pence" or "p" are to the currency of the United Kingdom (there
are 100 pence to each pound). Solely for your convenience, this prospectus/proxy
statement contains translations of certain pound sterling amounts into U.S.
dollars at specified rates. These translations should not be taken as assurances
that the pound sterling amounts actually represent such U.S. dollar amounts or
could be converted into U.S. dollars at the rate indicated or at any other rate.
Furthermore, these translations do not constitute an estimate of the exchange
rate that will apply when Peptide ordinary shares are valued for determining the
number of Peptide ordinary shares you will receive in the merger.
iv
<PAGE>
SUMMARY
This summary highlights selected information from this document. For a more
complete description of the transaction, you should read the entire document,
including the materials attached as annexes. We have included page references in
parentheses to direct you to more complete descriptions of the topics we have
summarized.
THE COMPANIES (PAGES 64 AND 85)
ORAVAX, INC.
38 Sidney Street, 4th Floor
Cambridge, Massachusetts 02139
(617) 494-1339
OraVax is a biopharmaceutical company engaged in the discovery, development
and commercialization of vaccines and antibody products for the prevention and
treatment of human infectious diseases. Its product candidates fall into two
categories:
- Vaccines that stimulate the body's own immunity to provide long term
protection against disease; and
- Antibody products that provide immediate passive immunity to treat
existing infections or to protect against an acute disease risk.
PEPTIDE THERAPEUTICS GROUP PLC
321 Cambridge Science Park
Milton Road
Cambridge, CB4 4WG, England
011-44-1223-423-333
Peptide is a biopharmaceutical company engaged in the research and
development of novel vaccines and other drugs. Peptide's business strategy is to
develop product candidates through phase II clinical trials. After phase II
clinical trials, the company seeks to collaborate with major pharmaceutical
companies to complete the regulatory approval, manufacturing and marketing of
product candidates.
Peptide is an English company. Its shares are listed on the London Stock
Exchange.
THE MERGER AND THE MERGER AGREEMENT
SUMMARY OF THE TRANSACTION (PAGE 44)
In the proposed merger, OraVax will become a wholly-owned subsidiary of
Peptide and OraVax stockholders will become Peptide shareholders. The merger
agreement is attached as Annex A. You should read the merger agreement as it is
the legal document that governs the merger.
WHAT YOU WILL RECEIVE IN THE MERGER (PAGE 44)
If the merger occurs, you will receive a portion of the merger
consideration. The merger consideration will be approximately $17 million.
The merger consideration will be allocated pro rata among the outstanding
shares of OraVax common stock (other than shares owned by OraVax, Peptide, and
their subsidiaries, which will be cancelled). The parties estimate that there
will be approximately 22 million shares of OraVax common stock outstanding.
Approximately 2 million of these shares are held by Peptide and will be
cancelled without consideration at the time of the merger. Assuming that merger
consideration equal to approximately $17 million is split among 20 million
shares, each share of OraVax common stock would convert into approximately $0.85
worth of the merger consideration. Although the parties estimate that
1
<PAGE>
there will be approximately 20 million shares of OraVax common stock outstanding
at the effective time of the merger, that number could increase to as much as
approximately 21.3 million shares if convertible securities of OraVax are
converted into OraVax common stock prior to the merger. In that case, each share
of OraVax common stock would convert into only $0.79 worth of merger
consideration. See "Risk Factors--Risks Relating to the Merger--Additional
OraVax Stock Issuances May Dilute Merger Consideration."
The merger consideration will be payable in Peptide ordinary shares. For the
purpose of determining the number of Peptide ordinary shares that will be paid,
the parties have agreed to value Peptide ordinary shares at the average closing
price on the London Stock Exchange during the ten trading days ending on the
third trading day prior to the closing date of the merger. This value will be
converted from pounds sterling to dollars at the exchange rates in effect on
such days. Peptide and OraVax have agreed that the value of a Peptide ordinary
share for these purposes, however, will not be deemed to be below $1.49 or above
$2.24. In other words, no additional Peptide shares will be issued to offset
decreases in the market value below $1.49; and, there will not be a reduction in
the number of Peptide shares to offset increases in the market value above
$2.24. Accordingly, the total consideration received by OraVax stockholders will
decrease if the market value of a Peptide ordinary share falls below $1.49, and
will increase if the market value of a Peptide ordinary share increases above
$2.24.
The following table illustrates the range in the number of Peptide ordinary
shares issuable to the OraVax stockholders depending on the value of the Peptide
ordinary shares used for calculating the merger consideration. The table assumes
the aggregate merger consideration equals $17 million and 20 million shares of
OraVax common stock are entitled to share such amount.
<TABLE>
<CAPTION>
APPROXIMATE NUMBER
OF PEPTIDE
SHARES TO BE NUMBER OF PEPTIDE SHARES
PEPTIDE SHARE ISSUED TO FOR ONE SHARE OF ORAVAX
PRICE ORAVAX STOCKHOLDERS COMMON STOCK
- ------------------ ------------------- -------------------------
<S> <C> <C>
$1.49 11,409,396 0.5705
$1.54 11,038,961 0.5519
$1.59 10,691,824 0.5346
$1.64 10,365,854 0.5183
$1.69 10,059,172 0.5030
$1.74 9,770,115 0.4885
$1.79 9,497,207 0.4749
$1.84 9,239,130 0.4620
$1.89 8,994,709 0.4497
$1.94 8,762,887 0.4381
$1.99 8,542,714 0.4271
$2.04 8,333,333 0.4167
$2.09 8,133,971 0.4067
$2.14 7,943,925 0.3972
$2.19 7,762,557 0.3881
$2.24 7,589,286 0.3795
</TABLE>
The following chart and examples show the effect of the collar assuming
Peptide will issue Peptide ordinary shares valued at $17 million and the number
of shares of OraVax common stock outstanding at the closing will be 20 million.
2
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PEPTIDE SHARE PRICE NUMBER OF PEPTIDE SHARES TO BE
<S> <C>
in Dollars at
Closing Issued for each OraVax Share
1 0.5705
1.49 0.5705
2.24 0.3795
2.75 0.3795
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AGGREGATE MARKET VALUE OF PEPTIDE
PEPTIDE SHARE PRICE SHARES
<S> <C>
in Dollars at
Closing to be Received (in millions)
1 $11.40
1.49 $17.00
2.24 $17.00
2.75 $20.90
</TABLE>
EXAMPLE 1: IF THE MARKET VALUE OF A PEPTIDE ORDINARY SHARE IS $1.87 (FOR
PURPOSES OF THIS EXAMPLE ONLY), THEN 100 SHARES OF ORAVAX COMMON STOCK WOULD
CONVERT INTO THE RIGHT TO RECEIVE APPROXIMATELY 45 PEPTIDE ORDINARY SHARES.
EXAMPLE 2: IF THE MARKET VALUE OF A PEPTIDE ORDINARY SHARE IS $2.24 OR MORE
(FOR PURPOSES OF THIS EXAMPLE ONLY), THEN 100 SHARES OF ORAVAX COMMON STOCK
WOULD CONVERT INTO THE RIGHT TO RECEIVE APPROXIMATELY 37 PEPTIDE ORDINARY
SHARES.
EXAMPLE 3: IF THE MARKET VALUE OF PEPTIDE ORDINARY SHARES IS $1.49 OR LESS
(FOR PURPOSES OF THIS EXAMPLE ONLY), THEN 100 SHARES OF ORAVAX COMMON STOCK
WOULD CONVERT INTO THE RIGHT TO RECEIVE APPROXIMATELY 57 PEPTIDE ORDINARY
SHARES.
In the above examples, the number of Peptide ordinary shares that the 100
shares of OraVax common stock would convert into is determined by:
- first dividing the merger consideration of $17 million by the market value
of a Peptide ordinary share (e.g. $1.87 in the first example). This gives
you the number of Peptide ordinary shares to be issued in the merger (e.g.
17,000,000/1.87 = 9,090,909)
- next, determining the pro rata portion of the outstanding shares of OraVax
common stock represented by 100 shares (e.g. 100/20,000,000 = .000005)
- finally, multiplying the aggregate number of Peptide ordinary shares
issuable in the merger by the percentage of the outstanding OraVax common
stock represented by 100 shares of OraVax common stock (e.g. .000005 X
9,090,909 = 45)
REQUIRED VOTE (PAGE 27)
The affirmative vote of the holders of a majority of the shares of OraVax
common stock outstanding is required to adopt the merger agreement. As of the
record date, the directors of OraVax and certain of their affiliates and the
executive officers of OraVax beneficially owned approximately
3
<PAGE>
% of the outstanding shares of OraVax common stock. Each of the individuals
has advised OraVax that he intends to vote to adopt the merger agreement.
APPRAISAL RIGHTS (PAGE 52)
You will have the right to an appraisal of the value of your OraVax shares
in connection with the merger.
TAX CONSEQUENCES (PAGE 58)
The merger will not be a tax-free reorganization under United States federal
tax law. As a result, you will probably recognize gain or loss in the merger.
Tax matters are very complicated and the tax consequences of the merger to you
will depend on the facts of your own situation.
You should read carefully the discussion under "Material Tax
Consequences--United States Federal Income Tax Consequences." In view of the
complexities of U.S. federal income and other tax laws, we urge you to consult
with your tax advisor regarding, among other things, the federal, state, local
and foreign income tax consequences of the merger applicable to your specific
circumstances.
ORAVAX'S REASONS FOR THE MERGER (PAGE 32)
The OraVax board of directors believes that the merger is in the best
interests of OraVax and its stockholders. In reaching its decision, the OraVax
board of directors considered a number of factors, including the following:
- The results of operations, financial condition, competitive position and
prospects of OraVax and Peptide, both on a historical and future basis and
as separate and combined entities;
- The OraVax board of directors' belief that the analyses of Hambrecht &
Quist supported the OraVax board of director's conclusion that the merger
consideration is fair from a financial point of view to OraVax
stockholders; and
- The opportunity for OraVax's stockholders to become shareholders of
Peptide, which allows the OraVax stockholders to participate in the future
of the combined entity.
FAIRNESS OPINION OF ORAVAX'S FINANCIAL ADVISOR (PAGE 33)
On November 9, 1998, Hambrecht & Quist delivered its written opinion to the
OraVax board of directors that the consideration to be paid in the merger is
fair to the holders of OraVax common stock from a financial point of view. This
opinion was delivered prior to the January 28, 1999 amendment to the merger
agreement increasing the total consideration from $15 million to $20 million and
a revised opinion has not been delivered.
The full text of the written opinion of Hambrecht & Quist, which sets forth
the assumptions made, matters considered and limits on the review undertaken, is
attached as Annex B to this document. We urge you to read such opinion carefully
and in its entirety.
PEPTIDE'S REASONS FOR THE MERGER (PAGE 38)
The Peptide board of directors unanimously approved the merger agreement and
the merger. The Peptide board of directors believes the merger provides
strategic advantages, including:
- Expansion of its product portfolio to achieve a critical mass of product
candidates;
- Access to OraVax's complementary vaccine product portfolio and its
proprietary technology platform, ChimeriVax-TM-; and
- The ability to acquire OraVax's rights as a 50% joint venture partner in
the H. PYLORI collaboration with Pasteur Merieux Connaught.
4
<PAGE>
CONDITIONS TO THE MERGER (PAGE 49)
OraVax and Peptide will not complete the merger unless a number of
conditions are satisfied or waived. These conditions include the following:
- The holders of a majority of the outstanding shares of OraVax common stock
adopting the merger agreement;
- The holders of a majority of the outstanding Peptide ordinary shares
approving the merger;
- Peptide completing a financing in the U.K. in which it raises
approximately L20.6 million (net of expenses) in cash;
- The absence of an injunction or order prohibiting the merger;
- The accuracy of representations and warranties made in the merger
agreement;
- Holders of less than 5% of the outstanding shares of OraVax common stock
exercising appraisal rights; and
- Peptide having listed the Peptide ordinary shares to be issued in the
merger on the London Stock Exchange.
TERMINATION OF THE MERGER AGREEMENT (PAGE 50)
OraVax and Peptide can agree in writing at any time to terminate the merger
agreement.
The merger agreement may be terminated by either OraVax or Peptide if any of
the following occurs:
- The merger is not completed by July 31, 1999, provided that neither party
has the right to terminate if its breach has caused the delay;
- Any governmental entity prohibits the merger;
- The holders of OraVax common stock do not adopt the merger agreement;
- The holders of Peptide ordinary shares do not approve the merger.
- The other party breaches its representations, warranties or obligations
under the merger agreement and does not cure the breach within 20 days of
receiving notice of such breach, provided the breach could have a material
adverse effect on the breaching party.
OraVax may terminate the merger agreement if it enters into a more favorable
alternative transaction without violating the terms of the merger agreement.
Peptide may terminate the merger agreement if the OraVax board of directors
withdraws or modifies, in a manner adverse to Peptide, its recommendation that
OraVax stockholders adopt the merger agreement.
TERMINATION FEE (PAGE 51)
If the merger agreement is terminated under certain circumstances, OraVax
may be required to pay Peptide's out-of-pocket expenses. In addition, if the
termination involves an alternative acquisition proposal or a failure of the
OraVax board of directors to recommend adoption of the merger agreement by the
OraVax stockholders, OraVax will be required to pay Peptide a termination fee of
$750,000 (less any amount paid for out-of-pocket expenses). If the termination
involves an alternative acquisition proposal by PMC, OraVax will be required to
pay Peptide a termination fee of $1.5 million (less any amount paid for
out-of-pocket expenses).
5
<PAGE>
NO SOLICITATION OF COMPETING TRANSACTIONS (PAGE 50)
The merger agreement restricts OraVax's ability to solicit, negotiate or
encourage alternative acquisition transactions except in certain limited
circumstances. OraVax must promptly notify Peptide if it receives offers or
proposals for any such alternative transactions.
ACCOUNTING TREATMENT (PAGE 54)
Peptide will account for the merger under the acquisition method of
accounting, a method provided for under generally accepted accounting principles
in the U.K., which is similar to purchase accounting under U.S. generally
accepted accounting principles.
COMPARATIVE PER SHARE MARKET PRICE INFORMATION (PAGE 16)
OraVax common stock was traded on the Nasdaq National Market through
November 16, 1998. Since November 17, 1998, OraVax common stock has traded on
the OTC Bulletin Board. Peptide ordinary shares are listed on the London Stock
Exchange. On November 10, 1998, the last full trading day prior to the public
announcement of the merger, OraVax's common stock closed at $0.4062 per share,
and Peptide ordinary shares closed at 112.5 pence per share or $1.87 using a
dollar/pound sterling exchange rate of 1.6580 (the noon buying rate on that
day). On February 2, 1999, OraVax common stock closed at $.578 per share and
Peptide ordinary shares closed at 117.5 pence per share or $1.93 using a
dollar/pound sterling exchange rate of 1.64 (the noon buying rate on that day).
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE
OraVax and Peptide have made forward-looking statements in this document.
These statements are subject to risks and uncertainties, and OraVax and Peptide
cannot guarantee that these statements will prove to be correct. Forward-looking
statements relate to future periods and include statements about:
- product development;
- receipt of regulatory approvals;
- projected cash needs;
- benefits of the merger; and
- financial results.
Generally, the words "believes," "expects," "anticipates" and similar
expressions identify forward-looking statements. You should understand that
several factors could cause results to differ materially from those expressed in
our forward-looking statements. These factors include: adverse changes in
economic conditions generally or in the markets served by OraVax and Peptide; a
significant delay in the expected completion of the merger; and the matters
discussed in this prospectus/proxy statement under the heading "Risk Factors."
Both OraVax and Peptide disclaim any obligation to update forward-looking
statements.
6
<PAGE>
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The tables on the following two pages present summary consolidated financial
information for Peptide and OraVax. This information has been derived from their
respective consolidated financial statements and notes, certain of which are
included in this prospectus/proxy statement. This information is only a summary
and should be read in conjunction with the historical financial statements of
Peptide and OraVax and the related notes contained in this prospectus/proxy
statement.
The financial information of Peptide, except for the interim financial
information dated June 30, 1998 and 1997, has been derived from audited
financial statements. The financial information of OraVax, except for the
interim financial information dated September 30, 1998 and 1997, has been
derived from audited financial statements.
All unaudited financial information presented has been derived from
unaudited consolidated financial statements, and in the opinion of Peptide's and
OraVax's management reflects all normal recurring adjustments necessary for a
fair presentation.
The financial information of Peptide has been prepared in accordance with
United Kingdom generally accepted accounting principles, which differs in
respects from United States generally accepted accounting principles. The
principal differences between U.K. GAAP and U.S. GAAP are summarized in Note 21
of Peptide's audited consolidated financial statements. The translation of
pounds sterling into U.S. dollars for the six months ended June 30, 1998 has
been made at the rate of L1.00 = $1.6695 based upon the noon buying rate on June
30, 1998. Such translation is provided solely for the convenience of the reader
and does not reflect financial information in accordance with generally accepted
accounting principles for foreign currency translations.
7
<PAGE>
<TABLE>
<CAPTION>
PEPTIDE YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
1995 1996 1997 1997 1998 1998
--------- --------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
U.K. GAAP
Turnover (Revenues)................... L 160 L 153 L 2,795 L 2,525 L 195 $ 326
Operating Expenses.................... 3,995 6,216 10,791 5,979 5,111 8,533
--------- --------- --------- --------- --------- ---------
Operating loss........................ (3,835) (6,063) (7,996) (3,454) (4,916) (8,207)
Interest receivable, net.............. 223 1,469 1,542 755 649 1,084
Tax on loss on ordinary activities.... (9) -- -- -- -- --
--------- --------- --------- --------- --------- ---------
Loss on ordinary activities after
taxation............................. (3,621) (4,594) (6,454) (2,699) (4,267) (7,123)
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Loss per ordinary share............... L (0.20) L (0.14) L (0.18) L (0.08) L (0.12) $ (0.20)
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
1995 1996 1997 1997 1998 1998
--------- --------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
U.S. GAAP
Operating expenses.................... L 3,999 L 6,324 L 11,960 L 6,842 L 4,714 $ 7,775
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Net loss.............................. (3,625) (4,702) (7,250) (3,562) (3,813) (6,366)
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Basic and diluted net loss per
share................................ L (0.21) L (0.14) L (0.20) L (0.10) L (0.11) $ (0.18)
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997 1998 1998
--------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
U.K. GAAP
Cash and liquid resources............. L20,556 L20,751 L15,862 $ 26,482
Working Capital....................... 19,410 19,369 14,807 24,721
Fixed assets.......................... 2,498 2,863 3,177 5,304
Total assets.......................... 24,977 25,342 21,530 35,944
Long-term obligations................. -- -- -- --
Shareholders' equity.................. 23,168 23,466 19,413 32,410
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997 1998 1998
--------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
U.S. GAAP
Cash, cash equivalents and short-term
investments.......................... L20,556 L20,751 L15,862 $ 26,482
Working capital....................... 19,410 19,369 14,807 24,721
Fixed assets.......................... 2,498 2,863 3,177 5,304
Total Assets.......................... 23,913 24,314 20,307 33,902
Long-term obligations................. -- -- -- --
Shareholders' Equity.................. 22,104 22,438 18,190 30,368
</TABLE>
8
<PAGE>
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------- ----------------------
ORAVAX 1995 1996 1997 1997 1998
--------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................................... $ 10,075 $ 8,745 $ 8,853 $ 6,498 $ 6,505
Operating expenses..................................... 15,836 25,282 18,429 13,909 13,398
--------- ---------- ---------- ---------- ----------
Operating loss......................................... (5,761) (16,537) (9,576) (7,411) (6,893)
Equity in operating loss of joint venture.............. (2,436) (5,085) (6,236) (4,608) (4,292)
--------- ---------- ---------- ---------- ----------
Net loss............................................... $ (8,197) $ (21,622) $ (15,812) $ (12,019) $ (11,185)
--------- ---------- ---------- ---------- ----------
--------- ---------- ---------- ---------- ----------
Net loss to common stockholders........................ $ (8,305) $ (21,622) $ (15,812) $ (12,019) $ (12,017)
--------- ---------- ---------- ---------- ----------
--------- ---------- ---------- ---------- ----------
Basic and diluted net loss per share................... $ (1.90) $ (2.46) $ (1.58) $ (1.20) $ (0.97)
--------- ---------- ---------- ---------- ----------
--------- ---------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1997
---------- ---------- SEPTEMBER 30,
-------------
1998
-------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................... $ 14,916 $ 10,274 $ 974
Short-term investments.............................. 7,209 1,448 --
Working capital (deficit)........................... 14,694 7,837 (4,271)
Total assets........................................ 28,744 17,344 3,875
Long-term obligations............................... 2,659 1,298 173
Shareholders' equity (deficit)...................... 18,424 9,785 (1,924)
</TABLE>
9
<PAGE>
Peptide and OraVax are providing the following summary pro forma financial
information to give OraVax stockholders a better picture of what results of
operations and financial position of the combined businesses of Peptide and
OraVax might have looked like had the merger occurred on an earlier date. This
information is provided for illustrative purposes only and does not show what
the results of operations and financial position of Peptide would have been if
the merger had actually occurred on the dates assumed. This information also
does not indicate what Peptide's future operating results or consolidated
financial position will be.
Please see "Unaudited Pro Forma Condensed Consolidated Balance Sheet and
Statements of Operations" on pages 11-14 for a more detailed explanation of this
analysis.
<TABLE>
<CAPTION>
PRO FORMA REFLECTING MERGER
<S> <C> <C> <C> <C> <C>
YEAR ENDED SIX MONTHS
DECEMBER ENDED
31, JUNE 30,
1997 1998
----------- ----------
(UNAUDITED) (UNAUDITED)
PRO FORMA STATEMENTS OF OPERATIONS DATA:
U.S. GAAP
Revenues.................................. $ 14,095 $ 4,996
Total operating expenses.................. 39,151 17,442
Interest income, net...................... 2,588 1,041
Net loss from operations.................. (22,468) (11,405)
Equity in operations of joint venture..... (6,236) (2,979)
Net loss.................................. $ (28,704) $ (14,384)
----------- ----------
----------- ----------
Basic and diluted net loss per ordinary
share................................... $ (0.64) $ (0.32)
----------- ----------
----------- ----------
Weighted average ordinary shares
outstanding............................. 44,674,940 45,133,385
----------- ----------
----------- ----------
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
1998
-----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
PRO FORMA BALANCE SHEET DATA:
U.S. GAAP
Cash, cash equivalents and investments......... $ 26,787
Working capital................................ 21,096
Total assets................................... 45,175
Long-term obligations, excluding current
portion...................................... 1,210
Total stockholders' equity..................... 35,789
Book value per common share.................... .79
</TABLE>
10
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AND STATEMENTS OF
OPERATIONS
The Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 30,
1998 gives effect to the merger as if it had occurred on such date. The
Unaudited Pro Forma Condensed Consolidated Statements of Operations for the year
ended December 31, 1997 and the six months ended June 30, 1998 give effect to
the merger as if it had occurred on January 1, 1997. The merger consideration
will be allocated pro rata among the outstanding shares of OraVax common stock
and will be payable in Peptide ordinary shares. For the purpose of determining
the number of Peptide ordinary shares which will be payable as the merger
consideration, a Peptide ordinary share will be valued at the average closing
price of Peptide ordinary shares on the London Stock Exchange during the ten
trading days ending on the third trading day prior to the closing date of the
merger. This value will be converted from pounds sterling to dollars at the then
current exchange rates. The value of a Peptide ordinary share for these
purposes, however, will not be below $1.49 or above $2.24. The unaudited pro
forma condensed consolidated financial statements have been prepared assuming
the total purchase price will be approximately $21.2 million and the market
value of the Peptide ordinary shares is $1.87, the mid-point between $1.49 and
$2.24. As a result, Peptide will issue approximately 9,090,909 ordinary shares
for the merger consideration. Because the assumptions may not reflect the actual
results for the periods presented, the pro forma net loss per ordinary share
would be between $(0.61) and $(0.67) for the year ended December 31, 1997 and
$(0.30) and $(0.33) for the six months ended June 30, 1998, using the conversion
value of a Peptide share of $1.49 and $2.24 respectively. Peptide and OraVax
believe that the assumptions used in preparing the Unaudited Pro Forma Condensed
Consolidated Balance Sheet and Statements of Operations provide a reasonable
basis on which to present such pro forma financial statements. The Unaudited Pro
Forma Condensed Consolidated Balance Sheet and Statements of Operations are for
informational purposes only and do not purport to be indicative of the results
that would have actually been obtained had the merger been completed as of the
assumed date or for the periods presented, or which may be obtained in the
future. For purposes of the unaudited pro forma statement of operations,
acquired in-process research and development of approximately $11,579,000
related to the acquisition of OraVax was assumed to have been written off prior
to the periods presented herein. Accordingly, the unaudited pro forma statements
of operations do not include such charge. The charge for in process research and
development is based on an initial estimate. The actual amount will be
determined following the completion of the merger. The actual charge may differ
significantly from the initial estimate. The Unaudited Pro Forma Condensed
Consolidated Balance Sheet and Statements of Operations should be read in
conjunction with Peptide's and OraVax's Management's Discussion and Analysis of
Financial Condition and Results of Operations and Peptide's and OraVax's
Consolidated Financial Statements, and the notes thereto appearing elsewhere in
this prospectus/proxy statement.
11
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
U.K. GAAP U.S. GAAP U.S. GAAP U.S. GAAP PRO FORMA
PEPTIDE ADJUSTMENTS PEPTIDE PEPTIDE(2) ORAVAX ADJUSTMENTS PRO FORMA
---------- ----------- ---------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash....................... L 9,308 L -- L 9,308 $ 15,540 $ 4,107 $ (4,200)(3) $ 15,447
Short-term investments..... 6,554 -- 6,554 10,942 398 -- 11,340
Accounts receivable........ 1,062 -- 1,062 1,773 -- -- 1,773
Prepaids and other current
assets................... -- -- -- -- 712 -- 712
---------- ----------- ---------- ----------- --------- ----------- -----------
Total current assets... 16,924 -- 16,924 28,255 5,217 (4,200) 29,272
Property and equipment,
net........................ 3,177 -- 3,177 5,304 2,578 -- 7,882
Long-term investments........ 1,429 (1,223 1d) 206 343 -- -- 343
Investment in and advances to
Joint Venture.............. -- -- -- -- (299) -- (299)
Other assets................. -- -- -- -- 257 7,720(3) 7,977
---------- ----------- ---------- ----------- --------- ----------- -----------
Total assets........... L 21,530 L (1,223) L 20,307 $ 33,902 $ 7,753 $ 3,520 $ 45,175
---------- ----------- ---------- ----------- --------- ----------- -----------
---------- ----------- ---------- ----------- --------- ----------- -----------
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Current maturities of debt
and capital lease
obligations.............. L -- L -- L -- $ -- $ 975 $ -- $ 975
Accounts payable and
accrued expenses......... 2,117 -- 2,117 3,534 3,667 -- 7,201
---------- ----------- ---------- ----------- --------- ----------- -----------
Total current
liabilities.......... 2,117 -- 2,117 3,534 4,642 -- 8,176
Long-term portion of debt and
capital lease
obligations................ -- -- -- -- 1,210 -- 1,210
Shareholders' equity......... 19,413 (1,223 1d) 18,190 30,368 1,901 17,000(3) 35,789
(1,901)(4)
(11,579)(3)
---------- ----------- ---------- ----------- --------- ----------- -----------
Total liabilities and
shareholders'
equity............... L 21,530 L (1,223) L 20,307 $ 33,902 $ 7,753 $ 3,520 $ 45,175
---------- ----------- ---------- ----------- --------- ----------- -----------
---------- ----------- ---------- ----------- --------- ----------- -----------
</TABLE>
See notes to unaudited pro forma condensed consolidated balance sheet and
statements of operations for discussion of adjustments.
12
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
U.K. GAAP U.S. GAAP U.S. GAAP U.S. GAAP PRO FORMA
PEPTIDE ADJUSTMENTS PEPTIDE PEPTIDE(2) ORAVAX ADJUSTMENTS(5) PRO FORMA
---------- ----------- ---------- ---------- --------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues............ L 2,795 L 439 (1c L 3,607 $ 5,925 $ 8,170 $ -- $ 14,095
373 (1b
Research and
development....... 9,745 373 (1b 10,118 16,621 14,589 -- 31,210
Selling, general and
administrative.... 1,485 796 (1a 2,281 3,747 3,422 772(6) 7,941
Other income........ (439) 439 (1c -- -- -- -- --
---------- ----------- ---------- ---------- --------- -------------- ------------
Total operating
expenses.......... 10,791 1,608 12,399 20,368 18,011 772 39,151
Interest income,
net............... 1,542 -- 1,542 2,533 265 (210)(7) 2,588
---------- ----------- ---------- ---------- --------- -------------- ------------
Net loss from
operations........ (6,454) (796) (7,250) (11,910) (9,576) (982) (22,468)
Equity in operations
of joint
venture........... -- -- -- -- (6,236) -- (6,236)
---------- ----------- ---------- ---------- --------- -------------- ------------
Net loss............ L (6,454) L (796) L (7,250) $ (11,910) $ (15,812) $ (982) $ (28,704)
---------- ----------- ---------- ---------- --------- -------------- ------------
---------- ----------- ---------- ---------- --------- -------------- ------------
Basic and diluted
net loss per
ordinary share.... L (0.20) $ (.64)
---------- ------------
---------- ------------
Weighted average
ordinary shares
outstanding....... 35,584,031 9,090,909(9) 44,674,940
---------- -------------- ------------
---------- -------------- ------------
</TABLE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(IN THOUSANDS, EXPECT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
U.K. GAAP U.S. GAAP U.S. GAAP U.S. GAAP PRO FORMA
PEPTIDE ADJUSTMENTS PEPTIDE PEPTIDE(2) ORAVAX ADJUSTMENTS(5) PRO FORMA
---------- ----------- ---------- ----------- --------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues............ L 195 L 126 (1c L 378 $ 632 $ 4,394 $ (30)(8) $ 4,996
57 (1b
Research and
development....... 4,479 57 (1b 4,536 7,573 7,158 (30)(8) 14,701
Selling, general and
administrative.... 758 (454) 1a) 304 508 1,847 386(6) 2,741
Other income........ (126) 126 (1c -- -- -- -- --
---------- ----------- ---------- ----------- --------- -------------- ------------
Total operating
expenses.......... 5,111 (271) 4,840 8,081 9,005 356 17,442
Interest income,
net............... 649 649 1,084 62 (105)(7) 1,041
---------- ----------- ---------- ----------- --------- -------------- ------------
Net loss from
operations........ (4,267) 454 (3,813) (6,365) (4,549) (491) (11,405)
Equity in operations
of joint
venture........... -- -- -- -- (2,979) -- (2,979)
---------- ----------- ---------- ----------- --------- -------------- ------------
Net loss............ L (4,267) L 454 L (3,813) $ (6,365) $ (7,528) $ (491) $ (14,384)
---------- ----------- ---------- ----------- --------- -------------- ------------
---------- ----------- ---------- ----------- --------- -------------- ------------
Basic and diluted
net loss per
ordinary share.... L (0.11) $ (.32)
---------- ------------
---------- ------------
Weighted average
ordinary shares
outstanding....... 36,042,476 9,090,909(9) 45,133,385
---------- -------------- ------------
---------- -------------- ------------
</TABLE>
See notes to unaudited pro forma condensed consolidated balance sheet and
statements of operations for discussion of adjustments.
13
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEET AND STATEMENTS OF OPERATIONS
(1) Peptide's consolidated financial statements are prepared in accordance with
U.K. GAAP, which differs in certain significant respects from U.S. GAAP.
(a) The principal difference between the U.K. GAAP and U.S. GAAP statement
of operations for Peptide relates to the accounting for stock options
granted to employees. Peptide has granted stock options that will vest
upon the attainment of certain targets. Under U.K. GAAP, there is no
accounting for these grants after the initial grant date. Under U.S.
GAAP, Accounting Principles Board (APB) Opinion 25, the company would be
required to follow variable plan accounting for these grants and measure
compensation expense as the difference between the exercise price and the
fair market value of the stock during each accounting period. Increases
in the fair market value of the stock would result in a charge to
operations and decreases in the fair market value of the stock would
result in a credit to operations. The resulting charge to operations
would be approximately L796,000 for the year ended December 31, 1997. Due
to declines in the market value of Peptide stock, the company would have
recorded a credit to operations of approximately L454,000 for the six
months ended June 30, 1998.
(b) Certain Peptide accounts have been reclassified to conform with U.S.
GAAP. In the statement of operations, Peptide has reclassified amounts
received under government grants to revenue. Under U.K. GAAP, these
grants were presented as a reduction in research and development expense.
Peptide reclassified L373,000 and L57,000 to revenue for the year ended
December 31, 1997 and the six-months ended June 30, 1998, respectively.
(c) In addition, Peptide has also reclassified amounts received as
reimbursements under research and development agreements to revenue.
Under U.K. GAAP, these reimbursements were presented as a component of
operating expenses under the caption "other income." Peptide reclassified
L439,000 and L126,000 for the year ended December 31, 1997 and the
six-months ended June 30, 1998.
(d) In the balance sheet, Peptide has reclassified the cost of purchasing
its own shares as a reduction of stockholders' equity. Under U.K. GAAP,
the cost of the shares purchased, L1,223,000, was presented as an asset.
(2) Translation of pounds sterling into dollars has been made at the rate of
L1.00 = $1.6695 or L1.00 = $1.6427 (the noon buying rate on June 30, 1998
and December 31, 1997). Such translation is provided solely for the
convenience of the reader and does not reflect financial information in
accordance with generally accepted accounting principles for foreign
currency translation.
(3) Gives effect to the purchase of OraVax including the purchase of outstanding
shares of OraVax preferred stock for $2,950,000, cash acquisition costs of
approximately $1,250,000 and the issuance to OraVax stockholders of
9,090,909 Peptide ordinary shares, valued at $17,000,000, assuming a
valuation of $1.87 per share. The total purchase price is approximately
$21,200,000. Reflects the purchase price allocation to the assets acquired
and liabilities assumed based upon the allocation of purchase price in
excess of book value of (a) approximately $11,579,000 to in-process research
and development which has been charged to accumulated deficit in the
Unaudited Pro Forma Condensed Consolidated Balance Sheet and (b) $7,640,000
to goodwill and other intangibles. See Note (5) below for additional
discussion.
(4) Gives effect to the elimination of OraVax's stockholders' equity of
approximately $1,901,000 as a result of the acquisition.
(5) For purposes of the Unaudited Pro Forma Condensed Consolidated Statement of
Operations, acquired in-process research and development of approximately
$11,579,000 related to the acquisition of OraVax was assumed to have been
written off prior to the periods presented. Accordingly, the Unaudited Pro
Forma Condensed Consolidated Statements of Operations do not include such
charge.
The purchase price will be allocated to the fair market value of the assets
acquired and the liabilities assumed. For U.K. GAAP purposes, the purchase
price in excess of the fair market value of the net identifiable assets
acquired will be recorded as goodwill and amortized over an estimated useful
life of ten years. For U.S. GAAP purposes, the purchase price in excess of
the fair market value of the net identifiable assets acquired will be
allocated to in-process research and development and goodwill. The purchase
price allocation, including the amount to be allocated to in-process
research and development, will be determined by an independent appraisal
following the completion of the merger. This independent valuation will be
completed prior to Peptide reporting its operating results for the period in
which the transaction was completed. The allocation included in the pro
forma financial information, including the $11,579,000 in-process research
and development charge, is based on Peptide's best estimate. The actual
results may differ significantly from this estimate.
(6) Gives effect to amortization expense of $772,000 for the year ended December
31, 1997 and $386,000 for the six-months ended June 30, 1998 for goodwill
and acquired intangible assets totaling approximately $5,640,000 over an
estimated useful life of ten years.
(7) Gives effect to a reduction in interest income of $210,000 for the year
ended December 31, 1997 and $105,000 for the six-months ended June 30, 1998
as a result of utilizing cash for the OraVax, acquisition. The reduction in
interest income was calculated based on the cash paid for OraVax stock of
$2,950,000, cash transaction costs of $1,200,000 and an assumed average
interest rate of 5%.
(8) Reflects the elimination of $30,000 for intercompany transactions.
14
<PAGE>
COMPARATIVE PER SHARE DATA
The following tables set forth certain unaudited historical per share data
of Peptide and OraVax and the combined per share data on an unaudited pro forma
basis after giving effect to the merger using the purchase method of accounting
for business combinations under U.S. GAAP (and assuming, for purposes of this
data only, that one Peptide ordinary share will be issued in exchange for
1.7529, 2.200 or 2.6353 shares of OraVax common stock and options to purchase
OraVax common stock, based on a conversion ratio of $1.49, $1.87, or $2.24
respectively). Book value per share is computed by dividing stockholders' equity
by the number of shares of common stock outstanding at the end of each period.
Equivalent pro forma data gives effect to the respective conversion ratio of
OraVax common stock, for one Peptide ordinary share. This data should be read in
conjunction with the selected financial information and the unaudited pro forma
condensed consolidated financial statements included elsewhere in this
prospectus/proxy statement. The pro forma combined financial data is not
necessarily indicative of the operating results or financial position that would
have been achieved if the merger had been consummated as of the beginning of the
periods presented, nor is it necessarily indicative of the future operating
results or financial position of Peptide or OraVax.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
1997 1998
----------------- -----------------
<S> <C> <C>
PEPTIDE--HISTORICAL
Loss per common share (Basic and diluted):
U.K. GAAP............................................................... L (0.18) L (0.12)
----------------- -----------------
----------------- -----------------
U.S. GAAP............................................................... L (0.20) L (0.11)
----------------- -----------------
----------------- -----------------
Book value per share at period end
U.K. GAAP............................................................... L 0.65 L 0.53
----------------- -----------------
----------------- -----------------
U.S. GAAP............................................................... L 0.63 L 0.50
----------------- -----------------
----------------- -----------------
ORAVAX--HISTORICAL
Earnings per common share:
Basic and diluted....................................................... $ (1.58) $ (0.73)
----------------- -----------------
----------------- -----------------
Book value per share at period end...................................... $ 0.94 $ 0.14
----------------- -----------------
----------------- -----------------
PEPTIDE/ORAVAX--PRO FORMA COMBINED--BASED ON A CONVERSION VALUE OF $1.49 PER
SHARE
Earnings per common share:
Basic and diluted....................................................... $ (0.61) $ (0.30)
----------------- -----------------
----------------- -----------------
Book value per share at period end........................................ $ 0.89 $ 0.75
----------------- -----------------
----------------- -----------------
ORAVAX--EQUIVALENT PRO FORMA--BASED ON A CONVERSION VALUE OF $1.49 PER SHARE
Earnings per common share:
Basic and diluted....................................................... $ (1.07) $ (0.53)
----------------- -----------------
----------------- -----------------
Book value per share at period end........................................ $ 1.57 $ 1.32
----------------- -----------------
----------------- -----------------
PEPTIDE/ORAVAX--PRO FORMA COMBINED--BASED ON A CONVERSION VALUE OF $1.87 PER
SHARE
Earnings per common share:
Basic and diluted....................................................... $ (0.64) $ (0.32)
----------------- -----------------
----------------- -----------------
Book value per share at period end........................................ $ 0.94 $ 0.79
----------------- -----------------
----------------- -----------------
ORAVAX--EQUIVALENT PRO FORMA--BASED ON A CONVERSION VALUE OF $1.87 PER SHARE
Earnings per common share:
Basic and diluted....................................................... $ (1.41) $ (0.70)
----------------- -----------------
----------------- -----------------
Book value per share at period end........................................ $ 2.07 $ 1.74
----------------- -----------------
----------------- -----------------
PEPTIDE/ORAVAX--PRO FORMA COMBINED--BASED ON A CONVERSION VALUE OF $2.24 PER
SHARE
Earnings per common share:
Basic and diluted....................................................... $ (0.67) $ (0.33)
----------------- -----------------
----------------- -----------------
Book value per share at period end........................................ $ 0.97 $ 0.82
----------------- -----------------
----------------- -----------------
ORAVAX--EQUIVALENT PRO FORMA--BASED ON A CONVERSION VALUE OF $2.24 PER SHARE
Earnings per common share:
Basic and diluted....................................................... $ (1.75) $ (0.87)
----------------- -----------------
----------------- -----------------
Book value per share at period end........................................ $ 2.56 $ 2.15
----------------- -----------------
----------------- -----------------
</TABLE>
15
<PAGE>
COMPARATIVE MARKET PRICE AND DIVIDEND INFORMATION
COMPARATIVE MARKET PRICE INFORMATION
Peptide ordinary shares are traded on the London Stock Exchange under the
symbol "PTE." Until November 16, 1998, OraVax common stock traded on the Nasdaq
National Market under the symbol "ORVX." The Nasdaq delisted OraVax common stock
on November 17, 1998. Since November 17, 1998, OraVax common stock has traded on
the OTC-Bulletin Board under the symbol "ORVX." The following tables set forth
the high and low closing mid market prices for the Peptide ordinary shares and
the high and low per share sale prices for the OraVax common stock.
PEPTIDE
<TABLE>
<CAPTION>
PRICE RANGE
---------------------
HIGH LOW
--------- ----------
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1996
First Quarter............................................................................ 229.0p 199.0p
Second Quarter........................................................................... 245.0 198.0
Third Quarter............................................................................ 225.0 188.5
Fourth Quarter........................................................................... 230.0 176.0
YEAR ENDED DECEMBER 31, 1997
First Quarter............................................................................ 398.0 230.0
Second Quarter........................................................................... 377.5 289.0
Third Quarter............................................................................ 331.5 298.5
Fourth Quarter........................................................................... 332.5 266.5
YEAR ENDED DECEMBER 31, 1998
First Quarter............................................................................ 310.0 266.5
Second Quarter........................................................................... 305.0 223.5
Third Quarter............................................................................ 243.5 83.5
Fourth Quarter........................................................................... 125.0 77.5
YEAR ENDED DECEMBER 31, 1999
First Quarter (through February 2, 1999)................................................. 125.0 77.5
</TABLE>
ORAVAX
<TABLE>
<CAPTION>
PRICE RANGE
----------------------
HIGH LOW
---------- ----------
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1996
First Quarter........................................................................... $ 15.00 $ 11.00
Second Quarter.......................................................................... 14.50 7.25
Third Quarter........................................................................... 9.25 6.50
Fourth Quarter.......................................................................... 10.75 5.25
YEAR ENDED DECEMBER 31, 1997
First Quarter........................................................................... 7.000 2.375
Second Quarter.......................................................................... 3.625 2.250
Third Quarter........................................................................... 2.750 2.125
Fourth Quarter.......................................................................... 4.250 1.750
YEAR ENDED DECEMBER 31, 1998
First Quarter........................................................................... 2.3750 1.5630
Second Quarter.......................................................................... 2.0630 0.9690
Third Quarter........................................................................... 1.2500 0.1875
Fourth Quarter.......................................................................... 0.5469 0.1875
YEAR ENDED DECEMBER 31, 1999
First Quarter (through February 3, 1999)................................................ 0.6406 .4062
</TABLE>
16
<PAGE>
On November 10, 1998, the last full day of trading before the issuance of
press releases by Peptide and OraVax announcing the proposed merger, the closing
mid-market price of the Peptide ordinary shares on the London Stock Exchange was
112.5 pence per share, and the high and low bid prices of the OraVax common
stock, as quoted on the Nasdaq National Market were 0.4688 and 0.3125,
respectively. On , 1999, the reported closing prices of Peptide
ordinary shares and OraVax common stock were and , respectively.
COMPARATIVE DIVIDEND INFORMATION
Peptide has never paid any cash dividends on its ordinary shares and does
not anticipate paying cash dividends in the foreseeable future.
OraVax has never paid any cash dividends on its common stock and does not
anticipate paying cash dividends in the foreseeable future.
EXCHANGE RATES
Peptide's financial statements are prepared in pounds sterling. Fluctuations
in the exchange rate between the pound and the U.S. dollar will affect the value
of the Peptide ordinary shares used to pay the merger consideration.
Additionally, these fluctuations may affect Peptide's earnings, the book value
of its assets and shareholders' equity as expressed in pounds and U.S. dollars,
and, consequently, may affect the market price for the Peptide ordinary shares.
The table below sets forth, for the periods and dates indicated, the
exchange rate for the U.S. dollar against the pound based on the noon buying
rate, expressed in dollars per pound sterling. The period average is based on
the average of the noon buying rates on the last day of each month during the
period. Such rates are not used by Peptide in the preparation of its
consolidated financial statements and the notes.
<TABLE>
<CAPTION>
PERIOD
HIGH LOW AVERAGE PERIOD END
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31,
1993................................................................ 1.5900 1.4175 1.4965 1.4775
1994................................................................ 1.5319 1.4615 1.5392 1.5665
1995................................................................ 1.6440 1.5302 1.5803 1.5535
1996................................................................ 1.7123 1.4948 1.5733 1.7123
1997................................................................ 1.7035 1.5775 1.6397 1.6427
1998................................................................ 1.7222 1.6114 1.6573 1.6628
1999 (through January 21, 1999)..................................... 1.6581 1.6308 1.6516 1.6487
</TABLE>
17
<PAGE>
RISK FACTORS
YOU SHOULD CONSIDER CAREFULLY THE FOLLOWING FACTORS, AS WELL AS, THE OTHER
INFORMATION REGARDING PEPTIDE, ORAVAX AND THE MERGER CONTAINED IN THIS
PROSPECTUS/PROXY STATEMENT IN DECIDING HOW TO VOTE.
RISKS RELATING TO PEPTIDE
PEPTIDE MAY BE UNABLE TO DEVELOP COMMERCIALLY SUCCESSFUL PRODUCTS
Peptide may not have any commercially successful products. The company has
not generated any revenue from product sales and does not expect to generate
significant revenue for several years. To date, Peptide has not yet completed
the full clinical development of any product candidate. Peptide expects to
undertake substantial additional research and development and to conduct
significant preclinical and clinical testing of its product candidates. The
company also anticipates the need to pursue numerous regulatory approvals.
Peptide cannot guarantee that these efforts will be successful.
Peptide's potential products are subject to the risks of failure inherent in
the development of pharmaceutical products based on new technologies including:
- a product candidate fails in preclinical studies;
- a potential product is not shown to be safe and effective in clinical
trials;
- required regulatory approvals are not obtained;
- a potential product cannot be produced in commercial quantities at an
acceptable cost; and
- a product does not gain market acceptance.
PEPTIDE MAY NOT BECOME PROFITABLE
Peptide has not been profitable since its inception in October 1993. As of
June 30, 1998, Peptide had an accumulated deficit of approximately L21.8
million. Peptide had a net loss of L4.6 million in 1996, a net loss of L6.5
million in 1997 and a net loss of L4.3 million for the six months ended June 30,
1998. Peptide expects to incur operating losses over the next several years and
may never realize significant revenues or be profitable. To date, Peptide's only
sources of revenue have been license fees, milestones and research and
development funding from its partners. For the foreseeable future, Peptide
expects that its level of revenues and its operating results will depend on its
ability to enter into new partnerships while maintaining existing partnerships.
See "Peptide Management's Discussion and Analysis of Financial Condition and
Results of Operations."
PEPTIDE WILL REQUIRE ADDITIONAL FINANCING TO CONTINUE ITS OPERATIONS
Peptide will require significant additional financing to continue operations
at anticipated levels. Additional financing may not be available to Peptide on
favorable terms or at all. If Peptide has insufficient funds or is unable to
raise additional funds, it may be required to delay, reduce or eliminate certain
of its programs. Peptide management believes that, following completion of the
merger, it will have sufficient cash to fund its operations through mid-2000.
This projection takes into account Peptide raising approximately L20.6 million
(net of expenses) by issuing new Peptide ordinary shares in a rights issue. This
rights issue has, except for the rights of certain Peptide shareholders who have
irrevocably undertaken to take up their rights, been fully underwritten by BT
Alex.Brown International. This rights issue is conditional upon the approval of
the merger by Peptide shareholders, the Underwriting Agreement with BT
Alex.Brown International not being terminated and the listing of the new Peptide
ordinary shares on the London Stock Exchange. The completion of the merger is
not a condition to the rights issue. However, completion of the rights issue is
a condition to the consummation of the merger.
Peptide's cash needs may differ from those currently projected because of a
number of factors including:
- the results of research and development and clinical testing;
18
<PAGE>
- the achievement of milestones under existing strategic alliances;
- the ability to establish and maintain additional collaborations and
licensing arrangements;
- the costs of establishing and protecting patent claims and other
intellectual property rights;
- the development of competitive products; and
- expenses associated with satisfying regulatory requirements.
See "Peptide Management's Discussion and Analysis of Financial Condition and
Results of Operations."
PEPTIDE'S SUCCESS DEPENDS ON PROTECTING ITS INTELLECTUAL PROPERTY RIGHTS
Peptide's success will depend, in large part, on its ability to obtain and
maintain patent or other proprietary protection for its technologies, products
and processes and its ability to operate without infringing the proprietary
rights of other parties. Peptide may not be able to obtain patent protection for
the composition of matter of discovered compounds, processes developed by
employees or uses of compounds discovered through its technology. Legal
standards relating to the validity of patents covering pharmaceutical or
biotechnological inventions and the scope of claims made under such patents are
still developing. There is no consistent policy regarding the breadth of claims
allowed in biotechnology patents. The patent position of a biotechnology company
is highly uncertain and involves complex legal and factual questions.
Peptide may have to initiate litigation to enforce its patent and license
rights. If its competitors file patent applications that claim technology also
claimed by Peptide, the company may have to participate in interference or
opposition proceedings to determine the priority of invention. An adverse
outcome could subject Peptide to significant liabilities to third parties and
require it to cease using technology or to license disputed rights from third
parties. Peptide may not be able to obtain licenses on commercially acceptable
terms or at all.
The cost to Peptide of any litigation or proceeding relating to patent
rights, even if resolved in its favor, could be substantial. Some of Peptide's
competitors may be able to sustain the costs of complex patent litigation more
effectively than Peptide because of their substantially greater resources.
Uncertainties resulting from any pending patent or related litigation could have
a material adverse effect on Peptide's ability to compete in the marketplace.
PEPTIDE'S SUCCESS IS HIGHLY DEPENDENT ON ITS COLLABORATORS
Peptide's collaborators have substantial responsibility for the development
and commercialization of Peptide's product candidates. These collaborators also
have significant discretion over the resources they devote to these efforts.
Peptide's success, therefore, will depend on the ability and efforts of these
outside parties in performing their responsibilities. Peptide cannot guarantee
that these collaborators will devote sufficient resources to collaborations with
it or that relevant product candidates can be developed and commercialized
without these collaborators.
Peptide cannot guarantee that it will be able to establish additional
collaborative arrangements or license agreements, that any such arrangement or
agreement will be on favorable terms or that any such arrangement or agreement
will prove successful.
Peptide currently does not plan to develop significant manufacturing,
marketing or sales capabilities. Peptide's future success, consequently, will
depend on its ability to negotiate alliances for such services and upon the
efforts and skill of the other parties to such alliances.
REGULATION BY GOVERNMENT AGENCIES IMPOSES SIGNIFICANT COSTS AND RESTRICTIONS ON
PEPTIDE'S BUSINESS ACTIVITIES
The ability of Peptide and its collaborative partners to successfully
satisfy regulatory requirements will significantly determine
19
<PAGE>
Peptide's future success. Peptide may not receive required regulatory approvals
for its products or it may not receive such approvals in a timely manner. The
production and sale of health care products and provision of health care
services are highly regulated. In particular, the U.S. FDA and comparable
agencies in foreign countries, including the Medicines Control Agency in the
U.K., must approve human therapeutic and preventive products before they are
marketed. This approval process can involve lengthy and detailed laboratory and
clinical testing, sampling activities and other costly and time-consuming
procedures. This regulation may delay the time at which a product or service can
first be sold, limit how a product or service may be used or adversely impact
third party reimbursement.
INTENSE COMPETITION MAY CAUSE PEPTIDE'S BUSINESS TO FAIL
Peptide's business may fail because it faces intense competition from major
pharmaceutical companies and specialized biotechnology companies engaged in the
development of vaccines and other drugs directed at infectious diseases and
allergic disorders. Many of Peptide's competitors, such as SmithKline Beecham
and Pasteur Merieux Connaught, have greater financial and human resources and
more experience in research and development than Peptide. Peptide's competitors
may develop safer or more effective vaccines and drugs and achieve faster or
broader regulatory approval, wider availability of supply, more effective sales
and marketing or superior proprietary positions. Peptide anticipates that it
will face increased competition in the future as new companies enter its markets
and alternative products and technologies become available.
RAPID TECHNOLOGICAL CHANGE MAY MAKE PEPTIDE'S PRODUCTS OBSOLETE
The field of biotechnology is characterized by significant and rapid
technological change. Research and discoveries by others may render Peptide's
product candidates obsolete.
THIRD PARTY REIMBURSEMENT AND HEALTH CARE COST CONTAINMENT INITIATIVES MAY
CONSTRAIN PEPTIDE'S FUTURE REVENUES
A significant portion of Peptide's future revenue may depend on payments by
third party payers, including government health administration authorities and
private health insurers. Peptide may not be able to sell its products profitably
if reimbursement is unavailable or limited in scope. Third party payers may not
reimburse patients for newly approved health care products such as the vaccines
and other drugs being developed by Peptide. More and more third party payers are
attempting to contain health care costs in ways that are likely to impact
products being developed by Peptide including:
- challenging the prices charged for health care products;
- limiting both coverage and the amount of reimbursement for new therapeutic
products;
- denying or limiting coverage for products that are approved by the
regulatory agencies but are considered experimental or investigational by
third party payers; and
- refusing to provide coverage when an approved product is used in a way
that has not received regulatory marketing approval.
PEPTIDE FACES PRODUCT LIABILITY RISKS AND MAY NOT BE ABLE TO OBTAIN ADEQUATE
INSURANCE
The testing, marketing and sale of Peptide's products involve significant
product liablity risks. Peptide may be held liable for adverse reactions
resulting from the use of its vaccines or other drugs. Currently, Peptide only
has limited amounts of product liability insurance and this insurance may not
provide adequate coverage against product liability claims. Peptide also may not
be able to obtain additional insurance in the future on acceptable terms, and
any additional insurance it does obtain may not provide adequate coverage
against any asserted claims.
20
<PAGE>
PEPTIDE'S STOCK PRICE HAS BEEN HIGHLY VOLATILE; PEPTIDE HAS NEVER PAID A
DIVIDEND
The market price for Peptide ordinary shares has been volatile. Factors that
could significantly impact the market price of Peptide ordinary shares in the
future include:
- announcements concerning technological innovations or product candidates
by Peptide or its competitors;
- governmental regulatory initiatives;
- patent or proprietary rights developments;
- public concern as to the safety or other implications of biotechnology
products; and
- general market conditions.
Peptide has never paid any cash dividends on its ordinary shares and does
not plan to do so in the foreseeable future.
YEAR 2000 ISSUES COULD CAUSE INTERRUPTION OR FAILURE OF PEPTIDE'S COMPUTER
SYSTEMS
Peptide uses a significant number of computer systems and software programs
in its operations, including applications used in support of research and
development activities, accounting and various administrative functions.
Although Peptide believes that its internal systems and software applications
contain source code that is able to interpret appropriately the dates following
December 31, 1999, Peptide's failure to make or obtain necessary modifications
to its systems and software could result in system interruptions or failures
that could have a material adverse effect on its business. Similarly, failure by
Peptide's key service providers, vendors and worldwide research and development,
manufacturing and clinical trial partners to make their computer software
programs and operating systems Year 2000 compliant could have a material adverse
effect on Peptide's business. See "Peptide Management's Discussion and Analysis
of Financial Condition and Results of Operations-- Year 2000."
THE EURO CONVERSION CREATES UNCERTAINTY
On January 1, 1999, 11 of the 15 member countries of the European Union
established fixed conversion rates between their existing currencies and a new
common currency called the "euro." This represents an initial step in a process
expected to culminate in the replacement of the existing currencies with the
euro. The United Kingdom is one of the four member countries that are not
participating in the conversion to the euro. The conversion to the euro by the
participating countries, and any decision in the future by the United Kingdom to
participate, will have operational and legal implications for some of Peptide's
business activities.
UNITED STATES JUDGMENTS MAY NOT BE ENFORCEABLE AGAINST PEPTIDE
Judgments of United States courts, including those predicated on the civil
liability provisions of the federal securities laws of the United States, may
not be enforceable in English courts. As a result, stockholders of Peptide who
obtain a judgment against Peptide in the United States may not be able to
require Peptide to pay the amount of the judgment.
RISKS RELATING TO ORAVAX
ORAVAX MAY NOT MEET ITS FUTURE CAPITAL NEEDS
OraVax will require substantial additional funds in order to continue its
research and development programs and testing of its product candidates and to
conduct manufacturing and marketing of any pharmaceutical products that it may
develop. OraVax's capital requirements depend on many factors, including:
- the progress of its research and development programs;
- the progress of preclinical and clinical testing;
- the time and costs involved in obtaining regulatory approvals;
- the ability of OraVax to establish collaborative arrangements; and
21
<PAGE>
- the purchase of additional facilities and capital equipment.
OraVax must, based upon its current operating plan, raise additional capital
in the first quarter of 1999 in order to fund operations, if the merger is not
consummated. Changes in OraVax's research and development plans or other events
affecting OraVax's operations may result in accelerated or unexpected
expenditures. The company cannot guarantee that financing will be available to
meet its future capital needs or, if available, that it will be available on
acceptable or affordable terms.
ORAVAX HAS LIMITED MANUFACTURING CAPABILITIES
OraVax's limited manufacturing capabilities may adversely affect its ability
to develop and deliver products on a timely and competitive basis. At present,
OraVax's ability to manufacture its products is limited to clinical trial
quantities. The company's strategy is to develop its manufacturing facilities
for producing commercial quantities of its products. To implement this strategy,
OraVax would need to establish sufficient technical staff to oversee all product
operations to ensure compliance with current manufacturing standards imposed by
the FDA. Alternatively, the company may enter into arrangements with contract
manufacturing companies to expand its own production capacity. If OraVax has
difficulty hiring sufficient technical staff or if OraVax chooses to contract
for manufacturing services and encounters difficulties in establishing
relationships with manufacturers, then market introduction and subsequent sales
of the company's products would be adversely affected.
ORAVAX'S SUCCESS DEPENDS ON COLLABORATORS
OraVax's product development strategy requires it to enter into various
arrangements with collaborators, licensors, licensees and others. As a result,
OraVax's success depends on the ability of outside parties to perform their
responsibilities. OraVax cannot guarantee that it will be able to establish
collaborative arrangements or license agreements that it deems necessary or
acceptable to develop and commercialize its products. If such arrangements or
agreements are established, OraVax cannot guarantee that they will be
successful.
ORAVAX IS SUBJECT TO EXTENSIVE GOVERNMENT REGULATION
The rigorous preclinical and clinical testing requirements and regulatory
approval process of the FDA and of foreign regulatory authorities can be
expensive and take a number of years. OraVax cannot guarantee that it will be
able to obtain the necessary approvals for clinical testing or for the
manufacturing and marketing of any products that it develops. Delays in
obtaining regulatory approvals would adversely affect the marketing of any
products developed by OraVax and OraVax's ability to receive product revenues or
royalties.
Even if initial regulatory approvals for OraVax's product candidates are
obtained, the company, its products and its manufacturing facilities are subject
to continual review and periodic inspection. Discovery of previously unknown
problems with a product, manufacturer or facility may result in:
- fines;
- suspensions of regulatory approvals;
- product recalls; and
- criminal prosecution.
Other violations of FDA requirements can result in similar penalties.
ORAVAX FACES PRODUCT LIABILITY RISKS AND MAY NOT BE ABLE TO OBTAIN ADEQUATE
INSURANCE
OraVax's business exposes it to potential liability risks that are inherent
in the testing, manufacturing and marketing of medical products. The use of
OraVax's products or clinical trials may expose the company to product liability
claims and possible adverse publicity. These risks also exist with respect to
OraVax's products, if any, that receive regulatory approval for commercial sale.
OraVax currently has limited product liability coverage for the clinical
research use of its products. The company does not have product liability
insurance for the commercial sale of its products. Such coverage is becoming
increasingly
22
<PAGE>
expensive and OraVax cannot guarantee that it will be able to maintain its
existing insurance coverage or obtain additional insurance coverage at
acceptable costs, if at all.
CLINICAL TRIALS ARE EXPENSIVE AND UNCERTAIN
Extensive and costly clinical trials must be conducted to demonstrate a
product's safety and efficacy before it can be approved by the FDA or other
regulatory authorities. A product candidate that appears to be safe and
effective in early testing may not ultimately prove to be safe and effective
when tested in a larger number of patients. OraVax may also encounter problems
in a clinical trial that significantly delay or cause the company to terminate
the clinical trial program. Any adverse clinical event could cause delays or
prevent OraVax from commercializing its products.
ORAVAX FACES RISKS ASSOCIATED WITH YEAR 2000
OraVax is in the process of conducting a company-wide assessment of its
computer systems and operations infrastructure to identify computer hardware,
software and control systems that are not Year 2000 compliant. The company
intends to replace, upgrade or modify any of its business-critical systems that
are not Year 2000 compliant, or to develop contingency plans. For additional
information addressing the Company's exposure to the Year 2000 issue, please see
"OraVax Management's Discussion and Analysis of Financial Condition and Results
of Operations--Year 2000 Compliance."
RISKS RELATING TO THE MERGER
MERGER IS CONTINGENT ON COMPLETION OF PEPTIDE FINANCING IN THE U.K.
A condition to the merger is that Peptide shall have completed a financing
that results in Peptide receiving net cash proceeds which, together with
existing financing available to Peptide, is sufficient for the present working
capital requirements of the combined entity in accordance with the rules of the
London Stock Exchange. This condition will be satisfied by Peptide raising
approximately L20.6 million (net of expenses) by an issue of new Peptide
ordinary shares in the form of a rights issue. This rights issue has, except for
the rights of certain Peptide shareholders who have irrevocably undertaken to
take up their rights, been fully underwritten by BT Alex. Brown International.
SHAREHOLDERS FACE DILUTION FROM PEPTIDE U.K. FINANCING
The issuance of equity in Peptide's U.K. financing could adversely affect
the market price of Peptide ordinary shares and/or result in the substantial
dilution of Peptide ordinary shares which will be received by OraVax common
stockholders in the merger.
INTEGRATION OF PEPTIDE AND ORAVAX MAY NOT SUCCEED
Peptide and OraVax have entered into the merger agreement with the
expectation that the merger will result in benefits to both companies through
the integration of the companies' operations. The integration of operations will
require, among other things, educating the employees of each company about the
technologies and programs of the other company, coordinating or combining
research and development efforts, identifying and allocating collaborative
relationships in a coherent manner and aligning the strategic plans of two
previously independent management teams. The difficulties of this integration
may be increased by the geographical separation of the two companies and their
employees. This integration will require the dedication of management resources
that may temporarily distract management's attention from the day-to-day
business of the combined company. If Peptide and OraVax fail to integrate the
companies quickly and efficiently, the combined company's business and results
of operations could be impaired.
LOSS OF KEY EMPLOYEES MAY HARM THE COMBINED COMPANY
Both Peptide and Oravax are, and the combined company will be, significantly
dependent on certain scientific and management personnel including Dr. Lance
Gordon, President of OraVax, Dr. Thomas Monath, Vice President of Research and
Medical Affairs at
23
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OraVax, Dr. Lawrence Garland, Director of Research and Development at Peptide,
Dr. Michael Darsley, Director of Molecular Immunology at Peptide, Dr. Philip
Bedford, Director of Development at Peptide and Dr. Alan Lamont, Director of
Biology at Peptide. Biotechnology companies such as Peptide and OraVax are
highly dependent on employees who have an in-depth and long term understanding
of the companies technologies, products, programs, collaborative relationships
and strategic goals. Biotech companies also rely on retaining employees who are
familiar with their intellectual property portfolio. The loss of such employees
by Peptide and OraVax could have a negative impact on the business and prospects
of the combined company. In addition, in recent months OraVax has reduced the
number of its employees. As a result, the impact of losing any additional OraVax
employees could be substantial.
The biotechnology industry has a highly competitive market for qualified
scientific and managerial employees. During the pre-merger and integration
periods, competitors may try to recruit the employees of Peptide and OraVax.
Employees of both companies may also decide to leave due to the uncertainty
surrounding the merger. The combined company will also need to continue to
recruit qualified employees. The failure to retain and recruit employees would
have an adverse effect on the combined company.
EXCHANGE RATE FLUCTUATIONS MAY REDUCE VALUE OF PEPTIDE SHARES FOR U.S. HOLDERS
Individuals and entities located in the U.S. who hold Peptide ordinary
shares will bear exchange rate risk. Although recent fluctuations in the
dollar/pound sterling exchange rate have not been significant, Peptide cannot
guarantee that such fluctuations will not be significant in the future. The
Peptide shares issued in the merger will only be traded on the London Stock
Exchange. As a result, U.S. holders of Peptide ordinary shares who would like to
sell their shares must sell them on the London Stock Exchange and then have the
proceeds of the sale converted into a dollar amount. Such holders may receive a
reduced dollar value upon the sale of their shares as the result of the
dollar/pound sterling exchange rate in effect at that time which may have no
relation to the operations or prospects of Peptide.
COORDINATION OF OPERATIONS IN THE U.S. AND THE U.K. MAY FAIL
Most of Peptide's research and development operations are located outside of
the United States. OraVax's research and development operations are located in
the United States. The geographic distance between the personnel in the United
Kingdom and the United States (Massachusetts) could lead to logistical and
communication difficulties. Peptide cannot guarantee that the geographic and
cultural differences will not result in problems that adversely affect the
combined company's business, financial condition and results of operations.
CHANGES IN CONVERSION VALUE MAY REDUCE NUMBER OF PEPTIDE SHARES ISSUED AS MERGER
CONSIDERATION
For the purposes of determining the number of Peptide ordinary shares which
will be issued as merger consideration, the Peptide ordinary shares will be
valued based on the average closing price of such shares during the ten trading
days ending three days prior to the merger, with each per share closing price
converted to a U.S. dollar value using the exchange rate for such day equal to
the midpoint between the bid price and ask price reported in THE FINANCIAL
TIMES. As a result, you will not know the exchange ratio that will be used to
calculate the value of the Peptide shares until shortly before the merger
occurs.
COLLAR PROVISION MAY REDUCE VALUE OF MERGER PROCEEDS
The total purchase price to be paid in the merger is fixed in terms of
dollars. The majority of the purchase price will be paid in Peptide ordinary
shares. For purposes of determining the number of shares to be issued in the
merger, the Peptide ordinary shares will be valued based on the average closing
price of the Peptide ordinary shares during the ten trading days ending three
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days prior to the merger. However, if such average price is less than $1.49, the
shares will be deemed to be valued at $1.49 per share, regardless of the actual
average price. If the average Peptide ordinary share price is so limited, the
number of Peptide ordinary shares issuable in the transaction would be limited
and the value of your merger proceeds would be decreased. For example, if your
portion of the merger proceeds was $100.00 according to the merger agreement,
but the actual Peptide ordinary share price was $1.00, you would receive 67.1
shares (i.e., the number of Peptide ordinary shares obtained by dividing $100.00
by $1.49). These shares would be worth only $67.10 in the open market.
ADDITIONAL ORAVAX STOCK ISSUANCES MAY DILUTE MERGER CONSIDERATION
The merger consideration to be received by the OraVax stockholders will be
divided pro rata among the outstanding shares of OraVax common stock. If the
number of shares of OraVax common stock outstanding increases, each holder of
OraVax common stock will receive a smaller portion of the merger consideration.
As of January 29, 1999, OraVax had the following outstanding convertible
securities:
- Stock options exercisable for an aggregate of 1,200,975 shares of common
stock
- Warrants exercisable for an aggregate of 84,086 shares of common stock;
and
- 1,957 shares of preferred stock convertible into shares of common stock,
of which 1,951 shares are held by Peptide and 6 shares are held by parties
who have agreed to redeem their shares for cash in the merger.
Although most of OraVax's outstanding options and warrants have exercise
prices which exceed the current trading price of OraVax common stock and
although Peptide has agreed to assume OraVax's outstanding options and warrants
in the merger, OraVax option and warrant holders may still elect to convert
prior to the merger and receive a portion of the merger consideration rather
than continue to hold the convertible security.
Peptide holds 1,951 shares of the outstanding shares of OraVax preferred
stock, which will be cancelled without consideration upon consummation of the
merger as required by the merger agreement. In addition, Peptide has agreed to
cancel without consideration in the merger any shares of OraVax common stock
issued to it upon conversion of the OraVax preferred stock it holds. The holders
of the remaining 6 shares of OraVax preferred stock have agreed to redeem their
shares for a cash payment equal to $1,090 per share plus accrued dividends at
the time of the merger.
NO U.S. TRADING MARKET FOR PEPTIDE SHARES MAY RESULT IN DELAY AND EXPENSE FOR
U.S. SHAREHOLDERS
Peptide ordinary shares trade on the London Stock Exchange. Peptide
currently does not intend to list its ordinary shares on any U.S. stock exchange
or on the Nasdaq. Peptide also has no current plans to create an ADR program for
its ordinary shares. As a result, it may be more time consuming and more
expensive for U.S. shareholders to dispose of their Peptide ordinary shares.
Quotations for Peptide ordinary shares are not generally available in U.S.
newspapers. (Quotations are available in the U.S. edition of the FINANCIAL TIMES
and on the Nasdaq-Amex Web site at http://www.nasdaq-uk.com) Some U.S. brokerage
firms may add a surcharge to their customary commissions for trades executed
offshore, although Peptide understands the major U.S. brokerage firms do not.
Sales of Peptide ordinary shares may result in a U.K. stamp tax of 50p per 100
pounds sterling (or portion thereof); however, this tax is usually paid by the
purchaser.
PEPTIDE'S ORGANIZATION IN ENGLAND AND WALES MAY CAUSE CONFUSION FOR SHAREHOLDERS
IN THE U.S.
The rights of holders of Peptide ordinary shares are governed by the laws of
England and Wales, including the Companies Acts, and by Peptide's memorandum and
articles of association. These rights differ in certain respects from the rights
of stockholders in typical United States corporations.
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OraVax stockholders may have difficulty understanding and assessing their
rights as Peptide shareholders due to their unfamiliarity with corporate law and
procedure in the U.K. Similarly, OraVax stockholders may have difficulty
locating attorneys or other advisors in the U.S. who are familiar with the
rights of a shareholder in a U.K. corporation.
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THE SPECIAL MEETING
GENERAL
This prospectus/proxy statement is being furnished to OraVax stockholders in
connection with the solicitation of proxies by the board of directors of OraVax
for use at the special meeting of stockholders to be held on , 1999,
at the offices of Hale and Dorr LLP, 60 State Street, Boston, MA 02109,
commencing at 10:00 a.m., local time, and at any adjournment or postponement of
the meeting.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the special meeting, OraVax stockholders will consider and vote on:
(1) Adoption of the merger agreement; and
(2) Such other business as may properly come before the special meeting.
RECORD DATE; VOTING RIGHTS; VOTING AT THE MEETING
The board of directors of OraVax has fixed , 1999 as the record
date. Accordingly, only holders of record shares of OraVax common stock at the
close of business on , 1999 are entitled to notice of and to vote at
the special meeting. Each holder of record shares of OraVax common stock on the
record date is entitled to cast one vote per share, exercisable in person or by
a properly executed proxy, at the special meeting. As of the record date, there
were shares of OraVax common stock outstanding and entitled to vote. Such
shares were held by approximately holders of record.
Under OraVax by-laws, the holders of a majority of shares of OraVax common
stock outstanding and entitled to vote at the special meeting will constitute a
quorum. Shares of OraVax common stock represented in person and by proxy will be
counted for purposes of determining whether a quorum is present.
The affirmative vote of the holders of a majority of the shares of OraVax
common stock outstanding is required to adopt the merger agreement. As of the
record date, the directors of OraVax and certain of their affiliates and the
executive officers of OraVax beneficially owned approximately % of the
outstanding shares of OraVax common stock. Each of the individuals has advised
OraVax that he intends to vote to adopt the merger agreement. Additionally,
Peptide owns approximately 9.9% of the outstanding OraVax common stock and
intends to vote in favor of adopting the merger agreement.
VOTING OF PROXIES
Properly executed proxies that have not been revoked will be voted at the
special meeting in accordance with the instructions indicated in the proxies. If
no instructions are indicated, such proxies will be voted FOR adoption of the
merger agreement.
If any other matters are properly presented at the special meeting,
including consideration of a motion to adjourn the meeting to another time or
place for the purpose of soliciting additional proxies, the persons named in the
enclosed form of proxy will have discretion to vote on such matters in
accordance with their best judgment (unless authorization to use such discretion
is withheld). OraVax is not aware of any matters expected to be presented at the
special meeting other than adoption of the merger agreement.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by
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- filing with the Secretary of OraVax (including by telegram or facsimile),
a written notice of revocation bearing a later date than the date of the
proxy or by giving notice of revocation at the special meeting,
- duly executing a later-dated proxy relating to the same shares and
delivering (including by telegram or facsimile) it to the Secretary of
OraVax or
- attending the special meeting and voting in person.
In order to vote in person at the special meeting, OraVax stockholders must
attend the meeting and cast their votes in accordance with the voting procedures
established for the meeting. Attendance at the special meeting will not in and
of itself revoke a proxy. Any written notice of revocation or subsequent proxy
must be sent to:
OraVax, Inc.
38 Sidney Street
Cambridge, MA 02139
Facsimile: (617) 494-1741
Attention: Secretary
Shares of OraVax common stock held of record by a broker which are present
in person or represented by proxy will be counted for purposes of determining a
quorum. If, however, under rules applicable to brokers, a broker does not have
discretionary voting authority to vote on any matter at the special meeting in
the absence of instructions from the beneficial owners, then such shares
(although present for quorum purposes) will not be considered entitled to vote
on such matter ("broker non-votes"). Broker non-votes and abstaining votes will
not be counted in favor of adopting the merger agreement. Since adoption
requires the affirmative vote of a majority of the outstanding shares of OraVax
common stock, abstentions and broker non-votes will have the same effect as
votes to reject the merger agreement.
SOLICITATION OF PROXIES
OraVax will pay the expenses of the solicitations for the special meeting.
In addition to solicitation by mail, directors, officers and employees of OraVax
may solicit proxies in person or by telephone, telegram or other means of
communication. OraVax will not pay these persons additional compensation for
solicitation of proxies but may reimburse them for reasonable out-of-pocket
expenses. OraVax has retained Kissell Blake at an estimated cost of $5,000, plus
reimbursement of expenses, to assist in its solicitation of proxies. OraVax also
will make arrangements with custodians, nominees and fiduciaries for forwarding
of proxy solicitation materials to beneficial owners of shares held of record by
such custodians, nominees and fiduciaries, and OraVax will reimburse such
custodians, nominees and fiduciaries for their reasonable expenses.
BACKGROUND AND REASONS FOR THE MERGER
BACKGROUND OF THE MERGER
OraVax completed a successful public offering of its common stock in June
1995 and a secondary offering in June 1996. As a development-stage biotechnology
company, OraVax required additional financing in 1997 but was unable to obtain
such financing in the public securities markets. The securities markets for
small biotech companies were weak, and OraVax failed to achieve sufficient
success in the clinical trials of its product candidates to attract investors.
In March 1997, OraVax announced the results of Phase III clinical trials for
HNK20, its product designed to treat respiratory infections in infants. The
trials failed to demonstrate the efficacy of the product, and the market price
of OraVax common stock rapidly declined from approximately $7 per
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share prior to the announcement to approximately $2.50 per share within two
weeks after the announcement. Throughout the balance of 1997, OraVax pursued
negotiations with additional potential corporate partners. OraVax did conclude
an agreement with Medeva to distribute Medeva's yellow fever vaccine in the U.S.
However, OraVax was unable to enter into sufficient further collaborations to
provide either substantial cash payments to OraVax or the foundation for raising
capital in the public securities market. In December 1997, OraVax raised
approximately $6 million in a private placement of its 6% convertible preferred
stock which is convertible into shares of OraVax common stock at a discount to
the market price at the time of conversion.
During 1998, OraVax continued to seek further financing through additional
private equity sales, corporate collaborations, or a business combination. The
limited cash resources of the company were depleted by ongoing operations during
the first nine months of 1998. At June 30, 1998 net assets were $1.9 million,
failing to meet the minimum of $4 million required for continued listing on the
Nasdaq National Market. The market price of OraVax common stock further declined
from the range of $2.00 at the start of 1998 to a low of $.18 during August,
1998. During this period of rapid stock price decline, holders of the 6%
convertible preferred stock converted many of their preferred shares into common
stock at a discount to the trading price. These conversions resulted in the
issuance of approximately 9 million shares of common stock, increasing the
outstanding shares of common stock from approximately 10,400,000 shares at
December 31, 1997 to approximately 20 million shares today. At the end of August
1998, OraVax was notified by Nasdaq that its common stock would be delisted for
failure to meet the minimum bid price of $1.00 as well as the minimum net asset
requirement.
OraVax continued to seek additional financing throughout this period and
received a number of financing proposals. The company rejected many of such
offers because they offered inadequate funding or involved convertible
securities with features which were disadvantageous to OraVax. It seriously
considered a proposal by a venture capital partnership to invest up to $20
million in cash in a private placement for a major ownership position through
convertible preferred stock. The proposal evolved as the OraVax stock price
declined, and the final form of the proposal, considered by the OraVax board of
directors in late August and early September 1998, would have required issuance
of $16 million of preferred stock convertible into ownership of 65% and the
establishment of a stock option pool comprising 10% of the outstanding common
stock of OraVax. The proposal also contained antidilution protection in the
event of future conversion of outstanding convertible preferred stock and
required a substantial reduction of OraVax's operations and cash expenses, in
order to permit the new capital to fund operations for at least 24 months
following the financing. OraVax believed the spending limitations would have
conflicted with its contractual obligations under certain product development
arrangements and would have limited the potential of certain programs. OraVax
estimated the value of this investment to be approximately $.32 per share at the
time of the closing, subject to further reduction under antidilution provisions.
However, it would not provide any immediate liquidity to the OraVax stockholders
but would very substantially dilute the interest of each existing stockholder.
The proposal would have required the issuance to the investor of preferred stock
convertible into approximately 50 million additional shares of common stock at a
time when 17 million shares were already outstanding.
A second proposal was made by Pasteur Merieux Connaught, joint venture
partner of OraVax since 1995 in the H. PYLORI joint venture. PMC discussed the
purchase of additional ownership in the joint venture from OraVax for $2.5
million to $4 million. The OraVax board felt that this proposal would not
provide adequate cash to sustain operations, even at a reduced spending level,
for a sufficient time to raise additional capital for its long-term needs. In
addition, the proposal would have required OraVax to give up valuable technology
at well below the fair value of such technology. While addressing limited
short-term cash needs, the proposal would not have provided enough financing to
permit OraVax to rebuild value for its stockholders. Eventually, the discussions
over this proposal led to
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a $3 million bridge loan from PMC which was closed on November 2, 1998, secured
by a portion of OraVax's rights in its existing joint venture with PMC to
develop vaccines against H. PYLORI.
A third proposal was an offer from a small cap biotech company to acquire
OraVax for stock of the acquiring company. The initial proposal suggested a
range of value, with the bottom of the range equal to $9 million in stock, and
the final proposal, by letter dated September 24, 1998, was for $13 million in
stock. The OraVax board of directors felt this proposal was inadequate
financially, particularly given the absence of a good strategic fit with the
potential acquiror.
On September 8, 1998, Peptide sent to OraVax a letter outlining the terms of
a proposed stock-for-stock merger transaction for total consideration of $5
million to $7 million to the stockholders of OraVax. While OraVax considered the
price inadequate, OraVax management was familiar with Peptide and believed there
was the potential for a strategic fit between the two companies. A year earlier,
in November, 1997, Peptide had visited OraVax and made a presentation on
Peptide's SALMONELLA vector technology, which was relevant to OraVax's H. PYLORI
project. These earlier discussions resulted in an option agreement between
OraVax and Peptide, dated April 24, 1998, designed to allow the parties to
evaluate the technical feasibility of H. PYLORI vaccines formulated with
SALMONELLA vectors. The two companies had continued to communicate frequently to
discuss scientific matters relating to the collaboration.
Peptide's September 8, 1998 letter was followed by considerable discussion
between the management of OraVax and Peptide, and on September 22, 1998, a
meeting took place at OraVax between OraVax's management and board of directors
representatives and the management of Peptide. The potential synergies between
the two companies were reviewed, and Peptide orally increased its offer to $13
million.
On October 1, 1998, Peptide sent a further letter to OraVax confirming the
increase in its proposed consideration in the merger to $13 million. Further
discussions between OraVax and Peptide management took place.
During the week of October 5, 1998, members of OraVax management traveled to
England and met with Peptide and their financial and legal advisors, exploring
the strategic fit of the two companies and conducting due diligence necessary to
evaluate the potential value of Peptide ordinary shares to OraVax stockholders.
On October 11, 1998, Peptide informed OraVax management that it would
increase its offer to $15 million and provide immediate bridge financing of $5
million secured by tangible assets of OraVax.
The OraVax board of directors valued the Peptide offer at approximately $.61
per share, or a premium of 178% over OraVax's closing price of $.22 per share on
October 6, 1998. OraVax analyzed the potential dilutive effect on this offer of
Peptide's need to obtain further financing to provide for the cash needs of the
combined company. Even after taking into consideration dilution associated with
Peptide's anticipated financing, the effective price still exceeded the proposed
financing alternative. The OraVax board of directors viewed Peptide's limited
cash resources as a risk; however, the strategic fit of the two companies
appeared to be excellent. The combined company would have a more diversified
product offering and larger critical mass. Peptide's investment bank, BT
Alex.Brown, expressed confidence in the ability to complete a financing to
provide adequate cash for the combined company.
As compared to the venture capital investment, the Peptide proposal offered
greater value to OraVax stockholders and the prospect of more diversified
products and larger critical mass. As compared to the sale of technology to PMC,
the Peptide transaction offered the prospect of retaining valuable technology
while obtaining financing for a much longer period into the future. As compared
to the other acquisition proposed, the Peptide transaction offered better
financial terms and a better strategic fit.
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After significant analysis, discussion and negotiation with various parties,
the OraVax board of directors on October 11, 1998 authorized management to move
forward with the negotiation of a combination with Peptide. An exclusivity
agreement was signed on October 12, 1998 providing for exclusive negotiations
until November 2, 1998. OraVax management met with representatives of Peptide
both at OraVax's offices in Cambridge, Massachusetts and at Peptide's offices in
Cambridge, England.
During the same period, OraVax negotiated with the holders of most of the
remaining outstanding shares of its 6% convertible preferred stock and obtained
the right for Peptide to purchase 2,584 shares for a price of approximately $3
million. These shares could at that time have been convertible into
approximately 15.8 million shares of OvaVax common stock, or approximately 45%
of the outstanding shares of OraVax common stock at that time. OraVax also
obtained agreement from its joint venture partner, PMC, to the proposed merger
with Peptide and obtained $3 million in bridge financing from PMC on November 2,
1998. The exclusivity agreement between OraVax and Peptide was extended to
November 10, 1998.
Between October 12, 1998 and November 10, 1998, representatives of Peptide
and OraVax and their respective advisors continued their due diligence reviews.
In addition, members of both management teams and their financial and legal
advisors participated in ongoing negotiations regarding the terms of the
proposed transaction. During this period, counsel for OraVax and Peptide
communicated numerous times to review and discuss drafts of the merger
agreement, the terms of potential bridge loans from Peptide to OraVax, and other
ancillary documents.
On November 9, 1998 the OraVax board of directors met, with representatives
of Hambrecht & Quist and Hale and Dorr participating, to review and discuss the
terms of the transaction. Following presentations and advice from its advisors
and discussion of the proposed transaction and of available alternatives, the
OraVax board of directors unanimously approved the merger and authorized
execution of the merger agreement, a loan agreement providing bridge financing
of up to a maximum of $5 million from Peptide, and other ancillary documents.
The merger agreement was executed on November 10, 1998 along with the
related bridge loan agreement of $5 million, secured by all the assets of OraVax
except its H. PYLORI technology. Peptide purchased 2,584 of the outstanding
shares of convertible preferred stock (representing, at that time, approximately
95% of the outstanding shares of convertible preferred stock) from the holders
of such stock for approximately $3 million on November 10, 1998. The total
merger consideration of $20 million includes this amount.
On November 11, 1998 prior to the opening of trading of Peptide's ordinary
shares on the London Stock Exchange, Peptide announced the merger. OraVax also
announced the merger in the United States prior to the opening of trading of the
OraVax common stock on the Nasdaq National Market.
On December 30, 1998, PMC sent a letter to OraVax indicating that PMC was
considering making an offer to acquire OraVax on terms superior to the
consideration to be paid by Peptide under the merger agreement. OraVax sent a
copy of PMC's letter to Peptide, as required under the merger agreement. In
response to PMC's letter, members of Peptide's management met independently with
PMC and negotiated a series of agreements, including a standstill agreement
under which PMC agreed not to make an offer to acquire OraVax and an agreement
by PMC to make a $3 million equity investment in Peptide ordinary shares in
connection with and conditioned upon consummation of the merger. PMC and Peptide
also agreed that the OraVax technology relating to vaccines for Japanese
encephalitis and tick-borne encephalitis would be licensed to PMC and that the
joint venture with PMC would be granted licenses to OraVax technology for the
development of vaccines for hepatitis C contingent on the merger being
consummated.
Since the merger was announced, OraVax has received increased interest from
prospective purchasers of the company's leasehold interests, leasehold
improvements and equipment in its Canton,
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Massachusetts, manufacturing facility. Based on these indications of interest,
OraVax has explored the sale of its interests in this facility. Based on the
further developments with PMC and with the Canton facility, which indicated
increased value for OraVax assets, the OraVax board of directors met on January
25, 1999 and authorized a letter from OraVax to Peptide on January 26, 1999
notifying Peptide that the OraVax board of directors believed the total
consideration to be paid by Peptide in the merger should be increased.
OraVax and Peptide engaged in extensive further discussion of the merger
terms over the next day, and the parties finally agreed to amend the merger
agreement to increase the total merger consideration, including amounts
previously paid by Peptide to purchase OraVax preferred stock, from $15 million
to $20 million, the increase taking the form of additional Peptide ordinary
shares. The OraVax board of directors met on January 27, 1999 and received oral
advice from Hambrecht & Quist, its financial advisors, that an increase in the
purchase price from $15 to $20 million would result in a transaction that was
fair to the OraVax stockholders given the new developments. The OraVax board of
directors approved the terms of the merger as amended, authorized amendment of
the merger agreement and confirmed to Peptide that it is the OraVax board of
directors' intention to recommend adoption of the merger agreement, as amended,
to the OraVax stockholders.
The merger agreement was amended on January 28, 1999. Announcement of the
amendment was made in the United States after the close of trading of OraVax
common stock on January 28, 1999, and simultaneously in England, after the close
of trading on the London Stock Exchange.
ORAVAX'S REASONS FOR THE MERGER; RECOMMENDATION OF THE ORAVAX BOARD OF DIRECTORS
In the course of reaching its decision to approve the merger agreement, the
board of directors of OraVax consulted with OraVax's legal, accounting and
financial advisors as well as with OraVax's management, and considered the
following material advantages and risks:
- OraVax's need for access to additional capital;
- The OraVax board of directors' view that OraVax's business, when combined
with Peptide's business following the merger, will have greater critical
mass and enhanced prospects for success in the rapidly changing and
increasingly competitive biotechnology and pharmaceutical industries;
- Peptide's financial ability to complete the proposed merger, including the
associated financing of OraVax's operations in the interim period;
- The terms and conditions of the proposed merger;
- The prospects for positive long-term performance of Peptide ordinary
shares;
- The presentation of OraVax's financial advisor, Hambrecht & Quist, and the
opinion of such firm to the effect that the merger would be fair, from a
financial point of view, to the stockholders of OraVax;
- The OraVax board of directors' assessment of OraVax's alternatives to
enhance stockholder value and conclusion that the proposed merger presents
the most favorable opportunity to do so;
- The fact that OraVax stockholders would receive stock in a U.K. company
traded on the London Stock Exchange rather than on a U.S. market;
- The risk that the advantages of the merger might not be realized;
- The risk that Peptide might not complete its financing to raise additional
capital for the combined company, or that such financing might be
dilutive; and
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- The risk that the value of the Peptide ordinary shares might decline by
the time of consummation of the merger, thus reducing the total
consideration available to the OraVax stockholders.
In evaluating these advantages and risks, the OraVax board of directors
concluded that the Peptide merger would provide a significantly greater
financial benefit to OraVax stockholders than any of the alternatives available
to OraVax. The OraVax board of directors also concluded that the larger critical
mass and more diversified products of the combined company would offer
significant advantages in obtaining financing, negotiating collaborative
arrangements, mitigating the risks of each product, and attracting and retaining
key employees. The OraVax board of directors also weighed the risk that the
advantages of the combined operations might not be realized and the risk that
the value of the Peptide ordinary shares received in the merger might decline.
In balance, considering all these factors and risks, the OraVax board of
directors concluded that the terms of the merger are fair to, and in the best
interests of the OraVax stockholders. Accordingly, the OraVax board of directors
recommends that the OraVax stockholders vote for adoption of the merger
agreement.
OPINION OF FINANCIAL ADVISOR TO THE BOARD OF DIRECTORS
The OraVax board of directors engaged Hambrecht & Quist to act as its
financial advisor in connection with the merger and to render an opinion as to
the fairness from a financial point of view to OraVax stockholders of the merger
consideration in the proposed merger with Peptide. Hambrecht & Quist rendered
its oral opinion (subsequently confirmed in writing) on November 9, 1998 to the
board of directors that, as of such date, the merger is fair to OraVax
stockholders from a financial point of view. A COPY OF HAMBRECHT & QUIST'S
OPINION DATED NOVEMBER 9, 1998, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS
CONSIDERED, THE SCOPE AND LIMITATIONS OF THE REVIEW UNDERTAKEN AND THE
PROCEDURES FOLLOWED BY HAMBRECHT & QUIST IS ATTACHED AS ANNEX B TO THIS PROXY
STATEMENT/PROSPECTUS. ORAVAX STOCKHOLDERS ARE ADVISED TO READ THIS OPINION IN
ITS ENTIRETY. OraVax stockholders should note that the opinion expressed by
Hambrecht & Quist was provided for the information of the OraVax board of
directors in its evaluation of the merger and does not constitute a
recommendation to any stockholder as to how such stockholder should vote with
respect to the merger agreement. No limitations were placed on Hambrecht & Quist
by the OraVax board of directors with respect to the investigation made or the
procedures followed in preparing and rendering its opinion. The opinion was
delivered prior to the January 28, 1999 amendment to the merger agreement
increasing the total merger consideration from $15 million to $20 million and a
revised opinion has not been delivered.
In connection with its review of the merger, and in arriving at its opinion,
Hambrecht & Quist, among other things:
- reviewed the publicly available financial statements of Peptide for recent
years and interim periods to date and certain other relevant financial and
operating data of Peptide made available to Hambrecht & Quist from
published sources and from the internal records of Peptide;
- reviewed certain internal financial and operating information, including
certain projections, relating to Peptide prepared by the management of
Peptide;
- discussed the business, financial condition and prospects of Peptide with
certain of its officers;
- reviewed the publicly available financial statements of OraVax for recent
years and interim periods to date and certain other relevant financial and
operating data of OraVax made available to Hambrecht & Quist from
published sources and from the internal records of OraVax;
- reviewed certain internal financial and operating information, including
certain projections, relating to OraVax prepared by the management of
OraVax;
- discussed the business, financial condition and prospects of OraVax with
certain of its officers;
33
<PAGE>
- reviewed the recent reported prices and trading activity for the ordinary
stock of Peptide and the common stock of OraVax and compared such
information and certain financial information for Peptide and OraVax with
similar information for certain other companies engaged in businesses
Hambrecht & Quist consider comparable;
- reviewed the financial terms, to the extent publicly available, of certain
comparable merger and acquisition transactions;
- reviewed drafts of the merger agreement; and
- performed such other analyses and examinations and considered such other
information, financial studies, analyses and investigations and financial,
economic and market data as Hambrecht & Quist deemed relevant.
In rendering its opinion, Hambrecht & Quist assumed and relied upon the
accuracy and completeness of all of the information concerning OraVax and
Peptide considered in connection with its review of the proposed transaction,
and Hambrecht & Quist did not assume any responsibility for independent
verification of such information. Hambrecht & Quist did not prepare any
independent evaluation or appraisal of any of the assets or liabilities of
OraVax or Peptide, nor did they conduct a physical inspection of the properties
and facilities of OraVax or Peptide. With respect to the financial projections
made available to Hambrecht & Quist and used in its analysis, Hambrecht & Quist
assumed that they reflected the best currently available estimates and judgments
of the expected future financial performance of OraVax and Peptide,
respectively. For purposes of its opinion, Hambrecht & Quist assumed that
neither Peptide nor OraVax was a party to any pending transactions, including
external financings, recapitalizations or material merger discussions, other
than the merger and those activities disclosed to Hambrecht & Quist or
undertaken in the ordinary course of conducting their respective businesses.
Hambrecht & Quist's opinion was necessarily based upon market, economic,
financial and other conditions as they existed and could be evaluated as of the
date of its opinion and any material change in such conditions would require a
reevaluation of its option. Hambrecht & Quist expressed no opinion as to the
price at which Peptide ordinary shares would trade subsequent to the effective
time of the merger.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. The summary
of the Hambrecht & Quist analyses set forth below does not purport to be a
complete description of the analyses underlying the Hambrecht & Quist opinion.
In arriving at its opinion, Hambrecht & Quist did not attribute any particular
weight to any analysis or factor considered by it, but rather made qualitative
judgments as to the significance and relevance of each analysis and factor.
Accordingly, Hambrecht & Quist believes that its analyses and the summary
set forth below must be considered as a whole and that selecting portions of its
analyses, without considering all analyses, or of the summary set forth below,
without considering all factors and analyses, could create an incomplete view of
the processes underlying the analyses set forth in the Hambrecht & Quist
presentation to the OraVax board of directors and the Hambrecht & Quist opinion.
In performing its analyses, Hambrecht & Quist made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of OraVax and Peptide. The
analyses performed by Hambrecht & Quist (and summarized below) are not
necessarily indicative of actual values or actual future results, which may be
significantly more or less favorable than suggested by such analyses.
Additionally, analyses relating to the values of businesses do not purport to be
appraisals or to reflect the prices at which businesses actually may be sold.
TRANSACTION ANALYSIS. Hambrecht & Quist reviewed and analyzed the proposed
terms of the merger and performed a sensitivity analysis of the consideration to
be received by OraVax shareholders,
34
<PAGE>
based on fluctuating values of Peptide's ordinary stock, and an exchange ratio
of L1.00 to $1.66 as of November 10, 1998. On the basis of its analysis,
Hambrecht & Quist observed the following:
- OraVax shareholders will receive approximately $12,040,125 of value in
Peptide's ordinary shares, subject to reduction in the event that
Peptide's stock price falls below $1.49 per share, at which point the
number of shares to be issued will be fixed at 8,080,620 ordinary shares,
and subject to increase in the event that Peptide's stock price rises
above $2.24 per share, at which point the number of shares to be issued
will be fixed at 5,375,055 ordinary shares;
- based on Peptide's closing stock price of $1.87 on November 6, 1998, the
total acquisition consideration would be fixed at $12,040,125, or
approximately $0.61 per share of OraVax common stock, which represented a
143.6% premium to OraVax's closing price of $0.25 on November 6, 1998 and
a 178.4% premium to OraVax's closing price of $0.22 on October 6, 1998;
and
- based on Peptide's closing stock price of $1.87 on November 6, 1998,
OraVax shareholders would own approximately 14.8% of Peptide following the
merger, up to a maximum of 17.8% if the maximum of 8,080,620 ordinary
shares of Peptide are issued in the merger, and a minimum of 12.6% if the
minimum of 5,375,055 ordinary shares of Peptide are issued in the merger.
ANALYSIS OF ALTERNATIVES TO THE MERGER. Hambrecht & Quist reviewed and
analyzed OraVax's alternatives to the proposed merger. Hambrecht & Quist
observed that in the first six months of 1998, OraVax's net loss was
approximately $1.3 million per month and that as of November 9, 1998, OraVax had
cash and marketable securities of approximately $3.1 million, including $3.0
million from the PMC bridge loan. Based on OraVax's historical net loss,
Hambrecht & Quist estimated that OraVax had less than three months of cash and
that even allowing for the reduction of net loss as a result of potential
partnerships, OraVax would have less than four months to accomplish one of the
following alternatives to the proposed merger: (1) raise money through a
financing; (2) find an alternative acquirer; (3) raise funding through a sale of
assets; or (4) file for bankruptcy protection. Hambrecht & Quist analyzed each
of these alternatives and their respective advantages and disadvantages for the
OraVax board of directors.
In order to determine the relative benefits of the merger compared to a
potential financing, Hambrecht & Quist reviewed the only other financing
proposal being evaluated by the management of OraVax. Hambrecht & Quist analyzed
the proposed financing in light of the value to the existing OraVax shareholders
accorded by the merger, and noted that, under the financing proposal: (1)
shareholders of OraVax received no immediate value; (2) such proposed financing
required immediate downsizing of OraVax operations; and (3) such proposed
financing diluted current shareholders by approximately 75% and provided no
diversification of research and development risk.
In order to determine the relative benefits of the merger compared to a
merger with another potential acquirer, Hambrecht & Quist along with the
management of OraVax, reviewed other potential acquirers and determined no other
offers to be as attractive as the proposed merger with Peptide.
In order to determine the relative benefits of the merger compared to
raising funding through a sale of assets, Hambrecht & Quist reviewed with the
company its saleable assets, and determined that the sale of those assets would
be insufficient to fund the company's continued operations for a full year.
In order to determine the relative benefits of the merger compared to filing
for bankruptcy protection, Hambrecht & Quist reviewed the Peptide offer and
determined that the merger offered greater potential shareholder value and
increased visibility of the future of the business than the possibility of
filing for bankruptcy protection.
35
<PAGE>
COMPARABLE COMPANY ANALYSIS--ORAVAX. Hambrecht & Quist reviewed and
compared selected historical financials, operating and stock market performance
data of OraVax to the corresponding data of four large capitalization vaccine
companies and six small capitalization vaccine companies. The Large Cap Vaccine
Companies included Aviron, Biochem Pharma, Inc., Chiron Corporation and North
American Vaccine, Inc. The Small Cap Vaccine Companies included Avant
Immunotherapeutics, Inc., Biomira, Inc., Cantab Pharmaceuticals plc, Corixa
Corporation, Genelabs Technologies, Inc. and Ribi ImmunoChem Research, Inc.
Hambrecht & Quist compared the market value, cash, technology value (consisting
of market value plus debt, less cash), revenues for the latest available 12
month period, LTM net income, as well as the ratio of their technology value to
LTM revenues, and compared such information with OraVax. This analysis indicated
technology values and technology value to revenue multiples as indicated below:
<TABLE>
<CAPTION>
TECHNOLOGY
TECHNOLOGY VALUE
VALUE / REVENUES
----------- ---------------
($MILLIONS)
<S> <C> <C>
OraVax............................................................. $ 4.5 0.5x
Large Cap Vaccine Average.......................................... 1,900.0 23.0x
Small Cap Vaccine Average.......................................... 44.9 5.6x
</TABLE>
COMPARABLE COMPANY ANALYSIS--PEPTIDE. Hambrecht & Quist reviewed and
compared selected historical financials, operating and stock market performance
data of Peptide to the corresponding data of the same companies used in the
OraVax comparable company analysis. Hambrecht & Quist compared the market value,
cash, technology value, LTM revenue, LTM net income, as well as the ratio of
their technology value to LTM revenues, and compared such information with
Peptide. This analysis indicated technology values and technology value to
revenue multiples as indicated below:
<TABLE>
<CAPTION>
TECHNOLOGY TECHNOLOGY VALUE
VALUE / REVENUES
----------- ----------------
($MILLIONS)
<S> <C> <C>
Peptide......................................................... $ 46.4 NM (> than 50x)
Large Cap Vaccine Average....................................... 1,900.0 23.0x
Small Cap Vaccine Average....................................... 44.9 5.6x
</TABLE>
STOCK TRADING HISTORY ANALYSIS. Hambrecht & Quist examined the comparable
price performance from December 31, 1996 to November 6, 1998 of OraVax common
stock, Peptide ordinary shares, the Comparable Vaccine Companies, the Nasdaq
Composite and the Nasdaq Biotechnology Index. This analysis indicated the price
performance data below:
<TABLE>
<CAPTION>
PRICE PERFORMANCE
FROM
12/31/96 TO
11/6/98
-----------------
<S> <C>
OraVax......................................................................................... -95.2%
Peptide........................................................................................ -54.1%
Comparable Vaccine Companies................................................................... +29.0%
Nasdaq Composite............................................................................... +42.3%
Nasdaq Biotechnology Index..................................................................... +18.7%
</TABLE>
36
<PAGE>
SELECTED COMPARABLE TRANSACTION ANALYSIS. Hambrecht & Quist compared the
merger with twenty-seven selected comparable merger and acquisition transactions
in the biotechnology area. Hambrecht & Quist reviewed the premiums paid to
closing stock prices in such transactions and noted the following:
<TABLE>
<CAPTION>
AVERAGE PREMIUM
PAID IN COMPARABLE PREMIUM PAID TO
DAYS PRIOR TO ANNOUNCEMENT TRANSACTIONS ORAVAX
- ---------------------------------------------------------------------------- --------------------- -----------------
<S> <C> <C>
One day..................................................................... 37.7% 143.6%
One week.................................................................... 39.4% 143.6%
One month................................................................... 48.9% 178.4%
</TABLE>
Hambrecht & Quist did not attempt to prepare any further quantitative
valuation analyses based on these acquisition transactions because Hambrecht &
Quist believed that differences in the technologies of each company and
differences in the market conditions at the times such acquisitions were made
would make such analyses meaningless.
No company or transaction used in the above analyses is identical to OraVax,
Peptide or the merger. Accordingly, an analysis of the results of the foregoing
is not mathematical; rather it involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
companies and other factors that could affect the public trading values of the
companies or company to which they are compared. The foregoing description of
Hambrecht & Quist's opinion is qualified in its entirety by reference to the
full text of such opinion, which is attached at Annex B to this proxy
statement/prospectus.
CERTAIN RELATIONSHIP; TERMS OF ENGAGEMENT. Hambrecht & Quist, as part of
its investment banking services, is regularly engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
strategic transactions, corporate restructurings, negotiated underwritings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. The OraVax board of directors
selected Hambrecht & Quist to serve as its financial advisor in connection with
the proposed transaction with Peptide because it is an internationally
recognized investment banking firm whose professionals have substantial
experience in merger and acquisition transactions and transactions similar to
the merger. In the ordinary course of business, Hambrecht & Quist may actively
trade in the equity securities of the company and Peptide Therapeutics for its
own account and for the accounts of its customers and, accordingly, may at any
time hold a long or short position in such securities. Hambrecht & Quist may in
the future provide additional investment banking or other financial advisory
services to Peptide.
Pursuant to an engagement letter dated October 23, 1998, OraVax has agreed
to pay Hambrecht & Quist a fee in connection with its services as financial
advisor to the OraVax board of directors and the rendering of a fairness
opinion. OraVax has agreed to pay a fee of $200,000 upon the delivery of the
fairness opinion. The fairness opinion fee shall be credited against any
transaction fee (as described below). Upon consummation by OraVax of the merger,
OraVax shall pay Hambrecht & Quist a transaction fee, payable in cash on
closing, of $250,000 less any fees previously paid. OraVax has agreed to
reimburse Hambrecht & Quist for its reasonable out of pocket expenses, and to
indemnify Hambrecht & Quist against certain liabilities, including liabilities
under the federal securities laws or relating to or arising out of Hambrecht &
Quist's engagement as financial advisor. The amount of compensation to be paid
to Hambrecht & Quist was determined by negotiations between the OraVax board of
directors and Hambrecht & Quist.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the OraVax board of directors with
respect to the merger agreement, OraVax stockholders should be aware that
Peptide has agreed to assume and continue the
37
<PAGE>
existing employment agreements between OraVax and Lance Gordon, the President
and Chief Executive Officer of OraVax, and Thomas Monath, the Vice President,
Research and Medical Affairs of OraVax. Peptide also expects to elect Lance
Gordon to the Peptide board of directors following the merger. As a result, Drs.
Gordon and Monath will benefit from the completion of the merger in ways that do
not apply to all OraVax stockholders, in the form of continued employment with
agreed upon terms, and in the case of Dr. Gordon, in the form of a seat on the
Peptide board of directors. The board of directors of OraVax was aware of these
interests and took these interests into account in approving the merger
agreement.
The key benefits and protections afforded to Dr. Gordon under the employment
agreement that Peptide will assume and continue are as follows:
- he is entitled to an annual base salary and a bonus;
- his employment agreement is terminable only upon six months written notice
unless the termination is for cause; and
- he is entitled to a severance payment equal to 50% of his annual base
salary if Peptide elects not to extend the employment agreement or
terminates him without cause.
The key benefits and protections afforded to Dr. Monath under the employment
agreement that Peptide will assume and continue are as follows:
- he is entitled to an annual salary and a bonus; and
- he is entitled to receive his current salary and benefits for a period of
six months if Peptide terminates him without cause.
PEPTIDE'S REASONS FOR THE MERGER
The board of directors of Peptide has unanimously approved the merger
agreement and the merger. In reaching its decision, the Peptide board of
directors considered a number of factors, including the following:
- The complementary nature of the companies' product candidates and
technology platforms;
- The similarity of the companies' business strategy and therapeutic focus;
- The ability to acquire OraVax's rights as a 50% joint venture partner in
the H. PYLORI collaboration with PMC;
- The potential for accelerating the receipt of product revenues due to the
later stage of development of certain of the OraVax product candidates;
- The perceived reduced risk associated with an expanded product portfolio;
- That the merger would bring together the alliances between OraVax and PMC
and Peptide and SmithKline Beecham;
- Access to OraVax scientists and research and development infrastructure;
and
- Opportunities to reduce the combined cash burn rate of the merged entity,
through potentially more efficient deployment of resources and increased
access to collaborators.
Having considered each of these advantages, the Peptide board of directors
determined that Peptide, as a result of the merger, would be a stronger and
larger company with a much broader range of product opportunities and
collaborative relationships, which would help to mitigate the risks inherent in
the biotechnology industry. Each of these advantages would enable the combined
company to be better positioned to obtain future financing, to increase its
research and development efforts and to more
38
<PAGE>
rapidly exploit its products and technologies. The Peptide board of directors
concluded that the combined effect of these advantages would create a
sustainable business over the long term. Accordingly, having evaluated each of
these advantages, the Peptide board of directors concluded that the merger was
in the best interests of its shareholders.
39
<PAGE>
MANAGEMENT AFTER THE MERGER
EXECUTIVE OFFICERS AND DIRECTORS
The following individuals will serve as the executive officers and directors
of Peptide following the effective time of the merger:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------- --- -------------------------------------------
<S> <C> <C>
Alan Goodman*.............................. 47 Non-Executive Chairman
John Brown................................. 43 Chief Executive Officer
Gordon Cameron............................. 32 Finance Director
Nicolas Higgins............................ 42 Commercial Director
Lance Gordon............................... 51 Director, North America
Alan Dalby*................................ 61 Non-Executive Director
Sir Brian Richards*........................ 66 Non-Executive Director
Alan Smith*................................ 54 Non-Executive Director
</TABLE>
- ------------------------
*Member of the Audit Committee and the Remuneration Committee.
ALAN GOODMAN has worked extensively in senior financial and general
management roles within a number of major U.K. companies, particularly in the
biotechnology and healthcare industries. In 1984, while Mr. Goodman was the
Finance director, Agricultural Genetics Company Limited completed a significant
financing. In 1989, he joined the board of Medeva plc to create a new
independent pharmaceutical group. In 1991, after retiring from the board of
Medeva plc, he concentrated on developing ATM, a company which has completed a
number of significant transactions in the healthcare sector. During 1992, he was
acting chief executive of Chiros Limited (now Chiroscience Group plc). He is
co-founder of Peptide and was appointed Chief Executive of Peptide in November
1993. He was appointed Deputy Chairman and Regional Director, North America in
February 1997 and became Chairman in May 1998. He is also a director of a number
of bioscience companies in the U.K., including Oxford Biomedica plc.
JOHN BROWN joined Peptide as Finance Director in March 1995 from
stockbrokers Sutherland and Partners (Edinburgh) Ltd where he was Head of
Research. From 1982 to 1987, he worked in research and development at Glaxo
Group Research, where he supervised projects on peptides and peptide mimetics.
From 1987 to 1991, he worked at PA Consulting Group Limited on due diligence
assignments, mergers and acquisitions and public offerings. In 1991, he joined
the Edinburgh stockbroker, Bell Lawrie White, covering the pharmaceutical and
biotechnology sectors before his move to Sutherland and Partners in early 1993.
He holds a PhD in Pharmacology and an MBA. Dr. Brown was appointed Chief
Executive in March 1997.
GORDON CAMERON has an MA in Economics and qualified as a Chartered
Accountant with Ernst & Young in 1991. After leaving Ernst & Young he spent two
years in corporate finance with Hill Samuel Bank. In 1993 he moved to N M
Rothschild & Sons Limited where he worked on a variety of mergers, acquisitions
and other corporate finance assignments. In particular, he was a key member of
the advisory team to Peptide's initial public offering in November 1995. In 1996
he joined Peptide and was appointed Finance Director in March 1997. He was also
appointed Company Secretary in February 1998.
NICOLAS HIGGINS has a BSc in Biochemistry, an MSc in Biochemical Engineering
and an MSc in the Management of Intellectual Property. He began his career with
Unilever Research in 1980. In 1982, he joined PA Consulting Group Limited and,
as a founding member of the biotechnology group, worked on a variety of
assignments in the life sciences area. In 1986, he moved to Porton International
Ltd where he managed a number of development projects. In 1990, he took on
special responsibility for the management of Porton's intellectual property
including the assessment of licensing opportunities. He
40
<PAGE>
joined Peptide in January 1994 with responsibility for the management of its
intellectual property, became Licensing Director in October 1996 and was
appointed Commercial Director in March 1997.
LANCE GORDON has served as the President and Chief Executive Officer and a
member of the Board of Directors of OraVax since June 1990. From January 1989 to
June 1990, Dr. Gordon served as senior vice president of North American Vaccine,
Inc., a biopharmaceutical company. From April 1988 to January 1989, he served as
chief executive officer of American Vaccine Corporation and Selcore
Laboratories, Inc., both of which are biopharmaceutical companies. From 1987 to
1988, Dr. Gordon was associate director, Infectious & Inflammatory Diseases,
Clinical Pharmacology--Drug Medical Affairs, of E.R. Squibb & Sons, Inc., a
pharmaceutical company. From 1981 to 1987, he was director, Immunobiology
Research at Connaught Laboratories, Ltd., a pharmaceutical company. During his
seven years with Connaught Laboratories, Ltd., Dr. Gordon was responsible for
both bacterial and viral research and development programs. He was the inventor
and project director of the Connaught Haemophilus influenzae type b conjugate
vaccine, PhoHibit. Dr. Gordon also serves on the advisory boards of the
not-for-profit Albert Sabin Foundation and BioSciences Contract Production, a
private biopharmaceutical services company. Dr. Gordon received a B.A. from the
University of California at Humboldt and a Ph.D. in Biomedical Science from the
University of Connecticut. Dr. Gordon completed his post-doctoral fellowship at
the Howard Hughes Medical Institute.
ALAN DALBY was appointed a non-Executive Director of Peptide in May 1998. He
is currently chairman of Reckitt & Colman PLC and a non-executive director of
Medeva plc. He is also a director of two U.S.-based biotechnology companies,
Alteon Inc. and Mitotix Inc. Mr. Dalby is the former chairman and chief
executive officer and a founder of Cambridge NeuroScience, Inc., an emerging
pharmaceutical company focused on neurobiology. Prior to joining Cambridge
NeuroScience, Inc., he was executive vice president and member of the board of
directors of SmithKline Beckman Corporation, spending 30 years with the company,
before retiring in 1987. He has held posts in the Pharmaceutical Manufacturers
Association.
SIR BRIAN RICHARDS joined Peptide from British Biotech plc (formerly British
Biotechnology Group plc) where he was Chairman and co-founder. He gained a PhD
from King's College London, following 13 years in academic medical research and
teaching at Kings College, University of London. He co-founded the research
laboratories at High Wycombe for G D Searle & Co. Ltd., the Chicago-based
pharmaceutical company, which pioneered the application of gene technology to
pharmaceuticals. British Biotechnology was established in Oxford in 1986
following the acquisition of G D Searle by Monsanto Inc. Sir Brian is chairman
of both Alizyme plc and Laboratory of the Government Chemistry Holdings Ltd. He
is also a non-executive director of Innogenetics (Belgium), Imperial Cancer
Research Technology Limited and Drug Royalty Corporation (Canada). He has been
an adviser to several U.K. government committees and sits on the Gene Therapy
Advisory Committee for the Department of Health. He is a visiting professor at
the University College of Wales, Aberystwyth and was Knighted in 1997. Sir Brian
is chairman of the Remuneration Committee.
ALAN SMITH was group managing director of Anglian Water plc until December
31, 1997. He started his career in local government, where he rose to assistant
treasurer for Suffolk County Council, prior to joining Anglian Water as
principal finance officer in 1974. He moved to become assistant director of
finance for Southern Water Authority from 1974-1980. He rejoined Anglian Water
in 1980 as finance director and became group managing director in 1990. He was
closely involved in the privatisation and initial public offering of Anglian
Water. Mr. Smith became a Director of Peptide in 1995 and is Chairman of the
Audit Committee.
41
<PAGE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
The compensation paid in respect of the year ended December 31, 1998 to the
directors and executive officers of Peptide who served during the year was as
set forth below. All of Peptide's executive officers are also directors:
<TABLE>
<CAPTION>
OTHER ANNUAL
NAME SALARY BONUS COMPENSATION
- --------------------------------------------------------------- --------- --------- -------------
L L L
<S> <C> <C> <C>
CURRENT DIRECTORS
Alan Goodman(1)................................................ 103,333 10,833 11,386
John Brown(2).................................................. 190,000 22,550 33,493
Gordon Cameron(3).............................................. 108,750 13,200 20,720
Nicolas Higgins................................................ 112,500 13,200 21,686
Alan Dalby(4).................................................. 13,333 -- --
Sir Brian Richards(5).......................................... 33,333 -- 279
Alan Smith..................................................... 20,000 -- --
FORMER DIRECTORS
Nancy Lane(6).................................................. 6,667 -- --
</TABLE>
- ------------------------
(1) In addition to the above, an overseas allowance of L32,670 was paid to Mr.
Goodman to assist with housing and living expenses performing his role as
Regional Director, North America.
(2) Dr. Brown has elected to receive 50% of his bonus in Peptide shares under
the rules of the Long-Term Incentive Plan.
(3) Mr. Cameron has elected to receive 50% of his bonus in Peptide shares under
the rules of the Long-Term Incentive Plan.
(4) Mr. Dalby was not appointed to the Board of Directors until May 1, 1998.
(5) Sir Brian Richards ceased to be Non-Executive Chairman on May 1, 1998, and
at that time became a Non-Executive Director.
(6) Dr. Lane retired from the Board of Directors with effect from May 1, 1998.
The aggregate amount of compensation paid by Peptide to all directors and
officers as a group, for services in all capacities, for the year ended December
31, 1998 was L735,763.
Peptide operates a discretionary annual bonus plan for all of its executive
directors. Bonuses are based on a percentage of base salary, up to a maximum of
50%. Bonuses are paid, at the discretion of the Remuneration Committee, in
recognition of each director's contribution to the success of the company. The
performance objectives established with respect to bonuses are intended to be
both challenging and realistic. Under the rules of the Long-Term Incentive Plan,
directors can elect to receive up to 50% of their bonus payable in new Peptide
shares.
The aggregate amount payable by Peptide during the year ended December 31,
1998 to provide for pension, retirement or similar benefits for Peptide's
director's pursuant to Peptide's pension plan was L41,125.
42
<PAGE>
OPTIONS TO PURCHASE SECURITIES FROM PEPTIDE
The following table sets forth certain information concerning options to
acquire new Peptide ordinary shares held by Peptide's directors as of January
27, 1999.
<TABLE>
<CAPTION>
NUMBERS OF SHARES EARLIEST DATE
OVER WHICH OPTIONS OF
GRANTED EXERCISE PRICE EXERCISE EXPIRATION DATE
------------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Alan Goodman............................. 14,149(1) L2.12 09/07/99 09/07/06
140,973(2) L2.05 11/09/99 11/09/03
-------
155,122
John Brown............................... 180,000(3) L0.10 22/11/95 27/09/02
70,000(3) L0.10 22/11/95 10/11/02
30,000(2) L2.00 28/11/98 28/11/02
14,149(1) L2.12 09/07/99 09/07/06
77,314(2) L2.05 11/09/99 11/09/03
5,909(4) L1.65 01/11/99 01/05/00
75,431(5) nil(5) 02/07/01 02/01/02
-------
452,803
Gordon Cameron........................... 145,000(2) L2.00 20/12/99 20/12/03
15,000(1) L2.00 10/12/99 20/12/06
45,259(5) nil(5) 02/07/01 02/01/02
12,187(4) L0.80 01/10/01 01/04/02
-------
217,446
Nicolas Higgins.......................... 259,260(3) L0.10 22/11/95 13/05/02
740(3) L0.10 22/11/95 07/10/02
20,000(2) L2.00 28/11/98 28/11/02
14,149(1) L2.12 09/07/99 09/07/06
68,290(2) L2.05 11/09/99 11/09/03
45,259(5) nil(5) 02/07/01 02/01/02
-------
407,698
Sir Brian Richards....................... 250,000(3) L0.10 22/11/95 19/08/01
30,000(2) L2.00 28/11/98 28/11/02
14,149(1) L2.12 09/07/99 09/07/06
77,802(2) L2.05 11/09/99 11/09/03
-------
371,951
</TABLE>
- ------------------------
(1) These options were granted under the Peptide Therapeutics 1996 Approved
Share Option Scheme. In order for these options to be exercised in full, the
growth in Peptide's share price over a specified consecutive three-year
period will have to exceed the growth of the total shareholder return for
the FTSE-A All-Share (900) Index over the same period.
(2) These options were granted under the Peptide Therapeutics 1995 Unapproved
Share Option Scheme. In order for these options to be exercised in full, the
growth in Peptide's share price over a specified consecutive three-year
period will have to exceed the growth of the total shareholder return for
the FTSE-A All-Share (900) Index over the same period.
(3) These options were granted under the Peptide Therapeutics Group plc 1994
Unapproved Share Scheme.
(4) These options were granted under the Peptide Therapeutics 1995 Savings
Related Share Option Scheme.
(5) These "nil-cost" options were awarded under the Peptide Therapeutics Share
Incentive Plan. The options are awards of shares which can only become
vested if the market capitalization of Peptide increases by at least 50%
over the period between the granting of the award and vesting. The exercise
price for the shares is a nominal L1.
The total number of Peptide ordinary shares underlying options granted to
Peptide's directors and executive officers is 1,605,020.
43
<PAGE>
THE MERGER AND THE MERGER AGREEMENT
The following is a summary of significant provisions of the merger
agreement. The merger agreement is attached as Annex A and is incorporated into
this prospectus/proxy statement by reference. You should read the merger
agreement for a complete understanding of its terms.
STRUCTURE OF THE MERGER
The merger agreement provides that, following the approval of the merger
agreement by the stockholders of OraVax and the satisfaction or waiver of the
other conditions to the merger, OraVax will become a wholly-owned subsidiary of
Peptide and OraVax stockholders will become Peptide shareholders.
EFFECTIVE TIME AND EFFECTS OF THE MERGER
The parties expect to close prior to March 31, 1999. The merger will be
effective upon the filing of appropriate documents with the Delaware Secretary
of State, or such later time as may be specified in such documents. Peptide and
OraVax plan to file such documents soon after the closing.
MERGER CONSIDERATION
The merger agreement provides that, at the effective time of the merger,
each share of OraVax common stock outstanding immediately prior to the effective
time (except for shares owned by OraVax, Peptide or their subsidiaries) will be
converted into the right to receive a pro rata share of $20 million less the sum
of (A) amounts paid to purchase outstanding shares of OraVax preferred stock and
(B) the intrinsic value of outstanding OraVax common stock options and warrants.
Peptide and OraVax estimate that approximately $2.95 million will be used to
acquire shares of preferred stock and preferred stock warrants and that the
intrinsic value of OraVax options will be approximately $0.01 million. Using
these estimates, holders of outstanding shares of OraVax common stock will
receive approximately $17 million in merger consideration. OraVax estimates that
at the effective time approximately 20,000,000 shares of OraVax common stock
will be outstanding. Assuming that merger consideration equal to $17 million is
split among 20 million shares, each share of OraVax common stock would convert
into $0.85 worth of the merger consideration. The figures used in this paragraph
are estimates. Actual amounts will depend on the cost to purchase the OraVax
preferred stock, warrants and options to purchase OraVax common stock and the
number of shares of OraVax common stock outstanding immediately prior to the
effective time. See "Risk Factors--Risks Relating to the Merger--Additional
OraVax Stock Issuances May Dilute Merger Consideration."
Holders of OraVax common stock will receive Peptide ordinary shares. These
Peptide ordinary shares will be valued at between $1.49 and $2.24 by reference
to the average of the closing prices for Peptide ordinary shares during the ten
trading days ending on the third trading day prior to the closing date of the
merger, as reported by the London Stock Exchange, with each closing price
converted into U.S. dollars based on the midpoint of the dollar/pound sterling
exchange rate for such day, as reported by THE FINANCIAL TIMES. If this
calculation indicates a market value for Peptide ordinary shares of less than
$1.49, the market value will be deemed to be $1.49, and if the calculation
indicates a market value for Peptide ordinary shares of more than $2.24, the
market value will be deemed to be $2.24. On February 2, 1999, the per share
closing price for a Peptide share was 117.5 pence and the midpoint of the
dollar/pound sterling exchange rate was 1.64, yielding a dollar value of $1.93.
Immediately following execution of the merger agreement, Peptide purchased
2,584 shares of OraVax preferred stock for approximately $2.95 million. Of these
shares, 1,957 additional shares of OraVax preferred stock were outstanding on
January 29, 1999. Under the merger agreement, at the effective time, outstanding
shares of OraVax preferred stock owned by Peptide will be cancelled and
outstanding shares of OraVax preferred stock owned by third parties will be
automatically converted
44
<PAGE>
into the right to receive $1,090 per share plus accrued but unpaid dividends.
These third parties have agreed to redeem their shares of OraVax preferred stock
for cash in the amount of $1,090 per share, plus accrued but unpaid dividends.
On January 4, 1999, Peptide converted 633 shares of OraVax preferred stock
into 2,193,537 shares of OraVax common stock. The shares of OraVax common stock
owned by Peptide will be cancelled in the merger.
Peptide will be entitled to withhold from the consideration payable to any
holder of OraVax common stock such amounts as it is required to deduct or
withhold under the tax laws of the United States or the United Kingdom.
NO FRACTIONAL PEPTIDE ORDINARY SHARES
No fractional Peptide ordinary shares will be issued in the merger. Each
holder of shares of OraVax common stock who otherwise would be entitled to
receive a fraction of a Peptide ordinary share pursuant to the merger will be
paid an amount in cash, without interest, equal to such fraction multiplied by
the market value of a Peptide ordinary share.
EXCHANGE OF SHARE CERTIFICATES
As soon as practicable after the effective time of the merger, Peptide will
mail transmittal forms to each holder of record of OraVax common stock for use
in forwarding certificates evidencing such shares for surrender and exchange for
Peptide ordinary shares and, if applicable, cash in lieu of a fractional Peptide
ordinary share. After receipt of such transmittal form, each holder of
certificates formerly representing shares of OraVax common stock should
surrender such certificates to the exchange agent. Instructions specifying
details of the exchange will accompany the transmittal forms.
ORAVAX STOCKHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY RECEIVE
A TRANSMITTAL FORM.
After the effective time of the merger, each certificate evidencing shares
of OraVax common stock, until surrendered and exchanged, will be deemed, for all
purposes, to evidence the right to receive the number of Peptide ordinary shares
into which the shares of OraVax common stock evidenced by such certificate have
been converted and the right to receive any cash payment in lieu of a fractional
Peptide ordinary share.
TREATMENT OF ORAVAX COMMON STOCK OPTIONS AND WARRANTS
At the effective time of the merger, each outstanding option to purchase
shares of OraVax common stock under the OraVax 1990 Stock Option Plan and the
OraVax 1995 Stock Option Plan, whether or not exercisable, will be assumed by
Peptide. Each OraVax option so assumed will continue to have, and be subject to,
the same terms and conditions set forth in the applicable OraVax stock option
plan immediately prior to the effective time, except that (i) each option will
be exercisable (or will become exercisable in accordance with its terms) for
that number of Peptide ordinary shares equal to the product of the number of
shares of OraVax common stock that were issuable upon exercise of such option
immediately prior to the effective time multiplied by the exchange ratio,
rounded down to the nearest whole number of Peptide ordinary shares, (ii) the
per share exercise price for the Peptide ordinary shares issuable upon exercise
of such assumed option will be equal to the quotient determined by dividing the
exercise price per share of OraVax common stock at which such option was
exercisable immediately prior to the effective time by the exchange ratio,
rounded up to the nearest whole cent and (iii) the vesting of options to
purchase an aggregate of 321,132 shares of OraVax common stock will be
accelerated (as of January 29, 1999). The exchange ratio means the quotient
determined by dividing (x) the common stock consideration payable with respect
to OraVax common stock by (y) the product of (A) the market value of a Peptide
ordinary share and (B) the number of shares of OraVax
45
<PAGE>
common stock outstanding immediately prior to the effective time of the merger,
less any shares held by OraVax or its subsidiaries, or by Peptide or its
affiliates.
The vesting of certain stock options, held by OraVax's senior management,
will be accelerated as a result of the merger. At this time, the exercise price
of all such stock options is greater than the market price of OraVax common
stock as well as the merger price expected to be paid to OraVax stockholders. As
a result, OraVax does not anticipate incurring a non-recurring charge in
connection with the accelerated vesting.
As of January 29, 1999, 1,200,975 shares of OraVax common stock were
issuable upon the exercise of outstanding OraVax options, which options,
assuming an exchange ratio of Peptide ordinary shares per OraVax share,
will be converted to become options to purchase approximately Peptide
ordinary shares at the effective time of the merger. The weighted average
exercise price per share of all OraVax options outstanding as of January 29,
1999 was $2.85 per share.
At the effective time of the merger, each outstanding warrant to purchase
shares of OraVax common stock, whether or not exercisable, will be assumed by
Peptide. Each such warrant so assumed by Peptide will continue to have, and be
subject to, the same terms and conditions set forth in the applicable warrant
immediately prior to the effective time except that (i) each warrant will be
exercisable (or will become exercisable in accordance with its terms) for that
number of Peptide ordinary shares equal to the product of the number of shares
of OraVax common stock that are issuable upon exercise of such OraVax warrant
immediately prior to the effective time multiplied by the exchange ratio,
rounded down to the nearest whole number of Peptide ordinary shares, and (ii)
the per share exercise price for the Peptide ordinary shares issuable upon
exercise of such assumed warrant will be equal to the quotient determined by
dividing the exercise price per share of OraVax common stock at which such
warrant was exercisable immediately prior to the effective time by the exchange
ratio rounded to the nearest whole cent.
At January 29, 1999, 84,086 shares of OraVax common stock were issuable upon
the exercise of outstanding and vested OraVax warrants to purchase common stock,
which will be converted, assuming an exchange ratio of , into warrants to
purchase approximately Peptide ordinary shares at the effective
time. The weighted average exercise price per OraVax share of all OraVax
warrants outstanding as of January 29, 1999 is $1.975.
REPRESENTATIONS AND WARRANTIES
OraVax and Peptide have each made customary representations and warranties
to the other in the merger agreement relating to, among other things:
- their organization, the organization of their subsidiaries and similar
corporate matters;
- their capital structure;
- the authorization, execution, delivery and performance of the merger
agreement and the absence of conflicts, violations or defaults under their
organizational documents and other agreements and documents or conflicts
with or violations of any laws as a result of executing the merger
agreement;
- governmental consents and filings;
- financial statements;
- the absence of undisclosed liabilities and material adverse events since
June 30, 1998;
- brokers' and finders' fees incurred in connection with the merger; and
- the information provided for inclusion in this prospectus/proxy statement.
46
<PAGE>
In addition to the representations and warranties described above, OraVax
has made representations and warranties to Peptide as to matters including the
following:
- that OraVax has taken all actions so that no "fair price," "business
combination," "control share," "acquisition" or similar statute will apply
to the merger;
- the filing of tax returns and the payment of taxes;
- title to its properties;
- ownership, use and non-infringement of intellectual property rights;
- its employee benefit plans;
- compliance with governmental regulations concerning employees and
relations with employees;
- compliance with environmental laws and other environmental matters;
- disclosure of material agreements and commitments;
- receipt of a fairness opinion;
- maintenance of insurance coverage;
- the filing of reports with the SEC and the accuracy of the information in
such reports; and
- the status of commercial relationships.
In addition to the representations and warranties described above, Peptide
has represented and warranted to OraVax in the merger agreement as to certain
matters, including the following:
- the filing of documents with the London Stock Exchange and the accuracy of
the information in such documents;
- the capitalization of the subsidiary Peptide formed to effect the merger;
and
- the business activities of the subsidiary Peptide formed to effect the
merger.
CERTAIN COVENANTS
INTERIM OPERATIONS OF ORAVAX
From the date of the execution of the merger agreement until the effective
time of the merger, OraVax has agreed to carry on its business in the ordinary
course consistent with past practice. OraVax has also agreed to use reasonable
commercial efforts to keep available the services of its officers and employees,
maintain its properties and assets in good condition and to keep insurance
policies in effect. These obligations are subject to certain exceptions provided
in the merger agreement and any other exceptions that are agreed to in writing
by Peptide.
During the period before the effective time, OraVax, without Peptide's
consent and subject to certain exceptions, will not do or agree to do any of the
following:
- Establish, amend, modify or terminate any employee benefit plan;
- Sell or transfer, or mortgage, pledge or create or permit to be created
any security interest on, any of its assets other than sales or transfers
in the ordinary course of business and in amounts not exceeding $10,000;
- Incur any indebtedness for borrowed money, obligation or liability or
enter into any contracts or commitments involving potential payments of
$25,000 or more (other than for up to $50,000 for clinical trials);
47
<PAGE>
- Change the compensation payable to any officer, director, employee, agent
or consultant, or enter into any employment, severance or other agreement
with any officer, director, employee, agent or consultant of OraVax;
- Make any change in the number of shares of its capital stock authorized,
issued or outstanding or grant or accelerate the exercisability of, any
option, warrant or other right to purchase, or to convert any obligation
into, shares of its capital stock, or declare or pay any dividend or other
distribution with respect to any shares of its capital stock, or sell or
transfer any shares of its capital stock, except upon the exercise by
officers, directors and employees of options outstanding on the date of
the merger agreement and disclosed in the merger agreement;
- Amend its certificate of incorporation or by-laws;
- Make, or permit to be made, any material acquisition of property or
assets;
- Make or change any material election in respect of taxes, adopt or change
any accounting method in respect to taxes, enter into any closing
agreement, settle any claim or assessment in respect to taxes, or consent
to any extension or waiver of the limitation period applicable to any
claim or assessment in respect to taxes; or
- Enter into or modify, or permit a subsidiary to enter into or modify, any
material license, development, research or collaborative agreement with
any other person or entity.
ORAVAX SPECIAL MEETING; RECOMMENDATIONS OF THE ORAVAX BOARD
OraVax has agreed to cause the OraVax special meeting to be held as promptly
as practicable after the signing of the merger agreement. The OraVax board of
directors has agreed to solicit from its stockholders proxies in favor of the
adoption of the merger agreement and to take all other actions necessary or
advisable to secure the vote or consent of the OraVax stockholders required to
secure such adoption.
CERTAIN OTHER COVENANTS
The merger agreement contains certain mutual covenants of the parties,
including covenants relating to public announcements; notifications; access to
information; reporting of the transaction for federal income tax purposes,
obtaining consents and approvals; and confidential treatment of non-public
information.
The merger agreement also contains a covenant by OraVax to provide Peptide
with a list of individuals and entities which may be affiliates of OraVax within
the meaning of Rule 145 under the Securities Act, and to use its best efforts to
cause such individuals and entities to sign and deliver to Peptide an agreement
in a form to be provided by Peptide agreeing to, among other things, not dispose
or offer to dispose of any Peptide ordinary shares received in the merger
outside the U.S. during the period 180 days following the effective date.
The merger agreement also contains certain covenants of Peptide including
covenants requiring Peptide to: prepare a disclosure document in accordance with
the listing rules of the London Stock Exchange and to use reasonable efforts to
publish such document and mail it to its shareholders; and to use reasonable
commercial efforts to have the Peptide ordinary shares to be issued in
connection with the merger admitted to listing on the Official List of the
London Stock Exchange.
48
<PAGE>
CONDITIONS TO THE MERGER
CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE MERGER
The obligations of Peptide and OraVax to consummate the merger are subject
to the satisfaction or waiver of several conditions including the following:
- OraVax having obtained all approvals of holders of shares of capital stock
of OraVax necessary to adopt the merger agreement;
- The registration statement of which this proxy statement/prospectus is a
part having become effective under the Securities Act and not being
subject to any stop order or related proceeding by the SEC and all state
securities or "blue sky" authorizations necessary to carry out the merger
having been obtained and being in full force and effect;
- No applicable law or regulation, judgment, injunction, order or decree of
a court of competent jurisdiction prohibiting or enjoining the
consummation of the merger;
- All required approvals from governmental entities having been obtained;
- Peptide having completed a financing resulting in the receipt by Peptide
of net cash proceeds which together with existing financing available to
Peptide is sufficient for the present working capital requirements of the
combined entity. This condition will be satisfied by Peptide raising
approximately L20.6 million (net of expenses) in its current financing by
way of a rights issue in the U.K.;
- The Peptide ordinary shares to be issued in the merger having been
admitted to the Official List of the London Stock Exchange; and
- The approval of the merger and the transactions contemplated thereby by
the holders of Peptide shares.
CONDITIONS TO THE OBLIGATIONS OF PEPTIDE
The obligations of Peptide and Merger Sub to effect the merger are further
subject to the satisfaction of certain conditions including the following:
- The representations and warranties of OraVax contained in the merger
agreement being accurate in all material respects;
- OraVax having delivered customary legal opinions and other documents
described in the merger agreement;
- Each of the individuals and entities who are "affiliates" of OraVax within
the meaning of Rule 145 under the Securities Act having delivered to
Peptide an agreement in a form prescribed by Peptide;
- Peptide having received letters from PricewaterhouseCoopers LLP,
independent public accountants for OraVax, regarding the financial
statements and certain financial information in this prospectus/proxy
statement;
- Not more than five percent (5%) of the shares of OraVax common stock
issued and outstanding on the closing date of the merger having exercised
dissenters' rights;
- Lance Gordon and Thomas Monath having agreed to continue their employment
arrangements with OraVax after the merger; and
- OraVax having obtained all third party waivers or consents required to be
obtained.
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<PAGE>
CONDITIONS TO THE OBLIGATIONS OF ORAVAX
The obligation of OraVax to effect the merger is further subject to the
satisfaction of several conditions, including the following:
- The representations and warranties of Peptide contained in the merger
agreement being accurate in all material respects; and
- OraVax having received customary legal opinions and other documents.
AMENDMENTS; WAIVERS
Peptide and OraVax may amend or waive any provisions of the merger
agreement; provided that after the adoption of the merger agreement by the
holders of OraVax common stock, no amendment which would change the formula for
determining the consideration payable to such stockholders or materially
adversely affect the OraVax stockholders may be made without the further
approval of such stockholders.
NO SOLICITATION BY ORAVAX
OraVax has agreed not to (1) solicit, initiate or knowingly encourage
discussions with any third party regarding a business combination involving
OraVax or any subsidiary of OraVax (an "Acquisition Proposal") or (2), except as
required by fiduciary duties, participate in negotiations with, or furnish
information to, a third party seeking to engage in such a transaction. OraVax
has agreed to inform Peptide of any offer, proposal or inquiry relating to any
Acquisition Proposal and to promptly furnish to Peptide copies of any written
communications or documents received with respect to the Acquisition Proposal.
TERMINATION OF THE MERGER AGREEMENT
The merger agreement may be terminated at any time prior to the effective
time, whether before or after approval of the merger agreement by Peptide
shareholders or OraVax stockholders:
- By mutual written consent of Peptide and OraVax;
- By OraVax:
- for certain material breaches by Peptide; or
- upon OraVax entering into an agreement with a third party to consummate
a qualified Acquisition Proposal;
- By Peptide:
- for certain material breaches by OraVax; or
- if, the OraVax board of directors has withdrawn or modified in a manner
adverse to Peptide its approval or recommendation of, the merger
agreement;
- By Peptide or OraVax:
- if the effective time has not occurred on or before July 31, 1999
unless its breach is the reason that the merger has not been
consummated;
- if there is a non-appealable government action prohibiting the
consummation of the merger;
- if OraVax stockholders do not vote to adopt the merger agreement within
ninety (90) days after the date the registration statement of which
this proxy statement/prospectus forms a part is declared effective by
the SEC; provided, however, that OraVax may not terminate
50
<PAGE>
the merger agreement where the failure to obtain the required
stockholder approval has been caused by its action or failure to act in
breach of the merger agreement; or
- by written notice to the other, if the required approval of the
shareholders of Peptide has not been obtained by April 29, 1999;
provided, however; that Peptide may not terminate the merger agreement
where the failure to obtain the required shareholder approval has been
caused by its action or failure to act in breach of the merger
agreement.
If the merger agreement is validly terminated, no provision of the merger
agreement survives (except for the provisions relating to termination, expenses,
publicity and confidentiality and miscellaneous provisions of general
application) and, except as provided in the merger agreement, such termination
is without any liability on the part of any party, unless such party is in
willful breach of any of its representations, warranties, covenants or
agreements contained in the merger agreement.
TERMINATION FEES AND EXPENSES
PAYMENT OF EXPENSES OF THE MERGER GENERALLY
Except as described below and for fees and expenses incurred in connection
with the printing and filing of this proxy statement/prospectus and the
registration statement (which will be shared equally by OraVax and Peptide), all
fees and expenses incurred in connection with the merger will be paid by the
party incurring such expenses.
PAYMENT OF PEPTIDE EXPENSES BY ORAVAX
OraVax will reimburse Peptide for (1) its costs and expenses related to
entering into the merger agreement and seeking to consummate the transactions
contemplated by the merger agreement, including fees and expenses payable to
legal, accounting and financial advisors relating to the merger and (2) the
costs and expenses, including legal fees and expenses, relating to the financing
commitment of Peptide to OraVax, if:
- Peptide terminates the merger agreement because OraVax has breached a
representation, warranty, covenant or agreement under the merger agreement
or because the OraVax board of directors has withdrawn or modified its
recommendation of the merger in a manner adverse to Peptide or has taken
any action (other than as permitted by the merger agreement) with respect
to any Acquisition Proposal by a third party; or
- OraVax terminates the merger agreement because of its decision to accept a
qualified Acquisition Proposal as permitted by the merger agreement.
In addition to any payment of Peptide expenses by OraVax pursuant to the
merger agreement, OraVax has agreed to pay Peptide:
- $750,000 (less amounts paid by OraVax to reimburse Peptide's fees and
expenses) if the merger agreement is terminated for certain reasons and at
such time a third party has made, or disclosed an intention to make, an
Acquisition Proposal; or
- $1,500,000 (less certain amounts paid by OraVax to reimburse Peptide's
fees and expenses) if the merger agreement is terminated for certain
reasons and OraVax enters into an agreement to consummate or consummates
an Acquisition Proposal with PMC.
NO LIMITATIONS ON RECOVERING FOR WILLFUL BREACH.
If the merger agreement is terminated by a party as a result of a willful
breach by the other party, the terminating party may pursue any remedies
available to it at law or in equity, including recovery of such damages to which
it may be entitled.
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<PAGE>
FEDERAL SECURITIES LAW CONSEQUENCES
All of the Peptide ordinary shares received by OraVax stockholders in the
merger will be freely transferable, except that Peptide ordinary shares received
by individuals and entities who are deemed to be "affiliates" (as such term is
defined under the Securities Act of 1933, as amended) of OraVax before the
merger may be resold by them only in transactions permitted by the resale
provisions of Rule 145 under the Securities Act (or Rule 144 under the
Securities Act, in the case of individuals and entities who become affiliates of
Peptide) or as otherwise permitted under the Securities Act. Persons who may be
deemed to be affiliates of OraVax or Peptide generally include individuals or
entities that control, are controlled by, or are under common control with, such
party and may include certain officers and directors of such party as well as
principal stockholders of such party. The merger agreement also requires OraVax
to use its best efforts to cause each of its affiliates to execute and deliver
to Peptide a written agreement to the effect that such affiliate will not offer
or sell or otherwise dispose of Peptide ordinary shares issued to such affiliate
in or pursuant to the merger in violation of the Securities Act or the related
rules and regulations adopted by the SEC thereunder. The delivery of such
agreements is also a condition to Peptide's obligation to complete the merger.
DEREGISTRATION OF ORAVAX SHARES; LISTING OF PEPTIDE ORDINARY SHARES
Upon consummation of the merger, OraVax common stock will be deregistered
under the Exchange Act and will cease to be traded on the OTC Bulletin Board.
A condition to the merger is that the Peptide ordinary shares issued in the
merger are admitted to the Official List of the London Stock Exchange and
Peptide has agreed to use reasonable commercial efforts to obtain such
admission.
APPRAISAL RIGHTS
If the merger is completed, an OraVax stockholder who:
- continues to hold those shares through the effective time of the merger,
- strictly complies with the procedures set forth under Section 262 of the
Delaware General Corporation Law, and
- has not voted in favor of the merger,
may have those shares appraised by the Delaware Court of Chancery under Section
262 and receive payment for the "fair value" of those shares in place of the
merger consideration.
OraVax stockholders considering seeking appraisal of their shares of OraVax
common stock should note that the fair value of their shares determined under
Section 262 could be more, the same or less than the merger consideration they
would receive if they did not seek appraisal of their shares. The costs of the
appraisal proceeding may be determined by the Chancery Court and allocated among
the parties as the Chancery Court deems equitable in the circumstances. Upon
application of a OraVax stockholder, the Chancery Court may order all or a
portion of the expenses incurred by any OraVax stockholder in connection with
the appraisal proceeding including, without limitation, reasonable attorney's
fees and the fees and expenses of experts, to be charged pro rata against the
value of all shares of OraVax common stock entitled to appraisal. In the absence
of such a determination or assessment, each Stockholder bears his, her or its
own expenses.
The statutory right of appraisal granted by Section 262 requires strict
compliance with the procedures set forth in Section 262. Failure to follow any
of those procedures may result in a termination or waiver of appraisal rights
under Section 262. The following is a summary of Section 262 and is qualified by
reference to Section 262, a copy of which is attached hereto as Annex C. OraVax
52
<PAGE>
stockholders should carefully read Section 262 as well as information discussed
below to determine their rights to appraisal.
An OraVax stockholder who elects to exercise the right to an appraisal under
Section 262 must deliver a written letter demanding appraisal of such
stockholder's shares to OraVax prior to the vote on the adoption of the merger
agreement. The written letter must identify the record owner of the shares and
expressly request an appraisal. All written letters should be delivered to the
following address:
Secretary
OraVax, Inc.
38 Sidney Street
Cambridge, Massachusetts 02139
The written letter demanding appraisal must be in addition to any proxy or
vote against adoption of the the merger agreement; neither voting against,
abstaining from voting nor failing to vote on the adoption of the merger
agreement will constitute a demand for appraisal within the meaning of Section
262.
The written letter demanding appraisal must be signed by the record owner,
fully and correctly, as that person's name appears on the common stock
certificates. If the shares are owned of record by a trustee, guardian or
custodian, on behalf of another person, such letter must be signed by the
trustee, guardian or custodian. If the shares are owned of record by or for more
than one person, such letter must be executed by or for all joint owners. An
authorized agent, including an agent for two or more joint owners, may execute
the letter demanding appraisal for a record owner; however, the agent must
identify the record owner(s) and expressly disclose the fact that, in exercising
the demand, he is acting as agent for the record owner(s).
A record owner, such as a broker, who holds shares of OraVax common stock as
a nominee for others may exercise his right of appraisal with respect to the
shares for all or less than all such persons. In such case, the letter must set
forth the number of shares covered by such demand. Where the number of shares is
not expressly mentioned, the demand will be presumed to cover all shares
outstanding in the name of such record owner.
Stockholders electing to exercise their appraisal rights under Section 262
must not vote for adoption of the merger agreement. If a stockholder returns a
signed proxy but does not specify a vote against adoption of the merger
agreement or a direction to abstain, the proxy will be voted FOR adoption of the
merger agreement, which will have the effect of waiving that stockholder's
appraisal rights.
Within 10 days after the effective time of the merger, OraVax will give
written notice of the effective time of the merger to each stockholder who has
satisfied the requirements of Section 262 and has not voted for the proposal to
adopt the merger agreement. Within 120 days after the effective time of the
merger, OraVax or any such dissenting stockholder may file a petition in the
court demanding a determination of the fair value of the shares of OraVax common
stock of all dissenting stockholders. Any dissenting stockholder who desires
such petition to be filed is advised to file such petition on a timely basis
unless such dissenting stockholder receives notice that such a petition has been
filed by OraVax or another dissenting stockholder.
If a petition for appraisal is timely filed, the court will determine which
stockholders are entitled to appraisal rights and thereafter will determine the
fair value of the shares of OraVax common stock held by dissenting stockholders,
exclusive of any element of value arising from the accomplishment or expectation
of the merger, but together with a fair rate of interest, if any, to be paid on
the amount determined to be fair value. In determining such fair value, the
court shall take into account all relevant factors.
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From and after the effective time of the merger, no dissenting stockholder
shall have any rights of a OraVax stockholder with respect to such holder's
shares for any purpose, except to receive payment of its fair value and to
receive payment of dividends or other distributions on such holder's shares, if
any, payable to OraVax stockholders of record as of a date prior to the
effective time of the merger. If a dissenting stockholder delivers to OraVax a
written withdrawal of the demand for an appraisal within 60 days after the
effective time of the merger or thereafter with the written approval of OraVax,
or if no petition for appraisal is filed within 120 days after the effective
time, then the right of such dissenting stockholder to an appraisal will cease
and such dissenting stockholder will be entitled to receive only the merger
consideration.
COVENANT NOT TO SELL PEPTIDE ORDINARY SHARES
In connection with the merger, each of OraVax's officers and directors will
agree that such officer or director will not offer to sell, sell or otherwise
dispose of the Peptide ordinary shares received in the merger outside of the
United States during the 180 days following the effective time of the merger.
ACCOUNTING TREATMENT
The merger will be treated as an acquisition on Peptide's financial
statements. The acquisition method of accounting for business combinations under
generally accepted accounting principles in the U.K. is similar to the purchase
method of accounting under generally accepted accounting principles in the U.S.
ARRANGEMENTS WITH PMC AND ORAVAX
PMC and OraVax formed a joint venture, also referred to as PM-O, in 1995 to
develop a vaccine to treat and prevent H. PYLORI infections, believed to be one
of the principal causes of peptic ulcers. A more detailed discussion of the
formation of PM-O appears on page 85 of this document. As described below,
Peptide has several contractual arrangements with PMC and PM-O.
PM-O COLLABORATION
In April 1998, Peptide entered into agreements with PM-O which grant PM-O a
worldwide exclusive option to use Peptide's proprietary oral vaccine delivery
technology for the development of oral H. PYLORI vaccines. PM-O is supplying its
proprietary H. PYLORI antigens which Peptide is incorporating into its oral
vaccine delivery system. PM-O is funding the costs of this research program. On
successful conclusion of this research program, PM-O has an option to take a
license and will be responsible for all future clinical development and
associated costs. Exercise of this option will trigger payment of a license fee
to Peptide, and Peptide will have a right to milestone payments and royalties on
future sales of the vaccine.
As a result of the merger, Peptide will gain indirect ownership in OraVax's
fifty-percent share in PM-O. In addition, as part of an agreement between
Peptide and PMC on January 25, 1999, upon the completion of the merger OraVax
will enter into an agreement with PMC to add the development of vaccines against
hepatitis C infections to the research program conducted by PM-O. Besides the
addition of the hepatitis C vaccines program, the joint venture agreements
between PMC and OraVax will continue to govern the operations of PM-O after the
merger. The terms of the hepatitis C vaccines program are described below.
OVERVIEW AGREEMENT
On January 25, 1999, Peptide and PMC entered into an overview agreement that
forms an alliance between the two companies with respect to OraVax's
ChimeriVax-TM- platform technology effective upon completion of the merger.
Peptide agreed to cause OraVax to sign several agreements upon completion
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of the merger and, PMC agreed, conditioned on consummation of the merger, to
make a $3 million investment in Peptide ordinary shares. In addition to the
agreement to add the hepatitis C vaccine program to PM-O as discussed above,
Peptide agreed to cause OraVax to enter into the following agreements following
the merger:
- JE/TBE AGREEMENT. The JE/TBE Agreement will grant PMC an exclusive
worldwide license to use the ChimeriVax-TM- technology for the development
and commercialization of Japanese encephalitis vaccines and tick-borne
encephalitis vaccines. PMC will make payments to OraVax based on the
successful achievement of specific milestones for JE and TBE vaccines and
will pay royalties on net sales of licensed products. OraVax will perform
research and development activities directed toward the JE vaccines. If
requested by PMC, OraVax will perform research and development activities
for TBE vaccines at PMC's expense.
- HEPATITIS C LICENSES. Under license agreements with PM-O, OraVax will
grant PM-O an exclusive worldwide license to use the ChimeriVax-TM-
technology for the development and commercialization of vaccines for the
prevention, treatment or cure of hepatitis C infections in humans. PM-O
will pay a license fee and make milestone payments to OraVax. In
accordance with the PM-O joint venture agreement, OraVax and PMC will
share equally in profits from the sales of hepatitis C vaccines and in all
future research, development, clinical and commercialization costs of the
vaccines.
- MILESTONE DEFERRAL AGREEMENT. In consideration of the receipt by OraVax of
research funding, milestone payments and royalties under the dengue
license agreement, JE/TBE agreement, hepatitis C licenses and PM-O joint
venture amendment, PMC or PM-O may, at their option, defer up to $3
million in milestone payments payable to OraVax under such agreements.
If the overview agreement is terminated, if Peptide fails to complete the
merger, or if PMC fails to make the equity investment in Peptide ordinary
shares, then Peptide is not required to cause OraVax to execute these
agreements. The overview agreement may be terminated at any time prior to the
effective time of the merger:
- by mutual written consent of the parties;
- upon termination of the merger agreement; or
- by PMC upon
- the public announcement of a tender or exchange offer for securities of
OraVax by any person other than PMC,
- any event that would entitle Peptide to terminate the merger agreement,
- upon the public announcement of the submission to OraVax of an
acquisition proposal by any person other than PMC, or
- breach of certain representations and warranties contained in the
overview agreement.
STANDSTILL AGREEMENT
On January 25, 1999, Peptide and PMC entered into a standstill agreement,
which provides that, prior to the effective time of the merger or the
termination of the standstill agreement, PMC will not directly or indirectly:
- acquire or make any proposal to acquire any securities of OraVax (except
by way of stock dividends or other distributions or offerings made by
OraVax on a pro rata basis to OraVax stockholders) or seek or propose any
merger, consolidation, business combination, tender or exchange offer or
sale or purchase of all or a substantial portion of the assets of OraVax;
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- solicit proxies to vote, or seek to advise or influence any person with
respect to the voting of any OraVax common stock;
- form, join or in any way participate in a "group" (within the meaning of
Section 13(d)(3) of the Exchange Act of 1934, as amended) with respect to
any OraVax common stock or in connection with any of the foregoing;
- have any discussions or enter into any arrangements, understandings or
agreements with, or advise, assist or encourage, any other persons in
connection with any of the foregoing; or
- announce an intention to do any of the foregoing.
However, PMC is not restricted by the standstill agreement from negotiating
with OraVax with respect to a licensing transaction involving the hepatitis C
vaccine program or an acquisition proposal if OraVax initiates such negotiations
with PMC or if OraVax or Peptide initiates such negotiations with any person
other than PMC.
The standstill agreement may be terminated at any time prior to the
effective time of the merger:
- by mutual written consent of the parties;
- by PMC or Peptide upon the termination of the merger agreement; or
- by PMC upon
- the public announcement of a tender or exchange offer for OraVax common
stock,
- the occurrence of certain events that would entitle Peptide to
terminate the merger agreement,
- the public announcement of the submission to OraVax of a bona fide
acquisition proposal by any person other than PMC, or
- any modification or amendment of the merger agreement which PMC
reasonably determines to be adverse to OraVax stockholders or which
extends the July 31, 1999 termination date of the merger agreement.
Under the standstill agreement, Peptide must promptly inform PMC when it
becomes aware of any termination events or the submission of an acquisition
proposal to OraVax. The standstill agreement will terminate on October 31, 1999
to the extent it is not otherwise terminated prior to that date.
SUBSCRIPTION AGREEMENT
Under a subscription agreement dated January 25, 1999 between PMC and
Peptide, PMC has agreed to invest the pounds sterling equivalent of $3 million
for new ordinary shares in Peptide at 78 pence per share. The subscription
agreement is conditional on the satisfaction of certain conditions prior to July
31, 1999, including the consummation of the merger and the approval of Peptide
shareholders.
DESCRIPTION OF BRIDGE LOAN
Peptide has committed to lend up to $5 million to OraVax pursuant to the
terms of a loan agreement dated as of November 10, 1998. The rate of interest on
the loans under the loan agreement is 9% per annum. Peptide's obligation to lend
is subject to the satisfaction of several conditions, including the grant by
OraVax of (i) a perfected security interest in all its assets and intellectual
property (except for H. PYLORI related patents and OraVax's interest in the PM-O
joint venture) and (ii) leasehold mortgages on OraVax's leasehold interests in
Cambridge and Canton, Massachusetts.
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The loan agreement provides that Peptide will lend up to $5 million to
OraVax prior to the consummation of the merger if OraVax has not breached the
merger agreement and has exhausted its other financing sources. OraVax's ability
to borrow in this circumstance is restricted by cash expenditure projections set
forth in the loan agreement which are subject to revision upon agreement of
OraVax and Peptide. However, if the merger agreement is terminated as a result
of a material breach by Peptide, joint agreement between OraVax and Peptide or a
failure of Peptide's shareholders to approve the merger or if Peptide fails to
enter into a satisfactory underwriting agreement to fulfill the funding
requirements set forth in the merger agreement, Peptide's commitment to lend is
limited to $3 million.
In each of the foregoing cases, Peptide's commitment will be reduced by the
amount of any termination fees payable to Peptide pursuant to the merger
agreement and any cash proceeds received by OraVax from the disposition of
assets (including the license of intellectual property). The loans are subject
to mandatory prepayment (and the commitment to lend simultaneously reduced) in
the event of the receipt by OraVax of any insurance proceeds, proceeds from the
issuance of equity securities or the incurrence of indebtedness or proceeds from
the disposition of assets (including the license of intellectual property).
OraVax may prepay the loans, at its option, at any time without premium or
penalty. Peptide's commitment to lend is terminated on the occurrence of
customary events of default including the failure of OraVax to pay principal or
interest under the loan agreement or in respect of other debts, OraVax's
bankruptcy and related events and breach by OraVax of any of its material
agreements.
As of the date of this prospectus/proxy statement, OraVax has not incurred
any indebtedness under the loan agreement. If OraVax does borrow amounts from
Peptide and the merger agreement is not adopted by OraVax stockholders or is
terminated, then OraVax could be required to sell or license its technology or
other assets to repay the loan. In this regard, OraVax is exploring the
possibility of selling its interest in its Canton, Massachusetts manufacturing
facility. OraVax believes that cash proceeds from such a sale would be
sufficient to repay any amounts that it may borrow under the loan agreement.
PEPTIDE SHAREHOLDER MATERIALS
The holders of a majority of the Peptide ordinary shares voting in person or
by proxy must approve the merger and other matters related to the merger,
including an increase in the authorized share capital of Peptide. An
extraordinary general meeting of Peptide has been convened for February 15,
1999. A circular comprising a prospectus and listing particulars relating to
Peptide has been prepared pursuant to the rules of the London Stock Exchange and
was sent to the shareholders of Peptide on January 29, 1999. A copy of the
circular has been delivered to the Registrar of Companies in England and Wales
for registration. The contents of the circular do not form part of, nor are they
incorporated into, this prospectus/proxy statement.
The London Stock Exchange listing rules require Peptide to state in the
circular that the working capital available to the combined entity is sufficient
for its present requirements or how it is proposing to provide the necessary
additional working capital. Peptide will meet this requirement by raising
approximately L20.6 million (net of expenses) by issuing new Peptide ordinary
shares through a rights issue. This rights issue has, except for the rights of
certain Peptide shareholders who have irrevocably undertaken to take up their
rights, been fully underwritten by BT Alex.Brown International. This rights
issue is conditional upon the approval of the merger by Peptide shareholders,
the Underwriting Agreement with BT Alex.Brown International not being terminated
and the listing of the new Peptide ordinary shares on the London Stock Exchange.
The completion of the merger is not a condition to the rights issue. However,
completion of the rights issue is a condition to the consummation of the merger.
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MATERIAL TAX CONSEQUENCES
GENERAL
The following discussion summarizes the material U.S. federal income tax
consequences of the merger to holders of OraVax common stock. It also summarizes
the material U.S. and U.K. income tax consequences to holders of OraVax common
stock who hold or dispose of Peptide ordinary shares received in the merger.
This summary is limited to U.S. persons who hold OraVax common stock (and who
will hold Peptide ordinary shares) as capital assets ("U.S. Holders"). A U.S.
person means:
- a citizen or resident of the U.S.;
- a corporation or partnership organized in the U.S.; or
- an estate or trust that is subject to U.S. federal income taxation without
regard to the source of its income.
The following discussion does not address the tax consequences to persons
subject to special tax treatment. Examples of such persons include the
following:
- foreign persons or entities;
- persons whose "functional currency" is not the U.S. dollar;
- tax-exempt organizations;
- securities dealers;
- regulated investment companies;
- real estate investment trusts, real estate mortgatge investment conduits
and financial asset securitization investment trusts;
- financial institutions and insurance companies;
- persons subject to alternative minimum tax;
- persons who acquired OraVax common stock by exercising stock options or
otherwise as compensation;
- persons holding OraVax common stock as part of a hedging, conversion,
short sale or integrated transaction or a straddle; and
- holders (directly, indirectly, or by attribution) of 10% or more of the
voting shares of Peptide.
In addition, the following discussion is based upon current law and current
interpretations of the law, which could change (possibly with retroactive
effect) or may be interpreted differently. This summary is provided for general
information purposes only, and is not legal or tax advice. Neither OraVax nor
Peptide has requested a ruling from the IRS with regard to the tax consequences
of the merger or of holding or disposing of Peptide ordinary shares received in
the merger.
The statements of U.K. tax laws set forth below summarize the material U.K.
tax effects of the merger to U.S. holders (except in relation to certain classes
of U.S. holders as set out below) but do not address potential U.K. tax effects
relevant to the merger. The statements of U.K. law are based on U.K. tax laws
and U.K. Inland Revenue practice in force as at the date of the filing of this
prospectus/ proxy statement and are subject to any changes in U.K. law occurring
after that date. While this summary is principally directed to U.K. tax law, it
does not address the tax position of U.K. holders of Peptide ordinary shares.
The tax treatment of a U.S. holder of Peptide ordinary shares may vary depending
on such holder's particular situation, and certain shareholders (including
insurance companies, tax exempt organizations, entities that are residents of
more than one country, financial
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institutions, dealers, broker-dealers or entities which, alone, or together,
with one or more associated corporations, control directly or indirectly more
than 10% of the voting shares of Peptide) may be subject to special rules not
discussed below.
ORAVAX STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS CONCERNING
THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER AND THE UNITED
STATES AND UNITED KINGDOM INCOME TAX CONSEQUENCES OF HOLDING OR DISPOSING OF THE
PEPTIDE ORDINARY SHARES IN LIGHT OF THEIR PARTICULAR SITUATIONS, AS WELL AS
CONCERNING ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAX
JURISDICTION, INCLUDING ANY STATE, LOCAL, OR OTHER FOREIGN JURISDICTION, AND ANY
ESTATE OR GIFT TAX CONSIDERATIONS.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The merger will be treated as a taxable sale of OraVax common stock by
OraVax stockholders for federal income tax purposes. It will not be a
tax-deferred "reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code because Peptide will acquire substantially all of the
outstanding OraVax 6% convertible preferred stock for cash as part of the
merger. Accordingly, a U.S. Holder of OraVax common stock will recognize gain
(or loss) equal to the amount by which the fair market value of the Peptide
ordinary shares received by such holder in the merger or the amount by which the
cash received pursuant to the exercise of dissenters' appraisal rights (in the
case of a holder who exercises such rights) exceeds (or is less than) the
holder's adjusted basis for the shares of OraVax common stock surrendered in the
merger. Gain or loss must be computed separately for blocks of OraVax common
stock acquired at different times and for different amounts. Such gain or loss
will be long-term capital gain or loss if the shares of OraVax common stock have
been held for more than one year. A U.S. Holder's adjusted tax basis in the
Peptide ordinary shares received in the merger will equal the fair market value
of such shares at the effective time of the merger. A U.S Holder's holding
period for the Peptide ordinary shares received in the merger will begin on the
day following the effective time of the merger.
The receipt of consideration pursuant to the merger or the exercise of
dissenters' appraisal rights may be subject, under certain circumstances, to
"backup withholding" at a 31% rate. Backup withholding generally applies only if
the holder (i) fails to furnish his or her social security or other taxpayer
identification number (TIN) within a reasonable time after the request therefor,
(ii) furnishes an incorrect TIN, (iii) is notified by the Internal Revenue
Service that he or she has failed to report properly interest or dividends, or
(iv) fails, under certain circumstances, to provide a certified statement,
signed under penalty of perjury, that the TIN provided is the correct number and
that he or she is not subject to backup withholding.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE OWNERSHIP OF PEPTIDE
ORDINARY SHARES
TAXATION OF DISTRIBUTIONS
Distributions made with respect to Peptide ordinary shares (including the
amount of any Treaty Payment or and any U.K. Withholding Tax, as defined below)
will, to the extent paid out of the current or accumulated earnings and profits
of Peptide, be treated for U.S. federal income tax purposes as foreign-source
dividend income. Distributions in excess of this amount will be treated as a
non-taxable return of capital to the extent of the U.S. Holder's adjusted tax
basis in the Peptide ordinary shares, and any excess over such basis will be
taxable as capital gain. Dividends paid by Peptide generally will not be
eligible for the dividends received deduction allowed to corporations under
Section 243 of the Internal Revenue Code.
For federal income tax purposes, dividends paid in pounds sterling will be
translated into their U.S.-dollar-value equivalents based upon the exchange rate
in effect on the date the dividend is received by the U.S. Holder, regardless of
whether such amounts are actually converted into U.S. dollars. A U.S. Holder
will have a basis in the pounds sterling equal to this U.S.-dollar-value
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equivalent. Any gain or loss realized on a subsequent conversion or other
disposition of the pounds sterling will be treated as ordinary income or loss.
U.S. CREDIT FOR U.K. TAXES WITHHELD
U.S. Holders will generally be able to claim a credit against their U.S.
federal income tax liability for U.K. Withholding Tax (as defined below)
deducted from dividends received on their Peptide ordinary shares. For these
purposes, dividends paid on the Peptide ordinary shares generally will be
treated as income from sources outside the U.S., and generally will constitute
passive income. THE FOREIGN TAX CREDIT RULES ARE COMPLEX, AND U.S. HOLDERS ARE
URGED TO CONSULT WITH THEIR TAX ADVISORS TO DETERMINE WHETHER AND TO WHAT EXTENT
A CREDIT WOULD BE AVAILABLE. U.S. HOLDERS THAT DO NOT ELECT TO CLAIM A FOREIGN
TAX CREDIT MAY INSTEAD CLAIM A DEDUCTION FOR U.K. WITHHOLDING TAX.
TAXATION OF CAPITAL GAINS
A U.S. Holder will recognize gain or loss for U.S. federal income tax
purposes upon the sale or other taxable disposition of Peptide ordinary shares
in an amount equal to the difference between the amount realized on such
disposition and the adjusted tax basis in the shares disposed of. This gain or
loss generally will be subject to U.S. federal income tax, and will be treated
as long-term capital gain or loss if the U.S. Holder has held the shares
disposed of for more than one year. Capital losses realized on such a
disposition will be subject to certain limitations on deductibility. Gain and,
under recently finalized Treasury Regulations, loss recognized by a U.S. Holder
on such a disposition of Peptide ordinary shares will generally be treated as
income from sources within the U.S. for purposes of the foreign tax credit
limitations discussed above, unless the gain is attributable to an office or
fixed place of business maintained by the U.S. Holder outside the U.S., and
certain other conditions are met.
BACKUP WITHHOLDING
Payments made in respect of Peptide ordinary shares may be subject to a 31%
U.S. backup withholding tax. Backup withholding generally will not apply,
however, to a holder who furnishes a correct taxpayer identification number or
certificate of foreign status or who is otherwise exempt from backup
withholding, and who makes any required certification. Backup withholding is not
an additional tax, and amounts withheld from payments would be treated as a
credit against the U.S. federal income tax liability of a U.S. Holder, provided
that the required information is furnished to the IRS.
UNITED STATES ANTI-DEFERRAL FEDERAL INCOME TAX ISSUES
The Internal Revenue Code contains certain "anti-deferral" provisions which,
if applicable, would change the U.S. federal income tax consequences of holding
or disposing of Peptide ordinary shares discussed above. These provisions, which
apply to foreign corporations classified as "foreign personal holding
companies," "passive foreign investment companies" or "controlled foreign
corporations," generally seek to reduce or eliminate the effect of the deferral
of U.S. taxes on certain undistributed earnings of such foreign corporations,
with the result that in some cases income may be required to be recognized
before an actual cash distribution is made.
As of the date of this prospectus/proxy statement, Peptide does not believe
that it will be classified as a foreign personal holding company, a passive
foreign investment company, or a controlled foreign corporation following the
merger, and therefore believes that these anti-deferral provisions will not
apply to U.S. Holders holding Peptide ordinary shares. This conclusion is based
upon a review by Arthur Andersen, Peptide's accountants, of existing financial
data and projections for Peptide and OraVax for 1999, and on the application of
the U.S. tax rules and regulations to these financial data and projections. Any
change in the ownership structure or in the makeup of the assets or income of
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Peptide or OraVax from those reflected in these financial data and projections
could change this conclusion.
If Peptide were determined to be a foreign personal holding company, a
passive foreign investment company or a controlled foreign corporation the
treatment of U.S. Holders holding Peptide ordinary shares would differ from that
discussed above. Specifically, if Peptide were classified as a passive foreign
investment company (a "PFIC") for any period following the merger, U.S. Holders
of Peptide ordinary shares would generally be required to treat all "excess
distributions" with respect to such shares as if such amounts were ordinary
income earned ratably over the holding period for such shares. Excess
distributions for this purpose would include gain realized on the disposition of
such shares as well as certain distributions made by Peptide. Amounts treated
under this analysis as earned in the year of the disposition or distribution or
in any year before the first year in which Peptide was a PFIC would be included
in the holder's ordinary income for the year of the disposition or distribution.
All remaining amounts would be subject to tax at the highest ordinary income tax
rate that would have been applicable in the year in which such amounts were
treated as earned, and interest would be charged on the tax payable with respect
to such amounts. In addition, if Peptide were classified as a PFIC, Peptide
ordinary shares acquired from a decedent generally would not receive a
"stepped-up" basis but would, instead, have a tax basis equal to the lower of
the decedent's basis or the fair market value of such shares. If Peptide were to
agree to comply with certain reporting requirements, however, U.S. Holders could
timely elect for the first year during their holding period of their Peptide
ordinary shares in which Peptide was a PFIC to treat Peptide as a qualified
electing fund (a "QEF" election). Such an election generally would require such
holders to include currently in income for each year in which Peptide was a PFIC
their pro rata share of the earnings and profits of Peptide, but would avoid the
application of the excess distribution rules and other adverse tax consequences
described above. Recently proposed Treasury Regulations also provide that, if
Peptide were a PFIC, U.S. Holders could elect (a "mark-to-market" election) to
annually mark-to-market their Peptide ordinary shares, and include as ordinary
income the excess of the value of such shares over their basis (adjusted to
reflect prior mark-to-market adjustments). U.S. holders making such an election
would likewise be allowed an ordinary deduction (up to the amount of their
previously recognized net mark-to-market gains) for years in which their basis
in their Peptide shares exceeded their value. A mark-to-market election could
generally be made without the need for any information from Peptide, and, if
made for the first year during a U.S. Holder's holding period for which Peptide
was a PFIC, would avoid the application of the excess distribution rules
described above.
Neither Peptide nor its advisors have any obligation to inform U.S. Holders
of future changes in circumstances that could result in Peptide being classified
as an entity subject to the Internal Revenue Code's anti-deferral provisions in
the future. U.S. HOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS CONCERNING
THE POTENTIAL APPLICATION OF THESE ANTI-DEFERRAL PROVISIONS TO PEPTIDE FOR
PERIODS OF TIME FOLLOWING THE MERGER, AS WELL AS THE POTENTIAL DESIRABILITY OF
MAKING A "QEF" OR "MARK-TO-MARKET" ELECTION FOR THEIR PEPTIDE ORDINARY SHARES IF
PEPTIDE WERE CLASSIFIED AS A PFIC.
U.K. TAX CONSEQUENCES OF OWNING PEPTIDE ORDINARY SHARES
TAXATION OF DIVIDENDS
A U.K. company is liable to account for Advance Corporation Tax ("ACT") on
the payment of a dividend. The rate of ACT is currently 25% of the cash dividend
paid. Under the provisions of the Income Tax Convention currently in force
between the U.K. and the U.S. (the "Income Tax Convention") a U.S. holder who is
an individual or a corporate portfolio holder (which is broadly defined as a
shareholder who holds less than 10% of the voting shares) of Peptide ordinary
shares will be entitled to receive from the U.K. Inland Revenue a refund (the
"Tax Treaty Payment"). The amount of the tax treaty payment will be equal to the
tax credit in respect of ACT minus a withholding (the "U.K. Withholding Tax") of
15% of the aggregate of the cash dividend plus the tax credit (limited to
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the tax credit). On the basis of an ACT rate of 25% of the dividend, an L80
dividend (the amount of the dividend and rate of ACT have been selected for
illustrative purposes only) would result in a L20 payment of ACT by Peptide. The
tax credit related to the dividend would be equal to L20 (20% of the aggregate
of the L80 dividend and the L20 tax credit). The U.S. holder who is an
individual or a corporate portfolio holder would be entitled to receive a L5 Tax
Treaty Payment, calculated by reducing the L20 tax credit by withholding tax of
L15 (15% of the aggregate of the L80 dividend and the L20 tax credit).
Accordingly such U.S. holder would have a total net receipt of L85 (cash
dividend plus a net tax credit of L5). Under current proposals the rate of tax
credits will be halved from 20% to 10% of the gross dividend for dividends paid
on or after April 6, 1999 with the result that a U.S. holder who is an
individual or a corporate portfolio holder would not be entitled to receive any
Tax Treaty Payment. Thus, using the example set out above, an L80 dividend will
result in the U.S. holder only receiving L80.
A U.S. holder of Peptide ordinary shares nonetheless will not be entitled to
claim the Tax Treaty Payment described above if:
- the holding of the Peptide ordinary shares is effectively connected with
- a permanent establishment situated in the U.K. through which the U.S.
holder carries on business in the U.K.,
- a fixed base in the U.K. from which the U.S. holder performs
independent personal services; or
- in the case of a U.S. holder that is a U.S. Corporation where the U.S.
Holder is:
- also a resident of the U.K. or
- in certain circumstances, an investment or holding company at least
25% of the capital of which is held, directly, or indirectly, by
persons that are not individuals, residents or nationals of the U.S.
Special rules may also apply if the U.S. holder is exempt from tax in the U.S.
on dividends paid by Peptide. The refund may not be available in the case of a
U.S. holder who owns 10% or more of the class of shares in respect of which the
dividend is paid to the extent that the dividend can only have been paid out of
profits which were earned, or from income which was received, in a period ending
12 months or more before the date on which the U.S. holder becomes the owner of
10% or more of the class of shares in question. If the U.S. holder of Peptide
ordinary shares is a U.S. partnership, trust or estate, the refund will be
available only to the extent that the income derived by such partnership, trust
or estate is subject to U.S. tax either as the income of a U.S. resident in its
hands or in the hands of its partners or beneficiaries as the case may be.
U.K. TAXATION OF CAPITAL GAINS
A U.S. holder who is not resident, or ordinarily resident, for tax purposes
in the U.K. will not be liable for U.K. Tax on capital gains on the disposal of
Peptide ordinary shares unless the U.S. holder carries on a trade, profession or
vocation in the U.K. through a branch or agency and the Peptide ordinary shares
are or have been used by, held by, or acquired for use by or for the purposes of
such trade, profession, vocation, branch or agent.
U.K. INHERITANCE TAX (ON ESTATES AND GIFTS)
The Estate and Gift Tax Convention in force between the U.S. and the U.K.
provides that the U.K. tax to which the Convention applies is Capital Transfer
Tax ("CTT") and that it will also apply to identical or substantially similar
taxes which are imposed subsequently. On January 1, 1998 CTT was replaced by
Inheritance Tax ("IHT"). It is understood that in practice the U.S. tax
authorities and the
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U.K. Inland Revenue apply the convention on the basis that IHT has replaced CTT
as the tax to which the convention now applies, although the Convention has not
been amended to that affect.
On the basis of that practice, Peptide ordinary shares held in the U.S. by
an individual who is domiciled for the purposes of the Estate and Gift Tax
Convention in the U.S. and is not for the purposes of the Convention a national
of the U.K., will not be subject to IHT on the individual's death or on a
transfer of the Peptide ordinary shares during the individual's lifetime
(although special rules apply in the case of Peptide ordinary shares held in
trust or as part of the business property of a permanent establishment in the
U.K. or related to the fixed base in the U.K. of a person providing independent
personal services).
U.K. STAMP DUTY AND STAMP DUTY RESERVE TAX
Any transfer of the Peptide ordinary shares may result in the stamp duty
liability at the rate of 0.5% of the consideration. There is no charge to ad
valorem stamp duty on gifts. On a transfer of Peptide ordinary shares from a
nominee to the beneficial owner (the nominee having at all times held the
Peptide ordinary shares on behalf of the transferee) under which no beneficial
interest passes and which is neither a sale, nor arises under or following a
contract of sale, nor is in contemplation of sale, a fixed 50p stamp duty will
be payable. The amount of ad valorem stamp duty is generally calculated at the
applicable rate on the purchase of the Peptide ordinary shares.
The issue of the Peptide ordinary shares to U.S. holders as part of the
merger will not attract U.K. Stamp Duty.
A stamp duty reserve tax generally at a rate 0.5% on the consideration, is
currently payable on any agreement to transfer ordinary shares or any interest
therein unless:
- an instrument transferring the ordinary shares is executed;
- stamp duty, generally at a rate of 0.5% is paid; and
- the instrument is stamped on or before the last day of the month following
the month in which the agreement is made, or, where the agreement is
conditional, the last day of the month following the month in which it
becomes unconditional.
The duty will, however, be refundable if within 6 years the agreement is
completed by an instrument which has been duly stamped, generally at a rate of
0.5%.
Increased U.K. stamp duty and stamp duty reserve tax charges (generally at
the rate of 1.5% of the consideration paid or the market value of the Peptide
ordinary shares depending on the circumstances) will apply if the Peptide
ordinary shares are issued or transferred to a custodian for a clearing system
or to a depositary who issues depositary receipts in respect of such shares.
THE ABOVE SUMMARY IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL
OF THE UNITED STATES AND UNITED KINGDOM INCOME TAX CONSEQUENCES OF THE MERGER OR
THE OWNERSHIP OR DISPOSITION OF PEPTIDE ORDINARY SHARES. THIS DISCUSSION IS
INCLUDED FOR GENERAL INFORMATION PURPOSES ONLY AND MAY NOT APPLY TO A PARTICULAR
STOCKHOLDER IN LIGHT OF SUCH STOCKHOLDER'S PARTICULAR CIRCUMSTANCES.
STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR
TAX CONSEQUENCES TO THEM OF THE MERGER OR THE OWNERSHIP OR DISPOSITION OF
PEPTIDE ORDINARY SHARES, INCLUDING THE APPLICATION OF STATE, LOCAL AND OTHER
FOREIGN TAX LAWS.
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DESCRIPTION OF PEPTIDE
GENERAL
Peptide was incorporated in England and Wales in 1993 under the Companies
Act 1985 as a private company with the name Dutybonus Company Limited, with
registered number 2863682. Its registered office, head office and principal
place of business in the United Kingdom is 321 Cambridge Science Park, Milton
Road, Cambridge, CB4 4WG. Peptide was re-registered as a public limited company
with the name Peptide Therapeutics plc with effect from May 10, 1994. Peptide
changed its name to Peptide Therapeutics Group plc in July 1994. Peptide was
listed on the London Stock Exchange in November 1995.
Peptide is the holding company of Peptide Therapeutics Limited, Peptide
Mimetics Limited, Cambium Limited and Peptide Therapeutics Employees' Trustees
Limited, a group of companies principally involved in the research and
development of novel biopharmaceutical products.
BUSINESS
Peptide is a biopharmaceutical company engaged in research and early-stage
clinical development of vaccines and other drugs directed primarily at
infectious diseases and allergic disorders. Peptide develops products through
Phase II clinical trials. Recently Peptide has expanded its product candidate
portfolio and has acquired or developed in-house a number of technology
platforms designed to provide the basis for developing future product
candidates. Peptide's long-term strategy is to generate royalty revenue under
collaborations and alliances with larger pharmaceutical companies which are
responsible for manufacturing and marketing the products.
SCIENTIFIC BACKGROUND
Peptide's primary product candidates are designed to assist the immune
system to either (1) protect against diseases caused by infectious organisms, or
pathogens, such as bacteria and viruses or (2) limit or avoid allergic reactions
to allergens. The immune system is comprised of two divisions: systemic and
mucosal. The systemic immune system protects the blood and deep tissues of the
body. The mucosal immune system protects mucosal surfaces, such as digestive,
respiratory and genitourinary tracts and the surface of the eye. The immune
system produces antibodies that combat foreign organisms and substances by
neutralizing them or initiating a process to remove them from the body. There
are five classes of antibodies: IgA, IgE, IgM, IgG and IgD. IgA is generally
associated with the mucosal immune system and IgE and IgM are generally
associated with the systemic immune system. IgE, which may play a crucial role
in the body's defense against certain parasites, is key component in the process
resulting in many allergic reactions. The role of IgD is not well understood.
The discussion below regarding Peptide's product candidates and technologies
includes certain terms common to discussions of the immune system. These terms
include:
ALLERGEN. A substance known to be an agent which causes immediate
hypersensitivity, such as pollen, animal fur or house dust proteins.
ANTIBIOTIC. A small molecule capable of slowing down or stopping microbial
growth by blocking metabolic pathways.
ANTIBODY. A protein molecule formed by the immune system which reacts
specifically with the antigen that induced its synthesis.
ANTIGEN. Any substance which can elicit the formation of specific
antibodies.
ATTENUATE. To reduce the disease producing ability of a micro-organism.
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AUTOIMMUNE. Relating to or caused by antibodies that attack molecules, cells
or tissues of the organism producing them.
ATOPY. A clinical syndrome comprising a combination of the allergic symptoms
of asthma, eczema and hay fever.
BACTERIOPHAGE. A virus that is parasitic within a bacterium.
EPITOPE. A molecule or portion of a molecule capable of binding to an
antibody.
IMMUNOGENIC. Capable of causing antibody formation.
IMMUNOMODULATION. The act of targeting receptors in the immune response
system to diminish their biological effects.
PATHOGEN. An organism which causes disease.
PEPTIDE. A compound made up of two or more amino acids.
PROTEASE. An enzyme which takes part in the breaking down of proteins.
INFECTIOUS DISEASES
Pharmaceutical products can assist in immune protection against infectious
diseases either by stimulating the body's own immune system to produce
antibodies directed at a particular pathogen or by directly introducing a
natural or synthetic antibody or other component which reacts with the pathogen.
Vaccines, for example, operate by introducing to the immune system dead or
disabled pathogens or fragments of pathogens, so that, upon subsequent exposure
to the pathogen in its active state, the immune system is able to quickly react
and neutralize the pathogen.
ALLERGIC DISORDERS
Allergic disorders involve an antigen triggering an immune response which
results in an adverse reaction. The immune systems of some humans and other
animals react to certain allergens by significantly increasing the levels of
certain antibodies in the blood stream. These antibodies, in turn, stimulate the
production of histamine and/or other chemicals. The release of these chemicals
causes the symptoms associated with various types of allergic reactions.
Pharmaceutical products which block production of the relevant antibodies or
block the activation of the chemical release may alleviate allergic reactions.
PRODUCT PORTFOLIO
Peptide, together with its collaborative partners, is developing the
following product candidates:
<TABLE>
<CAPTION>
STAGE OF
PRODUCT CANDIDATE PRIMARY INDICATION(S) DEVELOPMENT PARTNER
- ----------------------------------- ----------------------------------- ------------ ------------------------------
<S> <C> <C> <C>
Allergy Vaccine.................... Allergies (including anaphylaxis, Phase II SmithKline Beecham
severe allergies, allergic
rhinitis and atopic asthma)
Oral Typhoid Vaccine............... Typhoid Phase II Medeva
Tolerising Peptide (rye grass)..... Hay fever Phase II SmithKline Beecham
Oral ETEC Vaccine.................. Travelers' diarrhea Phase I Medeva
Veterinary Allergy Vaccine......... Flea bite allergy Preclinical Pfizer
Oral H. PYLORI Vaccine............. Peptic ulcers Preclinical Pasteur Merieux--OraVax
</TABLE>
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ALLERGY VACCINE
DESCRIPTION. The Allergy Vaccine is designed to reduce or prevent allergic
responses involving IgE antibodies. Potential indications include anaphylaxis,
severe food allergies, allergic rhinitis and atopic asthma.
DEVELOPMENT STATUS. Peptide has completed a Phase II clinical trial on
patients with severe food allergies. In this trial the vaccine was well
tolerated and afforded protection in a double blind, placebo controlled food
allergen challenge. In February 1997 Peptide signed a licensing and
collaboration agreement with SmithKline Beecham to continue the development of
the Allergy Vaccine.
A joint project team from SmithKline Beecham and Peptide has been
established, and Peptide has transferred its Allergy Vaccine technology to
SmithKline Beecham. SmithKline Beecham is conducting extended Phase II
feasibility trials to investigate the efficacy of the vaccine for a range of
allergic indications. Initial results from the trials are expected in 1999.
INTELLECTUAL PROPERTY. Peptide has European and U.S. patents relating to
the Allergy Vaccine and has applied for a patent in Japan. Peptide has patents
pending in Europe, Japan and the U.S. which relate to alternative allergy
vaccines.
ORAL TYPHOID VACCINE
DESCRIPTION. The Oral Typhoid Vaccine is a live vaccine consisting of
attenuated S. TYPHI bacteria. The attenuations are designed to weaken the
bacteria to a degree such that they no longer cause disease but still evoke an
immune response. Because the vaccine has been designed to induce both systemic
and mucosal immune responses, it should offer the prospect of improved efficacy
over existing oral and injectable typhoid vaccines. In addition, because it will
be administered in a single oral dose, Peptide believes it would result in
improved patient compliance over the currently available oral typhoid vaccine
that requires patients to have three or four separate doses.
DEVELOPMENT STATUS. A Phase II trial of a single dose, live attenuated oral
typhoid vaccine was successfully completed in January 1999. The trial, which was
co-sponsored by the National Institute of Allergy and Infectious Diseases in the
U.S., compared two dose levels of vaccine against placebo in 80 volunteers at
the Center for Vaccine Development at the University of Baltimore in Maryland.
The results of the trial confirmed that, when given as a single oral dose,
the vaccine is well tolerated, does not cause bacteremia and elicits both a
mucosal and systemic immune response. This provides a basis for the further
development of the vaccine for use in travellers and in populations where
typhoid fever is widespread, and supports the use of Peptide's proprietary S.
TYPHI technology for the development of other oral vaccines.
In keeping with its strategy to out-license products after Phase II clinical
trials, Peptide now intends to seek a partner to continue the development of the
Oral Typhoid Vaccine. Under an agreement entered into in January 1997, Medeva
has an option to negotiate a license for this product candidate.
INTELLECTUAL PROPERTY. Glaxo Wellcome holds a group of patents and patent
applications relating to this vaccine and has granted an exclusive license to
Medeva. Medeva has given an exclusive sub-license to Peptide under the terms of
a collaboration entered into in January 1997. Peptide is aware of a potentially
conflicting patent family owned by a third party. This patent has been opposed
by Medeva at the European Patent Office on behalf of Peptide. There are parallel
patents in the U.S. to those which Medeva is opposing at the European Patent
Office.
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TOLERISING PEPTIDE (RYE GRASS)
DESCRIPTION. The Tolerising Peptide is derived from a rye grass allergen.
This product candidate is designed to prevent hay fever caused by rye grass
pollen.
DEVELOPMENT STATUS. A Phase II clinical trial of the Tolerising Peptide
(rye grass) for the prevention of hay fever was successfully completed in
January 1999. The trial involved 129 patients at four centers in the U.K. and
was conducted during hay fever season. Prior to inclusion in the study, patients
were divided into "moderate" and "severe" groups according to their skin test
reponse.
The results of the Phase II clinical trial showed that the treatment was
well tolerated with no serious treatment-related adverse events in either group.
In severely allergic patients, the treatment was associated with a clear
reduction in the combined hay fever symptom and medication score and a delay in
the use of rescue medication. No such effects were apparent in the moderately
allergic group.
SmithKline Beecham has an option to license this product candidate.
SmithKline Beecham will make its decision whether to exercise the option
following presentation of the final Phase II clinical trial report which is
expected in the first quarter of 1999.
INTELLECTUAL PROPERTY. Peptide has filed a group of patent applications
relating to this product candidate in the U.S., Europe and Japan.
ORAL ENTEROTOXIGENIC E. COLI ("ETEC") VACCINE
DESCRIPTION. This vaccine is under development using an approach of
rational attenuation similar to that used to generate the Oral Typhoid Vaccine.
This vaccine is designed to protect humans against travelers' diarrhea, the
principal cause of which is ETEC. This vaccine, if developed, is expected to be
orally administered.
DEVELOPMENT STATUS. A Phase I trial of the Oral ETEC Vaccine commenced in
October 1998. In this initial trial Peptide has supplied two strains of ETEC
attenuated in different ways for testing in an in-patient dose-ranging study in
30 healthy volunteers. The trial is designed to determine which of the
attenuations results in the most appropriate balance of safety and
effectiveness.
INTELLECTUAL PROPERTY. Peptide has an exclusive license to certain patents
relating to this vaccine and has filed an additional patent application.
VETERINARY ALLERGY VACCINE
DESCRIPTION. Using an approach similar to that used with its Allergy
Vaccine, Peptide has identified peptides which it believes may be suitable for
the development of vaccines to moderate the allergic response in dogs and
horses. The principal indications for such vaccines include flea bite allergy in
dogs and atopy in horses.
DEVELOPMENT STATUS. The Veterinary Allergy Vaccine is being developed in
collaboration with Pfizer (see below). Pfizer is conducting various preclinical
tests, initially focusing on the prevention of food allergy in dogs.
INTELLECTUAL PROPERTY. The patents and patent applications applicable to
the Allergy Vaccine also relate to these product candidates. Peptide is aware of
a third party patent application which has claims covering the relevant dog
peptide.
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H. PYLORI VACCINE
DESCRIPTION. The gastric pathogen, H. PYLORI, is believed to be responsible
for most peptic ulcer disease. Studies of H. PYLORI have led to the
identification of candidate antigens which could be incorporated in a novel
vaccine against peptic ulcer disease. In collaboration with PM-O, a joint
venture formed by OraVax and PMC, Peptide is attempting to develop an oral
vaccine to protect against H. PYLORI. The vaccine under development uses
Peptide's attenuated SALMONELLA oral vaccine delivery system.
DEVELOPMENT STATUS. Peptide has incorporated the H. PYLORI antigens into
its SALMONELLA delivery system. The candidate strains are currently being
evaluated by PM-O.
INTELLECTUAL PROPERTY. The patents and patent applications applicable to
the Oral Typhoid Vaccine also relate to this product candidate as well as
additional patents and patent applications covering means of expressing foreign
antigens into SALMONELLA.
STRATEGIC ALLIANCES AND COLLABORATIONS
Peptide believes that future sales of Peptide's products will be maximized
if undertaken by established pharmaceutical companies, with Peptide receiving
license fees, milestone payments and royalties on sales. Peptide has entered
into several such collaborations, including four in the past two years with
multinational pharmaceutical companies.
To access new opportunities Peptide evaluates technology from third parties
which potentially could be developed by Peptide. Peptide acquires rights to such
technology through agreements with pharmaceutical companies, biotechnology
companies, universities and other research organizations. Peptide has entered
into such agreements with Medeva, the Medical Research Council, Peptimmune and
several universities in the U.K.
Details of Peptide's principal strategic alliances and collaborations are
set out below.
MEDEVA
In January 1997 Peptide entered into a collaboration with Medeva for the
research, development and marketing of novel, non-injectable vaccines. Three
vaccines are in development: Oral Typhoid, Oral ETEC (ENTEROTOXIGENIC E. COLI)
and Oral H. PYLORI.
Under the terms of this collaboration, Peptide acquired, for total
consideration of L1 million, an oral and nasal vaccine delivery technology,
rights to several vaccine product candidates and rights to a portfolio of 19
patent families. In addition, Peptide has provided L1 million of funding to
Medeva towards the cost of the development program which is taking place within
Medeva's vaccine research unit. Medeva has an option to license any products
developed from the alliance and has rights to participate in the revenues
Peptide generates from licensing a product to a third party. Medeva purchased
from Peptide approximately L3 million of Peptide ordinary shares at 340p per
share at the time of entering the alliance.
SMITHKLINE BEECHAM
In February 1997, Peptide entered into a strategic alliance with SmithKline
Beecham to continue the research and development of Peptide's Allergy Vaccine
and the related research portfolio.
Under the terms of the agreements, Peptide received L6 million, with Smith
Kline Beecham purchasing from Peptide L3.6 million of Peptide ordinary shares at
360p per share and paying L2.4 million in license fees. Peptide could receive up
to an additional L23.7 million if it achieves certain clinical development and
regulatory milestones. In addition, Peptide will receive royalties on any future
product sales. Under the agreements, SmithKline Beecham acquired exclusive
worldwide rights to
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market products arising from the alliance. The alliance involves a collaborative
research and development program. SmithKline Beecham will pay all clinical and
associated development costs of the Allergy Vaccine and any other product
candidates arising from the alliance.
SmithKline Beecham also acquired an option for a license for the Tolerising
Peptide (rye grass) product candidate. SmithKline Beecham is scheduled to decide
whether to exercise the option following its review of the final Phase II trial
report which is expected in the first quarter of 1999. Any license fees,
milestone payments and royalties on the Tolerising Peptide negotiated with
SmithKline Beecham would be in addition to those described above.
PFIZER
In December 1997 Peptide entered into an agreement with Pfizer for the
development of Peptide's Veterinary Allergy Vaccine. Under the terms of the
agreement, Pfizer acquired a two year exclusive option for a worldwide license
for Peptide's Veterinary Allergy Vaccine. Pfizer is obligated to conduct and pay
for all costs of the research and clinical development program for evaluating
the vaccine.
MEDICAL RESEARCH COUNCIL
In February 1998 Peptide entered into a research collaboration with the
Medical Research Council under the LINK Award Scheme, a U.K. Government
initiative promoting partnership between industry and research organizations.
Under the terms of this collaboration Peptide and the Medical Research
Council are working jointly towards the development of novel antibacterial drugs
based on the inhibition of bacterial proteases. These drugs will target bacteria
which are not currently amenable to treatment with antibiotics or are becoming
resistant to them. The Medical Research Council is identifying target proteases
and Peptide is applying its RAPiD-TM- technology (which is described below) to
design novel potent and specific inhibitors of these proteases and investigate
their therapeutic application.
Peptide and the Medical Research Council are jointly funding the three-year
project under the LINK award scheme, and Peptide has an exclusive license to the
intellectual property generated from the project.
PEPTIMMUNE
In March 1998 Peptide entered into a collaboration with Peptimmune, a U.S.
biotechnology company based in Cambridge, Massachusetts. The purpose of the
collaboration is to develop novel inhibitors of the protease CATHEPSIN S by
applying Peptide's RAPiD technology. Inhibitors of this enzyme have the
potential to treat disorders of the immune system, including autoimmune
diseases, allergies and atopic asthma.
Peptide and Peptimmune are sharing all costs for the development of the
product candidates up to demonstration of proof-of-principle and will benefit
equally from the commercialization of any products arising from the
collaboration.
PASTEUR MERIEUX-ORAVAX
In April 1998 Peptide entered into an agreement with PM-O for the
development of an oral vaccine against H. PYLORI, one of the principal causes of
peptic ulcers. PM-O is a joint venture formed between Pasteur Merieux Connaught,
one of the world's largest vaccine companies, and OraVax.
Under the terms of the agreement PM-O has a worldwide exclusive option to
use Peptide's proprietary oral vaccine delivery technology for the development
of a vaccine to prevent H. PYLORI
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infection. PM-O is supplying its proprietary H. PYLORI antigens which Peptide is
incorporating into its oral vaccine delivery system. PM-O is funding the costs
of this research program.
If this research program is successful, PM-O has an option to take a license
and will be responsible for all future clinical development and associated
costs. Exercise of this option would trigger a license fee, milestone payments
and royalties on any future sales of the vaccine.
ELI LILLY AND COMPANY
In November 1998, Peptide entered into a research collaboration with Eli
Lilly and Company. Under the terms of the agreement, Lilly is providing funding
to Peptide to apply its proprietary RAPiD technology to four protease targets
provided by Lilly.
NOVARTIS AG
In November 1998, Peptide entered into a research collaboration with
Novartis. Under the terms of this agreement, Novartis is providing funding to
Peptide to apply its proprietary RAPiD technology to one protease target
provided by Novartis.
UNIVERSITY COLLABORATIONS
Peptide has research collaborations with several universities to augment its
in-house capabilities. These include the University of Cambridge (combinatorial
chemistry), Bristol University (directed immunomodulation), University of Oxford
(inflammatory mechanisms), and the University of Newcastle (combinatorial
chemistry).
TECHNOLOGY PLATFORMS AND RESEARCH PROGRAMS
Since its initial public offering, Peptide has acquired or developed four
proprietary technology platforms. A summary of Peptide's technology platforms
and the associated research programs is set out below:
<TABLE>
<CAPTION>
TECHNOLOGY PLATFORM APPLICATION RESEARCH PROGRAMS
- ------------------------------------- ----------------------------------------------- -------------------------
<S> <C> <C>
MolVaD-Registered Trademark-......... To develop novel injectable vaccines Meningitis B
Anti-IgE
Mucosal Vaccine Delivery............. To develop novel oral and nasal vaccines Other antigen targets
RAPiD-TM-............................ To develop novel protease inhibitor drugs Der p 1
Factor Vlla
Cathepsin S
Bacterial proteases
Lilly collaboration
Novartis collaboration
Directed Immunomodulation............ To develop novel immunotherapeutic drugs Multiple sclerosis
</TABLE>
MOLVAD-REGISTERED TRADEMARK-
DESCRIPTION OF THE TECHNOLOGY. MolVaD (Molecular Vaccine Design) is a
technique employing bacteriophage peptide display to design novel vaccines.
MolVaD facilitates the discovery of new immunogens by employing protective
antibodies to select peptides which mimic key structural features of the target
organism. These peptides can be selected from bacteriophage libraries containing
approximately one billion distinct peptide structures. The bacteriophage
themselves can be used as carriers for immunogenic peptides and induce
protective
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antibodies against a disease causing organism. Such peptides can then be used to
elicit the production of antibodies which are specific for the target organism.
With MolVaD, Peptide believes it has developed a proprietary position from which
it can generate novel vaccine product candidates.
In June 1996 Peptide acquired a patent family from Cambridge Bacteriophage
Technology Limited covering the expression of peptides on the surface of
filamentous bacteriophage and the use of these bacteriophage as a vaccine
delivery system. The patent for this technology has been granted by the European
Patent Office and is pending at the United States Patent and Trademark Office
and in Japan.
A third-party patent which covers certain aspects of bacteriophage display
is being opposed by Peptide at the European Patent Office. The same third party
is opposing Peptide's bacteriophage display patent at the European Patent
Office. There are parallel patents in the U.S. to these patents.
RESEARCH PROGRAMS. MolVaD is being applied to develop two vaccines:
- Meningitis B--The bacterium N. MENINGITIDIS is a major cause of
meningitis, a potentially lethal infection, typically affecting children.
There are three dominant forms of the organism, serotypes A, B and C.
Although vaccines to A and C are available, none is available for B. Such
a vaccine is a much needed element in a multi-component vaccine to protect
children against meningitis. MolVaD is being used to identify peptides
which mimic the polysaccharide coat of N. MENINGITIDIS that will be
suitable for the development of an active vaccine against meningitis B.
Several leads have been identified and these are being optimized for
immunogenicity.
- Anti-IgE--As part of the collaboration with SmithKline Beecham, MolVaD is
being employed to identify epitopes on the IgE antibody which may
represent new allergy vaccine targets.
MUCOSAL VACCINE DELIVERY
DESCRIPTION OF THE TECHNOLOGY. This technology platform enables the
development of novel mucosal (oral and nasal) vaccines. Most infectious agents
enter the body through mucosal surfaces. The mucosa are capable of mounting an
immune response, yet many current injectable vaccines elicit a poor immune
response in the mucosa. Mucosal vaccination can be effected by oral or nasal
delivery of antigens in an appropriate carrier and therefore provides protection
against such infectious agents where it is most needed. Mucosal vaccination is
better tolerated and is more easily and conveniently administered than
conventional vaccination by injection.
The development of mucosal vaccines for certain diseases has been hindered
by the lack of suitable delivery systems and adjuvants to induce a mucosal
immune response. Peptide's technology potentially overcomes these two problems.
This technology platform comprises two inter-related technologies:
- live attenuated oral vaccines, e.g. the Oral Typhoid Vaccine and the Oral
ETEC Vaccine; and
- the use of these attenuated strains as carriers of antigens, e.g. the Oral
H. PYLORI Vaccine.
Peptide acquired the rights to the intellectual property covering this
technology platform from Medeva. These rights include a total of 19 patent
families which have potential application to mucosal vaccine delivery.
RESEARCH PROGRAMS.
- Antigen Targets--The attenuated S. TYPHI oral vaccine delivery system has
the potential to be used as a carrier for a number of other antigens.
Peptide is considering several other antigens which could be incorporated
into its proprietary delivery system to develop novel oral vaccines.
Peptide believes that this delivery system could be exploited by Peptide
either alone or in
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collaboration with other parties in a similar manner to the collaboration
agreement reached with PM-O on the Oral H. PYLORI Vaccine.
RAPID-TM-
DESCRIPTION OF THE TECHNOLOGY. RAPiD (Rational Approach to Protease
Inhibitor Design) is a proprietary technology which applies the techniques of
combinatorial chemistry to provide a novel means of developing protease
inhibitors.
Proteases are a type of enzyme and are potential therapeutic targets because
they play an integral role in the development of many diseases. Peptide believes
that inhibition of proteases may therefore be used as the basis of effective
drugs.
RAPiD has the advantage over conventional drug discovery techniques of being
able to deliver, in a matter of weeks rather than months, information for the
design of protease inhibitors. RAPiD can be used to: (i) rapidly identify novel
protease substrates; (ii) establish high throughput screens; (iii) map the
protease catalytic sites; and hence (iv) enable the design and synthesis of
potent and selective protease inhibitors.
Five patent applications have been filed covering RAPiD and its associated
technologies.
RESEARCH PROGRAMS. RAPiD is being employed in six research programs:
- Factor VIIa Inhibitor--Factor VIIa is one of several proteases involved in
the blood coagulation process. Anticoagulants are used by patients with a
history of cardiovascular disease (including heart attack, stroke and
thrombosis). Peptide is using its RAPiD technology to develop potent and
selective drugs to inhibit Factor VIIa and to develop a new class of
anticoagulants.
- Cathepsin S Inhibitor--Cathepsin S is a protease that has been shown to
play a critical role in the presentation of antigens to the immune system.
An inhibitor to Cathepsin S could have application in a number of diseases
where suppression of the immune response would be of benefit such as
autoimmune disease, graft vs. host disease, allergy and atopic asthma.
Using its RAPiD technology Peptide is developing inhibitors to Cathepsin S
in collaboration with Peptimmune and its collaborators at The Brigham and
Women's Hospital in Boston, Massachusetts.
- Der p 1 Inhibitor--House dust mite feces are known to induce asthma in
susceptible children. It is believed that proteases from the mite may be
responsible for their allergic response and that the major allergen is a
protease called Der p 1. Peptide has used its RAPiD technology to develop
potent, selective inhibitors of this enzyme and, in collaboration with the
University of Southampton, is currently exploring the therapeutic
potential of these agents as drugs to limit the onset and severity of
asthma in susceptible individuals.
- Lilly Collaboration--Under a research collaboration with Lilly, Peptide is
applying RAPiD to four protease targets provided by Lilly.
- Novartis Collaboration--Under a research collaboration with Novartis,
Peptide is applying RAPiD to one protease target provided by Novartis.
- Bacterial Protease Inhibitors--Antibiotic resistance is a growing problem.
Several bacterial diseases are difficult to treat as they are either not
amenable to treatment with antibiotics or the causative bacteria are
becoming resistant to antibiotics. New approaches to treatment are
therefore required. Proteases which are secreted by resistant bacteria
represent potential new drug targets. The Medical Research Council, with
whom Peptide is collaborating on this project, is identifying target
proteases to which Peptide is applying its RAPiD technology to design
novel and specific inhibitors of these proteases and investigate their
therapeutic application. The most
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advanced project in the Medical Research Council collaboration is to
develop an inhibitor of the protease GINGIPAIN. This is an important
protease secreted by the organism P. GINGIVALIS responsible for
periodontal (gum) disease and recently implicated as a factor in
cardiovascular disease. Peptide and the Medical Research Council are also
evaluating several other bacterial protease targets.
DIRECTED IMMUNOMODULATION
DESCRIPTION OF THE TECHNOLOGY. Directed immunomodulation is a means of
controlling the effects of T cells. T cells are the critical components of the
immune system which control the immune response to antigens. In allergy and
certain other disease states this immune response may not be beneficial and can
lead to certain organ and tissue damage.
Peptide is developing peptides which are capable of tolerising (switching
off) T cells that are directing an inappropriate, and therefore harmful, immune
response. Peptide's approach is to identify the critical epitope (recognition
sequence) which promotes T cell activation and then use this epitope as a
template to design novel immunotherapeutic drugs.
RESEARCH PROGRAMS. Peptide's research effort in this area is currently
focused on multiple sclerosis. Multiple sclerosis is an autoimmune disease in
which components of the body's own immune system attack the myelin sheath which
surrounds certain nerves and damage the normal transmission of signals down the
nerve.
Peptide is using its directed immunomodulation technology to develop
modified peptides that have the ability to tolerise those cells of the immune
system responsible for the disease. Several product candidates have been
identified and these are currently being optimized. Peptide is carrying out this
project in collaboration with Bristol University and the Multiple Sclerosis
Society.
PROPERTIES
The basic terms of the leases for Peptide's principal facilities are listed
in the table below. The contractual terms of the leases have expired but the
leases are being continued under Part 2 of the U.K. Landlord and Tenant Act 1954
(as amended). Peptide has submitted an application to renew each of these leases
for a further five year term on similar rents to those currently being paid. In
the meantime, Peptide is in discussions with several potential tenants to whom
Peptide may assign its leases upon its proposed move to the Peterhouse
Technology Park.
<TABLE>
<CAPTION>
APPROXIMATE
RENT PER SIZE (SQ
LOCATION TENURE LEASE EXPIRATION DATE ANNUM(L) FT.)
- -------------------------------------------------------------- --------- --------------------- ----------- -----------
<S> <C> <C> <C> <C>
Cambridge Science Park, Milton Road, Cambridge
Unit 321...................................................... Leasehold 6/01/98 75,000 4,750
Unit 324...................................................... Leasehold 6/01/98 75,000 4,750
Unit 327...................................................... Leasehold 9/29/98 51,000 3,300
Unit 329...................................................... Leasehold 6/01/98 51,000 3,300
</TABLE>
Peptide has expanded its laboratory facilities on the Cambridge Science
Park, mainly by refitting office space. While adequate for Peptide's present
research and development needs, the existing facilities will constrain the
future growth of Peptide. In particular the opportunities being generated by
Peptide's internal research projects necessitate further expansion, particularly
of its chemistry resources. Peptide recently entered into an agreement to lease
a new 30,000 square foot purpose-built research and development building on the
Peterhouse Technology Park on the south side of Cambridge details of which are
set out below. Peptide believes that the facilities provided by this building
should satisfy Peptide's requirements for the foreseeable future.
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<PAGE>
The total cost of fitting out the new building to Peptide's specification
will be approximately L4.6 million. The developer has agreed to contribute
approximately L2.3 million towards the cost, reducing the total funding
requirement for Peptide to approximately L2.3 million. Peptide believes that the
investment in this facility will enable Peptide to exploit the increasing number
of product opportunities available to it. The move from the Cambridge Science
Park and occupation of the new building is scheduled for April 1999.
EMPLOYEES
At the time of its listing on the London Stock Exchange in November 1995
Peptide had 29 employees. It has recruited actively since then and at January
29, 1999 had 88 employees, of which approximately 74 are engaged in research and
development and 42 have a Ph.D.
LITIGATION
There are no material legal proceedings pending to which Peptide or any of
its subsidiaries is a party.
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OWNERSHIP OF PEPTIDE ORDINARY SHARES
BENEFICIAL OWNERSHIP BY MANAGEMENT OF PEPTIDE
The following table sets forth information with respect to the Peptide
ordinary shares owned of record and beneficially owned as of January 27, 1999
(unless otherwise noted), by:
- each named current director of Peptide,
- each named executive officer of Peptide, and
- all directors and officers of Peptide as a group.
The business address of each of the directors and executive officers is 321
Cambridge Science Park, Milton Road, Cambridge, CB4 4WG, England.
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF PEPTIDE CURRENT
PEPTIDE ORDINARY ISSUED SHARE CAPITAL
NAME SHARES PRIOR TO THE MERGER
- -------------------------------------------------------------------------- ---------------- --------------------
<S> <C> <C>
Alan Goodman.............................................................. 3,071,390(1) 8.40%
John Brown................................................................ 285,000(2) *
Gordon Cameron............................................................ 2,500 *
Nicolas Higgins........................................................... 282,500(2) *
Sir Brian Richards........................................................ 381,920(3) 1.04%
Alan Dalby................................................................ 5,000 *
Alan Smith................................................................ 1,000 *
All executive officers and directors as a group (7 persons)............... 4,029,310(4) 11.02%
</TABLE>
- ------------------------
(1) Includes 724,280 shares held by ATM Investments Limited, a company in which
Mr. Goodman is the controlling shareholder.
(2) Includes 280,000 shares issuable upon exercise of share options exercisable
within the 60-day period following January 27, 1999.
(3) Consists of 76,920 shares owned jointly by Abacus Trustees (Jersey) Limited
and Abacus (C.I.) Limited, the trustees of a trust of which Sir Brian
Richards is the settlor.
(4) See footnotes (1) through (3) above.
BENEFICIAL OWNERSHIP OF CERTAIN STOCKHOLDERS
The following table sets forth information as to the stockholders known to
Peptide to be the beneficial owners of more than 5% of Peptide ordinary shares.
The information with respect to Peptide
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ordinary shares is based on information known to Peptide as of January 27, 1999.
Percentages shown are based on 36,579,039 shares outstanding on January 27,
1999.
<TABLE>
<CAPTION>
PERCENT OF
PEPTIDE CURRENT
NUMBER OF PEPTIDE ISSUED SHARE
ORDINARY CAPITAL PRIOR TO THE
NAME AND ADDRESS BENEFICIAL OWNERS SHARES MERGER
- ----------------------------------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
Alan Goodman................................................................. 3,071,390(1) 8.40%
321 Cambridge Science Park, Milton Road,
Cambridge CB4 4WG, England
Prelude Technology Fund II Limited Partnership............................... 2,788,010 7.62%
Sycamore Studios,
New Road, Over,
Cambridge, CB4 5PJ, England
Professor Denis Stanworth.................................................... 2,178,560 5.96%
43, Selly Wick Drive,
Birmingham B29 7JQ, England
</TABLE>
- ------------------------
(1) Includes 724,280 shares held by ATM Investments Limited, a company in which
Mr. Goodman is the controlling shareholder.
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SELECTED FINANCIAL INFORMATION OF PEPTIDE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected financial information of Peptide for each of the
fiscal years in the five-year period ended December 31, 1997 has been derived
from Peptide's audited consolidated financial statements. The consolidated
financial statements as of December 31, 1996, December 31, 1997 and June 30,
1998 and for each of the fiscal years in the three-year period ended December
31, 1997, and the six month periods ended June 30, 1998 and 1997, and the report
thereon, are included elsewhere in this prospectus/proxy statement. The
consolidated balance sheet data at June 30, 1998 and the consolidated statement
of operations data for the six months ended June 30, 1997 and 1998 are derived
from unaudited consolidated financial statements. The unaudited consolidated
financial statements include all adjustments consisting of only normal recurring
adjustments that Peptide considers necessary for a fair presentation of its
financial position and results of operations for these periods. The selected
financial data has been prepared in accordance with U.K. GAAP, which differs in
respect from U.S. GAAP. The principal differences between U.K. GAAP and U.S.
GAAP are summarized in Note 21 of Peptide's Audited Consolidated Financial
Statements appearing elsewhere in this prospectus/proxy statement. The selected
data below as of and for the six-month period ended June 30, 1998 are not
necessarily indicative of the results of operations to be expected for the
fiscal year ending December 31, 1998. Translation of pounds sterling into U.S.
dollars for the six months ended June 30, 1998 has been made at the rate of
L1.00 = $1.6695 based upon the noon buying rates on June 30, 1998. This
translation is provided solely for the convenience of the reader and does not
reflect financial information in accordance with generally accepted accounting
principles for foreign currency translations. The following information should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Peptide's Consolidated Financial
Statements and the notes thereto appearing elsewhere in this prospectus/proxy
statement.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
1993 1994 1995 1996 1997 1997 1998 1998
--------- --------- --------- --------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
U.K. GAAP
Turnover (Revenues)...................... L 90 L 50 L 160 L 153 L 2,795 L 2,525 L 195 $ 326
OPERATING EXPENSES:
Research & development costs, net........ 263 1,875 2,954 4,956 9,745 5,410 4,479 7,478
Administrative expenses.................. 66 918 1,041 1,260 1,485 784 758 1,265
Other operating income................... -- -- -- -- (439) (215) (126) (210)
--------- --------- --------- --------- --------- --------- --------- ---------
Total operating expenses................. 329 2,793 3,995 6,216 10,791 5,979 5,111 8,533
--------- --------- --------- --------- --------- --------- --------- ---------
Operating loss........................... (239) (2,743) (3,835) (6,063) (7,996) (3,454) (4,916) (8,207)
Interest receivable, net................. 1 21 223 1,469 1,542 755 649 1,084
Tax on loss on ordinary activities....... -- -- (9) -- -- -- -- --
--------- --------- --------- --------- --------- --------- --------- ---------
Loss on ordinary activities after
taxation............................... L (238) L(2,722) L(3,621) L(4,594) L (6,454) L(2,699) L(4,267) $ (7,123)
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
Loss per ordinary share.................. L(0.99) L (2.08) L (0.20) L (0.14) L (0.18) L (0.08) L (0.12) $ (0.20)
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
1995 1996 1997 1997 1998 1998
--------- --------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. GAAP
Operating expenses....................... L 3,999 L 6,324 L11,960 L 6,842 L 4,714 $ 7,775
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Net loss................................. (3,625) (4,702) (7,250) (3,562) (3,813) (6,366)
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Basic and diluted net loss per share..... L (0.21) L (0.14) L (0.20) L (0.10) L (0.11) $ (0.18)
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
77
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1993 1994 1995 1996 1997 1998 1998
--------- --------- --------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
U.K. GAAP
Cash and liquid resources........ L211 L1,081 L27,220 L20,556 L20,751 L15,862 $ 26,482
Working capital.................. 148 1,773 25,949 19,410 19,369 14,807 24,721
Fixed assets..................... 84 208 814 2,488 2,863 3,177 5,304
Total assets..................... 428 2,360 29,458 24,977 25,342 21,530 35,944
Long-term obligations............ -- 30 65 -- -- -- --
Shareholders' equity............. 232 1,951 27,762 23,168 23,466 19,413 32,410
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997 1998 1998
--------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. GAAP
Cash, cash equivalents and short-term
investments............................ L20,556 L20,751 L15,862 $ 26,482
Working capital.......................... 19,410 19,369 14,807 24,721
Fixed assets............................. 2,488 2,863 3,177 5,304
Total assets............................. 23,913 24,314 20,307 33,902
Long-term obligations.................... -- -- -- --
Shareholders' equity..................... 22,104 22,438 18,190 30,368
</TABLE>
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PEPTIDE MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Since its incorporation in 1993, Peptide has been engaged in the research
and development of novel drugs and vaccines.
To date, Peptide has not received any revenues from the sale of products and
does not expect to receive any such revenues before 2002. The first product
revenues are anticipated from sales of either the Allergy Vaccine or the Oral
Typhoid Vaccine, currently being developed by Peptide in Phase II trials. If
successfully developed, Peptide intends to seek a collaborative partner to
undertake sales of these products, from which Peptide would expect to receive
royalties. Peptide's losses incurred since inception have resulted principally
from expenditures on research and development. Peptide expects to incur
significant operating losses over the next several years due primarily to
expanded research and development efforts, preclinical testing and clinical
trials of its product candidates and the acquisition of additional technologies.
Results of operations may vary significantly from quarter to quarter depending
on, among other factors, the progress of Peptide's research and development
efforts, the receipt, if any, of milestone payments, the timing of certain
expenses and the establishment of collaborative research agreements.
On November 10, 1998 Peptide entered into an agreement to acquire OraVax in
a transaction anticipated to close prior to the end of the first quarter of
1999. The merger would create a larger biopharmaceutical company involved in the
development of novel drugs, vaccines and antibody products that control
significant human diseases. The merged company would have a total of ten
products in development, six of which are currently in clinical trials, with a
further four scheduled to go into clinical trials in the next twelve months, and
multiple corporate partnerships including ones with PMC and SmithKline Beecham.
The new business combination would result in a broader portfolio of product
programs, and greater market presence and potential for expanded corporate
partnerships.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
Peptide's total revenues decreased to L195,000 in the six months ended June
30, 1998 from L2,525,000 in the six months ended June 30, 1997. In the six
months ended June 30, 1998, Peptide's revenues consisted primarily of L185,000
in revenue relating to Peptide's agreements with Alizyme and PM-O and L9,000
from sales of reagents. In addition Peptide received L126,000 of other operating
income relating to development costs incurred by Peptide on the Allergy Vaccine
and charged to SmithKline Beecham. In the six months ended June 30, 1997,
Peptide's revenues consisted of L2,400,000 in license fees from SmithKline
Beecham in respect of the Allergy Vaccine and L125,000 in revenue relating to
Peptide's agreement with Alizyme. In May 1996 Peptide entered into an agreement
with Alizyme under which Peptide agreed to provide certain services relating to
the use of Peptide's combinatorial chemistry techniques in exchange for
committed funding by Alizyme of L250,000 per year for a three year period. Other
operating income for the period included development costs of L215,000 incurred
by Peptide on the Allergy Vaccine and charged to SmithKline Beecham.
Research and development expenses decreased to L4,479,000 in the six months
ended June 30, 1998 from L5,410,000 in the six months ended June 30, 1997. The
reduction is primarily due to the payment in 1997 of L1,000,000 to Medeva PLC
for its mucosal vaccine technology. Other research and development expenses,
primarily staff costs, laboratory supplies, external research and clinical trial
costs and intellectual property costs, were all maintained at a similar level to
the six months ended June 30, 1997. Government grants (netted against research
and development expenses) decreased to L57,000 in the six months ended June 30,
1998 from L144,000 in the six months ended June 30, 1997, as
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SmithKline Beecham assumed more of the development costs on the Allergy Vaccine
directly, thereby reducing the level of claims made under the SpurPlus grant.
SpurPlus is a UK government grant administered by the Department of Trade and
Industry to assist companies in the progression of development stage products.
Under the scheme, a percentage of Peptide's expenditures are reimbursed. The
maximum under the scheme is L450,000 of reimbursement for L1,500,000 of
expenditure.
Administrative expenses decreased to L758,000 in the six months ended June
30, 1998 from L784,000 in the six months ended June 30, 1997, primarily
reflecting a lower number of executive directors.
Net interest income decreased to L649,000 in the six months ended June 30,
1998 from L755,000 in the six months ended June 30, 1997, due primarily to lower
average levels of cash and liquid investments.
Peptide incurred a net loss of L4,267,000 in the six months ended June 30,
1998 compared to a net loss of L2,699,000 in the six months ended June 30, 1997,
due to the lower level of revenue partially offset by the lower levels of costs.
YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996
Peptide's total revenues increased to L2,795,000 in 1997 from L153,000 in
1996. In 1997, Peptide's revenues consisted of L2,400,000 in license fees from
SmithKline Beecham in respect of the Allergy Vaccine, L340,000 in revenue
relating to Peptide's agreements with Alizyme and Pfizer, L50,000 from other
revenues and L5,000 from sales of reagents. In addition, Peptide received
L439,000 of other operating income relating to development costs incurred by
Peptide on the Allergy Vaccine and recharged to SmithKline Beecham. In 1996,
Peptide's revenues consisted of L63,000 in revenue relating to Peptide's
agreement with Alizyme, L20,000 from other revenues and L70,000 from sales of
reagents. No other operating income was received in 1996 as the collaboration
with SmithKline Beecham did not commence until 1997.
Research and development expenses increased to L9,745,000 in 1997 from
L4,956,000 in 1996. Part of the increase is attributable to the L1,000,000
payment to Medeva in 1997 for its mucosal delivery technology, product
candidates and patents and Peptide's contribution of L500,000 to Medeva to fund
the development program within Medeva's Vaccine Research Unit. The remaining
increase reflected an expansion in scientific personnel and in the number of the
research and development programs, both of which contributed to an increase in
the level of laboratory supplies. It also reflected the clinical progress made
over the year as several projects entered into and progressed through clinical
trials. Government grants (netted against research and development expenses)
increased to L373,000 in 1997 from L97,000 in 1996, as activity on the Allergy
Vaccine increased and further claims were made under the SpurPlus grant.
Administrative expenses increased to L1,485,000 in 1997 from L1,260,000 in
1996, reflecting the general expansion of the company and its facilities.
Net interest income increased to L1,542,000 in 1997 from L1,469,000 in 1996,
due to slightly lower average levels of cash and liquid investments being more
than offset by higher interest rates on invested monies.
Peptide incurred a net loss of L6,454,000 in 1997 compared to a net loss of
L4,594,000 in 1996, primarily reflecting increased research and development
costs more than offsetting the increased revenue.
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YEARS ENDED DECEMBER 31, 1996 AND DECEMBER 31, 1995
Peptide's total revenues decreased to L153,000 in 1996 from L160,000 during
1995. In 1996, Peptide's revenues consisted of L63,000 in revenue relating to
Peptide's agreement with Alizyme, L20,000 from other revenues and L70,000 from
sales of reagents. In 1995, Peptide's revenues consisted of L120,000 from other
collaborative revenues and L40,000 from sales of reagents.
Research and development expenses increased to L4,956,000 in 1996 from
L2,954,000 in 1995. The increase reflected an expansion in scientific personnel
and in the number of the research and development programs, both of which
contributed to an increase in the level of laboratory supplies. Government
grants (netted against research and development expenses) increased to L97,000
in 1996 from L30,000 in 1995, as claims began to be made under the SpurPlus
grant for the Allergy Vaccine.
Administrative expenses increased to L1,260,000 in 1996 from L1,041,000 in
1995, reflecting the general expansion of Peptide and its facilities.
Net interest income increased to L1,469,000 in 1996 from L222,000 in 1995,
due to higher average levels of cash and liquid investments, following receipt
of L30,659,000 of net proceeds from equity issuances during 1995.
Peptide incurred a net loss of L4,594,000 in 1996 compared to a net loss of
L3,621,000 in 1995, reflecting the overall increase in costs as expansion of the
company took place following its listing on the London Stock Exchange.
LIQUIDITY AND CAPITAL RESOURCES
From inception through June 30, 1998 Peptide has financed its operations
primarily by equity issuances totaling L43,687,000, up-front license fees and
milestone payments totaling L2,690,000, research and development revenues
totaling L1,090,000 and sales of reagents of L125,000 and government grants
totaling L557,000. As of June 30, 1998, Peptide had cash, cash equivalents and
marketable securities totaling L15,862,000. In addition it held investments in
Alizyme plc (market value at June 30, 1998 of L167,000) and in Peptide ordinary
shares, through Peptide's Employee Share Ownership Trust (market value at June
30, 1998 of L1,343,000).
Peptide has entered into licensing agreements with various corporations.
These licenses provide for the payment of license fees, royalties and milestone
payments to Peptide under certain circumstances. In 1997 Peptide received
L2,795,000 under these agreements. In addition, Peptide has entered into certain
agreements with corporations and universities which require Peptide to pay
license fees, royalties and milestone payments under certain circumstances. In
1997 Peptide incurred fees and payments of L54,000 under these agreements.
In connection with a licensing deal on the Allergy Vaccine entered into in
February 1997, SmithKline Beecham purchased from Peptide L3,600,000 of Peptide
ordinary shares, at 360p per share which was above the market price at such
time. In connection with the purchase by Peptide from Medeva of mucosal vaccine
technology and the related collaboration entered into in January 1997, Medeva
purchased from Peptide L3,000,000 of Peptide ordinary shares, at 340p per share
which was above the market price at such time.
From inception through June 30, 1998, Peptide has acquired an aggregate of
L4,057,000 of laboratory and office equipment. In addition, Peptide leases its
office and laboratory facilities under operating leases. Through June 30, 1998,
Peptide had expended L817,000 for leasehold improvements to those leased
facilities. In March 1998 Peptide entered into an agreement to lease a new
30,000 square foot (net) research and development building. The total cost of
fitting out the building to meet Peptide's specifications will be approximately
L4,600,000. The developer has agreed to contribute
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approximately L2,300,000 toward the cost, reducing the total funding required by
Peptide to approximately L2,300,000. Through June 30, 1998 Peptide had expended
L528,000 for this facility.
Peptide's aggregate cash and liquid resources were L20,751,000 at December
31, 1997, an increase of L261,000 since December 31, 1996. Cash used by
operations during the period, principally to support research and development,
was L5,190,000. Peptide expended L1,338,000 for property and equipment and
repaid L65,000 of its capital lease obligations. It received L6,788,000 from the
issue of new shares, made up of L3,600,000 from SmithKline Beecham, L3,000,000
from Medeva and the balance from the exercise of share options.
Peptide's aggregate cash and liquid resources were L15,862,000 at June 30,
1998, a decrease of L4,889,000 since December 31, 1997. Cash used by operations
during the period, principally to support research and development, was
L4,328,000. Peptide expended L579,000 for property and equipment and lent a
total of L195,000 to Peptide's Employee Share Ownership Trust to finance the
purchase by it of shares in Peptide. It received L214,000 from the issue of new
shares, primarily from the exercise of share options.
Since inception, Peptide's cash expenditures have exceeded its revenues on
an annualized basis. Peptide's future capital requirements will depend on many
factors, including, but not limited to, the progress of its research and
development programs, the progress of preclinical and clinical testing, the time
and costs involved in obtaining regulatory approvals, the cost of filing,
prosecuting, defending and enforcing any patent claims and other intellectual
property rights, competing technological and market developments, changes in
Peptide's existing research relationships, the ability of Peptide to establish
collaborative arrangements, receipt of any license fees and royalties and the
acquisition of additional facilities and capital equipment.
Concurrently with seeking shareholder approval of the merger, Peptide is
aiming to complete a financing which results in the receipt by Peptide of
sufficient working capital for the present requirements of the combined entity.
Successful completion of that financing is a condition to the merger. Peptide
believes, assuming the financing is successful, that it will have sufficient
cash to fund its operations through mid-2000. Changes in Peptide's research and
development plans or other events affecting Peptide's operations, however, may
result in accelerated or unexpected expenditures. If additional funds are raised
by issuing equity securities in the financing discussed above or otherwise,
dilution to existing stockholders may result and future investors may be granted
rights superior to those of existing stockholders.
YEAR 2000
The Year 2000 problem is the result of computer programs having been written
using two digits, rather than four, to define the applicable year. Computer
programs and embedded computer chips may be unable to distinguish between the
years 1900 and 2000. Any computer hardware, software, research and development,
manufacturing or administrative equipment, and operational infrastructure
systems used by Peptide or by its external business partners may recognize a
year using "00" as the last two digits, as the year 1900 rather than the year
2000.
During the first quarter of 1998, Peptide implemented an internal Year 2000
compliance task force. The goal of the task force is to identify and minimize
disruptions to Peptide's business that could result from the Year 2000 problem,
and to minimize liabilities that Peptide might incur in connection with the Year
2000 problem. The task force consists of employees of Peptide representating
major operational functions. It is headed by Gordon Cameron, Finance Director,
and reports to the Audit Committee of the Board of Directors.
Peptide has conducted a company-wide assessment of its computer systems and
operations infrastructure to identify computer hardware, software, research and
development equipment and
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process control systems that are not Year 2000 compliant, or to develop
contingency plans. Peptide expects to have these steps completed by the end of
the first quarter of 1999.
Peptide has also identified and prioritized significant providers, vendors,
suppliers and worldwide research and development, manufacturing and clinical
trial related third parties that are critical to business operations. Peptide is
in the process of communicating with these external parties, through interviews
and questionnaires, to ascertain their Year 2000 compliance. These evaluations
will be followed by the development of contingency plans, including alternate
service providers and contractors, vendors and suppliers. Peptide expects to
have these steps completed by the end of the first quarter of 1999. Going
forward, Peptide will use its best efforts to ensure that new service providers
and contractors, vendors and suppliers are Year 2000 compliant before engaging
in business with them.
Peptide's greatest risk is the failure of critical, worldwide research and
development, manufacturing or clinical trial related service contractors not
being Year 2000 compliant. Because of the significant number of these external
service contractors and the vast number of business systems used by these
parties, Peptide may experience some disruption in its business operations.
Peptide is unable to determine at this time whether the consequences of Year
2000 failures by these parties will have a material impact on Peptide's business
operations. Peptide believes that with the implementation of contingency plans,
including identifying alternative service contractors, the possibility of
material interruptions of normal operations should be reduced. However, there is
no assurance that Peptide will be successful in finding alternative service
contractors. In the event that Peptide is unable to replace Year 2000
non-compliant service contractors, Peptide's business operations could be
adversely affected.
To date, Peptide has not incurred any material costs related to the
assessment of its internal and external Year 2000 compliance. The total costs of
Peptide's Year 2000 compliance efforts are not expected to be more than L40,000.
Peptide is using its reasonable efforts to ensure internal and external Year
2000 compliance. However, there can be no guarantee that Peptide's assessment
and correction efforts will prove accurate. Key external business partners may
be unsuccessful in solving their Year 2000 issues and Peptide may be
unsuccessful in identifying alternative critical service providers and
contractors, vendors and suppliers. As a result, Year 2000 problems may
adversely impact Peptide's business operations. Peptide's readiness program is
an ongoing process and the estimates of the costs and completion dates described
above are subject to change.
RECONCILIATION OF U.K. GAAP TO U.S. GAAP
Peptide's consolidated financial statements are prepared in accordance with
U.K. GAAP, which differs in certain significant respects from U.S. GAAP.
The principal difference between the U.K. GAAP and U.S. GAAP statement of
operations for Peptide relates to the accounting for stock options granted to
employees. Peptide has granted stock options that will vest upon the attainment
of certain targets. Under U.K. GAAP, there is no accounting for these grants
after the initial grant date. Under U.S. GAAP, APB Opinion 25, Peptide would be
required to follow variable plan accounting for these grants and measure
compensation expense as the difference between the exercise price and the fair
market value of the stock during each accounting period over the vesting period
of the options. Increases in the fair market value of the stock would result in
a charge to operations and decreases in the fair market value of the stock would
result in a credit to operations.
Peptide's net loss for the years ended December 31, 1995, 1996 and 1997 and
the six months ended June 30, 1997 and 1998 was L3,621,000, L4,594,000,
L6,454,000, L2,699,000 and L4,267,000, respectively under U.K. GAAP. Under U.S.
GAAP, Peptide would have reported net losses of L3,625,000, L4,702,000,
L7,250,000, L3,562,000 and L3,813,000, respectively.
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Certain Peptide accounts have been reclassified to conform with U.S. GAAP.
In the statement of operations, Peptide has reclassified amounts received under
government grants to revenue. Under U.K. GAAP, these grants were presented as a
reduction in research and development expense. In addition, Peptide has also
reclassified amounts received as reimbursements for research and development
agreements to revenue. Under U.K. GAAP, these reimbursements were presented as a
component of operating expenses under the caption, other income. In the balance
sheet, Peptide has reclassified the cost of its own shares purchased as a
reduction of stockholders' equity. Under U.K. GAAP, the shares purchased were
presented as an asset.
Another significant difference between U.K. GAAP and U.S. GAAP relates to
the accounting for business combinations. Under U.S. GAAP, there is a write-off,
as of the date of the acquisition of that portion of the purchase price
allocated to research and development projects where technological feasibility
has not yet been established and for which there are no alternative future uses.
Based on a preliminary estimate, the acquisition of OraVax will result in an
in-process research and development charge of approximately $11,579,000 under
U.S. GAAP. This would be reported as a reconciling item between U.K. GAAP and
U.S. GAAP in the period in which the transaction is consummated. The purchase
price allocation, including the amount to be allocated to in-process research
and development, will be determined following the completion of the transaction.
This independent valuation will be completed prior to Peptide reporting its
operating results for the period in which the transaction was completed. The
allocation included in the pro forma financial information, including the
$11,579,000 in-process research and development charge, is based on Peptide's
best estimate. The actual results may differ significantly from this estimate.
Other reconciling differences are detailed in Note 21 to the Peptide
consolidated financial statements.
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DESCRIPTION OF ORAVAX'S BUSINESS
GENERAL
OraVax, Inc. was incorporated in Delaware in 1990 and has its principal
offices and laboratories at 38 Sidney Street, Cambridge, Massachusetts
(telephone: (617) 494-1339).
BUSINESS
OraVax is engaged in the discovery, development and commercialization of
vaccine and antibody products for the prevention and treatment of human
infectious diseases. OraVax's products are vaccines that stimulate the body's
own immunity to provide long term protection against disease, as well as
antibody products that provide immediate passive immunity to treat existing
infections or to protect against an acute disease risk. OraVax's focus has been
on diseases of the mucosal surfaces and has been broadened to include a series
of arboviral (insect borne) diseases addressable by single-dose live viral
vaccines.
OraVax is currently pursuing five proprietary product development programs.
The diseases targeted by these programs include:
- peptic ulcers and gastritis;
- yellow fever;
- a group of viral diseases related to yellow fever, including Japanese
encephalitis, dengue, tick borne encephalitis and hepatitis C;
- antibiotic-associated colitis; and
- viral pneumonia in children;
OraVax's product candidates are designed to generate either mucosal or systemic
immunity, as appropriate to each specific disease target. OraVax also has
developed a portfolio of biologic production technologies.
OraVax's product candidates include the following:
<TABLE>
<CAPTION>
PRODUCT CANDIDATE INDICATION TECHNOLOGY STATUS
- --------------------------- --------------------------- --------------------------- ---------------------------
<S> <C> <C> <C>
Helicobacter pylori Prevention and treatment of Recombinant protein vaccine Phase II trials ongoing
(H. PYLORI) vaccines peptic ulcers and gastritis
HNK 20 antibody Prevention of pneumonia Monoclonal IgA antibody On hold pending third party
caused by respiratory nosedrop funding of Phase III trials
syncytial virus in high
risk children
CdVax vaccine and CdIG Prevention/treatment of Toxoid vaccine and hyper- Toxoid IND filed in
immune-globulin antibiotic-associated immune globulin September 1998; Phase I
colitis trial initiated first
quarter of 1999
ChimeriVax-TM- Japanese Prevention of infection by Chimeric live attenuated IND expected to be filed in
encephalitis (follow on the Japanese en- viral vaccine 1999
products include dengue, cephalitis virus and other
hepatitis C, TBE) flaviviruses
Arilvax-Registered Trademark- Prevention of infection by Single-dose live attenuated OraVax to facilitate US
YF vaccine (a product of the yellow fever virus viral vaccine registration (already
Medeva Pharma Limited) marketed in the UK and
Europe); Medeva to fund
Phase III trials scheduled
for 1999
</TABLE>
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To date, OraVax has not received any revenues from the sale of products and
does not expect to receive any such revenues until late 2000, at the earliest.
The first product revenues are anticipated from sales of the yellow fever
vaccine, under OraVax's partnership with Medeva Pharma Limited. OraVax's losses
incurred since inception have resulted principally from expenditures under its
research and development programs, and OraVax expects to incur significant
operating losses for the foreseeable future due primarily to research and
development efforts, preclinical testing and clinical trials of its product
candidates, the acquisition of additional technologies, and the performance of
commercialization activities.
SCIENTIFIC BACKGROUND
The human immune system is comprised of two systems: systemic and mucosal,
each including immunity mediated directly by the cells of the immune system,
"cell mediated immunity" and immunity mediated by antibody proteins, "humoral
immunity." Immunologically reactive cells react directly with the target
antigens on viruses or bacteria to inactivate them and also have direct
cytotoxic effects on virally infected cells. The systemic humoral immune system,
which protects the blood and deep tissues of the body, relies on antibodies
composed principally of IgG and IgM immunoglobulins. The mucosal immune system,
which protects mucosal surfaces, such as the digestive, respiratory and
genitourinary tracts and the surface of the eye, relies on antibodies composed
principally of the IgA class of immunoglobulins. Historically, vaccine or
antibody development has been focused on the systemic immune system, with the
objective of increasing IgG antibodies in the blood by injecting vaccines or
specific preformed immunoglobulins.
Conventional vaccines and antibodies are designed to provide systemic, as
opposed to mucosal immunity and are administered by injection. Such products
include:
- routine childhood vaccines such as diphtheria, tetanus, pertussis,
hepatitis B, measles, mumps and rubella;
- adult vaccines such as influenza and hepatitis B; and
- immune globulins such as rabies and cytomegalovirus.
These products provide immunity to infection only after the infecting organism
has entered the bloodstream or deep tissues of the body. In contrast, mucosal
vaccines and antibody products are not injected but rather are applied to
mucosal surfaces (e.g., orally or intranasally). Mucosal vaccines are designed
to prevent infection at the point of entry into the body, prior to deep tissue
penetration. Mucosal vaccine and antibody products may prevent or treat
infections that are not susceptible to a systemic immunity approach and can also
complement the effectiveness of systemic immunity.
PRODUCTS UNDER DEVELOPMENT
VACCINES AGAINST H. PYLORI
MARKET OPPORTUNITY. OraVax is developing vaccines designed to prevent and
treat peptic ulcers and chronic gastritis caused by H. PYLORI. According to an
NIH consensus statement dated February 1994, H. PYLORI has been associated with
virtually all duodenal ulcer cases and more than 80% of gastric ulcer cases. It
is estimated that at least five million people suffer from active peptic ulcers
each year and approximately 350,000 to 500,000 new cases are diagnosed annually
in the United States. Approximately 600,000 patients are hospitalized each year
in the United States with peptic ulcers. Additionally, H. PYLORI has been
classified as a Class I carcinogen which has been associated with a majority of
stomach cancers.
ORAVAX APPROACH. OraVax is developing vaccines to treat H. PYLORI
infection, to prevent reinfection in previously-infected persons and to
stimulate immunity in uninfected persons. OraVax believes that vaccines directed
against H. PYLORI, if successfully developed, would eventually be considered for
routine
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administration as treatment for peptic ulcer disease and chronic gastritis and
as a preventive for the full spectrum of H. PYLORI-caused diseases.
OraVax is evaluating antigens derived from H. PYLORI bacteria, as well as
several formulation technologies for use in vaccines designed to combat existing
infections (treatment of chronic gastritis or recurrent peptic ulcer) and/or to
prevent primary infection or reinfection. Preclinical and clinical studies have
confirmed the activity of OraVax's leading, proprietary vaccine candidate
antigen, the urease protein. Pre-clinical studies indicated that, when given by
the mucosal route or by injection, urease has both prophylactic and therapeutic
activity.
OraVax is conducting Phase II clinical trials with its leading candidate
vaccine called UreAB. The vaccine is based on urease. Urease is present in all
strains of H. PYLORI and is exposed on the surface of the bacteria as a target
for an antibody.
In October 1996, OraVax announced results of a Phase II safety and
immunogenicity study of recombinant urease, formulated with a mucosal adjuvant.
While the study involved a small population, it provided evidence that the
vaccine could have therapeutic activity in humans naturally infected with H.
PYLORI. These results are consistent with earlier results in animal models.
Based on the results indicating therapeutic activity of UreAB, efforts are
being directed toward optimizing the vaccine formulation. In October, 1997
OraVax initiated a second Phase II safety and immunogenicity clinical study at
the Beth Israel-Deaconess Medical Center, Boston, the objective of which is to
optimize the formulation of UreAB. The study is in progress.
OraVax is also undertaking three other clinical studies, with the objective
of identifying populations in which vaccine efficacy can be measured. In January
1997 OraVax initiated a study in Mexico City in which up to 200 H.
PYLORI-infected children and adults are being followed after antibiotic cure to
determine the incidence of reinfection. A similar study in Lima, Peru was
initiated in January 1998. The results of these studies, which are expected to
take 18-24 months, could provide a basis for Phase II and III trials of the
ability of immunization to prevent reinfection. In a third study, initiated in
October 1997 at the Veterans Administration Medical Center and Baylor
University, Houston, Texas, healthy uninfected volunteers will be challenged
with H. PYLORI. This study will provide a human challenge model in which the
prophylactic activity of UreAB can be determined. Results are expected in 1999.
COLLABORATION FOR H. PYLORI PRODUCT WITH PMC. In March 1995, OraVax formed
a joint venture with Pasteur Merieux Serums & Vaccins S.A., now Pasteur Merieux
Connaught, for the development, manufacturing, marketing and sale of
immuno-therapeutic and preventive vaccines against H. PYLORI infections in
humans. Under the joint venture, OraVax and PMC agreed to co-develop certain
target products which include vaccines that use the urease protein or any of its
sub-units as an antigen. OraVax and PMC share equally in profits from the sales
of the target products and in all future research, development, clinical and
commercialization costs. OraVax and PMC estimate that research, development and
clinical costs will exceed $50.0 million. PMC is providing technical expertise
and will also provide marketing expertise to the joint venture. PMC made an
initial payment of $3.2 million directly to OraVax which included $0.6 million
to recognize the value of research and development conducted by OraVax in the
first quarter of 1995 prior to the formation of the joint venture, and a
milestone payment of $2.6 million to recognize the value of technology
previously developed by OraVax and made available to the joint venture. In
addition, PMC purchased $2.5 million of OraVax preferred stock. Subsequently,
PMC purchased an additional $1.0 million of common stock in OraVax's initial
public offering. In addition, PMC agreed to pay OraVax directly up to $12.0
million during the development period, subject to the achievement of certain
clinical and regulatory milestones, of which $0.6 million was paid to OraVax in
December 1995. However, OraVax cannot guarantee that any milestones which
trigger such future payments will be achieved.
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Beginning in the second quarter of 1995, research, development and
commercialization activities of the joint venture were conducted through two
equally controlled partnerships which have contracted with OraVax to perform the
research, development and clinical trial activities. OraVax earned $7.6 million,
$6.6 million and $4.8 million under these contracts during 1997, 1996 and 1995,
respectively. In addition, during 1996, the joint venture entered into research
and development contracts with PMC and third parties. The research and
development budgets of the two partnerships comprising the joint venture are
established by joint committees in which each of the parties has an equal
participation and role. The venturers will pay approximately equal shares of the
agreed budgets. OraVax will receive revenue from the partnerships for the
research and development work which is requested to be performed by OraVax and
funded by the partnerships. OraVax cannot guarantee, however, that it will be
selected to perform such work. OraVax and PMC each licensed to the joint venture
upon its formation the right to use all of their respective existing proprietary
technologies relating to vaccines for the treatment or prevention of H. PYLORI,
except for so-called naked DNA technology (for an injectable vaccine) which is
the subject of a separate collaboration between PMC and a third party.
Additional technology in the H. PYLORI field acquired by either party since the
formation of the joint venture is required to be offered to the joint venture.
The joint venture itself has also obtained licenses to relevant technology from
third parties, including a license in November 1996 of the complete genome
sequence of H. PYLORI from MedImmune and Human Genome Sciences.
Any marketing activities of the joint venture will be managed by the joint
venture's marketing committee which is controlled by PMC.
OraVax and PMC each have a contractual right to withdraw from the joint
venture only in the event that there is a failure to efficiently and effectively
carry out the research and development program or a failure both of urease, and
of any other antigen or combination of antigens or formulations to work and
irreconcilable differences on how to proceed, in either case subject to
arbitration. In the event of termination, in all cases except breach, both
parties can commercialize the target products upon payment of cross-royalties.
HNK20 INTRANASAL IGA ANTIBODY AGAINST RSV
MARKET OPPORTUNITY. OraVax is developing HNK20, a monoclonal IgA antibody
product designed to prevent viral pneumonia in children caused by respiratory
syncytial virus or RSV. In the United States, approximately 250,000 children
annually have moderate to severe underlying medical problems that put them at
risk of contracting viral pneumonia from RSV infection.
ORAVAX APPROACH. OraVax is developing its HNK20, a monoclonal IgA antibody,
designed for administration by nose drop. Based on the results of primate
studies, the OraVax product candidate appears to be safe and provide protection
with small doses of antibody administered daily by nose drop. Studies in several
species, including nonhuman primates, indicate that HNK20 is effective when
administered once daily. OraVax expects that its product, if successfully
developed, would be used to protect those children at risk from RSV infection,
particularly during the winter season when RSV infection is most prevalent.
OraVax received approval from the FDA to initiate clinical trials of HNK20
under an Investigational New Drug Application or IND filed in March 1994. Safety
of HNK20 was initially demonstrated in Phase I/II clinical studies in adults. A
Phase I safety trial in children was completed in July 1995. A Phase II safety
and pharmacology trial in premature infants and infants with bronchopulmonary
dysplasia at high risk of contracting RSV viral pneumonia was completed in April
1996. Results of the studies indicated that HNK20 was well tolerated in the
target population; however, no significant differences were observed between the
HNK20 group and the placebo group related to the incidence of RSV infections,
pneumonia or hospitalization.
In May 1996, OraVax initiated a Phase III study designed to determine the
prophylactic effectiveness of intranasal administration of HNK20 in premature
infants and infants with
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bronchopulmonary dysplasia at high risk of contracting RSV viral pneumonia. The
results, announced in March 1987, failed to demonstrate a
statistically-significant reduction in hospitalization. However, the results
indicated that infants treated with HNK20 experienced a 24% reduction in lower
respiratory tract infection and an 11.4% reduction in the frequency of
hospitalization relative to infants receiving placebo, with a greater reduction
observed in younger infants.
OraVax believes that an additional Phase III study could be conducted in the
northern hemisphere to test the efficacy of HNK20, at an elevated dose level, in
infants under four months of age at study entry. OraVax will need to secure
additional partnerships or other sources of funding in order to conduct such a
study.
CDVAX AND CDIG AGAINST ANTIBIOTIC-ASSOCIATED COLITIS
MARKET OPPORTUNITY. OraVax is developing CdVax, a vaccine designed to
prevent antibiotic-associated colitis caused by Clostridium difficile (C.
DIFFICILE). Antibiotic treatment results in a decrease in the number of
non-disease causing bacteria in the intestine, a condition allowing the rapid
growth of the antibiotic-resistant C. DIFFICILE. The C. DIFFICILE bacteria
produce two toxins known as A and B toxins that cause intestinal inflammation
and fluid secretion.
ORAVAX APPROACH. OraVax has developed CdVax, containing chemically
inactivated A and B toxins which could be administered prior to exposure to the
C. DIFFICILE bacteria. Preclinical trials in animal models with CdVax have
provided preliminary indications that CdVax is effective in prevention of C.
DIFFICILE induced disease. A potential use for the vaccine is to stimulate
high-level antitoxin antibodies in plasma donors. These plasma donations will be
used to prepare an immune globulin product (CdIG) for use in the short-term
prophylaxis and therapy of C. DIFFICILE infections.
In October 1997, OraVax was awarded a Phase II Small Business Innovation
Research or SBIR grant totaling $690,000 from the National Institutes of Health
in support of CdVax and CdIG development. OraVax has filed an orphan drug
application for the colitis indication and filed an IND with the U.S. FDA in
1998. Clinical trials were initiated in February 1999.
CHIMERIVAX-TM- PLATFORM TECHNOLOGY
OraVax has developed a platform technology for the construction of vaccines
against a number of viral infections caused by members of the family
FLAVIVIRIDAE (Flaviviruses). The underlying technology was developed jointly by
St. Louis University and an exclusive worldwide license was granted to OraVax on
September 8, 1997. Flavivirus infections of medical significance include
hepatitis C, dengue, Japanese encephalitis, tick-borne encephalitis, St. Louis
encephalitis, and yellow fever. OraVax has developed vaccine candidates against
two disease targets, Japanese encephalitis and dengue, and has initiated
research and development on a product candidate addressing hepatitis C.
ARILVAX-REGISTERED TRADEMARK- VACCINE AGAINST YELLOW FEVER
In November 1997, OraVax acquired exclusive U.S. sales, marketing and
distribution rights to the Arilvax-Registered Trademark- yellow fever vaccine
from Medeva Pharma Limited. OraVax also agreed to work with Medeva to introduce
the vaccine into other international markets.
Under the terms of the agreement, OraVax will conduct clinical studies
necessary for U.S. registration of the vaccine and will market and distribute
the product to both civilian and military groups in the U.S.
Arilvax-Registered Trademark- is currently marketed by Medeva in Europe and
selected Asian markets. Medeva will fund all costs associated with the
agreed-upon clinical trials and with securing regulatory approval in the U.S.
Based on the established performance of Arilvax-Registered Trademark- in other
markets and discussions with the U.S. FDA, Medeva anticipates submitting a U.S.
product license application (PLA) in 1999. OraVax does not anticipate incurring
any material net expenditures under this agreement until 2000 at which time,
assuming a U.S. PLA is filed, it would expect to incur premarketing and
predistribution costs. OraVax believes it can market
Arilvax-Registered Trademark- effectively, with a small sales force, since the
market is currently restricted to the U.S. military and to physicians and travel
medicine clinics approved by state health departments.
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JE VACCINE AGAINST INFECTION BY THE JAPANESE ENCEPHALITIS VIRUS
OraVax is developing a vaccine for prevention of Japanese encephalitis (JE)
viral infections. JE is a potentially fatal neurotropic viral infection common
in Asia, including Japan Korea, Taiwan, China, India and Thailand. The World
Health Organization has identified a high priority for the development of safer
and less expensive vaccines against JE, which would ensure its use in endemic
regions. In addition, a safer vaccine that requires only a single dose for
immunization would better meet the needs of travelers and military. OraVax has
demonstrated safety and preclinical efficacy of its JE vaccine based on the
ChimeriVax-TM- technology in animal models, including nonhuman primates. OraVax
is currently in pilot production under the FDA's good manufacturing practices,
and expects to file an IND and initiate clinical trials during 1999.
DENGUE FEVER
Dengue is a mosquito-borne viral infection. The disease is characterized by
two distinct clinical syndromes: (1) dengue fever, a debilitating acute disease
characterized by fever, rash and muscle and joint pain and (2) dengue
hemorrhagic fever (DHF) characterized by prostration, bleeding and shock. Dengue
occurs throughout the tropical regions of the world, and is intermittently
introduced into the United States, Australia and Europe, with ensuing outbreaks.
To OraVax's knowledge, currently there is no specific treatment and no vaccine
is available for prevention of the infection.
There are four distinct viruses that cause dengue fever (dengue types 1-4).
OraVax has developed a candidate ChimeriVax-TM- vaccine against dengue type 2
which is in preclinical development. OraVax's objective is to develop a vaccine
containing all four dengue serotypes. In November 1998, OraVax entered into a
partnership with PMC for commercialization of the ChimeriVax-TM- dengue vaccine.
HEPATITIS C
Hepatitis C virus causes an estimated 20% of all cases of viral hepatitis,
and is the agent responsible for 80-90% of all cases of "nonA-nonB viral
hepatitis." OraVax believes that its ChimeriVax technology could be used in
developing a vaccine that would stimulate both humoral and cellular immunity
against hepatitis C. As with dengue, a multivalent vaccine is required, with
simultaneous immunization against two or three different hepatitis C types
representing the majority of types causing human illness.
TICK-BORNE ENCEPHALITIS
Tick-borne encephalitis or TBE, which can cause severe illness or death,
afflicts individuals in eastern Europe and the former USSR. OraVax believes its
ChimeriVax-TM- technology could be used in developing a TBE vaccine that would
have significant advantages over existing vaccines including, single dose, life
long immunity, safety and low cost.
OTHER ORAVAX TECHNOLOGIES
In addition to OraVax's three principal product development programs, OraVax
has rights to certain other technologies which may have the potential to be
developed into products. These technologies also build on OraVax's knowledge of
the mucosal immune system and immunology.
IGA ANTIBODY TECHNOLOGY. OraVax's IgA antibody technology includes methods
for stimulating IgA antibody production, producing recombinant secretory
component and linking IgA antibody to secretory component. OraVax's current
efforts in these areas are focused on the development of the HNK20 monoclonal
IgA antibodies against RSV. OraVax's holds a U.S. patent relating to the HNK20
monoclonal IgA antibody and has filed patent applications in Europe and Japan.
In addition, OraVax has filed a U.S. patent application claiming the DNA
encoding the RSV-recognition site. OraVax also has an exclusive worldwide
license from Harvard University to a patent application covering complexes
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of antibody and secretory component and methods for producing such complexes,
including methods for the production of recombinant secretory component and for
linking IgA antibodies to secretory component.
VIRICLE TECHNOLOGY. The bluetongue virus (BTV) afflicts sheep and cattle in
livestock raising regions, including the western United States, Australia and
South Africa, causing still births. Genetically engineered virus-like particles
known as Viricles-Registered Trademark- were developed as a vaccine against BTV
in sheep and against african horse sickness. OraVax has incorporated a portion
of the C. DIFFICILE gene into these virus-like particles and has shown that the
resulting Viricle vaccine stimulates antibody against both BTV and C. DIFFICILE.
SHIGELLA LIVE VECTOR ORAL VACCINE TECHNOLOGY. Infection by Shigella
bacteria is the leading cause of bacillary dysentery. Bacillary dysentery is a
worldwide problem, with the highest incidence among children in developing
countries. While certain antimicrobial drugs may provide protection against
Shigella, the widespread use of such drugs has not been recommended because of
their side effects and the possibility of inducing the development of drug
resistant strains of bacteria.
COPOLYMER MICROSPHERE TECHNOLOGY. OraVax has a non-exclusive license to a
patent application covering the use of copolymer microsphere technology in the
development of oral vaccines directed against five specific disease targets,
including H. PYLORI and C. DIFFICILE. However, this technology is not currently
used in formulating any OraVax product candidates. OraVax has a non-exclusive
license to an issued U.S. patent relating to the use of copolymer microspheres
in injected vaccines. OraVax is aware of an additional issued U.S. patent
relating to selective release of active ingredients through the use of copolymer
microspheres.
HYDROXYAPATITE. OraVax has an exclusive license from Harvard University to
a patent covering the use of hydroxyapatite crystals as a particulate carrier
for antigens used as oral vaccines. The patent titled "Hydroxyapatite-Antigen
Conjugates and Methods for Generating a Poly-Ig Immune Response", was issued in
August of 1995, US patent #5,443,832.
LICENSE OF CAGA. In September 1996, OraVax entered into a licensing
agreement with bioMerieux Vitek, Inc. granting bioMerieux exclusive rights to
develop automated human diagnostic products incorporating a proprietary OraVax
antigen. The antigen, called CagA, is a component of H. PYLORI. Strains of H.
PYLORI producing CagA are thought to be among the most virulent. Under the terms
of the agreement, bioMerieux receives an exclusive, royalty-bearing sublicense
to manufacture, use, sell, lease, and otherwise distribute any licensed products
for use in the field of in vitro diagnostic tests using instruments that perform
automatic, multiparametric immunoanalysis. This sublicense is worldwide, except
in Japan, where coexclusive rights were granted. Additionally, in March of 1998,
OraVax entered into a separate licensing agreement with Biomerica, Inc. for the
diagnostic use of CagA in in-office diagnostic tests. Under the terms of the
agreement, Biomerica receives an exclusive, royalty-bearing, worldwide,
sublicense to manufacture, use, sell, lease, and otherwise distribute any
licensed products for use as a single diagnostic test, or a component of a
diagnostic test that incorporates the CagA antigen and is intended for single
use. OraVax retains all rights to the use of CagA for vaccines to treat or
prevent diseases caused by H. PYLORI infection. CagA was originally identified
by Martin J. Blaser, M.D., Timothy Cover, M.D. and Murali Tummuru, Ph.D. of
Vanderbilt University School of Medicine. In 1993, OraVax acquired worldwide
exclusive rights to CagA patented by Vanderbilt University.
MANUFACTURING
At present, OraVax's ability to manufacture its products is limited to
clinical trial quantities. OraVax does not have the capability to manufacture
commercial quantities of products.
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UREAB ORAL VACCINE
The UreAB vaccine product used in the Phase I clinical trials is
manufactured in the biological production facility of the Walter Reed Army
Institute of Research in Forest Glen Section, Silver Spring, Maryland under a
cooperative research and development agreement with the United States Army.
OraVax anticipates the continued use of this facility to support Phase II and at
least the initial portion of any Phase III trials. OraVax's partner, PMC, has
initiated manufacturing based on the FDA's good manufacturing practices at its
facilities in Marcy l'Etoile (Lyon) France, and should be able to provide
vaccine for Phase III trials.
HNK20 LNTRANASAL ANTIBODY
Manufacturing of HNK20 for Phase I and Phase II clinical trials has been
performed by OraVax at its primary facility in Cambridge, Massachusetts and by
third parties under contract to OraVax. The product used in the Phase III
clinical trials conducted in the southern hemisphere which commenced at the end
of the second quarter of 1996 was manufactured by a contract manufacturer.
OraVax had previously anticipated using product from inventory produced by this
contract manufacturer to conduct a second Phase III trial in North America
during the winter of 1997-1998. However, during an audit conducted by OraVax in
October 1997 of an additional contract manufacturer, OraVax discovered that
improper handling of the product by the latter manufacturer during a step which
is not part of the current process, precluded the clinical use of this supply of
HNK20. The conduct of the trial will require additional funding and OraVax
continues to seek potential corporate partners for such funding.
CDAB VACCINE
Product for early clinical trials has been manufactured by third parties
under contract to OraVax and under a cooperative research and development
agreement with the Walter Reed Army Institute of Research. OraVax, however, may
elect to manufacture product for further clinical trials in its own facilities
in Cambridge or Canton, Massachusetts.
PATENTS AND PROPRIETARY RIGHTS; TECHNOLOGY AGREEMENTS
The following sets forth OraVax's proprietary position with respect to its
principal product development programs.
RSV PRODUCT DEVELOPMENT PROGRAM
OraVax's patent application, filed worldwide, describing the HNK20
monoclonal IgA antibody issued in the United States in 1996. OraVax has filed a
United States patent application claiming the DNA encoding the RSV-recognition
site. OraVax is not aware of any other patents or patent applications describing
this antibody.
H. PYLORI PRODUCT DEVELOPMENT PROGRAM
In addition to its own inventions, OraVax has worldwide rights to inventions
made by six groups of researchers in the field of H. PYLORI:
During 1997 OraVax and its joint venture partner, PMC, also acquired a
worldwide exclusive license to the Vibrovec live-vector vaccine delivery system
from Virus Research Institute in Cambridge, Massachusetts for antigens being
evaluated by the partners. The joint venture partners also completed option
agreements with Aquila covering the QS21 adjuvant. Separately, OraVax secured an
exclusive option agreement with IOMAI for their transdermal vaccine delivery
system.
HUMAN GENOME SCIENCES/MEDIMMUNE. In November 1996, OraVax and PMC entered
into a research and licensing agreement with Human Genome Sciences, Inc., or HGS
and MedImmune, licensing the complete genome sequence of H. PYLORI for the
development of vaccines. Under this
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agreement, OraVax and PMC have control and responsibility for filing patents on
new molecular discoveries for use in the development of vaccines against H.
PYLORI infection. Financial terms of the agreement call for OraVax and PMC to
make license payments to HGS/MedImmune beginning with execution of the agreement
and upon issuance of the first U.S. patent. In addition to royalties on any
future sales, future milestone payments will be paid to HGS/MedImmune to reflect
attainment of certain product development and revenue goals. During 1997, OraVax
and PMC filed several additional patent applications covering new molecules
identified using the genome sequence information.
CASE WESTERN RESERVE UNIVERSITY. In October 1993, OraVax entered into an
assignment agreement with its collaborators at Case Western Reserve University
or CWRU and a research agreement with these collaborators and CWRU. Pursuant to
the agreement, OraVax has been assigned preexisting patent rights claiming oral
immunization using H. PYLORI antigens. One patent was issued in the U.S. in
1996. The research agreement provides for sponsorship by PM-O of the continuing
development work of the collaborators in the field of H. PYLORI, including the
development of:
- monoclonal antibodies against urease and other antigens;
- adjuvants to be used in conjunction with an oral vaccine directed against
H. PYLORI; and
- animal models for the testing of oral vaccines directed against H. PYLORI.
Under the terms of the research agreement, OraVax will be granted a
worldwide exclusive license to inventions made in the course of sponsored
research.
CENTRE HOSPITALIER UNIVERSITAIRE VAUDOIS (CHUV); MAX-PLANCK INSTITUTE. In
April 1992, OraVax entered into a research and development agreement with the
Foundation Pour La Recherche Des Maladies GastroIntestinales (Gastrofonds) in
Lausanne, Switzerland pursuant to which OraVax is sponsoring research in the
field of H. PYLORI at the CHUV in Lausanne, Switzerland, and at the Max-Planck
Institute in Tubingen, Germany. Pursuant to this agreement, Gastrofonds, who
represents collaborating inventors at the CHUV and the Max-Planck Institute,
have assigned to OraVax title to two patent applications covering urease as a
vaccine for prevention and treatment of H. PYLORI infection. Also pursuant to
this agreement, Gastrofonds has granted OraVax a worldwide exclusive license to
all patent rights and know-how developed during the course of the sponsored
research in the field of vaccine and secretory IgA products for prevention or
treatment of infections caused by H. PYLORI.
INSTITUT PASTEUR. OraVax also has a co-exclusive license, with PMC, to an
issued patent and two patent applications owned by the Institut Pasteur covering
the H. PYLORI urease antigen, heat shock protein A (hspa) and other antigens.
SAINT BARTHOLOMEW'S HOSPITAL MEDICAL COLLEGE. In October 1992, OraVax
entered into an agreement with The Medical College of Saint Bartholomew's
Hospital in London, England (St. Bart's) pursuant to which OraVax sponsored,
from October 1992 through August 1995, research relating to the development of
vaccine candidates for use in an oral vaccine directed against H. PYLORI. Under
the agreement, OraVax was granted a worldwide nonexclusive license to
preexisting patent rights and know-how in the field of H. PYLORI developed by
St. Bart's, and a worldwide exclusive license to all patent rights and know-how
developed during the course of the sponsored research.
VANDERBILT UNIVERSITY. In September 1993, OraVax entered into a license
agreement with Vanderbilt University pursuant to which Vanderbilt has granted to
OraVax an exclusive worldwide license to patent rights to a specific region of
the gene for an H. PYLORI antigen, the Cag A antigen, as a vaccine and
diagnostic means and methods for detecting predisposition to peptic ulceration,
and to related know-how.
OraVax anticipates that its H. PYLORI vaccine products will be used in
conjunction with mucosal adjuvants or mucosal antigen delivery systems. The
UreAB vaccine formulation tested in a Phase II clinical trial uses the native
heat-labile enterotoxin (LT) produced by E. coli as a mucosal adjuvant.
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OraVax is aware of a patent application owned by a competitor claiming use of LT
combined with H. PYLORI antigens, including urease, against H. PYLORI infection.
Whether this application will issue in the U.S. or in other countries is
uncertain. OraVax currently has a license to the U.S. Navy's patent application
covering the use of native LT as a mucosal adjuvant. OraVax is aware of a patent
owned by the Kitasato Institute that also claims the use of native LT. OraVax is
also conducting research on the polyphosphazene mucosal adjuvant and the Vibrio
cholerae live-vector delivery system under an option from Virus Research
Institute in Cambridge, Massachusetts. Other formulation technologies being
evaluated include mutants of LT that may have advantages in greater safety or
potency, the Shigella live-vector system developed by OraVax and technologies
developed or controlled by PMC. It is possible that the joint venture may need
to obtain a license to the patent rights owned by a third party covering a
mucosal adjuvant or mucosal antigen delivery system, and OraVax does not know
whether it will be able to obtain any such license on favorable terms.
C. DIFFICILE PRODUCT DEVELOPMENT PROGRAM
In March 1993, OraVax entered into a collaborative development and license
agreement with Techlab, Inc. pursuant to which OraVax is sponsoring research and
the development of vaccines for the prevention of diseases caused by C.
DIFFICILE. With respect to technology developed during the course of the
collaboration, OraVax will have title to all patent rights and know-how invented
by OraVax employees or developed jointly by OraVax and Techlab employees, and
Techlab will have title to all patent rights and know-how developed solely by
its employees. Techlab has granted to OraVax a worldwide exclusive license to
technology owned solely by Techlab. OraVax has filed a patent application
covering its C. DIFFICILE vaccine product candidate and related technology.
OraVax owns this patent application and any patents issued under the
application.
GENERAL
OraVax's future success will depend, in part, upon its ability to develop
patentable products and technologies and obtain patent protection for its
products and technologies both in the U.S. and abroad. OraVax cannot guarantee
that additional patent applications owned or licensed by OraVax will issue as
patents or that patent protection will be secured for any particular technology.
Neither can OraVex guarantee that patents which are issued will be valid or that
they will provide OraVax with meaningful protection against competitors or with
a competitive advantage. OraVax cannot guarantee that patents will not be
challenged or designed around by others. OraVax could incur substantial costs in
proceedings before the U.S. Patent and Trademark Office, including interference
proceedings. These proceedings could also result in adverse decisions as to the
patentability of OraVax's licensed or assigned inventions. Further, OraVax
cannot guarantee that it will not infringe upon existing or future patents owned
by others. Neither can OraVax guarantee that it will not need to acquire
licenses under patents belonging to others for technology potentially useful, or
necessary to OraVax, or that such licenses will be available to OraVax, if at
all, on terms acceptable to OraVax. Moreover, OraVax cannot guarantee that any
patent issued to or licensed by OraVax will not be infringed by others. Also,
OraVax cannot guarantee that third parties will not bring suit against OraVax
for patent infringement or for declaratory judgment to have the patents owned or
licensed by OraVax declared invalid. OraVax also relies on trade secrets and
other unpatented proprietary technology. OraVax cannot guarantee that it can
meaningfully protect its rights in such unpatented technology or that others
will not independently develop substantially equivalent products and processes
or otherwise gain access to OraVax's technology.
OraVax is engaged in research and development collaborations and licensing
arrangements with a number of academic, government and commercial research
groups. OraVax has entered into these agreements to secure rights to certain
technologies, processes and compounds that it believes may be important to the
development of its products. In general, the research and development agreements
provide for OraVax sponsorship of research and development in exchange for
exclusive, royalty-bearing
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licenses or options to the technology developed during the course of the
sponsored research. Certain of these agreements also include nonexclusive
licenses to preexisting technology rights. In general, the license agreements
grant to OraVax exclusive licenses in exchange for varying combinations of
license fees, milestone payments, royalties and minimum royalties. In addition,
the license agreements typically place commercialization obligations on OraVax
which, if not satisfied, may result in the licensor having the right to render
the license nonexclusive or to terminate the agreement. In certain instances,
OraVax has obtained assignments of technology, although OraVax's ownership, in
some cases, is subject to forfeiture for failure to commercialize. Typically,
the agreements are terminable by either party for breach. Further, the research
agreements are generally terminable in the discretion of either party and the
license agreements are generally terminable by OraVax in its discretion.
GOVERNMENT REGULATION
Regulation by governmental authorities in the U.S. and other countries will
be a significant factor in the manufacturing and marketing of any products that
may be developed by OraVax. The nature and extent to which such regulation may
apply to OraVax will vary depending on the nature of any such products. All of
OraVax's products will require regulatory approval by governmental agencies
prior to commercialization. Human therapeutics, in particular, are subject to
rigorous preclinical and clinical testing and other approval procedures by the
FDA and similar health authorities in foreign countries. Various federal
statutes and regulations also govern or influence the manufacturing, safety,
labeling, storage, record keeping and marketing of such products.
The Immunization Practices Advisory Committee or ACIP of the CDC has a role
in setting the market for most, if not all, of the products OraVax intends to
make. The ACIP meets quarterly to review developing data on licensed vaccines,
and those approaching license, as well as epidemiologic data on the need for
these products. The recommendations of ACIP on the appropriate use of vaccines
and related products are published in the Morbidity and Mortality Weekly Report
and reprinted in several journals. The CDC develops epidemiologic data in
support of the need for new vaccines and monitors vaccine usage and changes in
disease incidence. In addition CDC staff frequently act as key advisors to the
FDA in their review process.
OraVax believes that both its vaccines and antibody products will be
classified by the FDA as "biologic products" as opposed to "drug products." New
biologic products must satisfy several requirements in order to receive
regulatory approval, including:
- preclinical laboratory and animal tests;
- submission by OraVax of:
(1) an IND application to the FDA or to an individual physician, or
(2) a request for approval of intrastate trials to an institutional review
board of a research institution, one of which must become effective
before human clinical trials begin;
- the performance of well-controlled clinical trials; and
- product license application or PLA submitted to the FDA containing the
results of clinical and manufacturing information prior to commercial sale
or shipment of the product.
During the approval process, the FDA must confirm that appropriate standards
were maintained during product testing and that the product meets regulatory
standards for safety and efficacy.
In addition to obtaining FDA approval for each PLA, an establishment license
application or ELA must be filed and approved by the FDA for the manufacturing
facilities for a biologic product before commercial marketing of the biologic
product is permitted. As a consequence of regulatory reforms initiated in 1995,
a formal ELA may not be needed for some of OraVax's product candidates. However,
manufacturing practices will continue to be subject to FDA regulations and
review. The regulatory process may take many years and requires the expenditure
of substantial resources. Before testing of
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any agents with potential therapeutic value in healthy human test subjects or
patients may begin, government requirements for preclinical data must be
satisfied. These data, obtained from studies in animals, as well as from
laboratory studies, are generally submitted in an IND application or its
equivalent in countries outside the United States where clinical studies are to
be conducted. These preclinical data must provide an adequate basis for
evaluating both the safety and the scientific rationale for the initial Phase 1
studies in human volunteers.
Phase I clinical studies are generally performed in healthy human subjects
or, occasionally, in selected patients with the targeted disease or disorder.
The goal of the Phase I study is to establish initial data about safety and
tolerance of the drug in humans. Also, the first data regarding the absorption,
distribution, metabolism and excretion of the drug in humans, or the immune
response to a vaccine, may be obtained. In Phase II human clinical studies,
evidence is sought about the desired therapeutic efficacy of a drug or antibody,
or the immune response to a vaccine, in limited studies with small numbers of
carefully selected subjects. Efforts are made to evaluate the effects of various
dosages and to establish an optimal dosage level and dosage schedule. Additional
safety data are also gathered from these studies. The Phase III clinical
development program consists of expanded, large scale, multicenter studies of
patients with the target disease or disorder, or in the case of a preventive
antibody or vaccine, who are susceptible to the disease. The goal of these
studies is to obtain definitive statistical evidence of the efficacy and safety
of the proposed product and dosage regimen.
At the same time that the human clinical program is being performed,
additional non-clinical (animal) studies may also be conducted. In addition,
expensive, long duration toxicity, teratogenicity (birth defects) and
carcinogenicity studies may be required to demonstrate the safety of drug
administration for the extended period of time required for effective therapy.
Also, a variety of laboratory, animal and initial human studies are performed to
establish manufacturing methods for the drug, as well as stable, effective
dosage forms. All data obtained from this comprehensive development program are
submitted as a PLA to the FDA and the corresponding agencies in other countries
for review and approval. FDA approval of the PLA and the associated
manufacturing documentation is required before marketing may begin in the United
States. Although the FDA's policy is to review priority applications within 180
days of their filing, in practice longer times may be required. The FDA
frequently requests that additional information be submitted requiring
significant additional review time. Essentially, all proposed products of OraVax
will be subject to demanding and time-consuming PLA or similar approval
procedures in the countries where OraVax intends to market its products. These
regulations define not only the form and content of the development of safety
and efficacy data regarding the proposed product, but also impose specific
requirements regarding manufacture of the product, quality assurance, packaging,
storage, documentation and record keeping, labeling and advertising, and
marketing procedures. Effective commercialization also requires inclusion of
OraVax's products in national, state, provincial, or institutional formularies
or cost reimbursement systems.
In addition, the activities of OraVax, and its potential partners and
licensees are subject to laws and regulations regarding, among other things:
- occupational safety;
- the use and handling of radioisotopes;
- environmental protection;
- laboratory and manufacturing working conditions;
- handling and disposition of potentially hazardous materials; and
- use of laboratory animals.
Whether or not FDA approval has been obtained, approval of a product by
comparable regulatory authorities may be necessary in foreign countries prior to
the commencement of marketing of the product in such countries. The approval
procedure varies among countries, can involve additional
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testing, and the time required may differ from that required for FDA approval.
Although there is now a centralized European Community approval mechanism in
place, each European country may nonetheless impose its own procedures and
requirements, many of which are time consuming and expensive. Thus, there can be
substantial delays in obtaining required approvals from both the FDA and foreign
regulatory authorities after the relevant applications are filed. OraVax expects
to rely on corporate partners and licensees, along with OraVax's expertise, to
obtain governmental approval in foreign countries of drug formulations utilizing
its compounds.
EMPLOYEES
As of January 29, 1999, OraVax employed a work force of 64 persons including
61 persons employed full-time, of which 10 are leased employees, and 3 persons
employed part-time. Of this total work force, 51 persons are engaged in research
and development activities and 13 are devoted to facilities support and
administrative activities. Sixteen persons hold Ph.D. or M.D. degrees. A
significant number of OraVax's management and professional employees have had
prior experience with pharmaceutical, biotechnology or medical products
companies. OraVax believes that it has been successful in attracting skilled and
experienced scientific personnel. However, competition for such personnel is
intense. OraVax believes that its relationships with its employees are good.
ACADEMIC CONSULTANTS
OraVax has relationships with a number of academic consultants. These
persons are not employees of OraVax. Accordingly, OraVax has limited control
over their activities and can expect only limited amounts of their time to be
dedicated to OraVax's activities. These persons may or may not enjoy
relationships with other commercial entities, some of which could compete with
OraVax. Although the precise nature of each relationship varies, the consultants
generally sign agreements which provide for confidentiality of OraVax's
proprietary information and results of studies but not for the assignment of
inventions. OraVax cannot guarantee that it will be able to maintain the
confidentiality of its technology, the dissemination of which could have a
materially adverse effect on OraVax's business. Further, OraVax cannot guarantee
that it will be able to license inventions and technology discovered by such
consultants.
PROPERTIES
OraVax's administrative offices and research facilities consist of an
aggregate of approximately 53,000 square feet of leased space at 38 Sidney
Street in Cambridge, Massachusetts. In addition, OraVax leases a 47,000 square
foot manufacturing facility in Canton, Massachusetts, designed and equipped for
the commercial production of biologic products. The facility is not currently in
use. When it entered into this lease, OraVax purchased leasehold improvements
and other related assets from the former tenant, payable in installments through
1999. Since the merger was announced, OraVax has received increased interest
from prospective purchasers of its leasehold interests, leasehold improvements
and equipment in the Canton facility. Based on these indications of interest,
OraVax has explored the sale of its interests in the facility.
LEGAL PROCEEDINGS
By letter dated September 8, 1998, the Securities and Exchange Commission
(the "SEC") requested OraVax to furnish the SEC staff with documents for use in
connection with an SEC inquiry re: In the Matter of OraVax, Inc. (MB-998). The
requested documents generally pertain to statements made in SEC filings by
OraVax regarding OraVax's relationship with the U.S. Department of Defense's
Joint Vaccine Acquisition Program. OraVax has responded to the SEC's request and
to date has received no further requests or information concerning this matter.
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ORAVAX STOCK OWNERSHIP
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF ORAVAX, INC.
The following table sets forth certain information, as of January 29, 1999,
with respect to the beneficial ownership of OraVax's Common Stock by the
following persons:
- each person known by OraVax to own beneficially more than 5% of the
outstanding shares of Common Stock;
- each director of OraVax;
- each executive officer of OraVax; and
- all directors and executive's officers of OraVax as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF
OF COMMON STOCK PERCENTAGE OF TOTAL VOTING
BENEFICIALLY COMMON STOCK CAPITAL STOCK
BENEFICIAL OWNER OWNED OUTSTANDING OUTSTANDING
- ---------------------------------------------------------------- ----------------- --------------- ---------------
<S> <C> <C> <C>
5% STOCKHOLDERS
Peptide Therapeutics Group plc (1)............................ 2,193,537 9.9% 9.9%
DIRECTORS
C. Boyd Clarke (2)............................................ 0 * *
Lance K. Gordon(3)............................................ 306,829 1.4% 1.4%
Andre L. Lamotte (4).......................................... 610,857 2.8% 2.8%
Douglas MacMaster (5)......................................... 43,600 * *
Allen Misher (6).............................................. 18,333 * *
OTHER EXECUTIVE OFFICERS
Robert J. Gerety (7).......................................... 61,950 * *
Brigid A. Makes............................................... 5,000 * *
Thomas P. Monath (8).......................................... 196,145 * *
All directors and executive officers as a group (9)............. 1,242,714 5.6% 5.6%
</TABLE>
- ------------------------
* Less than 1%.
(1) The information reported is based on a Schedule 13D filed with the
Securities and Exchange Commission on January 11, 1999. The address of this
entity is 321 Cambridge Science Park, Milton Road, Cambridge, CB4 4WG,
England.
(2) Dr. Clarke resigned from the board of directors effective November 30, 1998.
(3) Includes 225,221 shares of Common Stock which Dr. Gordon has the right to
acquire within 60 days after January 29, 1999 upon exercise of outstanding
stock options.
(4) Includes 424,993 shares held by Medical Science Partners, L.P. ("MSP"),
26,320 shares held by Medical Science II Co-Investment L.P. ("MSP II-Co")
and 149,544 shares held by Medical Science Partners II, L.P. ("MSP II"). Dr.
Lamotte is the Managing General Partner of Medical Science Ventures, the
General Partner of MSP and is the Managing General Partner of Medical
Science Ventures II, the General Partner of MSP II and MSP II-Co, and may be
deemed to be the beneficial owner of the shares held by MSP, MSP II and MSP
II-Co although Dr. Lamotte disclaims beneficial ownership of such shares.
The address of Dr. Lamotte is c/o MSP, 161 Worcester Road, Framingham, MA
01701. Includes 10,000 shares which Dr. Lamotte may acquire upon the
exercise of options within 60 days after January 29, 1999.
(5) Includes 23,600 shares which Mr. MacMaster may acquire upon the exercise of
options within 60 days after January 29, 1999.
(6) Includes 13,333 shares which Dr. Misher may acquire upon the exercise of
options within 60 days after January 29, 1999.
(7) Includes 31,250 shares which Dr. Gerety may acquire upon the exercise of
options within 60 days after January 29, 1999.
(8) Includes 161,056 shares which Dr. Monath may acquire upon the exercise of
options within 60 days after January 29, 1999.
(9) Includes 464,460 shares which all directors and executive officers as a
group may acquire upon the exercise of options within 60 days after January
29, 1999.
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SELECTED FINANCIAL INFORMATION OF ORAVAX
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The following selected historical consolidated financial information for
OraVax for each of the fiscal years in the five-year period ended December 31,
1997 has been derived from OraVax's audited consolidated financial statements.
The consolidated financial statements as of September 30, 1998, December 31,
1997 and December 31, 1996 and for each of the fiscal years in the three-year
period ended December 31, 1997, and the nine-month period ended September 30,
1998 and 1997 are included elsewhere in this prospectus/proxy statement. The
consolidated balance sheet at September 30, 1998 and the consolidated statement
of operations for the nine months ended September 30, 1997 and 1998 are derived
from unaudited consolidated financial statements. The unaudited consolidated
financial statements include all adjustments, consisting only of normal
recurring adjustments, that OraVax considers necessary for a fair presentation
of its financial position and results of operations for these periods. The
selected data below as of and for the nine-month period ended September 30, 1998
are not necessarily indicative of the results of operations to be expected for
the fiscal year ending December 31, 1998. The following information should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and OraVax's Audited Consolidated Financial
Statements and the notes thereto included elsewhere in this prospectus/proxy
statement.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
1993 1994 1995 1996 1997 1997 1998
--------- --------- --------- --------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Collaborative research and
development.......................... $ -- $ -- $ 8,684 $ 6,595 $ 7,587 $ 5,581 $ 5,656
Government grants and other............ 349 257 311 870 583 343 615
Interest............................... 78 51 1,080 1,280 683 574 234
--------- --------- --------- --------- ---------- ---------- ----------
427 308 10,075 8,745 8,853 6,498 6,505
Expenses:
Research and development............... 5,981 8,406 12,450 21,009 14,589 10,963 10,391
General and administrative............. 1,848 2,580 3,299 3,750 3,422 2,615 2,807
Interest............................... 92 190 87 523 418 331 200
--------- --------- --------- --------- ---------- ---------- ----------
7,921 11,176 15,836 25,282 18,429 13,909 13,398
Equity in joint venture.................. -- -- (2,436) (5,085) (6,236) (4,608) (4,292)
--------- --------- --------- --------- ---------- ---------- ----------
Net loss................................. $ (7,494) $ (10,868) $ (8,197) $ (21,622) $ (15,812) $ (12,019) $ (11,185)
--------- --------- --------- --------- ---------- ---------- ----------
--------- --------- --------- --------- ---------- ---------- ----------
Net loss to common stockholders.......... $ (7,494) $ (10,968) $ (8,305) $ (21,622) $ (15,812) $ (12,019) $ (12,017)
--------- --------- --------- --------- ---------- ---------- ----------
--------- --------- --------- --------- ---------- ---------- ----------
Basic and diluted loss per share......... $ (1.90) $ (2.46) $ (1.58) $ (1.20) $ (0.97)
--------- --------- ---------- ---------- ----------
--------- --------- ---------- ---------- ----------
Weighted average number of basic and
diluted shares outstanding............. 4,377,131 8,794,775 10,031,222 10,007,495 12,401,826
--------- --------- ---------- ---------- ----------
--------- --------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
1993 1994 1995 1996 1997
--------- --------- --------- --------- ---------- SEPTEMBER 30,
1998
-------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and investments...................... $1,042 $3,706 $27,631 $22,125 $11,722 $1,372
Total assets.............................. 3,050 5,195 29,833 28,744 17,344 3,875
Working capital (deficit)................. (218) 1,400 23,109 14,694 7,837 (4,271)
Long term obligations..................... 679 462 492 2,659 1,298 173
Convertible preferred stock............... 14,988 27,331 -- -- 5,601 2,326
Total stockholders' equity (deficit)...... (14,152) (25,038) 24,513 18,424 9,785 (1,924)
</TABLE>
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ORAVAX MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BUSINESS OVERVIEW
OraVax is engaged in the discovery, development and commercialization of
vaccines and antibody products for the prevention or treatment of human
infectious diseases. OraVax's products are vaccines that stimulate the body's
own immunity to provide long term protection against disease, as well as
antibody products that provide immediate passive immunity to treat existing
infections or to protect against acute disease risk.
The ultimate success of OraVax is dependent upon its ability to raise
capital through equity financings, direct financings, corporate partnerships,
sale of product and interest income on invested capital. Additional capital will
be required to ensure the on-going viability of OraVax. OraVax has secured
interim sources of financing to support operations into the first quarter of
1999. This funding is secured with the tangible and intangible assets of OraVax,
in addition to some of its rights in its joint venture partnership with PMC.
While management believes that additional capital may be available to fund
operations, OraVax cannot guarantee that additional funds will be available when
required, on terms acceptable to OraVax.
On November 10, 1998, OraVax entered into an agreement to merge with Peptide
in a transaction expected to close prior to the end of the first quarter of
1999. The merger would create a larger biopharmaceutical company involved in the
development of novel drugs, vaccines and antibody products that control
significant human diseases. The merged company would have a total of ten
products in development, six of which are currently in clinical trials, with a
further four scheduled to go into clinical trials in the next twelve months, and
multiple corporate partnerships including those with PMC and SmithKline Beecham.
The new business combination would result in a broader portfolio of product
programs, and greater market presence and potential for expanded corporate
partnerships.
To date, OraVax has not received any revenues from the sale of products and
does not expect to receive any such revenues until late 2000, at the earliest.
OraVax's losses incurred since inception resulted principally from expenditures
under its research and development programs and OraVax expects to incur
significant operating losses over the next several years due primarily to
expanded research and development efforts, preclinical testing and clinical
trials of its product candidates, the acquisition of additional technologies,
the establishment of manufacturing capability and the performance of
commercialization activities. Results of operations may vary significantly from
quarter to quarter depending on, among other factors, the progress of OraVax's
research and development efforts, the receipt, if any, of milestone payments,
the timing of certain expenses and the establishment of collaborative research
agreements.
Under the terms of the joint venture agreement with PMC, ownership of the
joint venture is based upon the proportion of the working capital paid in by
OraVax versus PMC over the life of the joint venture. To date OraVax and PMC
have equally supported the budget and each has approximately 50% ownership. The
funding of the H. PYLORI program with PMC at 50% ownership has approximated $6.0
million to $6.5 million annually for OraVax to date, which is a substantial
portion of the company's total expenditures. Under the agreement, a shortfall in
funding by OraVax does not constitute a default of the joint venture. If
OraVax's funding, since inception of the partnership, falls below 40% of the
total for greater than a six month period, PMC would get an additional seat on
the board of directors, giving it effective overall control of the joint
venture.
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RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED WITH THREE MONTHS ENDED SEPTEMBER
30, 1997
OraVax's total revenues decreased to $1,907,000 in the three months ended
September 30, 1998 from $2,150,000 in the three months ended September 30, 1997.
In the three months ended September 30, 1998, OraVax's revenues consisted of
$1,699,000 of collaborative research revenues earned under the joint venture,
$178,000 from government grants and license fees earned in connection with
sublicensing its CagA antigen to BioMerieux Vitek, Inc. and BioMerica, Inc., and
$30,000 in interest earned on invested funds. In the three months ended
September 30, 1997, OraVax's revenues consisted of $1,869,000 of collaborative
research revenues earned under the joint venture, $141,000 from government
grants and an annual license fee earned in connection with sublicensing its CagA
antigen to BioMerieux Vitek, Inc., and $140,000 in interest earned on invested
funds. The decreased revenue was attributable to decreases in research and
development activities under the joint venture and in interest income as a
result of declining cash investments offset by an increase in license revenue
earned in connection with the 1998 sub-license of the CagA antigen to BioMerica,
Inc.
OraVax's total costs and expenses decreased to $4,251,000 in the three
months ended September 30, 1998 from $4,657,000 in the three months ended
September 30, 1997. Research and development expenses decreased 15% to
$3,233,000 in the three months ended September 30, 1998 from $3,787,000 in the
three months ended September 30, 1997. Significant contributors to OraVax's
research and development expenditures in the third quarter of 1998, versus the
third quarter of 1997, included the conduct of three small-scale Phase II
clinical studies under its H. PYLORI program and advanced activities under its
Japanese encephalitis program, including the investment in other aspects of the
ChimeriVax family of vaccine opportunities. These expenditures were more than
offset by a decrease in costs resulting from expenses that were incurred in the
third quarter of 1997, under the RSV program, that were not incurred in the
third quarter of 1998. The 24% increase in general and administrative expenses
to $960,000 in the three months ended September 30, 1998 from $776,000 in the
three months ended September 30, 1997 is principally due to advanced ChimeriVax
patent efforts, business development costs as OraVax continues to focus its
efforts on obtaining strategic collaborations, and legal costs associated with
OraVax's pursuit of potential equity financings, business combinations and
selling of assets to raise capital needed to support operations. Interest
expense decreased to $58,000 in the three months ended September 30, 1998 from
$94,000 in the three months ended September 30, 1997.
OraVax accounts for its investment in the joint venture under the equity
method of accounting. Accordingly, OraVax recorded its $1,313,000 and $1,437,000
share of the joint venture's losses in the third quarter of 1998 and 1997,
respectively. The decreased loss is principally due to third party obligations,
incurred by the joint venture, in the third quarter of 1997 compared to the same
period in 1998.
OraVax incurred a net loss from operations of $3,657,000 in the three months
ended September 30, 1998 compared to a net loss from operations of $3,944,000 in
the three months ended September 30, 1997.
In the first quarter of 1998, OraVax began recognizing the annual cumulative
6% dividend that accrues in stock and the amortization of the conversion
discount recorded as deferred financing costs, related to the December 1997
convertible preferred stock financing.
OraVax incurred a net loss to common shareholders of $3,908,000 in the three
months ended September 30, 1998 compared to a net loss to common shareholders of
$3,944,000 in the three months ended September 30, 1997.
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NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 1997
OraVax's total revenues increased to $6,505,000 in the nine months ended
September 30, 1998 from $6,498,000 in the nine months ended September 30, 1997.
In the nine months ended September 30, 1998, OraVax's revenues consisted of
$5,656,000 of collaborative research revenues earned under the joint venture,
$615,000 from government grants and license fees earned in connection with
sublicensing its CagA antigen to BioMerieux Vitek, Inc. and BioMerica, Inc., and
$234,000 in interest earned on invested funds. In the nine months ended
September 30, 1997, OraVax's revenues consisted of $5,581,000 of collaborative
research revenues earned under the joint venture, $343,000 from government
grants and an annual license fee earned in connection with sublicensing its CagA
antigen to BioMerieux Vitek, Inc., and $574,000 in interest earned on invested
funds. Principal components of revenue in 1998 versus 1997 include increases in
research and development activities of the joint venture, in grant revenue from
the October 1997 award of a C. DIFFICILE Phase II Small Business Innovation
Research grant from the National Institute of Health and in-license revenue
earned in connection with the 1998 sub-license of its CagA antigen to BioMerica,
Inc. offset by a decrease in interest income as a result of declining cash
investments.
OraVax's total costs and expenses decreased to $13,398,000 in the nine
months ended September 30, 1998 from $13,909,000 in the nine months ended
September 30, 1997. Research and development expenses decreased 5% to
$10,391,000 in the nine months ended September 30, 1998 from $10,963,000 in the
nine months ended September 30, 1997. Significant contributors to OraVax's
research and development expenditures in the nine months ended September 30,
1998, versus the nine months ended September 30, 1997, included the conduct of
four small-scale Phase II clinical studies under its H. PYLORI program and
advanced activities under its Japanese encephalitis program, including the
investment in other aspects of the ChimeriVax family of vaccine opportunities.
These expenditures were offset by a decrease in costs resulting from expenses
that were incurred in the nine months ended September 30, 1997, under the RSV
program, that were not incurred in the nine months ended September 30, 1998, and
from aggressive cost control. The 7% increase in general and administrative
expenses to $2,807,000 in the nine months ended September 30, 1998 from
$2,615,000 in the nine months ended September 30, 1997 is principally due to
advanced H. PYLORI and ChimeriVax patent efforts, business development costs as
OraVax continues to focus its efforts on obtaining strategic collaborations, and
legal costs associated with OraVax's pursuit of potential equity financings,
business combinations and selling of assets to raise capital needed to support
operations offset by a decrease in expenses associated with OraVax's workforce
reduction in the second quarter of 1997. Interest expense decreased to $200,000
in the nine months ended September 30, 1998 from $331,000 in the nine months
ended September 30, 1997.
OraVax accounts for its investment in the joint venture under the equity
method of accounting. Accordingly, OraVax recorded its $4,292,000 and $4,608,000
share of the joint venture partnerships' losses for the nine months ended
September 30, 1998 and 1997, respectively. The decreased loss is principally due
to third party obligations, incurred by the joint venture in the nine months
ended September 30,1997 as compared to the same period in 1998, which were
offset by an increase in the 1998 budgeted research and development activities
of both OraVax and PMC.
OraVax incurred a net loss from operations of $11,185,000 in the nine months
ended September 30, 1998 compared to a net loss from operations of $12,019,000
in the nine months ended September 30, 1997.
In the first quarter of 1998, OraVax began recognizing the annual cumulative
6% dividend that accrues in stock and the amortization of the conversion
discount recorded as deferred financing costs, related to the December 1997
convertible preferred stock financing.
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OraVax incurred a net loss to common shareholders of $12,017,000 in the nine
months ended September 30, 1998 compared to a net loss to common shareholders of
$12,019,000 in the nine months ended September 30, 1997.
YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996
OraVax's total revenues increased to $8,853,000 in 1997 from $8,745,000 in
1996. In 1997, OraVax's revenues consisted of $7,587,000 earned under the joint
venture, $583,000 from government grants and other research revenues, and
$683,000 in interest earned on invested funds. In 1996, OraVax's revenues
consisted of $6,595,000 earned under the joint venture, $870,000 from government
grants and other research revenues, and $1,280,000 in interest earned on
invested funds. The increased revenue was attributable to increased budgeted
activities, for research and development, of the joint venture offset by a
decrease in interest income as a result of declining cash investments and a
decrease in grant revenue as a result of expired grants from the National
Institute of Health.
OraVax's total costs and expenses decreased to $18,429,000 in 1997 from
$25,282,000 in 1996. Research and development expenses decreased 31% to
$14,589,000 in 1997 from $21,009,000 in 1996, principally reflecting the 1996
conduct of both a Phase II clinical trial under its H. PYLORI program and a
Phase III clinical trial under its RSV program, and the 1996 production of
necessary supplies of clinical materials for its Phase III clinical trial. In
addition, OraVax reduced its workforce by approximately 25% in early April 1997.
General and administrative expenses decreased 9% to $3,422,000 in 1997 from
$3,750,000 in 1996 as decreased expenses associated with the workforce reduction
in the second quarter of 1997 offset increases which OraVax had incurred in the
first quarter of 1997 as compared to the same period in 1996. Interest expense
decreased to $418,000 in 1997 from $523,000 in 1996, principally due to the
expiration of some equipment leases.
OraVax accounts for its investment in the joint venture, through which the
joint venture began conducting its research beginning in the second quarter of
1995, under the equity method of accounting. Accordingly, OraVax recorded its
$5,085,000 and $6,236,000 share of the joint venture's losses during the years
ended December 31, 1996 and 1997, respectively. The increased loss was
principally attributable to increased budgeted activities, for research and
development, of the joint venture in 1997 as compared with 1996.
OraVax incurred a net loss of $15,812,000 in 1997 compared to a net loss of
$21,622,000 in 1996.
YEARS ENDED DECEMBER 31, 1996 AND DECEMBER 31, 1995
OraVax's total revenues decreased to $8,745,000 in 1996 from $10,075,000
during 1995. In 1996, OraVax's revenues consisted of $6,595,000 earned under the
joint venture, $870,000 from government grants and other research revenues and
$1,280,000 in interest earned on invested funds. In 1995, OraVax's revenues
consisted of $8,684,000 earned under the joint venture, of which $3,816,000
represented up front payments earned in connection with the initiation of the
joint venture, $311,000 from government grants and $1,080,000 in interest earned
on invested funds.
OraVax's total costs and expenses increased to $25,282,000 in 1996 from
$15,836,000 in 1995. Research and development expenses increased 69% to
$21,009,000 in 1996 from $12,450,000 in 1995, principally reflecting the conduct
of an approximately 600 patient Phase III clinical trial of OraVax's HNK20
product candidate together with production costs associated with clinical grade
materials used in the trial, and other growth in OraVax's other primary product
development programs, including conduct of a Phase 2 clinical trial under its H.
PYLORI program. The 14% increase in general and administrative expenses during
the same period to $3,750,000 in 1996 from $3,299,000 in 1995, reflects some
increases in other administrative costs necessary to support the growth in
research and development. General and administrative expenses did not grow in
proportion to the increase in research and development costs principally because
OraVax's clinical trials and manufacture of clinical
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grade materials were substantially conducted by outside contractors requiring
minimal incremental administrative overhead. Interest expense increased to
$523,000 in 1996 from $87,000 in 1995 principally as a result of the assumption
of existing and new debt in connection with OraVax's acquisition of its
manufacturing facility in Canton, Massachusetts in early 1996.
OraVax accounts for its investment in the joint venture, through which the
joint venture began conducting its research beginning in the second quarter of
1995, under the equity method of accounting. Accordingly, OraVax recorded its
$5,085,000 and $2,436,000 share of the joint venture's losses during the years
ended December 31, 1996 and 1995, respectively. The increase was principally
attributable to increased budgeted research activities of the joint venture in
1996 as compared with 1995.
OraVax incurred a net loss of $21,622,000 in 1996 compared to a net loss of
$8,197,000 in 1995.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standard Board issued Statement of
Accounting Standards No. 130, "Reporting Comprehensive Income". This statement
requires that changes in comprehensive income be shown in a financial statement
that is displayed with the same prominence as other financial statements. OraVax
adopted the new standard beginning in the first quarter of the fiscal year
ending December 31, 1998. The adoption of FAS 130 has not materially affected
financial statement presentation.
In June 1997, the Financial Accounting Standard Board also issued Statement
of Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information". This Statement specifies new guidelines for
determining a company's operating segments and related requirements for
disclosure. OraVax is in the process of evaluating the impact of the new
standard on the presentation of the financial statements and the disclosures
therein. The Statement will become effective for fiscal years beginning after
December 15, 1997. OraVax will adopt the new standard for the fiscal year ending
December 31, 1998.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative
Instruments and Hedging Activities". This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. The statement requires companies to
recognize all derivatives as either assets or liabilities, with the instruments
measured at fair value. The accounting for changes in fair value, gains or
losses, depends on the intended use of the derivative and its resulting
designation. The statement is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. OraVax will adopt SFAS 133 by January 1, 2000.
OraVax does not expect SFAS 133 to have a material impact on its financial
statements.
BRIDGE FINANCING--PASTEUR MERIEUX CONNAUGHT
On November 2, 1998, OraVax obtained a short-term bridge loan, in the amount
of $3 million, from PMC to support operations. OraVax pledged 12% ownership in
the joint venture as collateral. OraVax granted PMC a controlling vote regarding
all marketing-related decisions, thereby granting PMC overall direction of
marketing-related matters. OraVax will retain equal voting authority in all
non-marketing-related decisions. In addition, OraVax authorized PMC, or should
PMC elect, PMC's affiliates, to act as the principal marketing entity for
certain target products which include all vaccines which use the urease protein
or any of its sub-units as an antigen. The loan was to be repaid in two
installments: $2 million on January 31, 1999 and $1 million on June 30, 1999,
and bears interest at an annual rate of 5.42% which is payable when each
installment of principal is due. However, the loan was
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amended to require repayment of $3 million upon the earlier of consummation of
the merger or July 31, 1999.
In the event that OraVax defaults on the loan, PMC would, by virtue of
OraVax's pledge of 12% ownership in the joint venture to secure the loan,
increase its ownership interest in the joint venture to 62%, thereby obtaining
overall direction of all joint venture matters. OraVax's share of future
research, development, clinical and commercialization costs, and of profits from
target product sales would then decrease from the present 50% to 38%.
LIQUIDITY AND CAPITAL RESOURCES
OraVax's aggregate cash and investments were $1,372,000 at September 30,
1998, a decrease of $10,350,000 since December 31, 1997. Included in cash and
investments is $398,000 and $394,000 at September 30, 1998 and December 31,
1997, respectively, of restricted six-month treasury securities, that support
letters of credit for operating and equipment leases. Cash used by operations
during the nine months ended September 30, 1998, principally to support research
and development, was $5,944,000. OraVax expended $38,000 for property and
equipment, repaid $1,163,000 of its capital lease obligations and repaid $90,000
of its installment debt, net of accrued interest, during the period. In
addition, OraVax invested $4,581,000 in the joint venture with PMC during the
nine months ended September 30, 1998. In early 1998, OraVax received the
$1,400,000 remainder of cash proceeds from the December 1997 convertible
preferred stock financing. Also, OraVax received $66,000 in proceeds from Common
Stock issuances during the period.
Since inception, OraVax's cash expenditures have exceeded its revenues.
Operations have been funded principally through public and private placements of
equity securities, equipment lease financing, revenues from OraVax's H. PYLORI
joint venture with PMC, government grants and interest income. OraVax's future
capital requirements will depend on many factors, including, but not limited to,
the progress of its research and development programs, the progress of
preclinical and clinical testing, the time and costs involved in obtaining
regulatory approvals, the funding of OraVax's share of the expenses of
collaborative arrangements, the cost of filing, prosecuting, defending and
enforcing any patent claims and other intellectual property rights, competing
technological and market developments, changes in OraVax's existing research
relationships, the ability of OraVax to establish collaborative arrangements,
the development of commercialization activities and arrangements, and the
acquisition of additional facilities and capital equipment.
On November 10, 1998 OraVax entered into an Agreement to merge with Peptide
in a transaction anticipated to close prior to the end of the first quarter of
1999. A condition to the merger is that Peptide shall have completed a financing
that results in Peptide receiving net cash proceeds which, together with
existing financing available to Peptide, is sufficient for the present
requirements of the combined entity in accordance with the rules of the London
Stock Exchange.
Pending completion of its merger with Peptide, OraVax plans to finance its
cash needs in the near term principally through its existing cash reserves,
together with interest earned thereon, revenues from the H. PYLORI joint venture
and previously awarded government grants. OraVax believes, based upon its
current operating plan, that, in addition to its available cash balances and
known revenues, it will need additional financing in the first quarter of 1999
in order to fund OraVax's operations. On November 2, 1998, OraVax completed a
bridge loan from PMC in the amount of $3 million as described above, and $1
million on June 30, 1999. Peptide also has agreed to provide working capital
financing on a secured basis under certain circumstances. Changes in OraVax's
research and development plans or other events affecting OraVax's operations may
result in accelerated or unexpected expenditures. OraVax is continuing to review
its burn rate and has implemented expenditure initiatives to conserve its cash
resources, including putting non-essential expenditures on hold. As part of the
merger, Peptide will be seeking financing. OraVax in the meantime continues to
pursue corporate collaborations and the award
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of new government grants. OraVax cannot guarantee, however, that additional
financing will be available from any of these sources, or if available, will be
available on satisfactory terms. OraVax's inability to obtain needed funding on
satisfactory terms may require OraVax to delay, scale back or eliminate one or
more of its planned product development programs, or enter into collaborative
arrangements that may require OraVax to issue additional equity or relinquish
rights to certain technologies or product candidates that OraVax would not
otherwise issue or relinquish. In the event Peptide is unable to complete the
financing or its merger with OraVax is abandoned, OraVax would be required to
seek other sources of financing.
NASDAQ DELISTING
At June 30, 1998, OraVax's net tangible assets (total assets minus goodwill
and liabilities) was $1.9 million. The minimum net tangible asset requirement
for continued listing by the Nasdaq National Market is $4.0 million. OraVax
received a notice of delisting from the Nasdaq Stock Market, Inc. indicating
that because OraVax was not in compliance with the minimum net tangible asset
requirement OraVax's stock would be delisted from trading on the Nasdaq National
Market. OraVax was also notified by Nasdaq of non-compliance with the minimum $1
per share bid price and the minimum requirement for a public market float of $5
million. OraVax appealed the delisting and a hearing was granted before an NASD
panel concerning the delisting issues. OraVax presented its plans to the panel
and has continued to update Nasdaq on the progress of these plans. OraVax was
delisted from the Nasdaq National Market on November 16, 1998. OraVax began
trading on the OTC Bulletin Board on November 17, 1998. Upon closing of the
proposed merger, holders of OraVax's common stock will receive ordinary shares
of Peptide which are traded on the London Stock Exchange.
YEAR 2000 COMPLIANCE
The Year 2000 problem is the result of computer programs having been written
using two digits, rather than four, to define the applicable year. Computer
programs and embedded computer chips may be unable to distinguish between the
years 1900 and 2000. Any computer hardware, software, research and development,
manufacturing or administrative equipment, and operational infrastructure
systems used by OraVax or by its external business partners may recognize a year
using "00", as the last two digits, as the year 1900 rather than the year 2000.
During the second quarter of 1998, OraVax implemented an internal Year 2000
compliance task force. The goal of the task force is to identify and minimize
disruptions to OraVax's business that could result from the Year 2000 problem,
and to minimize liabilities that OraVax might incur in connection with the Year
2000 problem. The task force consists of employees of OraVax and is
representative of major business functions.
OraVax is in the process of conducting a company-wide assessment of its
computer systems and operations infrastructure to identify computer hardware,
software, research and development equipment and process control systems that
are not Year 2000 compliant. OraVax intends to replace, upgrade or modify any of
its business-critical systems that are not Year 2000 compliant, or to develop
contingency plans. OraVax anticipates to have these steps completed by the end
of the third quarter in 1999.
OraVax has also identified and prioritized significant service providers,
vendors, suppliers, and worldwide research and development, manufacturing and
clinical trial related third parties that are critical to business operations.
OraVax is in the process of communicating with these external parties, through
interviews and questionnaires, to ascertain their Year 2000 compliance. These
evaluations will be followed by the development of contingency plans, including
identifying alternate service providers and contractors, vendors and suppliers.
OraVax anticipates to have these steps completed by the end of the third quarter
in 1999. Going forward, OraVax will attempt to ensure that new service providers
and contractors, vendors and suppliers are Year 2000 compliant before engaging
in business with them.
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OraVax's greatest risk is the failure of critical, worldwide research and
development, manufacturing or clinical trial related service contractors not
being Year 2000 compliant. Because of the significant number of these external
service contractors and the vast number of business systems used by these
parties, OraVax may experience some disruption in its business operations.
OraVax is unable to determine at this time whether the consequences of Year 2000
failures by these parties will have a material impact on OraVax's business
operations. OraVax believes that with the implementation of contingency plans,
including identifying alternate service contractors, the possibility of material
interruptions of normal operations should be reduced. However, there is no
assurance that OraVax will be successful in finding alternate service
contractors. In the event that OraVax is unable to replace Year 2000
non-compliant service contractors, OraVax's business operations could be
adversely affected.
To date, OraVax has not incurred nor identified any material costs related
to the assessment of its internal and external Year 2000 compliance. The costs
of OraVax's Year 2000 compliance efforts are not yet determined. OraVax does not
anticipate incurring any material costs to ensure internal and external Year
2000 compliance.
There can be no guarantee that OraVax's assessment and correction efforts
will prove accurate. Key external business partners may be unsuccessful in
solving their Year 2000 issues and OraVax may be unsuccessful in identifying
alternate critical service providers and contractors, vendors and suppliers. As
a result, Year 2000 problems may adversely impact OraVax's business operations.
OraVax's readiness program is an ongoing process and the estimates of costs and
completion dates described above are subject to change.
Because of these and other factors, past financial performance should not be
an indicator of future performance. Investors should not use historical trends
to anticipate future results and should be aware that the trading price of
OraVax's common stock may be subject to wide fluctuations in response to
quarter-to-quarter variations in operating results, changes in the biotechnology
and pharmaceutical industries and recommendations by analysts or other events.
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DESCRIPTION OF PEPTIDE ORDINARY SHARES
The following summarizes certain rights of holders of the Peptide ordinary
shares based on the Peptide memorandum and articles of association and English
law in force as of the date of this prospectus/proxy statement. The summary does
not purport to be complete and is qualified in its entirety by reference to the
articles of association.
The authorized share capital of Peptide is 43,200,000 ordinary shares of 10p
each, of which 36,579,039 Peptide ordinary shares had been issued as of January
27, 1999. Each of the issued Peptide ordinary shares is fully paid and not
subject to any further calls or assessments by Peptide. There are no conversion
rights, redemption provisions or sinking fund provisions related to the Peptide
ordinary shares. The Peptide ordinary shares are issued in registered form.
At an extraordinary general meeting to be held on February 15, 1999, the
Peptide shareholders will be asked to approve an increase in the authorized
share capital of Peptide to 100,000,000 shares.
In the following description, a shareholder is the person registered in the
register of members of Peptide as the holder of the relevant share.
DIVIDENDS
Peptide has never paid cash dividends on its ordinary shares. Any dividends
on the Peptide ordinary shares must be declared and paid according to the amount
paid up on the Peptide ordinary shares (otherwise than in advance of calls) but
no dividend shall be declared in excess of the amount recommended by the
directors. The directors may from time to time pay to the members of Peptide
such interim dividends as appear to the directors to be justified by the profits
of Peptide available for distribution. There are no fixed dates on which
entitlement to dividends arises on the Peptide ordinary shares.
RIGHTS IN A WINDING UP
In the event of a winding-up or reduction of capital of Peptide involving
repayment, the assets of Peptide available for distribution among the members
shall be divided between the holders of the Peptide ordinary shares according to
the respective number of shares held by them and in accordance with the
provisions of the Companies Act. The liquidator may, with the sanction of an
extraordinary resolution of Peptide and subject to the Companies Act, divide
among the members in specie the whole or any part of the assets of Peptide in
such manner as he may determine.
VOTING
Voting at any general meeting of the Peptide shareholders is by a show of
hands unless a poll is duly demanded. A poll may be demanded by:
- the chairman of the meeting;
- at least three shareholders present in person or by proxy, and who are
entitled to vote at the meeting;
- any shareholder(s) present in person or by proxy, who represent in the
aggregate at least 10% of the voting rights of all shareholders entitled
to vote at the meeting;
- any shareholder(s) present in person or by proxy, who hold shares
providing a right to vote at the meeting on which the aggregate sum paid
up on such shares is equal to not less than 10% of the total sum paid upon
all the shares providing that right; or
- any shareholder present in person or by proxy, in the case of a resolution
to confer, vary, revoke or renew authority or approval for an off-market
purchase by Peptide of its own shares.
On a show of hands, every holder of Peptide ordinary shares who is present
in person at a general meeting of Peptide will have one vote, and on a poll,
every holder of Peptide ordinary shares who is present in person or by proxy
will have one vote per share. The necessary quorum for a shareholder meeting is
a minimum of two persons entitled to vote on the business to be transacted, each
being a shareholder or a proxy for a shareholder or a duly authorized
representative of a corporation. Unless
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otherwise required by law or the Articles of Association, voting in a general
meeting is by ordinary resolution which include among other matters:
- resolutions for the election of directors;
- the approval of financial statements;
- the declaration of final dividends;
- the appointment of auditors;
- the increase of authorized share capital; or
- the grant of authority to allot shares.
An ordinary resolution requires the affirmative vote of a majority of the
votes cast at a meeting at which there is a quorum. A special or extraordinary
resolution (e.g., relating to certain matters concerning, among other things, an
alteration of the articles of association, or a winding-up of Peptide, or
modifying the rights of any class of shares at a meeting of the holders of such
class) requires the affirmative vote of not less than three-fourths of the votes
cast. Meetings are generally convened upon advance notice of 21 or 14 clear days
(not including the days of delivery or receipt of the notice or the day of the
meeting) depending on the nature of the business to be transacted.
PREEMPTIVE RIGHTS
Under the Companies Act, the issue of equity securities that are, or are to
be, paid for wholly in cash (except shares held under an employees' share
scheme) must be offered in the first instance to the existing shareholders in
proportion to the respective nominal values of their holdings on the same or
more favorable terms, unless a special resolution to the contrary has been
passed in a general meeting of shareholders. In this context, equity securities
generally means, in relation to Peptide, Peptide ordinary shares, or shares with
no restrictions on the amounts receivable in a distribution of dividends or
capital and all rights to subscribe for or convert into such shares.
VARIATION OF RIGHTS AND SHARE CAPITAL
Peptide may by ordinary resolution increase its share capital or consolidate
and divide all or any of its share capital into shares of larger amounts.
Subject to the provisions of the Companies Act, Peptide may also subdivide its
shares or any of them into shares of smaller amount or cancel or reduce the
nominal value of any shares which have not been taken or agreed to be taken by
any person. Subject to the provisions of the Companies Act, Peptide may by
special resolution reduce its share capital, any capital redemption reserve and
any share premium account. Peptide may also, subject to such approvals as are
required by the Companies Act, purchase its own shares.
Subject to the provisions of the Companies Act, the rights attached to any
class of shares may (unless other provided by the terms of issue of that class)
be varied with the written consent of the holders of three-fourths in nominal
value of the issued shares of that class, or with the sanction of an
extraordinary resolution passed at a separate meeting of the holders of the
shares of that class.
DISCLOSURE OF INTERESTS
The Companies Act gives Peptide power to require persons who it knows are,
or has reasonable cause to believe to be, or to have been within the previous
three years, interested in its relevant share capital to disclose prescribed
particulars of those interests. For this purpose "relevant share capital" means
issued share capital of Peptide carrying the right to vote in all circumstances
at a general meeting of Peptide. Failure to provide the information requested
within 14 days after the date of sending of the notice may result in sanctions
being imposed against the holder of the relevant shares as provided in the
Companies Act. The articles of association allow the board to impose such
restrictions as they see fit from the following: the withdrawal of voting rights
of such shares and restrictions on the rights to receive dividends on and to
transfer such shares. In this context, the term "interest" is broadly defined
and will generally include an interest of any kind in shares, including the
interest of a holder of a Peptide ordinary share. In addition, under the
Companies Act, any person who acquires either alone or, in certain
circumstances, with others a direct or indirect interest in the relevant share
capital of
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Peptide in excess of the "notifiable percentage" (currently 3%, or 10% for
certain types of interest) is obligated to disclose prescribed information to
Peptide with respect to those shares within two business days. An obligation of
disclosure also arises where such person's notifiable interest subsequently
falls below the notifiable percentage or where, above that level, the percentage
of Peptide's relevant capital in which such person is interested (expressed in
whole numbers) increases or decreases.
MISCELLANEOUS
There are currently no United Kingdom foreign exchange controls on the
payment of dividends on the Peptide ordinary shares or the conduct of operations
of Peptide. There are no restrictions under the articles of association or under
English law that limit the right of non-resident or foreign owners to hold or
vote the Peptide ordinary shares.
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COMPARISON OF RIGHTS OF ORAVAX STOCKHOLDERS AND PEPTIDE SHAREHOLDERS
The rights of OraVax stockholders are currently governed by the Delaware
General Corporation Law, OraVax's second amended and restated certificate of
incorporation and OraVax's bylaws. The rights of Peptide shareholders are
currently governed by English law, including the Companies Act and Peptide's
memorandum and articles of association. As a result of the merger, stockholders
of OraVax will receive ordinary shares of Peptide, and thereby become Peptide
shareholders whose rights will be governed by Peptide's articles of association
and English law. There are a number of differences between the rights of OraVax
stockholders and the rights of Peptide shareholders. The following is a summary
of material differences between the rights of OraVax stockholders and the rights
of Peptide shareholders. To understand these differences fully, you should read
the relevant provisions of the DGCL, the Companies Act, OraVax's certificate of
incorporation and bylaws, and Peptide's memorandum and articles of association.
OraVax's certificate of organization and bylaws may be obtained by writing or
telephoning the Secretary of OraVax at the following address:
OraVax, Inc.
38 Sidney Street 4(th) Floor
Cambridge, Massachusetts 02139
Telephone: (617) 494-1339
Peptide's memorandum and articles of association may be obtained by writing
or telephoning the Secretary of Peptide at the following address:
Peptide Therapeutics Group plc
321 Cambridge Science Park
Milton Road
Cambridge, CB4 4WG England
Telephone: 011-44-1223-423-333
Under Section 14 of the Exchange Act and the proxy rules promulgated under
the Exchange Act, OraVax is required to comply with certain notice and
disclosure requirements relating to the solicitation of proxies in respect of
stockholder meetings. As a foreign private issuer, Peptide is not subject to the
proxy rules. However, Peptide is subject to the Companies Act and the listing
rules of the London Stock Exchange regulating notices of shareholder meetings.
Under the applicable Companies Act and the London Stock Exchange requirements,
notice of a shareholder meeting is normally accompanied by a shareholder
circular (or, in the case of an annual general meeting, by an annual report and
accounts) containing an explanation of the purpose of the meeting and the
recommendations of the board of directors with respect to actions to be taken.
In the following comparison, a shareholder of Peptide is the person
registered in the register of members of Peptide as the holder of the shares.
VOTING RIGHTS
Under Section 212 of the DGCL, each stockholder is entitled to one vote per
share unless the certificate of incorporation provides otherwise. In addition,
the certificate of incorporation may provide for cumulative voting in the
election of directors of the corporation. The OraVax certificate of
incorporation does not provide for cumulative voting at elections of directors.
A quorum consists of a majority of the shares entitled to vote, unless otherwise
required by law.
Under English law, the voting rights of shareholders are governed by a
company's articles of association, subject to the statutory right of
shareholders to demand a poll (a vote by the nominal value of shares held) at a
general meeting. As described in the above section titled "Description of
Peptide Ordinary Shares--Voting," the Peptide articles of association provide
that a poll may be demanded in certain circumstances. Cumulative voting is
essentially unknown under English law. Under English law, two shareholders
present in person constitute a quorum for purposes of a general meeting, unless
the
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company's articles of association specify otherwise. Peptide's articles of
association specify that two shareholders present in person or by proxy and
entitled to vote constitute a quorum. Any Peptide shareholder on the register
may vote in person or, assuming the proxy is received by Peptide at least 48
hours prior to the time set for the meeting, by proxy.
ACTION BY WRITTEN CONSENT
Section 228 of the DGCL provides that any action required or permitted to be
taken by stockholders may be effected by a written consent of a majority of the
holders of the outstanding stock having not less than the minimum number of
votes that would be necessary to take such action at a meeting at which all
shares entitled to vote thereon were present and voted, unless the corporation's
certificate of incorporation otherwise provides. OraVax's certificate of
incorporation provides that any action required or permitted to be taken by
stockholders must be effected at a duly called annual or special meeting of
stockholders. Stockholders may not take action by written consent
Under English law, a company's articles of association may provide that a
resolution in writing executed by or on behalf of each shareholder who would
have been entitled to vote upon it if it had been proposed at a general meeting
at which he was present will be as valid and effectual as if it had been passed
at a general meeting properly convened and held. Such a written resolution
requires the unanimous consent of all such shareholders entitled to attend and
vote. Peptide's articles of association contain such a provision.
SOURCES AND PAYMENT OF DIVIDENDS
Section 154 of the DGCL permits a corporation to pay dividends on common
stock, subject to any restrictions contained in the certificate of
incorporation, either (1) out of its surplus or (2) if there is no surplus, out
of its net profits for the fiscal year in which the dividend is declared and/or
the preceding fiscal year; except that no dividends may be paid out of such net
profits if the net assets of the corporation are less than the aggregate amount
of capital represented by the issued and outstanding stock having a preference
upon the distribution of assets. Surplus is defined in the DGCL as the amount by
which net assets (total assets less total liabilities) exceeds the capital of
the corporation. In accordance with the DGCL, capital is determined by the board
of directors and shall not be less than the aggregate par value of the
outstanding capital stock of the corporation having par value. The OraVax
certificate of incorporation and the OraVax bylaws do not restrict the payment
of dividends.
Under English law, a company may pay dividends on its ordinary shares,
subject to the prior rights of its preferred shareholders, only out of its
distributable profits (accumulated realized profits (not previously utilized by
distribution or capitalization) less accumulated realized losses) and not out of
share capital, which includes share premiums (paid-in surplus). Amounts credited
to the share premium account (representing the excess of the consideration for
the issue of shares over the aggregate par value of such shares) may not be paid
out as cash dividends but may be used, among other things, to pay up unissued
shares which may then be distributed to shareholders in proportion to their
holdings. The excess of the fair value of the shares to be issued in the merger
over their par value will be credited to a share premium account, which is part
of other additional capital, as permitted by the Companies Act. In addition, a
public company such as Peptide may make a distribution at any time only if, at
that time and immediately after such distribution, the amount of its net assets
is not less than the aggregate of its called-up (i.e., issued and paid-up) share
capital and undistributable reserves. Under English law, a dividend must be
declared by reference to relevant accounts showing the availability of
distributable reserves for such dividend. Peptide has historically paid no
dividends. Holders of Peptide ordinary shares must approve any final dividend to
be paid by Peptide at the annual general meeting of Peptide but no dividend can
exceed the amount recommended by the Peptide board. The Peptide board has the
power under Peptide's articles of association to declare and pay interim
dividends.
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RIGHTS OF PURCHASE AND REDEMPTION
Under Section 172 the DGCL, a corporation may purchase or redeem shares of
any class of its capital stock, but subject generally to the availability of
sufficient lawful funds therefor and provided at all times that, at the time of
any such redemption, the corporation shall have outstanding shares of one or
more classes or series of capital stock, which have full voting rights that are
not subject to redemption.
Under English law, a company may issue redeemable shares if authorized by
its articles of association and subject to the conditions stated therein.
Peptide's articles of association permit the issue of redeemable shares with the
sanction of a special resolution. Such shares may be redeemed only if fully paid
and, in the case of public companies, only, subject as provided below, out of
distributable profits or the proceeds of a new issue of shares issued for the
purpose of the redemption. When redeemable shares are redeemed wholly out of
profits, the amount by which the par value of the company's issued share capital
is diminished on cancellation of the redeemed shares must be transferred to the
capital redemption reserve, which is generally treated as paid-up share capital.
In addition, any amount payable on redemption of any redeemable shares in excess
of the par value of such shares may be paid out of the proceeds of a fresh issue
of shares up to an amount equal to the lesser of (1) the aggregate of the
premiums received by the company on the issue of those shares or (2) the amount
of the company's share premium account as at the time of the redemption
including any sum transferred to that account in respect of premiums on the new
issue. A company may purchase its own shares, including any redeemable shares,
if authorized by its articles of association previously approved by an ordinary
resolution of its shareholders in the case of an on-market purchase (which, in
the case of Peptide, means on the London Stock Exchange only) or a special
resolution in other cases. The above provisions that apply to redemption of
redeemable shares apply also to purchases by a company of its own shares. The
London Stock Exchange, on which the Peptide ordinary shares are listed, requires
that purchases pursuant to a general authority granted by shareholders of 15% or
more of a company's share capital must be made by way of either a tender or
partial offer to all shareholders. In the case of a tender offer, the shares
must be purchased at a stated maximum or fixed price. Notice of a tender offer
must be given by advertising in two U.K. national newspapers at least seven days
before the offer closes. Unless a tender or partial offer is made to all
shareholders on the same terms, purchases below the 15% threshold may be made
pursuant to a general authority granted by shareholders through the market in
the ordinary way only if the price is not more than 5% above the average of the
middle market quotations taken from the London Stock Exchange Official List for
the five trading days before the purchase date.
SPECIAL MEETING OF SHAREHOLDERS
Under the DGCL, a special meeting of stockholders may be called by the board
of directors or by such person or persons as may be authorized by the
certificate of incorporation or bylaws. OraVax's certificate of incorporation
and OraVax's by-laws provide that special meetings of stockholders may be called
by the chairman of the board or directors, the chief executive officer or the
board of directors.
Under English law, an extraordinary general meeting of shareholders may be
called by the board of directors or (notwithstanding any provision to the
contrary in a company's articles of association) by a request from shareholders
holding not less than one-tenth of the paid-up capital of the company carrying
voting rights at general meetings. An ordinary resolution, other than an
ordinary resolution to remove a director which requires 28 clear days' notice
requires 14 clear days' notice, and requires a majority vote of those present,
in person or by proxy, and voting. An extraordinary or special resolution
requires 21 clear days' notice and a three-quarters majority vote of those
present, in person or by proxy, and voting. The term "clear days' notice" means
calendar days and excludes the date of mailing, the deemed date of receipt of
such notice (which is provided for in the articles of association when
first-class mail is employed), and the date of the meeting itself. Extraordinary
resolutions are relatively unusual and are confined to certain matters out of
the ordinary course of business such as a proposal
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to wind up the affairs of the company. Proposals which are the normal subject of
special resolutions generally involve proposals to:
- change the name of the company;
- alter its capital structure;
- change or amend the rights of shareholders;
- permit the company to issue new shares for cash without applying the
shareholder's pre-emptive rights;
- to amend the company's objects (purpose) clause in its memorandum of
association and articles of association
- carry out certain other matters where a special resolution is required by
either the company's articles of association or the Companies Act.
change the name of the company, to alter its capital structure, to change or
amend the rights of shareholders, to permit the company to issue new shares for
cash without applying the shareholders' pre-emptive rights and to amend the
company's objects (purpose) clause in its memorandum of association and articles
of association and to carry out certain other matters where either the company's
articles of association or the Companies Act prescribe that a "special
resolution" is required. All other proposals relating to the ordinary course of
the company's business such as the election of directors would be the subject of
an ordinary resolution.
RIGHTS OF APPRAISAL
Under Section 262 of the DGCL, stockholders who follow prescribed statutory
procedures are entitled, in the event of certain mergers or consolidations, to
surrender their shares to the corporation in exchange for the judicially
determined "fair value" of such shares. Such stockholders are entitled to such
appraisal rights unless the shares of stock (or depositary receipts in respect
thereof) held by the stockholder are either (1) listed on a national securities
exchange or designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc. or (2)
held of record by more than 2,000 holders. No appraisal rights are available for
any shares of stock of the constituent corporation surviving a merger if the
merger did not require for its approval the vote of the stockholders of the
surviving corporation as provided in the DGCL. Regardless of this provision
appraisal rights are available for the shares of any class or series of stock of
a constituent corporation if its holders are required by the terms of an
agreement of merger or consolidation to accept for such stock anything except
the following:
- shares of stock or depositary receipts of the surviving or resulting
corporation in the merger or consolidation;
- shares of stock or depositary receipts of any other corporation, which
shares of stock or depositary receipts, at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the NASD or held of record by more than
2,000 holders;
- cash in lieu of fractional shares or fractional depositary receipts
described in the two above clauses;
- any combination of the shares of stock, depositary receipts and cash in
lieu of fractional shares, or fractional depositary receipts described in
all of the above clauses.
While English law does not generally provide for appraisal rights, if a
shareholder applies to a court as described in the section entitled "Shareholder
Votes on Certain Transactions" below, the court may specify such terms for the
acquisition as it considers appropriate. English law provides shareholders with
rights to dissent in respect of a reorganization of a company under Section 110
of the Insolvency Act of 1986 of Great Britain. In addition, dissenters' rights
exist where an offeror who,
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pursuant to a takeover offer for a company, has acquired or contracted to
acquire not less than nine-tenths in value of the shares to which the offer
relates, seeks to compulsorily acquire outstanding minority shareholdings.
PREEMPTIVE RIGHTS
Unless the certificate of incorporation expressly provides otherwise,
stockholders of a Delaware corporation do not have preemptive rights. The OraVax
certificate of incorporation does not provide for preemptive rights.
Under English law, the issue for cash of equity securities (securities which
with respect to dividends or capital carry a right to participate beyond a
specified amount) or rights to subscribe for or convert into equity securities
must be offered in the first instance to the existing equity shareholders in
proportion to the respective nominal values of their holdings, unless a special
resolution has been passed in a general meeting of shareholders to the contrary.
As is the custom of many English companies listed on the London Stock Exchange,
at its annual general meeting each year Peptide seeks general disapplication by
special resolution of statutory preemption rights on an annual basis: (1) in
respect of the entire unissued ordinary share capital where the equity
securities are to be issued by way of rights to existing shareholders and (2) to
disapply the statutory preemption rights on the issue for cash or equity
securities representing no more than five percent of the company's then issued
ordinary share capital.
AMENDMENT OF GOVERNING INSTRUMENTS
Under Section 242 of the DGCL, a corporation's board of directors may
propose, and its stockholders may adopt, one or more amendments to the
corporation's certificate of incorporation. Unless the certificate of
incorporation otherwise provides, such amendments may be adopted by the vote of
holders of a majority of the outstanding shares entitled to vote thereon, and a
majority of the outstanding stock of each class entitled to vote thereon as a
class. OraVax's certificate of incorporation provides that certain provisions of
the certificate of organization relating to the:
- election of removal of directors;
- special meetings of stockholders; and
- prohibition against stockholder action by written consent,
may only be amended with the vote of the holders of 75% of the shares entitled
to vote for the election of directors. Under the DGCL, the power to amend the
bylaws of a corporation is vested in the stockholders, but a corporation in its
certificate of incorporation may also confer such power upon the board of
directors. OraVax's certificate of incorporation and the OraVax bylaws provide
that the board of directors may amend the bylaws.
Under English law, the shareholders have the authority to alter, delete,
substitute or add to the objects clause in a company's memorandum and all
provisions of its articles of association by a vote of not less than
three-quarters of the shareholders entitled to vote and who do vote, either in
person or by proxy, at a general meeting. In the case of certain alterations to
the memorandum of association, the dissenting shareholders have a right to apply
to the courts to cancel the alterations. Under English law, the board of
directors is not authorized to change the memorandum or the articles of
association. Amendments affecting the rights of the holders of any class of
shares may, depending on the rights attached to such class and the nature of the
amendments, also require approval of the classes affected in separate class
meetings.
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SHAREHOLDER VOTES ON CERTAIN TRANSACTIONS
Under Section 241 of the DGCL, the vote of a majority of the outstanding
shares of capital stock entitled to vote generally is necessary to approve a
merger or other reorganization or a sale of all or substantially all of the
assets of the corporation.
Shareholder approval is usually required under the rules of the London Stock
Exchange for an acquisition or disposition by a listed company, if the net
assets of the company or business to be acquired or disposed of represent 25% or
more of the net asset value of the company or 25% or more of the value of the
company using any of the various other criteria prescribed by the listing rules
of the London Stock Exchange. Where the size of the acquisition or disposal
falls below that level, certain information may nevertheless be required to be
published or circulated to shareholders. Shareholder approval may also be
required for an acquisition or disposal of assets between, or a joint investment
by, a listed company and certain parties including:
- directors of the company or its subsidiaries;
- holders of 10% of the nominal value of any class of the company's or any
holding company's or subsidiary's shares having the right to vote in all
circumstances at general meetings of the relevant company; or
- any associate of the above.
Under the Companies Act, fundamental corporate changes, such as the passing
of a resolution for winding up, non pro rata issuances for cash, reduction of
capital (subject to sanction by the court) and certain repurchases of shares may
be authorized by a special resolution passed at a general meeting of
shareholders. Subject to the provisions of the Companies Act, if at such time,
the capital of Peptide is divided into different classes of shares and the
amendment or other resolution would cause any of the special rights attached to
any class of shares to be varied or abrogated, the amendment must also be
sanctioned by the holders of at least three-quarters in nominal value of the
issued shares of the class concerned.
The Companies Act provides for schemes of arrangement, which are
arrangements or compromises between a company and (any class of) its
shareholders or (any class of) its creditors and are used for certain types of
reconstructions, amalgamations, capital reorganizations or takeovers. They
require the approval at an extraordinary general meeting of the company convened
by order of the court of a majority in number of the shareholders representing
75% in value of the capital or class of creditors or shareholders or class of
shareholders present and voting, either in person or by proxy, and the sanction
of the court. Once so approved and sanctioned, all creditors and shareholders
(of the relevant class) are bound by the terms of the scheme. A dissenting
shareholder would have no rights comparable to dissenter's rights described
below. A scheme of reconstruction under Section 110 of the Insolvency Act may be
made when a company is being wound up voluntarily under which, with the sanction
of a special resolution of shareholders in a general meeting the whole or part
of the company's business or property is transferred to a second company in
consideration for the issue or transfer to them of shares in the second company.
Any dissenting shareholder can require the liquidator to abstain from carrying
the resolution into effect or to purchase his interest at a price agreed or
determined by arbitration. The Companies Act also provides that where a takeover
offer (as defined therein) is made for the shares of a company incorporated in
the U.K. and, within four months of the date of the offer the offeror has, by
virtue of acceptances of the offer, acquired or contracted to acquire not less
than nine-tenths in value of the shares of any class to which the offer relates,
the offeror may, within two months of reaching the nine-tenths level, by notice
require shareholders who do not accept the offer to transfer their shares on the
terms of the offer. A dissenting shareholder may apply to the court within six
weeks of the date on which such notice was given objecting to the transfer or
its proposed terms. The court is unlikely, in the absence of fraud or oppression
to exercise its discretion to order that the acquisition not take effect, but it
may specify such terms of the transfer as it finds appropriate. A minority
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shareholder is also entitled in these circumstances to require the offeror to
acquire his shares on the terms of the offer.
RIGHTS OF INSPECTION
The DGCL allows any stockholder, upon written demand under oath stating the
purpose thereof, to have the right during the usual hours for business to
inspect for any proper purpose the corporation's stock ledger, a list of its
stockholders, and its other books and records, and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
Except when closed in accordance with the provisions of the Companies Act,
the register and index of names of shareholders of a company, together with
certain other registers required to be maintained by such company, may be
inspected during business hours by its shareholders without charge and by other
persons upon payment of a fee, and copies may be obtained on payment of a fee.
The shareholders of an English public company may, without charge, also inspect
the minutes of meetings of the shareholders during business hours and obtain
copies upon payment of a fee. The published annual accounts of a public company
are required to be laid before the shareholders in general meeting and a
shareholder is entitled to a copy of such accounts. Copies are filed with the
Registrar of Companies in England and Wales from whom copies are publicly
available upon payment of the appropriate fee. The shareholders of Peptide have
no rights to inspect its accounting records or minutes of meetings of its
directors. Certain registers required to be kept by the company are open to
public inspection and service contracts of directors of the company (which have
more than 12 months unexpired or require more than 12 months' notice to
terminate) must be available for inspection during business hours. Rights of
inspection during business hours mean that the company must make the register,
index or document available for inspection for not less than two hours during
the period between 9:00 a.m. and 5:00 p.m. on each business day. The rules of
the London Stock Exchange require the service contracts of directors to be open
for inspection at certain times for periods longer than two hours.
CLASSIFICATION OF THE BOARD OF DIRECTORS
Under the DGCL, the certificate of incorporation of a Delaware corporation
may provide for the classification of the board of directors in order to stagger
the terms of directors. The term "classified board" generally means the
specification of selected board seats for a term of more than one year (but not
more than three years), with different classes of board seats coming up for
election each year. The OraVax certificate of incorporation and the OraVax
bylaws provides that the board is divided into three classes, as nearly as equal
in number as possible, with the term of office of the directors of each class to
expire at the third succeeding annual meeting after their election and until
their successors are elected and shall qualify.
English law permits a company to provide for the classification of the board
of directors with respect to the time for which directors severally hold office.
Peptide's articles of association provide that there shall not be less than two
directors, nor more than ten. All directors are subject to the general corporate
law requirements concerning the removal of directors. One-third of the directors
(or, if their number is not a multiple of three, the number nearest to but not
greater than one-third)-- excluding any director appointed by the directors
since the last annual general meeting--are required to retire from office by
rotation at each annual general meeting and are eligible to be re-elected by the
shareholders. The directors to retire are selected on the basis of time in
office since their last election. Any director appointed by the directors since
the last annual general meeting is required to retire at the next following
annual general meeting and is then eligible for election, but is not taken into
account in determining which directors are to retire by rotation at such
meeting.
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REMOVAL OF DIRECTORS
Under the DGCL, the entire board of directors or any individual director of
a corporation with a classified board may be removed from office by the
stockholders only for cause, unless the certificate of incorporation provides
otherwise. If the stockholders are entitled to cumulative voting in the election
of directors, no individual director may be removed without cause if the number
of votes cast against the resolution for his removal would be sufficient if
cumulatively voted to elect such director to the board. OraVax's certificate of
incorporation and the OraVax bylaws provide that directors may be removed from
office only for cause by the affirmative vote of holders of at least two-thirds
of the shares entitled to vote for the election of directors. OraVax's
certificate of incorporation does not provide for cumulative voting.
Under the Companies Act, shareholders have the right to remove a director
without cause by ordinary resolution of which special notice of 28 clear days
has been given to the company, irrespective of the provisions of the articles of
association of the company.
VACANCIES ON THE BOARD OF DIRECTORS
Under the DGCL, the board of directors of a corporation may fill any vacancy
on the board, including vacancies resulting from an increase in the number of
directors. OraVax's certificate of incorporation provides that vacancies in the
board of directors may be filled by a majority vote of the directors then in
office, although less than a quorum, or by a sole remaining director.
Under English law, shareholders of an English public company may, by
ordinary resolution at a meeting at which any director retires by rotation,
appoint a person who is willing to be a director either to fill a vacancy or as
an additional director. The board of directors also has the power to appoint a
director to fill a vacancy or as an additional director, subject to such
conditions as may be set out in the company's articles of association, provided
that such appointment will only last until the next following annual general
meeting of the company, at which the director concerned may be re-elected.
LIABILITY OF DIRECTORS AND OFFICERS
The DGCL permits a Delaware corporation to include in its certificate of
incorporation a provision eliminating the personal liability of directors for
monetary damages for certain breaches of fiduciary duty in a lawsuit by or on
behalf of the corporation or in an action by stockholders of the corporation.
The OraVax certificate of incorporation eliminates a director's monetary
liability in a lawsuit by or on behalf of the corporation or in an action by
stockholders of the corporation to the full extent permitted by the DGCL.
English law does not permit a company to exempt any director or other
officer of the company or any person employed by the company as auditor from any
liability in respect of any negligence, default, breach of duty or breach of
trust of which he may be guilty in relation to the company.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the DGCL provides that a corporation may, and in certain
circumstances, must, indemnify its directors, officers, employees and agents for
expenses, judgments or settlements actually and reasonably incurred by them in
connection with suits and other legal actions or proceedings if they acted in
good faith and in a manner they 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 their conduct was unlawful. In
any such suit or action brought by or on behalf of the corporation such
indemnification is limited to expenses reasonably incurred in defense or
settlement of the suit or action. The DGCL also permits a corporation to adopt
procedures for advancing expenses to directors, officers and others without the
need for a case-by-case determination of eligibility, so long as in the case of
officers and directors, they undertake to repay the amounts advanced if it is
ultimately determined that the officer or director was not entitled to be
indemnified. The OraVax certificate of
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incorporation and OraVax bylaws contain provisions for advancing expenses in the
manner provided for in the DGCL. The DGCL permits corporations to purchase and
maintain insurance for directors and officers against liability for expenses,
judgments or settlements whether or not the corporation would have the power to
indemnify such persons therefor.
OraVax has entered into contracts with each of its independent directors
requiring OraVax to indemnify such persons and to advance litigation expenses to
such persons to the fullest extent permitted by applicable law.
English law does not permit a company to indemnify a director or an officer
of the company or any person employed by the company as auditor against any
liability in respect of negligence, default, breach of duty or breach of trust
in relation to the company. This general rule does not apply where a director,
officer or auditor incurs liability in defending any legal proceedings (whether
civil or criminal) in which judgment is given in his favor or in which he is
acquitted or in certain instances where, although he is liable, a court finds
that such director, officer or auditor acted honestly and reasonably and that
having regard to all the circumstances he ought fairly to be excused and relief
is granted by the court. The indemnification provisions under English law may be
sufficiently broad to permit indemnification of Peptide's executive officers and
directors for liabilities arising under the Securities Act of 1933. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers or persons controlling Peptide pursuant to the
foregoing provisions, Peptide has been informed that in the opinion of the SEC
such indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable. Section 310 of the Companies Act enables
companies to purchase and maintain insurance for directors, officers and
auditors against any liability which would otherwise attach to them in respect
of any negligence, default, breach of duty or breach of trust in relation to the
company. Peptide maintains director and officer liability insurance.
SHAREHOLDERS' SUITS
Under Delaware law, a stockholder may institute a lawsuit against one or
more directors, either on his own behalf, or derivatively on behalf of the
corporation. An individual stockholder may also commence a lawsuit on behalf of
himself and other similarly situated stockholders when the requirements for
maintaining a class action under Delaware law have been met. Section 102(b)(7)
of the DGCL enables a corporation in its certificate of incorporation to
eliminate or limit the personal liability of a director for monetary damages for
violations of the director's fiduciary duty, except for the following:
- any breach of a director's duty of loyalty to the corporation or its
stockholders;
- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- liability under Section 174 of the DGCL which provides for director
liability for unlawful payment of dividends or unlawful stock purchases or
redemptions; or
- any transaction from which a director derived an improper personal
benefit.
Under English law shareholders have the right to institute a lawsuit on
behalf of the company in certain limited circumstances. In addition, Section 459
of the Companies Act permits a shareholder whose name is on the register of
members of the company (including U.S. persons) to apply for a court order when
the company's affairs are being or have been conducted in a manner unfairly
prejudicial to the interests of the shareholders, or when any actual or proposed
act or omission of the company is or would be so prejudicial. A court when
granting relief has wide discretion, including authorizing civil proceedings to
be brought in the name of the company by a shareholder on such terms as the
court may direct. Except in these limited respects, English law does not permit
class action lawsuits by shareholders on behalf of the company or on behalf of
other shareholders.
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Judgments of United States courts, including judgments against Peptide,
based on the civil liability provisions of the federal securities laws of the
United States, may not be enforceable in English courts. See "Enforceability of
Civil Liabilities."
CERTAIN PROVISIONS RELATING TO SHARE ACQUISITIONS
Section 203 of the DGCL prohibits a corporation which has securities traded
on a national securities exchange, designated on Nasdaq or held of record by
more than 2,000 stockholders from engaging in certain business combinations,
including:
- merger, sale of substantial assets, loan or substantial issuance of stock
with an interested stockholder; or
- an interested stockholder's affiliates or associates, for a three-year
period beginning on the date the interested stockholder acquires 15% or
more of the outstanding voting stock of the corporation.
The restrictions on business combinations do not apply if (1) the Board of
Directors gives prior approval to the transaction in which the 15% ownership
level is exceeded; (2) the interested stockholder acquires, in the transaction
pursuant to which the interested stockholder becomes the owner of 15% or more of
the outstanding stock, 85% of the corporation's stock (excluding those shares
owned by persons who are directors and also officers as well as employee stock
plans in which employees do not have a confidential right to determine whether
shares held subject to the plan will be tendered in a tender or exchange offer);
or (3) the business combination is approved by the board of directors and
authorized at a meeting of stockholders by the holders of at least two-thirds of
the outstanding voting stock, excluding shares owned by the interested
stockholder. Although a Delaware corporation may elect, pursuant to its
certificate of incorporation or bylaws, not to be governed by this provision,
the OraVax certificate of incorporation and the OraVax bylaws contain no such
election.
In the case of a company listed on the London Stock Exchange, shareholder
approval must be obtained for certain acquisitions or disposals of assets
involving directors or substantial shareholders or their associates as described
in the section entitled "Shareholder Votes on Certain Transactions." In
addition, takeovers of public companies are regulated by the City Code on
Takeovers and Mergers, non-statutory rules unenforceable at law but administered
by the Panel on Takeovers and Mergers, a body comprising representatives of
certain City of London financial and professional institutions which oversees
the conduct of such takeovers. One of the provisions of the City Code provides
that (1) when any person acquires, whether by a series of transactions over a
period of time or not, shares which (taken together with shares held or acquired
by persons acting in concert with him) carry 30% or more of the voting rights of
a public company; or (2) when any person, together with persons acting in
concert with him, holds not less than 30% but not more than 50% of the voting
rights and such person, or any person acting in concert with him, acquires in
any period of 12 months additional shares carrying more than 1% of the voting
rights, then such person must generally make an offer for all of the equity
shares of the company (whether voting or non-voting) for cash, or accompanied by
a cash alternative, at not less than the highest price paid for the relevant
shares during the 12 months preceding the date of the offer.
ANTI-TAKEOVER PROVISIONS
Under the rights agreement of OraVax, each outstanding share of OraVax
common stock also represents a right that, under certain circumstances, may
trade separately from the shares of OraVax common stock. The rights are not
currently exercisable. However, under certain circumstances they permit their
holders (other than an acquiror) to purchase at a favorable price a number of
shares of OraVax common stock or securities of a successor to OraVax with the
result that an acquiror's interest in OraVax would be substantially diluted. The
description and terms of the rights are set forth in the
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rights agreement. Immediately after entering into the merger agreement, the
rights agreement was amended so that it does not apply to the approval,
execution and delivery of the merger agreement.
Peptide does not have any comparable anti-takeover plan. Under English law,
directors of a company have a fiduciary duty to take only those actions which
are in the interests of the company. Generally speaking, anti-takeover
provisions are not actions which under English law fall within this category.
Under the City Code a company is prohibited from taking any action without the
approval of its shareholders at a general meeting held at any time after a bona
fide offer has been communicated to its board or after its board has reason to
believe that bona fide offer might be imminent which action could effectively
result in a bona fide offer being frustrated or in the shareholders being denied
an opportunity to decide on its merits.
DISCLOSURE OF INTERESTS
Acquirors of shares of OraVax common stock are subject to disclosure
requirements under Section 13(d)(1) of the Exchange Act and Rule 13d-1 of the
Exchange Act. These rules which provide that any person who becomes the
beneficial owner of more than 5% of the issued and outstanding shares of OraVax
common stock must file a Schedule 13D with the SEC disclosing certain specified
information, and send a copy of the Schedule 13D to OraVax and to the securities
exchange on which the security is traded within 10 days after such acquisition.
After the merger, acquirors of Peptide ordinary shares will be required to
comply with, among other things, the provisions of Section 13(d) of the Exchange
Act and Rule 13d-1 thereunder.
Section 198 of the Companies Act provides that a person, company and other
legal entity who acquires an interest or becomes aware that he has acquired an
interest of 3% (or 10% for certain types of interest) or more of any class of
shares comprised in a public company's "relevant share capital" is obliged to
notify that company of his interest within two days following the day on which
the obligation arises. Relevant share capital means that company's issued share
capital carrying rights to vote in all circumstances at general meetings of the
company). Thereafter, notice must be given to the company of any changes in
respect of whole percentage figure increases or decreases, rounded down to the
next whole number or which reduce such interest below 3% (or 10%, as
appropriate). The Peptide ordinary shares are "relevant share capital" for this
purpose.
In addition, the Companies Act provides that a public company may by notice
in writing, require a person whom the company knows or reasonably believes to
be, or to have been at any time during the three years immediately preceding the
date on which the notice is issued, interested in shares comprised in the
company's "relevant share capital" to confirm that fact or to indicate whether
or not that is the case. In addition, when the person holds or has during
relevant time held an interest in such shares, that person must give such
further information as may be required relating to his interest and any other
interest in the shares of which he is aware. The disclosure must be made within
such reasonable period as may be specified in the relevant notice (which may,
depending on the circumstances, be as short as one or two days).
For the purpose of the above obligations, the interest of a person in shares
means any kind of interest in shares including interests in any shares in which:
- a person's spouse, child or stepchild under the age of 18 is interested;
- a corporate body is interested and either:
(1) that corporate body or its board of directors is in the habit of
acting based on that person's directions or instructions, or
(2) that person is entitled to control or controls one-third or more of
the voting power of that corporate body; or
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- another party is interested and the person and that other party are
parties to a concert party agreement under Section 204 of the Companies
Act.
A concert party agreement is a agreement which provides for one or more
parties to it to acquire interests in shares of a particular public company,
which imposes obligations or restrictions on any one or more of the parties as
to the use, retention or disposal of such interests acquired pursuant to such
agreement and any interest in the company's shares is in fact acquired by any of
the parties pursuant to the agreement. Such concert party agreement need not be
in writing.
When a Section 212 notice is served by a company on a person who is or was
interested in shares of the company and that person fails to give the company
any information required by the notice within the time specified in the notice,
the company may apply to the court for an order directing that the shares in
question be subject to restrictions prohibiting any transfer of those shares,
the exercise of voting rights in respect of such shares, the issue of further
shares in respect of such shares and, other than in a liquidation, payments,
including dividends, in respect of such shares. Such restrictions may also void
any agreement to transfer such shares. In addition, a person who fails to
fulfill the obligations described above is subject to criminal penalties in the
United Kingdom. Under the Peptide articles of association certain of the powers
of imposing restrictions granted to the courts may be imposed by its board of
directors in certain circumstances.
CERTAIN LONDON STOCK EXCHANGE LISTING REQUIREMENTS
In addition to the provisions of its articles of association and the
Companies Act, Peptide is subject to the listing rules of the London Stock
Exchange made under Section 142 of the United Kingdom Financial Services Act
1986 and in particular to the continuing obligations under those rules. Among
other things these require a listed company to notify the London Stock Exchange
of any major new developments in its sphere of activities which are not public
knowledge which may by virtue of the effect of these developments on its assets
and liabilities or financial position or the general course of its business,
lead to a substantial movement in the price of its listed securities. Peptide
must ensure equality of treatment for all holders of listed securities who are
in the same position. When its securities are listed on more than one stock
exchange, Peptide must ensure that equivalent information is made available to
the market on each exchange on which its securities are listed. In addition, the
Peptide articles of association, the general law and/or the listing rules impose
obligations on listed companies to send the following information to
shareholders:
- details relating to certain acquisitions, disposals, takeovers, mergers
and offers either made by or in respect of the company; and
- an explanatory circular, whenever a general meeting of the shareholders is
convened. If the meeting includes any business other than routine business
at an annual general meeting, it must specify the general nature of such
business (routine business means declarations of dividends, considering
the report and accounts, election of directors in place of those retiring,
appointment and fixing of remuneration of auditors or the manner in which
fixed).
In addition to the above requirements, a company is required to notify the
London Stock Exchange of certain notifications received by the company of:
- persons holding an interest in 3% or more of any class of the company's
relevant share capital;
- any changes on the company's board of directors;
- any purchase or redemption by the company of its own equity securities;
- any directors' interests, including changes in the shares or the
debentures of their company; and
- changes in the capital structure of the company.
Unaudited half yearly reports of results for the first six months of any
fiscal year and an unaudited preliminary announcement of results for each full
fiscal year must also be published.
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ENFORCEABILITY OF CIVIL LIABILITIES
Peptide is a public limited company organized under the laws of England and
Wales. Most of Peptide's officers and directors reside principally in the United
Kingdom. A significant portion of the assets of Peptide are located outside of
the United States, although the combined company will have assets in the United
States following completion of the merger. As a result, it may not be possible
for investors to effect service of process upon Peptide within the United States
or to enforce against Peptide, in United States courts or courts outside of the
United States, judgments obtained in United States courts predicated upon the
civil liability provisions of the federal securities laws of the United States.
There is doubt as to the enforceability in England, in original actions or in
actions for enforcement of judgments of United States courts, of civil
liabilities predicated solely upon such securities laws.
Individual shareholders of an English company, including U.S. persons, have
the right under English law to bring lawsuits on behalf of the company in which
they are a shareholder, and on their own behalf against the company, in certain
limited circumstances. Except in limited circumstances, English law does not
permit class action lawsuits by shareholders. See "Comparison of Rights of
OraVax Stockholders and Peptide Shareholders--Shareholders' Suits."
LEGAL MATTERS
Certain legal matters relating to the Peptide ordinary shares will be passed
upon by Palmer & Dodge LLP, Boston, Massachusetts, United States counsel for
Peptide. The legality and validity of the Peptide ordinary shares to be issued
under the terms of the merger agreement if issued in a manner referred to in
this prospectus/proxy statement will be passed upon by Weil, Gotshal & Manges
LLP, London, England, United Kingdom counsel for Peptide.
EXPERTS
The consolidated financial statements of Peptide as of December 31, 1997 and
1996, and for each of the three years in the period ended December 31, 1997,
included in this prospectus/proxy statement have been audited by Arthur
Andersen, independent chartered accountants, as indicated in their report with
respect thereto, and included herein in reliance upon the authority of said firm
as experts in giving said reports.
The consolidated financial statements of OraVax as of December 31, 1997 and
1996 and for each of the three years in the period ended December 31, 1997
included in this prospectus/proxy statement have been audited by
PricewaterhouseCoopers LLP, independent auditors, as set forth in their report
with respect thereto, and are included herein in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
The combined financial statements of OraVax Merieux Co. and Merieux OraVax
Co. included in this prospectus/proxy statement have been audited by
PricewaterhouseCoopers LLP, as set forth in their report with respect thereto,
and are included herein in reliance upon the authority of such firm as experts
in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
OraVax files annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any reports, statements or
other information filed by OraVax at the SEC's public reference rooms in
Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms.
OraVax's SEC filings are also available to the public from commercial document
retrieval services and at the web site maintained by the SEC at
"http://www.sec.gov."
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Peptide has filed a registration statement on Form F-4 to register with the
SEC the Peptide ordinary shares to be issued to holders of OraVax common stock
in the merger. This prospectus/proxy statement is a part of that registration
statement and constitutes a prospectus of Peptide in addition to being a proxy
statement of OraVax for the Special Meeting. As allowed by SEC rules, this
prospectus/ proxy statement does not contain all the information you can find in
the registration statement or the exhibits to the registration statement.
You should rely only on the information contained or incorporated by
reference in this prospectus/ proxy statement to vote on the approval and
adoption of the merger agreement. Neither OraVax nor Peptide has authorized
anyone to provide you with information that is different from what is contained
in this prospectus/proxy statement. This prospectus/proxy statement is dated
, 1999. You should not assume that the information contained in the
prospectus/proxy statement is accurate as of any date other than such date, and
neither the mailing of this prospectus/proxy statement to stockholders nor the
issuance of Peptide ordinary shares in the merger shall create any implication
to the contrary.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
PEPTIDE THERAPEUTICS GROUP PLC
Report of Independent Chartered Accountants.......................................... F-2
Consolidated Profit and Loss Accounts for the years ended December 31, 1995, 1996 and
1997 and the six months ended June 30, 1997 and 1998............................... F-3
Balance Sheets as of December 31, 1996 and 1997 and as of June 30, 1998.............. F-4
Consolidated Cash Flow Statements for the years ended December 31, 1995, 1996 and
1997 and the six months ended June 30, 1997 and 1998............................... F-5
Notes to the Consolidated Financial Statements....................................... F-6
ORAVAX, INC.
Report of Independent Accountants.................................................... F-30
Consolidated Balance Sheets as of December 31, 1996 and 1997......................... F-31
Consolidated Statements of Operations for the years ended December 31, 1995, 1996,
and 1997........................................................................... F-32
Consolidated Statements of Stockholders' Equity (Deficit) for the years ended
December 31, 1995, 1996, and 1997.................................................. F-33
Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1996,
and 1997........................................................................... F-34
Notes to Consolidated Financial Statements........................................... F-35
ORAVAX MERIEUX CO. AND MERIEUX ORAVAX CO. PARTNERSHIPS
Report of Independent Accountants.................................................... F-49
Combined Balance Sheets as of December 31, 1996 and 1997............................. F-50
Combined Statements of Operations for the period from inception (March 31, 1995)
through December 31, 1995 and the years ended December 31, 1996 and 1997........... F-51
Combined Statements of Partners' Capital (Deficit) for the period from inception
(March 31, 1995) through December 31, 1995 and the years ended December 31, 1996
and 1997........................................................................... F-52
Combined Statements of Cash Flows for the period from inception (March 31, 1995)
through December 31, 1995 and the years ended December 31, 1996 and 1997........... F-53
Notes to Combined Financial Statements............................................... F-54
ORAVAX, INC.
Condensed Consolidated Balance Sheets as of September 30, 1998 and December 31,
1997............................................................................... F-57
Condensed Consolidated Statements of Operations for the three and nine months ended
September 30, 1998 and 1997........................................................ F-58
Condensed Consolidated Statements of Cash Flows for the nine months ended September
30, 1998 and 1997.................................................................. F-59
Notes to Condensed Consolidated Financial Statements................................. F-60
</TABLE>
F-1
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
REPORT OF INDEPENDENT CHARTERED ACCOUNTANTS
TO THE DIRECTORS OF PEPTIDE THERAPEUTICS GROUP PLC:
We have audited the financial statements on pages F-3 to F-29 which have
been prepared under the historical cost convention and in accordance with the
accounting policies set out on pages F- 6 to F-7.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The company's directors are responsible for the preparation of the financial
statements. It is our responsibility to form an independent opinion, based on
our audits, on those financial statements and to report our opinion to the
directors.
BASIS OF OPINION
We conducted our audit in accordance with United Kingdom Auditing Standards
issued by the Auditing Practices Board, which do not differ in any significant
respect from United States Generally Accepted Auditing Standards. An audit
includes examination, on a test basis, of evidence relevant to the amounts and
disclosures in the financial statements. It also includes an assessment of the
significant estimates and judgements made by the directors in the preparation of
the financial statements and of whether the accounting policies are appropriate
to the circumstances of the company and of the group, consistently applied and
adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
OPINION
In our opinion, the financial statements give a true and fair view of the
state of affairs of the group as of December 31, 1996 and 1997 and of the
group's loss or profit and cash flows for each of the three years ended December
31, 1995, 1996 and 1997, and in accordance with Generally Accepted Accounting
Principles in the United Kingdom.
RECONCILIATION TO US GAAP
Accounting practices used by the group in preparing the accompanying
financial statements conform with Generally Accepted Accounting Principles in
the United Kingdom, but do not conform with accounting principles generally
accepted in the United States. A description of theses differences and a
reconciliation of net loss and shareholders' equity to United States Generally
Accepted Accounting Principles is set out in Note 21.
Arthur Andersen
Chartered Accountants
Cambridge, England
1 May 1998
F-2
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
<TABLE>
<CAPTION>
FOR THE
FOR THE YEAR ENDED SIX MONTHS ENDED
31 DECEMBER, 30 JUNE,
------------------------------- --------------------
1995 1996 1997 1997 1998
--------- --------- --------- --------- ---------
NOTE UNAUDITED
<S> <C> <C> <C> <C> <C> <C>
L000 L000 L000 L000 L000
TURNOVER........................................ (2) 160 153 2,795 2,525 195
Research and development costs, net........... (2,954) (4,956) (9,745) (5,410) (4,479)
Administrative expenses....................... (1,041) (1,260) (1,485) (784) (758)
Other operating income........................ -- -- 439 215 126
--------- --------- --------- --------- ---------
OPERATING LOSS.................................. (3,835) (6,063) (7,996) (3,454) (4,916)
Interest receivable........................... 236 1,485 1,545 758 649
Interest payable and similar charge........... (3) (13) (16) (3) (3) --
--------- --------- --------- --------- ---------
LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION..... (3,612) (4,594) (6,454) (2,699) (4,267)
--------- --------- --------- --------- ---------
Tax on loss on ordinary activities............ (9) -- -- -- --
--------- --------- --------- --------- ---------
LOSS ON ORDINARY ACTIVITIES AFTER TAXATION...... (4) (3,621) (4,594) (6,454) (2,699) (4,267)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Loss per ordinary share....................... (7) (20.2)p (13.5)p (18.1)p (7.6)p (11.8)p
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
There were no recognized gains or losses, other than the loss on ordinary
activities after taxation and therefore a statement of total recognized gains
and losses has not been included in these financial statements.
A statement of movements on reserves is given in note 14.
The accompanying notes are an integral part of these consolidated profit and
loss accounts.
F-3
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
30 JUNE,
-----------
31 DECEMBER,
-------------------- 1998
-----------
1996 1997
--------- --------- UNAUDITED
NOTE L000 L000 L000
<S> <C> <C> <C> <C>
FIXED ASSETS
Tangible assets.......................................... (8) 2,488 2,863 3,177
Investments.............................................. (9) 1,270 1,234 1,429
--------- --------- -----------
3,758 4,097 4,606
--------- --------- -----------
CURRENT ASSETS
Debtors.................................................. (10) 663 494 1,062
Liquid resources......................................... (15) 20,551 20,709 12,365
Cash..................................................... (15) 5 42 3,497
--------- --------- -----------
21,219 21,245 16,924
CREDITORS:
Amounts falling due within one year...................... (11) (1,809) (1,876) (2,117)
--------- --------- -----------
NET CURRENT ASSETS......................................... 19,410 19,369 14,807
--------- --------- -----------
NET ASSETS................................................. 23,168 23,466 19,413
--------- --------- -----------
--------- --------- -----------
CAPITAL AND RESERVES
Called-up share capital.................................. (12) 3,392 3,588 3,630
Share premium account.................................... (13) 30,889 37,446 37,617
Accumulated deficit...................................... (13) (11,113) (17,568) (21,834)
--------- --------- -----------
SHAREHOLDERS' FUNDS--ALL EQUITY............................ 23,168 23,466 19,413
--------- --------- -----------
--------- --------- -----------
</TABLE>
Signed on behalf of the Board
JOHN BROWN, CHIEF EXECUTIVE
GORDON CAMERON, FINANCE DIRECTOR
1 May 1998
The accompanying notes are an integral part of these consolidated balance
sheets.
F-4
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
CONSOLIDATED CASH FLOW STATEMENTS
<TABLE>
<CAPTION>
FOR THE
FOR THE YEAR ENDED SIX MONTHS ENDED
31 DECEMBER, 30 JUNE,
------------------------------- --------------------
1995 1996 1997 1997 1998
--------- --------- --------- --------- ---------
UNAUDITED
<S> <C> <C> <C> <C> <C>
L000 L000 L000 L000 L000
NET CASH OUTFLOW FROM OPERATING ACTIVITIES (NOTE 16).................... (3,052) (5,190) (7,024) (3,584) (4,962)
--------- --------- --------- --------- ---------
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest received..................................................... 129 1,198 1,844 916 634
Interest paid......................................................... -- (2) -- -- --
Interest element of finance lease payments............................ (1) (20) (10) (8) --
--------- --------- --------- --------- ---------
Net cash inflow....................................................... 128 1,176 1,834 908 634
--------- --------- --------- --------- ---------
TAXATION
Withholding tax....................................................... (9) -- -- -- --
--------- --------- --------- --------- ---------
Net cash outflow...................................................... (9) -- -- -- --
--------- --------- --------- --------- ---------
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Payment to acquire own shares through ESOP trust...................... (1,064) -- -- -- (195)
Purchase of tangible fixed assets..................................... (419) (1,994) (1,338) (516) (579)
Purchase of trade investments......................................... -- (250) -- -- --
Sale of tangible fixed assets......................................... 2 2 -- -- --
Sale of trade investments............................................. -- 49 -- -- --
--------- --------- --------- --------- ---------
Net cash outflow...................................................... (1,481) (2,193) (1,338) (516) (774)
--------- --------- --------- --------- ---------
NET CASH OUTFLOW FROM BUSINESS ACTIVITIES............................. (4,414) (6,207) (6,528) (3,192) (5,102)
--------- --------- --------- --------- ---------
MANAGEMENT OF LIQUID RESOURCES
Net cash (placed on)/withdrawn from deposit........................... (27,220) 6,669 (158) (3,365) 8,344
Purchase of corporate bonds........................................... -- (3,756) -- -- --
Sale of corporate bonds............................................... -- 3,756 -- -- --
--------- --------- --------- --------- ---------
Net cash (inflow)/outflow............................................. (27,220) 6,669 (158) (3,365) 8,344
--------- --------- --------- --------- ---------
FINANCING
Issue of ordinary share capital....................................... 31,871 -- 6,752 6,643 214
Exercise of option over issued shares held by ESOP.................... -- -- 36 -- --
Payment of issue costs................................................ (2,212) (227) -- -- --
Payment of undertaking on shares...................................... 792 -- -- -- --
Capital element of finance lease payments............................. (73) (55) (65) (43) (1)
--------- --------- --------- --------- ---------
Net cash inflow/(outflow)............................................. 30,378 (282) 6,723 6,600 213
--------- --------- --------- --------- ---------
(DECREASE)/INCREASE IN CASH............................................. (1,256) 180 37 43 3,455
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN FUNDS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
FOR THE YEAR ENDED ENDED
31 DECEMBER, 30 JUNE,
------------------------------- --------------------
1995 1996 1997 1997 1998
--------- --------- --------- --------- ---------
UNAUDITED
L000 L000 L000 L000 L000
<S> <C> <C> <C> <C> <C>
(Decrease)/increase in cash........................................... (1,256) 180 37 43 3,455
Increase/(decrease) in liquid resources............................... 27,220 (6,669) 158 3,365 (8,344)
--------- --------- --------- --------- ---------
Increase/(decrease) in cash and liquid resources...................... 25,964 (6,489) 195 3,408 (4,889)
Changes in finance leases............................................. (112) 55 65 43 1
--------- --------- --------- --------- ---------
Movement in net funds................................................. 25,852 (6,434) 260 3,451 (4,888)
Net funds at beginning of period...................................... 1,072 26,924 20,490 20,490 20,750
--------- --------- --------- --------- ---------
Net funds at end of period............................................ 26,924 20,490 20,750 23,941 15,862
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated cash flow
statements.
F-5
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(1) ACCOUNTING POLICIES
A summary of the principal Group accounting policies, all of which have been
applied consistently throughout the periods presented, is set out below:
(a) BASIS OF ACCOUNTING The financial statements have been prepared in
accordance with applicable accounting standards and under the historical
cost convention. The financial statements have been prepared under United
Kingdom Generally Accepted Accounting Principles (U.K. GAAP). A
reconciliation from U.K. GAAP to United States Generally Accepted
Accounting Principles (U.S. GAAP) is set out in note 21.
The interim accounts for the six months ended 30 June 1997 and 1998 have
been prepared in accordance with the accounting policies adopted for the
annual accounts for the year ended 31 December 1997. The results for the
six months ended 30 June 1997 and 1998 have not been audited and do not
constitute statutory accounts within the meaning of Section 240 of the
Companies Act 1985. In the opinion of the Directors, all adjustments
necessary for a fair statement of the results for these periods have been
made, such adjustments being of a normal recurring nature. The results of
operations for the six months ended 30 June 1998 are not indicative of
the results expected for the year ending 31 December 1998.
(b) BASIS OF CONSOLIDATION The Group financial statements consolidate the
financial statements of Peptide Therapeutics Group plc and of its
subsidiary undertaking, Peptide Therapeutics Limited.
(c) TANGIBLE FIXED ASSETS Fixed assets are stated at original historical
cost. Depreciation is provided at rates calculated to write off the cost
of each asset on a straight-line basis over its expected useful life to
its residual value, as follows:
<TABLE>
<S> <C>
Computers and office equipment............ -33% per annum
Motor vehicles............................ -25% per annum
Fixtures and fittings..................... -20% per annum
Laboratory equipment...................... -14% per annum
</TABLE>
(d) INVESTMENTS Fixed asset investments are shown at cost less provision for
permanent diminution in value.
(e) FOREIGN CURRENCIES Transactions denominated in foreign currencies are
recorded in the local currency at actual exchange rates as at the date of
the transaction. Monetary assets and liabilities denominated in foreign
currencies are translated at the rates ruling at the balance sheet date.
Any gain or loss arising from a change in exchange rates subsequent to
the date of the transaction is included as an exchange gain or loss in
the profit and loss account.
(f) TAXATION Corporation tax payable is provided on taxable profits at the
current rate. Deferred taxation (which arises from differences in the
timing of the recognition of items, principally depreciation, in the
financial statements and by tax legislation) has been calculated on the
liability method. Deferred taxation is provided on timing differences
which will probably reverse, at the rates of tax likely to be in force at
the time of the reversal. Deferred tax is not
F-6
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
provided on timing differences which, in the opinion of the Directors,
will probably not reverse.
(g) RESEARCH AND DEVELOPMENT Research and development costs are written off
in the period in which they are incurred.
(h) TURNOVER Group turnover comprises the value of sales (excluding VAT and
similar taxes, trade discounts and intra-group transactions) and income
derived from license fees, contract research fees, development milestone
payments and royalties receivable from third parties in the normal course
of business. Contract research fees are recognized in the accounting
period in which the related work is carried out. License fees and
development milestone payments, which are nonrefundable and require no
future obligations of Peptide, are recognized when they fall
contractually due.
Expenses incurred as part of research and development programs and
recharged to the collaborative partner are shown as other operating
income.
(i) GOVERNMENT GRANTS Grants intended to contribute towards specific costs
are recognized in line with the proportion of those costs incurred.
Government grants, which have been netted against research and
development expense, were L30, L97, L373, L144 and L57 for the year ended
31 December 1995, 1996 and 1997 and the six months ended 30 June 1997 and
1998, respectively.
(j) PENSION COSTS The Group provides pensions to all employees both through
contributions to personal pension schemes and through a
self-administered, Inland Revenue approved pension scheme. All schemes
are defined contribution schemes. All pension contributions are charged
to the profit and loss account. Any difference between amounts charged to
the profit and loss account and contributions paid to private pension
schemes is shown in the balance sheet under creditors falling due within
one year.
(k) LEASES Assets held under finance leases are initially reported at fair
value of the asset, with an equivalent liability categorized as
appropriate under creditors due within or after one year. The asset is
depreciated over its useful economic life. Finance charges are allocated
to accounting periods over the period of the lease to produce a constant
rate of charge on the outstanding balance. Rentals are apportioned
between finance charges and reduction of the liability, and allocated to
other operating expenses. The Group entered into operating leases as
described in note 18. Rentals under operating leases are charged on a
straight-line basis over the lease term, even if the payments are not
made on such a basis.
F-7
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(2) TURNOVER
The geographical analysis of turnover by destination is as follows:
<TABLE>
<CAPTION>
FOR THE
FOR THE YEAR ENDED SIX
31 DECEMBER, MONTHS
----------------------------------- ENDED
1995 1996 1997 30 JUNE,
----- ----- --------- ---------
L000 L000 L000 1997
---------
L000
<S> <C> <C> <C> <C>
United Kingdom................................................................. -- 63 250 125
Europe......................................................................... 9 21 2,405 2,400
North America.................................................................. 31 69 140 --
Japan.......................................................................... 120 -- -- --
--- --- --------- ---------
160 153 2,795 2,525
--- --- --------- ---------
--- --- --------- ---------
<CAPTION>
-----
<S> <C>
United Kingdom................................................................. 125
Europe......................................................................... 40
North America.................................................................. 30
Japan.......................................................................... --
---
195
---
---
</TABLE>
All turnover originates in the United Kingdom.
(3) INTEREST PAYABLE AND SIMILAR CHARGES
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
31 DECEMBER,
-------------------------------------
1995 1996 1997
----- ----- -----
L000 L000 L000
<S> <C> <C> <C>
On bank overdrafts and other amounts repayable within five years.................. 1 2 --
Interest element of finance lease charges, due within one year.................... 12 14 3
-- -- --
13 16 3
-- -- --
-- -- --
<CAPTION>
SIX MONTHS ENDED
30 JUNE,
-------------
1997
-----
<S> <C> <C>
On bank overdrafts and other amounts repayable within five years.................. -- --
Interest element of finance lease charges, due within one year.................... 3 --
-- --
3 --
-- --
-- --
</TABLE>
F-8
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(4) LOSS ON ORDINARY ACTIVITIES BEFORE AND AFTER TAXATION
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE
31 DECEMBER, SIX MONTHS ENDED
------------------------------- 30 JUNE,
1995 1996 1997 --------------------
--------- --------- --------- 1997
--------- 1998
L000 L000 L000 L000 ---------
L000
<S> <C> <C> <C> <C> <C>
Loss on ordinary activities before taxation is stated after crediting:
Grant income.............................................................. 30 97 373 144 57
Other operating income.................................................... -- -- 439 215 126
And after charging:
Depreciation on tangible fixed assets
- -owned.................................................................... 121 402 573 266 337
- -held under finance leases................................................ 24 30 30 15 --
Government grants written off............................................. 10 -- -- -- --
Hire of office equipment and motor vehicles under operating leases........ 113 69 59 22 21
Other operating lease rentals............................................. 150 144 171 85 98
Staff costs (see note 5).................................................. 1,459 2,560 3,514 1,622 1,728
Auditors' renumeration
- -audit services........................................................... 8 29 19 -- --
- -taxation services........................................................ 2 12 23 -- 4
- -other services........................................................... 4 10 1 -- 1
</TABLE>
(5) STAFF COSTS
The average monthly number of employees (including Executive Directors) was:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
31 DECEMBER,
-------------------------------------
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Research and development.......................................................... 19 43 59
Administration.................................................................... 9 18 24
-- -- --
28 61 83
-- -- --
-- -- --
<CAPTION>
FOR THE
SIX MONTHS ENDED
30 JUNE,
-------------
1997 1998
----- -----
<S> <C> <C>
Research and development.......................................................... 54 65
Administration.................................................................... 23 23
-- --
77 88
-- --
-- --
</TABLE>
F-9
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
Their aggregate remuneration comprised:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE
31 DECEMBER, SIX MONTHS ENDED
------------------------------- 30 JUNE,
1995 1996 1997 --------------------
--------- --------- --------- 1997
--------- 1998
L000 L000 L000 L000 ---------
L000
<S> <C> <C> <C> <C> <C>
Wages and salaries........................................................ 1,236 2,194 2,913 1,269 1,464
Social security costs..................................................... 115 238 306 142 145
Other pension costs (see note 18c)........................................ 74 127 194 110 90
Redundancy................................................................ 4 1 -- -- --
Compensation for loss of office........................................... 30 -- 101 101 29
--------- --------- --------- --------- ---------
1,459 2,560 3,514 1,622 1,728
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
(6) DIRECTORS' REMUNERATION, INTERESTS AND TRANSACTIONS
The remuneration paid in respect of Directors who served during the years
were as follows:
<TABLE>
<CAPTION>
TOTAL TOTAL TOTAL
1995 1996 1997
DIRECTORS L L L
- ------------------------------------------------------------------------------------ --------- --------- ---------
<S> <C> <C> <C>
EXECUTIVE:
Sir Brian Richards.................................................................. 155,016 153,076 35,902
Alan Goodman........................................................................ 230,254 230,747 283,876
John Brown.......................................................................... 94,367 126,385 245,245
Gordon Cameron...................................................................... -- -- 120,128
Nicolas Higgins..................................................................... -- 24,081 151,454
Daniel Roach........................................................................ 121,027 130,186 24,555
--------- --------- ---------
TOTAL............................................................................... 600,664 664,475 861,160
--------- --------- ---------
NON-EXECUTIVE:
Sir Brian Richards.................................................................. -- -- 57,825
Alan Smith.......................................................................... 3,333 20,000 20,000
Nancy Lane.......................................................................... 3,333 20,000 20,000
Andrew Allars....................................................................... 17,917 20,000 3,333
--------- --------- ---------
TOTAL............................................................................... 24,583 60,000 101,158
--------- --------- ---------
FORMER DIRECTORS.................................................................... 148,483 43,851 --
--------- --------- ---------
TOTAL............................................................................... 773,730 768,326 962,318
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-10
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(6) DIRECTORS' REMUNERATION, INTERESTS AND TRANSACTIONS (CONTINUED)
DIRECTORS' INTERESTS The interests in the shares of the Company and its
subsidiaries for the Directors who held office during the years are described
below:
SHAREHOLDINGS IN THE COMPANY
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF NUMBER OF
ORDINARY ORDINARY ORDINARY
SHARES SHARES SHARES
OF 10P EACH OF 10P EACH OF 10P EACH
31 DECEMBER 31 DECEMBER 31 DECEMBER
1995 1996 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Sir Brian Richards................................................. 101,920 101,920 101,920
Alan Goodman....................................................... 3,041,390 3,041,390 3,041,390
Denis Stanworth.................................................... 2,208,560 2,208,560 --
Nancy Lane......................................................... 2,500 2,500 2,500
Alan Smith......................................................... 500 500 500
Daniel Roach....................................................... 1,575,750 1,575,750 1,593,877
Andrew Allars...................................................... -- 40,000 40,000
</TABLE>
F-11
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(6) DIRECTORS' REMUNERATION, INTERESTS AND TRANSACTIONS (CONTINUED)
OPTIONS OVER SHARES IN THE COMPANY
<TABLE>
<CAPTION>
OPTIONS OVER ORDINARY SHARES OF 10P EACH
------------------------------------------------ EXERCISE
DIRECTORS 1.1.95 GRANTED EXERCISED 31.12.95 PRICE
- ------------------------------------------------------------ --------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Sir Brian Richards.......................................... 250,000 -- -- 250,000 L0.10
-- 30,000 -- 30,000 L2.00
--------- ----------- ----------- ----------- -----
280,000
Alan Goodman................................................ 500,000 -- (500,000) -- L1.00
--------- ----------- ----------- ----------- -----
Mr. McCarthy................................................ 250,000 -- (250,000) -- L1.00
----------- -----
John Brown.................................................. -- 180,000 -- 180,000 L0.10
-- 70,000 -- 70,000 L0.10
-- 30,000 -- 30,000 L2.00
--------- ----------- ----------- ----------- -----
280,000
Daniel Roach................................................ 250,000 -- (250,000) -- L1.00
-- 30,000 -- 30,000 L2.00
--------- ----------- ----------- ----------- -----
30,000
<CAPTION>
EARLIEST
DATE OF EXPIRY
DIRECTORS EXERCISE DATE
- ------------------------------------------------------------ --------- ---------
<S> <C> <C>
Sir Brian Richards.......................................... 22.11.95 19.08.01
28.11.98 28.11.02
--------- ---------
Alan Goodman................................................ 22.11.95 --
--------- ---------
Mr. McCarthy................................................ 22.11.95 --
--------- ---------
John Brown.................................................. 22.11.95 27.09.02
22.11.95 10.11.02
28.11.98 28.11.02
--------- ---------
Daniel Roach................................................ 22.11.95 --
28.11.98 28.11.02
--------- ---------
</TABLE>
<TABLE>
<CAPTION>
OPTIONS OVER ORDINARY SHARES OF 10P EACH
------------------------------------------------ EXERCISE
DIRECTORS 1.1.96 GRANTED 31.12.96 PRICE
- ------------------------------------------------------------ --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Sir Brian Richards.......................................... 250,000 -- 250,000 L0.10
30,000 -- 30,000 L2.00
-- 14,149 14,149 L2.12
-- 77,802 77,802 L2.05
--------- ----------- ----------- -----
371,951
-----------
Alan Goodman................................................ -- 14,149 14,149 L2.12
-- 140,973 140,973 L2.05
--------- ----------- ----------- -----
155,122
-----------
John Brown.................................................. 180,000 -- 180,000 L0.10
70,000 -- 70,000 L0.10
30,000 -- 30,000 L2.00
-- 14,149 14,149 L2.12
-- 77,314 77,314 L2.05
-- 5,909 5,909 L1.65
--------- ----------- ----------- -----
377,372
-----------
Nicolas Higgins............................................. 259,260 -- 259,260 L0.10
740 -- 740 L0.10
20,000 -- 20,000 L2.00
-- 14,149 14,149 L2.12
-- 68,290 68,290 L2.05
--------- ----------- ----------- -----
362,439
-----------
Daniel Roach................................................ 30,000 -- 30,000 L2.00
-- 14,149 14,149 L2.12
-- 38,778 38,778 L2.05
--------- ----------- ----------- -----
82,927
-----------
<CAPTION>
EARLIEST
DATE OF EXPIRY
DIRECTORS EXERCISE DATE
- ------------------------------------------------------------ --------- ---------
<S> <C> <C>
Sir Brian Richards.......................................... 22.11.95 19.08.01
28.11.98 28.11.02
09.07.99 09.07.06
11.09.99 11.09.03
--------- ---------
Alan Goodman................................................ 09.07.99 09.07.06
11.09.99 11.09.03
--------- ---------
John Brown.................................................. 22.11.95 27.09.02
22.11.95 10.11.02
28.11.98 28.11.02
09.07.99 09.07.06
11.09.99 11.09.03
15.10.99 15.04.00
--------- ---------
Nicolas Higgins............................................. 22.11.95 13.05.02
22.11.95 07.10.02
28.11.98 28.11.02
09.07.99 09.07.06
11.09.99 11.09.03
--------- ---------
Daniel Roach................................................ 28.11.98 28.11.02
09.07.99 09.07.06
11.09.99 11.09.03
--------- ---------
</TABLE>
F-12
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(6) DIRECTORS' REMUNERATION, INTERESTS AND TRANSACTIONS (CONTINUED)
<TABLE>
<CAPTION>
OPTIONS OVER ORDINARY SHARES OF 10P EACH
------------------------------------------------------------- EARLIEST DATE
DIRECTORS 1.1.97 GRANTED EXERCISED LAPSED 31.12.97 EXERCISE PRICE OF EXERCISE EXPIRY DATE
- ------------------- --------- ----------- ----------- ----------- ----------- --------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sir Brian
Richards........... 250,000 -- -- -- 250,000 L0.10 22.11.95 19.08.01
30,000 -- -- -- 30,000 L2.00 28.11.98 28.11.02
14,149 -- -- -- 14,149 L2.12 09.07.99 09.07.06
77,802 -- -- -- 77,802 L2.05 11.09.99 11.09.03
--------- ----- ----------- ----------- ----------- ----- ------------- -----------
371,951
-----------
Alan Goodman....... 14,149 -- -- -- 14,149 L2.12 09.07.99 09.07.06
140,973 -- -- -- 140,973 L2.05 11.09.99 11.09.03
--------- ----- ----------- ----------- ----------- ----- ------------- -----------
155,122
-----------
John Brown......... 180,000 -- -- -- 180,000 L0.10 22.11.95 27.09.02
70,000 -- -- -- 70,000 L0.10 22.11.95 10.11.02
30,000 -- -- -- 30,000 L2.00 28.11.98 28.11.02
14,149 -- -- -- 14,149 L2.12 09.07.99 09.07.06
77,314 -- -- -- 77,314 L2.05 11.09.99 11.09.03
5,909 -- -- -- 5,909 L1.65 01.11.99 01.05.00
--------- ----- ----------- ----------- ----------- ----- ------------- -----------
377,372
-----------
Gordon Cameron..... 145,000 -- -- -- 145,000 L2.00 20.12.99 20.12.03
15,000 -- -- -- 15,000 L2.00 10.12.99 20.12.06
-- 3,735 -- -- 3,735 L2.61 01.11.00 01.05.01
--------- ----- ----------- ----------- ----------- ----- ------------- -----------
163,735
-----------
Nicolas Higgins.... 259,260 -- -- -- 259,260 L0.10 22.11.95 13.05.02
740 -- -- -- 740 L0.10 22.11.95 07.10.02
20,000 -- -- -- 20,000 L2.00 28.11.98 28.11.02
14,149 -- -- -- 14,149 L2.12 09.07.99 09.07.06
68,290 -- -- -- 68,290 L2.05 11.09.99 11.09.03
-- 3,735 -- -- 3,735 L2.61 01.11.00 01.05.01
--------- ----- ----------- ----------- ----------- ----- ------------- -----------
366,174
-----------
Daniel Roach....... 30,000 -- 18,000 12,000 -- L2.00 02.03.97 02.09.97
14,149 -- 14,149 -- -- L2.12 02.03.97 02.09.97
38,778 -- 38,778 -- -- L2.05 02.03.97 02.09.97
--------- ----- ----------- ----------- ----------- ----- ------------- -----------
--
-----------
</TABLE>
(7) LOSS PER ORDINARY SHARE
Basic loss per ordinary share is based on a Group loss for the period
divided by the number of ordinary shares issued and ranking for dividend during
the periods as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE
31 DECEMBER, SIX MONTHS ENDED
---------------------------------------- 30 JUNE,
1995 1996 1997 --------------------------
------------ ------------ ------------ 1997 1998
L000 L000 L000 ------------ ------------
L000 L000
<S> <C> <C> <C> <C> <C>
Loss on ordinary activities after taxation.... (3,621) (4,594) (6,454) (2,699) (4,267)
Loss per ordinary share....................... (20.2)p (13.5)p (18.1)p (7.6)p (11.8)p
Weighted average ordinary shares.............. 17,894,288 33,919,130 35,584,031 35,291,887 36,042,476
</TABLE>
F-13
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(8) TANGIBLE FIXED ASSETS
The movement in the periods was as follows:
<TABLE>
<CAPTION>
OFFICE FIXTURES AND MOTOR LABORATORY COMPUTER
EQUIPMENT FITTINGS VEHICLES EQUIPMENT EQUIPMENT
GROUP L'000 L'000 L'000 L'000 L'000
- ------------------------------------------------------- --------------- ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
COST
At 31 December 1996.................................... 49 828 20 1,941 259
Additions.............................................. 8 345 -- 583 146
Disposals.............................................. -- -- -- (149) --
-- --
----- ----- ---
At 31 December 1997.................................... 57 1,173 20 2,375 405
Additions.............................................. 3 381 22 239 19
Disposals.............................................. -- -- (20) (3) --
-- --
----- ----- ---
At 30 June 1998........................................ 60 1,554 22 2,611 424
-- --
-- --
----- ----- ---
----- ----- ---
DEPRECIATION
At 31 December 1996.................................... 22 253 2 243 89
Charge for year........................................ 15 147 5 331 105
Disposals.............................................. -- -- -- (45) --
-- --
----- ----- ---
At 31 December 1997.................................... 37 400 7 529 194
Charge for period...................................... 5 90 3 178 60
Disposals.............................................. -- -- (8) (1) --
-- --
----- ----- ---
At 30 June 1998........................................ 42 490 2 706 254
-- --
-- --
----- ----- ---
----- ----- ---
NET BOOK VALUE
At 31 December 1996.................................... 27 575 18 1,698 170
-- --
-- --
----- ----- ---
----- ----- ---
At 31 December 1997.................................... 20 773 13 1,846 211
-- --
-- --
----- ----- ---
----- ----- ---
At 30 June 1998........................................ 18 1,064 20 1,905 170
-- --
-- --
----- ----- ---
----- ----- ---
<CAPTION>
TOTAL
GROUP L'000
- ------------------------------------------------------- ---------
<S> <C>
COST
At 31 December 1996.................................... 3,097
Additions.............................................. 1,082
Disposals.............................................. (149)
---------
At 31 December 1997.................................... 4,030
Additions.............................................. 664
Disposals.............................................. (23)
---------
At 30 June 1998........................................ 4,671
---------
---------
DEPRECIATION
At 31 December 1996.................................... 609
Charge for year........................................ 603
Disposals.............................................. (45)
---------
At 31 December 1997.................................... 1,167
Charge for period...................................... 336
Disposals.............................................. (9)
---------
At 30 June 1998........................................ 1,494
---------
---------
NET BOOK VALUE
At 31 December 1996.................................... 2,488
---------
---------
At 31 December 1997.................................... 2,863
---------
---------
At 30 June 1998........................................ 3,177
---------
---------
</TABLE>
Included within fixtures and fittings are professional fees incurred on the
proposed move to, and fit out of, a new building. These fees have been
capitalized as leasehold improvements. The Group will not commence depreciation
on the costs related to the new building until occupation in April 1999.
Assets held under finance leases included in the above are laboratory
equipment with a net book value of L0.15m and L0.12m at 31 December 1996 and 31
December 1997 respectively. The depreciation charged during the years ended 31
December 1995, 1996, 1997 and six months ended 30 June 1997 was L0.02m, L0.03m,
L0.03m and L0.02m respectively. There were no leases outstanding in 1998.
F-14
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(9) FIXED ASSET INVESTMENTS
<TABLE>
<CAPTION>
31 DECEMBER, 30 JUNE,
-------------------- -----------
1996 1997 1998
--------- --------- -----------
L'000 L'000 L'000
<S> <C> <C> <C>
Trade investments......................................................................... 206 206 206
Investment in own shares.................................................................. 1,064 1,028 1,223
--------- --------- -----
1,270 1,234 1,429
--------- --------- -----
--------- --------- -----
</TABLE>
TRADE INVESTMENTS
<TABLE>
<CAPTION>
L'000
-----
<S> <C>
COST
At 31 December 1996 and 1997 and 30 June 1998................................................................. 206
AMOUNTS WRITTEN OFF
At 31 December 1996 and 1997 and 30 June 1998................................................................. --
---
NET BOOK VALUE
At 31 December 1996 and 1997 and 30 June 1998................................................................. 206
---
---
</TABLE>
Trade investments additions represent 515,000 ordinary shares of 2p each in
Alizyme plc, purchased for 40p each. As of 31 December 1997, the mid-market
price of these shares was 35p each. As of 30 June 1998, the mid-market price was
32.5p each.
SUBSIDIARY UNDERTAKINGS
<TABLE>
<CAPTION>
PROPORTION OF PROPORTION OF
ORDINARY SHARES VOTING RIGHTS
HELD BY THE HELD BY THE
COMPANY COMPANY
------------------- -----------------
<S> <C> <C>
Peptide Therapeutics Limited......................................................... 100% 100%
Peptide Mimetics Limited............................................................. 100% 100%
Peptide Therapeutics
Employees' Trustees Limited......................................................... 100% 100%
</TABLE>
The principal activity of Peptide Therapeutics Limited is the research and
development of novel biopharmaceutical products. Peptide Mimetics Limited has
not traded in the year. Peptide Therapeutics Employees' Trustees Limited acts as
the trustee of the Peptide Therapeutics Employees' Trust. There are no other
assets or liabilities of this subsidiary and it has not traded during the period
presented. Peptide Therapeutics Limited and Peptide Mimetics Limited are
registered in England and Wales. Peptide Therapeutics Employees' Trustees
Limited is registered in Jersey.
F-15
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
INVESTMENT IN OWN SHARES
<TABLE>
<CAPTION>
L'000
---------
<S> <C>
COST AND NET BOOK VALUE
31 December 1996............................................................................................. 1,064
Disposals.................................................................................................... (36)
---------
31 DECEMBER 1997............................................................................................. 1,028
Additions.................................................................................................... 195
---------
30 JUNE 1998................................................................................................. 1,223
---------
---------
</TABLE>
Disposals of L0.036m represent options exercised over 18,000 shares by Dr
Roach.
As of 31 December 1996, 31 December 1997 and 30 June 1998, Peptide
Therapeutics Employees' Trustees Limited held 531,990, 513,990 and 588,990
ordinary shares, respectively, in the Company with a total market value of
L1.1m, L1.0m and L1.2m on behalf of the Peptide Therapeutics Employees' Trust.
See note 20 for discussion of U.S. GAAP presentation.
(10) DEBTORS
<TABLE>
<CAPTION>
31 DECEMBER, 30 JUNE,
------------------------ -----------
1996 1997 1998
----- ----- -----------
L'000 L'000 L'000
<S> <C> <C> <C>
Trade debtors............................................................................... 1 95 93
VAT reclaimable............................................................................. 101 83 82
Prepayments and accrued income.............................................................. 561 316 887
--- --- -----
663 494 1,062
--- --- -----
--- --- -----
</TABLE>
(11) CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
31 DECEMBER, 30 JUNE,
-------------------- -----------
1996 1997 1998
--------- --------- -----------
L'000 L'000 L'000
<S> <C> <C> <C>
Obligations under finance leases.......................................................... 66 1 --
Trade creditors........................................................................... 964 991 1,303
Social security and PAYE.................................................................. 84 130 90
Payments on account....................................................................... 187 187 187
Accruals.................................................................................. 508 567 537
--------- --------- -----
1,809 1,876 2,117
--------- --------- -----
--------- --------- -----
</TABLE>
F-16
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(12) CALLED-UP SHARE CAPITAL
<TABLE>
<CAPTION>
NUMBER L'000
------------ ---------
<S> <C> <C>
AUTHORISED ORDINARY SHARES OF 10P EACH
31 December 1996............................................................................... 43,200,000 4,320
31 December 1997............................................................................... 43,200,000 4,320
30 June 1998................................................................................... 43,200,000 4,320
ALLOTTED, CALLED UP AND FULLY PAID ORDINARY SHARES OF 10P EACH
31 December 1996............................................................................... 33,920,280 3,392
31 December 1997............................................................................... 35,876,014 3,588
30 June 1998................................................................................... 36,300,804 3,630
</TABLE>
SHARE OPTION SCHEMES
The Company encourages employee participation in its shares through share
ownership and has established four share option schemes: the Peptide
Therapeutics Group plc 1994 Unapproved Share Option Scheme ("the 1994 Scheme"),
the Peptide Therapeutics 1995 Unapproved Share Option Scheme ("the 1995
Scheme"), the Peptide Therapeutics 1996 Approved Share Option Scheme ("the 1996
Scheme") and the Peptide Therapeutics 1995 Savings-Related Share Option Scheme
("the SAYE Scheme"). Grants and exercise of options under the above schemes are
subject to the Company's Code of Conduct for dealing in shares and the Model
Code.
The 1994 Scheme had 1,477,490, 1,477,490 and 1,140,935 ordinary shares
outstanding as of 31 December 1996, 31 December 1997, and 30 June 1998,
respectively. Options may be exercised at any time since application for listing
of the Company's shares on the London Stock Exchange until the seventh
anniversary of the date of grant. The exercise price of the options is 10p per
ordinary share. No further options may be granted under this scheme.
The 1995 Scheme had 2,316,022, 2,696,223 and 2,588,474 ordinary shares
outstanding as of 31 December 1996, 31 December 1997, and 30 June 1998,
respectively. Of these, options for 516,990, 486,990 and 436,990 as of 31
December 1996, 31 December 1997, and 30 June 1998, respectively are already in
issue and held by Peptide Therapeutics Employees' Trustees Limited as part of
its entire holding of 531,990, 513,990 and 588,990, as of 31 December 1996, 31
December 1997, and 30 June 1998, respectively. Normally these options are only
exercisable between the third and seventh anniversary of the date of grant. The
exercise price of the option is derived from the average closing mid-price over
the three days prior to grant. In order for these options to be exercised in
full, the growth in the Company's share price over a specified consecutive three
year period will have to exceed the growth of the total shareholder return for
the FT-SE-A All-Share (900) Index over the same period. See note 20 for
difference between U.K. GAAP and U.S. GAAP.
The 1996 Scheme had 1,047,666, 1,154,649 and 1,097,332 ordinary shares
outstanding as of 31 December 1996, 31 December 1997, and 30 June 1998,
respectively. Of these, options for 15,000 shares as of 31 December 1996, 31
December 1997, and 30 June 1998, respectively, are already in issue and held by
Peptide Therapeutics Employees' Trustees Limited as part of its entire holding
of 531,990, 513,990 and 588,990, as of 31 December 1996, 31 December 1997, and
30 June 1998, respectively. Normally these options are only exercisable between
the third and seventh anniversary of the date of
F-17
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
grant. The exercise price of the option is derived from the average closing
mid-price over the three days prior to grant. In order for these options to be
exercised in full, the growth in the Company's share price over a specified
consecutive three year period will have to exceed the growth of the total
shareholder return for the FT-SE-A All-Share (900) Index over the same period.
See note 20 for difference between U.K. GAAP and U.S. GAAP.
The SAYE Scheme had 121,391, 159,411 and 152,654 ordinary shares outstanding
as of 31 December 1996, 31 December 1997, and 30 June 1998, respectively.
Normally these options are only exercisable between the third anniversary of the
date of grant and six months thereafter. The exercise price of the option is
derived from a 20% discount to the average closing mid-price over the three days
prior to grant.
(13) RESERVES
<TABLE>
<CAPTION>
SHARE PREMIUM ACCOUNT PROFIT AND LOSS
----------------------- ACCOUNT
L'000 ---------------------
L'000
<S> <C> <C>
31 December 1996...................................................... 30,889 (11,113)
New share capital subscribed.......................................... 6,557 --
Loss for the period................................................... -- (6,454)
------ -------
31 December 1997...................................................... 37,446 (17,568)
New share capital subscribed.......................................... 171 --
Loss for period....................................................... -- (4,267)
------ -------
30 June 1998.......................................................... 37,617 (21,835)
------ -------
------ -------
</TABLE>
(14) RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
31 DECEMBER, 30 JUNE,
------------------------------- -----------
1995 1996 1997 1998
--------- --------- --------- -----------
L'000 L'000 L'000 L'000
<S> <C> <C> <C> <C>
Loss for the period........................................................... (3,621) (4,594) (6,454) (4,267)
New share capital subscribed, net............................................. 29,432 -- 6,752 214
--------- --------- --------- -----------
Net (decrease)/increase in shareholders' funds................................ 25,811 (4,594) 298 (4,053)
Opening shareholders' funds................................................... 1,951 27,762 23,168 23,466
--------- --------- --------- -----------
Closing shareholders' funds................................................... 27,762 23,168 23,466 19,413
--------- --------- --------- -----------
--------- --------- --------- -----------
</TABLE>
(15) CASH AND LIQUID RESOURCES
The Company manages its funds in a portfolio of cash, bank and treasury
deposits, and liquid investments with maturities chosen to meet its short and
medium term cash requirements. Maturity
F-18
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(15) CASH AND LIQUID RESOURCES (CONTINUED)
periods do not exceed 18 months. Since March 1998, the Company's liquid reserves
have been managed on a discretionary basis by a third party within the above
parameters which have been set by the Board.
<TABLE>
<CAPTION>
31 DECEMBER, 30 JUNE,
-------------------- -----------
1996 1997 1998
--------- --------- -----------
L'000 L'000 L'000
<S> <C> <C> <C>
Cash................................................................................... 5 42 3,497
Liquid resources....................................................................... 20,551 20,709 12,365
--------- --------- -----------
Total cash and liquid resources........................................................ 20,556 20,751 15,862
--------- --------- -----------
--------- --------- -----------
</TABLE>
(16) RECONCILIATION OF THE OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING
ACTIVITIES
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE
31 DECEMBER, SIX MONTHS ENDED
------------------------------- 30 JUNE,
1995 1996 1997 ----------------------
--------- --------- --------- 1997 1998
L'000 L'000 L'000 --------- -----------
L'000 L'000
<S> <C> <C> <C> <C> <C>
Operating loss....................................................... (3,835) (6,063) (7,996) (3,454) (4,916)
Depreciation......................................................... 145 432 603 281 336
Decrease/(increase) in debtors....................................... 25 (15) (131) (899) (552)
Increase in creditors................................................ 611 450 395 488 156
Loss on sale of tangible fixed assets................................ 2 11 105 -- 14
Gain on sale of trade investments.................................... -- (5) -- -- --
--------- --------- --------- --------- -----------
Net cash outflow from operating activities........................... (3,052) (5,190) (7,024) (3,584) (4,962)
--------- --------- --------- --------- -----------
--------- --------- --------- --------- -----------
</TABLE>
F-19
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(17) ANALYSIS OF NET FUNDS
<TABLE>
<CAPTION>
FINANCE CASH LIQUID TOTAL
LEASES --------- RESOURCES ---------
----------- L'000 ----------- L'000
L'000 L'000
<S> <C> <C> <C> <C>
Opening balance 1 January 1996................................................ (121) (175) 27,220 26,924
Management of liquid resources................................................ -- -- (6,669) (6,669)
Increase in cash.............................................................. -- 180 -- 180
Capital element of finance lease payments..................................... 55 -- -- 55
--- --------- ----------- ---------
Closing balance 31 December 1996.............................................. (66) 5 20,551 20,490
Management of liquid resources................................................ -- -- 158 158
Increase in cash.............................................................. -- 37 -- 37
Capital element of finance lease payments..................................... 65 -- -- 65
--- --------- ----------- ---------
Closing balance 31 December 1997.............................................. (1) 42 20,709 20,750
Management of liquid resources................................................ -- -- (8,344) (8,344)
Increase in cash.............................................................. -- 3,455 -- 3,455
Capital element of finance lease payments..................................... 1 -- -- 1
--- --------- ----------- ---------
Closing balance 30 June 1998.................................................. -- 3,497 12,365 15,862
--- --------- ----------- ---------
--- --------- ----------- ---------
</TABLE>
(18) FINANCIAL COMMITMENTS
a) LEASE COMMITMENTS The Group has not entered into any leases in respect
of vehicles and office equipment during the periods presented. The total
rental expense for the years ended 31 December 1995, 1996 and 1997 and
for the six months ended 30 June 1997 and 1998 for existing leases was
L0.11m, L0.07m, L0.06m, L0.02m and L0.02m, respectively. The Group has
entered into cancellable leases in respect to certain land and buildings
on short-term leases. The rentals for the years ended 31 December 1995,
1996 and 1997 and for the six months ended 30 June 1997 and 1998 on these
leases were L0.15m, L0.14m, L0.17m, L0.09m and L0.1m, respectively.
The Group entered a lease on 30 March 1998 in respect of a further unit
on the Cambridge Science Park, which has not been taken into account in
the following analysis. In addition, the Group entered into an additional
lease for a research and development facility, which is to commenced in
December 1998. See note 19.
The minimum accrual rentals under the foregoing leases are as follows:
<TABLE>
<CAPTION>
31 DECEMBER, 31 DECEMBER,
------------------------ ------------------------
PROPERTY VEHICLES AND EQUIPMENT
------------------------
1997 ------------------------
1996 ----- 1996 1997
----- L'000 ----- -----
L'000 L'000 L'000
<S> <C> <C> <C> <C>
GROUP
Operating leases which expire:
Within one year................................................................ 163 109 13 13
Within two to five years....................................................... -- -- 32 --
-- --
--- ---
163 109 45 13
-- --
-- --
--- ---
--- ---
</TABLE>
F-20
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(18) FINANCIAL COMMITMENTS (CONTINUED)
- ------------------------
b) CAPITAL COMMITMENTS At 31 December 1997, capital commitments contracted
but not provided for were L0.15m (1996--L0.03m).
c) PENSION ARRANGEMENTS The Group provides pension benefits to all
full-time employees on a defined contribution basis. The Company operates
a self-administered, Inland Revenue approved pension scheme for Executive
Directors and a limited number of senior employees. Other employees may
operate private personal pension schemes. The pension cost for the years
ended 31 December 1995, 1996 and 1997 and the six month periods ended 30
June 1997 and 1998 were L0.07m, L0.13m, L0.19m, L0.11m and L0.09m,
respectively. At 31 December 1996, 31 December 1997 and 30 June 1998 the
Group owed L4,343, L3,078 and L688, respectively to the pension schemes.
These amounts are shown in the balance sheet under creditors falling due
within one year.
(19) COLLABORATION AGREEMENTS
(a) SmithKline Beecham Agreement
In February 1997, the Company signed a licensing and collaboration agreement
with SmithKline Beecham to continue the development of its Allergy Vaccine.
SmithKline Beecham acquired exclusive worldwide rights to market products
arising from the agreement and will pay all clinical and associated development
costs of the Allergy Vaccine as well as for any other product candidates arising
from the alliance. The Company received a non-refundable L2.4m license payment
upon entering into the agreement. The Company also has the ability to receive up
to an additional L23.7m, payable upon achievement of clinical development and
product registration milestones. In addition, the Company will receive royalties
on any future product sales. As part of the collaboration agreement, SmithKline
Beecham purchased L3.6m of ordinary shares, at 360p per share.
The Company has recorded L2.4 million of turnover related to this
collaboration for the year ended 31 December 1997 and six months ended 30 June
1997. In addition, the Company recorded other operating income of L439, L215 and
L125 for the year ended 31 December 1997 and the six months ended 30 June 1997
and 1998, respectively for development costs on the Allergy Vaccine that was
reimbursed by SmithKline Beecham.
(b) Medeva Agreement
In January 1997, Peptide entered into a collaboration with Medeva for the
research, development and marketing of novel, non-injectable vaccines.
Under the terms of this collaboration, Peptide acquired, for total
consideration of L1 million, an oral and nasal vaccine delivery technology,
rights to several vaccine product candidates and rights to a portfolio of 19
patent families. In addition, Peptide has provided L1 million of funding to
Medeva towards the cost of the development program which is taking place within
Medeva's vaccine research unit. This funding was recorded as research and
development expense during 1997. Medeva has an option to license any products
developed from the alliance and has rights to participate in the revenues
Peptide generates from licensing a product to a third party. Medeva purchased
from Peptide approximately L3 million of Peptide ordinary shares at 340p per
share at the time of entering the alliance.
F-21
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(20) POST BALANCE SHEET EVENTS
On 12 March 1998, the Group entered into an agreement to lease a new 30,000
square foot purpose-built research and development facility in the Peterhouse
Technology Park on the south side of Cambridge. The lease commenced on December
16, 1998 and is for a 25-year term with annual payments of L520,000.
On 10 November 1998, the Group entered into an agreement to acquire OraVax,
Inc. ("OraVax"), a United States based corporation. The transaction will take
the form of a merger with OraVax, Inc. becoming a wholly owned subsidiary of the
Group. The Group will issue stock and cash totaling approximately $17.0 million
in consideration for the merger. Simultaneous with the execution of the merger
agreement, the Group purchased approximately 95% of OraVax's outstanding 6%
convertible preferred stock for an aggregate purchase price of approximately
$3.0 million. Completion of the merger is subject to certain conditions,
including approval by the shareholders of each company and the Group raising
additional capital to provide sufficient working capital for the combined
company following the merger, as required by the rules of the London Stock
Exchange. The merger will be accounted for using the acquisition method of
accounting under U.K. GAAP.
(21) SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN U.K. GAAP FOLLOWED BY THE GROUP
AND U.S. GAAP
The group's consolidated financial statements have been prepared under U.K.
GAAP, which differs in certain respects from U.S. GAAP. The principal
differences between the group's accounting policies under U.K. GAAP and U.S.
GAAP are set out in the table below.
RECONCILIATION OF NET LOSS FROM U.K. GAAP TO U.S. GAAP
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE
31 DECEMBER, SIX MONTHS ENDED
------------------------------- 30 JUNE,
1995 1996 1997 --------------------
--------- --------- --------- 1997 1998
L'000 L'000 L'000 --------- ---------
L'000 L'000
<S> <C> <C> <C> <C> <C>
Net loss as reported under U.K. GAAP............................ (3,621) (4,594) (6,454) (2,699) (4,267)
Adjustments for:
Compensation costs under variable plan accounting for stock
options....................................................... 4 108 796 863 (454)
--------- --------- --------- --------- ---------
Net loss as reported under U.S. GAAP............................ (3,625) (4,702) (7,250) (3,562) (3,813)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
The principal difference between U.K. GAAP and U.S. GAAP for Peptide relates
to the accounting for stock options granted to employees. Peptide has granted
stock options that will vest upon the attainment of certain targets. Under U.K.
GAAP, there is no accounting for these grants after the initial grant date.
Under U.S. GAAP, Accounting Principles Board (APB) Opinion 25, ACCOUNTING FOR
STOCK ISSUED TO EMPLOYEES, the Company would be required to follow variable plan
accounting for these grants and measure compensation expense as the difference
between the exercise price and the fair market value of the stock during each
accounting period over the vesting period of the options. Increases in fair
market value of the stock would result in a charge to operations and decreases
in the fair market value of the stock would result in a credit to operations.
There is no tax effect related to the adjustments included above.
F-22
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
LOSS PER SHARE UNDER U.S. GAAP
Under U.S. GAAP, the Group would compute loss per share under Statement of
Financial Accounting Standards (SFAS) No. 128 EARNINGS PER SHARE. Under SFAS No.
128, basic net loss per ordinary share is computed using the weighted average
number of shares of common stock outstanding during the period. Diluted net loss
per ordinary share for Peptide is the same as basic net loss per ordinary share
as the effects of the Company's potential ordinary share equivalents are
antidilutive.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE
31 DECEMBER, SIX MONTHS ENDED
---------------------------------------- 30 JUNE,
1995 1996 1997 --------------------------
------------ ------------ ------------ 1997 1998
L'000 L'000 L'000 ------------ ------------
L'000 L'000
<S> <C> <C> <C> <C> <C>
Basic and diluted loss per ordinary share..... (20.3)p (13.9)p (20.4)p (10.1)p (10.6)p
Shares used in computing basic loss per
ordinary share.............................. 17,894,288 33,919,130 35,584,031 35,291,887 36,042,476
Antidilutive securities, not included above... 1,917,490 4,832,499 5,284,725 4,879,864 4,826,741
</TABLE>
Antidilutive securities represent stock options outstanding which have not
been included in the calculation of loss per ordinary share as the impact of
including such shares in the calculation of loss per share would be
antidilutive.
RECONCILIATION OF SHAREHOLDERS' EQUITY FROM U.K. GAAP TO U.S. GAAP
<TABLE>
<CAPTION>
31 DECEMBER, JUNE 30,
------------------------------- -----------
1995 1996 1997 1998
--------- --------- --------- -----------
L000 L000 L000 L000
<S> <C> <C> <C> <C>
As reported under U.K. GAAP................................................... 27,762 23,168 23,466 19,413
Reclassification of cost of investment in Group shares........................ (1,064) (1,064) (1,028) (1,223)
--------- --------- --------- -----------
As reported under U.S. GAAP................................................... 26,698 22,104 22,438 18,190
--------- --------- --------- -----------
--------- --------- --------- -----------
</TABLE>
The principal difference between shareholders' equity under U.K. GAAP and
U.S. GAAP relates to the presentation for accounting for the purchase of the
Group shares. Under U.K. GAAP, the Group has classified the cost of shares
purchased as a fixed asset investment (see note 9). For U.S. GAAP purposes, the
cost of Group shares is shown as treasury stock and presented as a component of
shareholders' equity.
F-23
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' EQUITY UNDER U.S. GAAP
<TABLE>
<CAPTION>
CALLED UP SHARE CAPITAL TREASURY STOCK
-------------------------- ----------------------
NUMBER OF SHARE PREMIUM ACCUMULATED DEFERRED NUMBER OF
SHARES SHARE VALUE ACCOUNT LOSS COMPENSATION SHARES COST
----------- ------------- ----------------- ------------- --------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, 31 December
1994................... 1,507,522 1,508 3,341 (2,898) -- -- --
Issuance of ordinary
share capital.......... 374,106 374 5,098 -- -- -- --
Effect of ten-for-one
stock split............ 16,934,652 -- -- -- -- -- --
Issuance of ordinary
share capital.......... 15,100,000 1,510 22,450 -- -- -- --
Deferred compensation
related to grant of
stock options.......... -- -- 127 -- (127) -- --
Amortization of deferred
compensation related to
grant of stock
options................ -- -- -- -- 4 -- --
Payment to acquire own
shares through ESOP
trust.................. -- -- -- -- -- 531,990 (1,064)
Loss for the period under
U.S. GAAP.............. -- -- -- (3,625) -- -- --
----------- ----- ------ ------------- ------ ----------- ---------
Balance, 31 December
1995................... 33,916,280 3,392 31,016 (6,523) (123) 531,990 (1,064)
Deferred compensation
related to grant of
stock options.......... -- -- 118 -- (118) -- --
Amortization of deferred
compensation related to
grant of stock
options................ -- -- -- -- 108 -- --
Exercise of stock
options................ 4,000 -- -- -- -- -- --
Loss for the period under
U.S. GAAP.............. -- -- -- (4,702) -- -- --
----------- ----- ------ ------------- ------ ----------- ---------
Balance, 31 December
1996................... 33,920,280 3,392 31,134 (11,225) (133) 531,990 (1,064)
Deferred compensation
related to grant of
stock options.......... -- -- 1,387 -- (1,387) -- --
Amortization of deferred
compensation related to
grant of stock
options................ -- -- -- -- 796 -- --
Issuance of shares
through ESOP trust..... -- -- -- -- -- (18,000) 36
Exercise of stock
options................ 90,927 9 142 -- -- -- --
Issuance of ordinary
share capital.......... 1,864,807 187 6,415 -- -- -- --
Loss for the period under
U.S. GAAP.............. -- -- -- (7,250) -- -- --
----------- ----- ------ ------------- ------ ----------- ---------
Balance, 31 December
1997................... 35,876,014 3,588 39,078 (18,475) (724) 513,990 (1,028)
Exercise of stock
options................ 424,360 42 171 -- -- -- --
Deferred compensation
related to grant of
stock options.......... -- -- (1,463) -- 1,463 -- --
Reversal of amortization
of deferred
compensation related to
grant of stock
options................ -- -- -- -- (454) -- --
Payment to acquire own
shares through ESOP
trust.................. -- -- -- -- -- 75,000 (195)
Loss for the period under
U.S. GAAP.............. -- -- -- (3,813) -- -- --
----------- ----- ------ ------------- ------ ----------- ---------
Balance, 30 June 1998.... 36,300,374 3,630 37,786 (22,288) 285 588,990 (1,223)
----------- ----- ------ ------------- ------ ----------- ---------
----------- ----- ------ ------------- ------ ----------- ---------
<CAPTION>
TOTAL
SHAREHOLDERS'
EQUITY
---------------
<S> <C>
Balance, 31 December
1994................... 1,951
Issuance of ordinary
share capital.......... 5,472
Effect of ten-for-one
stock split............ --
Issuance of ordinary
share capital.......... 23,960
Deferred compensation
related to grant of
stock options.......... --
Amortization of deferred
compensation related to
grant of stock
options................ 4
Payment to acquire own
shares through ESOP
trust.................. (1,064)
Loss for the period under
U.S. GAAP.............. (3,625)
------
Balance, 31 December
1995................... 26,698
Deferred compensation
related to grant of
stock options.......... --
Amortization of deferred
compensation related to
grant of stock
options................ 108
Exercise of stock
options................ --
Loss for the period under
U.S. GAAP.............. (4,702)
------
Balance, 31 December
1996................... 22,104
Deferred compensation
related to grant of
stock options.......... --
Amortization of deferred
compensation related to
grant of stock
options................ 796
Issuance of shares
through ESOP trust..... 36
Exercise of stock
options................ 151
Issuance of ordinary
share capital.......... 6,602
Loss for the period under
U.S. GAAP.............. (7,250)
------
Balance, 31 December
1997................... 22,438
Exercise of stock
options................ 214
Deferred compensation
related to grant of
stock options.......... --
Reversal of amortization
of deferred
compensation related to
grant of stock
options................ (454)
Payment to acquire own
shares through ESOP
trust.................. (195)
Loss for the period under
U.S. GAAP.............. (3,813)
------
Balance, 30 June 1998.... 18,190
------
------
</TABLE>
F-24
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
DEFERRED TAXES
U.S. GAAP requires the application of SFAS No. 109, ACCOUNTING FOR INCOME
TAXES, which requires the recognition of deferred tax assets and liabilities for
expected future tax consequences of events that have been recognized in the
financial statements or tax returns. Under this method, deferred tax assets and
liabilities are determined based on the difference between the financial
statement and tax bases of assets and liabilities using the enacted tax rates in
effect for the year in which the differences are expected to reverse. SFAS No.
109 requires deferred tax assets and liabilities to be adjusted when the tax
rates or other provisions of the income tax laws change. The analysis using SFAS
No. 109 for the Group is as follows:
<TABLE>
<CAPTION>
31 DECEMBER,
--------------------
<S> <C> <C>
1996 1997
--------- ---------
L000 L000
Losses carried forward............................................................................ 4,040 5,392
Other timing items................................................................................ (615) (195)
--------- ---------
3,425 5,197
Valuation allowance............................................................................... (3,425) (5,197)
--------- ---------
Deferred tax asset................................................................................ -- --
--------- ---------
--------- ---------
</TABLE>
Given the uncertainty of the recoverability of the Groups' tax losses
carried forward which have no expiration date but are available only to offset
future income generated by the same line of business and other timing items, a
valuation allowance has been provided in full for the deferred tax asset
recognized under U.S. GAAP.
F-25
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
SHARE OPTION
The Group's directors and employees have been granted options over ordinary
shares under the following shares option plans: The 1994 Scheme, The 1995
Scheme, The 1996 Scheme and the SAYE Scheme. Under U.S. GAAP, the Group would
have accounted for these plans under APB Opinion No. 25 and elected the
disclosure only alternative under SFAS No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION under which certain pro forma disclosures would be required. The
Group has computed the pro forma disclosures required by SFAS No. 123 using the
Black-Scholes option pricing model. The assumptions used are as follows:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
FOR THE YEAR ENDED ENDED
31 DECEMBER, 30 JUNE,
------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1995 1996 1997 1997 1998
--------- --------- --------- --------- ---------
Risk-free interest rate............................................. 6.25% 5.99% 6.11% 6.24% 5.52%
Expected dividend yield............................................. -- -- -- -- --
Expected lives (years).............................................. 3 3 3 3 3
Expected volatility................................................. 65% 65% 65% 65% 65%
Weighted average grant date fair value.............................. 0.46p 0.97p 1.48p 1.51p 1.32p
Weighted average remaining contractual life of options outstanding
(years)........................................................... 6.13 6.04 5.10 5.32 4.73
</TABLE>
The effect of applying SFAS No. 123 would be as follows:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
FOR THE YEAR ENDED ENDED
31 DECEMBER, 30 JUNE,
------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1995 1996 1997 1997 1998
--------- --------- --------- --------- ---------
L000 L000 L000 L000 L000
Net loss
As reported under U.S. GAAP..................................... (3,625) (4,702) (7,250) (3,562) (3,813)
Pro forma under U.S. GAAP....................................... (3,701) (5,459) (7,631) (3,249) (4,906)
Basic and diluted net loss per share
As reported under U.S. GAAP..................................... (20.3)p (13.9)p (20.4)p (10.1)p (10.6)p
Pro forma under U.S. GAAP....................................... (20.7)p (16.1)p (21.4)p (9.20)p (13.6)p
</TABLE>
F-26
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
The stock option activity for all plans is as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES PRICE RANGE WEIGHTED AVERAGE PRICE
---------------- ----------- -----------------------
<S> <C> <C> <C>
Outstanding, 31 December 1994................................. 1,183,490 L.10 L.10
Granted....................................................... 735,000 .10-2.00 1.23
Exercised..................................................... (1,000) .10 .10
---------------- ----------- -----
Outstanding, 31 December 1995................................. 1,917,490 .10-2.00 .53
Granted....................................................... 2,918,009 2.00-2.12 2.06
Exercised..................................................... (3,000) .10 .10
---------------- ----------- -----
Outstanding, 31 December 1996................................. 4,832,499 .10-2.12 1.46
Granted....................................................... 645,153 2.98-3.47 3.09
Exercised..................................................... (90,927) 2.00-2.12 1.67
Canceled...................................................... (102,000) 2.00-2.12 2.06
---------------- ----------- -----
Outstanding, 31 December 1997................................. 5,284,725 .10-3.47 1.64
Granted....................................................... 148,000 2.80-2.85 2.80
Exercised..................................................... (424,360) .10-2.12 .50
Canceled...................................................... (181,624) 2.00-2.12 2.06
---------------- ----------- -----
Outstanding, 30 June 1998..................................... 4,826,741 L.10-3.47 L1.76
---------------- ----------- -----
---------------- ----------- -----
Exercisable, 30 June 1998..................................... 1,140,935 L.10 L.10
---------------- ----------- -----
---------------- ----------- -----
</TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
The consolidated statement of cash flows prepared under U.K. GAAP presents
substantially the same information as that required under U.S. GAAP by SFAS No.
95, STATEMENT OF CASH FLOWS. These standards differ however with regard to
classification of items within the statements and the definition of cash and
cash equivalents.
Under U.K. GAAP, cash comprises only cash in hand and deposits repayable on
demand. Deposits are repayable on demand if they can be withdrawn at any time
without notice and without penalty or if a maturity or period of notice of not
more than 24 hours or one working day has been agreed. Under U.S. GAAP, cash
equivalents are short term highly liquid investments, generally with original
maturities of three months or less, that are readily convertible to known
amounts of cash and present insignificant risk of changes in value because of
changes in interest rates.
Under U.K. GAAP, cash flows are presented separately for operating
activities, returns on investments and servicing of finance, taxation, capital
expenditure and financial investment, management of liquid resources and
financing activities. U.S. GAAP requires only three categories of cash flow
activity to be reported: operating, investing and financing. Cash flows from
taxation and returns on investments and servicing of finance under U.K. GAAP
would, with the exception of dividends paid, be shown under operating activities
under U.S. GAAP. The payment of dividends would be included as a financing
activity under U.S. GAAP. Management of liquid resources under U.K. GAAP would
be included as cash and cash equivalents under U.S. GAAP to the extent that the
amount involved have a maturity
F-27
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
of less than three months are convertible into known amounts of cash. Summary
statements of cash flow presented under U.S. GAAP are given below:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE
31 DECEMBER, SIX MONTHS ENDED
------------------------------- 30 JUNE,
1995 1996 1997 --------------------
--------- --------- --------- 1997 1998
L'000 L'000 L'000 --------- ---------
L'000 L'000
<S> <C> <C> <C> <C> <C>
Net cash used in operating activities........................ (2,758) (4,166) (5,227) (2,676) (4,328)
Net cash (used in)/provided by investing activities.......... (449) (11,393) 2,262 1,686 1,566
Net cash provided by/(used in) financing activities.......... 29,314 (282) 6,723 6,600 18
--------- --------- --------- --------- ---------
Increase/(decrease) in cash and cash equivalents............. 26,107 (15,841) 3,758 5,610 (2,744)
Beginning cash and cash equivalents.......................... 1,085 27,192 11,351 11,351 15,109
--------- --------- --------- --------- ---------
Ending cash and cash equivalents............................. 27,192 11,351 15,109 16,961 12,365
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following information is presented in compliance with the requirements
of SFAS No. 115, ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY
SECURITIES. Under SFAS No. 115, debt securities that the Company has the
positive intent and ability to hold to maturity are reported at amortized cost
and are classified as held-to-maturity securities. These securities include cash
equivalents and short-term investments. At 31 December 1996 and 1997 and 30 June
1998, the Group has classified all investments as held-to-maturity. Cash, cash
equivalents and short-term investments at 31 December 1996 and 1997 and 30 June
1998 consisted of the following (at amortized cost, which approximates fair
market value):
<TABLE>
<CAPTION>
31 DECEMBER, 30 JUNE,
-------------------- -----------
1996 1997 1998
--------- --------- -----------
L'000 L'000 L'000
<S> <C> <C> <C>
Cash and cash equivalents:
Cash and overnight investment....................................................... 5 42 3,497
Certificates of deposit............................................................. 11,351 15,109 5,811
--------- --------- -----------
11,356 15,151 9,308
Short-term investments:
Certificates of deposit............................................................. 9,200 5,600 6,554
--------- --------- -----------
Total cash, cash equivalents and short-term investments............................. 20,556 20,751 15,862
--------- --------- -----------
--------- --------- -----------
</TABLE>
COMPREHENSIVE INCOME
SFAS No. 130, REPORTING COMPREHENSIVE INCOME, requires disclosure of all
components of comprehensive income on an annual and interim basis for fiscal
years after 15 December 1997. Comprehensive income is defined as the change in
equity of a business enterprise during a period from transactions and other
events and circumstances from nonowner sources. The Company's comprehensive net
loss for the six months ended 30 June 1998 is the same as reported net loss for
the period.
F-28
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
NEW ACCOUNTING STANDARDS
In July 1997, the FASB issued SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION. SFAS No. 131 requires certain financial and
supplementary information to be disclosed on an annual and interim basis for
each reportable segment of an enterprise. Unless impracticable, companies would
be required to restate prior period information upon adoption.. This statement
is effective for fiscal years beginning after 15 December 1997 and is not
expected to have a material effect on the Group's consolidated financial
position or results of operations.
In February 1998, the FASB issued SFAS No. 132, EMPLOYERS' DISCLOSURES ABOUT
PENSIONS AND OTHER POSTRETIREMENT BENEFITS, which standardizes the disclosure
requirements for pensions and other postretirement benefits to the extent
practicable, requires additional information on changes of the benefit
obligations for the fair market values of plan assets that will facilitate
financial analysis and eliminates certain disclosures that are no longer as
useful as they were when SFAS No. 87, EMPLOYERS' ACCOUNTING FOR PENSIONS, SFAS
No. 88, EMPLOYERS' ACCOUNTING FOR SETTLEMENTS AND CURTAILMENTS OF DEFINED
BENEFIT PENSION PLANS AND FOR TERMINATION BENEFITS and SFAS No. 106, EMPLOYERS'
ACCOUNTING FOR POSTRETIREMENT BENEFITS OTHER THAN PENSIONS, were issued. SFAS
No. 132 suggests combined formats for presentation of pension and other
postretirement benefit disclosures. This statement is effective for the fiscal
years beginning after 15 December 1997 and is not expected to have a material
effect on the Group's consolidated financial position or results of operations.
In June 1998, the FASB issued SFAS No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities. This statement is effective for the
fiscal years beginning after 15 December 1999 and is not expected to have a
material effect on the Group's consolidated financial position or results of
operations.
F-29
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of OraVax, Inc.:
We have audited the accompanying consolidated balance sheets of OraVax, Inc.
as of December 31, 1996 and 1997 and the related consolidated statements of
operations, stockholders' equity (deficit), and cash flows for each of the three
years in the period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of OraVax, Inc. as
of December 31, 1996 and 1997, and the consolidated results of its operations
and cash flows for each of the three years in the period ended December 31,
1997, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note A to the
financial statements, the Company has suffered recurring losses from operations
and will require additional funds to continue operations into the second half of
1998, both of which raise substantial doubt about its ability to continue as a
going concern. Management's plans in regard to these matters are described in
Note A. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ PricewaterhouseCoopers LLP
COOPERS & LYBRAND
L.L.P.
Boston, Massachusetts
March 27, 1998
F-30
<PAGE>
ORAVAX, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------
<S> <C> <C>
1996 1997
---------- ----------
ASSETS
Cash and cash equivalents................................................................. $ 14,916 $ 10,274
Short-term investments.................................................................... 7,209 1,448
Deferred financing costs.................................................................. -- 847
Prepaid and other current assets.......................................................... 230 1,529
---------- ----------
Total current assets...................................................................... 22,355 14,098
Property and equipment, net............................................................... 5,454 3,524
Investment in and advances to (from) joint venture........................................ 619 (535)
Other assets.............................................................................. 316 257
---------- ----------
Total assets.............................................................................. $ 28,744 $ 17,344
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable.......................................................................... $ 1,135 $ 935
Accrued expenses.......................................................................... 3,653 3,659
Obligation under capital leases........................................................... 1,597 1,316
Installment debt.......................................................................... 330 260
Deferred joint venture revenue............................................................ 946 91
---------- ----------
Total current liabilities................................................................. 7,661 6,261
Obligation under capital leases, excluding current portion................................ 1,665 416
Installment debt, excluding current portion............................................... 994 882
---------- ----------
Total liabilities......................................................................... 10,320 7,559
Commitments and contingencies (Note H)
Stockholders' equity:
Preferred stock, $.001 par value; 2,000,000 shares authorized in 1996 and 1997; none
issued or outstanding................................................................. -- --
Convertible preferred stock, $.001 par value; 9,000 shares authorized in 1997; issued
and outstanding 6,300 in 1997 (liquidation preference $6,300)......................... -- 5,601
Common stock, $.001 par value; 25,000,000 shares authorized in 1996 and 1997; issued and
outstanding 9,975,821 and 10,371,543 in 1996 and 1997................................. 10 10
Additional paid-in capital.............................................................. 73,519 74,962
Deferred compensation................................................................... (223) (94)
Accumulated deficit..................................................................... (54,882) (70,694)
---------- ----------
Total stockholders' equity................................................................ 18,424 9,785
---------- ----------
Total liabilities and stockholders' equity................................................ $ 28,744 $ 17,344
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-31
<PAGE>
ORAVAX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
------------------------------------
<S> <C> <C> <C>
1995 1996 1997
---------- ---------- ------------
Revenue:
Collaborative research and development
--related party....................................................... $ 4,868 $ 6,595 $ 7,587
--other............................................................... 3,816 -- --
Government grants and other............................................. 311 870 583
Interest................................................................ 1,080 1,280 683
---------- ---------- ------------
10,075 8,745 8,853
---------- ---------- ------------
Expenses:
Research and development................................................ 12,450 21,009 14,589
General and administrative.............................................. 3,299 3,750 3,422
Interest................................................................ 87 523 418
---------- ---------- ------------
15,836 25,282 18,429
---------- ---------- ------------
Loss from operations...................................................... (5,761) (16,537) (9,576)
Equity in operating loss of joint venture................................. (2,436) (5,085) (6,236)
---------- ---------- ------------
Net loss.................................................................. (8,197) (21,622) (15,812)
Accretion to redemption value of preferred stock.......................... 108 -- --
---------- ---------- ------------
Net loss to common stockholders........................................... $ (8,305) $ (21,622) $ (15,812)
---------- ---------- ------------
---------- ---------- ------------
Basic and diluted loss per share.......................................... $ (1.90) $ (2.46) $ (1.58)
Weighted average number of basic and diluted
shares outstanding...................................................... 4,377,131 8,794,775 10,031,222
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-32
<PAGE>
ORAVAX, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PREFERRED COMMON COMMON PAID-IN DEFERRED ACCUMULATED
STOCK SHARES STOCK CAPITAL COMPENSATION DEFICIT
----------- ------------ ------------- --------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994......... 230,661 -- 245 (220) (25,063)
Conversion of redeemable
convertible preferred stock to
common stock..................... 5,019,383 $ 5 36,666 -- --
Issuance of common stock........... 2,310,197 3 20,745 -- --
Issuance of common stock-401k...... 5,758 -- 68 -- --
Issuance of common stock options... -- -- 141 (141) --
Exercise of common stock options... 44,982 -- 54 -- --
Exercise of common stock
warrants......................... 4,884 -- -- -- --
Vesting of compensatory common
stock options.................... -- -- 250 -- --
Accretion of redeemable convertible
preferred stock to redemption
value............................ -- -- (108) -- --
Amortization of deferred
compensation..................... -- -- -- 65 --
Net loss........................... -- -- -- -- (8,197)
----------- ------------ --- --------- ----- ------------
Balance, December 31, 1995......... 7,615,865 8 58,061 (296) (33,260)
Issuance of common stock........... 2,313,822 2 15,340 -- --
Issuance of common stock-401k...... 18,509 -- 97 -- --
Exercise of common stock options... 27,625 -- 21 -- --
Amortization of deferred
compensation..................... -- -- -- 73 --
Net loss........................... -- -- -- -- (21,622)
----------- ------------ --- --------- ----- ------------
Balance, December 31, 1996......... 9,975,821 10 73,519 (223) (54,882)
Issuance of common stock........... 276,146 -- 480 -- --
Issuance of common stock-401k...... 50,723 -- 89 -- --
Exercise of common stock options... 68,853 -- 51 -- --
Issuance of convertible preferred
stock (6,300 shares)............. 5,601 -- -- -- -- --
Deferred financing costs........... 847 -- --
Amortization of deferred
compensation..................... -- -- -- 66 -- --
Reversal of deferred
compensation..................... -- -- (63) 63 --
Non-cash stock
compensation..................... -- -- 39 -- --
Net loss........................... -- -- -- -- (15,812)
----------- ------------ --- --------- ----- ------------
Balance, December 31, 1997......... $ 5,601 10,371,543 $ 10 $ 74,962 $ (94) $ (70,694)
----------- ------------ --- --------- ----- ------------
----------- ------------ --- --------- ----- ------------
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
------------
<S> <C>
Balance, December 31, 1994......... (25,038)
Conversion of redeemable
convertible preferred stock to
common stock..................... 36,671
Issuance of common stock........... 20,748
Issuance of common stock-401k...... 68
Issuance of common stock options... --
Exercise of common stock options... 54
Exercise of common stock
warrants......................... --
Vesting of compensatory common
stock options.................... 250
Accretion of redeemable convertible
preferred stock to redemption
value............................ (108)
Amortization of deferred
compensation..................... 65
Net loss........................... (8,197)
------------
Balance, December 31, 1995......... 24,513
Issuance of common stock........... 15,342
Issuance of common stock-401k...... 97
Exercise of common stock options... 21
Amortization of deferred
compensation..................... 73
Net loss........................... (21,622)
------------
Balance, December 31, 1996......... 18,424
Issuance of common stock........... 480
Issuance of common stock-401k...... 89
Exercise of common stock options... 51
Issuance of convertible preferred
stock (6,300 shares)............. 5,601
Deferred financing costs........... 847
Amortization of deferred
compensation..................... 66
Reversal of deferred
compensation..................... 0
Non-cash stock
compensation..................... 39
Net loss........................... (15,812)
------------
Balance, December 31, 1997......... $ 9,785
------------
------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-33
<PAGE>
ORAVAX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
<S> <C> <C> <C>
1995 1996 1997
---------- ---------- ----------
Cash flows from operating activities:
Net loss from operations.................................................... $ (8,197) $ (21,622) $ (15,812)
Adjustments to reconcile net loss from operations to net cash
used in operating activities:
Depreciation............................................................ 708 2,028 2,183
Equity in operations of joint venture................................... 2,436 5,085 6,236
Amortization of debt discount........................................... -- -- 148
Non-cash compensation................................................... 383 170 194
Changes in operating assets and liabilities:
Prepaid expenses and other current assets............................. (172) 76 101
Other assets.......................................................... (37) (200) 59
Accounts payable...................................................... 210 74 (200)
Accrued expenses...................................................... 1,225 1,301 6
Deferred revenue...................................................... 899 47 (855)
---------- ---------- ----------
Net cash used in operating activities......................................... (2,545) (13,041) (7,940)
---------- ---------- ----------
Cash flows from investing activities:
Purchases of short-term investments......................................... (26,189) (17,378) (5,422)
Sales and maturities of short-term investments.............................. 10,440 25,918 11,183
Expenditures for property and equipment..................................... (762) (1,361) (253)
Proceeds from sale-leaseback of property and equipment...................... 614 775 --
Investment in and advances to joint venture................................. (2,886) (5,254) (5,082)
---------- ---------- ----------
Net cash provided by (used in) investing activities........................... (18,783) 2,700 426
---------- ---------- ----------
Cash flows from financing activities:
Proceeds from common stock issuances, net................................... 20,802 15,363 531
Proceeds from preferred stock issuances, net................................ 9,232 -- 4,201
Principal payments under capital lease obligations.......................... (530) (1,488) (1,530)
Principal payments of installment debt, net................................. -- (500) (330)
---------- ---------- ----------
Net cash provided by financing activities..................................... 29,504 13,375 2,872
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents.......................... 8,176 3,034 (4,642)
Cash and cash equivalents at beginning of period.............................. 3,706 11,882 14,916
---------- ---------- ----------
Cash and cash equivalents at end of period.................................... $ 11,882 $ 14,916 $ 10,274
---------- ---------- ----------
---------- ---------- ----------
Interest paid during the year................................................. $ 87 $ 384 $ 418
---------- ---------- ----------
---------- ---------- ----------
Noncash financing activities--See Note I.
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-34
<PAGE>
ORAVAX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. NATURE OF BUSINESS:
OraVax's mission is the discovery, development and commercialization of
biologic products for the prevention and treatment of human infectious diseases.
Prior to the first quarter of 1995, the Company operated as a development stage
enterprise, devoting substantially all of its efforts to establishing the new
business and carrying on research and development activities. Beginning in 1995,
the Company was no longer classified as a development stage enterprise.
Since inception, the Company's cash expenditures have exceeded its revenues.
These conditions raise substantial doubt about the Company's ability to continue
as a going concern. Operations have been funded principally through public and
private placements of equity securities, equipment lease financing, revenues
from the Company's Joint Venture with Merieux, government grants and interest
income. The Company's future capital requirements will depend on many factors,
including, but not limited to, the progress of its research and development
programs, the progress of preclinical and clinical testing, the time and cost
involved in obtaining regulatory approvals, the funding of the Company's share
of the expenses of the Joint Venture or similar arrangements, the cost of
filing, prosecuting and defending and enforcing any patent claims and other
intellectual property rights, competing technological and market developments,
changes in the company's existing research relationships, the ability of the
Company to establish collaborative arrangements, the development of
commercialization activities and arrangements, and the acquisition of additional
facilities and capital equipment.
The Company plans to finance these cash needs in the near term principally
through its existing cash reserves, together with interest earned thereon,
revenues, payments and reimbursements under the Company's Joint Venture with PMC
and facilities and equipment financing. The Company believes, based on its
current operating plan, that, in addition to its available cash balances and
known revenues, it will need additional financing in order to fund the Company's
operations in the second half of 1998. The Company will require additional funds
to conduct, if planned a Phase III trial of its HNK20 product candidate and for
HNK20 manufacturing start up. Moreover, changes in the Company's research and
developments plans or other events affecting the Company's operations may result
in accelerated or unexpected expenditures. In addition, the Company will need
substantial additional capital to fund its operations for the manufacturing and
marketing of any of its successful product candidates. Possible sources of
capital include strategic corporate partnerships and private equity financing,
both of which the Company is actively pursuing. If additional funds are raised
by issuing equity securities, further dilution to existing stockholders may
result and future investors may be granted rights superior to those of existing
stockholders. There can be no assurance, however, that additional financing will
be available from any of these sources, or if available, will be available on
terms satisfactory to the Company. The Company's inability to obtain needed
funding on satisfactory terms may require the Company to delay, curtail or
eliminate one or more of its planned product development programs, scale back
its planned manufacturing operations or enter into collaborative arrangements
that may require the Company to issue additional equity or relinquish rights to
certain technologies or product candidates that the Company would not otherwise
issue or relinquish.
The Company is subject to risks common to companies in the biotechnology
industry including, but not limited to, development by the Company or its
competitors of new technological innovations, dependence on key personnel,
protection of proprietary technology, manufacturing limitations, third party
reimbursements, collaborative arrangements, and compliance with government
regulations.
F-35
<PAGE>
ORAVAX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries, OraVax JVM, Inc. and OraVax Securities Corp.,
which were incorporated in 1995. Intercompany transactions and balances have
been eliminated in consolidation.
JOINT VENTURE
The Company accounts for its investment in its Joint Venture Partnerships
under the equity method of accounting. (see Note K)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of management's estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentration
of credit risk consist principally of temporary cash investments. The Company
restricts temporary cash investments to institutions with high credit standing.
SHORT-TERM INVESTMENTS
Short-term interest-bearing investments are those which, when purchased,
have maturities of less than one year but greater than three months. At December
31, 1997 Company had the following short-term investments available for sale
which it expects to utilize for working capital purposes, carried at amortized
cost plus accrued interest, which approximates fair market value (in thousands):
<TABLE>
<S> <C>
US Government and Agency obligations, due February 1998 through
April 1998, 4.8%--5.2%............................................ $ 394*
Certificate of deposit, due January 1998, 5.8%...................... 1,054
---------
$ 1,448
---------
---------
</TABLE>
- ------------------------
* These treasury securities are restricted as to their use.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. The Company provides for
depreciation using the straight-line method over the lesser of the lease term or
the estimated useful lives of the related assets, generally three to seven
years.
F-36
<PAGE>
ORAVAX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
When assets are retired or otherwise disposed of, the assets and related
accumulated depreciation and amortization are eliminated from the accounts and
any resulting gains and losses are included in operations in the period of
disposal.
REVENUE RECOGNITION
Revenue under the Company's collaborative research and development agreement
is recognized as related expenses are incurred. The Company recognizes milestone
payments as revenue when the milestones are achieved. (See Note K)
The Company recognizes government grant revenue as the related expenses are
incurred.
The Company does not recognize as revenue amounts received which are
refundable or involve future obligations.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred.
COMPUTATION OF NET LOSS PER COMMON SHARE
For the year ended December 31, 1997, the Company adopted Statement of
Accounting Standards No. 128 ("FAS 128"), which requires the presentation of
Basic and Dilutive earnings per share, which replaces primary and fully diluted
earnings per share. Earnings per share have been restated for all periods
presented to reflect the adoption of FAS 128. Basic net loss per share is
computed using the weighted average number of common shares outstanding during
the period. Diluted net loss per share is computed using the weighted average
number of common shares outstanding during the period, plus the dilutive effect
of common stock equivalents. Common stock equivalent shares consist of
convertible preferred stock (Note I) and stock options (Note J). The dilutive
computations do not include common stock equivalents for stock options of
802,807, 890,809 and 1,175,272 for the years ended December 31, 1995, 1996 and
1997, respectively, and Convertible Preferred Stock convertible into a maximum
of 2,016,163 shares of Common Stock at December 31, 1997, as their inclusion
would be antidilutive.
INCOME TAXES
The Company recognizes deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax liabilities and
assets are determined based on the difference between the financial reporting
and tax bases of liabilities and assets using enacted tax rates in effect in the
years in which the differences are expected to reverse. Potential future income
tax benefits resulting from net operating losses, unused research and
experimentation credits, and other timing differences will be recognized as
taxable income becomes available to absorb them.
EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standard Board issued Statement of
Accounting Standards No. 130, "Reporting Comprehensive Income". This statement
requires that changes in comprehensive income be shown in a financial statement
that is displayed with the same prominence as other financial statements. The
Statement will become effective for fiscal years beginning after December 15,
1997. The Company will adopt the new standard beginning in the first quarter of
the fiscal year ending
F-37
<PAGE>
ORAVAX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998. The Company does not expect the adoption of FAS 130 to
materially effect the financial statement presentation.
In June 1997, the Financial Accounting Standard Board also issued Statement
of Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information". This Statement specifies new guidelines for
determining a company's operating segments and related requirements for
disclosure. The Company is in the process of evaluating the impact of the new
standard on the presentation of the financial statements and the disclosures
therein. The Statement will become effective for fiscal years beginning after
December 15, 1997. The Company will adopt the new standard for the fiscal year
ending December 31, 1998.
C. PROPERTY AND EQUIPMENT:
Property and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
--------------------
<S> <C> <C>
1996 1997
--------- ---------
Furniture and equipment.................................................... $ 442 $ 493
Computer hardware and software............................................. 172 197
Leasehold improvements..................................................... 2,578 2,626
Equipment under capital lease.............................................. 4,803 4,353
--------- ---------
7,995 7,669
Less accumulated depreciation.............................................. 2,541 4,145
--------- ---------
Property and equipment, net................................................ $ 5,454 $ 3,524
--------- ---------
--------- ---------
</TABLE>
The net book value of equipment under capital lease was $3,121,000 and
$1,579,000 at December 31, 1996 and 1997, respectively.
D. ACCRUED EXPENSES:
Accrued expenses consisted of the following (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
--------------------
<S> <C> <C>
1996 1997
--------- ---------
Research and development contracts......................................... $ 2,374 $ 1,985
License fees............................................................... 58 63
Financing related deal costs............................................... -- 751
Other...................................................................... 1,221 860
--------- ---------
Total accrued expenses..................................................... $ 3,653 $ 3,659
--------- ---------
--------- ---------
</TABLE>
E. INCOME TAXES:
Deferred tax assets and deferred tax liabilities are recognized based on
temporary differences between the financial reporting and tax basis of assets
and liabilities using statutory rates. A valuation allowance is recorded against
deferred tax assets if it is more likely than not that some or all of the
deferred tax assets will not be realized.
F-38
<PAGE>
ORAVAX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The components of deferred taxes were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
----------------------
<S> <C> <C>
1996 1997
---------- ----------
Capitalization of costs............................................... $ 8,238 $ 11,943
Property, plant and equipment......................................... 563 898
Capital leases........................................................ (20) --
Accrued expenses...................................................... 326 358
Net operating loss.................................................... 11,272 13,459
Tax credits........................................................... 1,797 2,586
---------- ----------
Gross deferred tax asset.............................................. 22,176 29,244
Valuation allowance................................................... (22,176) (29,244)
---------- ----------
Net deferred tax asset................................................ $ -- $ --
---------- ----------
---------- ----------
</TABLE>
As of December 31, 1997, the Company had available federal net operating
loss carryforwards of approximately $33,760,000 and $1,770,000 of federal tax
credits, which may be used to offset future taxable income. These carryforwards
expire beginning in 2005. Due to the uncertainty surrounding the realization of
the net operating loss carryforwards in future tax returns, the net deferred tax
assets have been fully offset by a valuation allowance. The valuation allowance
increased approximately $7,069,000 from December 31, 1996 to December 31, 1997.
The Company has experienced ownership changes as defined under Section 382
of the Internal Revenue Code. Ownership changes limit the future use of the net
operating loss and credit carryforwards created prior to the ownership change.
If the full amount of the limitation is not used in any year, the amount not
used increases the allowable limit in the subsequent year.
F. CAPITAL LEASES:
During the year ended December 31, 1997, the Company did not enter into any
sale-leaseback or direct lease arrangements due to the low volume of capital
equipment expenditures. During 1996, an equipment lease assumed by the Company
in connection with its lease of a manufacturing facility in Canton,
Massachusetts, was capitalized in the amount of $2,773,000. Interest paid on
capital leases during the years ended December 31, 1995, 1996 and 1997 was
$87,000, $372,000 and $270,000, respectively.
F-39
<PAGE>
ORAVAX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Minimum future payments under the Company's capital leases as of December
31, 1997 were as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, AMOUNT
- ------------------------------------------------------------------------------------- ---------
<S> <C>
1998................................................................................. $ 1,418
1999................................................................................. 320
2000................................................................................. 124
---------
1,862
Less amount representing interest.................................................... 130
---------
1,732
Less current obligation.............................................................. 1,316
---------
Long-term obligation................................................................. $ 416
---------
---------
</TABLE>
G. INSTALLMENT DEBT:
In January 1996, the Company leased an approximately 47,000 square foot,
good manufacturing practices ("GMP"), manufacturing facility in Canton,
Massachusetts and acquired related equipment and leasehold improvements from the
former tenant. This facility was specifically designed and equipped by the
former tenant for the manufacture of biological products. The Company
anticipates that its initial use of the facility will be for the production of
vaccines for the Joint Vaccine Acquisition Program, of the U.S. Department of
Defense. The facility will also accommodate production development activities
for OraVax's proprietary products depending on the outcome of product
development. Existing building and capital equipment leases, which contain
renewal and purchase options were transferred to the Company. In addition, the
Company purchased leasehold improvements and other related assets from the
former tenant, capitalized in the amount of $1,824,000, with the related debt
payable in installments through 1999 collateralized by a leasehold mortgage and
collateral assignment of OraVax's interest in the building lease.
Future minimum payments under the installment purchase are as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, AMOUNT
- ------------------------------------------------------------------------------------- ---------
<S> <C>
1998................................................................................. $ 260
1999................................................................................. 1,050
---------
1,310
Less amount representing interest.................................................... 168
---------
1,142
Less current obligation.............................................................. 260
---------
Long-term obligation................................................................. $ 882
---------
---------
</TABLE>
F-40
<PAGE>
ORAVAX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
H. COMMITMENTS AND CONTINGENCIES:
OPERATING LEASES
The Company leases office and laboratory facilities in Cambridge,
Massachusetts under an operating lease which contains renewal options and
expires in March 2001. In addition, the Company has an operating lease for a
manufacturing facility in Canton, Massachusetts, containing renewal and purchase
options and expiring in June 2002. The noncancelable future payments as of
December 31, 1997 were as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, AMOUNT
- ------------------------------------------------------------------------------------- ---------
<S> <C>
1998................................................................................. $ 1,427
1999................................................................................. 1,430
2000................................................................................. 1,434
2001................................................................................. 511
2002................................................................................. 101
</TABLE>
Rent expense for leased facilities during the years ended December 31, 1995,
1996 and 1997 was $689,000, $1,862,000 and $2,051,000, respectively.
AGREEMENTS
The Company is party to various agreements, principally contracted research
and clinical trials, for which noncancelable minimum future payments as of
December 31, 1997 were $895,000 payable in the year ended December 31, 1998.
Under the agreements, the Company contracts with external parties to perform
research and clinical trials on the Company's behalf.
In addition, under certain of these and other agreements, the Company may
pay royalties on future sales of specified products.
The Company performs contracted research, development and commercialization
activities for its collaboration with Pasteur Merieux Connaught, which terms are
described in more detail in Note K.
I. PREFERRED STOCK:
The Company issued an aggregate of 964,803 shares of Series Redeemable
Convertible Preferred Stock for net cash proceeds of $27,231,000 (the "Series
Preferred Stock") at various dates since its inception through December 31,
1994.
In January and March 1995, the Company issued an aggregate of 216,237 shares
of Series Preferred Stock for net cash proceeds of $9,232,000.
During 1994 and 1995, $100,000 and $108,000, respectively, to accrete the
redeemable convertible preferred stock to its redemption value on a
straight-line basis, was recorded in noncash transactions.
In June 1995, all outstanding shares of Series Preferred Stock were
converted to 5,019,383 shares of common stock in connection with the closing of
the Company's initial public offering.
In December 1997, in a private placement financing, the Company issued 6,300
shares of 6% Convertible Preferred Stock ("Convertible Preferred Stock"), for
$1,000 per share, providing cash proceeds of $5.6 million, of which $4.2 million
was received in 1997 and $1.4 million in 1998, net of
F-41
<PAGE>
ORAVAX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
$700,000 in deal costs, to the Company. The holders of the Convertible Preferred
Stock receive an annual cumulative 6% dividend, which accrues in stock. All of
the Convertible Preferred shares are fully convertible into shares of the
Company's Common Stock, at the option of the holder. The conversion price is the
lowest trading price of the Common Stock during the 22 consecutive trading days
immediately preceding the date of conversion reduced by a conversion discount
that starts at 5% in December 1997 and increases to a maximum of 21% by June
1999. At December 31, 1997, the value of the discount is $846,788, which has
been recorded as deferred financing costs and will be amortized over the
eighteen month discount period. The number of shares sold on any given date are
limited to the greater of 4,000 shares, 10% of the average daily trading volume
of the Common Stock for the 5 trading days immediately preceding such sale, as
reported by Nasdaq or such principal exchange, or 10% of the trading volume of
the Common Stock on the day of such sale, as reported by Nasdaq or such
principal exchange. The conversion price is at all times also subject to
customary anti-dilution adjustment for events such as stock splits, stock
dividends, reorganizations and certain mergers affecting the Company's Common
Stock. On December 23, 2002, all outstanding shares of the Convertible Preferred
Stock, including any accrued dividends thereon, will automatically be converted
into the Company's Common Stock at the conversion price on such date. Each share
of Convertible Preferred Stock is also entitled to a liquidation preference of
$1,000 per share, plus any accrued but unpaid dividends, in preference to any
other class or series of capital stock of the Company. Except to determine
whether such stock is entitled to its liquidation preference under certain
circumstances, and as provided by applicable law, holders of the Convertible
Preferred Stock have no voting rights. In February 1998, 7,294,737 shares were
registered for conversion.
In connection with the private placement financing, warrants for 630 shares
of Convertible Preferred Stock, at a price of $1,000 per share, were issued to
the syndicators of the transaction. The warrants will expire on December 23,
2002.
J. STOCKHOLDERS' EQUITY:
COMMON STOCK
In December 1997, in a private placement financing, the Company sold 240,000
shares of its common stock, par value $.001 per share, for $1.91 per share,
providing net proceeds of $396,000 to the Company. In connection with the
private placement financing, warrants for 24,000 shares of common stock, at a
price of $1.91 per share, were issued to the syndicators of the transaction. The
warrants will expire on December 23, 2002.
In June 1996, the Company sold 2,300,000 shares of its common stock, par
value $.001 per share, for $7.25 per share in a follow-on stock offering,
providing net proceeds of $15,215,000 to the Company.
In June 1995, the Company sold 2,300,000 shares of its common stock, par
value $.001 per share, for $10.00 per share in an initial public offering,
providing net proceeds of $20,676,000 to the Company. In connection with the
initial public offering, all outstanding shares of Series Preferred Stock were
converted to common stock.
In March 1995, the Company's stockholders approved an increase in the
authorized shares of common stock to 25,000,000 shares and authorized 2,000,000
shares of a new class of preferred stock, par value $.001 per share.
F-42
<PAGE>
ORAVAX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
STOCK OPTIONS
Effective January 1, 1996, The Company adopted FAS No. 123, "Accounting for
Stock-Based Compensation." FAS 123 established financial accounting and
reporting standards for stock-based employee compensation plans. The statement
defines a new method of accounting for employee stock compensation plans using a
fair value based method, under which compensation costs is measured and
recognized in results of operations. Alternatively, FAS 123 allows an entity to
retain the accounting for employee stock compensation plans defined under
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees." The Company retained the accounting defined in APB No. 25 under
which no compensation expense is recognized for fixed stock option grants to
employees provided that the grant price equals or is greater than fair market
value. As required, the Company will disclose the pro forma effects of
stock-based compensation using the fair value based method defined under FAS
123.
Incentive stock options granted under the Company's 1990 and 1995 stock
option plans (the "Plans") may not be granted at a price less than the fair
market value of the common stock on the date of grant (or less than 110% of fair
market value in the case of employees or officers holding 10% or more of the
voting stock of the Company). Nonqualified stock options may be granted at an
exercise price established by the Board of Directors, which may be less than,
equal to or greater than the fair value of the common stock on the date of
grant. Options granted under the Plans generally vest over three- to five-year
periods, and expire not more than ten years from the date of grant, or not more
than five years from the date of grant in the case of incentive stock options
granted to an employee or officer holding 10% or more of the voting stock of the
Company.
The Company's 1996 Employee Stock Purchase Plan (the "ESPP") permits
employees to purchase common stock of the Company at the lesser of 85% of its
fair value at the beginning or end of related six month payroll withholding
periods. During 1995, 1996 and 1997, 10,197, 13,822 and 36,146 shares,
respectively, were sold to employees under the ESPP. At December 31, 1997,
39,835 shares of common stock remained reserved for future issuances under the
ESPP.
Had compensation cost for options issued under OraVax's stock option plan
and Employee Stock Purchase Plan been determined based on the fair value at the
grant dates consistent with the methods defined under FAS 123, OraVax's net loss
and loss per share would have been increased to the pro forma amounts indicated
below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
<S> <C> <C> <C>
1995 1996 1997
--------- ---------- ----------
Net loss as reported (in thousands)........................... $ (8,305) $ (21,622) $ (15,812)
Pro forma (in thousands)...................................... $ (8,378) $ (21,877) $ (16,233)
Basic and diluted loss per share.............................. $ (1.90) $ (1.91) $ (1.58)
Pro forma..................................................... $ (1.91) $ (2.49) $ (1.62)
</TABLE>
The fair value of each stock option granted is estimated on the grant date
using the Black-Scholes pricing model with the following weighted-average
assumptions.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1995 1996 1997
--------- --------- ---------
Expected Option Term............................................. 5 years 5 years 5 years
Expected Option Volatility....................................... 65% 65% 70%
Risk Free Interest Rate.......................................... 6.82% 6.13% 6.54%
</TABLE>
F-43
<PAGE>
ORAVAX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Expected Dividend Yield.......................................... 0% 0% 0%
</TABLE>
The weighted average fair value of options granted under the plans during
each of the years ended December 31, 1995, 1996 and 1997 was $4.55, $7.32 and
$1.66, respectively.
The fair value of each option granted under the Employee Stock Purchase Plan
is estimated on the grant date using the Black-Scholes pricing model with the
following weighted-average assumptions.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1995 1996 1997
--------- --------- ---------
Expected Option Term.............................................. 1/2 year 1/2 year 1/2 year
Expected Option Volatility........................................ 65% 65% 70%
Risk Free Interest Rate........................................... 5.64% 5.32% 5.62%
Expected Dividend Yield........................................... 0% 0% 0%
</TABLE>
The weighted-average fair value of options granted under the Employee Stock
Purchase Plan during each of the years ended December 31, 1995, 1996 and 1997
was $3.49, $3.11 and $.97, respectively.
Because some options vest over several years and additional awards are
generally made each year, the pro forma amounts may not be representative of the
effects on net income in future years.
A summary of the status of OraVax's stock option plan for the years ended
December 31, 1995, 1996 and 1997 is as follows:
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE
SHARES EXERCISE PRICE
---------- -----------------
<S> <C> <C>
Outstanding at December 31, 1994.................................. 761,419 1.74
Granted......................................................... 92,104 6.14
Exercised....................................................... (44,982) 1.20
Canceled........................................................ (5,734) 2.23
---------- -----
Outstanding at December 31, 1995.................................. 802,807 2.27
Granted......................................................... 127,610 12.18
Exercised....................................................... (27,625) .78
Canceled........................................................ (11,983) 5.21
---------- -----
Outstanding at December 31, 1996.................................. 890,809 3.70
Granted......................................................... 498,683 2.63
Exercised....................................................... (68,853) .74
Canceled........................................................ (145,367) 5.61
---------- -----
Outstanding at December 31, 1997.................................. 1,175,272 3.18
---------- -----
---------- -----
</TABLE>
F-44
<PAGE>
ORAVAX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table summarizes information about stock options outstanding
at December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
- ----------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPTIONS EXERCISABLE
WTD. AVERAGE -----------------------------------------
REMAINING WTD. AVERAGE WTD. AVERAGE
RANGE OF #OUTSTANDING CONTRACTUAL EXERCISE #OPTIONS EXERCISE
EXERCISE PRICE AT 12/31/97 LIFE PRICE EXERCISABLE PRICE
- -------------------- ------------- --------------- ------------- ----------- -------------
$ 0.471--$ 0.7065 41,802 4.36 0.69 46,333 0.68
0.765-- 1.1475 179,385 5.22 0.79 165,265 0.79
2.25 -- 3.375 792,968 8.25 2.60 270,516 2.56
3.529-- 5.2935 52,500 7.28 3.63 19,594 3.53
6.625-- 9.9375 22,745 7.78 7.81 9,000 7.85
11.75 -- 17.625 86,000 8.19 13.24 18,716 13.28
------------- -----------
$ 0.471--$17.625 1,175,400 7.59 3.18 529,424 2.35
------------- -----------
------------- -----------
</TABLE>
At December 31, 1997, options to purchase 818,178 shares of common stock
remained available for future grants under the plans. At December 31, 1997,
1,993,450 shares of common stock remained reserved to satisfy the issuance of
shares under outstanding and future grants under the plans.
In connection with certain stock option grants in 1995, the Company recorded
$141,000 of deferred compensation expense which is being amortized and charged
to operations over the five-year vesting period of the related options. In
addition, $250,000 of compensation expense was recorded in 1995 in connection
with the vesting of certain milestone-based stock options. In 1997, $39,000 of
compensation expense was recorded in connection with the vesting of certain
performance leased options and the extension of the term has certain options.
K. JOINT VENTURE:
In March 1995, the Company entered into a collaboration (the "Joint
Venture") with Pasteur Merieux Connaught ("PMC") for the development,
manufacturing, marketing and sale of immuno-therapeutic and preventive vaccines
against H. PYLORI infection in humans. Under the Joint Venture, OraVax and PMC
agreed to develop vaccines which use the urease protein or any of its sub-units
as an antigen (the "Target Products"). OraVax and PMC will share equally in
profits from the sales of the Target Products and in all future research,
development, clinical and commercialization costs. PMC is providing technical
expertise and will also provide marketing to the Joint Venture. PMC made an
initial payment of $3.2 million directly to OraVax which included $0.6 million
to recognize the value of research and development conducted by OraVax in the
first quarter of 1995 prior to forming the Joint Venture, and a milestone
payment of $2.6 million to recognize the value of technology previously
developed by OraVax and made available to the Joint Venture. In addition, PMC
purchased $2.5 million of the Company's Series Preferred Stock. Subsequently,
PMC purchased an additional $1.0 million of common stock in the Company's
initial public offering. In addition, PMC agreed to pay the Company directly up
to an additional $12.0 million during the development period, subject to the
achievement of certain clinical and regulatory milestones, of which $0.6 million
was paid to OraVax in December 1995. Beginning in the second quarter of 1995,
research, development and commercialization activities of the Joint Venture were
conducted through two equally controlled partnerships (the "Joint Venture
Partnerships") which have contracted with OraVax to perform the research,
development and clinical trial activities. OraVax earned $4,868,000, $6,595,000
and $7,587,000 under these contracts during 1995, 1996 and 1997, respectively.
In addition, during 1996 and 1997, the Joint Venture entered into
F-45
<PAGE>
ORAVAX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
research and development contracts with PMC and third parties. The research and
development budgets of the two partnerships comprising the Joint Venture are
established by joint committees in which each of the venturers has an equal
participation and role. The venturers will pay approximately equal shares of the
agreed upon budgets. OraVax will receive revenue from the partnerships for
research and development work which is requested to be performed by OraVax and
funded by the Partnerships.
Under the terms of the joint venture agreement with PMC, ownership of the
joint venture is based upon the proportion of the working capital paid in by
OraVax versus PMC over the life of the joint venture. To date OraVax and PMC
have equally supported the budget and each has approximately 50% ownership. The
funding of the H. pylori program with PMC at 50% ownership has approximated $6.0
to $6.5 million annually for OraVax to date, which is a substantial portion of
the company's total expenditures. Under the agreement, a shortfall in funding by
OraVax does not constitute a default of the joint venture. If OraVax's funding,
since inception of the partnership, falls below 40% of the total for greater
than a six month period, PMC would get an additional seat on the board of
directors, giving them effective overall control of the joint venture.
OraVax and PMC each invested approximately $2.9 million, $4.5 million and
$5.8 million in 1995, 1996 and 1997, respectively, to fund the Joint Venture's
operations. OraVax accounts for its investments in the Joint Venture
Partnerships under the equity method of accounting and, accordingly, recorded
its $2,436,000, $5,085,000 and $6,236,000 share of the Joint Venture
Partnerships' net losses during 1995, 1996 and 1997, respectively. Following are
the Joint Venture Partnerships' summarized combined balance sheets as of
December 31, 1996 and 1997, and the summarized combined statement of operations
for the period March 31, 1995 (inception) through December 31, 1995, for the
years ended December 31, 1996 and 1997 and cumulative from inception (March 31,
1995) through December 31, 1997.
OraVax and Merieux each licensed to the Joint Venture upon its formation the
right to use all of their respective existing proprietary technologies relating
to vaccines for the treatment of H. PYLORI, except for so-called naked DNA
technology (for an injectable vaccine) which is the subject of a separate
collaboration by Merieux with the third party. Additional technology in the H.
PYLORI field acquired by either party since the formation of the Joint Venture
is required to be offered to the Joint Venture. The Joint Venture itself has
also obtained licenses to relevant technology from third parties, including a
license in November, 1996 of the complete genome sequence of H. PYLORI from
MedImmune and Human Genome Sciences.
F-46
<PAGE>
ORAVAX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JOINT VENTURE PARTNERSHIPS
(DEVELOPMENT STAGE ENTERPRISES)
COMBINED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1996 1997
--------- ---------
ASSETS
Cash............................................................................................. $ 128 $ 625
Prepaid expenses................................................................................. 1,046 623
--------- ---------
$ 1,174 $ 1,248
--------- ---------
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable--OraVax......................................................................... $ 750 $ 382
Accounts payable--PMC............................................................................ 586 595
Accounts payable--Other.......................................................................... -- 1,240
Partners' capital:
OraVax......................................................................................... (81) (485)
PMC............................................................................................ (81) (484)
--------- ---------
$ 1,174 $ 1,248
--------- ---------
--------- ---------
</TABLE>
JOINT VENTURE PARTNERSHIPS
(DEVELOPMENT STAGE ENTERPRISES)
COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, 1995 CUMULATIVE
(INCEPTION) (INCEPTION
THROUGH YEAR ENDED YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1996 1997 1997)
-------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest income........................................ $ -- $ 16 $ 22 $ 38
------- ------------ ------------ ------------
Contract research expense--OraVax...................... 4,868 6,595 7,587 19,050
Contract research expense--PMC......................... -- 2,258 2,375 4,633
Contract research expense--other....................... -- 1,139 2,508 3,647
Legal and administrative expenses...................... -- 85 15 100
------- ------------ ------------ ------------
Total expenses......................................... 4,868 10,077 12,485 27,430
------- ------------ ------------ ------------
Net loss............................................... $ (4,868) $ (10,061) $ (12,463) $ (27,392)
------- ------------ ------------ ------------
------- ------------ ------------ ------------
</TABLE>
F-47
<PAGE>
ORAVAX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
L. RELATED PARTIES:
The Company has a consulting agreement with the chairman of its Board of
Directors under which, and together with fees paid to him for his services as
chairman, he was paid $57,000, $51,000 and $39,000 during 1995, 1996 and 1997,
respectively. In 1996, the Company entered into a consulting agreement with a
member of its Board of Directors under which, and together with fees paid to him
for his services as a director, he was paid $8,000 and $16,000 during 1996 and
1997, respectively. In 1997, the Company entered into a consulting agreement
with another member of its Board of Directors under which, and together with
fees paid to him for his services as a director, he was paid $10,000 during
1997.
M. EMPLOYEE BENEFITS:
The Company has a 401(k) retirement plan in which substantially all of its
permanent employees are eligible to participate. Participants may contribute up
to 15% of their annual compensation to the plan, subject to statutory
limitations. For 1995, 1996 and 1997, the Company declared discretionary
matching aggregate contributions to the plan of $68,000, $97,000 and $89,000,
respectively, paid in 5,758, 18,509 and 50,723 shares of the Company's common
stock, respectively. At December 31, 1997, there were 75,010 shares of common
stock reserved for future issuances under the plan.
F-48
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of OraVax Merieux Co. and Merieux OraVax Co.:
We have audited the accompanying combined balance sheets of OraVax Merieux
Co. and Merieux OraVax Co. (both development stage enterprises) as of December
31, 1996 and 1997 and the related statements of operations, partners' capital,
and cash flows for the period from inception (March 31, 1995) through December
31, 1995 and the years ended December 31, 1996 and 1997 and cumulative from
inception (March 31, 1995) through December 31, 1997. These financial statements
are the responsibility of the partnerships' management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of OraVax Merieux Co.
and Merieux OraVax Co. (development stage enterprises) as of December 31, 1996
and 1997, and the combined results of their operations and their cash flows for
the period from inception (March 31, 1995) through December 31, 1995 and the
years ended December 31, 1996 and 1997 and cumulative from inception (March 31,
1995) through December 31, 1997, in conformity with generally accepted
accounting principles.
/s/ PricewaterhouseCoopers LLP
COOPERS & LYBRAND
L.L.P.
BOSTON, MASSACHUSETTS
MARCH 27, 1998
F-49
<PAGE>
ORAVAX MERIEUX CO. AND
MERIEUX ORAVAX CO. PARTNERSHIPS
(DEVELOPMENT STAGE ENTERPRISES)
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
<S> <C> <C>
1996 1997
------------ ------------
ASSETS
Cash.................................................................................. $ 127,445 $ 625,055
Prepaid expenses...................................................................... 1,046,301 623,164
------------ ------------
Total assets.......................................................................... $ 1,173,746 $ 1,248,219
------------ ------------
------------ ------------
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Accounts payable and accrued expenses................................................. $ 1,335,862 $ 2,217,576
Commitments and contingencies (note D) Partners' capital (deficit).................... (162,116) (969,357)
------------ ------------
Total liabilities and partners' capital (deficit)..................................... $ 1,173,746 $ 1,248,219
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-50
<PAGE>
ORAVAX MERIEUX CO. AND
MERIEUX ORAVAX CO. PARTNERSHIPS
(DEVELOPMENT STAGE ENTERPRISES)
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
CUMULATIVE
(INCEPTION
MARCH 31, 1995 THROUGH
THROUGH YEAR ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, 1995 DECEMBER 31, 1996 DECEMBER 31, 1997 1997)
----------------- ----------------- ----------------- --------------
<S> <C> <C> <C> <C>
Revenue
Interest Income...................... -- $ 16,393 $ 21,509 $ 37,902
----------------- ----------------- ----------------- --------------
Expenses:
Contract research expense-- OraVax,
Inc. .............................. $ 4,867,799 $ 6,595,003 $ 7,587,421 $ 19,050,223
Contract research expense-- PMsv..... -- 2,257,985 2,375,000 4,632,985
Contract research expense-- other.... -- 1,139,033 2,507,559 3,646,592
Legal and administrative expenses.... -- 85,777 15,020 100,797
----------------- ----------------- ----------------- --------------
Total expenses......................... 4,867,799 10,077,798 12,485,000 27,430,597
----------------- ----------------- ----------------- --------------
Net loss............................... $ (4,867,799) $ (10,061,405) $ (12,463,491) $ (27,392,694)
----------------- ----------------- ----------------- --------------
----------------- ----------------- ----------------- --------------
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-51
<PAGE>
ORAVAX MERIEUX CO. AND
MERIEUX ORAVAX CO. PARTNERSHIPS
(DEVELOPMENT STAGE ENTERPRISES)
COMBINED STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
FOR THE PERIOD FROM INCEPTION (MARCH 31, 1995) THROUGH DECEMBER 31, 1997
<TABLE>
<CAPTION>
PASTEUR MERIEUX
ORAVAX MERIEUX AMERICA
JVM, INC. CONNAUGHT HOLDING, INC. TOTAL
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Capital contributions............................... $ 2,885,851 $ 2,014,444 $ 866,793 $ 5,767,088
Net loss............................................ (2,435,847) (1,700,322) (731,630) (4,867,799)
------------- ------------- ------------- --------------
Balance, December 31, 1995.......................... 450,004 314,122 135,163 899,289
Capital contributions............................... 4,503,600 3,143,700 1,352,700 9,000,000
Net loss............................................ (5,034,754) (3,521,082) (1,505,569) (10,061,405)
------------- ------------- ------------- --------------
Balance, December 31, 1996.......................... $ (81,150) $ (63,260) $ (17,706) $ (162,116)
------------- ------------- ------------- --------------
------------- ------------- ------------- --------------
Capital contributions............................... 5,832,751 4,062,359 1,761,140 11,656,250
Net loss............................................ (6,236,765) (4,361,714) (1,865,012) (12,463,491)
------------- ------------- ------------- --------------
Balance, December 31, 1997.......................... $ (485,164) $ (362,615) $ (121,578) $ (969,357)
------------- ------------- ------------- --------------
------------- ------------- ------------- --------------
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-52
<PAGE>
ORAVAX MERIEUX CO. AND
MERIEUX ORAVAX CO. PARTNERSHIPS
(DEVELOPMENT STAGE ENTERPRISES)
COMBINED STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (MARCH 31, 1995) THROUGH DECEMBER 31, 1997
<TABLE>
<CAPTION>
CUMULATIVE
MARCH 31, 1995 (INCEPTION
THROUGH YEAR ENDED YEAR ENDED THROUGH
DECEMBER 31, 1995 DECEMBER 31, 1996 DECEMBER 31, 1997 DECEMBER 31, 1997)
----------------- ----------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Net loss.......................... $ (4,867,799) $ (10,061,405) $ (12,463,491) $ (27,392,695)
Changes in operating assets and
liabilities:
Prepaid expenses................ (899,289) (147,012) 423,137 (623,164)
Accounts payable................ -- 1,335,862 881,714 2,217,576
----------------- ----------------- ----------------- ------------------
Net cash used by operating
activities........................ (5,767,088) (8,872,555) (11,158,640) (25,798,283)
Cash flows from financing
activities:
Capital contributions............. 5,767,088 9,000,000 11,656,250 26,423,338
----------------- ----------------- ----------------- ------------------
Net increase in cash and cash
equivalents....................... -- 127,445 497,610 625,055
Cash and cash equivalents at
beginning of period............... -- -- 127,445 --
----------------- ----------------- ----------------- ------------------
Cash and cash equivalents at end of
period............................ $ -- $ 127,445 $ 625,055 $ 625,055
----------------- ----------------- ----------------- ------------------
----------------- ----------------- ----------------- ------------------
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-53
<PAGE>
ORAVAX MERIEUX CO. AND
MERIEUX ORAVAX CO. PARTNERSHIPS
(DEVELOPMENT STAGE ENTERPRISES)
NOTES TO COMBINED FINANCIAL STATEMENTS
A. NATURE OF BUSINESS:
A collaboration between Pasteur Merieux Connaught ("PMC"), a societe anonyme
existing and organized under the laws of the Republic of France, and OraVax,
Inc. (OraVax), a corporation existing and organized under the laws of the State
of Delaware, was formed on March 31, 1995 (the "Collaboration").
In accordance with the Master Agreement of the Collaboration (the
"Agreement"), two partnerships, Merieux OraVax Co. and OraVax Merieux Co., both
development stage enterprises (the "Partnerships") were formed. The Partnerships
conduct all activities relative to the research, development, registration,
commercialization, manufacturing, marketing, sales and distribution of
immunotherapeutic and preventative vaccines against HELICOBACTER PYLORI
infections in humans which use the urease protein or any of its sub-units as an
antigen. The partnerships began operations on April 1, 1995. The two
collaborators, OraVax and PMC have established their intent to own the
partnerships equally on an aggregated basis, to share expenses equally, and to
share profits and losses equally. The capital contributions of each partner are
determined by budgets established annually by committees on which each of the
partners has equal representation and an equal vote. It is the intent of the
partners to share such additional capital contributions equally.
Merieux OraVax Co. is a French partnership whose partners are PMC and OraVax
JVM, Inc. ("OraVax JVM"), a wholly-owned subsidiary of OraVax. The term of the
partnership is ninety-nine years. The initial interest of each partner in
Merieux OraVax Co. is as follows:
<TABLE>
<S> <C>
PMsv............................................................... 49.9%
OraVax JVM......................................................... 50.1%
</TABLE>
The second partnership comprising the Collaboration is OraVax Merieux Co., a
Massachusetts general partnership, whose partners are OraVax JVM and Merieux
American Holding, Inc. ("MAHI"), an affiliate of PMC. The initial interest of
each partner in OraVax Merieux Co. is as follows:
<TABLE>
<S> <C>
MAHI............................................................... 50.1%
OraVax JVM......................................................... 49.9%
</TABLE>
While the partnership interests of the partners in each partnership are
slightly different, the Collaboration has been structured with the intent of
having all costs, capital, profits and losses shared equally by Merieux and
OraVax (through their respective affiliates). As a matter of partnership
accounting, the capital contributions shall be made equally, to be consistent
with the respective partnership interests for each partner as set forth above.
In the event of a default by a partner in the payment of capital
contributions to fund at least 80% of its share of the operating budget, the
Agreement calls for negotiation to resolve any disagreement. If the partners
fail to negotiate a resolution of the issue, the partner which has paid its
contribution shall take control of the partnership from the partner failing to
have contributed its share. Except for such a default, it is the intent of the
Collaboration that control remain equal between OraVax and PMC.
The partners of OraVax Merieux Co. and Merieux OraVax Co., both development
stage enterprises, have agreed to fund through the Partnerships the research and
development, clinical and pharmaceutical development costs of the Collaboration
as approved by its executive committee at least through December 1998.
F-54
<PAGE>
ORAVAX MERIEUX CO. AND
MERIEUX ORAVAX CO. PARTNERSHIPS
(DEVELOPMENT STAGE ENTERPRISES)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
A. NATURE OF BUSINESS: (CONTINUED)
The ultimate success of the Partnerships is dependent upon their ability to
raise capital through partners' contributions, equity and debt placement, sale
of product and interest income on invested capital. The Partnerships' capital
requirements may change depending upon numerous factors, including progress of
their research and development programs, time required to obtain regulatory
approvals, resources the Partnerships devote to self-funded projects,
proprietary manufacturing methods and advanced technologies and demand for the
Partnerships' products, if and when approved.
While management believes that additional capital will be available to fund
operations, there can be no assurance that additional funds will be available
when required, on terms acceptable to the Partnerships.
The Partnerships are subject to risks common to entities in the
biotechnology industry including, but not limited to, development by the
Partnerships or their competitors of new technological innovations, dependence
on key personnel, protection of proprietary technology and compliance with
government regulations.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF COMBINATION
The combined financial statements include the accounts of OraVax Merieux Co.
and Merieux OraVax Co. Intercompany transactions and balances have been
eliminated in combination.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred.
CASH AND CASH EQUIVALENTS
The Partnerships consider all highly liquid instruments purchased with an
original maturity of three months or less to be cash equivalents.
INCOME TAXES
In conformity with the Internal Revenue Code and applicable state and local
tax statutes, taxable income or loss of the Partnerships is required to be
reported in the tax returns of the partners in accordance with the terms of the
partnership agreements and, accordingly, no provision has been made in the
accompanying financial statements for income taxes.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of management's estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-55
<PAGE>
ORAVAX MERIEUX CO. AND
MERIEUX ORAVAX CO. PARTNERSHIPS
(DEVELOPMENT STAGE ENTERPRISES)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
C. RELATED PARTY TRANSACTIONS
The Partnerships entered into research and development contracts, with
OraVax, Inc., the parent company of OraVax JVM and with PMC, to perform contract
research and development for the Partnerships. Funds transferred to OraVax for
the period from inception through December 31, 1995 and the years ended December
31, 1996 and 1997 were $5,767,088, $6,642,015 and $7,205,000, respectively.
Contract research and development performed by OraVax during the same periods
were $4,867,799, $6,595,003 and $7,587,421, respectively. Funds transferred to
PMC for the years ended December 31, 1996 and 1997 were $2,357,985 and
$2,425,000, respectively. Contract research and development performed by PMC
during the same period was $2,257,985 and $2,375,000, respectively.
At December 31, 1996 and 1997, prepaid expenses represented funds
transferred to OraVax and PMC in advance of performance under its research and
development contracts. At December 31, 1997, accounts payable included
liabilities to OraVax and PMC in the amounts of $382,421 and $595,096,
respectively.
D. COMMITMENTS AND CONTINGENCIES
The Partnerships are party to research and license agreements with third
parties for which non-cancelable minimum future payments as of December 31, 1997
were $250,000. In addition, under these agreements, the Company may pay
milestones and/or royalties of future sales of specified products.
F-56
<PAGE>
ORAVAX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------------ -----------------
<S> <C> <C>
ASSETS
Cash and cash equivalents.................................................. $ 974 $ 10,274
Short-term investments..................................................... -- 1,054
Deferred financing costs................................................... 212 847
Prepaid and other current assets........................................... 169 1,529
------- -------
Total current assets....................................................... 1,355 13,704
Property and equipment, net................................................ 2,158 3,524
Investment in and advances to Joint Venture................................ (246) (535)
Restricted investments..................................................... 398 394
Other assets............................................................... 210 257
------- -------
Total assets............................................................... $ 3,875 $ 17,344
------- -------
------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable........................................................... $ 1,024 $ 935
Accrued expenses........................................................... 2,614 3,659
Deferred joint venture revenue............................................. 363 91
Obligation under capital leases............................................ 465 1,316
Obligation under installment debt.......................................... 1,160 260
------- -------
Total current liabilities.................................................. 5,626 6,261
Obligation under capital leases, excluding current portion................. 173 416
Installment debt, excluding current portion................................ -- 882
------- -------
Total liabilities.......................................................... 5,799 7,559
Stockholders' equity:
Preferred stock, $.001 par value; 2,000,000 shares authorized in 1998 and
1997; none issued or outstanding......................................... -- --
Convertible preferred stock, $.001 par value; 9,000 shares authorized in
1998 and 1997; 2,827 and 6,300 shares issued and outstanding in 1998 and
1997 (liquidation preference of $2,827).................................. 2,326 5,601
Common stock, $.001 par value; 50,000,000 and 25,000,000 shares authorized
in 1998 and 1997; 17,249,778 and 10,371,543 shares issued and outstanding
in 1998 and 1997......................................................... 17 10
Additional paid-in capital................................................. 78,494 74,962
Deferred compensation...................................................... (50) (94)
Accumulated deficit........................................................ (82,711) (70,694)
------- -------
Total stockholders' equity................................................. (1,924) 9,785
------- -------
Total liabilities and stockholders' equity................................. $ 3,875 $ 17,344
------- -------
------- -------
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
F-57
<PAGE>
ORAVAX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- --------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUE:
Collaborative research and development--related party.... $ 1,699 $ 1,869 $ 5,656 $ 5,581
Government grants and other.............................. 178 141 615 343
Interest................................................. 30 140 234 574
------------ ------------ ------------ ------------
1,907 2,150 6,505 6,498
------------ ------------ ------------ ------------
EXPENSES:
Research and development................................. 3,233 3,787 10,391 10,963
General and administrative............................... 960 776 2,807 2,615
Interest................................................. 58 94 200 331
------------ ------------ ------------ ------------
4,251 4,657 13,398 13,909
------------ ------------ ------------ ------------
Loss from operations..................................... (2,344) (2,507) (6,893) (7,411)
Equity in operations of joint venture.................... (1,313) (1,437) (4,292) (4,608)
------------ ------------ ------------ ------------
Net loss from operations................................. $ (3,657) $ (3,944) $ (11,185) $ (12,019)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Convertible Preferred Stock dividend..................... 39 -- 197 --
Accretion to conversion discount of Convertible Preferred
Stock.................................................. 212 -- 635 --
------------ ------------ ------------ ------------
Net loss to common shareholders.......................... $ (3,908) $ (3,944) $ (12,017) $ (12,019)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net loss per basic and diluted common share.............. $ (0.26) $ (0.39) $ (0.97) $ (1.20)
Weighted average number of basic and diluted shares
outstanding............................................ 14,995,649 10,052,414 12,401,826 10,007,475
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
F-58
<PAGE>
ORAVAX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
<S> <C> <C>
1998 1997
---------- ----------
Cash flows from operating activities:
Net loss from operations................................................................ $ (11,185) $ (12,019)
Adjustments to reconcile net loss from
operations to net cash used in operating activities:
Depreciation and amortization......................................................... 1,474 1,671
Equity in operations of joint venture................................................. 4,292 4,608
Amortization of debt discount......................................................... 108 115
Non-cash compensation................................................................. 44 91
Changes in operating assets and liabilities:
Prepaid expenses and other current assets........................................... (40) 90
Other assets........................................................................ 47 28
Accounts payable and accrued expenses............................................... (956) (766)
Deferred revenue--related party..................................................... 272 (473)
---------- ----------
Net cash used in operating activities................................................... (5,944) (6,655)
---------- ----------
Cash flows from investing activities:
Sales of short-term investments....................................................... 1,050 4,224
Expenditures for property and equipment............................................... (38) (194)
Investment in joint venture........................................................... (4,581) (4,311)
---------- ----------
Net cash used in investing activities................................................... (3,569) (281)
---------- ----------
Cash flows from financing activities:
Proceeds from Common Stock issuances.................................................. 66 135
Proceeds from Preferred Stock issuances, net.......................................... 1,400 --
Principal payments under capital lease obligations.................................... (1,163) (1,160)
Principal payments under installment debt obligations................................. (90) (330)
---------- ----------
Net cash provided by (used in) financing activities..................................... 213 (1,355)
---------- ----------
Net decrease in cash and cash equivalents................................................. (9,300) (8,291)
Cash and cash equivalents at beginning of period.......................................... 10,274 14,916
---------- ----------
Cash and cash equivalents at end of period................................................ $ 974 $ 6,625
---------- ----------
---------- ----------
</TABLE>
Non-cash disclosure of Convertible Preferred and Common Stock conversions:
as of September 30, 1998, 3,473 shares of Convertible Preferred Stock, including
applicable stock dividends, had been converted into 6,710,280 shares of Common
Stock.
Non-cash disclosure of property and equipment: as of September 30, 1998,
expenditures for property and equipment excluded $70 of equipment lease
renewals.
The accompanying notes are an integral part of the condensed consolidated
financial statements.
F-59
<PAGE>
ORAVAX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
INFORMATION WITH RESPECT TO THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1997 IS UNAUDITED.
1. NATURE OF BUSINESS
OraVax, Inc. ("OraVax" or the "Company") was incorporated in Delaware in
1990 and has its principal offices and laboratories at 38 Sidney Street,
Cambridge, Massachusetts and manufacturing facilities in Canton, Massachusetts.
OraVax's mission is the discovery, development and commercialization of
biologic products for the prevention or treatment of human infectious diseases.
The Company's products are vaccines that stimulate the body's own immunity to
provide long term protection against disease, as well as antibody products that
provide immediate passive immunity to treat existing infections or to protect
against acute disease risk. The Company employs both classical biologic product
methods and innovative technologies to produce therapeutics and preventatives
that meet the challenges of each infection and disease process.
The ultimate success of the Company is dependent upon its ability to raise
capital through equity financings, direct financings, corporate partnerships,
sale of product and interest income on invested capital. The Company's capital
requirements may change depending upon numerous factors, including progress of
the Company's research, development and clinical programs, time required to
obtain regulatory approvals, resources the Company devotes to self-funded
projects, proprietary manufacturing methods and advanced technologies and demand
for the Company's products, if and when approved.
Additional capital will be required to ensure the on-going viability of the
Company. The Company has secured interim sources of financing to support
operations into the first quarter of 1999. This funding is secured with the
tangible and intangible assets of the Company, in addition to some of its rights
in the Joint Venture Partnership in H. PYLORI. While management believes that
additional capital may be available to fund operations, there can be no
assurance that additional funds will be available when required, on terms
acceptable to the Company.
The Company is subject to risks common to companies in the biotechnology
industry including, but not limited to, development by the Company or its
competitors of new technological innovations, dependence on key personnel,
protection of proprietary technology, manufacturing limitations, third party
reimbursements, collaborative arrangements, and compliance with government
regulations.
2. MERGER WITH PEPTIDE THERAPEUTICS GROUP PLC AND RETIREMENT OF 6% CONVERTIBLE
PREFERRED STOCK
On November 10, 1998, the Company entered into an agreement to be merged
with Cambridge, England based Peptide Therapeutics Group PLC ("Peptide") for
stock of Peptide and cash totaling approximately $15 million, subsequently
increased to approximately $20 million. Peptide is a biopharmaceutical company
engaged in the research and development of novel drugs and vaccines, and is
listed on the London Stock Exchange, under the symbol PTE. Peptide currently has
four products in clinical development with several pre-clinical and research
programs. The Company and its Joint Venture partner Pasteur Merieux Connaught
("PMC") are already collaborating with Peptide in using Peptide's proprietary
platform technology to create oral vaccines for the treatment of H. PYLORI. The
merger will create a larger biopharmaceutical company involved in the
development of novel drugs, vaccines and antibody products that control
significant human diseases. The merged company will have a total of ten products
in development, six of which are currently in clinical trials, with a further
four scheduled to go into clinical trials in the next twelve months, and
multiple corporate partnerships
F-60
<PAGE>
ORAVAX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
INFORMATION WITH RESPECT TO THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1997 IS UNAUDITED.
including those with PMC and SmithKline Beecham. This new business combination
will result in a broader portfolio of product programs, and greater market
presence and potential for expanded corporate partnerships.
The transaction will take the form of a merger of the Company with a
subsidiary of Peptide, formed for the transaction, and the Company will become a
wholly owned subsidiary of Peptide following the merger. Completion of the
merger is subject to certain conditions, including approval by the shareholders
of each company and Peptide raising additional capital to provide sufficient
working capital for the combined company following the merger, as required by
the rules of the London Stock Exchange. The merger is anticipated to be
completed during the first quarter of 1999.
Simultaneous with the execution of the Merger Agreement, Peptide purchased
approximately 95% of the Company's outstanding 6% Convertible Preferred Stock
("Convertible Preferred Stock") for an aggregate price of approximately $3
million. Upon completion of the merger, the Convertible Preferred Stock held by
Peptide, and all shares of common stock issued to Peptide upon conversion of the
Convertible Preferred Stock held by Peptide, will be cancelled without merger
consideration.
Refer to Management's Discussion and Analysis of Financial Condition and
Results of Operations: Subsequent Event: Peptide Therapeutics Group PLC for
additional details.
3. SHORT-TERM BRIDGE LOAN
On November 2, 1998, the Company obtained a short-term bridge loan, in the
amount of $3 million, from PMC to support operations. The Company pledged 12%
ownership in the Joint Venture Partnership as collateral. The Company granted
PMC a controlling vote regarding all marketing-related decisions, thereby
granting PMC overall direction of marketing-related matters. The Company will
retain equal voting authority in all non-marketing-related decisions. The loan
was to be repaid in two installments: $2 million on January 31, 1999 and $1
million on June 30, 1999,and bears interest at an annual rate of 5.42% which is
payable when each installment of principal is due. However, the loan was amended
to require repayment of $3 million upon the earlier of consummation of the
merger and July 31, 1999.
In the event that the Company defaults on the loan, PMC would, by virtue of
the Company's pledge of 12% ownership in the Joint Venture Partnership to secure
the loan, increase its ownership interest in the Joint Venture Partnership to
62%, thereby obtaining overall direction of all Joint Venture Partnership
matters. The Company's share of future research, development, clinical and
commercialization costs, and of profits from Target Product sales would then
decrease from the present 50% to 38%.
4. BASIS OF PRESENTATION
The consolidated balance sheet as of September 30, 1998, and the
consolidated statements of operations and cash flows for the three and nine
months ended September 30, 1998 and 1997 are unaudited, have been prepared on a
basis substantially consistent with the audited financial statements, and, in
the opinion of management, include all adjustments (consisting of normal,
recurring adjustments) necessary for a fair presentation of results for these
interim periods. The preparation of interim financial statements in conformity
with generally accepted accounting principles requires the use of management's
estimates and assumptions that affect the reported amounts of assets and
F-61
<PAGE>
ORAVAX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
INFORMATION WITH RESPECT TO THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1997 IS UNAUDITED.
liabilities and disclosure of contingent assets and liabilities at the date of
the interim financial statements and the reported amounts of revenues and
expenses during the reporting period. The results for the nine months ended
September 30, 1998 are not necessarily indicative of results for the entire
year, although the Company expects to incur a significant loss for the year
ending December 31, 1998. These interim financial statements should be read in
conjunction with the annual consolidated financial statements included in the
Company's annual report filed on Form 10-K for the year ended December 31, 1997.
5. CHANGE IN ACCOUNTING ESTIMATE
ACCRETION OF CONVERTIBLE PREFERRED STOCK
In December 1997, in a private placement financing, the Company issued 6,300
shares of 6% Convertible Preferred Stock ("Convertible Preferred Stock"), for
$1,000 per share, providing cash proceeds of $5.6 million, net of $700,000 in
deal costs. Holders of the Convertible Preferred Stock are entitled to a
conversion discount that starts at 5% in December 1997 and increases to a
maximum of 21% by June 1999. At December 31, 1997, the value of the discount is
$846,788, which has been recorded as deferred financing costs and was to be
amortized over the eighteen month discount period. In the second quarter of
1998, the amortization period was changed from eighteen months to twelve months
to reflect the volume of conversions to the Company's Common Stock and the
second quarter's accretion to the conversion discount includes a retroactive
adjustment of $141,000. In conjunction with the November 10, 1998 Convertible
Preferred Stock buyback, the remaining $212,000 in deferred financing costs will
be amortized in the fourth quarter of 1998.
6. COMPUTATION OF NET LOSS PER COMMON SHARE
For the year ended December 31, 1997, the Company adopted Statement of
Accounting Standards No. 128 ("SFAS 128"), which requires the presentation of
Basic and Dilutive earnings per share, which replaces primary and fully diluted
earnings per share. Earnings per share have been restated for all periods
presented to reflect the adoption of SFAS 128. Basic net loss per share is
computed using the weighted average number of common shares outstanding during
the period, plus the dilutive effect of common stock equivalents. Common stock
equivalent shares consist of Convertible Preferred Stock and stock options. The
dilutive computations do not include common stock equivalents for stock options
of 1,370,696 and 1,334,274 at September 30, 1998 and September 30, 1997,
respectively, and Convertible Preferred Stock convertible to 15,875,202 shares
of Common Stock at September 30, 1998, as there inclusion would be
anti-dilutive.
7. CHANGES IN ACCOUNTING PRINCIPLES
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income". This Statement
requires that all items recognized under accounting standards as components of
comprehensive earnings be reported in an annual financial statement that is
displayed with the same prominence as other annual financial statements. This
Statement also requires that an entity classify items of other comprehensive
earnings by their nature in an annual financial statement. For example, other
comprehensive earnings may include foreign currency translation adjustments,
minimum pension liability adjustments, and unrealized gains and losses on
F-62
<PAGE>
ORAVAX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
INFORMATION WITH RESPECT TO THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1997 IS UNAUDITED.
marketable securities classified as available-for-sale. For the three and nine
months ended September 30, 1998 and 1997, comprehensive income was the same as
net income.
8. NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative
Instruments and Hedging Activities". This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. The statement requires companies to
recognize all derivatives as either assets or liabilities, with the instruments
measured at fair value. The accounting for changes in fair value, gains or
losses, depends on the intended use of the derivative and its resulting
designation. The statement is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. The Company will adopt SFAS 133 by January 1,
2000. The Company does not expect SFAS 133 to have a material impact on its
financial statements.
F-63
<PAGE>
ANNEX A
RESTATED
AGREEMENT AND PLAN OF ACQUISITION
AMONG
PEPTIDE THERAPEUTICS GROUP PLC
PEACH ACQUISITION CORP.,
AND
ORAVAX, INC.
------------------------
DATED AS OF NOVEMBER 10, 1998
---------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C>
SECTION 1 -- THE MERGER.................................................................................... 1
1.1 THE MERGER................................................................................ 1
1.2 Effective Time............................................................................ 1
1.3 Effects of the Merger..................................................................... 1
1.4 Certificate of Incorporation and By-Laws.................................................. 1
1.5 Directors and Officers.................................................................... 2
1.6 Conversion of Stock....................................................................... 2
1.7 Seller Options and Seller Warrants........................................................ 3
1.8 Closing of Seller Transfer Books.......................................................... 4
1.9 Dissenting Shares......................................................................... 4
1.10 Exchange of Certificates.................................................................. 5
1.11 No Fractional Shares...................................................................... 5
1.12 No Liability.............................................................................. 5
1.13 Lost Certificates......................................................................... 6
1.14 Withholding Rights........................................................................ 6
1.15 [Reserved]................................................................................ 6
1.16 Further Assurances........................................................................ 6
SECTION 2 -- REPRESENTATIONS AND WARRANTIES OF SELLER...................................................... 6
2.1 Organization and Qualification............................................................ 6
2.2 Authority to Execute and Perform Agreements............................................... 7
2.3 Capitalization and Title to Shares........................................................ 7
2.4 Seller Subsidiaries and Seller Joint Ventures............................................. 8
2.5 SEC Reports............................................................................... 9
2.6 Financial Statements...................................................................... 9
2.7 Absence of Undisclosed Liabilities........................................................ 10
2.8 No Material Adverse Change................................................................ 10
2.9 Books and Records......................................................................... 10
2.10 Tax Matters............................................................................... 10
2.11 Compliance with Laws...................................................................... 12
2.12 No Breach................................................................................. 13
2.13 Actions and Proceedings................................................................... 13
2.14 Contracts and Other Agreements............................................................ 13
2.15 Bank Accounts, Brokerage Accounts and Powers of Attorney.................................. 15
2.16 Properties................................................................................ 15
2.17 Intellectual Property..................................................................... 15
2.18 Commercial Relationships.................................................................. 15
2.19 Employee Benefit Plans.................................................................... 16
2.20 Employee Matters.......................................................................... 17
2.21 Transactions with Management.............................................................. 18
2.22 Insurance................................................................................. 18
2.23 Anti-Takeover Laws........................................................................ 19
2.24 Brokerage................................................................................. 19
2.25 Environmental Matters..................................................................... 19
2.26 Proxy Statement and Registration Statement................................................ 21
2.27 PMC Waiver................................................................................ 21
2.28 Fairness Opinion.......................................................................... 21
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C>
SECTION 3 -- REPRESENTATIONS AND WARRANTIES OF PARENT...................................................... 22
3.1 Organization.............................................................................. 22
3.2 Authority to Execute and Perform Agreement................................................ 22
3.3 LSE Reports............................................................................... 22
3.4 Capitalization............................................................................ 22
3.5 Financial Statements...................................................................... 22
3.6 Absence of Undisclosed Parent Liabilities................................................. 23
3.7 No Material Adverse Change................................................................ 23
3.8 Actions and Proceedings................................................................... 23
3.9 No Breach................................................................................. 23
3.10 Proxy Statement and Registration Statement................................................ 24
3.11 Brokerage................................................................................. 24
SECTION 4 -- REPRESENTATIONS AND WARRANTIES REGARDING MERGER SUB........................................... 24
4.1 Organization and Corporate Power.......................................................... 24
4.2 Corporate Authorization................................................................... 24
4.3 Non-Contravention......................................................................... 24
4.4 No Business Activities.................................................................... 25
SECTION 5 -- COVENANTS AND AGREEMENTS...................................................................... 25
5.1 Conduct of Business....................................................................... 25
5.2 Corporate Examinations and Investigations................................................. 26
5.3 Expenses.................................................................................. 27
5.4 Authorization from Others................................................................. 27
5.5 Further Assurances........................................................................ 27
5.6 Preparation of Disclosure Documents....................................................... 27
5.7 Public Announcements and Confidentiality.................................................. 28
5.8 Affiliate Letters......................................................................... 28
5.9 Stock Exchange Listing.................................................................... 29
5.10 No Solicitation........................................................................... 29
5.11 Updates to Parent Disclosure Schedule..................................................... 30
5.12 Updates to Seller Disclosure Schedule..................................................... 30
5.13 Voting Seller Preferred Stock............................................................. 31
5.14 FIRPTA Compliance......................................................................... 31
5.15 Reporting................................................................................. 31
5.16 Working Capital Requirement............................................................... 31
SECTION 6 -- CONDITIONS PRECEDENT TO THE OBLIGATIONS OF EACH PARTY TO CONSUMMATE THE MERGER................
31
6.1 Approvals................................................................................. 32
6.2 Registration Statement.................................................................... 32
6.3 Absence of Order.......................................................................... 32
6.4 Regulatory Approvals...................................................................... 32
6.5 Capital Raising........................................................................... 32
6.6 Admission to LSE.......................................................................... 32
SECTION 7 -- CONDITIONS PRECEDENT TO THE OBLIGATIONS OF MERGER SUB AND PARENT TO CONSUMMATE THE MERGER.....
33
7.1 Representations, Warranties and Covenants................................................. 33
7.2 Secretary of State Certificates........................................................... 33
7.3 Secretary's Certificate................................................................... 33
7.4 Affiliate Letters......................................................................... 33
7.5 Opinion of Counsel to Seller.............................................................. 33
7.6 Certificate of Merger..................................................................... 33
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C>
7.7 Comfort Letter............................................................................ 33
7.8 Dissenting Shares......................................................................... 34
7.9 Employment Agreements..................................................................... 34
7.10 Voting Agreements......................................................................... 34
7.11 Consents.................................................................................. 34
7.12 Purchase of Preferred Stock............................................................... 34
SECTION 8 -- CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER TO CONSUMMATE THE MERGER.....................
35
8.1 Representations, Warranties and Covenants................................................. 35
8.2 Opinion of Counsel to Parent.............................................................. 35
8.3 Merger Documents.......................................................................... 35
SECTION 9 -- TERMINATION, AMENDMENT AND WAIVER............................................................. 35
9.1 Termination............................................................................... 35
9.2 Effect of Termination..................................................................... 37
9.3 Termination Fees.......................................................................... 37
9.4 Seller Preferred Stock Put and Call Rights................................................ 38
9.5 Amendment................................................................................. 39
9.6 Waiver.................................................................................... 39
SECTION 10 -- MISCELLANEOUS................................................................................ 39
10.1 No Survival............................................................................... 39
10.2 Notices................................................................................... 39
10.3 Entire Agreement.......................................................................... 41
10.4 Governing Law............................................................................. 41
10.5 Binding Effect; No Assignment............................................................. 41
10.6 Variations in Pronouns.................................................................... 41
10.7 Counterparts.............................................................................. 41
</TABLE>
iii
<PAGE>
EXHIBITS
<TABLE>
<S> <C>
Exhibit A Form of Affiliate Letter
Exhibit B Form of Employment Agreements
Exhibit C Potential Seller Preferred Stock
Modifications
</TABLE>
SCHEDULES
<TABLE>
<S> <C>
Schedule 1.0 Individuals Executing Voting Agreements
Schedule 1.5 Directors and Officers of the Surviving
Corporation
</TABLE>
iv
<PAGE>
AGREEMENT AND PLAN OF ACQUISITION
THIS AGREEMENT AND PLAN OF ACQUISITION (this "Agreement") dated as of
November 10, 1998, as amended, is among Peptide Therapeutics Group plc
("Parent"), a corporation organized under the laws of England and Wales, Peach
Acquisition Corp. ("Merger Sub"), a Delaware corporation and a wholly-owned
subsidiary of Parent, and OraVax, Inc. ("Seller"), a Delaware corporation. The
parties wish to effect the acquisition of Seller by Parent through a merger of
Merger Sub with and into Seller on the terms and conditions hereof (the
"Merger"). As a condition to, and concurrently with the execution of, this
Agreement, each director, executive officer and stockholder of Seller listed on
Schedule 1.0 has executed and delivered to Parent an irrevocable agreement to
vote all shares of voting stock held by such person in favor of the approval of
this Agreement, the merger and the transactions contemplated hereby.
In consideration of the mutual representations, warranties and covenants
contained herein, the parties hereto agree as follows:
SECTION 1--THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions hereof, and
in accordance with the General Corporation Law of the State of Delaware (the
"DGCL"), Merger Sub shall be merged with and into Seller. The Merger shall occur
at the Effective Time (as defined herein). Following the Merger, Seller shall
continue as the surviving corporation (the "Surviving Corporation") and be a
wholly-owned subsidiary of Parent, and the separate corporate existence of
Merger Sub shall cease.
1.2 EFFECTIVE TIME. As soon as practicable after satisfaction or waiver of
all conditions to the Merger, the parties shall cause a Certificate of Merger
with respect to the Merger to be filed and recorded in accordance with Section
252 of the DGCL and shall take all such further actions as may be required by
law to make the Merger effective. The Merger shall be effective at such time as
the Certificate of Merger is duly filed with the Secretary of State of Delaware
in accordance with the DGCL or at such later time as is specified in the
Certificate of Merger (the "Effective Time"). Immediately prior to the filing of
the Certificate of Merger, a closing (the "Closing") will be held at the offices
of Palmer & Dodge LLP, One Beacon Street, Boston, Massachusetts (or such other
place as the parties may agree) for the purpose of confirming the foregoing (the
date on which the Closing occurs being hereafter referred to as the "Closing
Date").
1.3 EFFECTS OF THE MERGER. The Merger shall have the effects set forth in
Sections 259, 260 and 261 of the DGCL.
1.4 CERTIFICATE OF INCORPORATION AND BY-LAWS. The Certificate of
Incorporation and By-Laws of Merger Sub, in each case as in effect immediately
prior to the Effective Time, shall be the Certificate of Incorporation and
By-Laws of the Surviving Corporation immediately after the Effective Time
(except that Article I of the Certificate of Incorporation shall be amended as
of the Effective Time so that the name of the Surviving Corporation shall be
"OraVax, Inc.").
1.5 DIRECTORS AND OFFICERS. The directors and officers of the Surviving
Corporation immediately after the Effective Time shall be the individuals
identified on Schedule 1.5.
1.6 CONVERSION OF STOCK
(a) At the Effective Time, by virtue of the Merger and without any action on
the part of Parent, Merger Sub or Seller:
(i) All shares of common stock, $0.001 par value per share, of Seller
(the "Seller Common Stock") outstanding immediately prior to the Effective
Time, other than (A) shares held by Seller as treasury stock or shares held
by any Seller Subsidiary (as defined in Section 2.4) and shares held
A-1
<PAGE>
by Parent or its affiliates and (B) Dissenting Shares (as defined in Section
1.9), shall be converted into and become the right to receive, in the
aggregate, that number (subject to payment of cash in lieu of fractional
shares as provided in Section 1.11) of ordinary shares, nominal value of 10
pence per share, of Parent ("Parent Common Stock"), determined by dividing
(x) the Common Stock Consideration (as defined below) by (y) the Market
Value (as defined below) of a share of Parent Common Stock. The "Common
Stock Consideration" shall mean $20,000,000 less the sum of (A) $2,953,334
(the amount an affiliate of Parent paid on or about November 10, 1998 to
acquire approximately 65% of the then outstanding shares of Seller Preferred
Stock) (B) amounts payable by Parent pursuant to Section 1.6(a)(ii)
provided, however, no deduction shall be made for payments pursuant to
section 1.6(a)(ii) with respect to shares of Seller Preferred Stock which
Parent or its affiliates acquired on or about November 10, 1998 and
subsequently transferred, (C) the excess of (x) the number of shares of
Seller Common Stock represented by each Seller Option and Seller Common
Warrant multiplied by the Conversion Ratio less (y) the exercise price for
such shares for which (x) exceeds (y) (as such terms are hereinafter
defined) and (D) all amounts paid or payable pursuant to Section 1.7(b) or
otherwise paid or payable by Parent to acquire Seller Preferred Warrants.
The Common Stock Consideration shall be reduced by the consideration that
would otherwise be allocable to Dissenting Shares if the holders thereof had
not properly exercised rights under the DGCL. The Common Stock Consideration
shall be increased by the percentage by which (x) the number of shares of
Seller Common Stock outstanding at the Effective Time less (1) shares held
by Seller as treasury stock, (2) shares held by any Seller Subsidiary, (3)
shares held by Parent or its affiliates and (4) Dissenting Shares exceeds
(y) the number of shares of Seller Common Stock outstanding at the Effective
Time less (1) shares held by Seller as treasury stock, (2) shares held by
any Seller Subsidiary, (3) shares held by Parent of its affiliates, (4)
Dissenting Shares and (5) without double counting, the number of shares of
Seller Common Stock held by third parties who acquired those shares,
directly or indirectly, from Parent or its affilitates, including by
conversion of Seller Preferred Stock acquired, directly or indirectly, from
Parent or its affiliates.
(ii) Each share of Seller 6% Convertible Preferred Stock ("Seller
Preferred Stock") which has not been converted into Seller Common Stock
prior to the Effective Time, other than shares of Seller Preferred Stock
held by Parent or its affiliates, shall be converted into the greater of (x)
the right to receive in cash $1,090.00 (the "Per Share Preferred Stock
Consideration") plus accrued but unpaid dividends and (y) the Liquidation
Preference pursuant to the terms of the Seller Preferred Stock.
(iii) All shares of Seller Common Stock held at the Effective Time by
Seller as treasury stock or by a Seller Subsidiary, and all shares of Seller
Preferred Stock and Seller Common Stock held at the Effective Time by Parent
or its affiliates, shall be cancelled and no payment shall be made with
respect thereto.
(iv) All Dissenting Shares shall be handled in accordance with Section
1.9.
(v) Each share of common stock of Merger Sub, $0.01 par value per share,
outstanding immediately prior to the Effective Time shall be converted into
and become one outstanding fully paid and nonassessable share of common
stock of the Surviving Corporation.
(b) For the purpose of this Agreement, "Market Value" of a share of Parent
Common Stock shall mean the average of the per share closing prices of Parent
Common Stock as reported by the London Stock Exchange (the "LSE") for the 10
trading days ending on the third trading day prior to the Closing Date, with
each per share closing price converted to a U.S. dollar value using the exchange
rate for such day equal to the midpoint between the bid price and ask price
reported in THE FINANCIAL TIMES. Notwithstanding the foregoing, (i) if the
Market Value of a share of Parent Common Stock computed in accordance with the
previous sentence is less than $1.49 per share, Market Value of a
A-2
<PAGE>
share of Parent Common Stock shall mean $1.49 and (ii) if the Market Value of a
share of Parent Common Stock computed in accordance with the previous sentence
is greater than $2.24 per share, Market Value of a share of Parent Common Stock
shall mean $2.24.
(c) The Common Stock Consideration shall be allocated among the applicable
holders of shares of Seller Common Stock outstanding immediately prior to the
Effective Time by allocating to such holders that Market Value of shares of
Parent Common Stock determined by multiplying the number of shares of Seller
Common Stock held by each such holder by the Conversion Ratio. The "Conversion
Ratio" shall mean the quotient obtained by dividing the Common Stock
Consideration (prior to any reduction with respect to amounts otherwise
allocable to Dissenting Shares) by the number of shares of Seller Common Stock
outstanding immediately prior to the Effective Time less the number of shares
cancelled pursuant to Section 1.6(a)(iii) to the extent outstanding. The
"Exchange Ratio" shall mean the quotient obtained by dividing the Conversion
Ratio by the Market Value of a share of Parent Common Stock.
(d) If within the period beginning 13 trading days prior to the Closing Date
and ending on the Closing Date, there is a change in the number of issued and
outstanding shares of Parent Common Stock as the result of reclassification,
subdivision, recapitalization, combination, exchange, stock split (including
reverse stock split), stock dividend or distribution or other similar
transaction (other than the Merger), the number of shares of Parent Common Stock
issued in the Merger shall be equitably adjusted to eliminate the effect of such
event.
1.7 SELLER OPTIONS AND SELLER WARRANTS.
(a) At the Effective Time, each outstanding option to purchase shares of
Seller Common Stock (each a "Seller Option") under the Seller's 1990 Stock
Option Plan and 1995 Stock Option Plan (together the "Seller Stock Option
Plans"), whether or not exercisable, will be assumed by Parent. Each Seller
Option so assumed by Parent under this Agreement will continue to have, and be
subject to, the same terms and conditions set forth in the applicable Seller
Stock Option Plan immediately prior to the Effective Time (including, without
limitation, any repurchase rights), except that (i) each Seller Option will be
exercisable (or will become exercisable in accordance with its terms) for that
number of shares of Parent Common Stock equal to the product of the number of
shares of Seller Common Stock that were issuable upon exercise of such Seller
Option immediately prior to the Effective Time multiplied by the Exchange Ratio,
rounded down to the nearest whole number of shares of Parent Common Stock, and
(ii) the per share exercise price for the shares of Parent Common Stock issuable
upon exercise of such assumed Seller Option will be equal to the quotient
determined by dividing the exercise price per share of Seller Common Stock at
which such Seller Option was exercisable immediately prior to the Effective Time
by the Exchange Ratio, rounded up to the nearest whole cent. After the Effective
Time, Parent will issue to each holder of an outstanding Seller Option a notice
describing the foregoing assumption of such Seller Option by Parent. The
adjustment provided herein with respect to any Seller Options which are
"incentive stock options" as defined in Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code") shall be and is intended to be effected in a
manner which is consistent with Section 424(a) of the Code.
(b) Each outstanding warrant to acquire Seller Preferred Stock (a "Seller
Preferred Warrant"), whether or not then exercisable, shall become the right to
receive from Parent, to the extent positive, the Per Share Preferred Stock
Consideration multiplied by the number of shares of Preferred Stock covered by
the Seller Preferred Warrant, less the aggregate exercise price.
(c) At the Effective Time, each outstanding warrant to purchase shares of
Seller Common Stock (each a "Seller Common Warrant" and together with the Seller
Preferred Warrants the "Seller Warrants"), whether or not exercisable, will be
assumed by Parent. Each Seller Common Warrant so assumed by Parent under this
Agreement will continue to have, and be subject to, the same terms and
conditions set forth in the applicable Seller Common Warrant immediately prior
to the Effective Time
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(including, without limitation, any repurchase rights), except that (i) each
Seller Common Warrant will be exercisable (or will become exercisable in
accordance with its terms) for that number of shares of Parent Common Stock
equal to the product of the number of shares of Seller Common Stock that are
issuable upon exercise of such Seller Common Warrant immediately prior to the
Effective Time multiplied by the Exchange Ratio, rounded down to the nearest
whole number of shares of Parent Common Stock, and (ii) the per share exercise
price for the shares of Parent Common Stock issuable upon exercise of such
assumed Seller Common Warrant will be equal to the quotient determined by
dividing the exercise price per share of Seller Common Stock at which such
Seller Common Warrant was exercisable immediately prior to the Effective Time by
the Exchange Ratio rounded to the nearest whole cent. After the Effective Time,
Parent will issue to each holder of an outstanding Seller Common Warrant a
notice describing the foregoing assumption of such Seller Common Warrant by
Parent.
1.8 CLOSING OF SELLER TRANSFER BOOKS. At the Effective Time, the stock
transfer books of Seller shall be closed and no transfer of Seller Common Stock
shall thereafter be made.
1.9 DISSENTING SHARES
(a) Shares of capital stock of Seller held by a stockholder who has properly
exercised appraisal rights with respect thereto in accordance with Section 262
of the DGCL (collectively, the "Dissenting Shares") shall not be converted into
Common Stock Consideration. From and after the Effective Time, a stockholder who
has properly exercised such appraisal rights shall no longer retain any rights
of a stockholder of Seller or the Surviving Corporation, except those provided
under Section 262 of the DGCL.
(b) Seller shall give Parent (i) prompt notice of any written demands under
Section 262 of the DGCL with respect to any shares of capital stock of Seller,
any withdrawal of any such demand and any other instruments served pursuant to
the DGCL and received by Seller and (ii) the right to participate in all
negotiations and proceedings with respect to any such demands. Seller shall
cooperate with Parent concerning, and shall not, except with the prior written
consent of Parent, voluntarily make any payment with respect to, or offer to
settle or settle, any such demands.
1.10 EXCHANGE OF CERTIFICATES. Parent shall authorize one or more persons
to act as Exchange Agent hereunder (the "Exchange Agent"). As soon as
practicable after the Effective Time, Parent shall cause the Exchange Agent to
mail to all former holders of record of Seller Common Stock that was converted
into the right to receive shares of Parent Common Stock pursuant to Section
1.6(a)(i) instructions for surrendering their certificates representing Seller
Common Stock in exchange for a certificate or certificates representing Parent
Common Stock and cash payments in lieu of fractional shares. Parent shall also
notify all holders of Seller Options and Seller Common Warrants of the
conversion of their options and warrants to rights to purchase shares of Parent
Common Stock. Upon surrender of a Seller Common Stock certificate for
cancellation to the Exchange Agent, together with a letter of transmittal and
other requested documents and in accordance with the instructions thereon, the
holder of such certificate shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of Parent Common Stock into
which the shares of Seller Common Stock theretofore represented by such
certificate so surrendered shall have been converted pursuant to the provisions
of this Agreement. Until surrendered in accordance with the provisions of this
Section, each Seller Common Stock certificate (other than certificates for
shares to be canceled in accordance with Section 1.6.(a)(iii) and Dissenting
Shares, if any) shall represent for all purposes shares of Parent Common Stock.
Parent Common Stock into which Seller Common Stock shall be converted in the
Merger at the Effective Time shall be deemed to have been issued at the
Effective Time. If any certificates representing shares of Parent Common Stock
are to be issued in a name other than that in which the Seller Common Stock
certificate surrendered is registered, it shall be a condition of such exchange
that the person requesting such exchange shall deliver to the Exchange Agent all
documents necessary to evidence and effect such transfer and shall pay to the
Exchange Agent any transfer or
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other taxes required by reason of the issuance of a Parent Common Stock
certificate in a name other than that of the registered holder of the
certificate surrendered or establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not applicable. Beginning the date which is
six months following the Closing Date, Parent shall act as the Exchange Agent
and thereafter any holder of an unsurrendered Seller Common Stock certificate
shall look solely to Parent for any amounts to which such holder may be due,
subject to applicable law.
1.11 NO FRACTIONAL SHARES. No certificates representing fractional shares
of Parent Common Stock shall be issued pursuant to this Agreement. No fractional
interest shall entitle the owner to vote or to any other rights of a security
holder. In lieu of fractional shares, each individual or entity who would
otherwise have been entitled to a fractional share of Parent Common Stock
hereunder, will receive an amount in cash (without interest) determined by
multiplying such fraction by the Market Value of one share of Parent Common
Stock (determined in accordance with Section1.6).
1.12 NO LIABILITY. None of Parent, Merger Sub, Seller, the Surviving
Corporation or the Exchange Agent shall be liable to any Person in respect of
any shares (or dividends or distributions with respect thereto) or cash payments
delivered to a public official pursuant to any applicable escheat, abandoned
property or similar law.
1.13 LOST CERTIFICATES. If any certificate representing shares of Seller
Common Stock, shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such certificate or option to be
lost, stolen or destroyed and, if required by Parent, the posting by such person
of a bond in such reasonable amount as Parent may direct as indemnity against
any claim that may be made against it with respect to such certificate, the
Exchange Agent will deliver in exchange for such lost, stolen or destroyed
certificate, applicable payments under this Agreement.
1.14 WITHHOLDING RIGHTS. Each of the Surviving Corporation and Parent
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Seller Common
Stock, Seller Options or Seller Warrants such amounts as it is required to
deduct and withhold with respect to the making of such payment under the Code,
or any provision of state, local or foreign tax law, including the tax laws of
the United Kingdom. To the extent that amounts are so withheld by the Surviving
Corporation or Parent, as the case may be, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
the shares of Seller Common Stock, Seller Options or Seller Warrants, as the
case may be, in respect of which such deduction and withholding was made.
1.15 [RESERVED].
1.16 FURTHER ASSURANCES. At and after the Effective time, the officers and
directors of the Surviving Corporation will be authorized to execute and
deliver, in the name and on behalf of Seller or Merger Sub, any deeds, bills of
sale, assignments or assurances and to take and do, in the name and on behalf of
Seller or Merger Sub, any other actions and things to vest, perfect or confirm
of record or otherwise in the Surviving Corporation any and all right, title and
interest in, to and under any of the rights, properties or assets acquired or to
be acquired by the Surviving Corporation as a result of, or in connection with,
the Merger.
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SECTION 2--REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth on the disclosure schedule delivered to Parent on the
date hereof (the "Seller Disclosure Schedule"), the section numbers of which are
numbered to correspond to the section numbers of this Agreement to which they
refer, Seller hereby makes the following representations and warranties:
2.1 ORGANIZATION AND QUALIFICATION
(a) Each of Seller, each Seller Subsidiary and each Seller Joint Venture (as
defined in Section 2.4(c)) is a corporation or other legal entity duly
organized, validly existing and in good standing under the laws of its state of
incorporation and has corporate or similar power and authority to own, lease and
operate its assets and to carry on its business as now being and as heretofore
conducted. Each of Seller, each Seller Subsidiary and each Seller Joint Venture
is qualified or otherwise authorized to transact business as a foreign
corporation or other organization in all jurisdictions in which such
qualification or authorization is required by law, except for jurisdictions in
which the failure to be so qualified or authorized could not reasonably be
expected to have a material adverse effect on the assets, properties, business,
results of operations or financial condition of Seller and the Seller
Subsidiaries taken as a whole (but excluding any change, effect, condition,
event or circumstance arising out of or attributable to (i) changes, effects,
conditions, events or circumstances that generally affect the industries in
which Seller or the Seller Subsidiaries operate (including legal and regulatory
changes) or (ii) changes arising from the consummation of the transactions
contemplated hereby or the announcement of the execution of this Agreement) (a
"Seller Material Adverse Effect").
(b) Seller has previously provided to Parent true and complete copies of the
charter and bylaws or other organizational documents of Seller, each Seller
Subsidiary and Seller Joint Venture as presently in effect, and neither Seller
nor any Seller Subsidiary nor any Seller Joint Venture is in default in any
material respect in the performance, observation or fulfillment of any of such
documents.
2.2 AUTHORITY TO EXECUTE AND PERFORM AGREEMENTS. Seller has the corporate
power and authority to enter into, execute and deliver this Agreement and,
subject to the approval of this Agreement and the Merger by the holders of
Seller Common Stock, to perform fully its obligations hereunder. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by the Board of Directors of
Seller. No other action on the part of Seller is necessary to consummate the
transactions contemplated hereby (other than approval by the holders of Seller
Common Stock of this Agreement and the Merger). This Agreement has been duly
executed and delivered by Seller and, subject to the foregoing, constitutes a
valid and binding obligation of Seller, enforceable in accordance with its
terms.
2.3 CAPITALIZATION AND TITLE TO SHARES
(a) Seller is authorized to issue 50,000,000 shares of Seller Common Stock,
of which 17,762,712 shares were issued and outstanding as of November 5, 1998.
All of the issued and outstanding shares of Seller's Common Stock are duly
authorized, validly issued, fully paid, nonassessable and free of pre-emptive
rights.
(b) Seller has reserved 1,206,023 shares of Seller Common Stock for issuance
pursuant to all of the Seller Options. Seller Options to purchase 1,206,023
shares of Seller Common Stock were outstanding as of October 28, 1998. The
Seller Disclosure Schedule includes a true and complete list of all Seller
Options with vesting schedules and exercise prices. True and complete copies of
all instruments (or the forms of such instruments) referred to in this section
have been previously furnished to Parent.
(c) (i) Seller has reserved 84,086 shares of Seller Common Stock for
issuance pursuant to all of the Seller Common Warrants. Seller Common Warrants
to purchase 84,086 shares of Seller Common Stock were outstanding as of November
5, 1998.
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(ii) Seller has reserved 630 shares of Seller Preferred Stock for
issuance pursuant to all of the Seller Preferred Warrants and 4,061,157
shares of Seller Common Stock for issuance pursuant to conversion of such
shares of Seller Preferred Stock. Seller Preferred Warrants to purchase 630
shares of Seller Preferred Stock were outstanding as of November 5, 1998.
(iii) The Seller Disclosure Schedule includes a true and complete list of
all outstanding warrants with vesting schedules and exercise prices. True
and complete copies of all instruments (or the forms of such instruments)
referred to in this section have been previously furnished to Parent.
(d) Seller is authorized to issue 2,000,000 shares of Preferred Stock,
$0.001 par value per share. Seller has designated 9,000 such shares as 6%
Convertible Preferred Stock, 2,746 of which were outstanding as of November 5,
1998, and 200,000 of such shares as "Series A Junior Participating Preferred
Stock," all of which have been reserved for issuance under Seller's Shareholder
Rights Plan and none of which are outstanding. No other shares of Preferred
Stock are outstanding. All of the issued and outstanding shares of Seller
Preferred Stock are non-voting and are duly authorized, validly issued, fully
paid, nonassessable and free of pre-emptive rights.
(e) Except pursuant to (1) the conversion of outstanding shares of Parent
Preferred Stock described in Section 2.3(d), (2) the exercise of outstanding
Seller Options described in Section 2.3(b), (3) the exercise of outstanding
Seller Common Warrants described in Section 2.3(c)(i), (4) the exercise of
outstanding Seller Preferred Warrants described in Section 2.3(c)(ii), (5) the
conversion of shares of Seller Preferred Stock received upon exercise of
outstanding Seller Preferred Warrants described in Section 2.3(c)(ii) and the
exercise of rights with respect to the Series A Junior Participating Preferred
Stock referred to in Section 2.3(d), there are not as of the date hereof, and at
the Effective Time there will not be, any other shares of capital stock of
Seller authorized or outstanding or any subscriptions, options, conversion or
exchange rights, warrants, repurchase or redemption agreements, or other
agreements, claims or commitments of any nature whatsoever obligating Seller to
issue, transfer, deliver or sell, or cause to be issued, transferred, delivered,
sold, repurchased or redeemed, additional shares of the capital stock or other
securities of Seller or obligating Seller to grant, extend or enter into any
such agreement. To the best knowledge of Seller, there are no shareholder
agreements, voting trusts, proxies or other agreements, instruments or
understandings with respect to the voting of the capital stock of Seller, except
as set forth in the Seller Disclosure Schedule.
(f) Seller does not own beneficially any shares of capital stock of Parent.
2.4 SELLER SUBSIDIARIES AND SELLER JOINT VENTURES
(a) The Seller Disclosure Schedule sets forth all of the Seller Subsidiaries
and the jurisdiction in which each is incorporated and organized. Except as set
forth on the Seller Disclosure Schedule, all issued and outstanding shares or
other equity interests of each Subsidiary are owned directly by Seller free and
clear of any charges, liens, encumbrances, security interests or adverse claims.
As used in this Agreement, "Seller Subsidiary" means any corporation or other
legal entity of which Seller or any Seller Subsidiary owns, directly or
indirectly, 50% or more of the stock or other equity interest entitled to vote
for the election of directors or similar position.
(b) There are not as of the date hereof, and at the Effective Time there
will not be, any subscriptions, options, conversion or exchange rights,
warrants, repurchase or redemption agreements, or other agreements, claims or
commitments of any nature whatsoever obligating any Seller Subsidiary to issue,
transfer, deliver or sell, or cause to be issued, transferred, delivered, sold,
repurchased or redeemed, additional shares of the capital stock or other
securities of Seller or any Seller Subsidiary or obligating Seller or any Seller
Subsidiary to grant, extend or enter into any such agreement. To the best of
knowledge of Seller, there are no shareholder agreements, voting trusts, proxies
or other agreements, instruments or understandings with respect to the voting of
the capital stock of any Seller Subsidiary.
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(c) The Seller Disclosure Schedule sets forth for each Seller Joint Venture,
the interest held by the Seller and the jurisdiction in which such Seller Joint
Venture is organized. Except as set forth on the Seller Disclosure Schedule,
interests in Seller Joint Ventures held by Seller are held directly by Seller,
free and clear of any charges, liens, encumbrances, security interest or adverse
claims. The term "Seller Joint Venture" means any corporation or other entity
(including partnerships and other business associations) that is not a Seller
Subsidiary and in which the Seller or one or more Seller Subsidiaries owns an
equity interest (other than equity interests held for passive investment
purposes which are less than 10% of any class of the outstanding voting
securities or other equity of any such entity).
2.5 SEC REPORTS. Seller has previously delivered to Parent its (i) Annual
Report on Form 10-K for the year ended December 31, 1997 (the "Seller 10-K"), as
filed with the Securities and Exchange Commission (the "SEC"), (ii) all proxy
statements relating to Seller's meetings of stockholders held or to be held
since December 31, 1997 and (iii) all other reports filed by Seller with the SEC
under the Securities Exchange Act of 1934, as amended (the "Exchange Act") since
December 31, 1995. As of their respective dates or as amended prior to the date
hereof, such reports complied, and all reports filed by Seller with the SEC
under the Exchange Act between the date of this Agreement and the Closing Date
will comply, in all material respects with applicable SEC requirements and did
not, or in the case of reports filed on or after the date hereof will not,
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. Since
December 31, 1995, Seller has timely filed, and between the date of this
Agreement and the Closing Date will timely file, with the SEC all reports
required to be filed under Section 13, 14 or 15(d) of the Exchange Act. Except
as set forth in the Seller Disclosure Schedule, each person required to make
filings under Section 16 of the Exchange Act since December 31, 1997, based on
such person's relationship with Seller, has timely made all filings required
under such section.
2.6 FINANCIAL STATEMENTS. The consolidated financial statements contained
in the Seller 10-K and in Seller's quarterly reports on Form 10-Q for the
quarters ended March 31, 1998 and June 30, 1998 (the "Seller 10-Qs") have been
prepared from, and are in accordance with, the books and records of Seller and
present fairly, in all material respects, the consolidated financial condition
and results of operations of Seller and the Seller Subsidiaries as of and for
the periods presented therein, all in conformity with generally accepted
accounting principles applied on a consistent basis, except as otherwise noted
therein and subject, in the case of the unaudited financial statements included
in the Seller 10-Qs, to normal year-end adjustments, which are not, in the
aggregate, material.
2.7 ABSENCE OF UNDISCLOSED LIABILITIES. As at December 31, 1997, Seller
and the Seller Subsidiaries had no material liabilities of any nature, whether
accrued, absolute, contingent or otherwise (including without limitation,
liabilities as guarantor or otherwise with respect to obligations of others or
liabilities for taxes due or then accrued or to become due), required to be
reflected or disclosed in the balance sheet dated December 31, 1997 (or the
notes thereto) included in the Seller 10-K (the "Seller Balance Sheet") that
were not adequately reflected or reserved against on the Seller Balance Sheet.
Seller has no material liabilities of any nature, whether accrued, absolute,
contingent or otherwise, other than liabilities (i) adequately reflected or
reserved against on the Seller Balance Sheet, (ii) reflected in Seller's
unaudited balance sheet dated June 30, 1998 included in the Seller 10-Q for the
quarter ended June 30, 1998, (iii) which have arisen since June 30, 1998 in the
ordinary course of business of Seller in amounts and of a nature consistent with
past practices or (iv) included on the Seller Disclosure Schedule.
2.8 NO MATERIAL ADVERSE CHANGE. Since June 30, 1998, there has not been
any Seller Material Adverse Effect.
2.9 BOOKS AND RECORDS. The books of account, minute books, stock record
books, and other records of Seller, all of which have been made available to
Parent, are complete and correct in all
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material respects and have been maintained in accordance with sound business
practices and the requirements of Section 13(b)(2) the Exchange Act, including
the maintenance of an adequate system of internal controls. The Seller minute
books contain in all material respects accurate and complete records of all
meetings held of, and corporate action taken by, the stockholders, the Board of
Directors and committees of the board of directors of the Seller, and no meeting
of any such stockholders, Board of Directors or committee has been held for
which minutes have not been prepared and are not contained in such minute books.
At the Closing, all of those books and records will be in the possession of
Seller.
2.10 TAX MATTERS
(a) For purposes of this Agreement, the term "Tax" (and, with correlative
meaning, "Taxes" and "Taxable") means all United States federal, state, and
local, and all foreign, income, profits, franchise, gross receipts, payroll,
transfer, sales, employment, use, property, excise, value added, ad valorem,
estimated, stamp, alternative or add-on minimum, recapture, environmental,
withholding and any other taxes, charges, duties, impositions or assessments,
together with all interest, penalties, and additions imposed on or with respect
to such amounts, including any liability for taxes of a predecessor entity. "Tax
Return" means any return, declaration, report, claim for refund, or information
return or statement filed or required to be filed with any taxing authority in
connection with the determination, assessment, collection or imposition of any
Taxes.
(b) All Tax Returns required to be filed on or before the date hereof by or
with respect to the Seller and the Seller Subsidiaries have been filed within
the time and in the manner prescribed by law. All such Tax Returns are true,
correct and complete in all material respects, and all Taxes owed by the Seller
or the Seller Subsidiaries, whether or not shown on any Tax Return, have been
paid. The Seller and the Seller Subsidiaries file Tax Returns in all
jurisdictions where they are required to so file, and no claim has ever been
made by any taxing authority in any other jurisdiction that the Seller or the
Seller Subsidiaries are or may be subject to taxation by that jurisdiction.
(c) There are no liens or other encumbrances with respect to Taxes upon any
of the assets or properties of the Seller or the Seller Subsidiaries, other than
with respect to Taxes not yet due and payable.
(d) No audit is currently pending with respect to any Tax Return of the
Seller or the Seller Subsidiaries, nor is the Seller or its officers or
directors aware of any information which has caused or should cause them to
believe that an audit by any tax authority may be forthcoming. No deficiency for
any Taxes has been proposed in writing against the Seller or the Seller
Subsidiaries, which deficiency has not been paid in full. No issue relating to
the Seller or the Seller Subsidiaries or involving any Tax for which the Seller
or the Seller Subsidiaries might be liable has been resolved in favor of any
taxing authority in any audit or examination which, by application of the same
principles, could reasonably be expected to result in a deficiency for Taxes of
the Seller or the Seller Subsidiaries for any subsequent period, and neither the
Seller nor its officers or directors knows of any other basis for the assertion
of such a deficiency.
(e) There are no outstanding agreements, waivers or arrangements extending
the statutory period of limitation applicable to any claim for, or the period
for the collection or assessment of, Taxes due from or with respect to the
Seller or the Seller Subsidiaries for any taxable period, no power of attorney
granted by or with respect to the Seller or the Seller Subsidiaries relating to
Taxes is currently in force, and no extension of time for filing any Tax Return
required to be filed by or on behalf of the Seller or any Seller Subsidiary is
in force. The Seller has delivered to the Purchaser complete and correct copies
of all income Tax Returns, audit reports and statements of deficiencies for each
of the last three taxable years filed by or issued to or with respect to the
Seller or the Seller Subsidiaries.
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(f) With respect to any period for which Tax Returns have not yet been
filed, or for which Taxes are not yet due or owing, the Seller has, in
accordance with generally accepted accounting principles, made due and
sufficient accruals for such Taxes in the Seller 10-Q for the quarter ended June
30, 1998.
(g) No consent to the application of Section 341(f)(2) of the Code (or any
predecessor provision) has been made or filed by or with respect to the Seller
or the Seller Subsidiary or any of their assets or properties. None of the
assets or properties of the Seller or the Seller Subsidiaries are or will be
required to be treated as being (i) owned by any other person pursuant to the
provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as amended
and in effect immediately before the enactment of the Tax Reform Act of 1986, or
(ii) tax-exempt use property within the meaning of Section 168(h)(1) of the
Code.
(h) The Seller and the Seller Subsidiaries have not been and are not
currently in violation (or, with or without notice or lapse of time or both,
would be in violation) of any applicable law or regulation relating to the
payment or withholding of Taxes, and all withholding and payroll Tax
requirements required to be complied with by the Seller and the Seller
Subsidiaries up to and including the date hereof have been satisfied.
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(i) The Seller and the Seller Subsidiaries are not and have never been a
party to or bound by, nor do they have or have they ever had any obligation
under, any Tax sharing agreement or similar contract or arrangement. Neither the
Seller nor any Seller Subsidiary has any liability for the Taxes of any other
person under Treasury Regulation 1.1502-6 (or any similar provision of state,
local or foreign law), as a transferee or successor, by contract, or otherwise.
(j) There is no contract or agreement, plan or arrangement obligating the
Seller or the Seller Subsidiaries to make any payment that would not be
deductible by reason of Section 162(m) or 280G of the Code. Neither the Seller
nor any Seller Subsidiary has agreed to, or is required to, make any adjustments
under Section 481(a) of the Code by reason of a change in accounting method or
otherwise.
(k) Neither the Seller nor the Seller Subsidiaries are or were during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code a United
States real property holding corporation within the meaning of Section 897(c)(2)
of the Code.
(l) Seller's net operating loss carryover (calculated in accordance with the
provisions of Section 172 of the Code) as of December 31, 1997, equaled
$31,462,165.
2.11 COMPLIANCE WITH LAWS
(a) Seller and the Seller Subsidiaries have all licenses, permits,
franchises, orders or approvals of any federal, state, local or foreign
governmental or regulatory body necessary for the conduct of the business of
Seller and the Seller Subsidiaries (collectively, "Permits") except for such
Permits, the failure of which to obtain could not reasonably be expected to have
a Seller Material Adverse Effect; such Permits are in full force and effect; and
no proceeding is pending or, to the best knowledge of Seller, threatened to
revoke or limit any Permit. The Seller Disclosure Schedule contains a true and
complete list of all Permits.
(b) Seller and the Seller Subsidiaries are not in violation of and have no
liabilities, whether accrued, absolute, contingent or otherwise, under any
federal, state, local or foreign law, ordinance or regulation or any order,
judgment, injunction, decree or other requirement of any court, arbitrator or
governmental or regulatory body, including without limitation laws relating to
the operation of clinical testing laboratories, labor and employment practices,
health and safety, zoning, pollution or protection of the environment, including
without limitation laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals, or industrial, toxic
or hazardous substances or wastes into the environment, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials (as defined in Section 2.24),
except for violations of or liabilities under any of the foregoing which could
not, in the aggregate, reasonably be expected to have a Seller Material Adverse
Effect. During the last three years, neither Seller nor any of the Seller
Subsidiaries has received notice of, and there has not been any citation, fine
or penalty imposed against Seller or any of the Seller Subsidiaries for, any
such violation or alleged violation. To the best knowledge of Seller, neither
Seller nor any of the Seller Subsidiaries has received any such notice of
violation more than three years ago which has not been resolved.
2.12 NO BREACH. Except for (a) the filing of a proxy statement with the
SEC and (b) the filing of the Certificate of Merger with the Secretary of State
of Delaware, the execution, delivery and performance of this Agreement by Seller
and the consummation by Seller of the transactions contemplated hereby will not
(i) violate any provision of the Certificate of Incorporation or By-Laws of
Seller; (ii) except as set forth on the Seller Disclosure Schedule, violate,
conflict with or result in the breach of any of the terms or conditions of,
result in modification of, or otherwise give any other contracting party the
right to terminate, or constitute (or with notice or lapse of time or both
constitute) a default under, any material instrument, contract or other
agreement to which Seller, any of the Seller Subsidiaries or any Seller Joint
Venture is a party or to which any of them or any of their
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assets or properties is bound or subject; (iii) violate any law, ordinance or
regulation or any order, judgment, injunction, decree or other requirement of
any court, arbitrator or governmental or regulatory body applicable to Seller or
the Seller Subsidiaries or by which any of Seller's or the Seller Subsidiaries'
assets or properties is bound; (iv) violate any Permit; (v) require any filing
with, notice to, or permit, consent or approval of, any governmental or
regulatory body or (vi) result in the creation of any lien or other encumbrance
on the assets or properties of Seller, a Seller Subsidiary or a Seller Joint
Venture, excluding from the foregoing clauses (ii), (iii), (iv), (v) and (vi)
violations, breaches and defaults which, and filings, notices, permits, consents
and approvals the absence of which, in the aggregate, could not reasonably be
expected to have a material adverse effect on the ability of Seller to
consummate the transactions contemplated hereby or a Seller Material Adverse
Effect.
2.13 ACTIONS AND PROCEEDINGS. There are no outstanding orders, judgments,
injunctions, decrees or other requirements of any court, arbitrator or
governmental or regulatory body against Seller, any Seller Subsidiary or any of
their assets or properties. Except as set forth in the Seller Disclosure
Schedule, there are no actions, suits or claims or legal, administrative or
arbitration proceedings pending or, to the best knowledge of Seller, threatened
against Seller, any Seller Subsidiary, any Seller Joint Venture or any of their
securities, assets or properties that individually or in the aggregate could
reasonably be expected to have a material adverse effect upon the transactions
contemplated hereby or a Seller Material Adverse Effect. To the best knowledge
of Seller, there is no fact, event or circumstance now in existence that
reasonably could be expected to give rise to any action, suit, claim, proceeding
or investigation that individually or in the aggregate could be reasonably
expected to have a material adverse effect upon the transactions contemplated
hereby or upon the Business of Seller.
2.14 CONTRACTS AND OTHER AGREEMENTS. Neither Seller nor any Seller
Subsidiary is a party to or bound by, and neither they nor their properties are
subject to, any contract or other agreement required to be disclosed in a Form
10-K or Form 10-Q of the SEC which is not disclosed in the Seller 10-K or the
Seller 10-Qs. All of such contracts and other agreements and each of the
contracts set forth on the Seller Disclosure Schedule are valid, subsisting, in
full force and effect, binding upon Seller, and to the best knowledge of Seller,
binding upon the other parties thereto in accordance with their terms, and
Seller and the Seller Subsidiaries have paid in full or accrued all amounts now
due from them thereunder and have satisfied in full or provided for all of their
liabilities and obligations thereunder which are presently required to be
satisfied or provided for and are not in default under any of them, nor, to the
best knowledge of Seller, is any other party to any such contract or other
agreement in default thereunder, nor does any condition exist that with notice
or lapse of time or both would constitute a default thereunder.
The Seller Disclosure Schedule sets forth a list of the following contracts
and other material agreements to which Seller or any Seller Subsidiary is a
party or by or to which they or their assets or properties are bound or subject:
(a) any agreement (i) involving research, development or licenses or (ii)
that individually requires aggregate expenditures by Seller and/or any Seller
Subsidiary in any one year of more than $25,000;
(b) any indenture, trust agreement, loan agreement or note that involves or
evidences outstanding indebtedness, obligations or liabilities for borrowed
money in excess of $25,000;
(c) any lease, sublease, installment purchase or similar arrangement for the
purchase, use or occupancy of real or personal property (i) that individually
requires aggregate expenditures by Seller and/or any Seller Subsidiary in any
one year of more than $25,000 or (ii) pursuant to which Seller or any Subsidiary
is the lessor of any real property which has rentals over $25,000 per year,
together with the date of termination of such leases, the name of the other
party and the annual rental payments required to be made under such leases;
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(d) any agreement of surety, guarantee or indemnification, other than (i) an
agreement in the ordinary course of business with respect to obligations in an
amount not in excess of $25,000 or (ii) indemnification provisions contained in
leases not otherwise required to be disclosed;
(e) (i) any agreement, including without limitation employment agreements
and bonus plans, relating to the compensation of (A) officers, (B) employees
earning more than $50,000 year, (C) former employees or (D) consultants and (ii)
any agreements, contracts or commitments with any such individuals which contain
change of control of severance obligations;
(f) any agreement containing covenants of Seller or a Seller Subsidiary not
to compete in any line of business, in any geographic area or with any person or
covenants of any other person not to compete with Seller or a Seller Subsidiary
or in any line of business of Seller or a Seller Subsidiary;
(g) any agreement granting or restricting the right of Seller or any Seller
Subsidiary to use a trade name, trade mark, logo or Proprietary Rights (as
defined in Section 2.17 hereof);
(h) any agreement with any customer or supplier that cannot be terminated
without penalty in excess of $25,000 by Seller or any Subsidiary within one
year; and
(i) any agreement with a change of control provision or with restrictions or
limitations on, or consent requirements with respect to, assignments.
True and complete copies of all of the contracts and other agreements set forth
on the Disclosure Schedule have been previously provided to Parent.
2.15 BANK ACCOUNTS, BROKERAGE ACCOUNTS AND POWERS OF ATTORNEY. The Seller
Disclosure Schedule identifies all bank accounts or brokerage accounts used in
connection with the operations of Seller and the Seller Subsidiaries, whether or
not such accounts are held in the name of Seller, lists the respective
signatories therefore and lists the names of all persons holding a power of
attorney from Seller or a Seller Subsidiary and a summary of the terms thereof.
2.16 PROPERTIES. Seller and the Seller Subsidiaries own no real property.
Seller or a Seller Subsidiary owns or has a valid leasehold interest in all of
the buildings, structures, leasehold improvements, equipment and other tangible
property material to the Business of Seller, all of which are in good and
sufficient operating condition and repair, ordinary wear and tear excepted, for
the conduct of their business in accordance with past practices and neither
Seller nor any Seller Subsidiary has received notice that any of such property
is in violation of any existing law or any building, zoning, health, safety or
other ordinance, code or regulation except for such violations which,
individually or in the aggregate, could not reasonably be expected to have a
Seller Material Adverse Affect.
2.17 INTELLECTUAL PROPERTY. Seller, the Seller Subsidiaries and the Seller
Joint Ventures own, or are licensed to use, or otherwise have the right to use
all patents, trademarks, service marks, trade names, trade secrets, franchises,
inventions and copyrights, all information regarding the registration of any of
the foregoing, or applications therefor, and all grants and licenses or other
rights running to or from Seller or a Seller Subsidiary or a Seller Joint
Venture relating to any of the foregoing, that are material to the Business of
Seller (collectively, the "Proprietary Rights"). A list of all such registered
copyrights, trademarks, tradenames, patents and patent applications has been
previously delivered to Parent and is included on the Seller Disclosure
Schedule. All patents, registered trademarks and copyrights set forth on the
list referred to above are valid and subsisting and all "taxes" or "annuities"
with respect thereto have been paid. Seller is not aware of any claim by any
third party that the Business of Seller as currently conducted or proposed to be
conducted infringe upon the proprietary rights of others, nor has Seller or the
Seller Subsidiaries received any notice or claim of infringement from any third
party of such infringement by Seller or any Seller Subsidiary. Seller is not
aware of any infringement by any third party on, or any competing claim of right
to use or own any of, the Proprietary Rights of Seller, the Seller Subsidiaries
and the Seller Joint Venture. Seller, the Seller Subsidiaries and the Seller
Joint
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Venture have the right to use, free and clear of claims or rights of others, all
customer lists and computer software material to their business as presently
conducted. Except as disclosed on the Seller Disclosure Schedule, Seller, the
Seller Subsidiaries and the Seller Joint Venture have the unencumbered right to
sell their products and services (whether now offered for sale or under
development) free from any royalty or other obligations to third parties. To the
best knowledge of Seller, none of the activities of the employees of Seller on
behalf of Seller violates any agreement or arrangement which any such employees
have with former employers.
2.18 COMMERCIAL RELATIONSHIPS. The relationships of Seller, the Seller
Subsidiaries and the Seller Joint Ventures with their collaborators and contract
manufacturers are generally good commercial working relationships. Except as set
forth on the Seller Disclosure Schedule, no such entity has canceled or
otherwise terminated its relationship with Seller, a Seller Subsidiary or a
Seller Joint Venture or has, during the last twelve months, materially altered
its relationship with Seller, a Seller Subsidiary or a Seller Joint Venture.
Except as set forth on the Seller Disclosure Schedule, Seller does not know of
any plan or intention of any such entity, and has not received any written
threat or notice from any such entity, to terminate, cancel or otherwise
materially and adversely modify its relationship with Seller, a Seller
Subsidiary or a Seller Joint Venture.
2.19 EMPLOYEE BENEFIT PLANS
(a) The Seller Disclosure Schedule sets forth a complete list of all
pension, savings, profit sharing, retirement, deferred compensation, employment,
welfare, fringe benefit, insurance, short and long term disability, incentive,
bonus, stock, vacation pay, severance pay and similar plans, programs or
arrangements, including without limitation all employee benefit plans as defined
in Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") (the "Plans") maintained by Seller or the Seller Subsidiaries
or to which the Seller or any of the Seller Subsidiaries are parties or required
to contribute.
(b) Seller has delivered or made available to Parent current, accurate and
complete copies of (i) each Plan that has been reduced to writing and all
amendments thereto, (ii) a summary of the material terms of each Plan that has
not been reduced to writing, including all amendments thereto, (iii) the summary
plan description for each Plan subject to Title I of ERISA, and in the case of
each other Plan, any similar employee summary (including but not limited to any
employee handbook description), (iv) for each Plan intended to be qualified
under Section 401(a) or Section 501(c)(9) of the Code, the most recent
determination letter or exemption determination issued by the Internal Revenue
Service ("IRS"), (v) for each Plan with respect to which a Form 5500 series
annual report/ return is required to be filed, the most recently filed such
annual report/return and annual report/ return for the two preceding years,
together with all schedules and exhibits, (vi) all insurance contracts,
administrative services contracts, trust agreements, investment management
agreements or similar agreements maintained in connections with any Plan, (vii)
copies of any correspondence from the IRS, Department of Labor ("DOL") or other
U.S. government agency or department relating to an audit or an asserted or
assessed penalty with respect to a Plan or relating to requested relief from any
liability or penalty (including, but not limited to, any correspondence relating
to the IRS's EPCRS, VCR or CAP programs or the DOL's amnesty programs for later
filers and non-filers), (viii) for each Plan that is a defined benefit pension
plan, copies of the most recent actuarial valuation report and actuarial
valuation report for the two preceding years, (ix) for each Plan that is
intended to be qualified under Code Section 401(a), copies of compliance testing
results (nondiscrimination testing (401(a)(4), ADP, ACP, multiple use), 402(g),
415 and top-heavy tests) for the most recent plan year and two preceding plan
years, and (x) copies of COBRA and HIPPA forms and notices used for each Plan
that is a group health plan. No employee benefit handbook or similar employee
communication relating to any Plan nor any written communication of benefits
under such Plan described the Plan in a manner materially inconsistent with the
documents and summary plan descriptions relating to such Plan that have been
delivered pursuant to the following sentence.
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(c) There is no entity (other than the Seller or any Seller Subsidiary) that
together with the Seller or any Seller Subsidiary would be treated as a
single-employer within the meaning of Section 414(b), (c), (m) or (o) of the
Code or Section 4001(b) of ERISA. Neither the Seller nor any Seller Subsidiary
has ever maintained, contributed to or incurred any liability under any
"multiemployer plan" as defined in Section 4001(a)(3) of ERISA or a "multiple
employer plan" as defined in Section 413(c) of the Code. Neither Seller nor any
Seller Subsidiary has incurred any liability under Sections 4062, 4063 or 4201
of ERISA.
(d) Each Plan maintained by Seller or a Seller Subsidiary which is intended
to be qualified under either Section 401(a) or 501(c)(9) of the Code ("Qualified
Plans") is so qualified. Each Plan has been administered in all material
respects in accordance with the terms of such Plan and the provisions of any and
all statutes, orders or governmental rules or regulations, including without
limitation ERISA and the Code, and to the knowledge of Seller, nothing has been
done or not done with respect to any Plan that could result in any liability on
the part of the Seller or any Seller Subsidiary under Title I of ERISA or
Chapter 43 of the Code. All reports, forms and notices required to be filed with
respect to each Plan, including without limitation Form 5500 series annual
reports/returns and PBGC Form 1s, have been timely filed. All contributions,
premiums and other amount due to or in connection with each Plan under the terms
of the Plan or applicable law have been timely made.
(e) No "reportable event" as defined at Section 4043 of ERISA has occurred
with respect to any Plan subject to Title IV of ERISA. With respect to each Plan
subject to Title IV of ERISA, such Plan has no unfunded benefit liabilities and
such Plan could be terminated in a "standard termination" under Section 4041(b)
of ERISA on or before the Effective Time without any additional contribution
from any contributing employer (but disregarding any other prerequisites for
terminating such Plan). With respect to each Plan subject to Section 412 of the
Code, there is no accumulated funding deficiency (whether or not waived) under
such Plan.
(f) All claims for benefits incurred by employees on or before the Closing
Date are or will be fully covered by third-party insurance policies or programs.
Except for continuation of health coverage to the extent required under Section
4980B of the Code or Section 601 et seq. of ERISA, other applicable law or as
otherwise set forth in this Agreement, there are no obligations under any Plan
providing benefits after termination of employment.
(g) Neither the Seller nor any Seller Subsidiary has contracted with any
"leased employee" within the meaning of Section 414 of the Code or any
"independent contractor".
(h) Except for individual employment agreements, each Plan can be amended,
modified or terminated without advanced notice to or consent by any employee,
former employee or beneficiary, except as required by law.
2.20 EMPLOYEE MATTERS
(a) Seller and the Seller Subsidiaries, collectively, have approximately 48
full-time equivalent employees as of November 10, 1998 and generally enjoy good
employer-employee relations. Neither Seller nor any Seller Subsidiary is
delinquent in payments to any of its employees or consultants for any wages,
salaries, commissions, bonuses or other direct compensation for any services
performed by them to the date hereof or amounts required to be reimbursed to
such employees. Except as indicated in the Seller Disclosure Schedule, upon
termination of the employment of any employees, none of Seller, the Seller
Subsidiaries nor Parent will by reason of the Merger or anything done prior to
the Effective Time be liable to any of such employees for severance pay or any
other payments (other than accrued salary, vacation or sick pay in accordance
with normal policies). True and complete information as to all current
directors, officers, employees or consultants of Seller and the Seller
Subsidiaries including, in each case, name, current job title and annual rate of
compensation has been previously made available to Parent.
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(b) Seller and each Seller Subsidiary (i) is in compliance in all material
respects with all applicable foreign, federal, state and local laws, rules and
regulations respecting employment, employment practices, terms and conditions of
employment and wages and hours, in each case, with respect to employees, (ii)
has withheld all amounts required by law or by agreement to be withheld from the
wages, salaries and other payments to employees, (iii) is not liable for any
arrears of wages or any taxes or any penalty for failure to comply with any of
the foregoing, and (iv) is not liable for any payment to any trust or other fund
or to any governmental entity, with respect to unemployment compensation
benefits, social security or other benefits or obligations for employees (other
than routine payments to be made in the normal course of business and consistent
with past practice).
(c) No work stoppage or labor strike against Seller or any Seller Subsidiary
is pending or threatened. Neither Seller nor any Seller Subsidiary is involved
in or, to the knowledge of the Seller, threatened with, any labor dispute,
grievance, or litigation relating to labor, safety or discrimination matters
involving any employee, including without limitation charges of unfair labor
practices or discrimination complaints, that, if adversely determined, would
result in material liability to Seller. Neither Seller nor any Seller Subsidiary
has engaged in any unfair labor practices within the meaning of the National
Labor Relations Act that would, directly or indirectly result in material
liability to Seller. Neither Seller nor any Seller Subsidiary is presently, nor
has it been in the past, a party to or bound by any collective bargaining
agreement or union contract with respect to employees other than as set forth in
the Seller Disclosure Schedule and no collective bargaining agreement is being
negotiated by the Seller or any Seller Subsidiary. No union organizing campaign
or activity with respect to non-union employees of the Seller or any Seller
Subsidiary is ongoing, pending or, to the knowledge of the Seller, threatened.
2.21 TRANSACTIONS WITH MANAGEMENT. No executive officer or director of
Seller has (whether directly or indirectly through another entity in which such
person has a material interest, other than as the holder of less than 2% of a
class of securities of a publicly traded company) any material interest in (a)
any property or assets of Seller (except as a stockholder), (b) any current
competitor, customer, supplier or agent of Seller or a Seller Subsidiary or (c)
any person which is currently a party to any material contract or agreement with
Seller or a Seller Subsidiary.
2.22 INSURANCE. The Seller Disclosure Schedule sets forth a list of all
policies or binders of fire, liability, product liability, workmen's
compensation, vehicular, directors' and officers' and other insurance held by or
on behalf of Seller and the Seller Subsidiaries. Such policies and binders are
in full force and effect, are reasonably believed to be adequate for the
businesses engaged in by Seller and the Seller Subsidiaries and are in
conformity with the requirements of all leases or other agreements to which
Seller or the relevant Seller Subsidiary is a party and, to the best knowledge
of Seller, are valid and enforceable in accordance with their terms. Neither
Seller nor any Seller Subsidiary is in default with respect to any provision
contained in any such policy or binder nor has any of the Seller or a Seller
Subsidiary failed to give any notice or present any claim under any such policy
or binder in due and timely fashion. There are no outstanding unpaid claims
under any such policy or binder. Neither Seller nor any Seller Subsidiary has
received notice of cancellation or non-renewal of any such policy or binder.
2.23 ANTI-TAKEOVER LAWS. Seller has taken all action necessary such that
no "fair price," "business combination," "control share acquisition" or similar
statute will be applicable to the transactions contemplated by this Agreement.
2.24 BROKERAGE. Except as indicated on the Seller Disclosure Schedule, no
broker, finder, agent or similar intermediary has acted on behalf of Seller in
connection with this Agreement or the transactions contemplated hereby, and
there are no brokerage commissions, finders' fees or similar fees or commissions
payable in connection herewith based on any agreement, arrangement or
understanding with Seller, or any action taken by Seller.
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2.25 ENVIRONMENTAL MATTERS
(a) Neither Seller nor any of the Seller Subsidiaries has violated or is in
violation of Environmental Law, and except as authorized by Environmental Laws,
neither Seller nor any of the Seller Subsidiaries has generated, used, handled,
transported or stored any Hazardous Materials. There has been no generation,
use, handling, storage or disposal of any Hazardous Materials in violation of
any Environmental Law at any site owned or premises leased by Seller or any of
the Seller Subsidiaries during the period of Seller's or such Seller
Subsidiary's ownership or lease or, to the best of Seller's knowledge, prior
thereto, nor has there been or is there threatened any release of any
Environmental Contaminants into, on, at or from any such site or premises,
including without limitation into the ambient air, groundwater, surface water,
soils or subsurface strata, during such period or, to the best of Seller's
knowledge, prior thereto in violation of any Environmental Law or which created
or will create an obligation to report or remediate such release. There is no
underground storage tank or other container at any site owned or premises leased
by Seller or Seller Subsidiary or to the best of Seller's knowledge on any site
formerly owned or premises formerly leased by Seller.
(b) Neither Seller nor any Subsidiary has received written notification
that, and Seller has no knowledge that, any site currently or formerly owned or
premises currently or formerly leased by Seller or any of Seller Subsidiary is
the subject of any federal, state or local civil, criminal or administrative
investigation evaluating whether, or alleging that, any remedial action is
necessary to respond to a release or a threatened release of any Environmental
Contaminant into the environment. No such site or premises is listed, or to
Seller's knowledge, proposed for listing, on the National Priorities List or the
Comprehensive Environmental Response, Compensation, and Liability Information
System, both as provided under the federal Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), or any comparable state or local
governmental lists. Neither Seller nor any Seller Subsidiary has received
written notification of, and Seller has no knowledge of, any potential
responsibility of Seller or any Seller Subsidiary pursuant to the provisions of
(i) Section 104(e) of CERCLA (ii) any similar Environmental Law, or (iii) any
order issued pursuant to the provisions of any such Environmental Law with
respect to Environmental Contaminants used, manufactured, generated, stored, or
treated at, transported from, or disposed of on, any site currently or formerly
owned or premises currently or formerly leased by Seller or any Seller
Subsidiary.
(c) Seller and the Seller Subsidiaries have obtained all permits required by
Environmental Law necessary to enable it to conduct its respective business and
is in compliance with all material aspects of said permits.
(d) There is no environmental or health and safety matter that reasonably
could be expected to have a Seller Material Adverse Effect. Seller has
previously furnished to Parent copies of any and all environmental audits or
risk assessments, site assessments, documentation regarding off-site disposal of
Hazardous Materials or Release of Environmental Contaminant, spill control plans
and material correspondence with any governmental agency or other entity
regarding the foregoing.
(e) For purposes of this Agreement:
(i) "Environmental Laws" means any Federal, state, local or foreign laws
(including common law), regulations, codes, rules, orders, ordinances,
permits, requirements and final governmental determinations pertaining to
the environment, pollution or protection of human health or the environment,
as adopted or in effect in the jurisdictions in which the applicable site or
premises are located, including without limitation, the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. Section
9601 et seq.; the Emergency Planning and Community Right-to-Know Act, 42
U.S.C. Section 11001 et seq.; the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901 et seq.; the Federal Water Pollution Control Act, 33
U.S.C. Section 1251 et seq.; the Federal Insecticide, Fungicide and
Rodenticide Act, 7 U.S.C. Section 136 et seq.; the Toxic Substance
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Control Act, 15 U.S.C. Section 2601 et seq.; the Oil Pollution Act of 1990,
33 U.S.C. Section 1001 et seq.; the Hazardous Materials Transportation Act,
as amended, 49 U.S.C. Section 1801 et seq.; the Atomic Energy Act, as
amended 42 U.S.C. Section 2011 et seq.; the Occupational Safety and Health
Act, as amended, 29 U.S.C. Section 651 et seq.; the Federal Food, Drug and
Cosmetic Act, as amended 21 U.S.C. Section 301 et seq. (insofar as it
regulates employee exposure to Hazardous Substances), and any state or local
statute of similar effect, including Mass. Gen. L. C. 21E and the
Massachusetts Contingency Plan, 310 C.M.R. 40.000 et seq.; and any laws
relating to protection of safety, health or the environment which regulate
the use of biological agents or substances including medical or infectious
wastes as any such laws have been amended;
(ii) "Environmental Contaminant" means Hazardous Materials, or any other
pollutants, contaminants, toxic or constituent substances or waste
radioactive substances, materials or special wastes, petroleum or petroleum
products, polychlorinated byphenals, asbestos containing materials, or any
other substance or material, in each case regulated by applicable
Environmental Laws;
(iii) "Hazardous Materials"(A) any chemicals, materials or substances
defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances," "toxic pollutants,"
"hazardous air pollutants," "contaminants," "toxic chemicals," "toxics,"
"hazardous chemicals," "extremely hazardous substances," "pesticides," "oil"
or related materials as defined in any applicable Environmental Law or (B)
any petroleum or petroleum products, oil, natural or synthetic gas,
radioactive materials, asbestos-containing materials, urea formaldehyde foam
insulation, and radon; and
(iv) "Release" has the meaning specified in CERCLA.
2.26 PROXY STATEMENT AND REGISTRATION STATEMENT
(a) None of the information supplied or to be supplied by Seller for
inclusion or incorporation by reference in the registration statement on Form
F-4 to be filed with the SEC in connection with the issuance of shares of Parent
Common Stock in the Merger (the "Registration Statement") will, at the time the
Registration Statement is filed with the SEC, at any time it is amended or
supplemented or at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading. None of the information supplied or to be supplied by Seller for
inclusion or incorporation by reference in the proxy statement/prospectus
included in the Registration Statement related to the Seller Stockholder Meeting
(as defined in Section 5.6(b)) (the "Proxy Statement/ Prospectus"), on the date
it is first mailed to holders of Seller Common Stock or at the time of the
Seller Stockholder Meeting, will contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The Seller will use its best efforts to ensure
that the Proxy Statement/Prospectus will comply as to form in all material
respects with the requirements of the Exchange Act and the Securities Act and
the rules and regulations of the SEC thereunder.
(b) None of the information supplied or to be supplied by Seller for
inclusion in the Super Class 1 Shareholder Circular (comprising listing
particulars under Part IV of the Financial Services Act of 1986 of the United
Kingdom, as amended (the "FSA")) (the "Parent Disclosure Document") will, on the
date the Parent Disclosure Document is first mailed to shareholders of Parent
and at the time of the extraordinary general meeting of Parent shareholders (the
"Parent Shareholder Meeting") to vote on approval of the Merger, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
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2.27 PMC WAIVER. Pasteur Merieux Connaught ("PMC") has agreed that
consummation of the Merger will not constitute a "Change in Control" of Seller
as defined in Section 15.2 of the Master Agreement between the Seller and PMC
dated as of March 31, 1995.
2.28 FAIRNESS OPINION. Seller has received an opinion from Hambrecht &
Quist, dated as of the date hereof, to the effect that as of the date hereof,
the consideration to be received by Seller's stockholders in the Merger is fair
from a financial point of view and will deliver to Parent a copy of such written
opinion.
SECTION 3--REPRESENTATIONS AND WARRANTIES OF PARENT
Except as set forth on the disclosure schedule delivered to Seller on the
date hereof (the "Parent Disclosure Schedule"), the section numbers of which are
numbered to correspond to the section numbers of this Agreement to which they
refer, Parent hereby makes the following representations and warranties:
3.1 ORGANIZATION. Parent is a public limited company duly incorporated and
validly existing under the laws of England and Wales. Each of the Parent
Subsidiaries (as defined below) is a corporation duly organized, validly
existing and in good standing (where such concept is recognized) under the laws
of its jurisdiction of incorporation. Each of Parent and its Subsidiaries has
full corporate power and authority to own, lease and operate its assets and to
carry on its business as now being and as heretofore conducted. As used in this
Agreement, "Parent Subsidiary" means any corporation or other legal entity of
which Parent or any Parent Subsidiary owns, directly or indirectly, 50% or more
of the stock or other equity interest entitled to vote for the election of
directors.
3.2 AUTHORITY TO EXECUTE AND PERFORM AGREEMENT. Parent has the corporate
power and authority to enter into, execute and deliver this Agreement and,
subject to obtaining necessary approvals of its shareholders, to perform fully
its obligations hereunder. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Parent, subject to the approval
of the shareholders of Parent of the Merger and this Agreement and the creation
and issue of a sufficient amount of authorized ordinary share capital of Parent,
and the granting of authority pursuant to Section 80 Companies Act 1985. This
Agreement has been duly executed and delivered by Parent and constitutes its
valid and binding obligation, enforceable in accordance with its terms.
3.3 LSE REPORTS. Since December 31, 1997, Parent has filed in a timely
manner with the LSE all documents and announcements required to be filed by it
pursuant to the rules of the LSE and such documents and announcements complied
in all material respects with applicable LSE requirements and did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. Between
the date of this Agreement and the Closing Date, Parent will file in a timely
manner all documents and announcements required to be filed by it pursuant to
the rules of the LSE in relation to the Merger and such documents and
announcements will comply in all material respects with applicable LSE
requirements.
3.4 CAPITALIZATION. The authorized capital of Parent is 43,200,000 shares
of Parent Common Stock, of which 36,465,804 shares were issued and outstanding
as of November 10, 1998. The shares of Parent Common Stock which comprise the
Common Stock Consideration will, when issued in accordance with the terms of
this Agreement, be duly and validly issued fully paid and non-assessable.
3.5 FINANCIAL STATEMENTS. The consolidated audited accounts of Parent for
the financial year of Parent ended December 31, 1997 (a) show a true and fair
view of the assets, liabilities and state of affairs of Parent as at December
31, 1997 and of the loss of Parent for the financial year covered by those
accounts; and (b) were prepared in accordance with the Companies Act 1985 and,
save as
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otherwise noted or disclosed therein, all applicable United Kingdom generally
accepted accounting principles applied on a consistent basis.
3.6 ABSENCE OF UNDISCLOSED PARENT LIABILITIES. As at December 31, 1997,
Parent had no material liabilities of any nature, whether accrued, absolute,
contingent or otherwise (including, without limitation, liabilities as guarantor
or otherwise with respect to obligations of others or liabilities for taxes due
or then accrued or to become due), required to be reflected or disclosed in the
balance sheet dated December 31, 1997 (or the notes thereto) that were not
adequately reflected or reserved against on such balance sheet. Parent has no
such liabilities, other than liabilities (i) adequately reflected or reserved
against on such balance sheet, (ii) reflected in Parent's unaudited consolidated
balance sheet (or the notes thereto) dated June 30, 1998, (iii) incurred since
June 30, 1998 in the ordinary course of business or (iv) that would not, in the
aggregate, have a material adverse effect on the assets, properties, business,
results of operations or financial condition of Parent and the Parent
Subsidiaries taken as a whole (but excluding (A) any change, effect, condition,
event or circumstance arising out of or attributable to (i) changes, effects,
conditions, events or circumstances that generally affect the industries in
which Parent or the Parent Subsidiary operate (including legal and regulatory
changes) or (ii) changes arising from the consummation of the transactions
contemplated hereby or the announcement of the execution of this agreement or
(B) any adverse changes in the market price of the Parent Common Stock) (a
"Parent Material Adverse Effect").
3.7 NO MATERIAL ADVERSE CHANGE. Since June 30, 1998, there has not been
any Parent Material Adverse Effect.
3.8 ACTIONS AND PROCEEDINGS. There are no actions, suits or claims or
legal, administrative or arbitration proceedings pending or, to the best
knowledge of Parent, threatened against Parent or any Parent Subsidiary that
individually or in the aggregate could reasonably be expected to have a material
adverse effect upon the transactions contemplated hereby or a Parent Material
Adverse Effect. To the best knowledge of Parent, there is no fact, event or
circumstance now in existence that reasonably could be expected to give rise to
any suit, action, claim, investigation or proceeding that individually or in the
aggregate could reasonably be expected to have a material adverse effect upon
the transactions contemplated hereby or a Parent Material Adverse Effect.
3.9 NO BREACH. Except for (a) the filing of the Registration Statement
with the SEC, (b) filings with various blue sky authorities, (c) the filing of
the Certificate of Merger with the Secretary of State of Delaware, (d) the
filing of the Super Class 1 Shareholder Circular with and its approval by the
London Stock Exchange and compliance with the rules of the London Stock Exchange
and (e) the matters listed in the Parent Disclosure Schedule, the delivery and
performance of this Agreement by Parent and consummation by it of the
transactions contemplated hereby will not (i) violate any provision of the
articles of association of Parent; (ii) violate, conflict with or result in the
breach of any of the terms or conditions of, result in modification of the
effect of, or otherwise give any other contracting party the right to terminate,
or constitute (or with notice or lapse of time or both constitute) a default
under, any material instrument, contract or other agreement to which Parent or a
Parent Subsidiary is party or to which either of them or any of their assets or
properties is bound or subject; (iii) violate any law, ordinance or regulation
or any order, judgment, injunction, decree or requirement of any court,
arbitrator or governmental or regulatory body applicable to Parent or a Parent
Subsidiary or by which any of their assets or properties is bound; (iv) require
any filing with, notice to, or permit, consent or approval of, any governmental
or regulatory body or (v) result in the creation any lien or other encumbrance
on the assets or properties of Parent or a Party Subsidiary, excluding from the
foregoing clauses (ii), (iii), (iv) and (v) violations, breaches and defaults
which, and filings, notices, permits, consents and approvals the absence of
which, in the aggregate, would not have a material adverse effect on the ability
of Parent to consummate the transactions contemplated hereby or a Parent
Material Adverse Effect.
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3.10 PROXY STATEMENT AND REGISTRATION STATEMENT. None of the information
supplied or to be supplied by Parent for inclusion in the Registration Statement
will, at the time the Registration Statement is filed with the SEC, at any time
it is amended or supplemented or at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading. None of the information supplied or to be
supplied by Parent for inclusion or incorporation by reference in the Proxy
Statement/Prospectus will, at the date it is first mailed to holders of Seller
Common Stock or at the time of the Seller Stockholder Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
3.11 BROKERAGE. Except as indicated on the Parent Disclosure Schedule, no
broker, finder, agent or similar intermediary has acted on behalf of Parent or
Merger Sub in connection with this Agreement or the transactions contemplated
hereby, and there are no brokerage commissions, finders' fees or commissions
payable in connection herewith based on any agreement, arrangement or
understanding with Parent or Merger Sub, or any action taken by them.
SECTION 4--REPRESENTATIONS AND WARRANTIES REGARDING MERGER SUB
Parent and Merger Sub hereby make the following representations and
warranties:
4.1 ORGANIZATION AND CORPORATE POWER. Merger Sub is a corporation duly
incorporated, validly existing and in good standing under the laws of Delaware.
4.2 CORPORATE AUTHORIZATION. Merger Sub has all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance by the Merger Sub
of this Agreement and the consummation by Merger Sub of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Merger Sub, enforceable against it in accordance with its terms.
4.3 NON-CONTRAVENTION. The execution, delivery and performance by Merger
Sub of this Agreement and the consummation by Merger Sub of the transactions
contemplated hereby do not and will not contravene or conflict with the
Certificate of Incorporation or By-Laws of Merger Sub.
4.4 NO BUSINESS ACTIVITIES. Merger Sub was formed specifically for the
purpose of consummating the transactions contemplated by this Agreement and has
not conducted and will not conduct any business activities unrelated to the
transactions contemplated hereby.
SECTION 5--COVENANTS AND AGREEMENTS
The parties covenant and agree as follows:
5.1 CONDUCT OF BUSINESS. Except with the prior written consent of Parent,
which will not be unreasonably withheld, or as set forth in Section 5 of the
Seller Disclosure Schedule, and except as otherwise contemplated herein, during
the period from the date hereof to the Closing Date, Seller shall observe the
following covenants:
(a) AFFIRMATIVE COVENANTS PENDING CLOSING. Seller shall:
(i) PRESERVATION OF PERSONNEL. Use reasonable commercial efforts to
preserve intact and keep available the services of Seller's present
employees;
(ii) INSURANCE. Use reasonable commercial efforts to keep in effect
casualty, public liability, worker's compensation and other insurance
policies in coverage amounts not less than those in effect at the date of
this Agreement;
(iii) PRESERVATION OF THE BUSINESS; MAINTENANCE OF PROPERTIES, CONTRACTS.
Use reasonable commercial efforts to preserve the Business of Seller,
advertise, promote and market Seller's
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business activities in accordance with past practices over the last twelve
months, keep Seller's properties intact, preserve Seller's goodwill and
Seller's business, maintain all physical properties in such operating
condition as will permit the conduct of Seller's business on a basis
consistent with past practice, and perform and comply in all material
respects with the terms of the contracts set forth in the Seller Disclosure
Schedule;
(iv) INTELLECTUAL PROPERTY RIGHTS. Use best efforts to preserve and
protect the Proprietary Rights;
(v) ORDINARY COURSE OF BUSINESS. Operate Seller's business solely in the
ordinary course consistent with past practices;
(vi) SELLER OPTIONS AND WARRANTS. Take all actions necessary with
respect to Seller Options and Seller Warrants to effectuate the terms of
this Agreement, provided, however, Parent shall have the right to approve
any agreements to modify terms of the underlying instruments.
(b) NEGATIVE COVENANTS PENDING CLOSING. Seller shall not without the prior
consent of Parent:
(i) BENEFIT PLANS. Establish, amend, modify or terminate any Plan
(as defined in Section 2.19(a)), except as required by law, without the
written consent of Parent;
(ii) DISPOSITION OF ASSETS. Sell or transfer, or mortgage, pledge
or create or permit to be created any security interest on, any of its
assets, including its Proprietary Rights, other than sales or transfers
in the ordinary course of business and in amounts not exceeding $10,000
or the creation of security interests under existing arrangements
disclosed in the Seller Disclosure Schedule;
(iii) LIABILITIES. Incur any indebtedness for borrowed money,
obligation or liability or enter into any contracts or commitments
involving potential payments to or by Seller or Seller Subsidiaries of
$25,000 or more;
(iv) COMPENSATION. Change the compensation payable to any officer,
director, employee, agent or consultant, or enter into any employment,
severance or other agreement with any officer, director, employee, agent
or consultant of Seller or a Seller Subsidiary;
(v) CAPITAL STOCK. Make any change in the number of shares of its
capital stock authorized, issued or outstanding or grant or accelerate
the exercisability of, any option, warrant or other right to purchase, or
to convert any obligation into, shares of its capital stock, or declare
or pay any dividend or other distribution with respect to any shares of
its capital stock, or sell or transfer any shares of its capital stock,
except upon the exercise by officers, directors and employees of options
outstanding on the date hereof and disclosed herein;
(vi) CHARTER AND BY-LAWS. Amend the Certificate of Incorporation or
By-laws of Seller;
(vii) ACQUISITIONS. Make, or permit to be made, any material
acquisition of property or assets;
(viii) TAXES. Make or change any material election in respect of
Taxes, adopt or change any accounting method in respect to Taxes, enter
into any closing agreement, settle any claim or assessment in respect to
Taxes, or consent to any extension or waiver of the limitation period
applicable to any claim or assessment in respect to Taxes; or
(ix) AGREEMENTS. Enter into or modify, or permit a Seller
Subsidiary to enter into or modify, any material license, development,
research or collaborative agreement with any other person or entity.
5.2 CORPORATE EXAMINATIONS AND INVESTIGATIONS. Prior to the Effective
Time, Parent shall be entitled, through its employees and representatives, to
have such access to the assets, properties,
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business and operations of Seller, as is reasonably necessary or appropriate in
connection with Parent's investigation of Seller with respect to the
transactions contemplated hereby. Any such investigation and examination shall
be conducted at reasonable times and under reasonable circumstances so as to
minimize any disruption to or impairment of Seller's business and Seller shall
cooperate fully therein. No investigation by Parent shall diminish or obviate
any of the representations, warranties, covenants or agreements of Seller
contained in this Agreement. In order that Parent may have full opportunity to
make such investigation, Seller shall furnish the representatives of Parent
during such period with all such information and copies of such documents
concerning the affairs of Seller as such representatives may reasonably request
and cause its officers, employees, consultants, agents, accountants and
attorneys to cooperate fully with such representatives in connection with such
investigation.
5.3 EXPENSES. Subject to Section 9, Seller and Parent shall bear their
respective expenses incurred in connection with the preparation, execution and
performance of this Agreement and the transactions contemplated hereby,
including without limitation, all fees and expenses of agents, representatives,
counsel and accountants.
5.4 AUTHORIZATION FROM OTHERS. Prior to the Closing Date, the parties
shall use their reasonable commercial efforts to obtain all authorizations,
consents and Permits of others, required to permit the consummation of the
transactions contemplated by this Agreement.
5.5 FURTHER ASSURANCES. Each of the parties shall execute such documents,
further instruments of transfer and assignment and other papers and take such
further actions as may be reasonably required or desirable to carry out the
provisions hereof and the transactions contemplated hereby. Each party shall use
its respective reasonable commercial efforts to take other such actions to
ensure that to the extent within its control or capable of influence by it that
the transactions contemplated by this Agreement shall be fully carried out in a
timely fashion.
5.6 PREPARATION OF DISCLOSURE DOCUMENTS
(a) As soon as practicable following the date of this Agreement, Seller and
Parent shall prepare the Proxy Statement/Prospectus. Seller shall, in
cooperation with Parent, file the Proxy Statement/ Prospectus with the SEC as
its preliminary proxy statement and Parent shall, in cooperation with Seller,
prepare and file with the SEC the Registration Statement, in which the Proxy
Statement/Prospectus will be included. Each of Seller and Parent shall use
reasonable commercial efforts to have the Registration Statement declared
effective under the Securities Act as promptly as practicable after such filing
and to keep the Registration Statement effective as long as is necessary to
consummate the Merger. Seller shall mail the Proxy Statement/Prospectus to its
stockholders as promptly as practicable after the Registration Statement is
declared effective under the Securities Act and, if necessary, after the Proxy
Statement/Prospectus shall have been so mailed, promptly circulate supplemental
or amended proxy material, and, if required in connection therewith, resolicit
proxies. Parent shall also take any action (other than qualifying to do business
in any jurisdiction in which Parent is not now so qualified) required to be
taken under any applicable United States state securities laws in connection
with the issuance of shares of Parent Common Stock in connection with the
Merger, and Seller shall furnish all information concerning Seller and the
holders of Seller Common Stock as may be reasonably requested in connection with
any such action.
(b) (i) Seller shall, as soon as practicable following the date of this
Agreement and the effectiveness of the Registration Statement, duly call, give
notice of, convene and hold a meeting of its stockholders (the "Seller
Stockholders Meeting") for the purpose of obtaining the required stockholder
votes with respect to this Agreement, (ii) the Board of Directors of Seller,
unless otherwise required pursuant to the applicable fiduciary duties of the
Board of Directors of Seller to the stockholders of Seller (as determined in
good faith by the Board of Directors of Seller based upon the advice of outside
counsel), shall recommend adoption of this Agreement by its stockholders and
(iii) Seller shall take all lawful action to solicit such adoption.
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(c) In connection with the Parent Shareholder Meeting, to the extent
required by applicable law, (i) Parent shall, as soon as practicable after the
date of this Agreement and in accordance with the listing rules of the LSE
(including making the statements contemplated by Section 6.5), prepare and
submit to the LSE for approval the Parent Disclosure Document, and shall use
reasonable commercial efforts to have such document formally cleared by the LSE
and shall thereafter publish the Parent Disclosure Document and mail the same to
its shareholders in compliance with all legal requirements applicable to the
Parent Shareholder Meeting and the listing rules of the LSE and (ii) if
necessary, after the Parent Disclosure Document has been so posted, promptly
circulate amended, supplemental or supplemented materials and, if required in
connection therewith, resolicit votes.
(d) Except as required by law, no amendment or supplement to the Proxy
Statement/Prospectus or the Registration Statement shall be made by Parent or
Seller without the approval of the other party (which shall not be unreasonably
withheld). Each party shall advise the other party, promptly after it receives
notice thereof, of the time when the Registration Statement has become effective
or any supplement or amendment has been filed, of the issuance of any stop
order, of the suspension of the qualification of shares of Parent Common Stock
issuable in connection with the Merger for offering or sale in any jurisdiction,
or of any request by the SEC for amendment of the Proxy Statement/ Prospectus or
the Registration Statement or comments thereon and responses thereto or requests
by the SEC for additional information.
5.7 PUBLIC ANNOUNCEMENTS AND CONFIDENTIALITY. Any press release or other
information to the press or any third party with respect to this Agreement or
the transactions contemplated hereby or related to Seller by Parent (including
officers of Parent or entities controlled by Parent), or relating to Parent by
Seller (including officers of Seller or entities controlled by Seller) shall
require the prior approval of Parent and Seller, which approval shall not be
unreasonably withheld, provided that a party shall not be prevented from making
such disclosure as it shall be advised by counsel is required by law or the
rules of any stock exchange on which shares of Parent Common Stock are listed.
Each party shall keep confidential and shall not use in any manner any
information or documents obtained from the other concerning its assets,
properties, business and operations, unless readily ascertainable from public
information, already known or subsequently developed by such party
independently, received from a third party not under an obligation to keep such
information confidential or otherwise required by law. If this Agreement
terminates, all copies of any documents obtained from another party will be
returned, except that one copy thereof may be retained by counsel to the party
returning such documents in order to evidence compliance hereunder.
5.8 AFFILIATE LETTERS. Prior to the Closing Date, Seller shall identify to
Parent all persons who, at the time of the Seller Stockholder Meeting, Seller
believes may be "affiliates" of Seller within the meaning of Rule 145 under the
Securities Act. Seller shall use its best efforts to provide Parent with such
information as Parent shall reasonably request for purposes of making its own
determination of persons who may be deemed to be affiliates of Seller. Seller
shall use its best efforts to deliver to Parent prior to the Closing Date a
letter from each of such affiliates identified by Seller and Parent in
substantially the form attached hereto as Exhibit A (the "Affiliate Letters").
5.9 STOCK EXCHANGE LISTING Parent shall, prior to posting the Parent
Disclosure Document, prepare and submit to the LSE a listing application
covering the shares of Parent Common Stock to be issued in the Merger represent
the right to receive, and shall use reasonable commercial efforts to obtain,
prior to the Effective Time, agreement by the LSE for the admission of such
shares of Parent Common Stock to the Official List of the LSE, and Seller shall
cooperate with Parent with respect to such listing.
5.10 NO SOLICITATION
(a) Seller will not, and will not permit any of its directors, officers,
employees, agents or other representatives or those of any of its Subsidiaries
to, (i) solicit, initiate or knowingly encourage
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discussions with any person other than the Parent (a "Third Party"), relating to
the possible acquisition of Seller or any Seller Subsidiary or of all or a
material portion of the assets or capital stock of Seller or any Seller
Subsidiary or any merger or other business combination involving Seller or any
Seller Subsidiary (an "Acquisition Proposal") or (ii) participate in any
negotiations regarding, or furnish to any other person information with respect
to, any effort or attempt by any other person to do or to seek any Acquisition
Proposal. Seller agrees to inform Parent orally and in writing in reasonable
detail (including without limitation the applicable terms and conditions and
identity of the other person) within one business day of receipt of any offer,
proposal or inquiry relating to any Acquisition Proposal and of any modification
thereof or any proposed agreement and to promptly furnish to the Parent copies
of any written communications or documents received with respect to the
foregoing.
(b) Notwithstanding the provisions of Section 5.10(a), at any time prior to
the date on which stockholders of Seller vote to approve the Merger, Seller and
its officers, directors, employees, representatives and agents may, to the
extent the Board of Directors of Seller determines, in good faith, based upon
the advice of outside counsel, that the Board's fiduciary duties under
applicable law requires it to do so, (i) furnish or cause to be furnished
information concerning the Seller's business, properties or assets to a Third
Party in connection with a Qualified Acquisition Proposal (as hereinafter
defined) (subject to such Third Party executing a confidentiality agreement with
terms at least as restrictive as the confidentiality agreement between Seller
and Parent), (ii) enter into, participate in, conduct or engage in discussions
or negotiations with such Third Party regarding such Qualified Acquisition
Proposal, or (iii) upon termination of this Agreement as permitted in Section
9.1, enter into an agreement to consummate a Qualified Acquisition Proposal. As
used herein, "Qualified Acquisition Proposal" means a bona fide, unsolicited,
written Acquisition Proposal on terms and conditions that the Board of Directors
of Seller (after consultation with financial advisors) determines to be superior
to the Merger and to be in the best interests of Seller and its stockholders, is
reasonably capable of being financed by such Third Party and is reasonably
likely to be consummated. In addition, nothing herein shall prohibit the
Seller's Board of Directors from taking a position with respect to an
Acquisition Proposal in accordance with Rules 14a-9 and 14e-2 promulgated under
the Exchange Act.
5.11 UPDATES TO PARENT DISCLOSURE SCHEDULE
(a) Between the date hereof and the Closing Date, Parent shall promptly
notify Seller in writing of:
(i) the discovery by Parent of any event, condition, fact or
circumstance that occurred or existed on or prior to the date of this
Agreement and that caused or constitutes an inaccuracy in or breach of any
representation or warranty made by Parent in this Agreement;
(ii) any event, condition, fact or circumstance that occurs, arises or
exists after the date of this Agreement and that would cause or constitute
an inaccuracy in or breach of any representation or warranty made by Parent
in this Agreement; if (A) such representation or warranty had been made as
of the time of the occurrence, existence or discovery of such event,
condition, fact or circumstance, or (B) such event, condition, fact or
circumstance had occurred, arisen or existed on or prior to the date of this
Agreement;
(iii) any breach of any covenant or obligation of Parent; and
(iv) any event, condition, fact or circumstance that would make the
timely satisfaction of any of the conditions to Closing impossible or
unlikely.
(b) If any event, condition, fact or circumstance that is required to be
disclosed pursuant to Section 5.11(a) requires any change in the Parent
Disclosure Schedule, or if any such event, condition, fact or circumstance would
require such a change assuming the Parent Disclosure Schedule were dated as of
the date of the occurrence, existence or discovery of such event, condition,
fact or circumstance, then Parent shall promptly deliver to Seller an update to
the Parent Disclosure Schedule specifying
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such change. No such update shall be deemed to supplement or amend the Parent
Disclosure Schedule for the purpose of (i) determining the accuracy of any of
the representations and warranties made by Parent in this Agreement, or (ii)
determining whether any of the conditions set forth in Sections 6 or 8 has been
satisfied.
5.12 UPDATES TO SELLER DISCLOSURE SCHEDULE
(a) Between the date hereof and the Closing Date, Seller shall promptly
notify Parent in writing of:
(i) the discovery by Seller of any event, condition, fact or
circumstance that occurred or existed on or prior to the date of this
Agreement and that caused or constitutes an inaccuracy in or breach of any
representation or warranty made by Seller in this Agreement;
(ii) any event, condition, fact or circumstance that occurs, arises or
exists after the date of this Agreement and that would cause or constitute
an inaccuracy in or breach of any representation or warranty made by Seller
in this Agreement; if (A) such representation or warranty had been made as
of the time of the occurrence, existence or discovery of such event,
condition, fact or circumstance, or (B) such event, condition, fact or
circumstance had occurred, arisen or existed on or prior to the date of this
Agreement;
(iii) any breach of any covenant or obligation of Seller; and
(iv) any event, condition, fact or circumstance that would make the
timely satisfaction of any of the conditions to Closing impossible or
unlikely.
(b) If any event, condition, fact or circumstance that is required to be
disclosed pursuant to Section 5.12(a) requires any change in the Seller
Disclosure Schedule, or if any such event, condition, fact or circumstance would
require such a change assuming the Seller Disclosure Schedule were dated as of
the date of the occurrence, existence or discovery of such event, condition,
fact or circumstance, then Seller shall promptly deliver to the Company an
update to the Seller Disclosure Schedule specifying such change. No such update
shall be deemed to supplement or amend the Seller Disclosure Schedule for the
purpose of (i) determining the accuracy of any of the representations and
warranties made by Seller in this Agreement, or (ii) determining whether any of
the conditions set forth in Sections 6 or 7 has been satisfied.
5.13 VOTING SELLER PREFERRED STOCK. To the extent shares of Seller
Preferred Stock are entitled to vote on the Merger, Parent agrees to vote all
shares of Seller Preferred Stock which it is entitled to vote in favor of the
Merger.
5.14 FIRPTA COMPLIANCE. On or prior to the Closing Date, the Seller shall
deliver to the Parent a properly executed statement in a form reasonably
acceptable to the Parent for purposes of satisfying the Parent's obligations
under Treasury Regulation Section 1.1445-2(c)(3).
5.15 REPORTING. It is the parties' intent that the Merger shall be treated
for United States federal income tax purposes as a taxable acquisition by Parent
of the stock of Seller and each of the parties to this Agreement shall, unless
advised by their counsel that such reporting is not available, report the Merger
for federal income tax purposes as such a taxable acquisition.
5.16 WORKING CAPITAL REQUIREMENT. Between the date hereof and the Closing
Date, Parent shall not take any action out of the ordinary course of its
business that would materially increase the Minimum Financing Requirement as
defined in Section 6.5 below and shall use reasonable commercial efforts to
complete the financing contemplated by Section 6.5 below.
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SECTION 6--CONDITIONS PRECEDENT TO THE OBLIGATIONS OF EACH PARTY TO CONSUMMATE
THE MERGER
The respective obligations of each party to consummate the Merger shall be
subject to the satisfaction or waiver by mutual consent of the parties, at or
before the Effective Time, of each of the following conditions:
6.1 APPROVALS. Seller shall have obtained all approvals of holders of
shares of capital stock of Seller necessary to approve this Agreement and the
transactions contemplated hereby and (ii) Parent shall have obtained all
approvals of holders of shares of capital stock of Parent necessary to approve
this Agreement and the transactions contemplated hereby.
6.2 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective and shall remain effective and shall not be subject to a stop
order at the Effective Time. All state securities or "blue sky" authorizations
necessary to carry out the transactions contemplated hereby shall have been
obtained and be in full force and effect.
6.3 ABSENCE OF ORDER. No temporary restraining order, preliminary or
permanent injunction or other order issued by a court or other governmental
entity of competent jurisdiction shall be in effect and have the effect of
making the Merger illegal or otherwise prohibiting consummation of the Merger;
provided, however, that the provisions of this section shall not be available to
any party whose failure to fulfill its obligations under this Agreement shall
have been the cause of, or shall have resulted in, such order or injunction.
6.4 REGULATORY APPROVALS. All required approvals from governmental
entities shall have been obtained; provided, however, that the provisions of
this section shall not be available to any party whose failure to fulfill its
obligations under this Agreement shall have been the cause of, or shall have
resulted in, such failure to obtain such approval.
6.5 CAPITAL RAISING. Between the date of this Agreement and on or prior to
the Closing Date, Parent shall have completed a financing (by way of an issue of
new shares or a debt instrument or otherwise) resulting in the receipt by Parent
of net cash proceeds in an amount at least equal to the Minimum Financing
Requirement. For purposes of this Section 6.5, "Minimum Financing Requirement"
means that amount of financing which, when added to the existing financing
available to Parent and Parent Subsidiaries (after giving affect to the Merger),
enables:
(a) BT Alex. Brown (Parent's financial adviser) to give the written
confirmation to the LSE required by Rule 2.14 of the Listing Rules of the LSE,
which includes without limitation confirmation that the working capital
available to Parent and Parent Subsidiaries (after giving effect to the Merger)
is sufficient for its present requirements; and
(b) Parent to make a clean working capital statement in the Parent
Disclosure Document in compliance with Rule 6.E.16 of the LSE Listing Rules, to
the effect that in its opinion the working capital available to Parent and
Parent's Subsidiaries as a combined group (after giving effect to the Merger) is
sufficient for its present requirements.
6.6 ADMISSION TO LSE. The LSE shall have admitted the Parent Common Stock
to be issued in the Merger to the Official List (subject only to the allotment
of such shares) and such admission shall have become effective in accordance
with paragraph 7.1 of the Listing Rules of the LSE.
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SECTION 7--CONDITIONS PRECEDENT TO THE OBLIGATIONS OF MERGER SUB AND PARENT TO
CONSUMMATE THE MERGER
The obligations of Merger Sub and Parent to consummate the Merger are
subject, at the option of Parent acting in accordance with the provisions of
this Agreement with respect to termination hereof, to the fulfillment of the
following conditions, any one or more of which may be waived by Parent:
7.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations and
warranties made by the Seller in this Agreement and in each of the other
agreements and instruments delivered by Seller in connection with the
transactions contemplated by this Agreement shall have been accurate as of the
date of this Agreement and shall be accurate as of the Closing Date as if made
at the Closing Date (without giving effect to any update to the Seller
Disclosure Schedule except as to matters previously approved by Parent in
writing), except in each case where the failure to be so accurate (without
giving effect to any materiality or knowledge qualifications contained therein)
could not reasonably be expected to have a Seller Material Adverse Effect.
Seller shall have performed and complied in all material respects with all
covenants and agreements required by this Agreement to be performed or complied
with by it on or prior to the Effective Time. Seller shall have delivered to
Parent a certificate from its chief financial officer, dated the Closing Date,
to the foregoing effect.
7.2 SECRETARY OF STATE CERTIFICATES. Seller shall have delivered a copy of
the Certificate of Incorporation of the Seller, as in effect immediately prior
to the Closing Date, certified by the Delaware Secretary of State and a
certificate, as of the most recent practicable date, of the Delaware Secretary
of State as to Seller's corporate good standing.
7.3 SECRETARY'S CERTIFICATE. Seller shall have delivered a certificate of
the Secretary of Seller dated as of the Closing Date, certifying as to (i) the
incumbency of officers of Seller executing documents executed and delivered in
connection herewith, (ii) a copy of the Certificate of Incorporation of the
Seller as in effect immediately prior to the Closing Date; (iii) a copy of the
By-Laws of the Company, as in effect on and as of the Closing Date, (iv) a copy
of the resolutions of the Board of Directors of the Company authorizing and
approving the applicable matters contemplated hereunder and (v) a copy of the
resolutions of the stockholders of Seller authorizing and approving the
applicable matters contemplated hereunder.
7.4 AFFILIATE LETTERS. Parent shall have received the Affiliate Letters
referred to in Section 5.8.
7.5 OPINION OF COUNSEL TO SELLER. Parent shall have received the opinion
of Hale and Dorr LLP, counsel to Seller, dated the Closing Date and in
substantially the form previously agreed to by the parties.
7.6 CERTIFICATE OF MERGER. Seller shall have executed and delivered the
Certificate of Merger referred to in Section 1.2.
7.7 COMFORT LETTER. Parent shall have received a letter, dated as of a
date not more than two days prior to the date that the Registration Statement is
declared effective, and shall have received a subsequent letter, dated as of a
date not more than two days prior to the Closing Date, from
PricewaterhouseCoopers LLP, independent public accountants for Seller, in form
and substance reasonably satisfactory to Parent, to the effect that (i) they are
independent accountants within the meaning of the Securities Act and the
Exchange Act, (ii) in their opinion, the financial statements of Seller included
in the Registration Statement which were reported on by such firm comply as to
form in all material respects with the applicable accounting requirements of the
Securities Act and the Exchange Act, (iii) on the basis of limited procedures
specified in their letter, which need not constitute an audit, comfort regarding
Seller's consolidated financial position as of, and for the period ended
September 30, 1998, and that nothing has come to their attention which would
give them reason to believe that (A) since September 30, 1998 to the date of
such letter there has been any increase in the outstanding capital stock or
rights, securities, options or obligations exercisable for or convertible
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<PAGE>
into shares of capital stock, or any increase in the long term debt or short
term borrowings, of Seller, (B) there has been any change greater than $10,000
since September 30, 1998 in the balance sheet items of Seller set forth on its
balance sheet at September 30, 1998 or (C) there has been any increase in the
net loss of Seller since September 30, 1998 as compared with the corresponding
period for the prior year, except in all instances, for any such increase,
change or decrease referred to in or contemplated or described in the
Registration Statement or contemplated by or disclosed pursuant to this
Agreement.
7.8 DISSENTING SHARES. The Dissenting Shares of Seller Common Stock shall
not exceed five percent (5%) of the shares of Seller Common Stock issued and
outstanding on the Closing Date.
7.9 EMPLOYMENT AGREEMENTS. Lance Gordon and Thomas Monath shall have
executed and delivered to Parent, prior to the Closing Date, an agreement in the
form of Exhibit B hereto.
7.10 VOTING AGREEMENTS. Each of the individuals and entities listed on
Schedule 1.0 shall have executed a voting agreement in form and substance
satisfactory to Parent and each such agreement shall be in full force and
effect.
7.11 CONSENTS. Seller shall have obtained waivers or consents, which shall
remain in full force and effect, with respect to each agreement required to be
disclosed on Section 2.14(i) of the Seller Disclosure Schedule (other than
employment agreements) such that the terms of each such agreement are unchanged
by the Merger except to the extent failure to obtain such waivers or consents,
individually or in the aggregate, could not reasonably be expected to have a
Seller Material Adverse Effect and such agreement remains in full force and
effect following the Effective Time.
7.12 PURCHASE OF PREFERRED STOCK. Parent shall have acquired for cash the
shares of Seller Preferred Stock which are subject to the Stock Purchase
Agreement, made as of October 19, 1998.
SECTION 8--CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER
TO CONSUMMATE THE MERGER
The obligation of Seller to consummate the Merger is subject, at the option
of Seller acting in accordance with the provisions of this Agreement with
respect to termination hereof, to the fulfillment of the following conditions,
any one or more of which may be waived by it:
8.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. Except for changes
contemplated by this Agreement, the representations and warranties made by
Parent and Merger Sub in this Agreement and in each of the other agreements and
instruments delivered to Seller in connection with the transactions contemplated
by this Agreement shall have been accurate as of the date of this Agreement, and
shall be accurate as of the Closing Date as if made at the Closing Date (without
giving effect to any update to the Parent Disclosure Schedule except as to
matters previously approved by Seller in writing) except in each case where the
failure to be so accurate (without giving effect to any materiality or knowledge
qualifications contained therein) could not reasonably be expected to have a
Parent Material Adverse Effect. Each of Merger Sub and Parent shall have
performed and complied in all material respects with all covenants and
agreements required by this Agreement to be performed or complied with by it on
or prior to the Effective Time. Merger Sub and Parent shall have delivered to
Seller a certificate from an authorized officer dated the Closing Date, to the
foregoing effect.
8.2 OPINION OF COUNSEL TO PARENT. Seller shall have received the opinions
of Palmer & Dodge LLP and Weil, Gotshal & Manges LLP, counsel to Merger Sub and
Parent, dated the Closing Date and in substantially the forms previously agreed
to by the parties.
8.3 MERGER DOCUMENTS. Merger Sub shall have executed and delivered the
Certificate of Merger referred to in Section 1.2.
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SECTION 9--TERMINATION, AMENDMENT AND WAIVER
9.1 TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time, whether prior to or after approval by Parent shareholders or
Seller stockholders:
(a) By mutual written consent of Parent and Seller;
(b) By Seller:
(i) by written notice to Parent (provided that Seller is not then in
material breach of any representation, warranty, covenant or other agreement
contained herein) if there shall have been a material breach of any of the
covenants or agreements or any of the representations or warranties
contained in this Agreement on the part of Parent, which breach is either
not cured with twenty (20) days following written notice to Parent or by its
nature cannot be cured prior to the Closing Date; provided, however, that
Seller shall not have the right to terminate this Agreement pursuant to this
Section 9.1(b)(i) because of the breach of any representation or warranty
unless such breach, together with all such other breaches, would entitle
Seller not to consummate the transactions contemplated hereby under Section
8.1; or
(ii) by written notice to Parent upon Seller's entering into an
agreement with a Third Party to consummate a Qualified Acquisition Proposal
as permitted by Section 5.10(b);
(c) By Parent:
(i) by written notice to Seller (provided that Parent is not then in
material breach of any representation, warranty, covenant or other agreement
contained herein) if there shall have been a material breach of any of the
covenants or agreements or any of the representations or warranties
contained in this Agreement on the part of Seller, which breach is either
not cured with twenty (20) days following written notice to Seller or by its
nature cannot be cured prior to the Closing Date; provided, however, that
Parent shall not have the right to terminate this Agreement pursuant to this
Section 9.1(c)(i) because of the breach of any representation or warranty
unless such breach, together with all such other breaches, would entitle
Parent not to consummate the transactions contemplated hereby under Section
7.1; or
(ii) by written notice to Seller, if, prior to the Effective Time,
Seller's Board of Directors (A) shall have failed to recommend, or shall
have withdrawn or modified in a manner adverse to Parent its approval or
recommendation of, the Merger or this Agreement or (B) shall take any action
(other than as permitted under clauses (i) and (ii) of the first sentence of
Section 5.10(b)) with respect to any Acquisition Proposal by a third party
other than to recommend rejection of the Acquisition Proposal;
(d) By Parent or Seller:
(i) by written notice to the other, if the Effective Time shall not have
occurred on or before July 31, 1999; provided, however, that the right to
terminate this Agreement under this Section 9.1(d)(i) shall not be available
to any party whose breach of a representation or warranty or failure to
fulfill any covenant or agreement under this Agreement has been the cause of
or resulted in the failure of the Merger to occur on or before such date;
(ii) by written notice to the other, if any governmental entity shall
have issued any injunction or taken any other action permanently
restraining, enjoining or otherwise prohibiting the consummation of the
Merger and such injunction or other action shall have become final and
non-appealable;
(iii) by written notice to the other, if the required approval of the
shareholders of Seller shall not have been obtained within ninety (90) days
after the Registration Statement has been declared
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<PAGE>
effective by the SEC or by reason of the failure to obtain the required vote
upon a vote taken at a meeting of shareholders duly convened therefor or at
any adjournment thereof; provided, however; that the right to terminate this
Agreement pursuant to this Section 9(d)(iii) shall not be available to
Seller where the failure to obtain the required shareholder approval shall
have been caused by the action or failure to act of Seller in breach of this
Agreement; or
(iv) by written notice to the other, if the required approval of the
shareholders of Parent shall not have been obtained within ninety (90) days
after mailing its Super Class 1 Circular relating to this Agreement or by
reason of the failure to obtain the required vote upon a vote taken at a
meeting of shareholders duly convened therefor or at any adjournment
thereof; provided, however; that the right to terminate this Agreement
pursuant to this Section 9(d)(iv) shall not be available to Parent where the
failure to obtain the required shareholder approval shall have been caused
by the action or failure to act of Parent in breach of this Agreement.
9.2 EFFECT OF TERMINATION. If this Agreement is terminated as provided in
Section 9.1, this Agreement shall forthwith become void and have no effect,
without liability on the part of Parent and Seller and their respective
directors, officers, shareholders or stockholders, except that (i) the
provisions of this Section 9, Section 5.3 relating to expenses, Section 5.7
relating to publicity and confidentiality to the extent provided therein shall
survive; and (ii) no such termination shall relieve any party from liability by
reason of any willful breach by such party of any of its representations,
warranties, covenants or agreements contained in this Agreement, except to the
extent provided in Section 9.3(d).
9.3 TERMINATION FEES
(a) Seller shall reimburse Parent for (i) its costs and expenses related to
entering into this Agreement and seeking to consummate the transactions
contemplated by this Agreement, including fees and expenses payable to legal,
accounting and financial advisors relating to the Merger and (ii) the costs and
expenses, including legal fees and expenses, relating to the financing
commitment of Parent to Seller, if:
(i) Parent has terminated this Agreement pursuant to Section 9.1(c); or
(ii) Seller has terminated this Agreement pursuant to Section
9.1(b)(ii).
(b) In addition to any amount that may be payable to Parent pursuant to
Section 9.3(a), Seller shall pay to Parent:
(i) $750,000 if (A) Parent has terminated this Agreement pursuant to
Section 9.1(c)(i) because of a willful breach by Seller and at the time of
such breach a Third Party shall have made, or disclosed an intention to
make, an Acquisition Proposal, (B) Parent has terminated this Agreement
pursuant to Section 9.1(c)(ii), (C) Parent or Seller has terminated this
Agreement pursuant to Section 9.1(d)(iii) and at the time of the event
giving rise to such termination a Third Party shall have made, or disclosed
an intention to make, an Acquisition Proposal, or (D) Seller has terminated
this Agreement pursuant to Section 9.1(b)(ii) upon entering into an
agreement with a Third Party other than PMC to consummate a Qualified
Acquisition Proposal, provided that there shall be credited any amount paid
pursuant to Section 9.3(a); or
(ii) $1,500,000 if (A) Parent has terminated this Agreement pursuant to
Section 9.1(c)(i) because of a willful breach by Seller or Section
9.1(e)(ii) and prior thereto or within 12 months thereafter Seller enters
into an agreement to consummate or consummates an Acquisition Proposal with
PMC, (B) Parent or Seller has terminated this Agreement pursuant to Section
9.1(d)(iii) and prior thereto or within 12 months thereafter Seller enters
into an agreement to consummate or consummates an Acquisition Proposal with
PMC or (C) Seller has terminated this Agreement pursuant to Section
9.1(b)(ii) upon entering into an agreement with PMC to consummate a
Qualified Acquisition Proposal, provided that there shall be credited any
amount
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paid pursuant to Section 9.3(a) except that if the agreement is entered into
or the transaction is consummated prior to February 28, 1999, the amount
credited shall be limited to amounts paid pursuant to clause (i) of Section
9.3(a) in excess of $250,000.
(c) PAYMENTS. Any payments required by this Section 9.3 will be
payable by the party liable to the other party (by wire transfer of
immediately available funds to an account designated by the party entitled
to such payment) within five (5) business days after demand by such party.
(d) ENFORCEMENT. The parties agree that the agreements contained in
this Section 9.3 are an integral part of the transactions contemplated by
this Agreement. The parties acknowledge and agree that damages upon
termination of the Agreement under the circumstances referred to in Section
9.3(b) are not reasonably ascertainable and the payment pursuant to such
section constitutes liquidated damages and not a penalty, and shall be
Parent's exclusive remedy upon such termination. The payments pursuant to
Section 9.3(a) are intended to provide reimbursement for out-of-pocket
expenses and not damages for termination of this Agreement under the
circumstances referred to therein, and such payments shall not relieve any
party from liability for the willful breach by it of any of its
representations, warranties, covenants or agreements contained in this
Agreement and the non-breaching party may pursue any remedies available to
it at law or in equity, including recovery for such damages to which it may
be entitled. Notwithstanding anything to the contrary contained in Section
9.3, if one party fails to promptly pay to the other any amount due under
Section 9.3, in addition to any amounts paid or payable pursuant to such
section, the defaulting party shall pay the costs and expenses (including
legal fees and expenses) in connection with any action, including the filing
of any lawsuit or other legal action, taken to collect payment, together
with interest on the amount of any unpaid fee at an annual rate of 7% from
the date such fee was required to be paid.
9.4 SELLER PREFERRED STOCK PUT AND CALL RIGHTS.
(a) If this Agreement is terminated (1) by Seller pursuant to 9(b)(i); (2)
by Parent or Seller pursuant to Section 9.1(d)(i), Section 9.1(d)(ii) or Section
9.1(d)(iv); or (3) by mutual consent of Parent and Seller pursuant to Section
9.1(a), then Seller shall have the right (but not the obligation), exercisable
by written notice to Parent during the ninety (90) days immediately following
the date of such termination, to purchase from Parent all outstanding shares of
Seller Preferred Stock owned by Parent, at a per share purchase price equal to
$1,090 plus accrued dividends.
(b) If this Agreement is terminated (1) by Seller pursuant to Section
9.1(b)(ii), (2) by Parent pursuant to Section 9.1(c); (3) by Parent or Seller
pursuant to Section 9.1(d)(i), Section 9.1(d)(ii) or Section 9.1(d)(iii), or (4)
by mutual consent of Parent and Seller pursuant to Section 9.1(a), then Parent
shall have the right (but not the obligation), exercisable by written notice to
Seller during the ninety (90) days immediately following the date of such
termination, to sell to Seller all outstanding shares of Seller Preferred Stock
owned by Parent at a per share purchase price equal to $1,090 plus accrued
dividends.
(c) Seller shall pay to Parent by wire transfer of immediately available
funds amounts payable under Section 9.4(a) or 9.4(b) within three business days
of the date of the exercise notice.
(d) Parent agrees that, other than pursuant to Section 9.4(a) or 9.4(b),
during the period from the date of termination of this Agreement until the
ninety-first day following termination of this Agreement, without the prior
written consent of Seller, it will not sell, transfer or otherwise dispose of
any shares of Seller Preferred Stock owned by it on the date of termination of
this Agreement, or convert such shares of Seller Preferred Stock into shares of
Seller Common Stock; provided, however, such limitations shall terminate if
Seller fails to timely pay in accordance with Section 9.4(c) any amounts due
Parent under Section 9.
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(e) If (i) Seller has the right, under Section 9.4(a), to purchase all
outstanding shares of Seller Preferred Stock owned by Parent but does not
exercise such right and (ii) either (A) Parent does not have the right under
Section 9.4(b) to sell to Seller all outstanding shares of Seller Preferred
Stock owned by Parent or (B) Parent has such right but does not exercise it,
then on and after the ninety-first day following termination, Parent shall not
convert any shares of Seller Preferred Stock except in accordance with the
modified terms set forth in Exhibit C.
(f) If Parent notifies Seller of the exercise of its right under Section
9.4(b) to sell to Seller all outstanding shares of Seller Preferred Stock owned
by Parent and Seller fails to timely pay in accordance with Section 9.4(c) the
amounts due Parent, the 10% limitation on beneficial ownership upon conversion
shall not apply.
9.5 AMENDMENT. This Agreement may not be amended except by an instrument
signed by each of the parties hereto; provided, however, that after adoption of
this Agreement by the stockholders of Seller, without the further approval of
the stockholders of Seller, no amendment may be made that (a) alters or changes
the amount or kind of consideration to be received as provided in Section 1.6 or
(b) alters or changes any of the terms and conditions of this Agreement if such
alteration or change would materially adversely affect the stockholders of
Seller.
9.6 WAIVER. At any time prior to the Effective Time, any party hereto may
(a) extend the time for the performance of any of the obligations or other acts
of any other party hereto or (b) waive compliance with any of the agreements of
any other party or any conditions to its own obligations, in each case only to
the extent such obligations, agreements and conditions are intended for its
benefit; provided that any such extension or waiver shall be binding upon a
party only if such extension or waiver is set forth in a writing executed by
such party.
SECTION 10--MISCELLANEOUS
10.1 NO SURVIVAL. None of the representations, warranties, covenants and
agreements of any party in this Agreement or in any certificate delivered by any
party pursuant hereto shall survive the Merger.
10.2 NOTICES. Any notice or other communication required or permitted
hereunder shall be in writing and shall be deemed given when so delivered in
person, by overnight courier, by facsimile transmission (with receipt confirmed
by telephone or by automatic transmission report) or two business days after
being sent by registered or certified mail (postage prepaid, return receipt
requested), as follows:
(a) if to Parent, to:
Peptide Therapeutics Group plc
321 Cambridge Science Park
Milton Road
Cambridge CB4 4WG
England
Attn: Gordon Cameron
Telephone: 01223 423333
Facsimile: 01223 423341
with a copy to:
Palmer & Dodge LLP
One Beacon Street
Boston, Massachusetts 02108
Attn: Michael Lytton, Esq.
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<PAGE>
Telephone: (617) 573-0100
Facsimile: (617) 227-4420
(b) if to Seller, to:
OraVax, Inc.
38 Sidney Street
Cambridge, MA 02139
Attn: Lance Gordon
Telephone: (617) 494-1339
Facsimile: (617) 494-0924
with a copy to:
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Attn: John M. Westcott, Jr., Esq.
Telephone: (617) 526-6000
Facsimile: (617) 526-5000
Any party may by notice given in accordance with this Section 10.2 to the other
parties designate another address or person for receipt of notices hereunder.
10.3 ENTIRE AGREEMENT. This Agreement contains the entire agreement among
the parties with respect to the Merger and related transactions, and supersedes
all prior agreements, written or oral, with respect thereto, other than
confidentiality agreements.
10.4 GOVERNING LAW. This Agreement shall be governed by the law of the
State of Delaware.
10.5 BINDING EFFECT; NO ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns. This Agreement is not assignable without the prior written
consent of the other parties hereto.
10.6 VARIATIONS IN PRONOUNS. All pronouns and any variations thereof refer
to the masculine, feminine or neuter, singular or plural, as the context may
require.
10.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first stated above.
<TABLE>
<S> <C> <C>
PEPTIDE THERAPEUTICS GROUP plc
By /s/ John R. Brown
Name: John Brown
Title: Chief Executive
PEACH ACQUISITION CORP.
By /s/ John R. Brown
Name: John Brown
Title: President
ORAVAX, INC.
By /s/ Lance Gordon
Name: Lance Gordon
Title: President and CEO
</TABLE>
A-35
<PAGE>
ANNEX B
November 9, 1998
Confidential
The Board of Directors
OraVax, Inc.
38 Sidney Street
Cambridge, MA 02139
Ladies and Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of common stock (the "Common
Stock") of OraVax, Inc. ("OraVax" or the "Company") of the consideration to be
received by such shareholders in connection with the proposed merger of the
Company (the "Merger") with and into Peach Acquisition Corp. ("Merger Sub"), a
wholly owned subsidiary of Peptide Therapeutics Group plc ("Peptide
Therapeutics") pursuant to the Agreement and Plan of Merger to be dated as of
November 10, 1998, among Peptide Therapeutics, Merger Sub and OraVax (the
"Agreement").
We understand that the terms of the Agreement provide, among other things,
that Peptide Therapeutics will issue ordinary shares of Peptide Therapeutics
having a value of approximately $12,040,125 in exchange for all outstanding
OraVax common stock, provided, however, that the aggregate number of ordinary
shares issued at closing will not exceed 8,080,620 and will not be less than
5,375,055, as more fully set forth in the Agreement. For purposes of this
opinion, we have assumed that the Merger will qualify as a taxable
reorganization under the United States Internal Revenue Code for the
shareholders of the Company and that the Merger will be accounted for as a
purchase.
Hambrecht & Quist LLC ("Hambrecht & Quist"), as part of its investment
banking services, is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, strategic transactions,
corporate restructurings, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements and valuations for corporate
and other purposes. We have acted as a financial advisor to the Board of
Directors of OraVax in connection with the Merger, and we will receive a fee for
our services, which include the rendering of this opinion.
In connection with our review of the Merger, and in arriving at our opinion,
we have, among other things:
(i) reviewed the publicly available financial statements of Peptide
Therapeutics for recent years and interim periods to date and certain
other relevant financial and operating data of Peptide Therapeutics made
available to us from published sources and from the internal records of
Peptide Therapeutics;
(ii) reviewed certain internal financial and operating information,
including certain projections, relating to Peptide Therapeutics
prepared by the management of Peptide Therapeutics;
(iii) discussed the business, financial condition and prospects of Peptide
Therapeutics with certain of its officers;
(iv) reviewed the publicly available financial statements of OraVax for
recent years and interim periods to date and certain other relevant
financial and operating data of OraVax made available to us from
published sources and from the internal records of OraVax;
(v) reviewed certain internal financial and operating information, including
certain projections, relating to OraVax prepared by the management of
OraVax;
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<PAGE>
(vi) discussed the business, financial condition and prospects of OraVax
with certain of its officers;
(vii) reviewed the recent reported prices and trading activity for the
ordinary stock of Peptide Therapeutics and the common stock of OraVax
and compared such information and certain financial information for
Peptide Therapeutics and OraVax with similar information for certain
other companies engaged in businesses we consider comparable;
(viii) reviewed the financial terms, to the extent publicly available, of
certain comparable merger and acquisition transactions;
(ix) reviewed drafts of the Agreement; and
(x) performed such other analyses and examinations and considered such other
information, financial studies, analyses and investigations and
financial, economic and market data as we deemed relevant.
In rendering our opinion, we have assumed and relied upon the accuracy and
completeness of all of the information concerning Peptide Therapeutics or OraVax
considered in connection with our review of the Merger, and we have not assumed
any responsibility for independent verification of such information. We have not
prepared any independent valuation or appraisal of any of the assets or
liabilities of Peptide Therapeutics or OraVax; nor have we conducted a physical
inspection of the properties and facilities of either company. With respect to
the financial forecasts and projections made available to us and used in our
analysis, we have assumed that they reflect the best currently available
estimates and judgments of the expected future financial performance of Peptide
Therapeutics and OraVax. For purposes of this opinion, we have assumed that
neither Peptide Therapeutics nor OraVax is a party to any pending transactions,
including external financings, recapitalizations or material merger discussions,
other than the Merger and those activities disclosed to us or undertaken in the
ordinary course of conducting their respective businesses. Our opinion is
necessarily based upon market, economic, financial and other conditions as they
exist and can be evaluated as of the date of this letter and any change in such
conditions would require a reevaluation of this opinion. We express no opinion
as to the price at which Peptide Therapeutics will trade subsequent to the
Effective Time (as defined in the Agreement).
It is understood that this letter is for the information of the Board of
Directors in connection with their review of the Merger and may not be used for
any other purpose without our prior written consent; provided, however, that
this letter may be reproduced in full in the proxy statement/prospectus relating
to the Merger. This letter does not constitute a recommendation to any
stockholder as to how such stockholder should vote on the Merger.
Based upon and subject to the foregoing and after considering such other
matters as we deem relevant, we are of the opinion that as of the date hereof
the consideration to be received by the holders of the Common Stock in the
Merger is fair to such holders from a financial point of view. We express no
opinion, however, as to the adequacy of any consideration received in the Merger
by Peptide Therapeutics or any of its affiliates.
Very truly yours,
HAMBRECHT & QUIST LLC
By /s/ DAVID G. GOLDEN
------------------------------------------
David G. Golden
Managing Director
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<PAGE>
ANNEX C
PROVISIONS OF THE DELAWARE GENERAL CORPORATION LAW
RELATING TO RIGHTS OF DISSENTING STOCKHOLDERS
SECTION 262--APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of stock on
the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares
through the effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has neither voted in
favor of the merger or consolidation nor consented thereto in writing
pursuant to Section228 of this title shall be entitled to an appraisal by
the Court of Chancery of the fair value of his shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used
in this section, the word "stockholder" means a holder of record of stock in
a stock corporation and also a member of record of a nonstock corporation;
the words "stock" and "share" mean and include what is ordinarily meant by
those words and also membership or membership interest of a member of a
nonstock corporation; and the rods "depository receipt" mean a receipt or
other instrument issued by a depository representing an interest in one or
more shares, or fractions thereof, solely of stock of a corporation, which
stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or series of
stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section251, (other than a merger effected pursuant to
Section 251(g) of this title), 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall be
available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange
or designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc.
or (ii) held of record by more than 2,000 holders; and further provided
that no appraisal rights shall be available for any shares of stock of
the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the holders of the surviving
corporation as provided in subsections (f) of Section251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights under
this section shall be available for the shares of any class or series of
stock of a constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to
SectionSection251, 252, 254, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from such
merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed
on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more
than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph;
or
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d. Any combination of the shares of stock, depository receipts and cash
in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a, b, and c, of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation party
to a merger effected under Section253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate
of incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the
assets of the corporation. If the certificate of incorporation contains such
a provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting
of stockholders, the corporation, not less than 20 days prior to the
meeting, shall notify each of its stockholders who was such on the record
date for such meeting with respect to shares for which appraisal rights
are available pursuant to subsections (b) or (c) hereof that appraisal
rights are available for any or all of the shares of the constituent
corporations, and shall include in such notice a copy of this section.
Each stockholder electing to demand the appraisal of his shares shall
deliver to the corporation, before the taking of the vote on a merger or
consolidation, a written demand for appraisal of his shares. Such demand
will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing
to take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to Section 228 or
Section 253 of this title, each constituent corporation, either before or
after the effective date of the merger or consolidation or within ten
days thereafter, shall notify each of the holders of any class of series
of stock of such constituent corporation who are entitled to appraisal
rights of the approval of the merger or consolidation and that appraisal
rights are available for any or all shares of such class or series of
stock of such constituent corporation, and shall include in such notice a
copy of this section; provided that, if the notice is given on or after
the effective date of the merger or consolidation, such notice shall be
given by the surviving or resulting corporation to all such holders of
any class or series os stock of a constituent corporation that are
entitled to appraisal rights. Such notice may, and, if given on or after
the effective date of the merger or consolidation, shall, also notify
such stockholders of the effective date of the merger or consolidation.
Any stockholder entitled to appraisal rights may, within 20 days after
the mailing of such notice, demand in writing from the surviving or
resulting corporation the appraisal of such holders shares. Such demand
will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of such holder's shares. If such notice did not
notify stockholders of the
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effective date of the merger or consolidation, either (1) each such
constituent corporation shall send a second notice before the effective
date of the merger or consolidation notifying each of the holders of any
class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent
more than 20 days following the sending of the first notice, such second
notice need only be sent to each stockholder who is entitled to appraisal
rights and who has demanded appraisal of such holder's shares in
accordance with this subsection. An affidavit of the secretary or
assistant secretary or of the transfer agent of the corporation that is
required to give either notice that such notice has been given shall, in
the absence of fraud, be prima facie evidence of the facts stated
therein. For purposes of determining the stockholders entitled to receive
either notice, each constituent corporation may fix, in advance, a record
date that shall be not more than 10 days prior to the date the notice is
given, provided, that if the notice is given on or after the effective
date of the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is given prior
to the effective date, the record date shall be the close of business on
the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation, the
surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the
effective date of the merger or consolidation, any stockholder shall have
the right to withdraw his demand for appraisal and to accept the terms
offered upon the merger or consolidation. Within 120 days after the
effective date of the merger or consolidation, any stockholder who has
complied with the requirements of subsections (a) and (d) hereof, upon
written request, shall be entitled to receive from the corporation surviving
the merger or resulting from the consolidation a statement setting forth the
aggregate number of shares not voted in favor of the merger or consolidation
and with respect to which demands for appraisal have been received and the
aggregate number of holders of such shares. Such written statement shall be
mailed to the stockholder within 10 days after his written request for such
a statement is received by the surviving or resulting corporation or within
10 days after expiration of the period for delivery of demands for appraisal
under subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register
in Chancery in which the petition was filed a duly verified list containing
the names and addresses of all stockholders who have demanded payment for
their shares and with whom agreements as to the value of their shares have
not been reached by the surviving or resulting corporation. If the petition
shall be filed by the surviving or resulting corporation, the petition shall
be accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper
of general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail
and by publication shall be approved by the court, and the costs thereof
shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the stockholders
who have complied with this section and who have become entitled to
appraisal rights. The Court may require the
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stockholders who have demanded an appraisal for their shares and who hold
stock represented by certificates to submit their certificates of stock to
the Register in Chancery for notation thereon of the pendency of the
appraisal proceedings; and if any stockholder fails to comply with such
direction, the Court may dismiss the proceedings as to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court shall
appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In
determining the fair rate of interest, the Court may consider all relevant
factors, including the rate of interest which the surviving or resulting
corporation would have had to pay to borrow money during the pendency of the
proceeding. Upon application by the surviving or resulting corporation or by
any stockholder entitled to participate in the appraisal proceeding, the
Court may, in its discretion, permit discovery or other pretrial proceedings
and may proceed to trial upon the appraisal prior to the final determination
of the stockholder entitled to an appraisal. Any stockholder whose name
appears on the list filed by the surviving or resulting corporation pursuant
to subsection (f) of this section and who has submitted his certificates of
stock to the Register in Chancery, if such is required, may participate
fully in all proceedings until it is finally determined that he is not
entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares, together
with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders
of shares represented by certificates upon the surrender to the corporation
of the certificates representing such stock. The Court's decree may be
enforced as other decrees in the Court of Chancery may be enforced, whether
such surviving or resulting corporation be a corporation of this State or of
any state.
(j) The costs of the proceeding may be determined by the Court and taxed upon
the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and
the fees and expenses of experts, to be charged pro rata against the value
of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or
to receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed
within the time provided in subsection (e) of this section, or if such
stockholder shall deliver to the surviving or resulting corporation a
written withdrawal of his demand for an appraisal and an acceptance of the
merger or consolidation, either within 60 days after the effective date of
the merger or consolidation as provided in subsection (e) of this section or
thereafter with the written approval of the corporation, then the rights of
such stockholder to an appraisal shall cease. Notwithstanding the foregoing,
no appraisal proceeding in the Court of Chancery shall be dismissed as to
any stockholder without the approval of the Court, and such approval may be
conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares of
such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation. (Last amended by Ch. 299,
L. '96, eff. 2-1-96 and Ch. 349, L. '96, eff. 7-1-96.)
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ANNEX D
STOCKHOLDER VOTING AGREEMENT
This Stockholder Voting Agreement (the "Agreement") dated as of November ,
1998 is by and between Peptide Therapeutics Group plc ("Peptide"), a corporation
organized under the laws of England and Wales, and the undersigned stockholder
("Stockholder") of OraVax, Inc. (the "Seller"), a Delaware corporation.
RECITALS
A. Concurrently with the execution of this Agreement, Parent, Seller and
Peach Acquisition Corporation ("Merger Sub"), a Delaware corporation and a
wholly owned subsidiary of Parent, have entered into an Agreement and Plan of
Merger (the "Merger Agreement") which provides for a merger of Seller with and
into the Merger Sub (the "Merger"). Pursuant to the Merger, shares of common
stock of Seller will be converted into the right to receive American Depositary
Shares, each representing 10 ordinary shares, nominal value of 10 pence per
share of Parent on the basis set forth in the Merger Agreement.
B. The Stockholder is the record holder and beneficial owner (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) of such number of shares of the outstanding capital stock of Seller as is
indicated on the final page of this Agreement (the "Shares").
C. Parent desires the Stockholder to agree, and the Stockholder is willing
to agree, (i) not to transfer or otherwise dispose of any of the Shares, or any
other shares of capital stock of Seller acquired hereafter and prior to the
Expiration Date (as defined in Section 1 below) (together with the Shares, the
"Subject Shares"), except as otherwise permitted hereby, and (ii) to vote the
Subject Shares so as to facilitate consummation of the Merger.
NOW, THEREFORE, intending to be legally bound, the parties agree as follows:
1. AGREEMENT TO RETAIN SHARES. Stockholder agrees not to transfer (except
as may be specifically required by court order), sell, exchange, pledge or
otherwise dispose of or encumber any of the Subject Shares, or to make any offer
or agreement relating thereto, at any time prior to the Expiration Date. As used
herein, the term "Expiration Date" shall mean the earlier to occur of such date
and time as (i) the Merger shall become effective in accordance with the
provisions of the Merger Agreement and (ii) the Merger Agreement shall be
terminated pursuant to Section 9.1 thereof.
2. AGREEMENT TO VOTE SUBJECT SHARES. At every meeting of the stockholders
of Seller called with respect to any of the following, and at every adjournment
thereof, and on every action or approval by written consent of the stockholders
of Seller with respect to any of the following, Stockholder shall vote the
Subject Shares: (i) in favor of approval of the Merger Agreement and the Merger
and any matter that could reasonably be expected to facilitate the Merger; and
(ii) against approval of any proposal made in opposition to or competition with
consummation of the Merger and against any merger, consolidation, sale of
assets, reorganization or recapitalization, with any party other than with
Parent and its affiliates, and against any liquidation or winding up of Seller
(each of the foregoing is hereinafter referred to as an "Opposing Proposal").
Stockholder agrees not to take any actions contrary to Stockholder's obligations
under this Agreement.
3. IRREVOCABLE PROXY. Concurrently with the execution of this Agreement,
Stockholder agrees to deliver to Parent a proxy in the form attached hereto as
Exhibit I (the "Proxy"), which shall be irrevocable to the extent provided under
the Delaware General Corporation Law, with respect to the
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total number of shares of capital stock of Seller beneficially owned (as such
term is defined in Rule 13d-3 under the Exchange Act) by Stockholder set forth
therein.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
STOCKHOLDER. Stockholder hereby represents, warrants and covenants to Parent as
follows:
4.1. OWNERSHIP OF SHARES. Stockholder (i) is and will be at the time
of the action of the stockholders of Seller on the Merger the beneficial
owner of the Shares and the Subject Shares, which at the date hereof and at
all times up until the Expiration Date will be free and clear of any liens,
claims, options, charges or other encumbrances; (ii) does not beneficially
own any shares of capital stock of Seller other than the Shares (excluding
shares as to which Stockholder currently disclaims beneficial ownership in
accordance with applicable law); and (iii) has full power and authority to
make, enter into and carry out the terms of this Agreement and the Proxy.
4.2. NO PROXY SOLICITATIONS. Stockholder will not, and will not permit
any entity under Stockholder's control to: (i) solicit proxies or become a
"participant" in a "solicitation" (as such terms are defined in Regulation
14A under the Exchange Act) with respect to an Opposing Proposal or
otherwise encourage or assist any party in taking or planning any action
that would compete with, restrain or otherwise serve to interfere with or
inhibit the timely consummation of the Merger in accordance with the terms
of the Merger Agreement; (ii) initiate a stockholders' vote or action by
consent of stockholders of Seller with respect to an Opposing Proposal; or
(iii) become a member of a "group" (as such term is used in Section 13(d) of
the Exchange Act) with respect to any voting securities of Seller that takes
any action in support of an Opposing Proposal.
5. NO LIMITATION ON DISCRETION AS DIRECTOR. This Agreement is intended
solely to apply to the exercise by Stockholder in his or her individual capacity
of rights attaching to ownership of the Subject Shares, and nothing herein shall
be deemed to apply to, or to limit in any manner the discretion of Stockholder
with respect to, any action which may be taken or omitted by him or her acting
in his or her fiduciary capacity as a director of Seller.
6. ADDITIONAL DOCUMENTS. Stockholder hereby covenants and agrees to
execute and deliver any additional documents necessary or desirable, in the
reasonable opinion of Parent or Stockholder, as the case may be, to carry out
the intent of this Agreement.
7. CONSENT AND WAIVER. Stockholder hereby gives any consents or waivers
that are reasonably required for the consummation of the Merger under the terms
of any agreements to which Stockholder is a party or pursuant to any rights
Stockholder may have.
8. TERMINATION. This Agreement shall terminate and shall have no further
force or effect as of the Expiration Date.
9. MISCELLANEOUS.
9.1. SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, then the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
9.2. BINDING EFFECT AND ASSIGNMENT. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, but,
except as otherwise specifically provided herein, neither this Agreement nor
any of the rights, interests or obligations of the parties hereto may be
assigned by either party without prior written consent of the other.
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9.3. AMENDMENTS AND MODIFICATION. This Agreement may not be modified,
amended, altered or supplemented except upon the execution and delivery of a
written agreement executed by the parties hereto.
9.4. SPECIFIC PERFORMANCE; INJUNCTIVE RELIEF. The parties hereto
acknowledge that Parent will be irreparably harmed and that there will be no
adequate remedy at law for a violation of any of the covenants or agreements
of Stockholder set forth herein. Therefore, it is agreed that, in addition
to any other remedies that may be available to Parent upon any such
violation, Parent shall have the right to enforce such covenants and
agreements by specific performance, injunctive relief or by any other means
available to Parent at law or in equity.
9.5. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and sufficient if delivered in
person, by cable, telegram or facsimile, or sent by mail (registered or
certified mail, postage prepaid, return receipt requested) or overnight
courier (prepaid) to the respective parties as follows:
(a) if to Parent, to:
Peptide Therapeutics Group plc
321 Cambridge Science Park:
Milton Road
Cambridge, England CB4 4WG
Attn: John R. Brown
Telephone: 011-44-1223-423-333
Facsimile: 011-44-1223-423-341
with a copy to:
Palmer & Dodge LLP
One Beacon Street
Boston, Massachusetts 02108
Attn: Michael Lytton, Esq.
Telephone: (617) 573-0100
Facsimile: (617) 227-4420
(b) if to the Stockholder:
To the address for notice set forth on the last page hereof.
with a copy to:
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Attn: John M. Westcott, Jr., Esq.
Telephone: (617) 526-6000
Facsimile: (617) 526-5000
or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall only be
effective upon receipt.
9.6. GOVERNING LAW. This Agreement shall be governed by, and construed
and enforced in accordance with, the internal laws of the Commonwealth of
Massachusetts.
9.7. ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties in respect of the subject matter hereof, and
supersedes all prior negotiations and understandings between the parties
with respect to such subject matter.
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9.8. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
9.9. EFFECT OF HEADINGS. The section headings herein are for
convenience only and shall not affect the construction of interpretation of
this Agreement.
IN WITNESS WHEREOF, the parties have caused this Stockholder Voting
Agreement to be duly executed on the date and year first above written.
PEPTIDE THERAPEUTICS GROUP PLC
By:
- --------------------------------------------------------------------------------
Name:
- --------------------------------------------------------------------------------
Title:
- --------------------------------------------------------------------------------
STOCKHOLDER:
By:
- --------------------------------------------------------------------------------
Stockholder's Address for Notice:
--------------------------------------
--------------------------------------
--------------------------------------
Shares beneficially owned:
________________ shares of Common
Stock
Shares subject to outstanding options:
________________ shares of Common
Stock
[Signature Page to Stockholder Voting Agreement]
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 155 of the registrant's Articles of Association provides: "Subject
to the provisions of the Companies Acts but without prejudice to any indemnity
to which he may otherwise be entitled, every director, alternate director,
secretary, auditor or other officer of the Company shall be indemnified out of
the assets of the Company against all costs, charges, expenses, losses, damages
and liabilities incurred by him in or about the execution of his duties or the
exercise of his powers or otherwise in relation thereto including (without
prejudice to the generality of the foregoing) any liability incurred by him in
defending any proceedings, whether criminal or civil, which relate to anything
done or omitted or alleged to have been done or omitted by him as an officer or
employee of the Company in which judgment is given in his favor or in which he
is acquitted, or which are otherwise disposed of without any finding or
admission of material breach of duty on his part or in connection with any
application in which relief is granted to him by the court from liability for
negligence, default, breach of duty or breach of trust in relation to the
affairs of the Company." Pursuant to the provisions of Section 310(3) of the
Companies Act 1985 (as amended by the Companies Act 1989) the Company may
purchase and maintain insurance to indemnify any director, officer, manager or
auditor of the Company, or any company which is a member of the Group. Section
310 of the Companies Act 1985 (as amended by Section 137 of the Companies Act
1989) provides as follows:
"310. Provisions exempting officers and auditors from liability
(1) This section applies to any provision, whether contained in a
company's articles or in any contract with the company or otherwise, for
exempting any officer of the company or any person (whether an officer or
not) employed by the company as auditor from, or indemnifying him against,
any liability which by virtue of any rule of law would otherwise attach to
him in respect of any negligence, default, breach of duty or breach of trust
of which he may be guilty in relation to the company.
(2) Except as provided by the following subsection, any such provision
is void.
(3) This section does not prevent a company
(a) from purchasing and maintaining for any such officer or auditor
insurance against any such liability; or
(b) from indemnifying any such officer or auditor against any liability
incurred by him;
(i) in defending any proceedings (whether civil or criminal) in which
judgment is given in his favor or he is acquitted, or
(ii) in connection with any application under Section 144(3) or (4)
(acquisition of shares by innocent nominee) or Section 727 (general power to
grant relief in case of honest and reasonable conduct) in which relief is
granted to him by the court."
Section 727 of the Companies Act 1985 provides as follows:
"727. Power of court to grant relief in certain cases
"(1) If in any proceedings for negligence, default, breach of duty or breach of
trust against an officer of a company or a person employed by a company as
auditor (whether he is or is not an officer of the company) it appears to
the court hearing the case that that officer or person is or may be liable
in respect of the negligence, default, breach of duty or breach of trust,
but that he has acted honestly and reasonably, and that having regard to all
the circumstances of the case (including those connected with his
appointment) he ought fairly to be excused for the negligence, default,
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breach of duty or breach of trust, that court may relieve him, either wholly
or partly, from his liability in such terms as it thinks fit.
(2) If any such officer or person as above-mentioned has reason to apprehend
that any claim will or might be made against him in respect of any
negligence, default, breach of duty or breach of trust, he may apply to the
court for relief; and the court on the application has the same power to
relieve him as under this section it would have had if it had been a court
before which proceedings against that person for negligence, default, breach
of duty or breach of trust had been brought.
(3) Where a case to which subsection (1) applies is being tried by a judge with
a jury, the judge, after hearing the evidence, may, if he is satisfied that
the defendant or defender ought in pursuance of that subsection to be
relieved either in whole or in part from the liability sought to be enforced
against him, withdraw the case in whole or in part from the jury and
forthwith direct judgment to be entered for the defendant or defender on
such terms as to costs or otherwise as the judge may think proper."
These indemnification provisions may be sufficiently broad to permit
indemnification of the registrant's executive officers and directors for
liabilities arising under the Securities Act of 1933, as amended (the
"Securities Act").
The registrant, with approval of the registrant's Board of Directors,
maintains director and officer liability insurance.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENTS.
(A) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
2.1 Restated Agreement and Plan of Acquisition, dated as of November 10, 1998, among Peptide Therapeutics
Group plc, Peach Acquisition Corp. and OraVax, Inc. (attached as Annex A to the Prospectus/Proxy
Statement included in this Registration Statement).
2.2 Amendment No. 1 to Restated Agreement and Plan of Acquisition dated January 8, 1999, among Peptide
Therapeutics Group plc, Peach Acquisition Corp. and OraVax, Inc.
2.2 Amendment No. 2 to the Restated Agreement Plan of Acquisition dated January 28, 1999, among Peptide
Therapeutics Group plc, Peach Acquisition Corp. and OraVax, Inc. (Incorporated herein by reference to
Amendment No. 2 to Schedule 13D filed on January 28, 1999 by Peptide Therapeutics Group plc).
3.1 Memorandum and Articles of Association of Peptide Therapeutics Group plc.
5.1 Opinion of Weil, Gotshal & Manges LLP with respect to the legality of the securities registered hereby.
10.1 Collaboration Agreement between Peptide Therapeutics Limited and Eli Lilly and Company dated November 4,
1998.*
10.2 Option Agreement between Peptide Therapeutics Limited and the joint ventures between OraVax, Inc. and
Pasteur Merieux Serums et Vaccins known as Pasteur Merieux OraVax S.N.C. and OraVax Merieux Co. dated
April 27, 1998.*
10.3 Collaboration Agreement between Peptide Therapeutics Limited and Peptimmune, Inc. dated March 13. 1998.*
10.4 Collaborative Research and Option Agreement between Peptide Therapeutics Limited and Pfizer, Inc. dated
December 22, 1997.*
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.5 Research and Development and License Agreement between Peptide Therapeutics Limited and SmithKline
Beecham plc dated February 7, 1997.*
10.6 Sales Agreement between Peptide Therapeutics Limited, Peptide Therapeutics Group plc, Evans Medical
Limited and Medeva plc dated January 30, 1997.*
10.7 Assignment and Variation Agreement between Peptide Therapeutics Limited, the University of Maryland at
Baltimore and Medeva plc dated September 10, 1997.*
10.8 Collaboration Agreement between Peptide Therapeutics Limited and Novartis Pharma AG dated November 1,
1998.*
10.9 Amendment No. 1 to Research and Development and License Agreement between Peptide Therapeutics Limited
and SmithKline Beecham plc dated November 25, 1998.*
10.10 Overview Agreement between Peptide Therapeutics Limited and Pasteur Merieux Serums et Vaccins S.A. dated
January 25, 1999.*
10.11 Standstill Agreement between Peptide Therapeutics Group plc and Pasteur Merieux Serums et Vaccins S.A.
dated January 25, 1999. (Incorporated herein by reference to Amendment No. 2 to Schedule 13D filed on
January 28, 1999 by Peptide Therapeutics Group plc.)
10.12 Lease Agreement between The Master Fellows and Scholars of Trinity College Cambridge and Peptide
Therapeutics Group plc dated May 24, 1996 with respect to Unit 329 Phase V Cambridge Science Park,
Milton Road, Cambridge, England.
10.13 Lease Agreement among The Master Fellows and Scholars of Trinity College, Chefaro Proprietaries Limited
and NED-INT Holdings Limited dated March 29, 1994 with respect to Unit 327 Phase V Cambridge Science
Park, Milton Road, Cambridge, England.
10.14 Lease Agreement between The Master Fellows and Scholars of Trinity College Cambridge and IBRD Europe,
Inc. dated April 29, 1993 with respect to Unit 324 Phase 5 Cambridge Science Park, Milton Road,
Cambridge, England.
10.15 Lease Agreement between the Master Fellows and Scholars of Trinity College Cambridge and IBRD Europe,
Inc. dated November 26, 1992 with respect to Unit 321 Phase 5 Cambridge Science Park, Milton Road,
Cambridge, England.
10.16 Director's Service Agreement between Peptide Therapeutics Group plc and Nicolas Higgins dated November
29, 1996, as amended September 18, 1998.
10.17 Director's Service Agreement between Peptide Therapeutics Group plc and Gordon Cameron dated March 1,
1997, as amended September 18, 1998.
10.18 Director's Service Agreement between Peptide Therapeutics plc and John Brown dated March 1, 1997.
10.19 Letter of Appointment between Peptide Therapeutics Group plc and Alan Dalby dated March 25, 1998.
10.20 Letter of Appointment between Peptide Therapeutics Group plc and Alan Smith dated January 8, 1998, as
amended April 30, 1998.
10.21 Letter of Appointment between Peptide Therapeutics Group plc and Sir Brian Richards dated March 1, 1997,
as amended May 1, 1998.
10.22 Letter of Appointment between Peptide Therapeutics Group plc and Alan Goodman dated July 14, 1998.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.23 Peptide Therapeutics Group plc 1994 Unapproved Share Option Scheme.
10.24 Peptide Therapeutics Group plc 1995 Savings--Related Share Option Scheme.
10.25 Peptide Therapeutics Group plc 1995 Unapproved Share Option Scheme.
10.26 Peptide Therapeutics Group plc 1996 Approved Share Option Scheme.
10.27 Peptide Therapeutics Group plc Share Incentive Plan.
21.1 Subsidiaries of Peptide Therapeutics Group plc
23.1 Consent of Weil, Gotshal & Manges (included as part of Exhibit 5.1).
23.2 Consent of Arthur Anderson, independent auditors.
23.3 Consent of PricewaterhouseCoopers LLP, independent accountants.
23.4 Consent of Lance Gordon to serve as a director.
23.5 Consent of Hambrecht & Quist LLP
24.1 Powers of Attorney (included on the signature page).
99.1 Form of proxy to be mailed to stockholders of OraVax, Inc.
</TABLE>
- ------------------------
* To be filed by amendment.
(B) FINANCIAL STATEMENT SCHEDULES.
Not applicable.
(C) FAIRNESS OPINION.
Included in Part I as Annex B to the Prospectus/Proxy Statement contained in
this Registration Statement. Form of opinion of Hambrecht & Quist (attached as
Annex B to the included in this Registration Statement).
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act
of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement;
II-4
<PAGE>
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
BONA FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
(4) To file a post-effective amendment to the registration statement to include
any financial statements required by Rule 3-19 of this chapter at the start
of any delayed offering or throughout a continuous offering. Financial
statements and information otherwise required by Section 10(a)3 of the Act
need not be furnished, provided that the registrant includes in the
prospectus, by means of a post-effective amendment, financial statements
required pursuant to this paragraph (a)(4) and other information necessary
to ensure that all other information in the prospectus is at least as
current as the date of those financial statements.
(b) The undersigned registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
the registrant undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.
(c) The undersigned registrant undertakes that every prospectus (i) that is
filed pursuant to paragraph (a)(1) immediately proceeding, or (ii) that
purports to meet the requirements of Section 10(a)(3) of the Act and is used
in connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the registration statement and will not
be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, as amended (the
"Securities Act"), each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial BONA FIDE offering thereof.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Proxy
Statement/Prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form,
within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means and
(ii) to arrange or provide for a facility in the U.S. for the purpose of
responding to such requests. This includes information contained in
documents filed subsequent to the effective date of the registration
statement through the date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(f) Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions discussed in Item 20 hereof, or
otherwise, the registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other
II-5
<PAGE>
than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered hereby, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Cambridge,
England, on February 10, 1999.
PEPTIDE THERAPEUTICS GROUP PLC
By: /s/ JOHN R. BROWN
-----------------------------------------
John R. Brown
CHIEF EXECUTIVE
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each individual whose signature appears
below constitutes and appoints John R. Brown, Gordon B. Cameron and Alan Dalby,
and each of them, his true and lawful attorneys-in-fact and agents with full
power of substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this registration statement, and to file the same, with all exhibits thereto
and all documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or his or
their substitute or substitutes, may lawfully do or cause to be done or by
virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ JOHN R. BROWN
- ------------------------------ Chief Executive (Principal February 10, 1999
John R. Brown Executive Officer)
Finance Director
/s/ GORDON B. CAMERON (Principal Financial
- ------------------------------ Officer and Chief February 10, 1999
Gordon B. Cameron Accounting Officer)
/s/ ALAN G. GOODMAN
- ------------------------------ Non-Executive Chairman February 10, 1999
Alan G. Goodman
/s/ NICOLAS HIGGINS
- ------------------------------ Commercial Director February 10, 1999
Nicolas Higgins
/s/ ALAN DALBY
- ------------------------------ Non-Executive Director February 10, 1999
Alan Dalby
/s/ SIR BRIAN RICHARDS
- ------------------------------ Non-Executive Director February 10, 1999
Sir Brian Richards
/s/ ALAN SMITH
- ------------------------------ Non-Executive Director February 10, 1999
Alan Smith
/s/ ALAN DALBY
- ------------------------------ Authorized U.S. February 10, 1999
Alan Dalby Representative
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
2.1 Restated Agreement and Plan of Acquisition, dated as of November 10, 1998, among Peptide Therapeutics
Group plc, Peach Acquisition Corp. and OraVax, Inc. (attached as Annex A to the Prospectus/Proxy
Statement included in this Registration Statement).
2.2 Amendment No. 1 to Restated Agreement and Plan of Acquisition dated January 8, 1999, among Peptide
Therapeutics Group plc, Peach Acquisition Corp. and OraVax, Inc.
2.3 Amendment No. 2 to Restated Agreement and Plan of Acquisition dated January 28, 1999, among Peptide
Therapeutics Group plc, Peach Acquisition Corp. and OraVax, Inc. (Incorporated herein by reference to
Amendment No. 2 to Schedule 13D filed on January 28, 1999 by Peptide Therapeutics Group plc.)
3.1 Memorandum and Articles of Association of Peptide Therapeutics Group plc.
5.1 Opinion of Weil, Gotshal & Manges LLP with respect to the legality of the securities registered hereby.
10.1 Collaboration Agreement between Peptide Therapeutics Limited and Eli Lilly and Company dated November 4,
1998.*
10.2 Option Agreement between Peptide Therapeutics Limited and the joint ventures between OraVax, Inc. and
Pasteur Merieux Serums et Vaccins known as Pasteur Merieux OraVax S.N.C. and OraVax Merieux Co. dated
April 27, 1998.*
10.3 Collaboration Agreement between Peptide Therapeutics Limited and Peptimmune, Inc. dated March 13. 1998.*
10.4 Collaborative Research and Option Agreement between Peptide Therapeutics Limited and Pfizer, Inc. dated
December 22, 1997.*
10.5 Research and Development and License Agreement between Peptide Therapeutics Limited and SmithKline
Beecham plc dated February 7, 1997.*
10.6 Sales Agreement between Peptide Therapeutics Limited, Peptide Therapeutics Group plc, Evans Medical
Limited and Medeva plc dated January 30, 1997.*
10.7 Assignment and Variation Agreement between Peptide Therapeutics Limited, the University of Maryland at
Baltimore and Medeva plc dated September 10, 1997.*
10.8 Collaboration Agreement between Peptide Therapeutics Limited and Novartis Pharma AG dated November 1,
1998.*
10.9 Amendment No. 1 to Research and Development and License Agreement between Peptide Therapeutics Limited
and SmithKline Beecham plc dated November 25, 1998.*
10.10 Overview Agreement between Peptide Therapeutics Limited and Pasteur Merieux Serums et Vaccins S.A. dated
January 25, 1999.*
10.11 Standstill Agreement between Peptide Therapeutics Group plc and Pasteur Merieux Serums et Vaccins S.A.
dated January 25, 1999. (Incorporated herein by reference to Amendment No. 2 to Schedule 13D filed on
January 28, 1999 by Peptide Therapeutics Group plc.)
10.12 Lease Agreement between The Master Fellows and Scholars of Trinity College Cambridge and Peptide
Therapeutics Group plc dated May 24, 1996 with respect to Unit 329 Phase V Cambridge Science Park,
Milton Road, Cambridge, England.
10.13 Lease Agreement among The Master Fellows and Scholars of Trinity College, Chefaro Proprietaries Limited
and NED-INT Holdings Limited dated March 29, 1994 with respect to Unit 327 Phase V Cambridge Science
Park, Milton Road, Cambridge, England.
10.14 Lease Agreement between The Master Fellows and Scholars of Trinity College Cambridge and IBRD Europe,
Inc. dated April 29, 1993 with respect to Unit 324 Phase 5 Cambridge Science Park, Milton Road,
Cambridge, England.
10.15 Lease Agreement between the Master Fellows and Scholars of Trinity College Cambridge and IBRD Europe,
Inc. dated November 26, 1992 with respect to Unit 321 Phase 5 Cambridge Science Park, Milton Road,
Cambridge, England.
10.16 Director's Service Agreement between Peptide Therapeutics Group plc and Nicolas Higgins dated November
29, 1996, as amended September 18, 1998.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.17 Director's Service Agreement between Peptide Therapeutics Group plc and Gordon Cameron dated March 1,
1997, as amended September 18, 1998.
10.18 Director's Service Agreement between Peptide Therapeutics plc and John Brown dated March 1, 1997
10.19 Letter of Appointment between Peptide Therapeutics Group plc and Alan Dalby dated March 25, 1998.
10.20 Letter of Appointment between Peptide Therapeutics Group plc and Alan Smith dated January 8, 1998, as
amended April 30, 1998.
10.21 Letter of Appointment between Peptide Therapeutics Group plc and Sir Brian Richards dated March 1, 1997,
as amended May 1, 1998.
10.22 Letter of Appointment between Peptide Therapeutics Group plc and Alan Goodman dated July 14, 1998.
10.23 Peptide Therapeutics Group plc 1994 Unapproved Share Option Scheme.
10.24 Peptide Therapeutics Group plc 1995 Savings-Related Share Option Scheme.
10.25 Peptide Therapeutics Group plc 1995 Unapproved Share Option Scheme.
10.26 Peptide Therapeutics Group plc 1996 Approved Share Option Scheme.
10.27 Peptide Therapeutics Group plc Share Incentive Plan.
21.1 Subsidiaries of Peptide
23.1 Consent of Weil, Gotshal & Manges (included as part of Exhibit 5.1).
23.2 Consent of Arthur Anderson, independent auditors.
23.3 Consent of PricewaterhouseCoopers LLP, independent accountants.
23.4 Consent of Lance Gordon to serve as a director.
23.5 Consent of Hambrecht & Quist LLP
24.1 Powers of Attorney (included on the signature page).
99.1 Form of proxy to be mailed to stockholders of OraVax, Inc.
</TABLE>
- ------------------------
* To be filed by amendment.
<PAGE>
EXHIBIT 2.2
AMENDMENT NO. 1 TO RESTATED
AGREEMENT AND PLAN OF ACQUISITION
This Amendment No. 1 to Restated Agreement and Plan of Acquisition
(this "Amendment") is entered into as of January 8, 1999 by and among Peptide
Therapeutics Group plc ("Parent"), Peach Acquisition Corp. ("Merger Sub") and
OraVax, Inc. ("Seller"). Capitalized terms not otherwise defined herein shall
have the meanings given to them in that certain Agreement and Plan of
Acquisition dated as of November 10, 1998 among Parent, Merger Sub and Seller
(as restated, the "Merger Agreement").
WHEREAS, Parent, Merger Sub and Seller have entered into the Merger
Agreement pursuant to which Seller shall be acquired by Parent through a merger
of Merger Sub with and into Seller; and
WHEREAS, Parent, Merger Sub and Seller desire to amend the Merger
Agreement as set forth herein pursuant to Section 9.5 thereto;
NOW, THEREFORE, the parties, intending to be legally bound, hereby
agree as follows:
1. Section 1.6(a) of the Merger Agreement is hereby amended to read in
its entirety as follows:
"1.6 CONVERSION OF STOCK
(a) At the Effective Time, by virtue of the Merger
and without any action on the part of Parent, Merger Sub or Seller:
(i) All shares of common stock, $0.001 par
value per share, of Seller (the "Seller Common Stock") outstanding immediately
prior to the Effective Time, other than (A) shares held by Seller as treasury
stock or shares held by any Seller Subsidiary (as defined in Section 2.4) and
shares held by Parent or its affiliates and (B) Dissenting Shares (as defined in
Section 1.9), shall be converted into and become the right to receive, in the
aggregate, that number (subject to payment of cash in lieu of fractional shares
as provided in Section 1.11) of ordinary shares, nominal value of 10 pence per
share, of Parent ("Parent Common Stock"), determined by dividing (x) the Common
Stock Consideration (as defined below) by (y) the Market Value (as defined
below) of a share of Parent Common Stock. The "Common Stock Consideration" shall
mean $15,000,000 less the sum of (A) $2,953,334 (the amount an affiliate of
Parent paid on or about November 10, 1998 to acquire approximately 95% of the
then outstanding shares of Seller Preferred Stock), (B) amounts payable by
Parent pursuant to Section 1.6(a)(ii), provided, however, no deduction shall be
made for payments pursuant to Section 1.6(a)(ii) with respect to shares of
Parent Preferred Stock which Parent or its affiliates acquired on or about
November 10, 1998 and subsequently transferred, (C) the excess of (x) the number
of shares of Seller Common Stock represented by each Seller Option and Seller
Common Warrant multiplied by the Conversion Ratio less (y) the exercise price
for such shares for which
<PAGE>
(x) exceeds (y) (as such terms are hereinafter defined) and (D) all amounts paid
or payable pursuant to Section 1.7(b) or otherwise paid or payable by Parent to
acquire Seller Preferred Warrants. The Common Stock Consideration shall be
reduced by the consideration that would otherwise be allocable to Dissenting
Shares if the holders thereof had not properly exercised rights under the DGCL.
The Common Stock consideration shall be increased by the percentage by which (x)
the number of shares of Seller Common Stock outstanding at the Effective Time
less (1) shares held by Seller as treasury stock, (2) shares held by any Seller
Subsidiary, (3) shares held by Parent or its affiliates and (4) Dissenting
Shares exceeds (y) the number of shares of Seller Common Stock outstanding at
the Effective Time less (1) shares held by Seller as treasury stock, (2) shares
held by any Seller Subsidiary, (3) shares held by Parent or its affiliates, (4)
Dissenting Shares and (5) without double counting, the number of shares of
Seller Common Stock held by third parties who acquired those shares, directly or
indirectly, from Parent or its affiliates, including by conversion of Seller
Preferred Stock acquired, directly or indirectly, from Parent or its affiliates.
(ii) Each share of Seller 6% Convertible
Preferred Stock ("Seller Preferred Stock") which has not been converted into
Seller Common Stock prior to the Effective Time, other than shares of Seller
Preferred Stock held by Parent or its affiliates, shall be converted into the
greater of (x) the right to receive in cash $1,090.00 (the "Per Share Preferred
Stock Consideration") plus accrued but unpaid dividends and (y) the Liquidation
Preference pursuant to the terms of the Seller Preferred Stock.
(iii) All shares of Seller Common Stock held
at the Effective Time by Seller as treasury stock or by a Seller Subsidiary, and
all shares of Seller Preferred Stock and Seller Common Stock held at the
Effective Time by Parent or its affiliates, shall be cancelled and no payment
shall be made with respect thereto.
(iv) All Dissenting Shares shall be handled
in accordance with Section 1.9.
(v) Each share of common stock of Merger
Sub, $0.01 par value per share, outstanding immediately prior to the Effective
Time shall be converted into and become one outstanding fully paid and
nonassessable share of common stock of the Surviving Corporation."
2. Except as amended hereby, the Merger Agreement shall remain
unchanged and shall remain in full force and effect.
3. This Amendment may be executed in any number of counterparts, each
of which shall be an original, but all of which together shall constitute one
instrument.
2
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed by their respective duly authorized representatives as of the date
first above written.
PEPTIDE THERAPEUTICS GROUP PLC
By: /S/ GORDON CAMERON
-----------------------------
Gordon Cameron
Finance Director
PEACH ACQUISITION CORP.
By: /S/ GORDON CAMERON
-----------------------------
Gordon Cameron
Treasurer
ORAVAX, INC.
By: /S/LANCE GORDON
-----------------------------
Lance Gordon
President & CEO
3
<PAGE>
Exhibit 3.1
The Companies Act 1985 to 1989
Public Company Limited by Shares
Company Number: 2863682
MEMORANDUM
AND
ARTICLES OF ASSOCIATION
PEPTIDE THERAPEUTICS GROUP plc
Incorporated the 19th October 1993
<PAGE>
THE COMPANIES ACTS 1985 TO 1989
PUBLIC COMPANY LIMITED BY SHARES
MEMORANDUM OF ASSOCIATION OF
PEPTIDE THERAPEUTICS GROUP plc
*1. The Company's name is "Peptide Therapeutics Group plc".
2. The Company is to be a public company.
3. The Company's registered office is to be situated in England and Wales.
4. The Company's objects are:
(i)(A) to act or carry on business as a holding company and to control and
co-ordinate the administration and operation of any new companies
from time to time directly or indirectly controlled by the Company.
(B) to carry on the business of providing, promoting, developing and
researching technology and development in all subjects relating to
bio-technology and life sciences and to undertake the use and
applications of technology in any way, in any country and for all
purposes including manufacturing, industrial, importing, exporting
and licensing and generally to carry on any agency, brokering,
consulting and advising businesses or activities.
(ii) Without prejudice to the generality of the foregoing to carry on the
following businesses:
(a) to purchase or by any other means acquire and take options over
any property whatever, and any rights or privileges of any kind
over or in respect of any property
(b) to apply for, register, purchase, or by other means acquire and
protect, prolong and renew, whether in the United Kingdom or
elsewhere any patents, patent rights, brevets d'invention,
licences, secret processes, trade marks, designs, protections
and concessions and to disclaim, alter, modify, use and turn to
account and to manufacture under or grant licences or
privileges in respect of the same, and to expend money in
experimenting upon, testing and improving any patents,
inventions or rights which the Company may acquire or propose
to acquire;
(1) ----------------------
* The company was incorporated as a private company limited by shares with
the name Dutybonus Company Limited and was re-registered as a public
company with the name Peptide Therapeutics plc on 10th May 1994. The name
of the Company was changed to Peptide Therapeutics Group plc on 20th July
1994.
<PAGE>
(c) to acquire or undertake the whole or any part of the business,
goodwill, and assets of any person, firm, or company carrying
on or proposing to carry on any of the businesses which the
Company is authorised to carry on and as part of the
consideration for such acquisition to undertake all or any of
the liabilities of such person, firm or company, or to acquire
an interest in, amalgamate with, or enter into partnership or
into any arrangement for sharing profits, or for co-operation,
or for mutual assistance with any such person, firm or company,
or for subsidising or otherwise assisting any such person, firm
or company, and to give or accept, by way of consideration for
any of the acts or things aforesaid or property acquired, any
shares, debentures, debenture stock or securities that may be
agreed upon, and to hold and retain, or sell, mortgage and deal
with any shares, debentures, debenture stock or securities so
received;
(d) to improve, manage, construct, repair, develop, exchange, let
on lease or otherwise, mortgage, charge, sell, dispose of, turn
to account, grant licenses, options, rights and privileges in
respect of, or otherwise deal with all or any part of the
property and rights of the Company;
(e) to invest and deal with the moneys of the Company not
immediately required in such manner as may from time to time be
determined and to hold otherwise deal with any investments
made;
(f) to lend and advance money or give credit on any terms and with
or without security to any person, firm or company (including
without prejudice to the generality of the foregoing any
holding company, subsidiary or fellow subsidiary of, or any
other company associated in any way with, the Company), to
enter into guarantees, contracts of indemnity and suretyships
of all kinds, to receive money on deposit or loan upon any
terms, and to secure or guarantee in any manner and upon any
terms the payment of any sum of money or in the performance of
any obligation by any person, firm or company (including
without prejudice to the generality of the foregoing any such
holding company, subsidiary, fellow subsidiary or associated
company as aforesaid);
(g) to borrow and raise money in any manner and to secure the
repayment of any money borrowed, raised or owing by mortgage,
charge, standard security, lien or other security upon the
whole or any part of the Company's property or assets (whether
present or future), including its uncalled capital, and also by
a similar mortgage, charge, standard security, lien or security
to secure and guarantee the performance by the Company of any
obligation or liability it may undertake or which may become
binding on it;
(h) to draw, make, accept, endorse, discount, negotiate, execute
and issue cheques, bills of exchange, promissory notes, bills
of lading, warrants, debentures, and other negotiable or
transferable instruments.
(i) To apply for, promote, and obtain any Act of Parliament, order,
or licence of the Department of Trade or other authority for
enabling the Company
<PAGE>
to carry any of its objects into effect, or for effecting any
modification of the Company's constitution, or for any other
purpose which may seem calculated directly or indirectly to
promote the Company's interests, and to oppose any proceedings
or applications which may seem calculated directly or
indirectly to prejudice the Company's interests.
(j) To enter into any arrangements with any government or authority
(supreme, municipal, local or otherwise) that may seem
conducive to the attainment of the Company's objects or any of
them, and to obtain from any such government or authority any
charters, decrees, rights, privileges or concessions which the
Company may think desirable and to carry out, exercise, and
comply with any such charters, decrees, rights, privileges, and
concessions.
(k) To subscribe for, take, purchase, or otherwise acquire, hold,
sell, deal with and dispose of, place and underwrite shares,
stocks, debentures, debenture stocks, bonds, obligations or
securities issued or guaranteed by any other company
constituted or carrying on business in any part of the world,
and debentures, debenture stocks, bonds, obligations or
securities issued or guaranteed by any government or authority,
municipal, local or otherwise, in any part of the world.
(l) To control, manage, finance, subsidise, co-ordinate or
otherwise assist any company or companies in which the Company
has a direct or indirect financial interest, to provide
secretarial, administrative, technical, commercial and other
services and facilities of all kinds for any such company or
companies and to make payments by way of subvention or
otherwise and any other arrangements which may seem desirable
with respect to any business or operations of or generally with
respect to any such company or companies.
(m) To promote any other company for the purpose of acquiring the
whole or any part of the business or property or undertaking or
any of the liabilities of the Company, or of undertaking any
business or operations which may appear likely to assist or
benefit the Company or to enhance the value of any property or
business of the Company, and to place or guarantee the placing
of, underwrite, subscribe for, or otherwise acquire all or any
part of the shares or securities of any such company as
aforesaid.
(n) To sell or otherwise dispose of the whole or any part of the
business or property of the Company, either together or in
portions, for such consideration as the Company may think fit,
and in particular for shares, debentures, or securities of any
company purchasing the same.
(o) To act as agents or brokers and as trustees for any person,
firm or company, and to undertake and perform sub-contracts.
(p) To remunerate any person, firm or company rendering services to
the Company either by cash payment or by the allotment to him
or them of shares or other securities of the Company credited
as paid up in full or in part or otherwise as may be thought
expedient.
<PAGE>
(q) To distribute among the Members of the Company in kind any
property of the Company of whatever nature.
(r) To pay all or any expenses incurred in connection with the
promotion, formation and incorporation of the Company, or to
contract with any person, firm or company to pay the same, and
to pay commissions to brokers and others for underwriting,
placing, selling, or guaranteeing the subscription of any
shares or other securities of the Company.
(s) To support and subscribe to any charitable or public object and
to support and subscribe to any institution, society, or club
which may be for the benefit of the Company or its Directors or
employees, or may be connected with any town or place where the
Company carries on business; to give or award pensions,
annuities, gratuities, and superannuation or other allowances
or benefits or charitable aid and generally to provide
advantages, facilities and services for any persons who are or
have been Directors of, or who are or have been employed by, or
who are serving or have served the Company, or any company
which is a subsidiary of the Company or the holding company of
the Company or a fellow subsidiary of the Company or the
predecessors in business of the Company or of any such
subsidiary, holding or fellow subsidiary company and to the
wives, widows, children and other relatives and dependants of
such persons; to make payments towards insurance including
insurance for any Director, officer or Auditor against any
liability as is referred to in Section 310(1) of the Act; and
to set up, establish, support and maintain superannuation and
other funds or schemes (whether contributory or
non-contributory) for the benefit of any of such persons and of
their wives, widows, children and other relatives and
dependants; and to set up, establish, support and maintain
profit sharing or share purchase schemes for the benefit of any
of the employees of the Company or of any such subsidiary,
holding or fellow subsidiary company and to lend money to any
such employees or to trustees on their behalf to enable any
such purchase schemes to be established or maintained.
(t) Subject to and in accordance with a due compliance with the
provisions of Sections 155 to 158 (inclusive) of the Act (if
and so far as such provisions shall be applicable), to give,
whether directly or indirectly, any kind of financial
assistance (as defined in Section 152(1)(a) of the Act) for any
such purpose as is specified in Section 151(1) and/or Section
151(2) of the Act.
(u) To procure the Company to be registered or recognised in any
part of the world.
(v) To do all or any of the things or matters aforesaid in any part
of the world and either as principals, agents, contractors or
otherwise, and by or through agents, brokers, sub-contractors
or otherwise and either alone or in conjunction with others.
<PAGE>
(w) To do all such other things as may be deemed incidental or
conducive to the attainment of the Company's object or of any
of the powers given to it by the Act or by this Clause.
AND so that:
(1) None of the provisions set forth in any sub-clause of this Clause shall
be restrictively construed but the widest interpretation shall be given
to each such provision, and none of such provisions shall, except where
the context expressly so requires, be in any way limited or restricted by
reference to or inference from any other provision set forth in such
sub-clause, or by reference to or inference from the terms of any other
sub-clause of this Clause, or by reference to or inference from the name
of the Company.
(2) The word "Company" in this Clause, except where used in reference to the
Company, shall be deemed to include any partnership or other body of
persons, whether incorporated or unincorporated and whether domiciled in
the United Kingdom or elsewhere.
(3) In this Clause the expression "the Act" means the Companies Act 1985, but
so that any reference in this Clause to any provision of the Act shall be
deemed to include a reference to any statutory modification or
re-enactment of that provision for the time being in force.
5. The liability of the Members is limited.
** 6. The Company's share capital is L2,320,000 divided into 2,320,000
shares of L1 each.
(1) ------------------------
** NOTES:
(1) By an Ordinary Resolution passed on 3rd May 1994 the authorised
share capital of the Company was increased from L1,000 to
L1,700,000 by the creation of 1,699,000 ordinary shares of
L1 each.
(2) By an Ordinary Resolution passed on 26th May 1994 the authorised
share capital of the Company was increased from L1,700,000 to
L2,000,000 by the creation of 300,000 ordinary shares of
L1 each.
(3) By an Ordinary Resolution passed on 15th December 1994 the
authorised share capital of the Company was increased from
L2,000,000 to L2,320,000 by the creation of 320,000
ordinary shares of L1 each.
(4) By a Special Resolution passed on 3rd November 1995 and which became
effective on the admission of the whole of the ordinary share
capital of the Company to listing on the official list of the London
Stock Exchange each ordinary share of L1 each in the capital
of the Company was subdivided into 10 ordinary shares of 10p each
and the authorised share capital of the Company was increased from
L2,320,000 to L4,320,000 by the creation of 20 million
further ordinary shares of 10p each.
We, the subscribers to this Memorandum of Association, wish to be
formed into a Company pursuant to this Memorandum; and we agree to take
the number of shares shown opposite our respective names.
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Number of shares taken
Names and Addresses of Subscribers by each Subscriber
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
1. Instant Companies Limited One
2 Baches Street
London N1 6UB
2. Swift Incorporations Limited One
2 Baches Street
London N1 6UB
-----------------
Total shares taken Two
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
Dated this 1st day of July, 1993.
Witness to the above Signature: Mark Anderson
2 Baches Street
London
N1 6UB
<PAGE>
THE COMPANIES ACTS 1985 and 1989
---------------------------
PUBLIC COMPANY LIMITED BY SHARES
----------------------------
NEW
ARTICLES OF ASSOCIATION
of
PEPTIDE THERAPEUTICS GROUP plc
Incorporated the 19th day of October 1993
Registered as a public company the 10th day of May 1994
New articles of association adopted 3rd November 1995
<PAGE>
CONTENTS
PAGE
PRELIMINARY
1. Exclusion of Table A
2. Definitions
SHARE CAPITAL
3. Share Capital
VARIATION OF RIGHTS
4. Sanction required for variation
5. Actions constituting a variation of rights
SHARES
6. Further issues
7. Unissued shares
8. Redeemable shares
9. Payment of commission
10. Trusts not recognised
SHARE CERTIFICATES
11. Right to share certificate
12. Execution of share certificates
13. Replacement of share certificates
LIEN ON SHARES
14. Company's lien on shares not fully paid
15. Enforcing lien by sale
16. Giving effect to a sale
17. Application of proceeds of sale
CALLS ON SHARES
18. Calls
19. When call made
20. Liability of joint holders
21. Interest due on non-payment
22. Sums payable treated as calls
23. Power to differentiate
24. Payment of calls in advance
<PAGE>
FORFEITURE AND SURRENDER OF SHARES
25. Notice if call not paid
26. Forfeiture on non-compliance with notice
27. Disposal of forfeited shares
28. Effect of forfeiture
29. Statutory declaration as to forfeiture
TRANSFER OF SHARES
30. Form of transfer
31. Refusal of registration of partly-paid share
32. Other rights to refuse registration
33. Notice of refusal
34. Suspension of registration
35. No fee for registration
36. Retention of transfers
37. Renunciation deemed to be a transfer
TRANSMISSION OF SHARES
38. Transmission on death
39. Election of person entitled by transmission
40. Rights of person entitled by transmission
UNTRACEABLE SHAREHOLDERS
41. Untraceable shareholders
DISCLOSURE OF INTERESTS
42. Disclosure of interests
ALTERATION OF SHARE CAPITAL
43. Increase, consolidation, sub-division and cancellation
44. Fractions arising on consolidation
45. Reduction of capital
PURCHASE OF OWN SHARES
46. Purchase of own shares
GENERAL MEETINGS
47. Annual general meetings
48. Calling of general meetings
<PAGE>
NOTICE OF GENERAL MEETINGS
49. Length of notice
50. Contents of notice
51. Omission or non-receipt of notice
PROCEEDINGS AT GENERAL MEETINGS
52. Special business
53. Quorum
54. Procedure if quorum not present
55. Chairman
56. Directors' right to attend and speak
57. Adjournment
58. Amendments to resolutions
59. Method of voting and demand for a poll
60. Declaration by chairman
61. Withdrawal of demand for a poll
62. Method of taking a poll
63. Casting vote
64. When poll to be taken
65. Notice of a poll
66. Written resolution
VOTES OF MEMBERS
67. Votes of members
68. Joint holders
69. Votes on behalf of incapable members
70. No right to attend or vote where sums overdue
71. Objections to voters
PROXIES
72. Appointment of proxy
73. Form of proxy
74. Delivery of proxies
75. Determination of proxy's authority
REPRESENTATIVES OF CORPORATIONS
76. Representatives of corporations
CLASS MEETINGS
77. Class meetings
NUMBER OF DIRECTORS
78. Number of directors
<PAGE>
APPOINTMENT AND RETIREMENT OF DIRECTORS
79. Number to retire by rotation
80. Identity of directors to retire
81. Deemed reappointment of retiring director
82. Age of directors
83. Persons eligible as directors
84. Power of the company to appoint directors
85. Power of the board to appoint directors
DISQUALIFICATION AND REMOVAL OF DIRECTORS
86. Power of removal by special resolution
87. Vacation of office
ALTERNATE DIRECTORS
88. Appointment of alternate directors
89. Termination of appointment
90. Effect of appointment
91. Expenses and remuneration
92. Alternate director to be an officer
93. Method of appointment and removal
94. Appointee acting in more than one capacity
POWERS OF DIRECTORS
95. General powers of the company vested in the board
96. Local Board
97. Appointment of attorneys and agents
DELEGATION OF DIRECTORS' POWERS
98. Delegation of directors' powers
BORROWING POWERS
99. Borrowing powers
EXECUTIVE DIRECTORS
100. Appointment to executive offices
101. Exemption from retirement by rotation
102. Executive office not linked to directorship
103. Emoluments of executive directors
104. Delegation to executive directors
<PAGE>
ASSOCIATE DIRECTORS
105. Associate directors
REMUNERATION OF DIRECTORS
106. Directors' fees
107. Extra remuneration
DIRECTORS' EXPENSES
108. Directors' expenses
DIRECTORS' GRATUITIES AND PENSIONS
109. Directors' gratuities and pensions
DIRECTORS' INTERESTS
110. Interests to be disclosed
111. Permitted interests
112. Director may act in a professional capacity
113. Voting on matters where a director is interested
114. Quorum when a director is not entitled to vote
115. Proposals may be considered separately
116. Chairman to decide whether a director may vote
PROCEEDINGS OF THE BOARD
117. Notice of board meetings
118. Voting at board meetings
119. Quorum
120. Participation in meetings by telephone
121. Number of directors below quorum
122. Chairman
123. Resolution in writing
124. Validity of acts
SECRETARY
125. Secretary
MINUTES
126. Minutes
THE SEAL
127. Use of seal
128. Official seal
<PAGE>
DIVIDENDS
129. Declaration of dividends by the company
130. Calculation of dividends
131. Board may pay interim and fixed dividends
132. Amounts due on shares may be deducted
133. No interest on dividends
134. Record dates
135. Payment to persons entitled by transmission
136. Payment procedure
137. Uncashed dividends
138. Dividends other than in cash
139. Scrip dividends
140. Joint holders
ACCOUNTS
141. Members have no right to inspect records
142. Delivery of accounts
CAPITALISATION OF PROFITS
143. Capitalisation of profits
NOTICES
144. Notices to be in writing
145. Method of service
146. Members with overseas addresses
147. Member present deemed to have received notice
148. Service of notice on person entitled by transmission
149. Untraced member not entitled to notices
150. When notice deemed served
151. Notice when post not available
AUTHENTICATION OF DOCUMENTS
152. Authentication of documents
DESTRUCTION OF DOCUMENTS
153. Destruction of documents
WINDING UP
154. Winding up
<PAGE>
INDEMNITY
155. Indemnity
<PAGE>
THE COMPANIES ACTS 1985 and 1989
---------------------------
PUBLIC COMPANY LIMITED BY SHARES
----------------------------
NEW
ARTICLES OF ASSOCIATION
of
PEPTIDE THERAPEUTICS GROUP plc
(adopted by Special Resolution passed on 3rd November 1995)
---------------------------
PRELIMINARY
1 No regulations for management of a company set out in any schedule to, or
subordinate legislation made under, any statute concerning companies shall
apply to the Company, but these Articles alone shall be the Articles of
Association of the Company.
2 In these Articles, if not inconsistent with the subject or context, the
words standing in the first column of the following table shall bear the
meanings set opposite them respectively in the second column:
WORDS MEANINGS
the Act the Companies Act 1985
the Acts the Act, the Companies Act 1989 and all other statutes,
orders, regulations or other subordinate legislation
for the time being in force concerning companies so far
as they apply to the Company
Alternate Director an alternate director appointed in accordance with
Article 88
these Articles these Articles of Association as from time to time
altered
the Auditors the auditors for the time being of the Company
<PAGE>
the Board the Directorsor any of them acting as the Board of
Directors of the Company
calendar year year from 1st January to 31st December inclusive
clear days in relation to the period of a notice means that period
excluding the day when the notice is given or deemed to
be given and the day for which it is given or on which
it is to take effect
connected with in relation to a Director has the meaning given by
section 346 of the Act
the Directors the directors for the time being of the Company
dividend dividend or bonus
Executive Director a Director holding any office or employment or
providing any services as referred to in Article 100
the Group the Company and all Subsidiary Undertakings for the
time being
the holder in relation to shares means the member whose name is
entered in the Register as the holder of the shares
the London Stock The International Stock Exchange of the United Kingdom
Exchange and the Republic of Ireland Limited or any successor to
its functions
member a member of the Company
the Office the registered office of the Company
paid paid or credited as paid
the Register the register of members of the Company
the Seal the common seal of the Company
the Secretary the secretary of the Company or any other person
appointed by the Board to perform the duties of the
secretary of the Company including a joint, assistant
or deputy secretary
Subsidiary Undertaking a subsidiary undertaking of the Company
the Transfer Office the place where the Register is for the time being
situated
the United Kingdom Great Britain and Northern Ireland
in writing written, or produced by any legible and non-transitory
visible substitute for writing, or partly one and
partly another
<PAGE>
year any period of 12 consecutive months
Words denoting the masculine gender shall include the feminine and neuter
genders; words denoting the singular number shall include the plural number and
vice versa; words denoting persons shall include corporations.
Save as aforesaid any words or expressions defined in the Act shall, if not
inconsistent with the subject or context, bear the same meaning in these
Articles.
All references in these Articles to the Act, to any section or provision of the
Act or to any other statute or statutory provision shall be deemed to include a
reference to any statutory re-enactment or modification thereof for the time
being in force.
SHARE CAPITAL
3 *The share capital of the Company is L2,320,000 divided into
2,320,000 ordinary shares of L1 each.
VARIATION OF RIGHTS
4 Subject to the Acts, whenever the capital of the Company is divided into
different classes of shares, the rights attached to any class may (unless
otherwise provided by the terms of issue of the shares of that class) be
varied or abrogated, whether or not the Company is being wound up, either
with the consent in writing of the holders of three-fourths of the issued
shares of the class or with the sanction of an extraordinary resolution
passed at a separate meeting of such holders (but not otherwise).
5 The special rights conferred upon the holders of any shares or class of
shares shall, unless otherwise provided by these Articles or the terms of
issue of the shares concerned, be deemed to be varied by a reduction of
capital paid up on those shares but shall be deemed not to be varied by
the creation or issue of further shares ranking pari passu with them or
subsequent to them. No consent or sanction of the holders of ordinary
shares shall be required under Article 4 to any variation or abrogation
effected by a resolution on which only the holders of ordinary shares are
entitled to vote.
SHARES
6 Subject to the provisions of the Acts and without prejudice to any rights
attached to any existing shares, any share may be issued with such rights
or restrictions as the Company my by ordinary resolution determine, or in
the absence of such determination, or so far as any such resolution does
not make specific provision, as the Board may determine.
7 Subject to the provisions of the Acts and to any resolution of the
Company in general meeting, all unissued shares of the Company shall be
at the disposal of the Board which
(1) ------------------------
* By a Special Resolution passed on 3rd November 1995 and which became
effective on the admission of the whole of the ordinary share capital of
the Company to listing on the Official List of the London Stock Exchange
each ordinary share of L1 each in the capital of the Company was
sub-divided into 10 ordinary shares of 10p each and the authorised share
capital of the Company was increased from L2,320,000 to
L4,320,000 by the creation of 20 million further ordinary shares of
10p each.
<PAGE>
may allot, grant options over or otherwise dispose of them to such
persons, on such terms and at such times as it may think fit.
8 Subject to the provisions of the Acts, shares may be issued which are to
be redeemed or are liable to be redeemed at the option of the Company or
the holder on such terms and in such manner as may be provided by or in
accordance with these Articles.
9 In addition to all other powers of paying commissions the Company may
exercise the powers of paying commissions conferred by the Acts. Subject
to the provisions of the Acts, any such commission may be satisfied by
the payment of cash or by the allotment of fully or partly paid shares or
partly in one way and partly in the other.
10 Except as required by law, no person shall be recognised by the Company
as holding any share upon any trust and (except as otherwise provided by
these Articles or by law) the Company shall not be bound to recognise any
interest in any share except an absolute right to the entirety of the
share in the holder.
SHARE CERTIFICATES
11 Every member, upon becoming the holder of any shares (other than a person
who is not entitled to a certificate under the Acts) shall be entitled,
without payment, to receive within five business days after allotment or
lodgement of a transfer to them of those shares one certificate for all
the shares of each class held by him and, upon transferring a part of the
shares comprised in a certificate, a certificate for the balance of such
shares. Shares of different classes may not be included in the same
certificate. The Company shall not be bound to issue more than one
certificate for shares held jointly by several persons and delivery of a
certificate to one joint holder shall be a sufficient delivery to all of
them.
12 Share certificates of the Company (other than letters of allotment, scrip
certificates and other like documents) shall, unless the Board by
resolution otherwise determines, either generally or in any particular
case or cases, be issued under the Seal or under any official seal kept
by the Company by virtue of section 40 of the Act. Whether or not share
certificates are issued under a seal, the Board may by resolution
determine, either generally or in any particular case or cases, that any
signatures on any certificates for shares, stock or debenture or loan
stock (except where the trust deed constituting any stock or debenture or
loan stock provides to the contrary) or representing any other form of
security of the Company need not be autographic but may be applied to the
certificates by some mechanical means or may be printed thereon or that
such certificates need not be signed by any person. Every share
certificate shall specify the number and class of the shares to which it
relates and the amount paid up on such shares.
13 If a share certificate is worn out, defaced, stolen or destroyed, it may
be renewed without payment of any fee but on such terms (if any) as to
evidence and indemnity with or without security and otherwise as the
Board requires and, in the case of a worn out or defaced certificate, on
delivery up of that certificate. In the case of loss, theft or
destruction, the person to whom the new certificate is issued may be
required to pay to the Company any exceptional out of pocket expenses
incidental to the investigation of evidence of loss, theft or destruction
and the preparation of the requisite form of indemnity.
<PAGE>
LIEN ON SHARES
14 The Company shall have a first and paramount lien on every share (not
being a fully paid share) for all moneys (whether presently payable or
not) payable at a fixed time or called in respect of that share. The
Board may at any time declare any share to be wholly or in part exempt
from the provisions of this Article. The Company's lien on a share shall
extend to any amount payable in respect of it and to any share or
security issued in right of it.
15 The Company may sell in such manner as the Board determines any shares on
which the Company has a lien if the sum in respect of which the lien
exists is presently payable and is not paid within fourteen clear days
after notice has been given to the holder of the share or to the person
entitled to it in consequence of the death or bankruptcy of the holder or
otherwise by operation of law, demanding payment and stating that if the
notice is not complied with the shares may be sold.
16 To give effect to a sale the Board may authorise some person to execute
an instrument of transfer of the shares sold to, or in accordance with
the directions of, the purchaser. The purchaser shall not be bound to see
to the application of the purchase moneys, and the title of the
transferee to the shares shall not be affected by any irregularity in or
invalidity of the proceedings relating to the sale.
17 The net proceeds of the sale, after payment of the costs of sale, shall
be applied in or towards payment of so much of the sum for which the lien
exists as is presently payable, and any residue shall (upon surrender to
the Company for cancellation of the certificate for the shares sold and
subject to a like lien for any moneys not presently payable as existed
upon the shares before the sale) be paid to the person entitled to the
shares at the date of the sale.
CALLS ON SHARES
18 Subject to the terms of allotment, the Board may make calls upon the
members in respect of any moneys unpaid on their shares (whether in
respect of nominal value or premium) and each member shall (subject to at
least fourteen clear days' notice having been given specifying when and
where payment is to be made) pay to the Company as required by the notice
the amount called on his shares. A call may be required to be paid by
instalments. A call may, before receipt by the Company of any sum due
thereunder, be revoked in whole or in part and payment of a call may be
postponed in whole or part. A person upon whom a call is made shall
remain liable jointly and severally with the successors in title to his
shares for calls made upon him notwithstanding the subsequent transfer of
the shares in respect of which the call was made.
19 A call shall be deemed to have been made at the time when the resolution
of the Board authorising the call was passed.
20 The joint holders of a share shall be jointly and severally liable to pay
all calls in respect of that share.
21 If a call remains unpaid after it has become due and payable the person
from whom the sum is due and payable shall pay interest on the amount
unpaid from the day it became due and payable until it is paid at the
rate fixed by the terms of allotment of the share or
<PAGE>
in the notice of the call or, if no rate is fixed, at the appropriate
rate, but the Board may waive payment of the interest wholly or in part.
22 An amount payable in respect of a share on allotment or at any fixed
date, whether in respect of nominal value or premium or as an instalment
of a call, shall be deemed to be a call and if it is not paid the
provisions of these Articles shall apply as if that amount had become due
and payable by virtue of a call.
23 Subject to the terms of allotment, the Board may make arrangements on the
issue of shares for a difference between the holders in the amounts and
times of payment of calls on their shares.
24 The Board may, if it thinks fit, receive from any member willing to
advance it, all or any part of the moneys uncalled and unpaid upon any
shares held by him, and may pay upon all or any of the moneys so advanced
(until the same would but for such advance become presently payable)
interest at the appropriate rate or at such other rate as may be agreed
between the Board and such member, subject to any directions of the
Company in general meeting.
FORFEITURE AND SURRENDER OF SHARES
25 If a call remains unpaid after it has become due and payable the Board
may give to the person from whom it is due not less than fourteen clear
days' notice requiring payment of the amount unpaid together with any
interest which may have accrued and any costs, charges and expenses
incurred by the Company by reason of such non-payment. The notice shall
name the place where payment is to be made and shall state that if the
notice is not complied with the shares in respect of which the call was
made will be liable to be forfeited.
26 If the notice is not complied with any share in respect of which it was
given may, before the payment required by the notice has been made, be
forfeited by a resolution of the Board and the forfeiture shall include
all dividends or other moneys payable in respect of the forfeited shares
and not paid before the forfeiture. The Board may accept upon such terms
and conditions as may be agreed a surrender of any share liable to be
forfeited and, subject to such terms and conditions, a surrendered share
shall be treated as if it had been forfeited.
27 Subject to the provisions of the Acts, a forfeited share may be sold,
re-allotted or otherwise disposed of on such terms and in such manner as
the Board determines either to the person who was before the forfeiture
the holder or to any other person and at any time before sale,
re-allotment or other disposition, the forfeiture may be cancelled on
such terms as the Board thinks fit. Where for the purposes of its
disposal a forfeited share is to be transferred to any person the Board
may authorise some person to execute an instrument of transfer of the
share to that person.
28 A person any of whose shares have been forfeited shall cease to be a
member in respect of them and shall surrender to the Company for
cancellation the certificate for the shares forfeited but shall remain
liable to the Company for all moneys which at the date of forfeiture were
presently payable by him to the Company in respect of those shares with
interest at the rate at which interest was payable on those moneys before
the forfeiture or, if no interest was so payable, at the appropriate rate
from the date of forfeiture until
<PAGE>
payment but the Board may waive payment wholly or in part or enforce
payment without any allowance for the value of the shares at the time of
forfeiture or for any consideration received on their disposal.
29 A statutory declaration by a Director or the Secretary that a share has
been forfeited or sold to satisfy a lien of the Company on a specified
date shall be conclusive evidence of the facts stated in it as against
all persons claiming to be entitled to the share and the declaration
shall (subject to the execution of an instrument of transfer if
necessary) constitute a good title to the share and the person to whom
the share is disposed of shall not be bound to see to the application of
the consideration, if any, nor shall his title to the share be affected
by any irregularity in or invalidity of the proceedings relating to the
forfeiture, sale or disposal of the share.
TRANSFER OF SHARES
30 The instrument of transfer of a share may be in any usual form or in any
other form which the Board may approve and shall be executed by or on
behalf of the transferor and, unless the share is fully paid, by or on
behalf of the transferee. The transferor shall be deemed to remain the
holder of the share until the name of the transferee is entered in the
Register in respect of it.
31 The Board may refuse in its absolute discretion to register the transfer
of a share which is not fully paid but shall not be bound to specify the
grounds upon which such registration is refused provided that such
refusal does not prevent dealings taking place on an open and proper
basis.
32 The Board may also refuse to register a transfer unless the instrument of
transfer is:
(1) duly stamped or duly certified or otherwise shown to the
satisfaction of the Board to be exempt from stamp duty, is lodged at
the Transfer Office or at such other place as the Board may appoint
and (save in the case of a transfer by a person to whom no
certificate was issued in respect of the shares in question)
accompanied by the certificate for the shares to which it relates,
and such other evidence as the Board may reasonably require to show
the right of the transferor to make the transfer and, if the
instrument of transfer is executed by some other person on his
behalf, the authority of that person so to do;
(2) in respect of only one class of shares; and
(3) in favour of not more than four transferees.
33 If the Board refuses to register a transfer, it shall within two months
after the date on which the transfer was lodged with the Company send to
the transferee notice of the refusal.
34 Subject to the provisions of the Acts, the registration of transfers of
shares or of transfers of any class of shares may be suspended and the
Register closed at such times and for such periods (not excluding thirty
days in any calendar year) as the Board may determine.
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35 No fee shall be charged for the registration of any instrument of
transfer or other document relating to or affecting the title to any
share or for making any entry in the Register affecting the title to any
share.
36 The Company shall be entitled to retain any instrument of transfer which
is registered, but any instrument of transfer which the Board refuses to
register shall be returned to the person lodging it when notice of the
refusal is given.
37 For all purposes of these Articles relating to the registration of
transfers of shares, the renunciation of the allotment of any shares by
the allottee in favour of some other person shall be deemed to be a
transfer and the Board shall have the same powers of refusing to give
effect to such a renunciation as if it were a transfer.
TRANSMISSION OF SHARES
38 If a member dies the survivor or survivors where he was a joint holder,
and his personal representatives where he was a sole holder or the only
survivor of joint holders, shall be the only persons recognised by the
Company as having any title to his interest; but nothing contained in
these Articles shall release the estate of a deceased member from any
liability in respect of any share which had been held (whether solely or
jointly) by him.
39 A person becoming entitled to a share in consequence of the death or
bankruptcy of a member or otherwise by operation of law may, upon such
evidence being produced as the Board may properly require and subject as
hereinafter provided, elect either to become the holder of the share or
to have some person nominated by him registered as the transferee. If he
elects to become the holder he shall give notice to the Company to that
effect. If he elects to have another person registered he shall execute
an instrument of transfer of the share to that person. All the provisions
of these Articles relating to the transfer and the registration of
transfers of shares (including any right to refuse to register any
instrument of transfer) shall apply to the notice or instrument of
transfer as if it were an instrument of transfer executed by the member
and the death or bankruptcy of the member or other event giving rise to
the entitlement had not occurred.
40 Subject to any other provisions of these Articles, a person becoming
entitled to a share in consequence of the death or bankruptcy of a member
or otherwise by operation of law shall have the rights to which he would
be entitled if he were the holder of the share, except that he shall not,
before being registered as the holder of the share, be entitled in
respect of it to receive notice of or to attend or vote at any meeting of
the Company or at any separate meeting of the holders of any class of
shares in the Company. The Board may at any time give notice requiring
any such person to elect either to be registered himself or to transfer
the share and if the notice is not complied with within sixty days the
Board may thereafter withhold payment of all dividends or other moneys
payable in respect of the share until the requirements of the notice have
been complied with.
UNTRACEABLE SHAREHOLDERS
41 (1) The Company shall be entitled to sell at the best price reasonably
obtainable any shares of a member or the shares to which a person is
entitled by virtue of transmission on death or bankruptcy or
otherwise by operation of law if and provided that:
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(a) for a period of twelve years no cheque or warrant sent by the
Company through the post in a pre-paid envelope addressed to
the member or to the person entitled to the shares at his
address on the Register or (if different) the last known
address given by the member or the person so entitled to which
cheques and warrants are to be sent has been paid and no
communication has been received by the Company from the member
or the person so entitled (in his capacity as member or person
entitled) and in such period of twelve years at least three
dividends (whether interim or final) have become payable on the
shares and no such dividend has been claimed; and
(b) the Company has at the expiration of the said period of twelve
years by advertisement in both a national newspaper and in a
newspaper circulating in the area in which the address referred
to in paragraph (1)(a) of this Article is located given notice
of its intention to sell such shares; and
(c) during the period of three months following the publication of
the said advertisements the Company has received no
communication in respect of such share from such member or
person entitled; and
(d) notice has been given in writing to the London Stock Exchange
of its intention to make such sale.
If at any time during or after the said period of twelve years
further shares have been issued in right of those held at the
commencement of that period or of any issued in right during that
period and, since the date of issue, the requirements of paragraphs
(1)(a) to (d) of this Article have been satisfied in respect of such
further shares, the Company may also sell the further shares.
(2) To give effect to a sale the Board may authorise some person
to execute an instrument of transfer of the shares to be sold.
The purchaser shall not be bound to see to the application of
the purchase moneys and the title of the transferee to the
shares shall not be affected by any irregularity in or
invalidity of the proceedings relating to the sale. The net
proceeds of sale shall belong to the Company which shall be
obliged to account to the former member or other person
previously entitled to the shares for an amount equal to the
net proceeds, which shall be a debt of the Company, and shall
enter the name of such former member or other person in the
books of the Company as a creditor for such amount. No trust
shall be created and no interest shall be payable in respect
of the debt, and the Company shall not be required to account
for any money earned on the net proceeds, which may be
employed in the business of the Company or invested in such
investments for the benefit of the Company as the Board may
from time to time determine.
DISCLOSURE OF INTERESTS
42 (1) For the purposes of this Article, unless the context otherwise
requires:
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(a) "disclosure notice" means a notice issued by or on behalf of
the Company requiring disclosure of interests in shares
pursuant to section 212 of the Act;
(b) "specified shares" means all or, as the case may be, some of
the shares specified in a disclosure notice;
(c) "restrictions" means one or more, as the case may be, of the
restriction referred to in paragraph (3) of this Article;
(d) "restriction notice" means a notice issued by or on behalf of
the Company stating, or substantially to the effect, that
(until such time as the Board determines otherwise pursuant to
paragraph (4) of this Article) the specified shares referred to
therein shall be subject to one or more of the restrictions
stated therein;
(e) "restricted shares" means all or, as the case may be, some of
the specified shares referred to in a restriction notice;
(f) a person other than a member holding a share shall be treated
as appearing to be interested in that share if:
(i) the member has informed the Company, whether under any
statutory provision relating to disclosure of interests
or otherwise, that the person is, or may be, or has been
at any time during the three years immediately preceding
the date upon which the disclosure notice is issued, so
interested; or
(ii) the Board (after taking account of any information
obtained from the member or, pursuant to a disclosure
notice, from any other person) knows or has reasonable
cause to believe that the person is, or may be, or has
been at any time during the three years immediately
preceding the date upon which the disclosure notice is
issued, so interested; or
(iii) in response to a disclosure notice, the member or any
other person appearing to be so interested has failed to
establish the identities of all those who are so
interested and (after taking into account the response
and any other relevant information) the Company has
reasonable cause to believe that such person is or may be
so interested;
(g) "connected" shall have the meaning given to it in section 839
of the Income and Corporation Taxes Act 1988;
(h) "interested" shall be construed as it is for the purpose of
section 212 of the Act;
(i) "recognised investment exchange" shall have the same meaning as
in the Financial Services Act 1986; and
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(j) for the purposes of paragraphs (2)(b) and (4) of this Article
the Company shall not be treated as having received the
information required by the disclosure notice in accordance
with the terms of such disclosure notice in circumstances where
the Board knows or has reasonable cause to believe that the
information provided is false or materially incorrect.
(2) Notwithstanding anything in these Articles to the contrary, if:
(a) a disclosure notice has been served on a member or any other
person appearing to be interested in the specified shares; and
(b) the Company has not received (in accordance with the terms of
such disclosure notice) the information required therein in
respect of any of the specified shares within fourteen days
after the service of such disclosure notice;
then the Board may (subject to paragraph (7) below)) determine that
the member holding the specified shares shall, upon the issue of a
restriction notice referring to those specified shares in respect of
which information has not been received, be subject to the
restrictions referred to in such restriction notice, and upon the
issue of such restriction notice such member shall be so subject. As
soon as practicable after the issue of a restriction notice the
Company shall serve a copy of the notice on the member holding the
specified shares.
(3) The restrictions which the Board may determine shall apply to
restricted shares pursuant to this Article shall be one or more, as
determined by the Board, of the following:
(a) that the member holding the restricted shares shall not be
entitled, in respect of the restricted shares, to attend or be
counted in the quorum or vote either personally or by proxy at
any general meeting or at any separate meeting of the holders
of any class of shares or upon any poll or to exercise any
other right or privilege in relation to any general meeting or
any meeting of the holders of any class of shares;
(b) that no transfer of the restricted shares shall be effective or
shall be registered by the Company;
(c) that no dividend (or other moneys payable) shall be paid in
respect of the restricted shares and that, in circumstances
where an offer of the right to elect to receive shares instead
of cash in respect of any dividend is or has been made, any
election made thereunder in respect of such specified shares
shall not be effective.
(4) The Board may determine that one or more of the restrictions imposed
on restricted shares shall cease to apply at any time. If the
Company receives in accordance with the terms of the relevant
disclosure notice the information required therein in respect of the
restricted shares all restrictions imposed on the restricted shares
shall cease to apply seven days after receipt of the information. In
addition, in the event that the Company receives an executed
instrument of
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transfer in respect of all or any restricted shares, which would
otherwise be given effect to, pursuant to a sale:
(a) on a recognised investment exchange; or
(b) on any stock exchange outside the United Kingdom on which the
Company's shares are normally dealt; or
(c) on the acceptance of a takeover offer (as defined in section
428 of the Act) for the shares of the class of which such
restricted shares form part
to a party not connected with the member holding such restricted
shares or with any other person appearing to be interested in such
restricted shares, then all the restrictions imposed on such
restricted shares shall cease to apply with effect from the date on
which any such transfer as aforesaid is received by the Company for
registration provided always that if, within ten days after such
receipt, the Board decides that it has reasonable cause to believe
that the change in the registered holder of such restricted shares
would not be as a result of an arm's length sale resulting in a
material change in the beneficial interests in such restricted
shares, the restrictions imposed on the restricted shares shall
continue to apply.
(5) Where the Board makes a decision pursuant to the proviso to
paragraph (4) above, the Company shall notify the purported
transferee of such decision as soon as practicable and any person
may make representations in writing to the Board concerning any such
decision. The Company shall not be liable to any person as a result
of having imposed restrictions or deciding that such restrictions
shall continue to apply if the Board acted in good faith.
(6) Where dividends or other moneys are not paid as a result of
restrictions having been imposed on restricted shares, such
dividends or other moneys shall accrue and, upon the relevant
restriction ceasing to apply, shall be payable (without interest) to
the person who would have been entitled had the restriction not been
imposed.
(7) Where the aggregate number of shares of the same class as the
specified shares in which any person appearing to be interested in
the restricted shares (together with persons connected with him)
appears to be interested represents less than 0.25 per cent. (in
nominal value) of the shares of that class in issue at the time of
service of the disclosure notice in respect of such specified shares
only the restriction referred to in sub-paragraph (3)(a) of this
Article may be determined by the Board to apply.
(8) Shares issued in right of restricted shares shall on issue become
subject to the same restrictions whilst held by that member as the
restricted shares in right of which they are issued. For this
purpose, shares which the Company offers or procures to be offered
to shareholders pro rata (or pro rata ignoring fractional
entitlements and shares not offered to certain members by reason of
legal or practical problems associated with offering shares outside
the United Kingdom) shall be treated as shares issued in right of
restricted shares.
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<PAGE>
(9) The Board shall at all times have the right, at its discretion, to
suspend, in whole or in part, any restriction notice given pursuant
to this Article either permanently or for any given period and to
pay to a trustee any dividend payable in respect of any restricted
shares or in respect of any shares issued in right of restricted
shares. Notice of any suspension, specifying the sanctions suspended
and the period of suspension, shall be given to the relevant holder
in writing within seven days after any decision to implement such a
suspension.
(10) The limitations on the powers of the Board to impose and retain
restrictions under this Article are without prejudice to the
Company's power to apply to the court pursuant to the acts to apply
these or any other restrictions on any conditions.
ALTERATION OF SHARE CAPITAL
43 The Company may by ordinary resolution:
(1) increase its share capital by new shares of such amount as the
resolution prescribes;
(2) consolidate and divided all or any of its share capital into shares
of larger amount than its existing shares;
(3) subject to the provisions of the Acts, sub-divide its shares, or any
of them, into shares of smaller amount and the resolution may
determine that, as between the shares resulting from the
sub-division, any of them may have any preference or advantage or
deferred rights or be subject to any restrictions as compared with
the others;
(4) cancel or reduce the nominal value of shares which, at the date of
the passing of the resolution, have not been taken or agreed to be
taken by any person and diminish the amount of its share capital by
the amount of the shares so cancelled or the amount of the
reduction.
44 Upon any consolidation of shares into shares of larger amount the Board may
settle any difficulty which may arise with regard to such consolidation and
in particular may, as between the holders of shares so consolidated,
determine which shares are consolidated into each consolidated share and in
the case of any shares registered in the name of one member being
consolidated with shares registered in the name of another member the Board
may make such arrangements for the allotment, acceptance and/or sale of
shares representing fractional entitlements to the consolidated share or
for the sale of the consolidated share and may sell the fractions or the
consolidated share either upon the market or otherwise to such person at
such time and at such price as it may think fit. For the purposes of giving
effect to any such sale the Board may authorise some person to execute an
instrument of transfer of the shares or fractions sold to, or in accordance
with the directions of, the purchaser. The purchaser shall not be bound to
see to the application of the purchase moneys nor shall his title to such
shares be affected by any irregularity in or invalidity of the proceedings
relating to the sale. The Board shall distribute the net proceeds of sale
among such members rateably in accordance with their rights and interests
in the consolidated share or the fractions provided that the Board shall
have power when making such arrangements to determine that no member shall
be entitled to receive such net proceeds of sale unless his entitlement
exceeds such amount as the Board shall determine (not exceeding L3
per holding) and if the Board exercises
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such power the net proceeds of sale not distributed to members as a result
shall belong absolutely to the Company.
45 Subject to the provisions of the Acts, the Company may by special
resolution reduce its share capital, any capital redemption reserve and any
share premium account or other undistributable reserve in any way.
PURCHASE OF OWN SHARES
46 Subject to the provisions of the Acts, the Company may purchase its own
shares (including any redeemable shares) and any shares to be so purchased
may (subject to any resolution of the Company in general meeting) be
selected by the Board in any manner.
GENERAL MEETINGS
47 All general meetings other than annual general meetings shall be called
extraordinary general meetings.
48 The Board may call general meetings and, on the requisition of members
pursuant to the provisions of the Acts, shall forthwith convene an
extraordinary general meeting. If there are not sufficient Directors
capable of acting to call a general meeting, any Director may call a
general meeting. If there is no Director able to act, any two members may
call a general meeting for the purpose of appointing Directors.
NOTICE OF GENERAL MEETINGS
49 Unless consent to short notice is obtained in accordance with the
provisions of the Acts, an annual general meeting or an extraordinary
general meeting called for the passing of a special resolution shall be
called by at least twenty-one clear days' notice. All other extraordinary
general meetings shall be called by at least fourteen clear days' notice.
Subject to the provisions of these Articles and to any restrictions imposed
on any shares, every notice of meeting shall be given to all the members,
all other persons who are at the date of the notice entitled to received
notices from the Company and to the Directors and auditors.
50 Every notice of meeting shall specify the place, the day and the time of
the meeting and, in the case of special business (within the meaning of
Article 52), the general nature of the business to be transacted and, in
the case of an annual general meeting, shall specify the meeting as such.
Every notice calling a meeting for the passing of an extraordinary or
special resolution shall specify the intention to propose the resolution as
an extraordinary or special resolution (as the case may be) and the terms
of the resolution. Every notice of meeting shall state with reasonable
prominence that a member entitled to attend and vote is entitled to appoint
one or more proxies to attend and (on a poll) vote instead of him and that
a proxy need not be a member.
51 The accidental omission to give notice of a meeting, or to send a form of
proxy with a notice as required by these Articles, to any person entitled
to receive the same, or the non-receipt of a notice of meeting or form of
proxy by such a person, shall not invalidate the proceedings at that
meeting.
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PROCEEDINGS AT GENERAL MEETINGS
52 All business shall be deemed special that is transacted at an extraordinary
general meeting, and all business that is transacted at an annual general
meeting shall also be deemed special with the exception of:
(1) the laying and consideration of the reports of the Directors and
Auditors, the annual accounts and any other documents required to
accompany or to be annexed to them;
(2) the sanction and declaration of dividends;
(3) the election and re-election of Directors to fill vacancies caused
by Directors retiring by rotation or otherwise;
(4) the appointment of auditors where special notice of such appointment
is not required by the Act and the fixing or determination of the
manner of fixing of their remuneration;
(5) the giving, variation or renewal of any authority to the Board for
the purpose of section 80 of the Act.
53 No business shall be transacted at any general meeting unless a quorum is
present when the meeting proceeds to business. The absence of a quorum
shall not preclude the appointment of a chairman in accordance with the
provisions of these Articles, which shall not be treated as part of the
business of the meeting. Two members present in person or by proxy and
entitled to vote upon the business to be transacted at the meeting shall be
a quorum.
54 If such a quorum is not present within fifteen minutes (or such longer time
not exceeding one hour as the chairman of the meeting may decide to wait)
from the time appointed for the meeting, the meeting, if convened on the
requisition of or by members, shall be dissolved. In any other case it
shall stand adjourned to the same place and time one week later, or to such
day (not being more than twenty-eight days after the date appointed for the
meeting) and to such time and place as the Board may determine. If the
meeting is adjourned for 14 days or more, not less than five days' notice
thereof shall be given by advertisement in one national newspaper, but no
other notice shall be required. If at any such adjourned meeting a quorum
is not present within fifteen minutes from the time appointed for the
meeting, the member present in person or by proxy and entitled to vote upon
the business to be transacted at the meeting shall be a quorum.
55 The chairman (if any) of the Board or in his absence the deputy chairman
(if any) shall preside as chairman at every general meeting of the Company.
If there is no such chairman or deputy chairman present and willing to act
as chairman at any meeting within five minutes after the time appointed for
holding the meeting the Directors present shall choose one of their number
to be chairman and, if there is only one Director present and willing to
act, he shall be chairman. If no Director is willing to act as chairman, or
if no Director is present within five minutes after the time appointed for
holding the meeting, the members present in person or by proxy and entitled
to vote shall choose one of their number to be chairman of the meeting.
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56 A Director shall, notwithstanding that he is not a member, be entitled to
attend and speak at any general meeting and at any separate meeting of the
holders of any class of shares in the Company.
57 The chairman of a meeting at which a quorum is present may, with the
consent of the meeting (and shall if so directed by the meeting), adjourn
the meeting from time to time and from place to place and if it appears to
the chairman that it is likely to be impracticable to hold or continue the
meeting, because the number of persons attending or wishing to attend
cannot be conveniently accommodated in the place appointed for the meeting,
or the unruly conduct of persons attending the meeting prevents or is
likely to prevent the continuation of the business of the meeting, he may
adjourn the meeting to another time and place without the consent of the
meeting. No business shall be transacted at any adjourned meeting other
than business which might properly have been transacted at the meeting had
the adjournment not taken place. When a meeting is adjourned for thirty
days or more (otherwise than due to the absence of a quorum) or without a
time and place for the adjourned meeting being fixed, at least seven clear
days' notice of the adjourned meeting shall be given in the same manner as
in the case of the original meeting. Otherwise it shall not be necessary to
give any such notice.
58 (1) No amendment or proposed amendment to any ordinary resolution shall
be put to or voted upon by the members at any general meeting or
adjourned general meeting unless the Company has received written
notice of the amendment or proposed amendment and of the intention
of the proposer to attend and propose it at least forty-eight hours
before the time fixed for the general meeting. Notwithstanding that
no such written notice shall have been given, the chairman, in his
absolute discretion, may accept or propose at any general meeting or
adjourned general meeting amendments of a minor or formal nature or
to correct a manifest error or which he may in his absolute
discretion consider fit for consideration at the meeting.
(2) Subject to paragraph (1) of this Article, if an amendment shall be
proposed to any resolution under consideration but shall in good
faith be ruled out of order by the chairman of the meeting the
proceedings on the substantive resolution shall not be invalidated
by any error in such ruling.
(3) In the case of a resolution duly proposed as a special or
extraordinary resolution no amendment thereto (other than a mere
clerical amendment to correct a patent error) may be considered or
voted upon.
59 At any general meeting a resolution put to the vote of the meeting shall be
decided on a show of hands unless before, or on the declaration of the
result of, the show of hands, or on the withdrawal of any other demand for
a poll, a poll is demanded by:
(1) the chairman of the meeting; or
(2) at least three members present in person or by proxy having the
right to vote at the meeting; or
(3) a member or members present in person or by proxy and representing
not less than one-tenth of the total voting rights of all the
members having the right to vote at the meeting; or
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(4) a member or members present in person or by proxy holding shares in
the Company conferring a right to vote at the meeting, being shares
on which an aggregate sum has been paid up equal to not less than
one-tenth of the total sum paid up on all the shares conferring that
right; or
(5) any member present in person or by proxy in the case of a resolution
to confer, vary, revoke or renew authority or approval for an
off-market purchase by the Company of its own shares;
and a demand by a person as proxy for a member shall be the same as a
demand by the member.
60 Unless a poll is duly demanded and the demand is not withdrawn, a
declaration by the chairman of the meeting that a resolution has been
carried or carried unanimously, or by a particular majority, or lost, or
not carried by a particular majority and an entry to that effect in the
minutes of the meeting shall be conclusive evidence of fact without proof
of the number or proportion of the votes recorded in favour of or against
the resolution.
61 The demand for a poll may, before the poll is taken, be withdrawn but only
with the consent of the chairman of the meeting and a demand so withdrawn
shall not be taken to have invalidated the result of a show of hands
declared before the demand was made.
62 A poll shall be taken as the chairman of the meeting directs and he may
appoint scrutineers (who need not be members) and fix a time and place for
declaring the result of the poll. The result of the poll shall be deemed to
be the resolution of the meeting at which the poll was demanded.
63 In the case of an equality of votes, whether on a show of hands or on a
poll, the chairman of the meeting at which the show of hands takes place or
at which the demand for the poll is made shall be entitled to a casting
vote in addition to any other vote he may have.
64 A poll demanded on the election of a chairman of the meeting or on a
question of adjournment shall be taken forthwith. A poll demanded on any
other question shall be taken either forthwith or at such time and place as
the chairman directs not being more than thirty days after the poll is
demanded. The demand for a poll (other than on the election of a chairman
of the meeting or on a question of adjournment) shall not prevent the
continuance of a meeting for the transaction of any business other than the
question of which the poll has been demanded. If a poll is demanded before
the declaration of the result of a show of hands and the demand is duly
withdrawn, the meeting shall continue as if the demand had not been made.
65 No notice need be given of a poll not taken forthwith if the time and place
at which it is to be taken are announced at the meeting at which it is
demanded. In any other case at least seven clear days' notice shall be
given specifying the time and place at which the poll is to be taken.
66 A resolution in writing executed by or on behalf of each member who would
have been entitled to vote upon it if it had been proposed at a general
meeting at which he was present shall be as effectual as if it had been
passed at a general meeting duly convened and held and may consist of
several instruments in the like form each executed by or on behalf of one
or more members.
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VOTE OF MEMBERS
67 Subject to any rights or restrictions attached to any shares, on a show of
hands every member who (being an individual) is present in person or (being
a corporation) is present by a duly authorised representative, not being
himself a member entitled to vote shall have one vote and on a poll every
member shall have one vote for every share of which he is the holder.
68 In the case of joint holders the vote of the senior who tenders a vote,
whether in person or by proxy, shall be accepted to the exclusion of the
votes of the other joint holders; and for this purpose seniority shall be
determined by the order in which the names of the holders stand in the
Register in respect of the joint holding.
69 A member in respect of whom an order has been made by any court having
jurisdiction (whether in the United Kingdom or elsewhere) in matters
concerning mental disorder may vote, whether on a show of hands or on a
poll, and otherwise exercise all his rights as a member by his receiver or
other person authorised in that behalf appointed by that court, and any
such receiver or other person may, on a poll, vote by proxy. Evidence to
the satisfaction of the Board of the authority of the person claiming to
exercise the right to vote or act shall be deposited at the Office, or at
such other place as is specified in accordance with these Articles for the
deposit of instruments of proxy, not less than forty-eight hours before the
time appointed for holding the meeting or adjourned meeting at which the
right to vote is to be exercised or, in the case of a poll, at least
forty-eight hours before the time appointed for the taking of the poll and
in default the right to vote shall not be exercisable.
70 Unless the Board otherwise determines, no member shall attend or vote at
any general meeting or at any separate meeting of the holders of any class
of shares in the Company or upon a poll, either in person or by proxy, in
respect of any share held by him or exercise any other right or privilege
conferred by membership in relation to any such meeting or poll unless all
moneys presently payable by him in respect of that share have been paid.
71 No objection shall be raised to the qualification of any voter except at
the meeting or adjourned meeting or poll at which the vote objected to is
tendered, and every vote not disallowed at the meeting or poll shall be
valid. Any objection made in due time shall be referred to the chairman of
the meeting whose decision shall be final and conclusive.
PROXIES
72 On a poll votes may be given either personally or by proxy. A member may
appoint more than one proxy to attend on the same occasion and a person
entitled to more than one vote need not use all his votes or cast all the
votes he uses in the same way. No proxy shall in that capacity be entitled
to speak at any general meeting, except to demand or join in a demand for a
poll. A person appointed to act as a proxy need not be a member of the
Company.
73 Proxy forms for use in respect of any general meeting shall be sent by the
Company to all persons entitled to notice of and to attend and vote at that
meeting. The instrument appointing a proxy shall be in writing executed by
or on behalf of the appointor or, if the appointor is a corporation, under
the hand of a duly authorised officer or attorney and shall be in any
common form or in any other form which the Board shall approve. The
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instrument appointing a proxy shall be deemed (subject to any contrary
direction contained in the instrument) to confer authority to demand or
join in demanding a poll and to vote on a poll on any resolution or
amendment of a resolution put to, or any other business which may properly
come before the meeting for which it is given as the proxy thinks fit. The
instrument appointing a proxy shall, unless the contrary is stated therein,
be valid as well for any adjournment of the meeting as for the meeting to
which it relates. If a member appoints more than one person to act as his
proxy the instrument appointing each such proxy shall specify the shares
held by the member in respect of which each such proxy is authorised to
vote and no member may appoint more than one proxy (save in the
alternative) to vote in respect of any one share held by that member.
74 The instrument appointing a proxy and (unless the Board otherwise decides)
any authority under which it is executed or a copy of such authority
certified notarially or in accordance with the Powers of Attorney Act 1971
or in some other way approved by the Board shall:
(1) be deposited at the Office or at such other place within the United
Kingdom as may be specified in the notice of meeting or any proxy
form or other document accompanying the same not less than
forty-eight hours before the time for holding the meeting or
adjourned meeting or the taking of the poll at which the person
named in the instrument proposes to vote; or
(2) in the case of a poll taken more than forty-eight hours after it is
demanded, be deposited as aforesaid not less than forty-eight hours
before the time appointed for the taking of the poll; or
(3) where the poll is not taken forthwith but is taken not more than
forty-eight hours after it was demanded, be delivered at the meeting
at which the poll was demanded to the chairman of the meeting or to
the Secretary or to any Director;
and an instrument of proxy which is not delivered or deposited in a manner
so permitted shall be invalid. When two or more valid but differing
instruments of proxy are delivered in respect of the same share for use at
the same meeting or poll, the one which is last delivered (regardless of
its date or the date of its execution) shall be treated as replacing and
revoking the other as regards that share; if the Company is unable to
determine which was last delivered, none of them shall be treated as valid
in respect of that share. No instrument of proxy shall be valid after the
expiration of twelve months from the date stated in it as the date of its
execution.
75 A vote given or poll demanded by a proxy or by the duly authorised
representative of a corporation shall be valid notwithstanding the previous
determination of the authority of the person voting or demanding a poll
unless notice of the determination was received by the Company at the
Office or at such other place as is specified for the deposit of
instruments of proxy not less than two hours before the time for holding
the meeting or adjourned meeting at which the vote is given or the poll
demanded or (in the case of a poll taken otherwise than at or on the same
day as the meeting or adjourned meeting) the time appointed for taking the
poll.
REPRESENTATIVES OF CORPORATIONS
76 Any corporation (which includes, without prejudice to the foregoing, any
company, body corporate (not being a corporation sole), limited partnership
or association of persons)
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which is a member of the Company may, by resolution of its directors or
other governing body, authorise any person it thinks fit to act as its
representative at any meeting of the Company. The person so authorised
shall be entitled to exercise the same powers on behalf of the corporation
which he represents as that corporation could exercise if it were an
individual member of the Company present in person and shall for the
purposes of these Articles be regarded as a member present in person. Such
representative may be required to produce a copy of such resolution
certified by a proper officer of such corporation.
CLASS MEETINGS
77 Unless otherwise provided by the terms of issue of any class of shares of
the Company, all the provisions of these Articles relating to general
meetings of the Company or to the proceedings at general meetings shall,
mutatis mutandis, apply to every separate meeting of the holders of any
class of shares of the Company, except that in the case of a meeting held
in connection with the variation or abrogation of the rights attached to
the shares of the class:
(1) the necessary quorum shall be two persons at least holding or
representing by proxy at least one-third in nominal amount of the
issued shares of the class or, at any adjourned meeting of such
holders, the holder or holders of shares of the class who are
present in person or by proxy, whatever his or their holdings;
(2) a poll may be demanded by any holder of shares of the class present
in person or by proxy; and
(3) the holders of shares of the class shall, on a poll, have one vote
in respect of every share of the class held by them respectively.
NUMBER OF DIRECTORS
78 Unless otherwise determined by ordinary resolution of the Company, the
number of Directors shall not be less than two, nor more than ten.
APPOINTMENT AND RETIREMENT OF DIRECTORS
79 At every annual general meeting any Directors who shall be bound to retire
under these Articles (other than this Article) and one-third of the other
Directors (other than any Directors exempt from retirement by rotation
under these Articles) or, if their number exceeds but is not a multiple of
three, the number nearest to (but not exceeding) one-third or, if their
number is less than three, one such other Director, shall retire from
office and shall be eligible for re-appointment, provided that no Director
shall be required to retire by rotation earlier than the third annual
general meeting after the meeting at which he was elected or last elected.
A Director retiring at a meeting who is not reappointed shall retain office
until the meeting appoints someone in his place or, if it does not do so,
until the end of the meeting or of any adjournment thereof.
80 Subject to the provisions of the Acts, the Directors to retire by rotation
shall be those who have been longest in office since their last appointment
or reappointment, but as between persons who became or were last
reappointed Directors on the same day, those to retire shall (unless they
otherwise agree among themselves) be determined by lot. The Directors to
retire on each occasion (both as to number and identity) shall be
determined
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by the composition of the Board at the date of the notice convening the
annual general meeting and no Director shall be required to retire by
rotation or be relieved from retiring by rotation by reason of any change
in the number or identity of the Directors after the date of the notice but
before the close of the meeting.
81 If the Company, at the meeting at which a Director retires by rotation,
does not fill the vacancy the retiring Director shall, if willing to act,
be deemed to have been reappointed unless at the meeting it is resolved not
to fill the vacancy or unless a resolution for the reappointment of the
Director is put to the meeting and lost.
82 No Director shall vacate or be required to vacate his office as a Director
on or by reason of his attaining or having attained the age of 70 or any
other age, and any Director retiring or liable to retire under the
provisions of these Articles and any person proposed to be appointed a
Director shall be capable of being appointed or reappointed notwithstanding
that he has attained the age of 70 or any other age and no special notice
need be given of any resolution for the appointment or reappointment as a
Director of a person who shall have attained the age of 70 or any other
age. Section 293 of the Act shall not apply to the Company.
83 No person other than a Director retiring at the meeting shall be appointed
or reappointed a Director at any general meeting unless:
(1) he is recommended by the Board; or
(2) not less than seven nor more than twenty-one clear days before the
date appointed for the meeting, notice executed by a member
qualified to vote at the meeting has been given to the Company of
his intention to propose that person for appointment or
reappointment stating the particulars which would, if he were so
appointed or reappointed, be required to be included in the
Company's register of directors together with notice executed by
that person confirming his willingness to be appointed or
reappointed.
84 Subject to the provisions of these Articles, the Company may by ordinary
resolution appoint a person who is willing to act to be a Director either
fill a vacancy or as an additional Director.
85 The Board may appoint a person who is willing to act to be a Director,
either to fill a vacancy or as an additional Director, provided that the
appointment does not cause the number of Directors to exceed any number
fixed by or in accordance with these Articles as the maximum number of
Directors. A Director so appointed shall hold office only until the next
following annual general meeting and shall not be taken into account in
determining the Directors who are to retire by rotation at such meeting
under these Articles. If not reappointed at such annual general meeting, he
shall vacate office at its conclusion.
DISQUALIFICATION AND REMOVAL OF DIRECTORS
86 In addition to any power of removal conferred by the Acts, the Company may
by special resolution remove any Director before the expiration of his
period of office and may (subject to these Articles) by ordinary resolution
appoint another person who is willing to act to be a Director in his place.
Such removal shall be without prejudice to any claim such Director may have
for damages for breach of any contract of service between him
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and the Company. Any person so appointed shall be treated, for the purpose
of determining the time at which he or any other Director is to retire, as
if he had become a Director on the day on which the person in whose place
he is appointed was last appointed or reappointed a Director.
87 The office of a Director shall be vacated if:
(1) he becomes bankrupt or makes any arrangement or composition with his
creditors generally; or
(2) he becomes incapable by reason of physical incapacity or mental
disorder of discharging his duties as a Director and the Board
resolves that his office be vacated; or
(3) he is absent from meetings of the Board during a continuous period
of six months without permission of the Board and his Alternate
Director (if any) shall not during such period have attended in his
stead, and the Board resolves that his office be vacated; or
(4) he ceases t be a Director by virtue of any provision of the Acts, is
removed from office or becomes prohibited by law from being a
Director; or
(5) he resigns his office by notice to the Company; or
(6) he is removed from office by notice in writing signed by all the
other Directors.
ALTERNATE DIRECTORS
88 Any Director may appoint any other Director, or any other person approved
by resolution of the Board and willing to act, to be an Alternate Director
and may remove from office an Alternate Director so appointed by him.
89 The appointment of an Alternate Director shall automatically determine in
any of the following events:
(1) if his appointor terminates the appointment;
(2) on the happening of any event which, if he were a Director, would
cause him to vacate the office of Director;
(3) if he resigns his appointment by notice to the Company;
(4) if his appointor ceases for any reason to be a Director otherwise
than by retiring and being reappointed or deemed to be reappointed
at the meeting at which he retires;
(5) if he is not a Director and the Board revokes its approval of him by
resolution.
90 An Alternate Director shall (subject to his giving to the Company an
address within the United Kingdom at which notices may be served upon him)
be entitled at his appointor's request to receive notice of all meetings of
the Board and of all meetings of committees of the Board of which he is
appointor is a member, to attend and vote and (save as provided in these
Articles) be counted in the quorum at any such meeting at which the
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Director appointing him is not personally present, and generally to perform
all the functions of his appointor as a Director in his absence.
91 An Alternate Director may be repaid by the Company such expenses as might
properly have been repaid to him if he had been a Director and in respect
of his office of Alternate Director may receive such remuneration from the
Company as the Board may determine. An Alternate Director shall be entitled
to be indemnified by the company to the same extent as if he were a
Director.
92 An Alternate Director shall, during his appointment, be an officer of the
Company and shall alone be responsible for his own acts and defaults and he
shall not be deemed to be the agent of the Director appointing him.
93 Any appointment or removal of an Alternate Director shall be in writing
signed by the Director making or revoking the appointment or in any other
manner approved by the Board and shall take effect (subject to any approval
required by these Articles) upon receipt of such written appointment or
removal at the Office or by the Secretary.
94 A Director or any other person may act as Alternate Director to represent
more than one Director and an Alternate Director shall be entitled at
meetings of the Board or any committee of the Board to one vote for every
Director whom he represents in addition to his own vote (if any) as a
Director.
POWERS OF DIRECTORS
95 Subject to the provisions of the Acts, the Memorandum of Association of the
Company and these Articles and to any directions given by special
resolution, the business of the Company shall be managed by the Board who
may exercise all the powers of the Company. No alteration of the Memorandum
or these Articles and no such direction shall invalidate any prior act of
the Board which would have been valid if that alteration had not been made
or that direction had not been given. The powers given by this Article
shall not be limited by any special power given to the Board by these
Articles and a duly convened meeting of the Board at which a quorum is
present may exercise all powers exercisable by the Board.
96 The Board may make such arrangements as the Board thinks fit for the
management and transaction of the Company's affairs and may for that
purpose appoint local boards, managers and agents and delegate to them any
of the powers of the Board with power to sub-delegate.
97 The Board may from time to time, by power of attorney executed by the
Company or otherwise, appoint any company, firm or person, or any
fluctuating body of persons, whether nominated directly or indirectly by
the Board, to be the attorney or agent of the Company for such purposes and
with such powers, authorities and discretions (not exceeding those vested
in or exercisable by the Board under these Articles) and for such period
and subject to such conditions as it may think fit. Any such power of
attorney or other authority may contain such provisions for the protection
and convenience of persons dealing with any such attorney or agent as the
Board may think fit and may also authorise any such attorney or agent to
sub-delegate all or any of the powers, authorities and discretions vested
in him.
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DELEGATION OF DIRECTORS' POWERS
98 The Board may delegate any of its powers, authorities and discretions
(including, without prejudice to the generality of the foregoing, all
powers and discretions whose exercise involves or may involve agreement of
the terms of service or termination of employment or appointment of or the
payment of remuneration to or the conferring of any other benefit on all or
any of the Directors) to any committee consisting of one or more Directors
together with any other person or persons approved by the Board, with power
to sub-delegate. Any such delegation may be made subject to any conditions
the Board may impose, and either collaterally with or to the exclusion of
its own powers and may be revoked or altered. Subject to any such
conditions, the proceedings of a committee with two or more members shall
be governed by the provisions of these Articles regulating the proceedings
of the board so far as they are capable of applying. Insofar as any power,
authority or discretion is delegated to a committee, any reference in these
Articles to the exercise by the Board of such power, authority or
discretion shall be read and construed as if it were a reference to the
exercise of such power, authority or discretion by such committee. Every
such committee shall have as a majority of its membership persons who are
Directors and no resolution of any such committee shall be effective unless
the majority of the persons present (in person or by their Alternate
Directors) at the meeting at which it is passed are Directors.
BORROWING POWERS
99 (1) The Board shall restrict the borrowings of the Company, and shall so
far as possible by the exercise of the Company's voting rights in
and other rights or powers of control over its Subsidiary
Undertakings secure that they restrict their borrowings, so that the
aggregate principal amount at any time outstanding in respect of
money borrowed by the Group shall not without the previous sanction
of an ordinary resolution of the Company exceed a sum equal to the
greater of L30 million or two and one half times the adjusted
share capital and reserves.
(2) For the purposes of this Article:
(a) "adjusted share capital and reserves" means the aggregate of
the amount paid up or credited as paid up on the allotted or
issued share capital of the Company and the amount standing to
the credit of each of the consolidated capital and revenue
reserves (including any share premium account, capital
redemption reserve, revaluation reserve and profit and loss
account but net of any debit balance on profit and loss
account) of the Group all as shown in the latest audited
consolidated balance sheet of the Group but adjusted as may be
necessary:
(i) to take account of any variation in the paid up share
capital, share premium account or capital redemption
reserve of the Company since the date of that balance
sheet and so that for this purpose if any issue or
proposed issue of shares by the Company for cash has been
underwritten (whether unconditionally or not) then such
shares shall be deemed to have been issued and the amount
(including any premium) of the subscription money shall
to the extent so underwritten be deemed to have been paid
up on the date when the issue was underwritten;
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(ii) to take account in the case of Subsidiary Undertakings of
the interests of participants outside the Group (if any)
and any variation in the interest of the Company in any
Subsidiary Undertaking between the date of the balance
sheet and the date for which the calculation fails to be
made; and
(iii) to take account of any other factor which the Directors
or the Auditors consider relevant;
(b) "money borrowed" shall include:
(i) the nominal amount and any fixed or minimum premium
payable on redemption or repayment of any debentures or
loan capital issued by any member of the Group;
(ii) the nominal amount of any issued share capital and the
principal amount of any money borrowed the redemption or
repayment of which is guaranteed or secured or the
subject of an indemnity by the Company or any Subsidiary
Undertaking (together in each case with any fixed or
minimum premium payable on final redemption or repayment)
except so far as such money borrowed is otherwise taken
into account as money borrowed by the Company or a
Subsidiary Undertaking;
but the following shall be disregarded:
(iii) money borrowed by a member of the Group from another
member of the Group, other than amounts to be taken into
account under paragraph 2(b)(v) of this Article;
(iv) any money borrowed intended to be applied within four
months of being borrowed in the repayment of any money
previously borrowed pending its application for such
purpose within such period; and
(v) that proportion of the total money borrowed by any
partly-owned Subsidiary Undertaking which its issued
equity share capital not for the time being beneficially
owned directly or indirectly by the Company bears to the
whole of its issued equity share capital but a like
proportion of any borrowings from such partly-owned
Subsidiary Undertaking by the Company or any other
Subsidiary Undertaking shall fall to be treated as
borrowings of the Company or such other Subsidiary
Undertaking notwithstanding the same would not otherwise
be taken into account.
(3) For the purposes of calculating the amount of money borrowed
under this Article there shall be credited (subject, in the
case of any item held or deposited by a partly-owned Subsidiary
Undertaking, to the exclusion of a proportion thereof equal to
the proportion of the issued equity share capital of the
partly-owned Subsidiary Undertaking which is not directly or
indirectly attributable to the Company) against the gross
amount of money borrowed the aggregate of:
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(a) cash in hand of the Group;
(b) the realisable value of certificates of deposit and securities
of governments and companies owned by a member of the Group;
and
(c) cash deposits and the credit balance on each current account of
the Group with banks in the United Kingdom or elsewhere if the
remittance of the cash to the United Kingdom is not prohibited
by any law, regulation, treaty or official directive; however,
if the remittance of such cash is prohibited it shall
nonetheless be deducted from amounts borrowed but only to the
extent that it may be set-off against or act as security for
such amounts.
(4) No person dealing with the Company or any of its Subsidiary
Undertakings shall by reason of the foregoing provisions be
concerned to see or enquire whether this limit is observed and no
debt incurred or security given in excess of such limit shall be
invalid or ineffectual.
(5) A report by the Auditors stating what is in their opinion, based on
their examination of the accounting records of the Group or such
other evidence as they may think appropriate, the amount of the
adjusted share capital and reserves or the amount of money borrowed
or the effect that the limit imposed by this Article was not or will
not be exceeded at any time or times shall be conclusive evidence of
such amount or fact for the purposes of this Article.
EXECUTIVE DIRECTORS
100 Subject to the provisions of the Acts, the Board may:
(1) appoint one or more of its body to the office of managing director
or chief executive or to any other executive office (except that of
auditor) of the Company and may enter into an agreement or
arrangement with any Director for his employment by the Company or
any Subsidiary Undertaking or for the provision by him of any
services outside the scope of the ordinary duties of a Director. Any
such appointment, agreement or arrangement may be made upon such
terms as the Board determines and it may remunerate any such
Director for his services as it thinks fit;
(2) permit any person appointed to be a Director to continue in any
other office or employment held by him with the Company or any
Subsidiary Undertaking before he was so appointed.
101 A Director appointed to the office of managing director or chief executive
(or if these offices are held by different Directors, whichever one of them
the Board shall select) shall, while holding that office, be exempt from
retirement by rotation and shall not be taken into account in determining
the number of Directors to retire in each year, but shall (subject to the
provisions of any contract between himself and the Company) be subject to
the same provisions as to resignation and removal as the other Directors.
Any appointment of a Director to the office of managing director or chief
executive shall terminate if he ceases to be a Director but without
prejudice to any claim for damages for breach of contract of service
between the Director and the Company and he shall not (unless any agreement
between him and the Company shall otherwise provide) cease to
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hold his office as Director by reason only of his ceasing to be managing
director or chief executive. Any person who, on ceasing to hold the office
of managing director or chief executive, remains in office as a Director
shall, if he has been exempt from retirement by rotation during his period
of appointment, retire from office at the next following annual general
meeting and shall then be eligible for reappointment, but shall not be
taken into account in determining the Directors to retire by rotation at
such meeting under these Articles.
102 Save as provided in the foregoing Article, an Executive Director shall not
be exempt from retirement by rotation, and (unless any agreement between
him and the Company shall otherwise provide) he shall not cease to hold his
office or employment with the Company by reason only of his ceasing to be a
Director nor cease to be a Director if he ceases from any cause to hold the
office or employment by virtue of which he is termed an Executive Director.
103 The emoluments and benefits of any Executive Director for his services as
such shall be determined by the Board and may be of any description, and
(without limiting the generality of the foregoing) may include membership
of any scheme or fund instituted or established or financed or contributed
to by the Company for the provision of pensions, life assurance or other
benefits for employees or their dependants or, apart from membership of any
such scheme or fund, the payment of a pension or other benefits to him or
his dependants on or after retirement or death.
104 The Board may delegate or entrust to and confer upon any Executive Director
any of the powers, authorities and discretions exercisable by it (with
power to sub-delegate) upon such terms and conditions and with such
restrictions as it thinks fit and either collaterally with or to the
exclusion of its own powers and may from time to time revoke, withdraw or
vary all or any part of such powers.
ASSOCIATE DIRECTORS
105 The Board may at any time and from time to time appoint any person to be an
associate director having such title, including the word "director", as the
Board may decide and may at any time remove any person so appointed. A
person so appointed shall not be a Director of the Company and shall not be
a member of the Board. Subject as aforesaid, the Board may define and limit
the powers and duties of any associate director and may determine his
remuneration which may be in addition to any other remuneration receivable
by him from the Company or any Subsidiary Undertaking.
REMUNERATION OF DIRECTORS
106 The ordinary remuneration of the Directors (other than any Executive
Directors appointed under these Articles) shall be such amount as the
Directors shall from time to time determine provided that, unless otherwise
approved by the Company in general meeting, the aggregate of the ordinary
remuneration of such Directors shall not exceed L150,000 per year.
The ordinary remuneration shall be divided among such Directors in such
manner as the Directors may determine. A Director holding office for part
only of a year shall be entitled to a proportionate part of a full year's
remuneration.
107 Any Director who, by request of the Board, performs special services or
goes or resides abroad for any purposes of the Company may be paid such
extra remuneration by way of salary, percentage of profits or otherwise as
the Board may determine.
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DIRECTORS' EXPENSES
108 The Directors may be paid all travelling, hotel and other expenses as they
may incur in connection with their attendance at meetings of the Board or
of committees of the Board or general meetings or separate meetings of the
holders of any class of shares or debentures of the Company or otherwise in
connection with the discharge of their duties.
DIRECTORS' GRATUITIES AND PENSIONS
109 The Board may provide benefits, whether by the payment of gratuities or
pensions or by insurance or otherwise, for any Director who has held but no
longer holds any executive office or employment with the Company or with
any body corporate which is or has been a Subsidiary Undertaking or a
predecessor in business of the Company or of any Subsidiary Undertaking,
and for any member of his family (including a spouse and a former spouse)
or any person who is or was dependent on him, and may (as well before as
after he ceases to hold such office or employment) contribute to any fund
and pay premiums for the purchase or provision of any such benefit.
DIRECTORS' INTERESTS
110 A Director who is in any way, whether directly or indirectly, interested in
a transaction or arrangement with the Company shall, at a meeting of the
Board, declare in accordance with the Acts the nature of his interest. For
the purposes of this Article and Articles 111 and 113:
(1) a general notice given to the Board that a Director is to be
regarded as having an interest of the nature and extent specified in
the notice in any transaction or arrangement in which a specified
person or class of persons is interested shall be deemed to be a
disclosure that the Director has an interest in any such transaction
of the nature and extent so specified;
(2) an interest of which a Director has no knowledge shall not be
treated as an interest of his; and
(3) an interest of a person who is connected with a Director shall be
treated as an interest of the Director.
111 Subject to the provisions of the Acts, and provided that he has disclosed
to the Board the nature and extent of any interest of his in accordance
with Article 110, a Director notwithstanding his office:
(1) may be a party to, or otherwise interested in, any transaction or
arrangement with the Company or in which the Company is otherwise
interested;
(2) may be a director or other officer of, or employed by, or a party to
any transaction or arrangement with, or otherwise interested in, any
body corporate promoted by the Company or in which the Company is
otherwise interested; and
(3) shall not, by reason of his office, be accountable to the Company
for any benefit which he derives from any such office or employment
or from any such transaction or arrangement or from any interest in
any such body corporate and no
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such transaction or arrangement shall be liable to be avoided on the
ground of any such interest or benefit.
112 Any Director may act by himself or his firm in a professional capacity for
the Company (otherwise than as auditor) and he or his firm shall be
entitled to remuneration for professional services as if he were not a
Director.
113 Save as otherwise provided in these Articles, a Director shall not vote at
a meeting of the Board or of a committee of the Board on any resolution
concerning a matter in which he has, directly or indirectly, an interest in
which is material (otherwise than by virtue of his interest in shares,
debentures or other securities of, or otherwise in or through, the Company)
unless his interest or duty arises only because the case falls within one
or more of the following paragraphs:
(1) the resolution relates to the giving to him or a person connected
with him of a guarantee, security or indemnity in respect of money
lent to, or an obligation incurred by him or such a person at the
request of or for the benefit of, the Company or any Subsidiary
Undertaking;
(2) the resolution relates to the giving to a third party of a
guarantee, security or indemnity in respect of a debt or obligation
of the Company or any Subsidiary Undertaking for which the Director
or a person connected with him has assumed responsibility in whole
or part and whether alone or jointly with others under a guarantee
or indemnity or by the giving of security.
(3) his interest arises by virtue of him or a person connected with him
subscribing or agreeing to subscribe for any shares, debentures or
other securities of the Company or any Subsidiary Undertaking or by
virtue of him or a person connected with him being, or intending to
become, a participant in the underwriting or sub-underwriting of an
offer of any such shares, debentures, or other securities by the
Company or any Subsidiary Undertaking for subscription, purchase or
exchange;
(4) the resolution relates in any way to any other company in which he
is interested, directly or indirectly and whether as an officer or
shareholder or otherwise howsoever, provided that he and any persons
connected with him do not to his knowledge hold an interest in
shares (as that term is used in sections 198 to 211 of the Act)
representing one per cent. or more of any class of the equity share
capital of such company or of the voting rights available to the
members of such company;
(5) the resolution relates in any way to an arrangement for the benefit
of the employees of the Company or any Subsidiary Undertaking which
does not award him as such any privilege or advantage not generally
awarded to the employees to whom such arrangement relates;
(6) the resolution relates in any way to the purchase or maintenance for
the Directors of insurance against any liability which by virtue of
any rule of law would otherwise attach to all or any of them in
respect of any negligence, default, breach of duty or breach of
trust in relation to the Company.
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114 A Director shall not be counted in the quorum present at a meeting in
relation to a resolution on which he is not entitled to vote.
115 Where proposals are under consideration concerning the appointment
(including fixing or varying the terms of appointment) of two or more
Directors to offices or employments with the Company or a body corporate in
which the Company is interested the proposals may be divided and considered
in relation to each Director separately and (provided he is not for another
reason precluded from voting) each of the Directors concerned shall be
entitled to vote and be counted in the quorum in respect of each resolution
except that concerning his own appointment.
116 If a question arises at a meeting of the Board or of a committee of the
Board as to the right of a Director to vote and such question is not
resolved by his voluntarily agreeing to abstain from voting, the question
may (unless the Director concerned is the chairman of the meeting in which
case he shall withdraw from the meeting and the Board shall elect a vice
chairman to consider the question in place of the chairman), before the
conclusion of the meeting, be referred to the chairman of the meeting and
his ruling in relation to any Director other than himself shall be final
and conclusive except in a case where the nature or extent of the interest
of the Director concerned has not been fairly disclosed and provided that
any such question shall, for the purposes of disclosure of the interest in
the accounts of the Company, be finally and conclusively decided by a
majority of the Board (other than the Director concerned.).
PROCEEDINGS OF THE BOARD
117 Subject to the provisions of these Articles, the Board may regulate its
proceedings as it thinks fit. A Director may, and the Secretary at the
request of a Director shall, call a meeting of the Board. It shall not be
necessary to give notice of a meeting of the Board to a Director who is
absent from the United Kingdom, unless he has given notice to the Company
of an address within the United Kingdom to which notice should be sent
during his absence. A Director may waive notice of any meeting either
prospectively or retrospectively.
118 Questions arising at a meeting shall be decided by a majority of votes. In
the case of an equality of votes, the chairman of the meeting shall have a
second or casting vote.
119 The quorum for the transaction of the business of the Board may be fixed by
the Board and unless so fixed at any other number shall be two. A person
who holds office as an Alternate Director shall, if his appointor is not
present, be counted in the quorum provided that a Director or Alternate
Director who attends a meeting of the Board shall for the purposes of a
quorum be counted as one person notwithstanding that he also attends such
meeting as an Alternate Director or that he attends as an Alternate
Director appointed by more than one Director.
120 Any Director or other person may participate in a meeting of the Board by
means of conference telephone or similar communications equipment whereby
all persons participating in the meeting can her each other and any person
participating in the meeting in this manner shall be deemed to be present
in person at that meeting. Such a meeting shall be deemed to take place
where the largest group of those participating is assembled or, if there is
no such group, at the place where the chairman of the meeting is at the
time the meeting is held.
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121 The continuing Directors or a sole continuing Director may act
notwithstanding any vacancies in the Board but, if the number of Directors
is less than the number fixed as the quorum, the continuing Directors or
Director may act only for the purpose of filling vacancies in the Board or
of calling a general meeting.
122 The Board may appoint one of its number to be the chairman of the Board and
one or more deputy chairmen and may at any time remove them from office.
Unless he is unwilling to do so, the chairman of the Board shall preside at
every meeting of the Board at which he is present. But if there is no
chairman of the Board or deputy chairman holding office, or if at any
meeting neither the chairman of the Board nor a deputy chairman is present
and willing to preside within five minutes after the time appointed for the
meeting, the Directors present may appoint one of their number to be
chairman of the meeting.
123 A resolution in writing signed by all the Directors entitled to receive
notice of a meeting of the Board (not being less than the number required
to form a quorum of the Board) or all members of a committee of the Board
shall be as valid and effectual as if it had been passed at a meeting of
the Board or (as the case may be) a committee of the Board duly convened
and held and may consist of several documents in the like form each signed
by one or more Directors; but a resolution signed by an Alternate Director
need not also be signed by his appointor and, if it is signed by a Director
who has appointed an Alternate Director, it need not be signed by the
Alternate Director in that capacity.
124 All acts done by a meeting of the Board, or of a committee of the Board, or
by a person acting as a Director, Alternate Director or member of a
committee shall, notwithstanding that it be afterwards discovered that
there was a defect in the appointment or continuance in office of any
Director, Alternate Director or person acting as aforesaid, or that any of
them were disqualified from holding office, or had vacated office, or were
not entitled to vote, be as valid as if every such person had been duly
appointed and was qualified and had continued to be a Director, Alternate
Director or member of a committee and had been entitled to vote.
SECRETARY
125 Subject to the provisions of the Acts, the Secretary shall be appointed by
the Board for such term, at such remuneration and upon such conditions as
it may think fit and any Secretary so appointed may be removed by the
Board. Two or more persons may be appointed as joint secretaries and the
Board may also appoint from time to time on such terms as it may think fit
one or more temporary or assistant or deputy secretaries.
MINUTES
126 The Board shall cause minutes to be made in books kept for the purpose:
(1) of all appointment of officers made by the Board; and
(2) of all proceedings at meetings of the Company, of the holders of any
class of shares in the Company, and of the Board, and of committees
of the Board, including the names of the Directors present at each
such meeting.
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Any such minutes, if purporting to be signed by the chairman of the meeting
to which they relate or of the meeting at which they are approved, shall be
sufficient evidence without any further proof of the facts stated in them.
THE SEAL
127 If the Company has a Seal it shall only be used by the authority of the
Board or of a committee of the Board authorised by the Board. The Board may
determine who shall sign any instrument to which the Seal is affixed and
unless otherwise so determined it shall be signed by a Director and by the
Secretary or by a second Director.
128 The Company may exercise the powers conferred by the Acts with regard to
having an official seal for use abroad, and such powers shall be vested in
the Board.
DIVIDENDS
129 Subject to the provisions of the Acts, the Company may by ordinary
resolution declare dividends in accordance with the respective rights of
the members, but no dividend shall exceed the amount recommended by the
Board.
130 Except as otherwise provided by the rights attached to the shares, all
dividends shall be declared and paid according to the amounts paid up on
the shares on which the dividend is paid but (for the purposes of this
Article only) no amount paid on a share in advance of calls shall be
treated as paid on the share. All dividends shall be apportioned and paid
proportionately to the amounts paid up on the shares during any portion or
portions of the period in respect of which the dividend is paid; but, if
any share is issued on terms providing that it shall rank for dividend as
from a particular date, that share shall rank for dividend accordingly.
131 Subject to the provisions of the Acts, the Board may pay interim dividends
if it appears to the Board that they are justified by the profits of the
Company available for distribution. If the share capital is divided into
different classes of shares, the Board may pay interim dividends on shares
which confer deferred or non-preferred rights with regard to dividend as
well as on shares which confer preferential rights with regard to dividend,
but no interim shall be paid on shares carrying deferred or non-preferred
rights if, at the time of payment, any preferential dividend is in arrear.
The Board may also pay at intervals settled by it any dividend payable at a
fixed rate if it appears to them that the profits available for
distribution justify the payment. Provided the Board acts in good faith the
Directors shall not incur any liability to the holders of shares conferring
preferred rights for any loss that they may suffer by the lawful payment of
an interim dividend on any shares having deferred or non-preferred rights.
132 The Board may deduct from any dividend or other moneys payable on or in
respect of a share to any member all sums of money (if any) presently
payable by him to the Company on account of calls or otherwise in relation
to shares of the Company.
133 No dividend or other moneys payable in respect of a share shall bear
interest as against the Company unless otherwise provided by the rights
attached to the share. All unclaimed dividends may be retained by the
Company or invested or made use of by the Company as the Board may think
fit until they are claimed and so that the Company shall not be obliged to
account for any interest or other income derived from them nor shall it be
constituted a trustee in respect of them or be responsible for any loss
thereby arising.
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Any interest or profits earned on unclaimed dividends invested or otherwise
made use of shall belong to the Company. Any dividend which has remained
unclaimed for twelve years from the date when it was declared or became due
for payment shall be forfeited and cease to remain owing by the Company.
134 Any dividend or other moneys payable in respect of a share shall belong and
be paid (subject to any lien of the Company) to those members whose names
shall be on the Register at the date at which such dividend shall be
declared or at the date on which such other moneys shall be payable
respectively, or at such other date as the Company by ordinary resolution
or the Board may determine, notwithstanding any subsequent transfer or
transmission of shares.
135 The Board may pay the dividends or other moneys payable on shares in
respect of which any person is entitled to be registered as holder by
transmission to such person upon production of such certificate and
evidence as would be required if such person desired to be registered as a
member in respect of such shares.
136 Any dividend or other moneys payable in cash in respect of a share may be
paid by:
(1) cheque or warrant sent by post to the address in the Register of the
person entitled to the moneys or, if two or more persons are the
holders of the share or are jointly entitled to it by reason of the
death or bankruptcy of the holder or otherwise by operation of law,
to the address in the Register of that one of those persons who is
first named in the Register in respect of the joint holding or to
such person and to such address as the person or persons entitled to
the moneys may in writing direct. Every such cheque or warrant shall
be made payable to the person or persons entitled to the moneys or
to such other person as the person or persons so entitled may in
writing direct and shall be sent at the risk of the person or
persons so entitled and payment of the cheque or warrant shall be a
good discharge to the Company. Any such cheque or warrant may be
crossed "account payee" although the Company shall not be obliged to
do so;
(2) inter-bank transfer to such account as the person or persons
entitled to the moneys may in writing direct; or
(3) such other method of payment as the person or persons entitled to
the moneys may in writing agree to.
137 If on two consecutive occasions cheques or warrants in payment of dividends
or other moneys payable in respect of any shares have been sent through the
post in accordance with the provisions of the preceding Article but have
been returned undelivered or left uncashed during the periods for which
they are valid, the Company need not thereafter despatch further cheques or
warrants in payment of dividends or other moneys payable on or in respect
of the share in question until the member or other person entitled thereto
shall have communicated with the Company and supplied in writing to the
Transfer Office a new address to be used for the purpose.
138 Any general meeting declaring a dividend may, upon the recommendation of
the Board, direct payment or satisfaction of such dividend wholly or in
part by the distribution of specific assets and in particular of fully paid
shares or debentures of any other company, and the Board shall give effect
to such directions. Where any difficulty arises in regard to the
distribution, the Board may settle the same as it thinks expedient, and in
particular
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may fix the value for distribution of such specific assets or any part
thereof and may determine that cash payment shall be made to any members
upon the footing of the value so fixed in order to adjust the rights of
those entitled to participate in the dividend, and may vest any such
specific assets in trustees, upon trust for the members entitled to the
dividend, as may seem expedient to the Board.
139 The Board may, with the sanction of an ordinary resolution of the Company,
offer the holders of shares the right to elect to receive shares, credited
as fully paid, instead of cash in respect of the whole (or some part, to be
determined by the Board) of such dividend or dividends as are specified by
such resolution. The following provisions shall apply:
(1) the resolution may specify a particular dividend, or may specify all
or any dividends declared or paid within a specified period, but
such period shall end not later than the beginning of the annual
general meeting in the fifth year following that in which such
resolution is passed;
(2) the entitlement of each holder of shares to new shares shall be such
that the Relevant Value of such new shares shall be as nearly as
possible equal to (but not in excess of) the cash amount that such
holders would otherwise have received by way of dividend. For this
purpose "Relevant Value" shall be the average of the middle market
quotations for such a share as derived from the London Stock
Exchange Daily Official List on such five consecutive dealing days
as the Directors shall determine provided that the first of such
dealing days shall be on or after the day when the shares are first
quoted "ex" the relevant dividend;
(3) the basis of allotment shall be such that no member may receive a
fraction of a share;
(4) the Board, after determining the basis of allotment, shall notify
the holders of shares in writing of the right of election offered to
them and (except in the case of any holder from whom the Company has
received written notice in such form as the Board may require which
is effective for the purposes of the relevant dividend that such
holder wishes to receive shares instead of cash in respect of all
future dividends in respect of which the Board offers the holders of
shares the right to elect to receive shares as aforesaid) shall send
with, or following, such notification, forms of election and specify
the procedure to be followed and place at which, and the latest date
and time by which, duly completed forms of election must be lodged
in order to be effective;
(5) the dividend (or that part of the dividend in respect of which a
right of election has been offered) shall not be payable on shares
in respect of which such election has been duly made (the "elected
shares") and instead additional shares shall be allotted to the
holders of the elected shares on the basis of allotment determined
as provided above. For such purpose the Board shall capitalise out
of such of the sums standing to the credit of reserves (including
any share premium account or capital redemption reserve) or any of
the profits which could otherwise have been applied in paying
dividends in cash as the Board may determine a sum equal to the
aggregate nominal amount of the additional shares to be allotted on
such basis and shall apply the same in paying up in full the
appropriate number of unissued shares for allotment and distribution
to and amongst the holders of the elected shares on such basis;
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(6) the additional shares so allotted shall rank pari passu in all
respects with the fully-paid shares of that class then in issue save
only as regards participation in the relevant dividend;
(7) the Board may on any occasion determine that rights of election
shall only be made available subject to such exclusions,
restrictions or other arrangements as it may in its absolute
discretion deem necessary or desirable in order to comply with legal
or practical problems under the laws of, or the requirements of any
recognised regulatory body or any stock exchange in, any territory.
140 If several persons are entered in the Register as joint holders of any
share or are jointly entitled to a share, any one of them may give receipts
for any dividend or other moneys payable in respect of the share and the
Board may deduct from the dividends or other moneys payable in respect of
any share held jointly by several persons all sums of money (if any)
presently payable to the Company from any one or more of the registered
holders on account of calls or otherwise in relation to shares in the
Company held in the joint names of all (but not some only) of such
registered holders.
ACCOUNTS
141 No member shall (as such) have any right of inspecting any accounting
records or other book or document of the Company except as conferred by the
Acts or authorised by the Board or by ordinary resolution of the Company.
142 (1) Save as provided in this Article, a copy of the annual accounts of
the Company together with a copy of the Auditors' report and the
Directors' report shall, not less than twenty-one days before the
date of the general meeting at which copies of those documents are
to be laid, be sent to every member and to every debenture holder of
the Company and to every other person who is entitled to receive
notices from the Company of general meetings and copies of each of
these documents shall at the same time be forwarded to the secretary
of the London Stock Exchange and to the secretary of any other stock
exchange on which any part of the share or loan capital of the
Company is for the time being listed.
(2) Copies of the documents referred to in paragraph (1) of this Article
need not be sent:
(a) to a person who is not entitled to receive notices of general
meetings and of whose address the Company is unaware; or
(b) to more than one of the joint holders of shares or debentures
in respect of those shares or debenture.
Provided that any member or debenture holder to whom a copy of
such documents has not been sent shall be entitled to receive
a copy free of charge on application at the Office.
(3) The Company may, in accordance with section 251 of the Act and any
regulations made under it, send a summary financial statement to any
of the persons otherwise entitled to be sent copies of the documents
referred to in paragraph (1) of this Article instead of or in
addition to these documents and, where it does so, the statement
shall be delivered or sent by post to such person not less than
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twenty-one days before the general meeting at which copies of those
documents are to be laid.
CAPITALISATION OF PROFITS
143 (1) The Board may with the authority of an ordinary resolution of the
Company:
(a) subject as hereinafter provided, resolve to capitalise all or
any part of the profits of the Company to which this Article
applies;
(b) appropriate the sum resolved to be capitalised to the members
who would have been entitled to it if it were distributed by
way of dividend and in the same proportions and apply such sum
on their behalf either:
(i) in or towards paying up the amounts, if any, for the time
being unpaid on any shares held by them respectively; or
(ii) in paying up in full unissued shares or debentures of the
Company of a nominal amount equal to that sum, and allot
the shares or debentures credited as fully paid to those
members, or as they may direct, in those proportions;
or partly in one way and partly in the other;
(c) make such provision by the issue of fractional certificates or
by payment in cash or otherwise as it determines in the case of
shares or debentures otherwise becoming distributable under
this Article in fractions; and
(d) authorise any person to enter on behalf of all the members
concerned into an agreement with the Company providing for the
allotment to them respectively, credited as fully paid, of any
shares or debentures to which they are entitled upon such
capitalisation, any agreement made under such authority being
binding on all such members.
(2) The profits of the Company to which this Article applies shall be
any undivided profits of the Company not required for paying fixed
dividends on any preference shares or other shares issued on special
conditions and shall be deemed to include:
(a) any reserves arising from appreciation in capital assets or
ascertained by valuation; and
(b) any other amounts for the time being standing to any reserve or
reserves including capital redemption reserve and share premium
account;
Provided that to the extent required by the Acts:
(a) the Company shall not apply an unrealised profit in paying up
debentures or any amounts unpaid on any of its issued shares;
and
(b) the only purpose to which sums standing to share premium
account or capital redemption reserve shall be applied pursuant
to this Article shall
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be the payment up in full of unissued shares to be allotted
and distributed as aforesaid.
NOTICES
144 Any notice or other document to be given pursuant to these Articles shall
be in writing except that a notice calling a meeting of the Board need not
be in writing.
145 The Company may give any notice to a member either personally or by sending
it by post in a prepaid envelope addressed to the member at his address in
the Register or by leaving it at that address. In the case of joint holders
of a share, all notices and other documents shall be given to the joint
holder who name stands first in the Register in respect of the joint
holding and notice so given shall be sufficient notice to all the joint
holders.
146 A member whose address in the Register is not within the United Kingdom and
who gives to the Company an address within the United Kingdom at which
notices may be given to him shall be entitled to have notices given to him
at that address, but otherwise no such member shall be entitled to receive
any notice from the Company.
147 A member present, either in person or by proxy, at any meeting of the
Company or of the holders of any class of shares in the Company (and, where
such person is one of the joint holders of a share, all the joint holders)
shall be deemed to have received notice of the meeting and, where
requisite, of the purposes for which it was called.
148 A notice may be given by the Company to the persons entitled to a share in
consequence of the death or bankruptcy of a member or otherwise by
operation of law by sending or delivering it, in any manner authorised by
these Articles for the giving of notice to a member, addressed to them by
name, or by the title of representatives of the deceased, or trustee of the
bankrupt or by any like description at the address, if any, within the
United Kingdom supplied for that purpose by the persons claiming to be so
entitled. Until such an address has been supplied, a notice may be given in
any manner in which it might have been given if the death or bankruptcy or
other event giving rise to the transmission of the share by operation of
law had not occurred. Every person who becomes entitled to a share shall be
bound by any notice in respect of that share which, before his name is
entered in the Register, has been duly given to a person from whom he
derives his title.
149 If the Company has suspended the despatch of cheques or warrants to any
member or other person entitled thereto in accordance with the provisions
of these Articles or, if on two consecutive occasions notices have been
sent through the post to any member or other person entitled thereto at his
registered address or address for service but have been returned
undelivered, such member or other person entitled thereto shall not
thereafter be entitled to receive notices from the Company until he shall
have communicated with the Company and supplied in writing to the Transfer
Office a new registered address or address within the United Kingdom for
the service of notices.
150 Any notice or other document if served by post shall be deemed to have been
served on the day following that on which the envelope containing the same
is posted (by whatever class of post). In proving such service it shall be
sufficient to prove that the envelope containing the notice or document was
properly addressed, stamped and posted. Any notice or other document
delivered to or left at a registered address or address for service
27
<PAGE>
or otherwise than by post shall be deemed to have been served on the day it
is so delivered or left.
151 Without prejudice to the Article governing the accidental omission to give
notice and to the presumption of service by post and the presumed date of
service by post in the last preceding Article, if at any time, by reason of
the suspension or curtailment of postal services within all or any part of
the United Kingdom, the Company reasonably believes that a notice of a
general meeting, if sent by post, is unlikely to be delivered within seven
days of posting, the Company may at its sole discretion and either in
addition to or in substitution for notice by post, convene a general
meeting by a notice advertised in at least one national newspaper and such
notice shall be deemed to have been duly served on all members and other
persons entitled thereto on the day when the advertisement has appeared in
at least one such newspaper. If in any such case notices have not been
posted the Company shall send confirmatory copies of the notice by post if
at least seven days prior to the meeting the delivery by post of notices to
addresses throughout the United Kingdom again becomes practicable.
AUTHENTICATION OF DOCUMENTS
152 Any Director or the Secretary or any person appointed by the Board for the
purpose may authenticate any document affecting the constitution of the
Company and any resolution passed by the Company or the Board or any
committee of the Board, and any books, records, documents and accounts
relating to the business of the Company and may certify copies thereof or
extracts therefrom as true copies or extracts. Except in the case of
manifest error a document which is certified as aforesaid shall be
conclusive evidence in favour of all persons dealing with the Company in
good faith that the document is true and complete and in the case of a copy
of a resolution or an extract from the minutes of the Board or any
committee of the Board that such minutes or extract is a true and accurate
record of proceedings at a duly constituted meeting.
DESTRUCTION OF DOCUMENTS
153 (1) It shall be presumed conclusively in favour of the Company that
every entry on the Register purporting to have been made on the
basis of an instrument of transfer or other document destroyed by
the Company was duly and properly made and that every instrument of
transfer so destroyed was a valid and effective instrument duly and
properly registered, and that every share certificate so destroyed
was a valid and effective certificate duly and properly cancelled
and that every other document mentioned in paragraph (a) below so
destroyed was a valid and effective document in accordance with the
recorded particulars of it in the books and records of the Company
and that every paid dividend warrant and cheque so destroyed was
duly paid; provided always that:
(a) six years shall have elapsed since the date of registration of
the relevant instrument of transfer of shares and two years
shall have elapsed since the date of recording of the relevant
dividend mandate or notification of change of name or address
and one year shall have elapsed since the recorded date of
payment of the relevant dividend cheque or cancellation of the
relevant cancelled share certificate; and
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(b) the Company is not shown to have destroyed a document in bad
faith or with actual notice of any claim (regardless of the
parties) to which the document might be relevant.
(2) The Company shall be entitled to destroy any such document after the
relevant period referred to in paragraph (1)(a) of this Article but
nothing in these Articles shall be construed as imposing upon the
Company any duty to retain any document for such period.
(3) References in this Article to the destruction of any document
include references to its disposal in any manner.
WINDING UP
154 If the Company is wound up, the liquidator may, with the sanction of an
extraordinary resolution of the Company and any other sanction required by
the Acts, divide among the members in specific the whole or any part of the
assets of the Company and may, for that purpose, value any assets and
determine how the division shall be carried out as between the members or
different classes of members. The liquidator may, with the like sanction,
vest the whole or any part of the assets in trustees upon such trusts for
the benefit of the members as he with the like sanction determines, but no
member shall be compelled to accept any assets upon which there is a
liability.
INDEMNITY
155 Subject to the provisions of the Acts but without prejudice to any
indemnity to which he may otherwise be entitled, every Director, Alternate
Director, Auditor, Secretary or other officer of the Company shall be
indemnified out of the assets of the Company against all costs, charges,
expenses, losses, damages and liabilities incurred by him in or about the
execution of his duties or the exercise of his powers or otherwise in
relation thereto including (without prejudice to the generality of the
foregoing) any liability incurred by him in defending any proceedings,
whether civil or criminal, which relate to anything done or omitted or
alleged to have been done or omitted by him as an officer or employee of
the Company in which judgment is given in his favour or in which he is
acquitted, or which are otherwise disposed of without any finding or
admission of material breach of duty on his part or in connection with any
application in which relief is granted to him by the court from liability
for negligence, default, breach of duty or breach of trust in relation to
the affairs of the Company.
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NAME AND ADDRESSES OF SUBSCRIBERS
- ------------------------------------------------------------------------------
156 Instant Companies Limited
2 Baches Street
London
N1 6UB
157 Swift Incorporations Limited
2 Baches Street
London
N1 6UB
DATED this 1st day of July 1994
Witness to the above signatures: Mark Anderson
2 Baches Street
London
N1 6UB
30
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EXHIBIT 5.1
FORM OF WEIL, GOTSHAL & MANGES LLP LEGAL OPINION
[Weil, Gotshal & Manges LLP Letterhead]
________, 1999
Peptide Therapeutics Group plc
321 Cambridge Science Park
Milton Road
Cambridge, CB4 4WG
ENGLAND
Dear Sirs:
You have requested our opinion with respect to certain matters of English law in
connection with the Registration Statement on Form F-4 ("the Registration
Statement") to be filed by Peptide Therapeutics Group plc ("Peptide") with the
Securities and Exchange Commission, in connection with the registration under
the Securities Act of 1933, as amended, of up to ___________ Ordinary Shares of
10p each in Peptide ("the Shares"). The Shares are to be issued for outstanding
shares of OraVax, Inc. ("OraVax") common stock as described in the Registration
Statement and pursuant to the Agreement and Plan of Acquisition by and among
OraVax, Peptide and Peach Acquisition Corp. ("the Agreement") filed as an
exhibit thereto. As your UK legal Counsel, we have examined the proceedings
taken and are familiar with the proceedings proposed to be taken in connection
with the issue of the Shares.
It is our opinion that, upon completion of the proceedings being taken or to be
taken prior to issue of the Shares, and upon completion of the proceedings being
taken in order to permit such transactions to be carried out in accordance with
the securities laws of the United States and the various states in the United
States and in the United Kingdom, where required, the Shares when issued in the
manner referred to in the Registration Statement will be legally and validly
issued, fully paid and non-assessable.
We consent to the use of this Opinion as an exhibit to the Registration
Statement. We also consent to all references to us in the Registration
Statement, including the Prospectus/ Proxy Statement constituting a part thereof
and any amendments thereto which have been approved by us.
Yours truly,
<PAGE>
Exhibit 10.12
DATED 24th May 1996
-------------------
THE MASTER FELLOWS AND SCHOLARS OF
TRINITY COLLEGE CAMBRIDGE
- and -
PEPTIDE THERAPEUTICS GROUP PLC
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
LEASE
- of -
Unit 329 Phase V Cambridge Science Park,
Milton Road, Cambridge
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Term: 24th May 1996 to 24th December 1997 (inclusive)
Initial Rent: (pound)51,000 per annum
Mills & Reeve,
112 Hills Road,
Cambridge.
CB2 1PH. (HIN)
jim7348.xdoc
<PAGE>
Map of "CAMBRIDGE SCIENCE PARK"
[Map Omitted]
<PAGE>
Contents
<TABLE>
<S> <C>
Interpretation ........................................................ page 1
The demise habendum and reddendum ..................................... page 4
Lessee's covenants .................................................... page 5
Lessor's covenants .................................................... page 5
Proviso agreement and declaration
As to re-entry .................................................. page 5
As to notices ................................................... page 6
As to rent abatement ............................................ page 6
As to Part II Landlord and Tenant Act 1954 ...................... page 7
As to warranties ................................................ page 7
As to Lessors' powers to deal with
the Lessors' neighbouring premises ........................... page 7
As to arbitration ............................................... page 7
As to Lessors' obligations ...................................... page 7
Release of Lessors .............................................. page 7
Guarantor's further covenant to take lease ............................ page 8
Headings .............................................................. page 8
Charities Act ......................................................... page 8
Agreement for Lease ................................................... page 8
First Schedule The property and rights included in this demise
First Part The property ........................................ page 9
Second Part The rights
Right to services ......................................... page 9
Right of way .............................................. page 9
Right to park ............................................. page 9
Right of support .......................................... page 10
Right to use Common Parts ................................. page 10
Second Schedule
First Part Exceptions and reservations in favour of the Lessors
Right to services ......................................... page 11
Right to light and air .................................... page 11
Right to support .......................................... page 11
Right to enter ............................................ page 11
First Part Right of Escape in Case of Fire ..................... page 11
Second Part Existing encumbrances .............................. page 12
Third Schedule The rents payable by the Lessee
First Part Service Charge and Interim Charge
Definitions ............................................... page 13
Second Part Other rents payable upon demand
Rent for Common Parts ..................................... page 16
Interest on arrears ....................................... page 16
Insurance excess .......................................... page 17
Fourth Schedule Lessee's covenants
To pay rent ..................................................... page 18
To pay outgoings ................................................ page 18
To repair and decorate .......................................... page 18
Not to make alterations ......................................... page 19
To permit entry ................................................. page 19
To repair on notice ............................................. page 20
To pay cost of damage ........................................... page 20
To pay Lessors' costs (LPA) ..................................... page 20
As to use and safety ............................................ page 21
Not to use for unlawful or illegal purposes or cause nuisance ... page 21
Not to reside ................................................... page 22
As to user ...................................................... page 22
To keep open and security ....................................... page 22
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Displays and advertisements ..................................... page 22
To keep clean ................................................... page 23
To comply with enactments and give notice ....................... page 23
To comply with the Planning Acts ................................ page 24
Not to vitiate insurance ........................................ page 25
To indemnify .................................................... page 25
As to assignments etc. .......................................... page 26
To give notice of assignments, devolutions etc. ................. page 27
As to loss or acquisition of easements .......................... page 27
To produce plans/documents ...................................... page 28
Not to interfere with reserved rights ........................... page 28
To permit entry for reletting etc. .............................. page 28
To yield up ..................................................... page 28
As to failure of guarantee and additional guarantees ............ page 28
As to value added tax ........................................... page 29
Statutory acquisitions .......................................... page 29
Fire fighting appliances ........................................ page 29
To carry out the Lessee's New Works ............................. page 29
Not to obstruct ................................................. page 30
To comply with regulations ...................................... page 30
As to water supply .............................................. page 30
To comply with Planning Agreements .............................. page 30
Fifth Schedule Lessors' covenants
As to quiet enjoyment ........................................... page 31
To insure ....................................................... page 31
To reinstate .................................................... page 32
To maintain spine road .......................................... page 32
To provide services ............................................. page 32
Sixth Schedule The Lessee's New Works ................................ page 34
Seventh Schedule Guarantor's covenants and agreements ................ page 35
</TABLE>
<PAGE>
THIS LEASE is made the twenty fourth day of May One thousand nine hundred and
ninety six
BETWEEN
(1) ("the Lessors") THE MASTER FELLOWS AND SCHOLARS OF THE COLLEGE OF THE HOLY
AND UNDIVIDED TRINITY WITHIN THE TOWN AND UNIVERSITY OF CAMBRIDGE OF KING HENRY
THE EIGHTH'S FOUNDATION
(2) ("the Lessee") PEPTIDE THERAPEUTICS GROUP PLC (Company Number )
Registered office
NOW THIS DEED WITNESSETH as follows:-
INTERPRETATION
1. IN this Lease unless the context otherwise requires:-
(A) "the Lessors" shall include the person for the time being entitled to
the reversion immediately expectant on the determination of the said term
as herein defined
(B) "the Lessee" shall include the Lessee's successors in title and
assigns and shall include personal representatives
(C) "the Guarantor" means a person who has entered into a guarantee of the
Lessee's covenants contained in this Lease (whether by separate deed
pursuant to the provisions of this Lease or otherwise) and shall include
the Guarantor's successors whether by substitution or otherwise including
personal representatives
(D) "the Surveyor" means any suitably qualified surveyor or where
appropriate the Surveyors Consulting Engineers Architects and Agents for
the time being of the Lessors
(E) "the said term" means the total period of demise hereby granted and
(save in respect of Clause 2 hereof and in respect of the service of any
statutory notice of termination) any period of holding over or any
extension or continuance thereof whether by statute or common law where
the context so admits
(F) "service channels" means all such flues sewers drains ditches pipes
wires watercourses cables channels gutters ducts and other conductors of
services and plumbing and ventilating equipment and motors appurtenant
thereto as are now existing or which may be constructed or laid during the
said term and within the period of limitation as herein defined
(G) "Plan 1" shall mean the plan annexed hereto and marked "1" and "Plan
2" shall mean the plan annexed hereto and marked "2"
(H) "the demised premises" means
(i) the property hereby demised as described in the First Part of
the First Schedule hereto including all service channels in on or
under such property and fixtures and fittings (other than trade or
tenant's
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Map of "PLAN 2 SECOND FLOOR"
[Map Omitted]
<PAGE>
fixtures and fittings) therein together with all additions and
improvements to such property and
(ii) the rights described in the Second Part of the First Schedule
hereto
together with all additions alterations and improvements to such property
and rights
(I) "the Estate" shall mean Cambridge Science Park shown edged blue on
Plan situate adjoining Milton Road partly in the City of Cambridge and
partly in the County of Cambridgeshire together with any such further
neighbouring area in respect of which the Lessors or their lessees may
from time to time or at any time during the period of limitation receive
planning permission to develop for uses similar or ancillary to the use of
the said area edged blue and which the Lessors during the period of
limitation elect to include in Cambridge Science Park
(J) "the period of limitation means the period of eighty years commencing
on the date hereof or such longer period as the law may permit (which
period is hereby specified as the perpetuity period applicable to this
Lease under the rule against perpetuities)
(K) "the insured risks" means at any particular time the risk of loss or
damage by fire or aircraft and other aerial devices or articles dropped
therefrom lightning explosion riot and civil commotion malicious damage
earthquakes storm tempest flood burst pipes impact and the risk of any
other kind of loss or damage which the Lessors may from time to time
reasonably deem it desirable to insure against and against which they
shall at that particular time have a policy of insurance in effect subject
to the Lessors first having given to the Lessee written notice thereof and
subject also to such exclusions and limitations as the insurers may impose
(L) "the Planning Acts" means the Town and Country Planning Acts 1948 to
1990 the Planning (Hazardous Substances) Act 1990 the Planning (Listed
Buildings Conservation Areas) Act 1990 the Local Government Planning and
Land Act 1980 and the Public Health Acts 1875 to 1969 and all notices
directions orders regulations byelaws rules and conditions under or in
pursuance of or deriving effect therefrom from time to time and any
reference herein to these or any other Act or Acts shall include a
reference to any statutory modification or re-enactment thereof for the
time being in force and any future legislation of a like nature
(M) "the Building" means the building numbered 320 (containing the block
of Units numbered 321-329 (both numbers inclusive) Cambridge Science Park
including the Common Parts (as hereinafter defined) shown for
identification purposes on Plan 2 and thereon edged green and all
alterations and improvements thereto and all plant and equipment machinery
fittings and furnishings now or hereafter therein but excluding tenants'
and trade fixtures and fittings
(N) "the Lessors" neighbouring premises" means any land or buildings now
or hereafter during the period of limitation erected adjoining or
neighbouring the demised premises (whether beside under or over) which
belong to the Lessors now or hereafter during the period of limitation
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<PAGE>
including those parts of the Building not forming part of the demised
premises
(O) "the Common Parts" means those parts of the Building which are not
intended to be demised by an occupational tenancy from time to time
including but not limited to the entrance reception area plant room lifts
landings fire escapes toilets washrooms roadways car parks paths gardens
and kitchen facilities
(P) "the Estate Service Charge" shall mean a service rent in respect of
(a) the maintenance repair cultivation and management of the Estate
including all roads ways and paths service channels amenity grounds
and cultivated areas (whether situate thereon or otherwise serving
the same) and
(b) all such other matters whatsoever which in the reasonable
opinion of the Surveyor shall be necessary to maintain high
standards for a development of such a character including without
prejudice to the generality hereof a notional figure as certified by
the Surveyor equivalent to the reasonable market rental for the time
being of any premises provided by the Lessors on the Estate being
used or occupied (whether with or without rental) to enable the
Lessors the Surveyor and their respective servants or employees to
implement and carry out such maintenance repairs cultivation and
management of the Estate and all other matters as aforesaid but less
any rental thereof received by the Lessors
such service charge to be in the reasonable opinion of the Surveyor such
as shall be just and equitable in all the circumstances PROVIDED ALWAYS
THAT such service rent shall not include any sum in respect of the cost of
the initial laying out or construction of the matters referred to in
paragraphs (a) and (b) above or any work or costs arising out of or in
connection with such initial construction
(Q) "Interest" shall mean interest at the yearly rate of three per cent
above the base rate published from time to time by Barclays Bank PLC or
(in the event of base rate or Barclays Bank PLC ceasing to exist) such
other equivalent rate of interest as the Lessors may from time to time in
writing specify
(R) "enactments" shall include all present and future Acts of Parliament
(including but not limited to the Public Health Acts 1875 to 1969 the
Factories Act 1961 the Offices Shops and Railway Premises Act 1963 the
Fire Precautions Act 1971 the Defective Premises Act 1972 the Health
Safety at Work etc. Act 1974 and the Planning Acts) and all notices
directions orders regulations bye-laws rules and conditions under or in
pursuance of or driving effect therefrom and any reference herein to a
specific enactment or enactments (whether by reference to its or their
short title or otherwise) shall include a reference to any enactment
amending or replacing the same and any future legislation of a like nature
(S) "the Lessee's New Works" shall mean the works described in the Sixth
Schedule hereto
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<PAGE>
(T) "the Planning Agreements" shall mean
(a) an agreement dated the Eighth day of November One thousand nine
hundred and seventy one made pursuant to Section 37 of the Town and
Country Planning Act 1962 between the County Council of the
Administrative County of Cambridgeshire and Isle of Ely (1) and the
Lessors (2) and
(b) an agreement dated the Nineteenth day of August One thousand
nine hundred and seventy five made pursuant to Section 52 of the
Town and Country Planning Act 1971 between the same parties and in
the same order as the Section 37 agreement and
(c) an agreement dated the Second day of February One thousand nine
hundred and eighty two made pursuant to Section 52 of the Town and
Country Planning Act 1971 between South Cambridgeshire District
Council (1) and the Lessors (2) and
(d) an agreement dated the Twenty sixth day of June One thousand
nine hundred and eighty four made pursuant to Section 52 of the Town
and Country Planning Act 1971 between South Cambridgeshire District
Council (1) and the Lessors (2) and
(e) an agreement dated the Second day of June One thousand nine
hundred and eighty eight made pursuant to Section 52 of the Town and
Country Planning Act 1971 between South Cambridgeshire District
Council (1) and the Lessors (2)
(U) words importing the masculine gender only include the feminine gender
and vice versa and include any body of persons corporate or unincorporate
words importing the singular number only include the plural number and
vice versa and the word "person" shall include any body of persons
corporate or unincorporate and all covenants by any party hereto shall be
deemed to be joint and several covenants where that party is more than one
person and any covenant by the Lessee not to do or not to do or omit to do
an act or thing shall be deemed to include an obligation not to permit or
suffer such act or thing to be done or omitted
THE DEMISE HABENDUM AND REDDENDUM
2. In consideration of the several rents and covenants on the part of the Lessee
herein reserved and contained the Lessors HEREBY DEMISE unto the Lessee ALL
THOSE premises more particularly described in the First Part of the First
Schedule hereto TOGETHER WITH (in common with the Lessors their lessees and
assigns and all other persons from time to time having the like rights) the
rights set out in the Second Part of the First Schedule hereto EXCEPT AND
RESERVING UNTO THE LESSORS and their successors in title assigns and lessees and
all persons from time to time authorised by them the interests rights
reservations and exceptions more particularly set out in the First Part of the
Second Schedule hereto TO HOLD the demised premises unto the Lessee SUBJECT to
any or all easements and other rights (if any) now subsisting over or which may
affect the same (including any such as are more particularly set forth in the
Second Part of the Second Schedule hereto) from the twenty fourth day of May One
thousand nine hundred and ninety six to the 24th December 1997 inclusive but
4
<PAGE>
determinable nevertheless as hereinafter provided YIELDING AND PAYING THEREFOR
unto the Lessors during the said term
(a) yearly and proportionately for any fraction of a year the rent of
Fifty one thousand pounds ((pound)51,000) per annum exclusive of Value
Added Tax the first such payment or a proportionate part thereof in
respect of the period from the twenty fourth day of September One thousand
nine hundred and ninety six to the next regular quarter day to be made on
the grant hereof and thereafter such rents to be paid by equal quarterly
instalments in advance on the four usual quarter days in every year
(b) by way of further rent the Service Charge and Interim Charge specified
in the First Part of the said Third Schedule hereto to be paid on the days
and in the manner specified therein and
(c) by way of further rent on demand the rents specified in the Second
Part of the said Third Schedule
all such payments to be made without any deduction
LESSEE'S COVENANTS
3. THE Lessee HEREBY COVENANTS with the Lessors that the Lessee will at all
times during the said term duly observe and perform all the covenants and
provisions on the Lessee's part set out in the Fourth Schedule hereto and the
provisions and conditions in this Lease contained
LESSORS' COVENANTS
4. THE Lessors HEREBY COVENANT with the Lessee that all times during the said
term duly observe and perform all the covenants and provisions on the Lessors'
part set out in the Fifth Schedule hereto and the provisions and conditions in
this Lease contained
PROVISO AGREEMENT AND DECLARATION
5. PROVIDED ALWAYS and it is hereby agreed as follows:-
AS TO RE-ENTRY
(A) If and whenever the said rents hereby reserved or any part thereof
respectively shall be in arrear for twenty one days next after the same shall
have become due whether any formal or legal demand therefor shall have been made
or not or if and whenever there shall be any breach non-observance or
non-performance by the Lessee of any of the covenants on the part of the Lessee
herein contained or if the Lessee being a Company shall become subject to an
administration order or shall suffer a trustee receiver or similar officer to be
appointed over the whole or any part of the Lessee's undertaking property or
assets or shall be the subject of a winding up order by the Court (save for the
purpose of reconstruction or amalgamation of a solvent company not involving a
realisation of assets) or pass a resolution for winding up (save as aforesaid)
or otherwise enter into
5
<PAGE>
liquidation or if the Lessee being an individual (or being more than one
individual any one of them) shall be adjudged bankrupt or shall enter into a
composition scheme or arrangement with or for the benefit of the Lessee's
creditors or suffer any distress or execution to be levied on or enforced
against the Lessee's goods then and in any such case it shall be lawful for the
Lessors to re-enter into and upon the whole of the demised premises or any part
of the demised premises in the name of the whole and thereupon this present
demise shall absolutely determine and become null and void but without prejudice
nevertheless to any right of action or remedy of the Lessors in respect of any
antecedent breach by the Lessee of any of the covenants on the Lessee's part
herein contained
AS TO NOTICES
(B) Any notice under this Lease shall be in writing and any notice
(a) to the Lessee or the Guarantor shall be deemed to be sufficiently
served if
(i) left addressed to the Lessee on the demised premises or
(ii) sent to the Lessee or the Guarantor by recorded delivery post
at the last known address or (if a Company) registered office of the
Lessee or the Guarantor and
(b) to the Lessors shall be deemed to be sufficiently served if
(i) sent to the Lessors by post at the last known address or (if a
Company) registered office of the Lessors
(ii) whilst the reversion immediately expectant on the determination
of the said term is vested in the original Lessors (as named herein)
addressed to the Lessors' Senior Bursar and delivered to him
personally or sent to him by post
AS TO RENT ABATEMENT
(C) In case the demised premises or any part thereof shall at any time during
the said term be so damaged by the insured risks or any of them as to be unfit
for occupation and use then (unless the insurance money shall be wholly or
partially irrecoverable by reason solely or in part of any act omission neglect
or default of the Lessee or their employees servants agents independent
contractors customers visitors licensees invitees or any other person under the
Lessee's control) the rent hereby reserved or a fair proportion thereof
according to the nature and extent of the damage sustained (the amount of such
proportion to be determined by the Surveyor acting reasonably) shall be
suspended either for the period from the date of such damage until the date when
the demised premises shall again be rendered fit for occupation and use or for
three years (whichever of the said periods shall be the shorter) and any dispute
with reference to this proviso shall be referred to arbitration in accordance
with the Arbitration Acts 1950 and 1979
6
<PAGE>
AS TO PART II LANDLORD AND TENANT ACT 1954
(D) If this Lease is within Part II of the Landlord and Tenant Act 1954 then
subject to the provisions of subsection (2) of Section 38 of that Act neither
the Lessee nor any assignee of the said term or of the demised premises shall be
entitled on quitting the demised premises to any compensation under Section 37
of that Act
AS TO WARRANTIES
(E) The Lessee hereby acknowledges and admits that the Lessors have not given or
made any representation or warranty that the use of the demised premises herein
authorised is or will remain a permitted use under the Planning Acts
AS TO LESSORS' POWERS TO DEAL WITH THE LESSORS' NEIGHBOURING PREMISES
(F) Notwithstanding anything herein contained the Lessors and all persons
authorised by the Lessors shall have power without obtaining any consent from or
making any compensation to the Lessee to deal as the Lessors may think fit with
the Lessors' neighbouring premises and to erect thereon or on any part thereof
any building whatsoever and to make any repairs alterations or additions and
carry out any demolition or rebuilding whatsoever (whether or not affecting the
light or air to the demised premises) which the Lessors may think fit or desire
to do subject to the Lessors or the person exercising such powers making good
any damage caused to the demised premises in the exercise of such power to the
reasonable satisfaction of the Lessee and PROVIDED THAT in the exercise of such
power the Lessors will not so far as the Lessors are able materially restrict
access to and from the demised premises
AS TO ARBITRATION
(G) If any dispute or difference shall arise between the parties hereto touching
these presents or the rights or obligations of the parties hereunder such
dispute or difference shall in the event of this Lease expressly so providing
and otherwise may by agreement between the parties be referred to a single
arbitrator to be agreed upon by the parties hereto or in default of agreement to
be nominated by the President or Vice President for the time being of the Royal
Institution of Chartered Surveyors on the application of any party in accordance
with and subject to the provisions of the Arbitration Acts 1950 and 1979
AS TO LESSORS' OBLIGATIONS
(H) Nothing herein contained shall render the Lessors liable (whether by
implication of law or otherwise howsoever) to do any act or thing which the
Lessors have not expressly covenanted to carry out provide or do in the Fifth
Schedule hereto
RELEASE OF LESSORS
(J) If the Lessors (in this sub-clause (J) meaning the lessors for the time
being) cease to be entitled to the reversion expectant on the determination of
the said term the Lessee will (if required) execute and deliver
7
<PAGE>
unconditionally to the Lessors a deed (to be prepared by and at the expense of
the Lessors) already executed by the new reversioner and which:-
(a) contains a covenant by the new reversioner with the Lessee to perform
the Lessors' covenants in this Lease and
(b) releases the Lessors from liability under the terms of the Lessors'
covenants contained in this Lease
GUARANTOR'S FURTHER COVENANT TO TAKE LEASE
7. The Guarantor HEREBY FURTHER COVENANTS with the Lessors that if the Lessee
(being a Company) shall be subject to an administration order or be the subject
of a winding up order by the Court or otherwise go into liquidation or (being an
individual) shall be adjudged bankrupt and the Liquidator or Administrator or
the Trustee of the bankrupt's estate (as the case may be) shall disclaim or
abandon this Lease and if the Lessors shall within three months after such
disclaimer or abandonment by notice in writing require the Guarantor to accept a
lease of the demised premises for a term equal to the residue which if there had
been no such disclaimer or abandonment would have remained of the said term at
the same rents and under the like covenants and provisions as are reserved by
and contained in this Lease with the exception of this Clause and Clause 6 (the
said new lease and the rights and liabilities thereunder to take effect as from
the date of the said disclaimer or abandonment) then and in such case the
Guarantor shall accept such lease accordingly and execute and deliver to the
Lessors a counterpart thereof in all respects at the sole cost of the Guarantor
HEADINGS
8. The headings hereto are inserted for convenience of reference only and shall
not in any manner affect the construction meaning or effect of anything herein
contained or govern the rights of the parties hereto
CHARITIES ACT
9. The demised premises are held by or in trust for a charity by the Lessors and
the charity is an exempt charity
AGREEMENT FOR LEASE
10. This Lease is not entered into pursuant to an Agreement for Lease
This instrument is executed as a deed and by its execution the parties authorise
their respective solicitors to deliver it for them on the date it is completed
8
<PAGE>
THE FIRST SCHEDULE hereinbefore referred to
THE PROPERTY AND RIGHTS INCLUDED IN THIS DEMISE
FIRST PART
THE PROPERTY
ALL THAT Unit Numbered 329 forming part of the Building on Cambridge Science
Park containing 3,300 square feet more or less as the same is more particularly
delineated on Plan 2 and thereon edged red including
(1) the plaster and other decorative finishes to the internal walls
(2) the raised floors including the void beneath and any service channels
therein exclusively serving the demise
(3) the false ceiling including the void above and any service channels
therein exclusively serving the demise excluding the floor slab of the
unit above
(4) the windows and the window frames and the glass therein and door
frames and doors but excluding the exterior of the Building and any part
of the structure foundations and roof of the same
SECOND PART
THE RIGHTS
RIGHT TO SERVICES
(1) Save in relation to statutory undertakers services at all times hereafter
the right of passage of water soil electricity gas air and other services from
and to the demised premises through the service channels now in under or upon
the Building or the Estate or the Lessors' neighbouring premises and all such
rights of access for the Lessee as may from time to time be reasonably required
for the purpose of laying inspecting cleansing repairing maintaining or renewing
such service channels or any of them but the enjoyment of the aforesaid rights
shall be subject to the person or persons exercising such right causing as
little damage or interference as is reasonably possible in the exercise of such
right and the Lessee being liable to make good all damage to the Estate or the
Lessors' neighbouring premises thereby occasioned with all reasonable dispatch
RIGHT OF WAY
(2) The right of way for all purposes reasonably necessary for the use and
enjoyment of the demised premises for the purposes herein authorised but not
further or otherwise with or without vehicles over the roadways coloured brown
on Plan 1 until the same are adopted by the Local Authority as roads and
footpaths maintainable at the public expense
RIGHT TO PARK
(3) The right to park no more than 29 cars on the car parking spaces comprised
within the Common Parts on those spaces as may from time to time be specified by
the Lessors
9
<PAGE>
RIGHT OF SUPPORT
(4) A right of subjacent and lateral support shelter and protection from
remainder of the Building
RIGHT TO USE COMMON PARTS
(5) Subject to sub-clause (3) above a right to the proper use of the Common
Parts for the purposes for which they are provided but not for any other purpose
(6) The right to display the Lessee's name and logo on the communal sign
provided from time to time in the entrance way to the Building
10
<PAGE>
THE SECOND SCHEDULE hereinbefore referred to
FIRST PART
EXCEPTIONS AND RESERVATIONS IN FAVOUR OF THE LESSORS
RIGHT TO SERVICES
1. At all times hereafter the right of passage and running of appropriate
services through the service channels forming part of the demised premises and
to make connection with such service channels or any of them for the purpose of
exercising the said rights and all such rights of access for the Lessors the
Surveyor and the Lessors' lessees and employees and all persons from time to
time authorised by the Lessors as may from time to time be reasonably required
for the purpose of laying inspecting cleansing repairing maintaining renewing or
adding to such service channels or any of them but the enjoyment of the
aforesaid rights shall be subject to the Lessors or other the person or persons
exercising the same or having the benefit thereof being liable to make good all
damage to the demised premises thereby occasioned with reasonable dispatch
RIGHT TO LIGHT AND AIR
2. The Lessee shall not be entitled to any right of access of light or air to
the demised premises which would restrict or interfere with the user of the
Building the Estate or any of the Lessors neighbouring premises or any part
hereof for building or otherwise howsoever
RIGHT TO SUPPORT
3. The right to support and shelter and all other rights and privileges in the
nature of easements and quasi-easements now or hereafter belonging to or enjoyed
by the Building the Estate or the Lessors' neighbouring premises
RIGHT TO ENTER
4. At all times during the said term the right with or without the Surveyor the
Lessors' employees and workmen and any persons authorised by them to enter the
demised premises on reasonable prior notice (except in emergency) for the
purpose of doing any act matter or thing in respect of which the Lessors are
permitted entry to the demised premises under the Fourth Schedule hereto upon
the terms therein stated and for all other requirements of the Lessors as in the
opinion of the Lessors shall be reasonably necessary such reservation to be in
addition to and not in substitution for or limitation of any other rights
exceptions or reservations to which the Lessors are entitled hereunder PROVIDED
THAT the Lessors or the persons exercising this right shall (as soon as
reasonably practicable) make good all damage caused to the demised premises in
the exercise of the right to the reasonable satisfaction of the Lessee
RIGHT OF ESCAPE IN CASE OF FIRE
5. A right of escape in case of emergency only for all occupiers of or visitors
to the Building through the demised premises and to the point marked "B" on Plan
2
11
<PAGE>
SECOND PART
EXISTING ENCUMBRANCES
(1) The Planning Agreements
12
<PAGE>
THE THIRD SCHEDULE hereinbefore referred to
THE RENTS PAYABLE BY THE LESSEE
FIRST PART
SERVICE CHARGE AND INTERIM CHARGE
DEFINITIONS
1. In this Part of this Schedule the following expressions shall have the
following meanings respectively:-
(A) "the Lessors' Services" shall mean
(1) effecting and maintaining an insurance policy or policies in
accordance with the provisions of Clause 2 of the Fifth Schedule of
this Lease against such liability or liabilities of the Lessors
their agents servants and workmen (including negligence) in
connection with or arising out of the Building or the occupation
maintenance or management thereof or any part thereof as the Lessors
in their absolute discretion shall think fit and all reasonable
professional fees which the Lessors may from time to time incur in
connection with the valuation of the Building for insurance purposes
(2) cleaning lighting maintaining and repairing the Common Parts
including cultivating the gardens comprised therein
(3) providing and maintaining any refuse disposal services security
services fire alarms fire fighting equipment and signage provided by
the Lessors and all other such services for the benefit of all the
lessees of the Building
(4) providing space heating and domestic water to the Building
(5) the provision of gas water electricity and other services to the
Common Parts
(6) the provision of all services and equipment to the Common Parts
from time to time including (but not limited to) lavatories and the
drains therefrom the provision of cleaning facilities for the Common
Parts and all other services provided for the use of the lessees of
the Building except in so far as the Lessors in their absolute
discretion may charge a lessee or occupier for the use thereof
directly
(7) refurnishing and decorating the Common Parts
(8) decorating maintaining and repairing the Building in accordance
with Clause 5 of the Fifth Schedule hereto
(9) employing managing agents to perform all or any of the services
specified in this sub-clause (A) and of any caretaker to manage
supervise or attend to the security of the Building including the
provision of uniforms and materials and of services provided by them
(10) the provision of any extraordinary or emergency services or
expenses incurred by the Lessors for the benefit of the Lessee and
other lessees of the Lessors relating to the Building
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(11) any steps taken by the Lessors (including legal proceedings)
which the Lessors may reasonably decide in the interests of good
estate management are necessary for the benefit or protection of the
Building as a whole and any rights and easements appurtenant thereto
or which may be required by any Act of Parliament or bye-law
(12) the payment of any rates water rates taxes assessments duties
charges and impositions whatsoever (whether or not of a recurring
nature) now or hereafter during the said term assessed charged or
imposed on in respect of those parts of the Building which are not
demised or not intended to be demised by an occupational tenancy
from time to time
(13) enforcing or attempting to enforce against any lessee of the
Building the observance of any covenant in that lessee's Lease the
non-observance of which is or may reasonably be detrimental to the
Lessors the Lessee or the other lessees of the Building
(14) the provision installation maintenance repair and renewal of
such other services and facilities and the pursuit of such other
like activities as the Lessors shall in their reasonable discretion
determine or provide for the Building in the interest of good estate
management
(15) any other act or thing done in the discretion of the Lessors in
or about or in connection with the Building reasonably calculated to
be for the benefit of the Lessee (either alone or in conjunction
with other lessees of the Lessors) but not otherwise provided for in
this lease
(16) the payment of all Value Added Tax chargeable in connection
with services rendered by the Lessors for which the Service Charge
is payable
but so that the Lessors may from time to time withhold add to vary extend
or make any alterations in the rendering of the services or any of them
from time to time as appropriate if reasonably considered by the Lessors
to be for the benefit of the Lessees of the Building
(B) "the Cost of the Lessors' Services" in respect of any Accounting
Period shall mean the aggregate of
(a) the costs and expenses incurred by the Lessors of providing the
Lessors' Services and
(b) a proper proportion (to be reasonably determined by the Surveyor
whose determination shall be final) attributable to the Building of
the Estate Service Charge and
(c) a reasonable sum by way of a provision towards the cost and
expense of replacing renewing maintaining repairing and decorating
the Building and replacing renewing repairing and maintaining the
plant installations and equipment therein and of any expenditure by
way of maintenance which is of a periodically recurring nature
(whether recurring regularly or irregularly) (hereinafter called
"the
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Fund") and the Fund shall be determined on the assumption that the
anticipated expenditure thereof is calculated as the Surveyor may
reasonably determine (acting as an expert and not as an arbitrator)
and that each year the Service Charge shall include such provision
towards such anticipated costs so that the Fund shall accumulate
sufficient monies to cover the anticipated expenditure whether or
not the expenditure so anticipated shall occur in whole or in part
during the said term PROVIDED THAT
(i) nothing herein shall oblige the Lessors to establish the
Fund or if established to maintain the Fund sufficient in
whole or in part to cover the costs and expenses hereinbefore
specified
(ii) all such sums received by the Lessors for the Fund shall
be credited to an interest bearing deposit account separate
from the Lessors' own money and shall he held by the Lessors
upon trust during the period of eighty years from the Twenty
fifth day of December One thousand nine hundred and eighty
nine (which shall be the perpetuity period applicable) for the
persons or corporations who from time to time shall be tenants
of the Building to apply the same and any interest accruing
thereto for the purposes hereinbefore specified and at the
expiry of the perpetuity period any such sums unexpended shall
be paid to the persons or corporations who shall then be
tenants of the Building in shares calculated by reference to
their then contributions
(C) "the Service Charge" shall mean the proportion of the Cost of the
Lessors' Services which in the reasonable opinion of the Surveyor shall be
just and equitable in all the circumstances PROVIDED THAT the Lessee shall
not be responsible for the cost of the Lessor's services in respect of
those parts of the Building (as do not comprise the Common Parts) which
are unlet from time to time
(D) "the Interim Charge" shall mean such sum as is to be paid on account
of the Service Charge in respect of each Accounting Period as the Lessors
shall specify such Interim Charge to he based on the anticipated Cost of
the Lessors' Services for the then current Accounting Period estimated by
reference to (inter alia) the total expenditure for the immediately
preceding Accounting Period
(E) "Accounting Period" shall mean a period commencing on the First day of
December in any year and ending on the Thirtieth day of November in the
following year
2. The first payment of the Interim Charge in respect of the period from the
date hereof to the twenty fourth day of June One thousand nine hundred and
ninety six shall be made on the date hereof and thereafter the Interim Charge
shall be paid to the Lessors by equal quarterly payments in advance on the four
usual quarter days in each year and in case of default the same shall be
recoverable from the Lessee as rent in arrear
3. If the Interim Charge paid by the Lessee in respect of any Accounting period
exceeds the Service Charge for that period the surplus of the Interim Charge so
paid over and above the Service Charge shall be carried forward by the Lessors
and credited to the account on the Lessee in computing the Service Charge in
succeeding Accounting Periods as hereinafter provided
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4. If the Service Charge payable by the Lessee in respect of any Accounting
Period exceeds the Interim Charge paid by the Lessee in respect of that
Accounting Period together with any surplus from previous years carried forward
as aforesaid then subject to the provisions of Clause 6 below the Lessee shall
pay the excess to the Lessors within twenty one days of the service upon the
Lessee of the Certificate referred to in Clause 5 below and in case of default
the same shall be recoverable from the Lessee as rent in arrear
5. As soon as practicable after the expiration of each Accounting Period there
shall be served upon the Lessee by the Surveyor a Certificate signed by the
Surveyor containing the following information:-
(i) the amount of the Interim Charge paid by the Lessee in respect of that
Accounting Period together with any surplus carried forward from previous
Accounting Periods
(ii) the amount of the Service Charge in respect of that Accounting Period
and of any excess or deficiency of the Service Charge over the Interim
Charge
6. The Surveyor shall keep a proper account (with vouchers so far as reasonably
possible) of the cost of the Lessor's services for each Accounting Period. The
Lessee shall be entitled at its own expense at any time within one month after
service of such Certificate to inspect the accounts and receipts and vouchers
upon which the same is based relating to the Cost of the Lessors' Services and
to raise with the Surveyor all reasonable questions arising thereon and to
obtain satisfactory replies thereto
SECOND PART
OTHER RENTS PAYABLE UPON DEMAND
RENT FOR COMMON PARTS
1. To the extent that the same is not covered by the Service Charge hereinbefore
referred to a fair and proper proportion attributable to the demised premises of
the cost and expense of making repairing maintaining rebuilding cleansing and
operating all ways roads pavements service channels yards bicycle stores vehicle
parks and gardens fences party structures and any installations equipment
fittings fixtures easements appurtenances or conveniences which shall belong to
or be used by the demised premises in common with other parts of the Building
and with the other buildings on the Estate and the Lessors' neighbouring
premises and with any other premises adjoining or neighbouring or over or under
the demised premises (or any of them) including architects' and surveyor's fees
properly incurred in connection with such works (such proper proportion to be
certified by the Surveyor acting reasonably whose certificate shall be final and
binding on the Lessee)
INTEREST ON ARREARS
2. Interest on any monies payable by the Lessee to the Lessors under any
covenant or provision of this Lease which remain unpaid in the case of the rent
reserved by clause 2(a) of this Lease and (if the Lessee has been notified in
writing of the amount of the Interim Charge for the Accounting Period in
question) the Interim Charge from the date the same are due
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whether demanded or not and in other cases from the date of written demand for
seven days shall be payable by the Lessee such Interest to be calculated from
the date when such monies were due until the date when such monies are received
by the Lessors PROVIDED THAT the provisions of this Clause shall not prejudice
any rights or remedies of the Lessors in respect of any breach of any of the
covenants on the part of the Lessee herein contained
INSURANCE EXCESS
3. If a claim arising under any policy of insurance affected by the Lessors upon
the Building shall be subject to any insurance excess the Lessee shall reimburse
or otherwise indemnify the Lessors against a fair and proper proportion (to be
conclusively determined by the Surveyor whose determination shall be final) of
the amount of such excess
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THE FOURTH SCHEDULE hereinbefore referred to
LESSEE'S COVENANTS
TO PAY RENT
1. To pay to the Lessors the rents hereby reserved at the times and in the
manner herein appointed for payment thereof without any deduction set off or
(except as provided by Clause 5 (C) of this Lease) abatement whatsoever and to
pay those rents reserved in Clause 2 (a) of this Lease by standing order to the
bankers of the Lessors
TO PAY OUTGOINGS
2. To pay and discharge all rates taxes duties assessments charges impositions
and outgoings whatsoever (whether parliamentary local public utility or of any
other description and whether or not of a recurrent nature) now or at any time
during the said term taxed assessed charged imposed upon or payable in respect
of the demised premises or any part thereof or by the Lessors or Lessee or owner
or occupier in respect thereof
TO REPAIR AND DECORATE
3. (a) Well and substantially to cleanse maintain repair the demised premises
and every part thereof (including all additions thereto and all the
Lessors' fixtures fittings plant and machinery therein and the service
channels forming part of the demised premises) and the drains connecting
the demised premises to and as far as their points of connection to the
drains used in common
(b) Without prejudice to the generality of sub-clause (a) hereof to paint
(or otherwise decorate) with two coats at least of best paint (or other
suitable materials) all such parts of the demised premises as have been
usually painted (or otherwise decorated) such painting (or other
decoration) to be in every fifth year of the said term and in the last
year of the said term (however determined but not more than once in any
period of twelve months) and otherwise as the Lessors may reasonably so
require
(c) Not to remove or damage any of the Lessors' fixtures and fittings in
the demised premises and to replace with similar articles of at least
equal quality such fixtures and fittings as may be lost or worn out or
become unfit for use
PROVIDED THAT all work referred to in this Clause shall be done in a good and
workmanlike manner and to the reasonable satisfaction of the Surveyor AND
PROVIDED FURTHER THAT the liability of the Lessee under this Clause shall not
extend to damage caused by any of the insured risks unless the insurance shall
have been vitiated or insurance monies rendered irrecoverable in whole or in
part by any act omission neglect or default of the Lessee or their employees
servants agents independent contractors customers visitors licensees invitees or
any other person under the Lessee's control
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NOT TO MAKE ALTERATIONS
4. (a) Not to alter the demised premises (except as regards the carrying out
by the Lessee of the Lessee's New Works) and not to cut maim injure or
damage any part thereof (including the Lessee's New Works once these have
been completed) and not to make any alteration in the plan or elevation of
the demised premises or in the nature of the use of the demised premises
or any part thereof or to make any erection or addition whatsoever or to
carry out any development (as defined in the Planning Acts) on or to the
demised premises or any part thereof except for the erection of
non-structural demountable partitions without the consent in writing of
the Lessors
(b) Without prejudice to any other rights of the Lessors immediately upon
the Lessors by notice in writing to that effect requiring them so to do to
remove all additional buildings erections works alterations or additions
whatsoever to the demised premises for which the Lessors' consent in
writing has not first been obtained pursuant to the provisions of
sub-clause (a) of this Clause (herein called "the unauthorised works") and
make good and restore the demised premises to the state and condition
thereof before the unauthorised works were carried out and if the Lessee
shall neglect to do so for 28 days after such notice then it shall be
lawful for the Surveyor the Lessors and the Lessors' servants contractors
agents and workmen to enter upon the demised premises and to remove the
unauthorised works and to make good and restore the same to the state and
condition existing before the carrying out of the unauthorised works and
all expenses of so doing shall be repaid to the Lessors by the Lessee
within seven days of a written demand in that behalf
(c) any consent on the part of the Lessors pursuant to the provisions of
sub-clause (a) of this Clause may be subject to such conditions as the
Lessors may reasonably require including (but not limited to)
reinstatement of the demised premises at the expiration or sooner
determination of the said term
TO PERMIT ENTRY
5. To permit the Lessors the Surveyor and their respective workmen and persons
duly authorised by them respectively on reasonable notice (except in emergency)
in reasonable hours to enter the demised premises for the purposes of
(a) viewing the same and
(b) taking inventories of the fixtures fittings appliances and equipment
to be yielded up at the expiration or sooner determination of the said
term
(c) inspecting for defects in and recording the condition of the demised
premises or any other breaches of covenant on the part of the Lessee
(d) inspecting cleansing maintaining repairing altering renewing or adding
to the Estate or any buildings thereon or the Lessors' neighbouring
premises or any other premises adjoining the demised premises (whether
beside under or over) or any service channels not comprised within the
demised premises
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(e) performing any covenant complying with any condition or pursuant to
any reservation contained in this Lease including but not limited to the
Lessors' obligations under Clause 5 of the Fifth Schedule
or any other reasonable purpose connected with the management of the demised
premises or the Building PROVIDED THAT the Lessors shall make good all damage to
the demised premises caused by such entry to the reasonable satisfaction of the
Lessee
TO REPAIR ON NOTICE
6. (a) To make good to the reasonable satisfaction of the Surveyor within two
months or sooner if requisite (or immediately in case of emergency) any
defect in the repair or decoration of the demised premises for which the
Lessee is liable hereunder or any other want of compliance with any of the
obligations on the part of the Lessee under this Lease of which the
Lessors or the Surveyor has given notice in writing to the Lessee or left
notice in writing at the demised premises
(b) If the Lessee shall not comply with sub-clause (a) hereof the Lessee
shall permit the Lessors the Surveyor and their respective workmen
(without prejudice to any other remedy of the Lessors) to enter the
demised premises and make good such defect breach or want of compliance as
aforesaid without the payment of any compensation to the Lessee and all
proper expenses of so doing (including legal costs and Surveyor's fees)
together with Interest from the date of expenditure by the Lessors shall
be paid by the Lessee to the Lessors on demand and shall be recoverable as
rent in arrear
TO PAY COST OF DAMAGE
7. Without prejudice to any other provisions herein contained to pay to the
Lessors on demand the full cost as assessed by the Surveyor acting reasonably of
making good any damage to the Common Parts and/or the Building and to the said
roads coloured brown on Plan 1 and any other roads and road fittings on the
Estate including but not limited to lighting and signs or any other part of the
Estate whether occasioned by the Lessee or their employees servants agents
independent contractors customers visitors licensees invitees or any other
person under the Lessee's control
TO PAY LESSORS' COSTS (LPA)
8. To pay the Lessors' reasonable and proper costs and expenses (including legal
costs and Surveyor's and other professional fees)
(a) In or in contemplation of any proceedings relating to the demised
premises under Sections 146 and/or 147 of the Law of Property Act 1925 or
the preparation and service of notices thereunder (whether or not any
right of re-entry or forfeiture has been waived by the Lessors or a notice
served under the said Section 146 is complied with by the Lessee or the
Lessee has been relieved under the provisions of the said Act and
notwithstanding that forfeiture is avoided otherwise than by relief
granted by the Court)
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(b) In the preparation and service of any Schedule of Dilapidations at any
time during or after the said term
(c) In connection with the recovery of arrears of rent due from the Lessee
hereunder (including but not limited to bailiffs' commission incurred by
the Lessors of and incidental to every distress levied by the Lessors on
the Lessee's goods for the recovery of overdue rent or other sums due
under this Lease)
(d) In connection with approving plans and specifications required
hereunder and the supervision and inspection of alterations erections
additions and any other works carried out by the Lessee where the Lessor's
consent is required under this Lease
(e) In respect of any application for consent required by this Lease
whether or not such consent be granted
AS TO USE AND SAFETY
9. Save in properly designed stores or containers and in accordance with the
recommendation of any competent Authority and the insurers of the demised
premises not to keep or use or permit or suffer to be kept or used upon the
demised premises any materials which are inflammable explosive or otherwise
dangerous or any machinery apparatus or equipment and any other thing which may
attack or in any way injure by percolation corrosion vibration excessive weight
or otherwise the structure of any building comprised therein and in the Estate
and in the Lessors' neighbouring premises or the keeping or using whereof may
contravene any enactments
NOT TO USE FOR UNLAWFUL OR ILLEGAL PURPOSES OR CAUSE NUISANCE
10. Not to
(a) use or permit or suffer the demised premises or any part thereof to be
used for any unlawful illegal or immoral purpose or for the manufacture
sale or consumption of intoxicating liquors or for the manufacture sale or
consumption of Controlled Drugs as defined by the Misuse of Drugs Act 1971
(otherwise than by a practitioner or pharmacist as defined by that Act) or
for the manufacture publication or sale of any article or thing which may
in the reasonable opinion of the Lessors be pornographic offensive or
obscene or for betting gaming or lotteries or as a hotel club billiards
saloon dance hail funfair or amusement premises or for an auction or for
any noisy noxious or offensive trade or business and
(b) do or permit or suffer to be done on the demised premises or any part
thereof anything which may be or become or cause an annoyance
inconvenience nuisance damage disturbance injury or danger of or to the
Lessors or the owners lessees or occupiers of any premises in the
neighbourhood or which in the reasonable opinion of the Lessors might be
detrimental to the use or development of the demised premises or of the
Estate or of the Lessors' neighbouring premises (or any of them) and to
pay to the Lessors all costs charges and expenses which may be incurred by
the Lessors in abating any nuisance on or arising from the demised
premises and executing all works as may be necessary for such purpose
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(c) use any radio television video or sound system audible outside the
demised premises or play or suffer to be played any musical instrument
audible outside the demised premises
NOT TO RESIDE
11. Not to reside on the demised premises and not to create or permit or suffer
to be created any residential tenancy or residential occupation of the demised
premises or any part thereof
AS TO USER
12. That neither the Lessee shall use the demised premises or any part thereof
other than for a purpose appropriate to a Science Park that is to say any one or
more of the following uses
(a) Scientific research associated with industrial production
(b) Light industrial production of a kind which is dependent on regular
consultation with either or both of the following:
(i) The Lessee's own research development and design staff
established in the Cambridge Study Area
(ii) The scientific staff or facilities of the University or of
local scientific institutions
(c) Ancillary buildings and works appropriate in the sole opinion of the
Lessors to the use of the demised premises as an integral part of a
Science Park
TO KEEP OPEN AND SECURITY
13. (a) Not to permit the demised premises to remain vacant or unattended
without the prior written consent of the Lessors (which the Lessors may
grant or withhold at their absolute discretion but which shall not be
withheld in respect of periods of not more than 28 days connected with any
assignment or underletting of the demised premises pursuant to clause 20
of this fourth schedule
(b) Without prejudice to the generality of sub-clause (a) above to
indemnify the Lessors against any empty property rate or penal rate levied
or assessed upon the Lessors by reason of the demised premises having been
left empty
(c) To ensure that the Lessors at all times have written notice of the
name and address and telephone number of at least one keyholder of the
demised premises
DISPLAYS AND ADVERTISEMENTS
14. Not to display or permit to be displayed on any part of the demised premises
so as to be visible outside the demised premises any name writing notice sign
placard sticker or advertisement of whatsoever nature and not to place leave or
install any merchandise or display outside the demised premises and on any
breach by the Lessee the Lessors the Surveyor and their
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respective workmen may without notice and without prejudice to any other remedy
of the Lessors remove the cause of the breach of this covenant and shall not be
liable to make good any loss or pay compensation for so doing
TO KEEP CLEAN
15. (a) Not to allow any rubbish or refuse of any description to accumulate
upon the demised premises or the Common Parts or on any other part of the
Building save in suitably located dustbins provided by the Lessee for that
purpose and so often as it shall be necessary or desirable and in any
event at least once a week to cause such dustbins to be emptied
(b) Generally to keep the demised premises clean tidy and properly lighted
(c) To clean the inside and outside of all windows in the demised premises
at least once each month
(d) Not to bring or keep or suffer to be brought or kept upon the demised
premises or the Common Parts anything which in the reasonable opinion of
the Lessors are or may become unclean unsightly or detrimental to the
demised premises the Estate the Building or the Lessors' neighbouring
premises and nearby premises (or any of them)
(e) Not to discharge into any service channels oil grease solids or other
deleterious matter or any substance which might be or become a source of
danger or injury to the drainage system of the demised premises the
Building the Estate or the Lessors' neighbouring premises (or any of them)
or which may pollute the water of any watercourse so as to render the
Lessors liable to action or proceedings by any person or body and
generally to keep the service channels comprised within the demised
premises unobstructed
(f) Not to do or suffer anything which may cause or tend to cause an
obstruction or blockage of any water or soil pipes or drains or disruption
of the service channels in the demised premises the Building or the Estate
TO COMPLY WITH ENACTMENTS AND GIVE NOTICE
16. (a) At the Lessee's own expense to comply with the provisions and
requirements of all enactments or as prescribed or required by any
competent Authority court or body so far as they relate to or affect the
demised premises or the use thereof
(b) At the Lessee's own expense to do all works and all other things so as
to comply with sub-clause (a) of this Clause including (without prejudice
to the generality of the foregoing) the obtaining of any fire certificate
required for the demised premises
(c) Within seven days of receipt of notice thereof to give to the Lessors
particulars of any provision or requirement of all enactments or as
prescribed or required by any competent Authority court or body or
proposal therefor relating to the demised premises or the Estate or the
Lessors' neighbouring premises (or any of them) or the condition or use
thereof respectively and at the request of the Lessors but at the joint
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cost of the Lessors and the Lessee to make or join with the Lessors in
making such objection or representation against any such proposal as
relates to the demised premises as the Lessors shall deem expedient
(d) To pay to the Lessors upon demand a fair and proper proportion (to be
conclusively determined by the Surveyor acting reasonably) of all
reasonable and proper costs charges and expenses (including the Surveyor's
and other professional advisers' fees) incurred by the Lessors of or
incidental to
(i) complying with all provisions and requirements of all enactments
or as prescribed or required by any competent Authority court or
body and
(ii) doing all works and other things so as to comply therewith
so far as the same relate to any premises capable of being used or enjoyed
by the Lessee in common or jointly with any other person or the use
thereof
TO COMPLY WITH THE PLANNING ACTS
17. (a) At all times during the said term to comply in all respects with the
provisions and requirements of the Planning Acts and any regulations or
orders made thereunder and all licences consents permissions and
conditions (if any) granted or imposed thereunder so far as the same
respectively relate to or affect the demised premises or any part thereof
and to keep the Lessors fully and effectually indemnified against all
actions proceedings damages costs expenses claims and demands whatsoever
in respect of or arising out of any contravention of the Planning Acts and
against the cost of any permissions and consents thereunder and the
implementation thereof
(b) In the event of the Lessors giving consent to any of the matters in
respect of which the Lessors' consent shall be required pursuant to the
provisions of any covenant or condition contained in this Lease to apply
at the cost of the Lessee to the local and planning authorities for all
necessary consents and permissions in connection therewith and to give
notice to the Lessors of the granting or refusal (as the case may be) of
all such consents and permissions forthwith on the receipt thereof
(c) In the event of the said Planning Authority agreeing to grant such
necessary consent or permission only with modifications or subject to
conditions to give to the Lessors forthwith full particulars of such
modifications or conditions AND if such modifications or such conditions
shall in the reasonable opinion of the Lessors be undesirable then the
Lessee shall not implement or proceed with the matters works or change of
use to which the application relates
(d) If the Lessee shall receive any compensation in respect of the demised
premises under or by virtue of the Planning Acts forthwith to make such
provision as is just and equitable for the Lessors to receive its due
benefit from such compensation
(e) Not to apply for or implement any planning permission in respect of
the whole or any part of the demised premises if such application or the
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implementation thereof would or might give rise to any tax charge or other
levy payable by the Lessors
(f) Unless the Lessors shall otherwise direct to carry out before the
expiration or sooner determination of the said term any works stipulated
to be carried out to the demised premises by a date subsequent to such
expiration or sooner determination as a condition of the grant of any
planning permission obtained by the Lessee during the said term
NOT TO VITIATE INSURANCE
18. (a) Not to do or omit to do (or permit or suffer to be done or omitted to
be done) anything whereby the policy or policies of insurance on the
Building against the insured risks may become void or voidable or whereby
the rate of premium thereon or upon the Estate or upon the Lessors'
neighbouring premises may be increased or cause the insurers to impose
more onerous terms in such policy or policies and to repay to the Lessors
all sums paid by way of increased premiums and any expenses incurred by
the Lessors in or about any renewal of such policy or policies consequent
upon a breach of this covenant and all such sums shall be added to the
rent herein reserved and be recoverable upon demand as rent and in the
event of the Building or any part thereof being damaged by the insured
risks and the insurance money under any insurance effected against the
same being wholly or partly irrecoverable by reason solely or in part of
any act omission neglect or default of the Lessee or their employees
servants agents independent contractors customers visitors licensees
invitees or any other person under the Lessee's control then and in every
such case the Lessee will forthwith pay to the Lessors the whole or (as
the case may require) an appropriate proportion of the costs of completely
rebuilding and reinstating the Building
(b) To comply with any requirements or recommendations of the insurers of
the Building
(c) To notify the Lessors forthwith upon the whole or any part of the
demised premises or the Common Parts being destroyed or damaged by any of
the insured risks
TO INDEMNIFY
19. To keep the Lessors fully and effectually indemnified from and against all
liability in respect of losses damages proceedings claims costs expenses and any
other liability whatsoever arising from or in connection with
(a) the injury or death of any person
(b) damage to or destruction of any property whatsoever
(c) the infringement disturbance or destruction of any rights easements or
privileges
arising directly or indirectly out of:-
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(i) the state of repair and condition or use of the demised premises or
works carried out or in the course of being carried out to the demised
premises
(ii) anything now or hereafter attached to or projecting from the demised
premises by or on behalf of the Lessee any underlessee or their respective
servants or agents or any other person under the Lessee's or any
underlessee's control
(iii) any act default or negligence of the Lessee any underlessee or their
respective servants or agents or any other person under the Lessee's or
underlessee's control
and to insure against such liability in a reputable Insurance Office
AS TO ASSIGNMENTS ETC.
20. (a) Not to assign part with possession of or charge by way of legal
mortgage in any way any part of the demised premises less than the whole
(b) Not to assign the whole of the demised premises except to a permitted
assignee and the expression "permitted assignee" shall mean a substantial
and respectable body or person whose registered office principal place of
business or address is within the United Kingdom who in the reasonable
opinion of the Lessors shall have the capacity and the qualifications
necessary to observe and perform all the provisions of this Lease and who
shall prior to any such assignment have
(i) submitted references satisfactory to the Lessors and
(ii) entered into a direct covenant under seal with the Lessors to
pay the rents reserved by and to observe and perform the covenants
conditions agreements and stipulations contained in this Lease and
on the part of the Lessee to be observed and performed as if the
permitted assignee were the original Lessee hereunder and such
covenants conditions agreements and stipulations were repeated in
extenso in such covenant with the substitution of the name of the
permitted assignee for the name of the Lessee and
(iii) if reasonably so required by the Lessors (it being reasonable
for the Lessors so to require if the permitted assignee is not a
public limited company) procured that not less than two persons or a
corporate body acceptable to the Lessors (and in respect of whom
full information shall have been supplied to the Lessors) enter into
a Deed of Guarantee in such form as the Lessors may reasonably
require (for the avoidance of doubt like covenants conditions
agreements and declarations to those contained in the Seventh
Schedule hereto being in all respects reasonable for the purpose of
such Deed of Guarantee)
(c) Not to underlet the whole or any part of the demised premises
(d) Not to share possession of the whole or any part of the demised
premises save with another member of the same group as defined by
26
<PAGE>
Section 42 of the Landlord and Tenant Act 1954 subject to the following
conditions
(i) the relationship of landlord and tenant shall not be created and
shall not at any time during such sharing arise and
(ii) the member of the same group shall not be permitted to have
exclusive occupation of the whole or any part of the demised
premises and
(iii) the member of the same group's sharing of possession shall
determine upon their ceasing to be within the definition contained
in the said Section 42 of the Landlord and Tenant Act 1954
(e) Not to hold or occupy the demised premises or any part thereof as
trustee or agent or otherwise for the benefit of any other person
(f) Not to part with possession of the demised premises or any part
thereof except by virtue of an assignment of a kind permitted by this
Clause and with the prior written consent of the Lessors which consent may
be withheld unless the Lessee enters into an authorised guarantee
agreement within the meaning of the Landlord and Tenant (Covenants) Act
1995 with the Lessors
(g) Not without the prior consent in writing of the Lessors (such consent
not to be unreasonably refused in the case of a chargee by way or legal
mortgage reasonably acceptable to the Lessors) to charge by way of legal
mortgage in any way the whole of the demised premises
(h) Not to mortgage the demised premises or any part thereof by way of
subdemise
TO GIVE NOTICE OF ASSIGNMENTS, DEVOLUTIONS ETC.
21. (a) To produce every assignment transfer charge Probate Letters of
Administration order instrument or other writing effecting or evidencing
any transmission or devolution of any estate or interest in the demised
premises or any part thereof to the Solicitors of the Lessors for
registration within one month from the date thereof and to pay to the
Lessors' Solicitors their reasonable fees for each such registration
(b) Within seven days of an assignment of this Lease to give to the
Lessors written notice of the person to whom future rent demands should be
sent
AS TO LOSS OR ACQUISITION OF EASEMENTS
22. (a) Not to permit any easement or right comprised in belonging to or used
with the demised premises or any part thereof from being obstructed or
lost
(b) Not to give to any third party any acknowledgement that the Lessee
enjoys the access of light to any of the windows or openings in the
demised premises by the consent of such third party nor to pay to such
third party any sum of money nor to enter into any agreement with such
third party for the purpose of inducing or binding such third party to
27
<PAGE>
abstain from obstructing the access of light to any such windows or
openings
(c) To take all such steps as may be necessary to prevent the acquisition
of any easement or right against over upon or under the demised premises
or any part thereof and any encroachment thereon and to give to the
Lessors immediate notice of any encroachment or threatened encroachment
upon the demised premises or any attempt to acquire any easement or right
under or over the demised premises which shall be within the Lessee's
knowledge and to do all such things as may be necessary to prevent any
encroachment being made or any new easement being acquired
TO PRODUCE PLANS/DOCUMENTS
23. If and whenever called upon so to do to produce to the Lessors or the
Surveyor all such plans documents or other evidence as the Lessors may from time
to time reasonably require to satisfy themselves that the Lessee has complied in
all respects with the provisions of the Lessee's covenants herein
NOT TO INTERFERE WITH RESERVED RIGHTS
24. Not to interrupt or interfere with the exercise of the rights contained or
referred to in the Second Schedule hereto
TO PERMIT ENTRY FOR RELETTING ETC.
25. During the last six months before the expiration or sooner determination of
the said term or after the expiration thereof (or at any time during the said
term in the event of a sale of the Lessors' interest in the demised premises) to
permit the Lessors and the Surveyor on reasonable prior notice to enter upon the
demised premises and to affix upon any suitable part or parts thereof a notice
board or boards for reletting or other disposal of the demised premises and not
to remove or obscure the same PROVIDED THAT such boards do not interfere with
the access or the access of light and air to and from the demised premises and
at all reasonable times in the daytime to permit all persons authorised by the
Lessors or the Surveyor to enter and inspect the demised premises
TO YIELD UP
26. At the expiration or sooner determination of the said term peaceably and
quietly to surrender and yield up to the Lessors the demised premises (together
with all keys thereto) so repaired maintained decorated cleansed glazed painted
and kept as herein provided and if so required by the Lessors to remove such
tenants and trade fixtures as the Lessors may specify the Lessee making good all
damage caused by the removal of these to the reasonable satisfaction of the
Surveyor
AS TO FAILURE OF GUARANTEE AND ADDITIONAL GUARANTEES
27. Within fourteen days of the death during the said term of any person who has
guaranteed to the Lessors the performance of the Lessee's covenants herein or of
such person being adjudged bankrupt or entering into a composition scheme or
arrangement with or for the benefit of such person's creditors or being a
company becoming subject to an administration order or
28
<PAGE>
suffering a trustee receiver or similar officer to be appointed over the whole
or any part of the company's undertaking property or assets or being the subject
of a winding up order by the Court (save for the purpose of reconstruction or
amalgamation of a solvent company not involving a realisation of assets) or
passing a resolution for winding up (save as aforesaid) or otherwise entering
into liquidation to give notice thereof to the Lessors and if so required by the
Lessors at the expense of the Lessee within twenty eight days to procure that
some other person or body acceptable to the Lessors enters into a Deed of
Guarantee in such form as the Lessors may reasonably require (for the avoidance
of doubt like covenants conditions agreements and declarations to those
contained in the Seventh Schedule hereto being in all respects reasonable for
the purpose of such Deed of Guarantee)
AS TO VALUE ADDED TAX
28. Where the Lessee is required by this Lease to pay to the Lessors or any
other person any sum in respect of the supply of goods or services for Value
Added Tax purposes (or for the purposes of any substituted tax) the Lessee will
also on demand discharge any liabilities of the Lessors relating to Value Added
Tax (or substituted tax) in respect of any supply (whether or not the supply is
taxable following an election by the Lessors)
STATUTORY ACQUISITIONS
29. Not to do or omit to do any act matter or thing as a consequence whereof the
Lessors' reversion immediately expectant upon the determination of the said term
shall become liable to acquisition pursuant to any enactments
FIRE FIGHTING APPLIANCES
30. To keep the demised premises sufficiently supplied and equipped with such
suitable fire fighting and extinguishing appliances as shall from time to time
be required by law or by the local or other competent authority and by the
Lessors' insurers and such appliances shall be open to inspection and shall be
properly maintained and also not to obstruct the access to or means of working
such appliances or the means of escape from the demised premises in case of fire
TO CARRY OUT THE LESSEE'S NEW WORKS
31. At the Lessees own expense forthwith to apply for and diligently seek to
obtain all licences approvals plans consents and permissions and other things
necessary for the carrying out of the Lessee's New Works from the Local Planning
Authority and from any other Authority whose approval permission or consent
shall be necessary and to comply in all respects with the enactments relating
thereto and subject to all necessary approvals and consents having been obtained
at the Lessee's expense to carry out the Lessee's New Works in compliance as
aforesaid as soon as reasonably practicable the Lessee's New Works to be
executed in a good and substantial manner employing good materials and
workmanship and in conformity in every respect with the specifications plans and
drawings which shall first have been submitted to and approved in writing by the
Surveyor such approval not to be unreasonably withheld (with such alterations
only as shall first have been authorised by the Lessors in writing) employing
good
29
<PAGE>
materials and workmanship and in all respects to the reasonable satisfaction of
the Surveyor and any relevant authority
NOT TO OBSTRUCT
32. Not to permit any vehicles to stand on the roadways comprised within the
Estate or on any other part of the Estate except on such parts as shall from
time to time have been authorised by the Lessors or shall have been designated
by the Lessors as a loading bay for the Lessee (but during the period of loading
and unloading of vehicles only) and not to park on or obstruct any Common Parts
or any communal part of the Estate
TO COMPLY WITH REGULATIONS
33. To comply with all regulations made by the Lessors from time to time for the
management of the Building the Estate and of any land or premises used or to be
used in common or jointly with any other person and to procure that the Lessee's
employees and all persons under the control of the Lessee shall at all times
observe and perform the same
AS TO WATER SUPPLY
34. Not to use or permit or suffer to be used the supply of water to the Estate
for any purpose other than the Lessee's purposes hereby permitted and not in any
event to use the same or permit or suffer the same to be used for research or
industrial purposes without the provision of a proper recirculation system to a
specification first approved by the Statutory Water Undertaker or otherwise in
compliance with the reasonable recommendations of the Water Authority
TO COMPLY WITH PLANNING AGREEMENTS
35. In addition to and not in substitution for or limitation of the covenants
contained herein and in particular the Lessee's covenants as to the use of the
demised premises or any part thereof to observe and perform all the covenants on
the Lessors' part in the Planning Agreements respectively contained and the
agreements and provisions of the Planning Agreements to the extent that the same
affect the demised premises or any part thereof and at all times to indemnify
the Lessors against any breach or non-observance of the same
30
<PAGE>
THE FIFTH SCHEDULE hereinbefore referred to
LESSORS' COVENANTS
AS TO QUIET ENJOYMENT
1. That the Lessee paying the rents hereby reserved at the times and in the
manner herein appointed and performing and observing the covenants on the
Lessee's part and the conditions agreements and stipulations herein contained
may peaceably enjoy the demised premises for the said term without any lawful
Interruption from the Lessors or any person lawfully claiming under or in trust
for the Lessors
TO INSURE
2. (a) That the Lessors will during the said term insure and keep insured in
some established Insurance Office the Building (excluding all plate and
other glass therein) against the Insured Risks with a sum assured to cover
the following
(i) the full reinstatement value thereof (excluding the amount of
any insurance excess for which the Lessee shall be liable) to be
determined from time to time by the Lessors surveyor and
(ii) architect's surveyor's and other professional fees demolition
site clearance and the cost of boarding and propping including a due
allowance for cost increases over any likely rebuilding period and
(iii) three years' loss of rent and
(iv) liability attaching to the Lessors as owners or landlords of
the Building
(v) incidental expenses
AND the Lessors may insure the air conditioning or central heating
installations passenger lifts hoists (or any of them) separately in such
manner and for such amount as the Lessors may from time to time determine
(b) The Lessors shall have full power to settle and adjust with the
insurers all questions with regard to the liability of the insurers and
the amount or amounts payable under any policy
(c) The Lessors shall inform the Insurers of the Lessee's interest in the
demised premises
(d) The Lessors shall whenever reasonably requested produce to the Lessee
a copy of the insurance policy or policies (or a summary of its or their
terms to include details of the exclusions and limitations imposed by the
insurers and any requirements of the insurers in relation to any of the
matters referred to in paragraph 9 of the fourth schedule) and
satisfactory evidence of payment of the current premium
31
<PAGE>
TO REINSTATE
3. In case the demised premises or the Common Parts or any parts thereof
respectively shall at any time during the said term be destroyed or damaged by
the insured risks so as to be unfit for occupation or use then (unless any
monies payable under any policy of the Lessors shall be refused either by reason
of any act omission neglect or default of the Lessee or their employees servants
agents independent contractors customers visitors licensees invitees or any
other person under the Lessee's control or by reason of any breach of the
provisions of Clause 18 of the Fourth Schedule to this Lease) and subject to the
Lessors obtaining all necessary consents licences or approvals (which it shall
use its best endeavours consistent with reasonable commercial prudence to
obtain) as soon as reasonably practicable and when lawful so to do the Lessors
will apply all monies received (other than in respect of loss of rent fees
demolition site clearance the cost of boarding and propping and any sums paid to
the Lessors to indemnify the Lessors for any liability as owner or as landlord
of the demised premises or the Common Parts or otherwise payable on the
occurrence of a risk not involving damage to the demised premises all of which
shall in all circumstances belong to the Lessors) by virtue of such insurance as
aforesaid towards making good so far practicable the damage to the demised
premises or the common parts or parts thereof caused by the insured risks
TO MAINTAIN SPINE ROAD
4. To maintain such parts of the main spine road on the Estate shown coloured
brown on Plan 1 as may not be adopted by the local authority as being
maintainable at the public expense
TO PROVIDE SERVICES
5. Subject to the Lessee paying the Service Rent specified in the First Part of
the Third Schedule hereto to provide the Lessors' Services in a competent manner
and in accordance with good estate management practice and in particular
(a) to maintain repair renew and otherwise keep in good repair and
condition the Building including the roof structure and foundations
thereof save such parts as are maintainable by the several lessees of the
Building (including the Lessee) in pursuance of the repairing covenants in
their respective occupational leases
(b) as often as the Lessors deem necessary and not less than every five
years to clean paint redecorate and otherwise treat to protect all the
outside wood metal brick and cement work and other external surfaces of
the Building in a workmanlike manner and in colours determined by the
Lessors
(c) to keep all fixtures and fittings in the Common Parts in good order
and repair and to replace such fittings and fixtures as and when
replacement is necessary or requisite
(d) at all times during the said term to maintain the service channels
used in common in good order and to maintain and repair the other
appurtenances and amenities of the Building in good order and condition
32
<PAGE>
and free from litter and to clean the outside surfaces of all windows at
proper intervals
PROVIDED THAT the Lessors shall not be liable to the Lessee in respect of
(i) any failure or interruption in any of the Lessors' Services by reason
of necessary repair replacement maintenance of any installation or
apparatus or their damage or destruction or by reason of mechanical or
other defect or breakdown or frost or other inclement conditions or
shortage of fuel materials water or labour or any other cause beyond the
Lessors' control provided that the Lessors use all reasonable endeavours
to restore the Lessors' Services in question as speedily as possible
(ii) any act or omission or negligence of any employee agent or other
person undertaking the Lessors' Services or any of them on behalf of the
Lessors
33
<PAGE>
THE SIXTH SCHEDULE hereinbefore referred to
THE LESSEE'S NEW WORKS
To fit out the demised premises in a manner in all respects suitable for the
Lessee's use and occupation
34
<PAGE>
THE SEVENTH SCHEDULE hereinbefore referred to
GUARANTOR'S COVENANTS AND AGREEMENTS
1. The Guarantor HEREBY COVENANTS with and guarantees to the Lessors that
(a) the Lessee will at all times during the said term and until the
Lessors have beneficial occupation of the demised premises pay the rents
hereby reserved and all other sums and payments covenanted and or agreed
to be paid by the Lessee at the respective times and in manner herein
appointed for payment thereof and will also duly perform and observe and
keep the several covenants and provisions on the Lessee's part herein
contained and
(b) the Guarantor will pay and make good to the Lessors all losses
liabilities costs and expenses sustained by the Lessors through the
default of the Lessee in respect of any of the before mentioned matters
and
(c) that any neglect or forbearance of the Lessors in endeavouring to
obtain payment of the said several rents and payments as and when the same
become due or their delay to take any steps to enforce performance or
observance of the several covenants and provisions herein on the Lessee's
part contained and any time which may be given by the Lessors to the
Lessee shall not release or in any way lessen or affect the liability of
the Guarantor under the guarantee on the Guarantor's part herein contained
and
(d) if the Lessee (being a Company) shall become subject to an
administration order or be the subject of a winding up order by the Court
or otherwise go into liquidation or if the Lessee (being an individual)
shall be adjudged bankrupt and the Liquidator or Administrator or the
Trustee of the bankrupt's estate (as the case may be) shall disclaim this
Lease and if the Lessors shall within three months after such disclaimer
by notice in writing require the Guarantor to accept a lease of the
demised premises for a term equal to the residue which if there had been
no such disclaimer would have remained of the said term at the same rents
and under the like covenants and provisions as are reserved by and
contained in the Lease the said new lease and the rights and liabilities
thereunder to take effect as from the date of the said disclaimer then and
in such case the Guarantor shall accept such lease accordingly and execute
and deliver to the Lessors a counterpart thereof in all respects at the
sole cost of the Guarantor and
(e) If any sums payable by the Guarantor under this clause 1 remain unpaid
for seven days after falling due upon demand to pay to the Lessors
Interest on all amounts due under this Clause 1 from the date the same
respectively fell due until the date of payment thereof
AGREEMENTS BY GUARANTOR
2. It is hereby agreed and declared that
(a) the Guarantor covenants as Principal Debtor and not as guarantor and
accordingly (for the avoidance of doubt)
35
<PAGE>
(i) it shall not be necessary for the Lessors to resort to or seek
to enforce any other guarantee or security (whether from the Lessee
or otherwise) before claiming payment hereunder and
(ii) until all monies and liabilities due or incurred by the Lessee
to the Lessors have been paid or discharged in full notwithstanding
payment in whole or in part of the amount by the Guarantor or any
purported release or cancellation hereof the Guarantor shall not by
virtue of any such payment or by any other means or on any other
ground
(aa) claim any set off or counter claim against the Lessee in
respect of any liability on the part of the Guarantor to the
Lessors and
(bb) make or enforce any claim or right against the Lessee or
prove in competition with the Lessors or exercise any right as
a preferential creditor against the Lessee or against the
assets of the Lessee
and
(b) the Guarantor's covenants herein contained shall not be affected or
modified in any way by the liquidation or dissolution of the Lessee or the
appointment of any receiver administrator or manager and
(c) the Lessors shall be at liberty at all times without affecting or
discharging the Guarantor's liability hereunder
(i) to vary release or modify the rights of the Lessors against the
Lessee hereunder without the Guarantor's consent and
(ii) to compound with discharge release or vary the liability of the
Lessee or any other guarantor or other person and
(iii) to appropriate any payment the Lessors may receive from the
Lessee the Guarantor or any other person towards such monies due
under this Lease as the Lessors shall in their absolute discretion
think fit
THE COMMON SEAL of THE )
MASTER FELLOWS AND )
SCHOLARS OF TRINITY ) /s/ [ILLEGIBLE] [SEAL]
COLLEGE CAMBRIDGE was )
affixed in the presence of:- )
Senior Bursar
/s/ [ILLEGIBLE]
Junior Bursar
36
<PAGE>
Exhibit 10-13
DATED 29th March 1994
- --------------------------------------------------------------------------------
THE MASTER FELLOWS AND SCHOLARS OF
TRINITY COLLEGE CAMBRIDGE
- and -
CHEFARO PROPRIETARIES LIMITED
NED-INT HOLDINGS LIMITED
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LEASE
of Unit 327 Phase V Cambridge Science Park,
Milton Road, Cambridge
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Term: 5 years
Rent: (pound)51,000 per annum exclusive of VAT
Mills & Reeve,
112 Hills Road.
Cambridge.
CB2 1PH. (HIN)
jim3944.edoc
<PAGE>
THIS LEASE is made the 29th day of March One thousand nine hundred and ninety
six.
BETWEEN
(1) ("the Lessors") THE MASTER FELLOWS AND SCHOLARS OF THE COLLEGE OF THE HOLY
AND UNDIVIDED TRINITY WITHIN THE TOWN AND UNIVERSITY OF CAMBRIDGE OF KING HENRY
THE EIGHTH'S FOUNDATION
(2) ("the Lessee") CHEFARO PROPRIETARIES LIMITED whose registered office is at
Cambridge Science Park Milton Road Cambridge CB4 4FL (company number 922235)
(3) ("the Guarantor") NED-INT HOLDINGS LIMITED whose registered office is at
Cambridge Science Park Milton Road Cambridge CB4 4FL (company number 1014976)
WHEREAS
The demised premises are held by or in trust for a charity by the Lessors and
the charity is an exempt charity
NOW THIS DEED WITNESSETH as follows:-
INTERPRETATION
1. IN this Lease unless the context otherwise requires:-
(A) "the Lessors" shall include the person for the time being entitled to
the reversion immediately expectant on the determination of the said term
as herein defined
(B) "the Lessee" shall include the Lessee's successors in title and
assigns and shall include personal representatives
(C) "the Guarantor" means a person who has entered into a guarantee of the
Lessee's covenants contained in this Lease (whether by separate deed
pursuant to the provisions of this Lease or otherwise) and shall include
the Guarantor's successors whether by substitution or otherwise including
personal representatives
(D) "the Surveyor" means the Surveyors Consulting Engineers Architects and
Agents for the time being of the Lessors
(E) "the said term" means the total period of demise hereby granted
(F) "service channels" means all such flues sewers drains ditches pipes
wires watercourses cables channels gutters ducts and other conductors of
services and plumbing and ventilating equipment and motors appurtenant
thereto as are now existing or which may be constructed or laid during the
said term and within the period of limitation as herein defined
(G) "Plan A" shall mean the plan annexed hereto and marked "A" and "Plan
D" shall mean the plan annexed hereto and marked "D"
<PAGE>
(H) "the demised premises" means
(i) the property hereby demised as described in the First Part of
the First Schedule hereto including all service channels in on or
under such property and fixtures and fittings (other than trade or
tenant's fixtures and fittings) therein and
(ii) the rights described in the Second Part of the First Schedule
hereto
together with all additions alterations and improvements to such property
and rights
(I) "the Estate" shall mean Cambridge Science Park shown edged blue on
Plan A situate adjoining Milton Road partly in the City of Cambridge and
partly in the County of Cambridgeshire together with any such further
neighbouring area in respect of which the Lessors or their lessees may
from time to time or at any time during the period of limitation receive
planning permission to develop for uses similar or ancillary to the use of
the said area edged blue and which the Lessors during the period of
limitation elect to include in Cambridge Science Park
(J) "the period of limitation" means the period of eighty years commencing
on the date hereof or such longer period as the law may permit (which
period is hereby specified as the perpetuity period applicable to this
Lease under the rule against perpetuities)
(K) "the insured risks" means at any particular time the risk of loss or
damage by fire or aircraft and other aerial devices or articles dropped
therefrom lightning explosion riot and civil commotion malicious damage
earthquakes storm tempest flood burst pipes impact and the risk of any
other kind of loss or damage which the Lessors may from time to time
reasonably deem it desirable to insure against and against which they
shall at that particular time have a policy of insurance in effect subject
to the Lessors first having given to the Lessee written notice thereof and
subject also to such exclusions and limitations as the insurers may impose
(L) "the Planning Acts" means the Town and Country Planning Acts 1948 to
1990 the Planning (Hazardous Substances) Act 1990 the Planning (Listed
Buildings Conservation Areas) Act 1990 the Local Government Planning and
Land Act 1980 and the Public Health Acts 1875 to 1969 and all notices
directions orders regulations byelaws rules and conditions under or in
pursuance of or deriving effect therefrom from time to time and any
reference herein to these or any other Act or Acts shall include a
reference to any statutory modification or re-enactment thereof for the
time being in force and any future legislation of a like nature
(M) "the Building" means the building numbered 320 (containing the block
of Units numbered 321-329 (both numbers inclusive) Cambridge Science Park
including the Common Parts (as hereinafter defined) shown for
identification purposes on Plan A and thereon edged green and all
alterations and improvements thereto and all plant and equipment machinery
fittings and furnishings now or hereafter therein but excluding tenants
and trade fixture and fittings
2
<PAGE>
PLAN D
SECOND FLOOR
[GRAPHIC OMITTED]
<PAGE>
(N) "the Lessors' neighbouring premises" means any land or buildings now
or hereafter during the period of limitation erected adjoining or
neighbouring the demised premises (whether beside under or over) which
belong to the Lessors now or hereafter during the period of limitation
including those parts of the Building not forming part of the demised
premises
(O) "the Common Parts" means those parts of the Building which are not
intended to be demised by an occupational tenancy from time to time
including but not limited to the entrance reception area plant room lifts
landings fire escapes toilets washrooms roadways car parks paths gardens
kitchen facilities all structural parts of the Building including the roof
and foundations thereof
(P) "the Estate Service Charge" shall mean a service rent in respect of
(a) the maintenance repair cultivation and management of the Estate
including all roads ways and paths service channels amenity grounds
and cultivated areas and
(b) all such other matters whatsoever which in the reasonable
opinion of the Surveyor (acting as an expert) shall be necessary to
maintain good standards for a development of such a character
including without prejudice to the generality hereof a notional
figure as certified by the Surveyor equivalent to the reasonable
market rental for the time being of any premises provided by the
Lessors on the Estate being used or occupied (whether with or
without rental) to enable the Lessors the Surveyor and their
respective servants or employees to implement and carry out such
maintenance repairs cultivation and management of the Estate and all
other matters as aforesaid but less any rental thereof received by
the Lessors
such service charge to be in the reasonable opinion of the Surveyor such
as shall be just and equitable in all the circumstances PROVIDED ALWAYS
THAT such service rent shall not include any sum in respect of the cost of
the initial laying out or construction of the matters referred to in
paragraphs (a) and (b) above or any work or costs arising out of or in
connection with such initial construction
(Q) "Interest" shall mean interest at the yearly rate of three per cent
above the base rate published from time to time by Barclays Bank PLC or
(in the event of base rate or Barclays Bank PLC ceasing to exist) such
other equivalent rate of interest as the Lessors may from time to time in
writing specify
(R) "enactments" shall include all present and future Acts of Parliament
(including but not limited to the Public Health Acts 1875 to 1969 the
Factories Act 1961 the Offices Shops and Railway Premises Act 1963 the
Fire Precautions Act 1971 the Defective Premises Act 1972 the Health and
Safety at Work etc. Act 1974 and the Planning Acts) and all notices
directions orders regulations bye-laws rules and conditions under or in
pursuance of or deriving effect therefrom and any reference herein to a
specific enactment or enactments (whether by reference to its or their
short title or otherwise) shall include a reference to any enactment
amending or replacing the same and any future legislation of a like nature
3
<PAGE>
(S) "the Planning Agreements" shall mean
(a) an agreement dated the Eighth day of November One thousand nine
hundred and seventy one made pursuant to Section 37 of the Town and
Country Planning Act 1962 between the County Council of the
Administrative County of Cambridgeshire and Isle of Ely (1) and the
Lessors (2) and
(b) an agreement dated the Nineteenth day of August One thousand
nine hundred and seventy five made pursuant to Section 52 of the
Town and Country Planning Act 1971 between the same parties and in
the same order as the Section 37 agreement and
(c) an agreement dated the Second day of February One thousand nine
hundred and eighty two made pursuant to Section 52 of the Town and
Country Planning Act 1971 between South Cambridgeshire District
Council (1) and the Lessors (2) and
(d) an agreement dated the Twenty sixth day of June One thousand
nine hundred and eighty four made pursuant to Section 52 of the Town
and Country Planning Act 1971 between South Cambridgeshire District
Council (1) and the Lessors (2) and
(e) an agreement dated the Second day of June One thousand nine
hundred and eighty eight made pursuant to Section 52 of the Town and
Country Planning Act 1971 between South Cambridgeshire District
Council (1) and the Lessors (2)
(T) words importing the masculine gender only include the feminine gender
and vice versa and include any body of persons corporate or unincorporate
words importing the singular number only include the plural number and
vice versa and the word "person" shall include any body of persons
corporate or unincorporate and all covenants by any party hereto shall be
deemed to be joint and several covenants where that party is more than one
person and any covenant by the Lessee not to do or not to do or omit to do
an act or thing shall be deemed to include an obligation not to permit or
suffer such act or thing to be done or omitted
THE DEMISE HABENDUM AND REDDENDUM
2. In consideration of the several rents and covenants on the part of the Lessee
and the Guarantor herein respectively reserved and contained the Lessors HEREBY
DEMISE unto the Lessee ALL THOSE premises more particularly described in the
First Part of the First Schedule hereto TOGETHER WITH (in common with the
Lessors their lessees and assigns and all other persons from time to time having
the like rights) the rights set out in the Second Part of the First Schedule
hereto EXCEPT AND RESERVING UNTO THE LESSORS and their successors in title
assigns and lessees and all persons from time to time authorised by them the
interests rights reservations and exceptions more particularly set out in the
First Part of the Second Schedule hereto TO HOLD the demised premises unto the
Lessee SUBJECT to any or all easements and other rights (if any) now subsisting
over or which may affect the same (including any such as are more particularly
set forth in the Second Part of the Second Schedule hereto) from
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the 16th day of August One thousand nine hundred and ninety-three to the quarter
day next subsequent to the grant hereof and thereafter for the term of five
years but determinable nevertheless as hereinafter provided YIELDING AND PAYING
THEREFOR unto the Lessors during the said term
(a) from the 16th day of August One thousand nine hundred and ninety three
to the day of February One thousand nine hundred and ninety four one
peppercorn
(b) from the 16th day of February One thousand nine hundred and ninety
four to the end of the said term yearly and proportionately for any
fraction of a year the rent of Fifty one thousand pounds ((pound)51,000)
per annum exclusive of Value Added Tax the first such payment or a
proportionate part thereof in respect of the period from the 10th day of
February One thousand nine hundred and ninety four to the next regular
quarter day to be made on the 29th day of March One thousand nine hundred
and ninety four and thereafter such rents to be paid by equal quarterly
instalments in advance on the four usual quarter days in every year
(c) by way of further rent the Service Charge and Interim Charge specified
in the First Part of the said Third Schedule hereto to be paid on the days
and in the manner specified therein and
(d) by way of further rent on demand the rents specified in the Second
Part of the said Third Schedule
(e) any value added tax that may be chargeable on the rents reserved by
this Lease
all such payments to be made without any deduction
LESSEE'S COVENANTS
3. THE Lessee HEREBY COVENANTS with the Lessors that the Lessee will at all
times during the said term duly observe and perform all the covenants and
provisions on the Lessee's part set out in the Fourth Schedule hereto and the
provisions and conditions in this Lease contained
LESSORS' COVENANTS
4. THE Lessors HEREBY COVENANT with the Lessee that if and so long as the Lessee
performs complies with and observes the Lessee's covenants and obligations
contained in this Lease the Lessors will at all times during the said term duly
observe and perform all the covenants and provisions on the Lessors' part set
out in the Fifth Schedule hereto and the provisions and conditions in this Lease
contained but not so as to impose any personal liability upon any individual
Master Fellow Scholar or Trustee who is at any time one of the Lessors except in
respect of his own acts and defaults
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PROVISO AGREEMENT AND DECLARATION
5. PROVIDED ALWAYS and it is hereby agreed as follows:-
AS TO RE-ENTRY
(A) If and whenever the said rents hereby reserved or any part thereof
respectively shall be in arrear for twenty one days next after the same shall
have become due whether any formal or legal demand therefor shall have been made
or not or if and whenever there shall be any breach non-observance or
non-performance by the Lessee of any of the covenants on the part of the Lessee
herein contained or if the Lessee being a Company shall become subject to an
administration order or shall suffer a trustee receiver or similar officer to be
appointed over the whole or any part of the Lessee's undertaking property or
assets or shall be the subject of a winding up order by the Court (save for the
purpose of reconstruction or amalgamation of a solvent company not involving a
realisation of assets) or pass a resolution for winding up (save as aforesaid)
or otherwise enter into liquidation or if the Lessee being an individual (or
being more than one individual any one of them) shall be adjudged bankrupt or
shall enter into a composition scheme or arrangement with or for the benefit of
the Lessee's creditors then and in any such case it shall be lawful for the
Lessors to re-enter into and upon the whole of the demised premises or any part
of the demised premises in the name of the whole and thereupon this present
demise shall absolutely determine and become null and void but without prejudice
nevertheless to any right of action or remedy of the Lessors in respect of any
antecedent breach by the Lessee of any of the covenants on the Lessee's part
herein contained
AS TO NOTICES
(B) Any notice under this Lease shall be in writing and any notice
(a) to the Lessee or the Guarantor shall be deemed to be sufficiently
served if
(i) left addressed to the Lessee or the Guarantor on the demised
premises or
(ii) sent to the Lessee or the Guarantor by post at the last known
address or (if a Company) registered office of the Lessee or the
Guarantor and
(b) to the Lessors shall be deemed to be sufficiently served if
(i) sent to the Lessors by post at the last known address or (if a
Company) registered office of the Lessors
(ii) whilst the reversion immediately expectant on the determination
of the said term is vested in the original Lessors (as named herein)
addressed to the Lessors Senior Bursar and delivered to him
personally or sent to him by post
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AS TO RENT ABATEMENT
(C) In case the Building or any part thereof shall at any time during the said
term be so damaged by the insured risks or any of them as to render the demised
premises to be unfit for occupation and use or inaccessible then (unless the
insurance money shall be wholly or partially irrecoverable by reason solely or
in part of any act omission neglect or default of the Lessee or their employees
servants agents independent contractors customers visitors licensees invitees or
any other person under the Lessee's control) the rent hereby reserved or a fair
proportion thereof according to the nature and extent of the damage sustained
(the amount of such proportion to be determined by the Surveyor acting
reasonably) shall be suspended either for the period from the date of such
damage until the date when the demised premises shall again be rendered fit for
occupation and use and accessible or for the period in respect of which the
Lessors shall receive insurance money equivalent to the rent hereby reserved
(whichever of the said periods shall be the shorter) and any dispute with
reference to this proviso shall be referred to arbitration in accordance with
the Arbitration Acts 1950 and 1979
AS TO PART II LANDLORD AND TENANT ACT 1954
(D) If this Lease is within Part II of the Landlord and Tenant Act 1954 then
subject to the provisions of subsection (2) of Section 38 of that Act neither
the Lessee nor any assignee of the said term or of the demised premises shall be
entitled on quitting the demised premises to any compensation under Section 37
of that Act
AS TO WARRANTIES
(E) The Lessee hereby acknowledges and admits that the Lessors have not given or
made any representation or warranty that the use of the demised premises herein
authorised is or will remain a permitted use under the Planning Acts
AS TO LESSORS' POWERS TO DEAL WITH THE LESSORS' NEIGHBOURING PREMISES
(F) Notwithstanding anything herein contained the Lessors and all persons
authorised by the Lessors shall have power without obtaining any consent from or
making any compensation to the Lessee to deal as the Lessors may think fit with
the Lessors' neighbouring premises and to erect thereon or on any part thereof
any building whatsoever and to make any repairs alterations or additions and
carry out any demolition or rebuilding whatsoever (whether or not affecting the
light or air to the demised premises) which the Lessors may think fit or desire
to do PROVIDED THAT in the exercise of such power the Lessors will not so far as
the Lessors are able substantially restrict access to and from the demised
premises to employees and potential customers of the Lessee during normal
business hours nor cause any disturbance to the Lessee in the carrying out of
its business from or enjoyment of the demised premises
AS TO ARBITRATION
(G) If any dispute or difference shall arise between the parties hereto touching
these presents or the rights or obligations of the parties hereunder such
dispute or difference shall in the event of this Lease expressly so
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providing and otherwise may by agreement between the parties be referred to a
single arbitrator to be agreed upon by the parties hereto or in default of
agreement to be nominated by the President or Vice President for the time being
of the Royal Institution of Chartered Surveyors on the application of any party
in accordance with and subject to the provisions of the Arbitration Acts 1950
and 1979
GUARANTOR'S COVENANT
6. The Guarantor (in consideration of the demise hereinbefore contained having
been made at the Guarantor's request) hereby covenants with the Lessors that the
Guarantor will at all times during the said term duly observe and perform the
covenants and provisions on the Guarantor's part set out in the Sixth Schedule
hereto and the agreements and declarations therein contained
GUARANTOR'S FURTHER COVENANT TO TAKE LEASE
7. The Guarantor HEREBY FURTHER COVENANTS with the Lessors that if the Lessee
(being a Company) shall be subject to an administration order or be the subject
of a winding up order by the Court or otherwise go into liquidation or (being an
individual) shall be adjudged bankrupt and the Liquidator or Administrator or
the Trustee of the bankrupt's estate (as the case may be) shall disclaim or
abandon this Lease and if the Lessors shall within three months after such
disclaimer or abandonment by notice in writing require the Guarantor to accept a
lease of the demised premises for a term equal to the residue which if there had
been no such disclaimer or abandonment would have remained of the said term at
the same rents and under the like covenants and provisions as are reserved by
and contained in this Lease with the exception of this Clause and Clause 6 (the
said new lease and the rights and liabilities thereunder to take effect as from
the date of the said disclaimer or abandonment) then and in such case the
Guarantor shall accept such lease accordingly and execute and deliver to the
Lessors a counterpart thereof in all respects at the sole cost of the Guarantor
HEADINGS
8. The headings hereto are inserted for convenience of reference only and shall
not in any manner affect the construction meaning or effect of anything herein
contained or govern the rights of the parties hereto
This instrument is executed as a deed and by its execution the parties authorise
their respective solicitors to deliver it for them on the date it is completed
THE FIRST SCHEDULE hereinbefore referred to
THE PROPERTY AND RIGHTS INCLUDED IN THIS DEMISE
FIRST PART
THE PROPERTY
ALL THAT Unit Numbered 327 (forming part of the Building) on Cambridge Science
Park containing three thousand three hundred square feet more or less as the
same is more particularly delineated on Plan D and thereon edged red including
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(1) the plaster and other decorative finishes to the internal walls
(2) the raised floors including the void beneath and any service channels
therein exclusively serving the demised premises
(3) the false ceiling including the void above and any service channels
therein exclusively serving the demised premises
(4) the windows and the window frames and the glass therein and door
frames and doors
SECOND PART
THE RIGHTS (for the benefit of the Lessee and all others authorised by it)
RIGHT TO SERVICES AND ACCESS
(1) Save in relation to statutory undertakers services at all times hereafter
the right of passage of water soil electricity gas air and other services from
and to the demised premises through the service channels now in under or upon
the Building or the Estate or the Lessors' neighbouring premises and all such
rights of access for the Lessee as may from time to time be reasonably required
for the purpose of laying inspecting cleansing repairing maintaining or renewing
such service channels or any of them but the enjoyment of the aforesaid rights
shall be subject to the person or persons exercising such right causing as
little damage or interference as is reasonably possible in the exercise of such
right and the Lessee being liable to make good all damage to the Estate or the
Lessors' neighbouring premises thereby occasioned with all reasonable dispatch
RIGHT OF WAY
(2) The right of way for all purposes reasonably necessary for the use and
enjoyment of the demised premises for the purposes herein authorised but not
further or otherwise with or without vehicles over the roadways and footpaths
coloured brown on Plan A until the same are adopted by the Local Authority as
roads and footpaths maintainable at the public expense
RIGHT TO PARK
(3) The right to park no more than eighteen cars on the car parking spaces
comprised within the Common Parts on those spaces as may from time to time be
specified by the Lessors
RIGHT OF SUPPORT
(4) A right of subjacent and lateral support shelter and protection from
adjoining parts of the Building
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THE SECOND SCHEDULE hereinbefore referred to
FIRST PART
EXCEPTIONS AND RESERVATIONS IN FAVOUR OF THE LESSORS
RIGHT TO SERVICES
1. At all times hereafter the right of passage and running of appropriate
services through the service channels forming part of the demised premises and
to make connection with such service channels or any of them for the purpose of
exercising the said rights and all such rights of access for the Lessors the
Surveyor and the Lessors' lessees and employees and all persons from time to
time authorised by the Lessors as may from time to time be reasonably required
for the purpose of laying inspecting cleansing repairing maintaining renewing or
adding to such service channels or any of them but the enjoyment of the
aforesaid rights shall be subject to the Lessors or other the person or persons
exercising the same or having the benefit thereof being liable to make good all
damage to the demised premises thereby occasioned with reasonable dispatch
RIGHT TO LIGHT AND AIR
2. The Lessee shall not be entitled to any right of access of light or air to
the demised premises which would restrict or interfere with the user of the
Building the Estate or any of the Lessors' neighbouring premises or any part
thereof for building or otherwise howsoever
RIGHT TO SUPPORT
3. The right to support and shelter and all other rights and privileges in the
nature of easements and quasi-easements now or hereafter belonging to or enjoyed
by the Building the Estate or the Lessors' neighbouring premises
RIGHT TO ENTER
4. At all times during the said term the right with or without the Surveyor the
Lessors' employees and workmen and any persons authorised by them to enter the
demised premises for the purpose of doing any act matter or thing in respect of
which the Lessors are permitted entry to the demised premises under the Fourth
Schedule hereto upon the terms therein stated
RIGHT OF ESCAPE IN CASE OF FIRE
5. A right of escape in emergency only for the Lessee and occupiers for the time
being of Unit 328 forming part of the Building on Cambridge Science Park from
Unit 328 through that part of the demised premises known as Unit 327 such route
as may from time to time be approved in writing by the Lessors (after
consultation with the Lessee) and the Fire Officer (in respect of which the
Lessors' consent shall not be unreasonably withheld)
SECOND PART
EXISTING ENCUMBRANCES
(1) The Planning Agreements
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THE THIRD SCHEDULE hereinbefore referred to
THE RENTS PAYABLE BY THE LESSEE
FIRST PART
SERVICE CHARGE AND INTERIM CHARGE
DEFINITIONS
1. In this Part of this Schedule the following expressions shall have the
following meanings respectively:-
(A) "the Lessors' Services" shall mean
(1) effecting and maintaining an insurance policy or policies in
accordance with the provisions of Clause 2 of the Fifth Schedule of
this Lease against such liability or liabilities of the Lessors
their agents servants and workmen (including negligence) in
connection with or arising out of the Building or the occupation
maintenance or management thereof or any part thereof as the Lessors
shall acting in a reasonable manner think fit and all reasonable and
proper professional fees which the Lessors may from time to time
properly incur in connection with the valuation of the Building for
insurance purposes (no more than one such valuation being permitted
in any one calendar year)
(2) cleaning lighting maintaining and repairing the Common Parts
including cultivating the gardens comprised therein
(3) providing and maintaining any refuse disposal services security
services fire alarms fire fighting equipment and signage provided by
the Lessors and all other such services for the benefit of all the
lessees of the Building
(4) providing space heating and domestic water to the Building
(5) the provision of gas water electricity and other services to the
Common Parts
(6) the provision of all services and equipment to the Common Parts
from time to time including (but not limited to) any staffed
reception area any central switchboard meeting rooms and waiting
areas lavatories and the drains therefrom the provision of cleaning
facilities for the Common Parts and all other services provided for
the use of the lessees of the Building except in so far as the
Lessors in their absolute discretion may charge a lessee or occupier
for the use thereof directly
(7) maintaining repairing refurnishing and decorating the Common
Parts
(8) decorating maintaining and repairing the Building in accordance
with Clause 5 of the Fifth Schedule hereto
(9) employing managing agents to perform all or any of the services
specified in this sub-clause (A) and of any caretaker to manage
supervise or attend to the security of the Building including the
provision of uniforms and materials and or services provided by them
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(10) the provision of any extraordinary or emergency services or
expenses incurred by the Lessors for the benefit of the Lessee and
other lessees of the Lessors relating to the Building
(11) any steps taken by the Lessors (including legal proceedings)
which the Lessors may reasonably decide in the interests of good
estate management are necessary for the benefit or protection of the
Building as a whole and any rights and easements appurtenant thereto
or which may be required by any Act of Parliament or bye-law
(12) the payment of any rates water rates taxes assessments duties
charges and impositions whatsoever (whether or not of a recurring
nature) now or hereafter during the said term assessed charged or
imposed on in respect of those parts of the Building which are not
demised or not intended to be demised by an occupational tenancy
from time to time
(13) enforcing or attempting to enforce against any lessee of the
Building the observance of any covenant in that lessee's Lease the
non-observance of which is or may be detrimental to the Lessors the
Lessee or the other lessees of the Building
(14) the provision installation maintenance repair and renewal (only
if necessary) of such other services and facilities and the pursuit
of such other like activities as the Lessors shall in their
reasonable discretion determine or provide for the Building in the
interest of good estate management
(15) any other act or thing done in the discretion of the Lessors in
or about or in connection with the Building reasonably calculated to
be for the benefit of the Lessee (either alone or in conjunction
with other lessees of the Lessors) but not otherwise provided for in
this Lease
(16) the payment of all Value Added Tax chargeable in connection
with services rendered by the Lessors for which the Service Charge
is payable
but so that the Lessors may from time to time withhold add to vary extend
or make any alterations in the rendering of the services or any of them
from time to time as appropriate provided only that so doing does not in
any way materially interfere with the Lessee's use or enjoyment of the
demised premises
(B) "the Cost of the Lessors' Services" in respect of any Accounting
Period shall mean the aggregate of
(a) the costs and expenses incurred by the Lessors of providing the
Lessors' Services and
(b) a proper proportion (to be conclusively determined by the
Surveyor (acting as an expert) whose determination shall be final)
attributable to the Building of the Estate Service Charge and
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(c) a reasonable sum by way of a provision towards the cost and
expense of replacing renewing maintaining repairing and decorating
the Building and replacing renewing repairing and maintaining the
plant installations and equipment therein and of any expenditure by
way of maintenance which is of a periodically recurring nature
(whether recurring regularly or irregularly) (hereinafter called
"the Fund") and the Fund shall be determined on the assumption that
the anticipated expenditure thereof is calculated as the Surveyor
may reasonably determine (acting as an expert and not as an
arbitrator) and that each year the Service Charge shall include such
provision towards such anticipated costs so that the Fund shall
accumulate sufficient monies to cover the anticipated expenditure
whether or not the expenditure so anticipated shall occur in whole
or in part during the said term PROVIDED THAT
(i) nothing herein shall oblige the Lessors to establish the
Fund or if established to maintain the Fund sufficient in
whole or in part to cover the costs and expenses hereinbefore
specified
(ii) all such sums received by the Lessors for the Fund shall
be credited to a deposit account separate from the Lessors'
own money and shall be held by the Lessors upon trust during
the period of eighty years from the Twenty fifth day of
December One thousand nine hundred and eighty nine (which
shall be the perpetuity period applicable) for the persons or
corporations who from time to time shall be tenants of the
Building to apply the same and any interest accruing thereto
for the purposes hereinbefore specified and at the expiry of
the perpetuity period any such sums unexpended shall be paid
to the persons or corporations who shall then be tenants of
the Building in shares calculated by reference to their then
contributions
(C) "the Service Charge" shall mean the proportion of the Cost of the
Lessors' Services which in the reasonable opinion of the Surveyor (acting
as an expert) shall be just and equitable in all the circumstances
(D) "the Interim Charge" shall mean such sum as is to be paid on account
of the Service Charge in respect of each Accounting Period as the Lessors
shall specify such Interim Charge to be based on the anticipated Cost of
the Lessors' Services for the then current Accounting Period estimated by
reference to (inter alia) the total expenditure for the immediately
preceding Accounting Period
(E) "Accounting Period" shall mean a period commencing on the First day of
December in any year and ending on the Thirtieth day of November in the
following year
2. The first payment of the Interim Charge in respect of the period from the
date hereof to the ___________ day of __________ One thousand nine hundred and
___________ shall be made on the date hereof and thereafter the Interim Charge
shall be paid to the Lessors by equal quarterly payments in advance on the four
usual quarter days in each year and in case of default the same shall be
recoverable from the Lessee as rent in arrear
3. If the Interim Charge paid by the Lessee in respect of an Accounting period
exceeds the Service Charge for that period the surplus of the Interim
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Charge so paid over and above the Service Charge shall be carried forward by the
Lessors and credited to the account of the Lessee in computing the Service
Charge in succeeding Accounting Periods as hereinafter provided
4. If the Service Charge payable by the Lessee in respect of any Accounting
Period exceeds the Interim Charge paid by the Lessee in respect of that
Accounting Period together with any surplus from previous years carried forward
as aforesaid then subject to the provisions of Clause 6 below the Lessee shall
pay the excess to the Lessors within twenty one days of the service upon the
Lessee of the Certificate referred to in Clause 5 below and in case of default
the same shall be recoverable from the Lessee as rent in arrear
5. As soon as practicable after the expiration of each Accounting Period there
shall be served upon the Lessee by the Surveyor a Certificate signed by the
Surveyor containing the following information:-
(i) the amount of the Interim Charge paid by the Lessee in respect of that
Accounting Period together with any surplus carried forward from previous
Accounting Periods
(ii) the amount of the Service Charge in respect of that Accounting Period
and of any excess or deficiency of the Service Charge over the Interim
Charge
6. The Lessee shall be entitled at its own expense at any time within one month
after service of such Certificate to inspect the accounts and receipts and
vouchers upon which the same is based relating to the Cost of the Lessors'
Services and to raise with the Surveyor all reasonable questions arising thereon
and to obtain satisfactory replies thereto
SECOND PART
OTHER RENTS PAYABLE UPON DEMAND
RENT FOR COMMON PARTS
1. To the extent that the same is not covered by the Service Charge hereinbefore
referred to a proper proportion attributable to the demised premises of the cost
and expense of making repairing maintaining rebuilding cleansing and operating
all ways roads pavements service channels yards bicycle stores vehicle parks and
gardens fences party structures and any installations equipment fittings
fixtures easements appurtenances or conveniences which shall belong to or be
used by the demised premises in common with other parts of the Building and with
the other buildings on the Estate (or any of them) including reasonable and
proper architects' and surveyor's fees properly incurred in connection with such
works (such proper proportion to be certified by the Surveyor (acting as an
expert) acting reasonably whose certificate shall be final and binding on the
Lessee)
INTEREST ON ARREARS
2. Interest on any monies payable by the Lessee to the Lessors under any
covenant or provision of this Lease which remain unpaid for twenty one days
shall be payable by the Lessee such Interest to be calculated from the date when
such monies were due until the date when such monies are received by the Lessors
PROVIDED THAT the provisions of this Clause shall not
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prejudice any rights or remedies of the Lessors in respect of any breach of any
of the covenants on the part of the Lessee herein contained
THE FOURTH SCHEDULE hereinbefore referred to
LESSEE'S COVENANTS
TO PAY RENT
1. To pay to the Lessors the rents hereby reserved at the times and in the
manner herein appointed for payment thereof without any deduction set off or
(except as provided by Clause 5 (C) of this Lease) abatement whatsoever and to
pay those rents reserved in Clause 2 (a) of this Lease by standing order to the
bankers of the Lessors
TO PAY OUTGOINGS
2. To pay and discharge all rates taxes duties assessments charges compositions
and outgoings whatsoever (whether parliamentary local public utility or of any
other description and whether or not of a recurrent nature) now or at any time
during the said term taxed assessed charged imposed soon or payable in respect
of the demised premises or any part thereof or to the Lessors or Lessee or
owner or occupier in respect thereof
TO REPAIR AND DECORATE
3. (a) Well and substantially to cleanse maintain and repair the demised
premises and every part thereof (including all additions thereto and all
the Lessors' fixtures fittings plant and machinery therein and the service
channels forming part of the demised premises) and the drains connecting
the demised premises to and as far as their points of connection to the
drains used in common
(b) Without prejudice to the generality of sub-clause (a) hereof to paint
(or otherwise decorate) with two coats at least of good quality paint (or
other suitable materials) all such parts of the demised premises as have
been usually painted (or otherwise decorated) such painting (or other
decoration) to be in the last year of the said term and otherwise as the
Lessors may reasonably so require
(c) Not to remove or damage any of the Lessors' fixtures and fittings in
the demised premises and to replace with similar articles of equal quality
such fixtures and fittings as may be lost or worn out or become unfit for
use
PROVIDED THAT all work referred to in this Clause shall be done in a good and
workmanlike manner and to the reasonable satisfaction of the Surveyor AND
PROVIDED FURTHER THAT the liability of the Lessee under this clause shall not
extend to damage caused by any of the insured risks unless the insurance shall
have been vitiated or insurance monies rendered unrecoverable in whole or in
part by any act omission neglect or default of the Lessee or their employees
servants agents independent contractors customers visitors licensees invitees or
any other person under the Lessee's control
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NOT TO MAKE ALTERATIONS
4. Not to alter the demised premises and not to cut maim injure or damage any
part thereof and not to make any alteration in the plan or elevation of
the demised premises or in the nature of the use of the demised premises
or any part thereof or to make any erection or addition whatsoever or to
carry out any development (as defined in the Planning Acts) on or to the
demised premises or any part thereof without the consent in writing of the
Lessors such consent not to be unreasonably delayed PROVIDED THAT nothing
in this sub-clause shall prevent the Lessee (without the need to obtain
the Lessors' consent) from erecting altering or removing internal
non-structural demountable partitioning and provided that the Lessee shall
give notice of the erections thereof in writing to the Lessors within
twenty eight days of completion and shall supply the Lessors with full
details thereof and PROVIDED THAT the Lessee shall indemnify the Lessors
against any liability for any tax assessed upon the Lessors by reason of
any such alteration erection or addition to the demised premises carried
out by or on behalf of the Lessee
(b) Without prejudice to any other rights of the Lessors immediately upon
the Lessors by notice in writing to that effect requiring them so to do to
remove all additional buildings erections works alterations or additions
whatsoever to the demised premises for which the Lessors' consent in
writing has not first been obtained pursuant to the provisions of
sub-clause (a) of this Clause (herein called "the unauthorised works") and
make good and restore the demised premises to the state and condition
thereof before the unauthorised works were carried out and if the Lessee
shall neglect to do so for seven days after such notice then it shall be
lawful for the Surveyor the Lessors and the Lessors' servants contractors
agents and workmen to enter upon the demised premises and to remove the
unauthorised works and to make good and restore the same to the state and
condition existing before the carrying out of the unauthorised works and
all expenses of so doing shall be repaid to the Lessors by the Lessee
within seven days of a written demand in that behalf
(c) Any consent on the part of the Lessors pursuant to the provisions of
sub-clause (a) of this Clause may be subject to such conditions as the
Lessors may reasonably require including (but not limited to)
reinstatement of the demised premises at the expiration or sooner
determination of the said term
T0 PERMIT ENTRY
5. To permit the Lessors the Surveyor and their respective workmen and persons
duly authorised by them respectively on reasonable written notice (of not less
than forty eight hours) (except in emergency) at reasonable hours to enter the
demised premises for the purposes of
(a) taking Inventories of the fixtures fittings appliances and equipment
to be yielded up at the expiration or sooner determination of the said
term
(b) inspecting for defects in and recording the condition of the demised
premises or any breaches of covenant on the part of the Lessee
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(c) inspecting cleansing maintaining repairing altering renewing or adding
to the Estate or any buildings thereon or the Lessors' neighbouring
premises or any other premises adjoining the demised premises (whether
beside under or over) or any service channels not comprised within the
demised premises
(d) performing any covenant complying with any condition or pursuant to
any reservation contained in this Lease including but not limited to the
Lessors' obligations under Clause 5 of the Fifth Schedule
or any other reasonable purpose connected with the management of the demised
premises or the Estate and to co-operate fully with the Lessors and all persons
authorised by them in connection therewith PROVIDED THAT the Lessors shall
expeditiously make good all damage to the demised premises caused by such entry
without the payment of compensation to the Lessee
TO REPAIR ON NOTICE
6. (a) To make good to the reasonable satisfaction of the Surveyor within
three months or such extended period as in the opinion of the Surveyor is
reasonable (or sooner in case of emergency) any defect in the repair or
decoration of the demised premises for which the Lessee is liable
hereunder or any other want of compliance with any of the obligations on
the part of the Lessee under this Lease of which the Lessors or the
Surveyor has given notice in writing to the Lessee or left notice in
writing at the demised premises
(b) If the Lessee shall not comply with sub-clause (a) hereof the Lessee
shall permit the Lessors the Surveyor and their respective workmen
(without prejudice to any other remedy of the Lessors) to enter the
demised premises and make good such defect breach or want of compliance as
aforesaid without the payment of any compensation to the Lessee and all
expenses of so doing (including all reasonable and proper legal costs and
Surveyor's fees) together with Interest from the date of expenditure by
the Lessors shall be paid by the Lessee to the Lessors on demand and shall
be recoverable as rent in arrear
T0 PAY COST OF DAMAGE
7. Without prejudice to any other provisions herein contained to pay to the
Lessors on demand the full cost as assessed by the Surveyor of making good any
damage to the Common Parts and/or the Building and to the said roads coloured
brown on Plan A and any other roads and road fittings on the Estate including
but not limited to lighting and signs or any other part of the Estate whether
occasioned by the Lessee or their employees servants agents independent
contractors customers visitors licensees invitees or any other person under the
Lessee's control
TO PAY LESSORS' COSTS (LPA)
8. To pay the Lessors' costs and expenses (including legal costs and surveyor's
and other professional fees (if any))
(a) In or in contemplation of any proceedings relating to the demised
premises under Sections 146 and/or l47 of the Law of Property Act 1925 or
the preparation, and service of notices thereunder (whether or not any
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right of re-entry or forfeiture has been waived by the Lessors or a notice
served under the said Section 146 is complied with by the Lessee or the
Lessee has been relieved under the provisions of the said Act and
notwithstanding that forfeiture is avoided otherwise than by relief
granted by the Court)
(b) In the preparation and service of any Schedule of Dilapidations at any
time during or within six months after the expiration of the term
(c) In connection with the recovery of arrears of rent due from the Lessee
hereunder
(d) In connection with supervising any work required in dealing with the
service rent reserved hereby
(e) In connection with approving plans and specifications required
hereunder and the supervision and inspection of alterations erections
additions and any other works carried out by the Lessee
(f) In respect of any application for consent required by this Lease
whether or not such consent be granted PROVIDED THAT there shall be no
such liability on the Lessee thereunder in circumstances where the Lessors
withhold consent unreasonably
and the Lessors' reasonable and proper legal costs incurred in connection with
the preparation and completion of this Lease up to a maximum of Two Thousand
five hundred pounds
AS TO USE AND SAFETY
9. Save in properly designed stores or containers and in accordance with the
recommendations of any competent Authority and the insurers of the demised
premises not to keep or use or permit or suffer to be kept or used upon the
demised premises any materials which are inflammable explosive or otherwise
dangerous or any machinery apparatus or equipment and any other thing which may
attack or in any way injure by percolation corrosion vibration excessive weight
or otherwise the structure of any building comprised therein and in the Estate
and in the Lessors' neighbouring premises or the keeping or [Illegible] whereof
may contravene any enactments
NOT TO USE FOR UNLAWFUL OR ILLEGAL PURPOSES OR CAUSE NUISANCE
10. Not to
(a) use or permit or suffer the demised premises or any part thereof to be
used for any unlawful illegal or immoral purpose or for the manufacture
sale or consumption of intoxicating liquors or for the manufacture sale or
consumption of Controlled Drugs as defined by the Misuse of Drugs Act 1971
(otherwise than by a practitioner or pharmacist as defined by that Act) or
for the manufacture publication or sale of any article or thing which may
in the reasonable opinion of the Lessors be pornographic offensive or
obscene or for betting gaming or lotteries or as a hotel club billiards
saloon dance hall funfair or amusement premises or for an auction or for
any noisy noxious or offensive trade or business and
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(b) do or permit or suffer to be done on the demised premises or any part
thereof anything which may be or become or cause an annoyance
inconvenience nuisance damage disturbance injury or danger of or to the
Lessors or the owners lessees or occupiers of any premises in the
neighbourhood or which in the opinion of the Lessors might be detrimental
to the use or development of the demised premises or of the Estate or of
the Lessors' neighbouring premises (or any of them)
(c) use any radio television video or sound system audible outside the
demised premises or play or suffer to be played any musical instrument
audible outside the demised premises
NOT TO RESIDE
11. Not to reside on the demised premises and not to create or permit or offer
to be created any residential tenancy or residential occupation of the demised
premises or any part thereof
AS TO USER
12. That neither the Lessee nor any other person shall use the demised premises
or any part thereof other than for a purpose appropriate to a Science Park that
is to say any one or more of the following uses
(a) Scientific research associated with industrial production
(b) Light industrial production of a kind which is dependent on regular
consultation with either or both of the following:
(i) The Lessee's own research development and design staff
established in the Cambridge Study Area
(ii) The scientific staff or facilities of the University or of
local scientific institutions
(c) Ancillary buildings and works appropriate in the sole opinion of the
Lessors to the use of the demised premises as an integral part of a
Science Park
TO KEEP OPEN AND SECURITY
13. (a) Not to permit the demised premises to remain vacant and to keep the
demised premises open during hours appropriate to the Lessee's business
(b) Without prejudice to the generality of sub-clause (a) above to
indemnify the Lessors against any empty property rate or penal rate levied
or assessed upon the Lessors by reason of the demised premises having been
left empty
(c) To ensure that the Lessors at all times have written notice of the
name and address and telephone number of at least one keyholder of the
demised premises
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DISPLAYS AND ADVERTISEMENTS
14. Not to display or permit to be displayed on any part of the demised premises
so as to be visible outside the demised premises any name writing [Illegible]
sign placard sticker or advertisement of whatsoever nature and not to
[Illegible] leave or install any merchandise or display outside the demised
premises and on any breach by the Lessee the Lessors the Surveyor and their
[Illegible] workmen may without notice and without prejudice to any other
[Illegible] of the Lessors remove the cause of the breach of this covenant and
shall not be liable to make good any loss or pay compensation for so doing
TO KEEP CLEAN
15. (a) Not to allow any rubbish or refuse of any description to accumulate
upon the demised premises or the Common Parts or on any other part of the
Building save in suitably located dustbins provided by the Lessee for that
purpose and so often as it shall be necessary or desirable and in any
event at least once a week to cause such dustbins to be emptied
(b) Generally to keep the demised premises clean and tidy
(c) Not to bring or keep or suffer to be brought or kept upon the demised
premises or the Common Parts anything which in the opinion of the Lessors
are or may become unclean unsightly or detrimental to the demised premises
the Estate or the Building
(d) Not to discharge into any service channels oil grease solids or other
deleterious matter or any substance which might be or become a source of
danger or injury to the drainage system of the demised premises the
Building the Estate or the Lessors' neighbouring premises (or any of them)
or which may pollute the water of any watercourse so as to render the
Lessors liable to action or proceedings by any person or body and
generally to keep the service channels comprised within the demised
premises unobstructed
(f) Not to do or suffer anything which may cause or tend to cause an
obstruction or blockage of any water or soil pipes or drains or disruption
of the service channels in the demised premises the Building or the Estate
TO COMPLY WITH ENACTMENTS AND GIVE NOTICE
16. (a) At the Lessee's own expense to comply with the provisions and
requirements of all enactments or as prescribed or required by any
competent Authority court or body so far as they relate to or affect the
demised premises or the Lessors or the Lessee thereof
(b) At the Lessee's own expense to do all works and all other things so as
to comply with sub-clause (a) of this Clause including (without prejudice
to the generality of the foregoing) the obtaining of any fire certificate
required for the demised premises
(c) Within fourteen days of receipt of notice thereof to give to the
Lessors particulars of any provision or requirement of all enactments or
as prescribed or required by any competent Authority court or body or
proposal therefor relating to the demised premises or the Estate or the
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Lessors' neighbouring premises (or any of them) or the condition or use
thereof respectively and at the request of the Lessors but at the cost of
the Lessee to make or join with the Lessors in making such objection or
representation against any such proposal as relates to the demised
premises as the Lessors shall deem expedient
(d) To pay to the Lessors upon demand a due proportion (to be conclusively
determined by the Surveyor acting as an expert) of all costs charges and
expenses (including the Surveyor's and other professional advisers' fees)
incurred by the Lessors of or incidental to
(i) complying with all provisions and requirements of all enactments
or as prescribed or required by any competent Authority court or
body and
(ii) doing all works and other things so as to comply therewith
so far as the same relate to any premises capable of being used or enjoyed
by the Lessee in common or jointly with any other person or the use
thereof
TO COMPLY WITH THE PLANNING ACTS
17. (a) At all times during the said term to comply in all respects with the
provisions and requirements of the Planning Acts and any regulations or
orders made thereunder and all licences consents permissions and
conditions (if any) granted or imposed thereunder so far as the same
respectively relate to or affect the demised premises or any part thereof
and to keep the Lessors fully and effectually indemnified against all
actions proceedings damages costs expenses claims and demands whatsoever
in respect of or arising out of any contravention of the Planning Acts and
against the cost of any permissions and consents thereunder and the
implementation thereof
(b) In the event of the Lessors giving consent to any of the matters in
respect of which the Lessors' consent shall be required pursuant to the
provisions of any covenant or condition contained in this Lease to apply
at the cost of the Lessee to the local and planning authorities for all
necessary consents and permissions in connection therewith and to give
notice to the Lessors of the granting or refusal (as the case may be) of
all such consents and permissions forthwith on the receipt thereof
(c) In the event of the said Planning Authority agreeing to grant such
necessary consent or permission only with modifications or subject to
conditions to give to the Lessors forthwith full particulars of such
modifications or conditions AND if such modifications or such conditions
shall in the reasonable opinion of the Lessors be undesirable then the
Lessee shall not implement or proceed with the matters works or change of
use to which the application relates
(d) If the Lessee shall receive any compensation in respect of the demised
premises under or by virtue of the Planning Acts forthwith to make such
provision as is just and equitable for the Lessors to receive its due
benefit from such compensation
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(e) Not to apply for or implement any planning permission in respect of
the whole or any part of the demised premises if such application or the
implementation thereof would or might give rise to any tax charge or other
levy payable by the Lessors
(f) Unless the Lessors shall otherwise direct to carry out before the
expiration or sooner determination of the said term any works stipulated
to be carried out to the demised premises by a date subsequent to such
expiration or sooner determination as a condition of the grant of any
[Illegible] permission obtained by the Lessee during the said term
NOT TO VITIATE INSURANCE
18. (a) Not to do or omit to do (or permit or suffer to be done or omitted
to be done) anything whereby the policy or policies of insurance on the
building against the insured risks may become void or voidable or
thereby the rate of premium thereon or upon the Estate or upon the
Lessors' neighbouring premises may be increased or cause the insurers to
impose more onerous terms in such policy or policies and to repay to the
Lessors all sums paid by way of increased premiums and any expenses
incurred by the Lessors in or about any renewal of such policy or policies
consequent upon a breach of this covenant and all such sums shall be added
to the rent herein reserved and be recoverable upon demand as rent and in
the event of the Building or any part thereof being damaged by the insured
risks and the insurance money under any insurance effected against the
same being wholly or partly irrecoverable by reason solely or in part of
any act omission neglect or default of the Lessee or their employees
servants agents independent contractors customers visitors licensees
invitees or any other person under the Lessee's control then and in every
such case the Lessee will forthwith pay to the Lessors the whole or (as
the case may require) an appropriate proportion of the costs of completely
rebuilding and reinstating the building
(b) To comply with any requirements of the insurers of the Building
(c) To notify the Lessors forthwith upon becoming aware of the whole or any part
of the demised premises or the Common Parts being destroyed or damaged by any of
the insured risks
TO INDEMNIFY
19. To keep the Lessors fully and effectually indemnified from and against
liability in respect of losses damages proceedings claims costs expenses
or any other liability whatsoever arising from or in connection with
(a) the injury or death of any person
(b) damage to or destruction of any property whatsoever
(c) the infringement disturbance or destruction of any rights easements or
privileges
(d) the breach by the Lessee of any of the terms covenants and conditions on the
part of the Lessee herein contained
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[Illegible] directly or indirectly out of:-
(i) the repair condition existence or use of the demised premises or of
any alteration to the demised premises or works carried out or in the
course of being carried out to the demised premises
(ii) anything now or hereafter attached to or projecting from the demised
premises
(iii) any act default or negligence of the Lessee or the servants agents
licensees or invitees of the Lessee
[Illegible] TO ASSIGNMENTS ETC.
20. (a) Not to assign part with possession of or charge by way of legal
mortgage in any way any part of the demised premises less than the whole
(b) Not to assign the whole of the demised premises except to a permitted
assignee and the expression "permitted assignee" shall mean a substantial
and respectable body or person whose registered office principal place of
business or address is within the United Kingdom who in the reasonable
opinion of the Lessors shall have the capacity and the qualifications
necessary to observe and perform all the provisions of this Lease and who
shall prior to any such assignment have
(i) submitted references satisfactory to the Lessors and
(ii) entered into a direct covenant under seal with the Lessors to
pay the rents reserved by and to observe and perform the covenants
conditions agreements and stipulations contained in this Lease and
on the part of the Lessee to be observed and performed as if the
permitted assignee were the original Lessee hereunder and such
covenants conditions agreements and stipulations were repeated in
extenso in such covenant with the substitution of the name of the
permitted assignee for the name of the Lessee and
(iii) if reasonably so required by the Lessors (it being reasonable
for the Lessors so to require if the permitted assignee is not a
public limited company) procured that not less than two persons or a
corporate body acceptable to the Lessors (and in respect of whom
full information shall have been supplied to the Lessors) enter into
a Deed of Guarantee in such form as the Lessors may reasonably
require (for the avoidance of doubt like covenants conditions
agreements and declarations to those contained in the Sixth Schedule
hereto being in all respects reasonable for the purpose of such Deed
of Guarantee)
(c) Not to underlet the whole or any part of the demised premises
(d) Not to share possession of the whole or any part of the demised
premises save with another member of the same group as defined by Section
42 of the Landlord and Tenant Act 1954 subject to the following conditions
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(i) the relationship of landlord and tenant shall not be created and
shall not at any time during such sharing arise and
(ii) the member of the same group shall not be permitted to have
exclusive occupation of the whole or any part of the demised
premises and
(iii) the member of the same group's sharing of possession shall
determine upon their ceasing to be within the definition contained
in the said Section 42 of the Landlord and Tenant Act 1954
(e) Not to hold or occupy the demised premises or any part thereof as
trustee or agent or otherwise for the benefit of any other person
(f) Not to part with possession of the demised premises or any part
thereof except by virtue of an assignment of a kind permitted by this
Clause and with the prior written consent of the Lessors such consent not
to be unreasonably withheld or delayed
(g) Not without the prior consent in writing of the Lessors (such consent
not to be unreasonably refused or delayed in the case of a chargee by way
of legal mortgage reasonably acceptable to the Lessors) to charge by way
of legal mortgage in any way the whole of the demised premises
(h) Not to mortgage the demised premises or any part thereof by way of
subdemise
TO GIVE NOTICE OF ASSIGNMENTS, DEVOLUTIONS ETC.
21. (a) To produce every assignment transfer charge Probate Letters of
Administration order instrument or other writing effecting or evidencing
any transmission or devolution of any estate or interest in the demised
premises or any part thereof to the Solicitors of the Lessors for
registration within one month from the date thereof and to pay to the
Lessors' Solicitors their reasonable fees for each such registration
(b) Within seven days of an assignment of this Lease to give to the
Lessors written notice of the person to whom future rent demands should be
sent
AS TO LOSS OR ACQUISITION OF EASEMENTS
22. (a) Not to knowingly permit any easement or right comprised in belonging
to or used with the demised premises or any part thereof from being
obstructed or lost
(b) Not to give to any third party any acknowledgement that the Lessee
enjoys the access of light to any of the windows or openings in the
demised premises by the consent of such third party nor to pay to such
third party any sum of money nor to enter into any agreement with such
third party for the purpose of inducing or binding such third party to
abstain from obstructing the access of light to any such windows or
openings
(c) To take all such steps as may be reasonably necessary to prevent the
acquisition of any easement or right against over upon or under the
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demised premises or any part thereof and any encroachment thereon and to
give to the Lessors immediate notice of any encroachment or threatened
encroachment upon the demised premises or any attempt to acquire any
easement or right under or over the demised premises which shall be within
the Lessee's knowledge
TO PRODUCE PLANS/DOCUMENTS
23. If and whenever called upon so to do to produce to the Lessors or the
Surveyor all such plans documents or other evidence as the Lessors may from time
to time reasonably require to satisfy themselves that the Lessee has complied in
all respects with the provisions of the Lessee's covenants herein
NOT TO INTERFERE WITH RESERVED RIGHTS
24. Not to knowingly or deliberately interrupt or interfere with the exercise of
the rights contained or referred to in the Second Schedule hereto
TO PERMIT ENTRY FOR RELETTING ETC.
25. During the last six months before the expiration or sooner determination of
the said term or after the expiration thereof (or at any time during the said
term in the event of a sale of the Lessors' interest in the demised premises) to
permit the Lessors and the Surveyor to enter upon the demised premises and to
affix upon any suitable part or parts thereof a notice board or boards for
reletting or other disposal of the demised premises and not to remove or obscure
the same and at all reasonable times in the daytime to permit all persons
authorised by the Lessors or the Surveyor to enter and inspect the demised
premises
TO YIELD UP
26. At the expiration or sooner determination of the said term peaceably and
quietly to surrender and yield up to the Lessors the demised premises (together
with all keys thereto) so repaired maintained decorated cleansed glazed painted
and kept as herein provided and if so required by the Lessors to remove such
tenants and trade fixtures as the Lessors may specify the Lessee making good all
damage caused by the removal of these to the satisfaction of the Surveyor
AS TO FAILURE OF GUARANTEE AND ADDITIONAL GUARANTEES
27. Within fourteen days of the death during the said term of any person who has
guaranteed to the Lessors the performance of the Lessee's covenants herein or of
such person being adjudged bankrupt or entering into a composition scheme or
arrangement with or for the benefit of such person's creditors or being a
company becoming subject to an administration order or offering a trustee
receiver or similar officer to be appointed over the whole or any part of the
company's undertaking property or assets or being the subject of a winding up
order by the Court (save for the purpose of reconstruction or amalgamation of a
solvent company not involving a realisation of assets) or passing a resolution
for winding up (save as aforesaid) or otherwise entering into liquidation to
give notice thereof to the assessors and if so required by the Lessors at the
expense of the Lessee within twenty eight days to procure that some other person
or body
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acceptable to the Lessors enters into a Deed of Guarantee in such form as
[Illegible] Lessors may reasonably require
TO VALUE ADDED TAX
28. Where the Lessee is required by this Lease to pay to the Lessors or any
other person any sum in respect of the supply of goods or services for Value
Added Tax purposes (or for the purposes of any substituted tax) the Lessee
[Illegible] also on demand discharge any liabilities of the Lessors relating to
Value Added Tax (or substituted tax) in respect of any supply (whether or not
the supply is taxable following an election by the Lessors) save to the extent
that any such tax is not input tax recoverable by the Lessors
STATUTORY ACQUISITIONS
29. Not to do or omit to do any act matter or thing as a consequence thereof the
Lessors' reversion immediately expectant upon the determination [Illegible]
the said term shall become liable to acquisition pursuant to any enactments
FIRE FIGHTING APPLIANCES
30. To keep the demised premises sufficiently supplied and equipped with such
suitable fire fighting and extinguishing appliances as shall from time to time
be required by law or by the local or other competent authority and by
[Illegible] Lessors' insurers and such appliances shall be open to inspection
and shall [Illegible] properly maintained and also not to obstruct the access to
or means of [Illegible] such appliances or the means of escape from the demised
premises [Illegible] case of fire
NOT TO OBSTRUCT
31. Not to permit any vehicles to stand on the roadways comprised within
[Illegible] Estate or on any other part of the Estate except on such parts as
shall from time to time have been authorised by the Lessors or shall have been
designated by the Lessors as a loading bay for the Lessee (but during the period
of loading and unloading of vehicles only) and not to park on or obstruct any
Common Parts or any communal part of the Estate save as hereinbefore provided
TO COMPLY WITH REGULATIONS
32. To comply with all regulations made by the Lessors from time to time
[Illegible] the management of the Building the Estate and of any land or
premises [Illegible] or to be used in common or jointly with any other person
and to [Illegible] insure that the Lessee's employees and all persons under the
control of the Lessee shall at all times observe and perform the same
[Illegible] TO WATER SUPPLY
33. Not to use or permit or suffer to be used the supply of water to the Estate
for any purpose other than the Lessee's purposes hereby permitted and
[Illegible] in any event to use the same or permit or suffer the same to be used
[Illegible] research or industrial purposes otherwise than in compliance with
the reasonable recommendations of the Statutory Water Undertaker or Water
Authority
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T0 COMPLY WITH PLANNING AGREEMENTS
34. In addition to and not in substitution for or limitation of the covenants
contained herein and in particular the Lessee's covenants as to the use of the
demised premises or any part thereof to observe and perform all the covenants on
the Lessors' part in the Planning Agreements respectively contained and the
agreements and provisions of the Planning Agreements to the extent that the same
affect the demised premises or any part thereof and at all times to indemnify
the Lessors against any breach or non-observance of the same
THE FIFTH SCHEDULE hereinbefore referred to
LESSORS' COVENANTS
AS TO QUIET ENJOYMENT
35. That the Lessee paying the rents hereby reserved at the times and in the
manner herein appointed and performing and observing the covenants on the
Lessee's part and the conditions agreements and stipulations herein contained
may peaceably enjoy the demised premises for the said term without any lawful
interruption from the Lessors or any person lawfully claiming under or trust for
the Lessors
TO INSURE
36. (a) That the Lessors will during the said term insure and keep insured in
some established Insurance Office the Building (excluding all plate and
other glass therein) against the Insured Risks with a sum assured to cover
the following
(i) the full reinstatement value thereof (excluding the amount of
any insurance excess for which the Lessee shall be liable) to be
determined from time to time by the Lessors and
(ii) architect's surveyor's and other professional fees demolition
site clearance and the cost of boarding and propping including a due
allowance for cost increases over any likely rebuilding period and
(iii) three years' loss of rent and
(iv) liability attaching to the Lessors as owners or landlords of
the Building
(v) incidental expenses
AND the Lessors may insure the air conditioning or central heating
installations passenger lifts hoists (or any of them) separately in such
manner and for such amount as the Lessors may from time to time determine
(b) The Lessors shall have full power to settle and adjust with the
insurers all questions with regard to the liability of the insurers and
the amount or amounts payable under any policy
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(c) The Lessors shall inform the Insurers of the Lessee's interest in the
demised premises
TO REINSTATE
37. In case the demised premises or the Common Parts or the Building or any
parts thereof respectively shall at any time during the said term be destroyed
or damaged by the insured risks so as to be unfit for occupation or use then
(unless any monies payable under any policy of the Lessors shall be refused
either by reason of any act omission neglect or default of the Lessee or their
employees servants agents independent contractors customers visitors licensees
invitees or any other person under the Lessee's control or by reason of any
breach of the provisions of Clause 18 of the Fourth Schedule to this Lease) and
subject to the Lessors obtaining all necessary consents licences or approvals
(which it shall use its best endeavours consistent with reasonable commercial
prudence to obtain) as soon as reasonably practicable and when lawful so to do
the Lessors will apply all monies received (other than in respect of loss of
rent fees demolition site clearance the cost of boarding and propping and any
sums paid to the Lessors to indemnify the Lessors for any liability as owner or
as landlord of the demised premises or the Common Parts or otherwise payable on
the occurrence of a risk not involving damage to the demised premises all of
which shall in all circumstances belong to the Lessors) by virtue of such
insurance as aforesaid towards making good so far as practicable the damage
caused by the insured risks but this obligation shall be conditional upon the
Lessee's performance of the covenants on the Lessee's part contained in clause
18 of the Fourth Schedule hereto
T0 MAINTAIN SPINE ROAD
38. To maintain such parts of the main spine road on the Estate as may not be
adopted by the local authority as being maintainable at the public expense
T0 PROVIDE SERVICES
39. Subject to the Lessee paying the Service Rent specified in the First Part of
the Third Schedule hereto to provide the Lessors' Services in a competent manner
and in accordance with good estate management practice and in particular
(a) to maintain repair and otherwise keep in good repair and condition the
Building including the roof structure and foundations thereof save such
parts as are maintainable by the several lessees of the Building
(including the Lessee) in pursuance of the repairing covenants in their
respective occupational leases
(b) as often as the Lessors deem necessary and not less than every five
years to clean paint redecorate and otherwise treat to protect all the
outside wood metal brick and cement work and other external surfaces of
the Building in a good and workmanlike manner and in colours determined by
the Lessors
(c) to keep all fixtures and fittings in the Common Parts in good order
and repair and to replace such fittings and fixtures as and when
replacement is necessary or requisite
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(d) at all times during the said term to maintain the service channels
used in common in good order and to maintain and repair the other
appurtenances and amenities of the Building in good order and condition
and free from litter and to clean the outside surfaces of all windows at
proper intervals
PROVIDED THAT the Lessors shall not be liable to the Lessee in respect of
(i) any failure or interruption in any of the Lessors' Services by reason
of necessary repair replacement maintenance of any installation or
apparatus or their damage or destruction or by reason of mechanical or
other defect or breakdown or frost or other inclement conditions or
shortage of fuel materials water or labour or any other cause beyond the
Lessors' control provided that the Lessors use all reasonable endeavours
to restore the Lessors' Services in question as speedily as possible
(ii) any act or omission or negligence of any employee agent or other
person undertaking the Lessors' Services or any of them on behalf of the
Lessors
THE SIXTH SCHEDULE hereinbefore referred to
GUARANTOR'S COVENANTS AND AGREEMENTS
1. The Guarantor HEREBY COVENANTS with and guarantees to the Lessors that
(a) the Lessee will at all times during the said term and until this
demise is lawfully brought to an end and the Lessors have beneficial
occupation of the demised premises pay the rents hereby reserved and all
other sums and payments covenanted and or agreed to be paid by the Lessee
at the respective times and in manner herein appointed for payment thereof
and will also duly perform and observe and keep the several covenants and
provisions on the Lessee's part herein contained and
(b) the Guarantor will pay and make good to the Lessors all losses
liabilities costs and expenses sustained by the Lessors through the
default of the Lessee in respect of any of the before mentioned matters
and
(c) that any neglect or forbearance of the Lessors in endeavouring to
obtain payment of the said several rents and payments as and when the same
become due or their delay to take any steps to enforce performance or
observance of the several covenants and provisions herein on the Lessee's
part contained and any time which may be given by the Lessors to the
Lessee shall not release or in any way lessen or affect the liability of
the Guarantor under the guarantee on the Guarantor's part herein contained
and
(d) if the Lessee (being a Company) shall become subject to an
administration order or be the subject of a winding up order by the Court
or otherwise go into liquidation or if the Lessee (being an individual)
shall be adjudged bankrupt and the Liquidator or Administrator or the
Trustee of the bankrupt's estate (as the case may be) shall disclaim this
Lease and if the Lessors shall within three months after such disclaimer
by notice in writing require the Guarantor to accept a lease of the
demised premises for a term equal to the residue which if
29
<PAGE>
there had been no such disclaimer would have remained of the said term at
the same rents and under the like covenants and provisions as are reserved
by and contained in the Lease (other than the specific covenants on the
part of the Guarantor contained in Clause 6 of this Lease but imposing
like requirements for a Deed of Guarantee to those set out in the Lessee's
covenants contained in the Fourth Schedule hereto) the said new lease and
the rights and liabilities thereunder to take effect as from the date of
the said disclaimer then and in such case the Guarantor shall accept such
lease accordingly and execute and deliver to the Lessors a counterpart
thereof in all respects at the sole cost of the Guarantor and
(e) upon demand to pay to the Lessors Interest on all amounts due under
this Clause 1 from the date the same respectively fell due until the date
of payment thereof
AGREEMENTS BY GUARANTOR
It is hereby agreed and declared that
(a) the Guarantor covenants as Principal Debtor and not as guarantor and
accordingly (for the avoidance of doubt)
(i) it shall not be necessary for the Lessors to resort to or seek
to enforce any other guarantee or security (whether from the Lessee
or otherwise) before claiming payment hereunder and
(ii) until all monies and liabilities due or incurred by the Lessee
to the Lessors have been paid or discharged in full notwithstanding
payment in whole or in part of the amount by the Guarantor or any
purported release or cancellation hereof the Guarantor shall not by
virtue of any such payment or by any other means or on any other
ground
(aa) claim any set off or counter claim against the Lessee in
respect of any liability on the part of the Guarantor to the
Lessors and
(bb) make or enforce any claim or right against the Lessee or
prove in competition with the Lessors or exercise any right as
a preferential creditor against the Lessee or against the
assets of the Lessee
and
(b) the Guarantor's covenants herein contained shall not be affected or
modified in any way by the liquidation or dissolution of the Lessee or the
appointment of any receiver administrator or manager and
(c) the Lessors shall be at liberty at all times without affecting or
discharging the Guarantor's liability hereunder
(i) to vary release or modify the rights of the Lessors against the
Lessee hereunder without the Guarantor's consent and
(ii) to compound with discharge release or vary the liability of the
Lessee or any other guarantor or other person and
30
<PAGE>
(iii) to appropriate any payment the Lessors may receive from the
Lessee the Guarantor or any other person towards such monies due
under this Lease as the Lessors shall in their absolute discretion
think fit
THE COMMON SEAL of THE )
MASTER FELLOWS AND )
SCHOLARS OF TRINITY ) [SEAL]
COLLEGE CAMBRIDGE was )
affixed in the presence of:- )
/s/ [Illegible] Senior Bursar
/s/ [Illegible] Junior Bursar
31
<PAGE>
EXHIBIT 10.14
DATED 29th April 1993
THE MASTER FELLOWS AND SCHOLARS OF
TRINITY COLLEGE CAMBRIDGE
- and -
IBRD EUROPE, INC.
================================================================================
LEASE
- of -
Unit 324 Phase 5 Cambridge Science Park, Milton Road, Cambridge
================================================================================
Term: l2th January 1993 to 25th December 1997
Rent: (POUND)75,000 per annum
Mills & Reeve,
112 Hills Road,
Cambridge.
CB2 1PH. (LAP)
jim2819.edoc
<PAGE>
THIS LEASE is made the twenty ninth day of April One thousand nine hundred and
ninety three
BETWEEN
(1) ("the Lessors") THE MASTER FELLOWS AND SCHOLARS OF THE COLLEGE OF THE HOLY
AND UNDIVIDED TRINITY WITHIN THE TOWN AND UNIVERSITY OF CAMBRIDGE OF KING HENRY
THE EIGHTH'S FOUNDATION
(2) ("the Lessee") IBRD EUROPE. INC. whose principal office is situate at 2525
Campus Drive Irvine California 92715 U.S.A.
NOW THIS DEED WITNESSETH as follows:-
INTERPRETATION
1. IN this Lease unless the context otherwise requires:-
(A) "the Lessors" shall include the person for the time being entitled to
the reversion immediately expectant on the determination of the said term
as herein defined
(B) "the Lessee" shall include the Lessee's successors in title and
assigns and where relevant shall include personal representatives
(C) "the Guarantor" means any person who has entered into a guarantee of
the Lessee's covenants contained in this Lease (whether by separate deed
pursuant to the provisions of this Lease or otherwise) and shall include
if it is an individual that person's personal representatives
(D) "the Surveyor" means any suitably qualified Surveyor or where
appropriate Consulting Engineers Architects and Agents employed from time
to time by the Lessors
(E) "the said term" means the total period of demise hereby granted and
(save in respect of Clause 2 hereof and in respect of the service of any
statutory notice of termination) any period of holding over or any
extension or continuance thereof whether by statute or common law where
the context so admits
(F) "service channels" means all such flues sewers drains ditches pipes
wires watercourses cables channels gutters ducts and other conductors of
services and plumbing and ventilating equipment and motors appurtenant
thereto as are now existing or which may be constructed or laid during the
said term and within the period of limitation as herein defined
(G) "Plan A" means the plan annexed hereto and marked "A" and "Plan B"
means the plan annexed hereto and marked "B"
(H) "the demised premises" means, the property hereby demised as described
in the First Part of the First Schedule hereto including all service
channels in on or under such property and fixtures and fittings (other
than tenant's fixtures and fittings) therein together with all additions
alterations and improvements to such property
1
<PAGE>
(I) "the Estate" shall mean Cambridge Science Park shown [Illegible]
Plan A situate adjoining Milton Road partly in the City [Illegible]
and partly in the County of Cambridgeshire together [Illegible]
further neighbouring area in respect of which the Lessors [Illegible]
may from time to time or at any time during the [Illegible]
receive planning permission to develop for uses similar [Illegible]
use of the said area edged blue and which the Lessors [Illegible]
of limitation elect to include in Cambridge Science Park [Illegible]
(J) "the period of limitation" means the period of eighty years commencing
on the date hereof or such longer period as the law may permit (which
period is hereby specified as the perpetuity period applicable to this
Lease under the rule against perpetuities)
(K) "the insured risks" means loss or damage by fire aircraft and other
aerial devices or articles dropped therefrom lightning explosion riot and
civil commotion malicious damage earthquakes storm tempest flood burst
pipes impact and such other risks as the Lessors may from time to time
reasonably deem it desirable to insure against and against which they
shall at that particular time have a policy of insurance in effect subject
to the Lessors first having given to the Lessee written notice thereof and
subject also to such exclusions and limitations as the insurers may impose
(L) "the Planning Acts" means the Town and Country Planning Acts 1948 to
1990 the Planning (Hazardous Substances) Act 1990 the Planning (Listed
Buildings and Conservation Areas) Act 1990 the Local Government Planning
and Land Act 1980 and the Public Health Acts 1875 to 1969 and all notices
directions orders regulations byelaws rules and conditions under or in
pursuance of or deriving effect therefrom from time to time and any
reference herein to these or any other Act or Acts shall include a
reference to any statutory modification or re-enactment thereof for the
time being in force and any future legislation of a like nature
(M) "the Building" means the building numbered 320 (containing the block
of units numbered 321-329 (both numbers inclusive)) Cambridge Science Park
including the Common Parts (as hereinafter defined) shown for
identification purposes edged green on Plan A and all alterations and
improvements thereto and all plant and equipment machinery fittings and
furnishings now or hereafter therein but excluding tenants' fixtures and
fittings
(N) "the Lessors' neighbouring premises" means any land or buildings now
or hereafter during the period of limitation erected adjoining or
neighbouring the demised premises (whether beside under or over) which
belong to the Lessors now or hereafter during the period of limitation
including those parts of the Building not forming part of the demised
premises
(O) "the Common Parts" means those parts of the building which are not
intended to be demised by an occupational tenancy from time to time
including but not limited to the entrance reception area plant room lifts
landings fire escapes toilets washrooms roadways car parks paths gardens
and kitchen facilities
2
<PAGE>
CAMBRIDGE SCIENCE PARK
PLAN A
[Map omitted]
<PAGE>
(P) "the Estate Service Charge" shall mean a service rent in respect of
(a) the maintenance repair cultivation and management of the Estate
including all roads ways and paths service channels amenity grounds
and cultivated areas (whether situate thereon or otherwise serving
the same) and
(b) all such other matters whatsoever which in the reasonable
opinion of the Surveyor shall be necessary to maintain high
standards for a development of such a character including without
prejudice to the generality hereof a notional figure as certified by
the Surveyor equivalent to the reasonable market rental for the time
being of any premises provided by the Lessors on the Estate to be
used or occupied (whether with or without rental) to enable the
Lessors the Surveyor and their respective servants or employees to
implement and carry out such maintenance repairs cultivation and
management of the Estate and all other matters as aforesaid but less
any rental thereof received by the Lessors
such service charge to be in the reasonable opinion of the Surveyor such
as shall be just and equitable in all the circumstances PROVIDED ALWAYS
THAT such service rent shall not include any sum in respect of the cost of
the initial laying out or construction of the Estate or any work or costs
arising out of or in connection with such initial construction
(Q) "Interest" shall mean interest at the yearly rate of three per cent
above the base rate published from time to time by Barclays Bank PLC or
(in the event of base rate or Barclays Bank PLC ceasing to exist) such
other equivalent rate of interest as the Lessors may from time to time in
writing specify
(R) "enactments" shall include all present and future Acts of Parliament
(including but not limited to the Public Health Acts 1875 to 1969 the
Factories Act 1961 the Offices Shops and Railway Premises Act 1963 the
Fire Precautions Act 1971 the Defective Premises Act 1972 the Health and
Safety at Work etc. Act 1974 and the Planning Acts) and all notices
directions orders regulations bye-laws rules and conditions under or in
pursuance of or deriving effect therefrom and any reference herein to a
specific enactment or enactments (whether by reference to its or their
short title or otherwise) shall include a reference to any enactment
amending or replacing the same and any future legislation of a like nature
(S) "the Lessee's New Works" shall mean the works described in the Sixth
Schedule hereto
(T) "the Planning Agreements" shall mean
(a) an agreements dated the Eighth day of November One thousand nine
hundred and seventy one made pursuant to Section 37 of the Town and
Country Planning Act 1962 between the County Council of the
Administrative County of Cambridgeshire and Isle of Ely (1) and the
Lessors (2) and
3
<PAGE>
(b) an agreement dated the Nineteenth day of August One thousand
nine hundred and seventy five made pursuant to Section 52 of the
Town and Country Planning Act 1971 between the same parties and in
the same order as the Section 37 agreement and
(c) an agreement dated the Second day of February One thousand nine
hundred and eighty two made pursuant to Section 52 of the Town and
Country Planning Act 1971 between South Cambridgeshire District
Council (1) and the Lessors (2) and
(d) an agreement dated the Twenty sixth day of June One thousand
nine hundred and eighty four made pursuant to Section 52 of the Town
and Country Planning Act 1971 between South Cambridgeshire District
Council (1) and the Lessors (2) and
(e) an agreement dated the Second day of June One thousand nine
hundred and eighty eight made pursuant to Section 52 of the Town and
Country Planning Act 1971 between South Cambridgeshire District
Council (1) and the Lessors (2)
(U) words importing the masculine gender only include the feminine gender
and vice versa and include any body of persons corporate or unincorporate
words importing the singular number only include the plural number and
vice versa and the word "person" shall include any body of persons
corporate or unincorporate and all covenants by any party hereto shall be
deemed to be joint and several covenants where that party is more than one
person and any covenant by the Lessee not to do or not to do or omit to do
an act or thing shall be deemed to include an obligation not to permit or
suffer such act or thing to be done or omitted
(V) "the Yearly Rent Commencement Date" shall mean the twelfth day of
October One thousand nine hundred and ninety three
THE DEMISE HABENDUM AND REDDENDUM
2. In consideration of the several rents and covenants on the part of the Lessee
herein reserved and contained the Lessors HEREBY DEMISE unto the Lessee ALL
THOSE the demised premises TOGETHER WITH (in common with the Lessors their
lessees and assigns and all other persons from time to time having the like
rights) the rights set out in the Second Part of the First Schedule hereto
EXCEPT AND RESERVING UNTO THE LESSORS and their successors in title assigns and
lessees and all persons from time to time properly authorised by them the
interests rights reservations and exceptions more particularly set out in the
First Part of the Second Schedule hereto TO HOLD the demised premises unto the
Lessee SUBJECT to any or all easements and other rights (if any) now subsisting
over or which may affect the same and the matters referred to in the documents
referred to in the Second part of the Second Schedule hereto from the twelfth
day of January One thousand nine hundred and ninety three to the Twenty fifth
day of December One thousand nine hundred and ninety seven but determinable
nevertheless as hereinafter provided YIELDING AND PAYING THEREFOR unto the
Lessors during the said term
4
<PAGE>
(a) from the Yearly Rent Commencement Date yearly and proportionately for
any fraction of a year the rent of Seventy five thousand pounds
((POUND)75,000) per annum exclusive of Value Added Tax the first such
payment or a proportionate part thereof in respect of the period from the
Yearly Rent Commencement Date to the next following quarter day to be made
on the Yearly Rent Commencement Date and thereafter such rents to be paid
by equal quarterly instalments in advance on the four usual quarter days
in every year
(b) by way of further rent the Service Charge and Interim Charge specified
in the First Part of the said Third Schedule hereto to be paid on the days
and in the manner specified therein and
(c) by way of further rent on demand the rents specified in the Second
Part of the said Third Schedule
all such payments to be made without any deduction
LESSEE'S COVENANTS
3. THE Lessee HEREBY COVENANTS with the Lessors that the Lessee will at all
times during the said term duly observe and perform all the covenants and
provisions on the Lessee's part set out in the Fourth Schedule hereto and the
provisions and conditions contained in this Lease
LESSORS' COVENANTS
4. THE Lessors HEREBY COVENANT with the Lessee that the Lessors will at all
times during the said term duly observe and perform all the covenants and
provisions on the Lessors' part set out in the Fifth Schedule hereto and the
other provisions and conditions contained in this Lease
PROVISO AGREEMENT AND DECLARATION
5. PROVIDED ALWAYS and it is hereby agreed as follows:-
AS TO RE-ENTRY
(A) If and whenever the said rents hereby reserved or any part thereof
respectively shall be in arrear for twenty eight days next after the same shall
have become due whether any formal or legal demand therefor shall have been made
or not or if and whenever there shall be any breach non-observance or
non-performance by the Lessee of any of the covenants on the part of the Lessee
herein contained or if the Lessee being a Company shall become subject to an
administration order or shall suffer a trustee receiver or similar officer to be
appointed over the whole or any part of the Lessee's undertaking property or
assets or shall be the subject of a winding up order by the Court (save for the
purpose of reconstruction or amalgamation of a solvent company not involving a
realization of assets) or pass a resolution for winding up (save as aforesaid)
or otherwise enter into liquidation or if the Lessee being an individual (or
being more than one individual any one of them) shall be adjudged bankrupt or
shall enter into a composition scheme or arrangement with or for the benefit of
the Lessee's creditors or suffer any distress or execution to be levied on or
enforced against the Lessee's goods then and in any such case it shall be lawful
for the Lessors to re-enter into and upon the whole of the demised premises or
5
<PAGE>
any part of the demised premises in the name of the whole and thereupon this
present demise shall absolutely determine and become null and void but without
prejudice nevertheless to any right of action or remedy of the Lessors in
respect of any antecedent breach by the Lessee of any of the covenants on the
Lessee's part herein contained
AS TO NOTICES
(B) Any notice under this Lease shall be in writing and any notice
(a) to the Lessee shall be deemed to be sufficiently served if
(i) left addressed to the Lessee on the demised premises or
(ii) sent to the Lessee by recorded delivery post if within the
United Kingdom or by post at the last known address or (if a
Company) registered or principal office of the Lessee and
(b) to the Guarantor (if any) shall be deemed to be sufficiently served if
sent to the Guarantor by recorded delivery post if within the United
Kingdom or by post at the last known address or (if a Company) registered
or principal office of the Guarantor and
(c) to the Lessors shall be deemed to be sufficiently served if
(i) sent to the Lessors by recorded delivery post at the last known
address or (if a Company) registered office of the Lessors
(ii) whilst the reversion immediately expectant on the determination
of the said term is vested in the original Lessors (as named herein)
addressed to the Lessors' Senior Bursar and delivered to him
personally or sent to him by post at Trinity College Cambridge CB2
1TQ
AS TO RENT ABATEMENT
(C) In case the demised premises or any part thereof shall at any time during
the said term be so damaged by the insured risks or any of them as to be unfit
for occupation and use then (unless the insurance money shall be wholly or
partially irrecoverable by reason solely or in part of any act omission neglect
or default of the Lessee or their employees servants agents independent
contractors customers visitors licensees invitees or any other person under the
Lessee's control) the rent hereby reserved or a fair proportion thereof
according to the nature and extent of the damage sustained (the amount of such
proportion to be determined by the Surveyor acting reasonably) shall be
suspended either for the period from the date of such damage until the date when
the demised premises shall again be rendered fit for occupation and use or for
three years (whichever of the said periods shall be the shorter) and any dispute
with reference to this proviso shall be referred to arbitration in accordance
with Clause 5 (G)
AS TO PART II LANDLORD AND TENANT ACT 1954
(D) If this Lease is within Part II of the Landlord and Tenant Act 1954 then
subject to the provisions of subsection (2) of Section 38 of that Act neither
the Lessee nor any assignee of the said term or of the demised premises
6
<PAGE>
shall be entitled on quitting the demised premises to any compensation under
Section 37 of that Act
AS TO WARRANTIES
(E) The Lessee hereby acknowledges and admits that the Lessors have not given or
made any representation or warranty that the use of the demised premises herein
authorised is or will remain a permitted use under the Planning Acts
AS TO LESSORS' POWERS TO DEAL WITH THE LESSORS' NEIGHBOURING PREMISES
(F) Notwithstanding anything herein contained the Lessors and all persons
authorised by the Lessors shall have power without obtaining any consent from or
making any compensation to the Lessee to deal as the Lessors may think fit with
the Lessors' neighbouring premises and to erect thereon or on any part thereof
any building whatsoever and to make any repairs alterations or additions and
carry out any demolition or rebuilding whatsoever (whether or not affecting the
light or air to the demised premises) which the Lessors may think fit or desire
to do subject to the Lessors or the person exercising such power making good any
damage caused to the demised premises in the exercise of such power to the
reasonable satisfaction of the Lessee and PROVIDED THAT in the exercise of such
power the Lessors will not so far as the Lessors are able materially restrict
access to and from the demised premises
AS TO ARBITRATION
(G) If any dispute or difference shall arise between the parties hereto touching
these presents or the rights or obligations of the parties hereunder such
dispute or difference shall in the event of this Lease expressly so providing
and otherwise may by agreement between the parties be referred to a single
arbitrator to be agreed upon by the parties hereto or in default of agreement to
be nominated by the President or Vice President for the time being of the Royal
Institution of Chartered Surveyors on the application of any party in accordance
with and subject to the provisions of the Arbitration Acts 1950 and 1979
AS TO LESSORS' OBLIGATIONS
(H) Nothing herein contained shall render the Lessors liable (whether by
implication of law or otherwise howsoever) to do any act or thing which the
Lessors have not expressly covenanted to carry out provide or do in the Fifth
Schedule hereto
JURISDICTION
6. The Courts of England and Wales (or in the case of Arbitration the Arbitrator
referred to in sub-clause (G) hereof) shall have jurisdiction to determine any
difference or dispute arising hereunder and in the event of any such difference
or dispute the process whereby any Court action of proceeding or reference to
arbitration is begun or the process for any appeal arising therefrom may in
addition to any other form of service authorised by law (or in the case of
arbitration by the Arbitration Acts 1950 and 1979) in the case of the Lessee be
served on it at the offices of [Illegible] Kenneth
7
<PAGE>
Brown 100 Fetter Lane London EC4A 1DD (Ref 37) or such other place within the
United Kingdom as it may from time to time notify to the Lessors
HEADINGS
7. The headings hereto are inserted for convenience of reference only and shall
not in any manner affect the construction meaning or effect of anything herein
contained or govern the rights of the parties hereto
This instrument is executed as a deed and by its execution the parties authorise
their respective solicitors to deliver it for them on the date it is completed
THE FIRST SCHEDULE hereinbefore referred to
FIRST PART
THE DEMISED PREMISES
ALL THAT Unit Numbered 324 forming part of the Building on Cambridge Science
Park containing approximately Four thousand eight hundred and forty five square
feet net and shown for the purposes of identification only edged red on Plan B
and including
(1) the plaster and other decorative finishes to the internal walls
(2) the raised floors including the void beneath and any service channels
therein exclusively serving the unit demised by this Lease
(3) the false ceiling including the void above and any service channels
therein exclusively serving the unit demised by this Lease but excluding
the floor slab of the unit above
(4) the windows and the window frames and the glass therein and door
frames and doors
(5) the Lessors' fixtures and fittings which include the plant machinery
and equipment referred to in the Eighth Schedule to the extent that the
same are situate within the aforesaid unit numbered 324
but excluding the exterior of the Building and any part of the structure
foundations and roof of the same
SECOND PART
THE RIGHTS
RIGHT TO SERVICES
(1) Save in relation to statutory undertakers services at all times hereafter
the right of passage of water soil electricity gas air and other services from
and to the demised premises through the service channels now in under or upon
the Building or the Estate or the Lessors' neighbouring premises and all such
rights of access for the Lessee as may from time to time be reasonably required
for the purpose of laying inspecting cleansing repairing maintaining or renewing
such service channels or any of them but the enjoyment of the
8
<PAGE>
PLAN B
FIRST FLOOR
[GRAPHIC OMITTED]
<PAGE>
aforesaid rights shall be subject to the person or persons exercising such
rights causing as little damage or interference as is reasonably possible in the
exercise of such rights and the Lessee being liable to make good all damage to
the Estate or the Lessors' neighbouring premises thereby occasioned with all
reasonable dispatch
RIGHT OF WAY
(2) The right of way for all purposes necessary for the use and enjoyment of the
demised premises for the purposes herein authorised but not further or otherwise
with or without vehicles over the roadways coloured brown on Plan A until the
same are adopted by the Local Authority as roads and footpaths maintainable at
the public expense
RIGHT TO PARK
(3) The right to park no more than twenty seven cars on the car parking spaces
comprised within the Common Parts in such spaces as may from time to time be
specified by the Lessors but not otherwise
RIGHT OF SUPPORT
(4) The right of subjacent and lateral support shelter and protection from the
remainder of the Building
RIGHT TO USE COMMON PARTS
(5) Subject to sub-clause (3) above the right to the proper use of the Common
Parts for the purposes for which they are provided but not for any other purpose
RIGHT TO DISPLAY NAME
(6) The right to display the Lessee's name and logo on the communal sign
provided from time to time by the Lessors for that purpose in the entrance way
to the Building (subject to the Lessee obtaining the prior written approval of
the Lessors to the size and design thereof such approval not to be unreasonably
withheld or delayed)
THE SECOND SCHEDULE hereinbefore referred to
FIRST PART
EXCEPTIONS AND RESERVATIONS IN FAVOUR OF THE LESSORS
RIGHT TO SERVICES
1. At all times hereafter the right of passage and running of appropriate
services through the service channels forming part of the demised premises and
to make connection with such service channels or any of them for the purpose of
exercising the said rights and all such rights of access for the Lessors the
Survey or and the Lessors' lessees employees and agents and all persons from
time to time authorised by the Lessors as may from time to time be reasonably
required for the purpose of laying inspecting cleansing repairing maintaining
renewing or adding to such service channels or any of them but the enjoyment of
the aforesaid rights shall be subject to the Lessors or other the person or
persons exercising the same or having the benefit thereof being liable to make
good all damage to the demised
9
<PAGE>
premises thereby occasioned with reasonable dispatch
RIGHT TO LIGHT AND AIR
2. The Lessee shall not be entitled to any right of access of light or air to
the demised premises which would restrict or interfere with the user of the
Building the Estate or any of the Lessors' neighbouring premises or any part
thereof for building or otherwise howsoever
RIGHT TO SUPPORT
3. The right to support and shelter and all other rights and privileges in the
nature of easements and quasi-easements now or hereafter belonging to or enjoyed
by the Building the Estate or the Lessors' neighbouring premises
RIGHT TO ENTER
4. At all times during the said term the right with or without the Surveyor the
Lessors' employees workmen and agents and any persons authorised by them to
enter the demised premises on reasonable prior notice (except in emergency) for
the purpose of doing any act matter or thing in respect of which the Lessors are
permitted entry to the demised premises under the Fourth Schedule hereto upon
the terms therein stated and for all other requirements of the Lessors as in the
opinion of the Lessors shall be reasonably necessary such reservation to be in
addition to and not in substitution for or limitation of any other rights
exceptions or reservations to which the Lessors are entitled hereunder PROVIDED
THAT the Lessors or the persons exercising this right shall (as soon as
reasonably practicable) make good all damage caused to the demised premises in
the exercise of the right to the reasonable satisfaction of the Lessee
ACCESS TO COMMON PARTS
5. The right of way in the case of the Lessors on reasonable prior notice to the
Lessee (except in emergency) for the Lessors and all persons authorised by the
Lessors with or without equipment to and from those parts of the Common Parts
comprising the kitchen and toilet facilities and cupboard housing the power
supply edged blue on Plan B to enable the same to be properly used for the
purposes provided
SECOND PART
EXISTING ENCUMBRANCES
(1) The Planning Agreements
THE THIRD SCHEDULE hereinbefore referred to
THE RENTS PAYABLE BY THE LESSEE
FIRST PART
SERVICE CHARGE AND INTERIM CHARGE
DEFINITIONS
1. In this Part of this Schedule the following expressions shall have the
following meanings respectively:-
10
<PAGE>
(A) "the Lessors' Services" shall mean
(1) effecting and maintaining an insurance policy or policies in respect
of the Building (excluding all plate and other glass therein) in
accordance with the provisions of Clause 2 of the Fifth Schedule of this
Lease and against such liability or liabilities of the Lessors their
agents servants and workmen (including negligence) in connection with or
arising out of the Building or the occupation maintenance or management
thereof or any part thereof as the Lessors in their absolute discretion
shall think fit and all reasonable professional fees which the Lessors may
from time to time properly incur in connection with the valuation of the
Building for insurance purposes
(2) cleaning lighting maintaining and repairing the Common Parts including
cultivating the gardens comprised therein
(3) providing and maintaining any refuse disposal services security
services fire alarms fire fighting equipment and signage provided by the
Lessors and all other such services which are provided for the benefit of
all the lessees of the Building
(4) providing space heating and domestic water to the Building
(5) the provision of gas water electricity and other services to the
Common Parts
(6) the provision of all services and equipment to the Common Parts from
time to time including (but not limited to) lavatories and the drains
therefrom the provision of cleaning facilities for the Common Parts and
all other services provided for the use of the lessees of the Building
except in so far as the Lessors in their absolute discretion may charge a
lessee or occupier for the use thereof directly
(7) refurnishing and decorating the Common Parts when reasonably necessary
(8) decorating maintaining and repairing the Building in accordance with
Clause 5 of the Fifth Schedule hereto
(9) employing managing agents to perform all or any of the services
specified in this sub-clause (A) and a caretaker to manage supervise or
attend to the security of the Building including the provision of uniforms
and materials and of services provided by them
(10) the provision of any extraordinary or emergency services or expenses
incurred by the Lessors for the benefit of the Lessee and other lessees of
the Lessors relating to the Building
(11) any steps taken by the Lessors (including legal proceedings) which
the Lessors may reasonably decide in the interests of good estate
management are necessary for the benefit or protection of the Building as
a whole and any rights and easements appurtenant thereto or which may be
required by any Act of Parliament or bye-law
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(12) the payment of any rates water rates taxes assessments duties charges
and impositions whatsoever (whether or not of a recurring nature) now or
hereafter during the said term assessed charged or imposed on or in
respect of those parts of the Building which are not demised or not
intended to be demised by an occupational tenancy from time to time
(13) enforcing or attempting to enforce against any lessee of the Building
the observance of any covenant in that lessee's lease of part of the
Building the non-observance of which is or may reasonably be considered by
the Lessors to be detrimental to the Lessors the Lessee or the other
lessees of the Building
(14) the provision installation maintenance repair and renewal of such
other services and facilities and the pursuit of such other like
activities as the Lessors shall in their reasonable discretion determine
or provide for the Building in the interest of good estate management
(15) any other act or thing done in the discretion of the Lessors in or
about or in connection with the Building reasonably calculated to be for
the benefit of the Lessee (either alone or in conjunction with other
lessees of the Lessors) but not otherwise provided for in this Lease
(16) the payment of all Value Added Tax chargeable in connection with
services rendered by the Lessors for which the Service Charge is payable
but so that the Lessors may from time to time withhold add to vary extend or
make any alterations in the rendering of the services or any of them from time
to time as appropriate if reasonably considered by the Lessors to be for the
benefit of any or all of the lessees of the Building
(B) "Accounting Period" shall mean a period commencing on the First day of
December in any year and ending on the Thirtieth day of November in the
following year
(C) "the Cost of the Lessors' Services" in respect of any Accounting Period
shall mean the aggregate of
(a) the costs and expenses incurred by the Lessors of providing the
Lessors' Services and
(b) a proper proportion (to be reasonably determined by the Surveyor whose
determination shall be final) of the Estate Service Charge attributable to
the Building and
(c) a reasonable sum by way of a provision towards a fund to cover the
cost and expense of replacing renewing maintaining repairing and
decorating the Building and replacing renewing repairing and maintaining
the plant installations and equipment therein and of any expenditure by
way of maintenance which is of a periodically recurring nature (whether
recurring regularly or irregularly (hereinafter called "the Fund") and the
amount of such provision towards the Fund shall be determined by the
Surveyor acting
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reasonably (as an expert and not as an arbitrator) and on the assumption
that each year the Service Charge shall include such provision towards
such anticipated costs so that the Fund shall accumulate sufficient monies
to cover the anticipated expenditure whether or not the expenditure so
anticipated shall occur in whole or in part during the said term PROVIDED
THAT
(i) nothing herein shall oblige the Lessors to establish the Fund or
if established to maintain the Fund sufficient in whole or in part
to cover the costs and expenses hereinbefore specified
(ii) all such sums received by the Lessors for the Fund shall be
credited to an interest bearing deposit account separate from the
Lessors' own money and shall be held by the Lessors upon trust
during the period of eighty years from the Twenty fifth day of
December One thousand nine hundred and eighty nine (which shall be
the perpetuity period applicable) for the persons or corporations
who from time to time shall be tenants of the Building to apply the
same and any interest accruing thereto for the purposes hereinbefore
specified and at the expiry of the perpetuity period any such sums
unexpended shall be paid to the persons or corporations who shall
then be tenants of the Building in shares calculated by reference to
their then contributions
(D) "the Service Charge" shall mean the proportion of the Cost of the
Lessors' Services which in the reasonable opinion of the Surveyor shall be
just and equitable in all the circumstances PROVIDED THAT the Lessee shall
not be responsible for the cost of the Lessors' Services in respect of
those parts of the Building (as do not comprise Common Parts) which are
unlet from time to time
(E) "the Interim Charge" shall mean such sum as is to be paid on account
of the Service Charge in respect of each Accounting Period as the Lessors
shall from time to time specify in writing such Interim Charge to be based
on the anticipated Cost of the Lessors' Services for the then current
Accounting Period estimated by reference to (inter alia) the total
expenditure for the immediately preceding Accounting Period
2. The first payment of the Interim Charge in respect of the period from the
twelfth day of January One thousand nine hundred and ninety three to the next
following quarter day shall be made on the date hereof and thereafter the
Interim Charge shall be paid to the Lessors by equal quarterly payments in
advance on the four usual quarter days in each year and in case of default the
same shall be recoverable from the Lessee as rent in arrear
3. As soon as practicable after the expiration of each Accounting Period there
shall be served upon the Lessee by the Lessors or the Surveyor a Certificate by
the Surveyor containing the following information:-
(i) the amount of the Interim Charge paid by the Lessee in respect of that
Accounting Period together with any surplus carried forward from previous
Accounting Periods
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(ii) the amount of the Service Charge in respect of that Accounting Period
and of any excess or deficiency of the Service Charge over the Interim
Charge
4. If the Interim Charge paid by the Lessee in respect of any Accounting Period
exceeds the Service Charge for that period the surplus of the Interim Charge so
paid over and above the Service Charge shall forthwith be carried forward by the
Lessors and credited to the account of the Lessee in computing the Service
Charge and Interim Charge payable by the Lessee in succeeding Accounting Periods
5. If the Service Charge payable by the Lessee in respect of any Accounting
Period exceeds the Interim Charge paid by the Lessee in respect of that
Accounting Period together with any surplus from previous years carried forward
as aforesaid then subject to the provisions of Clause 6 below the Lessee shall
pay the excess to the Lessors within twenty one days of the service upon the
Lessee of the Certificate referred to in Clause 3 above and in case of default
the same shall be recoverable from the Lessee as rent in arrear
6. The Surveyor shall keep a proper account (with vouchers so far as reasonably
possible) of the cost of the Lessors' Services for each Accounting Period and
the Lessee shall be entitled at any time within one month after service of the
Certificate to inspect the accounts and receipts and vouchers upon which the
same is based relating to the Cost of the Lessors' Services and to raise with
the Surveyor all reasonable questions arising thereon and to obtain satisfactory
replies thereto
SECOND PART
OTHER RENTS PAYABLE UPON DEMAND
RENT FOR COMMON PARTS
1. To the extent that the same is not covered by the Service Charge hereinbefore
referred to a fair and proper proportion attributable to the demised premises of
the cost and expense of making repairing maintaining rebuilding cleansing and
operating all ways roads pavements service channels yards bicycle stores vehicle
parks and gardens fences party structures and any installations equipment
fittings fixtures easements appurtenances or conveniences which shall belong to
or be used by the demised premises in common with other parts of the Building
and with the other buildings on the Estate and the Lessors' neighbouring
premises and with any other premises adjoining or neighbouring or over or under
the demised premises (or any of them) including architects' and surveyor's fees
properly incurred in connection with such works (such fair and proper proportion
to be certified by the Surveyor acting reasonably whose certificate shall be
final and binding on the Lessee)
INTEREST ON ARREARS
2. Interest on any monies payable by the Lessee to the Lessors under any
covenant or provision of this Lease which remain unpaid in the case of the rent
reserved by clause 2 (a) of this Lease and (if the lessee has been notified in
writing of the amount of the Interim Charge for the Accounting Period in
question) the Interim Charge from the date the same are due whether demanded or
not and in other cases from the date of written
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demand for seven days shall be payable by the Lessee such Interest to be
calculated from the date when such monies were due until the date of actual
payment PROVIDED THAT the provisions of this Clause shall not prejudice any
rights or remedies of the Lessors in respect of any breach of any of the
covenants on the part of the Lessee herein contained
INSURANCE EXCESS
3. If a claim arising under any policy of insurance effected by the Lessors upon
the Building shall be subject to any insurance excess the Lessee shall reimburse
or otherwise indemnify the Lessors against a fair and proper proportion (to be
conclusively determined by the Surveyor acting reasonably whose determination
shall be final) of the amount of such excess
THE FOURTH SCHEDULE hereinbefore referred to
LESSEE'S COVENANTS
TO PAY RENT
1. To pay to the Lessors the rents hereby reserved at the times and in the
manner herein appointed for payment thereof without any deduction set off or
(except as provided by Clause 5 (C) of this Lease) abatement whatsoever and to
pay those rents reserved in Clause 2 (a) of this Lease by standing order to the
bankers of the Lessors
TO PAY OUTGOINGS
2. To pay and discharge all rates taxes duties assessments charges impositions
and outgoings whatsoever (whether parliamentary local public utility or of any
other description and whether or not of a recurrent nature) now or at any time
during the said term taxed assessed charged imposed upon or payable in respect
of the demised premises or any part thereof or by the Lessors or Lessee or owner
or occupier in respect thereof
TO REPAIR AND DECORATE
3. (a) Well and substantially to cleanse maintain and repair the demised
premises and every part thereof (including all additions thereto and all
the Lessors' fixtures fittings plant and machinery therein and the service
channels forming part of the demised premises) and the drains connecting
the demised premises to and as far as their points of connection to the
drains used in common
(b) Without prejudice to the generality of sub-clause (a) hereof to paint
(or otherwise decorate) with two coats at least of good quality paint (or
other suitable materials) all such parts of the demised premises as have
been usually painted (or otherwise decorated) such painting (or other
decoration) to be in the fifth year of the said term and in the last year
of the said term (however determined but not more than once in any period
of twelve months) and otherwise as the Lessors may reasonably so require
(c) Not to remove or damage any of the Lessors' fixtures and fittings in
the demised premises and to replace with similar articles of at least
equal quality such fixtures and fittings as may be lost or worn out or
become unit for use
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PROVIDED THAT all work referred to in this Clause shall be done in a good and
workmanlike manner and to the reasonable satisfaction of the Surveyor AND
PROVIDED FURTHER THAT the liability of the Lessee under this Clause shall not
extend to damage caused by any of the insured risks unless the insurance shall
have been vitiated or insurance monies rendered irrecoverable in whole or in
part by any act omission neglect or default of the Lessee or their employees
servants agents independent contractors customers visitors licensees invitees or
any other person under the Lessee's control
NOT TO MAKE ALTERATIONS
4. (a) Not to alter the demised premises (except as regards the carrying out
by the Lessee of the Lessee's New Works) and not to cut maim injure or
damage any part thereof (including the Lessee's New Works once these have
been completed) and not to make any alteration in the plan or elevation of
the demised premises or in the nature of the use of the demised premises
or any part thereof or to make any erection or addition whatsoever or to
carry out any development (as defined in the Planning Acts) on or to the
demised premises or any part thereof without the consent in writing of the
Lessors which shall not be unreasonably withheld or delayed (except for
the erection or alteration to the layout of non-structural demountable
partitions subject to the Lessors being supplied with full details
thereof)
(b) Without prejudice to any other rights of the Lessors immediately upon
the Lessors by notice in writing to that effect requiring them so to do to
remove all additional buildings erections works alterations or additions
whatsoever to the demised premises for which the Lessors' consent in
writing has not first been obtained pursuant to the provisions of
sub-clause (a) of this Clause (herein called "the unauthorised works") and
make good and restore the demised premises to the state and condition
thereof before the unauthorised works were carried out and if the Lessee
shall neglect to do so for twenty eight days after such notice then it
shall be lawful for the Surveyor the Lessors and the Lessors' servants
contractors agents and workmen to enter upon the demised premises and to
remove the unauthorised works and to make good and restore the same to the
state and condition existing before the carrying out of the unauthorised
works and all proper expenses of so doing shall be repaid to the Lessors
by the Lessee within seven days of a written demand in that behalf being
served on the Lessee
(c) Any consent on the part of the Lessors pursuant to the provisions of
sub-clause (a) of this Clause may be subject to such conditions as the
Lessors may reasonably require including (but not limited to)
reinstatement of the demised premises at the expiration or sooner
determination of the said term
TO PERMIT ENTRY
5. To permit the Lessors the Surveyor and their respective workmen and persons
duly authorised by them respectively on reasonable prior notice in writing
(except in emergency) at reasonable hours to enter the demised premises for the
purposes of
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(a) viewing the same
(b) taking Inventories of the fixtures fittings appliances and equipment
to be yielded up at the expiration or sooner determination of the said
term
(c) inspecting for defects in and recording the condition of the demised
premises or any other breaches of covenant on the part of the Lessee
(d) inspecting cleansing maintaining repairing altering renewing or adding
to the Estate or any buildings thereon or the Lessors' neighbouring
premises or any other premises adjoining the demised premises (whether
beside under or over) or any service channels not comprised within the
demised premises
(e) performing any covenant complying with any condition or pursuant to
any reservation contained in this Lease including but not limited to the
Lessors' obligations under Clause 5 of the Fifth Schedule
or any other reasonable purpose connected with the management of the demised
premises or the Building PROVIDED THAT the Lessors shall as soon as reasonably
practicable make good all damage to the demised premises caused by such entry to
the reasonable satisfaction of the Lessee
TO REPAIR ON NOTICE
6. (a) To make good to the reasonable satisfaction of the Surveyor within two
months or such shorter period as may be reasonable in the circumstances
(or immediately in case of emergency) any defect in or want of repair or
decoration of the demised premises for which the Lessee is liable
hereunder or any other want of compliance with any of the obligations on
the part of the Lessee under this Lease in respect of which the Lessors or
the Surveyor has given notice in writing to the Lessee
(b) If the Lessee shall not comply with sub-clause (a) hereof the Lessee
shall permit the Lessors the Surveyor and their respective workmen
(without prejudice to any other remedy of the Lessors) to enter the
demised premises and make good such defect breach or want of compliance as
aforesaid without the payment of any compensation to the Lessee and the
proper expenses of so doing (including legal costs and Surveyor's fees)
together with Interest from the date of expenditure by the Lessors shall
be paid by the Lessee to the Lessors on demand and shall be recoverable as
rent in arrear
TO PAY COST OF DAMAGE
7. Without prejudice to any other provisions herein contained to pay to the
Lessors on demand the full cost as determined by the Surveyor acting reasonably
of making good any damage to the Common Parts and/or the Building and to the
road coloured brown on Plan A and any other roads and road fittings on the
Estate including but not limited to lighting and signs or any other part of the
Estate whether occasioned by the Lessee or its employees servants agents
independent contractors customers visitors licensees invitees or any other
person under the Lessee's control
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TO PAY LESSORS' COSTS
8. To pay the Lessors' reasonable and proper costs and expenses (including legal
costs and Surveyor's and other professional fees)
(a) In or in contemplation of any proceedings relating to the demised
premises under Sections 146 and/or 147 of the Law of Property Act 1925 or
the preparation and service of notices thereunder (whether or not any
right of re-entry or forfeiture has been waived by the Lessors or a notice
served under the said Section 146 is complied with by the Lessee or the
Lessee has been relieved under the provisions of the said Act and
notwithstanding that forfeiture is avoided otherwise than by relief
granted by the Court)
(b) In the preparation and service of any Schedule of Dilapidations at any
time during or within six months after the expiry or sooner determination
of the said term
(c) In connection with the recovery of arrears of rent due from the Lessee
hereunder (including but not limited to bailiffs' commission incurred by
the Lessors of and incidental to every distress levied by the Lessors on
the Lessee's goods for the recovery of overdue rent or other sums due
under this Lease)
(d) In connection with approving plans and specifications required
hereunder and the supervision and inspection of alterations erections
additions and any other works carried out by the Lessee where the Lessors'
consent is required under this Lease
(e) In respect of any application for consent required by this Lease
whether or not such consent be granted
and the Lessors' reasonable and proper legal costs incurred in connection with
the preparation and completion of this Lease subject to a maximum of Two
thousand five hundred pounds
AS TO USE AND SAFETY
9. Save in properly designed stores or containers and in accordance with the
recommendations (if any) of any competent authority and the insurers of the
demised premises not to keep or use or permit or suffer to be kept or used upon
the demised premises any materials which are inflammable explosive or otherwise
dangerous or any machinery apparatus or equipment and any other thing which may
attack or in any way injure by percolation corrosion vibration excessive weight
or otherwise the structure of the Building the Estate or the Lessors'
neighbouring premises or the keeping or using whereof may contravene any
enactments
NOT TO USE FOR UNLAWFUL OR ILLEGAL PURPOSES OR CAUSE NUISANCE
10. Not to
(a) use or permit or suffer the demised premises or any part thereof to be
used for any unlawful illegal or immoral purpose or for the manufacture
sale or consumption of intoxicating liquors or for the
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manufacture sale or consumption of Controlled Drugs as defined by the
Misuse of Drugs Act 1971 (otherwise than by a practitioner or pharmacist
as defined by that Act) or for the manufacture publication or sale of any
article or thing which may in the reasonable opinion of the Lessors be
pornographic offensive or obscene or for betting gaming or lotteries or as
a hotel club billiards saloon dance hall funfair or amusement premises or
for an auction or for any noisy noxious or offensive trade or business and
(b) do or permit or suffer to be done on the demised premises or any part
thereof anything which may be or become or cause an annoyance
inconvenience nuisance damage disturbance injury or danger of or to the
Lessors or the owners lessees or occupiers of the Building or any premises
in the Estate or the neighbourhood or which in the reasonable opinion of
the Lessors might be detrimental to the use or development of the demised
premises or of the Estate or of the Lessors' neighbouring premises (or any
of them) and to pay to the Lessors all costs charges and expenses which
may be incurred by the Lessors in abating any nuisance on or arising from
the demised premises and executing all works as may be necessary for such
purpose
(c) use any radio television video or sound system audible outside the
demised premises or play or suffer to be played any musical instrument
audible outside the demised premises
NOT TO RESIDE
11. Not to reside on the demised premises and not to create or permit or suffer
to be created any residential tenancy or residential occupation of the demised
premises or any part thereof
AS TO USER
12. Not to use the demised premises or any part thereof other than for a purpose
appropriate to a science park that is to say any one or more of the following
uses
(a) Scientific research associated with industrial production
(b) Light industrial production of a kind which is dependent on regular
consultation with either or both of the following:
(i) The Lessee's own research development and design staff
established in the Cambridge Study Area
(ii) The scientific staff or facilities of the University of
Cambridge or of local scientific institutions
(c) Ancillary buildings and works appropriate in the opinion of the
Lessors to the use of the demised premises as part of a science park
TO KEEP OPEN AND SECURITY
13. (a) Not to permit the demised premises to remain vacant or unattended
without the prior written consent of the Lessors (which the Lessors may
grant or withhold at their absolute discretion but which shall not be
withheld in respect of periods of not more than twenty eight days
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connected with any assignment or underletting of the demised premises
pursuant to Clause 20 of this Fourth Schedule)
(b) Without prejudice to the generality of sub-clause (a) above to
indemnify the Lessors against any empty property rate or penal rate levied
or assessed upon the Lessors by reason of the demised premises having been
left empty
(c) To ensure that the Lessors at all times have written notice of the
name and address and telephone number of at least one keyholder of the
demised premises
DISPLAYS AND ADVERTISEMENTS
14. Not to display or permit to be displayed on any part of the demised premises
so as to be visible from outside the demised premises any name writing notice
sign placard sticker or advertisement of whatsoever nature and not to place
leave or install any merchandise or display outside the demised premises and on
any breach by the Lessee the Lessors the Surveyor and their respective workmen
may without notice and without prejudice to any other remedy of the Lessors
remove the cause of the breach of this covenant and shall not be liable to make
good any loss or pay compensation for so doing
TO KEEP CLEAN
15. (a) Not to allow any rubbish or refuse of any description to accumulate
upon the demised premises or the Common Parts or on any other part of the
Building save in suitably located dustbins provided by the Lessee for that
purpose and so often as it shall be necessary or desirable and in any
event at least once a week to cause such dustbins to be emptied
(b) To keep the demised premises clean tidy and properly lighted
(c) To clean the inside and outside of all windows in the demised premises
at least once each month
(d) Not to bring or keep or suffer to be brought or kept upon the demised
premises or the Common Parts anything which in the reasonable opinion of
the Lessors are or may become unclean unsightly or detrimental to the
demised premises the Estate the Building or the Lessors' neighbouring
premises and nearby premises (or any of them)
(e) Not to discharge into any service channels oil grease solids or other
deleterious matter or any substance which might be or become a source of
danger or injury to the drainage system of the demised premises the
Building the Estate or the Lessors' neighbouring premises (or any of them)
or which may pollute the water of any watercourse so as to render the
Lessors liable to action or proceedings by any person or body and to keep
the service channels comprised within the demised premises unobstructed
(f) Not to do or suffer anything which may cause or tend to cause an
obstruction or blockage or disruption of the service channels in the
demised premises the Building or the Estate
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TO COMPLY WITH ENACTMENTS AND GIVE NOTICE
16. (a) At the Lessee's own expense to comply with the provisions and
requirements of all enactments or of any competent national local or
statutory authority court or body so far as they still subsist and have
not been repealed and relate to or affect the demised premises or the use
thereof
(b) At the Lessee's own expense to do all works and all other things so as
to comply with sub-clause (a) of this Clause including (without prejudice
to the generality of the foregoing) the obtaining of any fire certificate
required for the demised premises
(c) Within seven days of receipt of notice thereof to give to the Lessors
particulars of any provision or requirement of all enactments or as
prescribed or required by any competent national local or statutory
authority court or body or proposal therefor relating to the demised
premises or the Estate or the Lessors' neighbouring premises (or any of
them) or the condition or use thereof respectively and at the request of
the Lessors but at the joint cost of the Lessors and the Lessee (save when
the same relate exclusively to the demised premises when they shall be at
the cost of the Lessee) to make or join with the Lessors in making such
objection or representation against any such proposal as relates to the
demised premises as the Lessors shall reasonably deem expedient
(d) To pay to the Lessors upon demand a fair and proper proportion (to be
conclusively determined by the Surveyor acting reasonably) of all
reasonable and proper costs charges and expenses (including the Surveyor's
and other professional advisers' fees) incurred by the Lessors of or
incidental to
(i) complying with all provisions and requirements of all enactments
or as prescribed or required by any competent national local or
statutory authority court or body and
(ii) doing any works and other things reasonably necessary to comply
therewith
so far as the same relate to any premises capable of being used or enjoyed by
the Lessee in common or jointly with any other person or the use thereof
TO COMPLY WITH THE PLANNING ACTS
17. (a) At all times during the said term to comply in all respects with the
provisions and requirements of the Planning Acts and all licences consents
permissions and conditions (if any) granted or imposed thereunder so far
as the same respectively relate to or affect the demised premises or any
part thereof and to keep the Lessors fully and effectually indemnified
against all actions proceedings damages costs expenses claims and demands
whatsoever in respect of or arising out of any contravention of the
Planning Acts relating to or affecting the demised premises or any part
thereof and against the cost of any permissions and consents thereunder
and the implementation thereof
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(b) In the event of the Lessors giving consent to any of the matters in
respect of which the Lessors' consent shall be required pursuant to the
provisions of any covenant or condition contained in this Lease to apply
at the cost of the Lessee to the local planning authority for all
necessary consents and permissions in connection therewith and to give
notice to the Lessors of the granting or refusal (as the case may be) of
all such consents and permissions forthwith on the receipt thereof
(c) In the event of the said planning authority agreeing to grant such
necessary consent or permission only with modifications or subject to
conditions to give to the Lessors forthwith full particulars of such
modifications or conditions AND if such modifications or such conditions
shall in the reasonable opinion of the Lessors be undesirable then the
Lessee shall not implement or proceed with the matters works or change of
use to which the application relates
(d) If the Lessee shall receive any compensation in respect of the demised
premises under or by virtue of the Planning Acts forthwith to make such
provision as is just and equitable for the Lessors to receive its due
benefit from such compensation
(e) Not to apply for or implement any planning permission in respect of
the whole or any part of the demised premises if such application or the
implementation thereof would or might give rise to any tax charge or other
levy payable by the Lessors
(f) Unless the Lessors shall otherwise direct to carry out before the
expiration or sooner determination of the said term any works stipulated
to be carried out to the demised premises by a date subsequent to such
expiration or sooner determination as a condition of the grant of any
planning permission obtained by the Lessee during the said term
NOT TO VITIATE INSURANCE
18. (a) Not to do or omit to do (or permit or suffer to be done or omitted to
be done) anything whereby the policy or policies of insurance on the
Building against the insured risks may become void or voidable or whereby
the rate of premium thereon or upon the Estate or upon the Lessors'
neighbouring premises may be increased or cause the insurers to impose
more onerous terms in such policy or policies and to repay to the Lessors
all sums paid by way of increased premiums and any expenses incurred by
the Lessors in or about any renewal of such policy or policies consequent
upon a breach of this covenant and all such sums shall be added to the
rent herein reserved and be recoverable upon demand as rent and in the
event of the Building or any part thereof being damaged by the insured
risks and the insurance money under any insurance effected against the
same being wholly or partly irrecoverable by reason solely or in part of
any act omission neglect or default of the Lessee or their employees
servants agents independent contractors customers visitors licensees
invitees or any other person under the Lessee's control then and in every
such case the Lessee will forthwith pay to the Lessors the amount of the
insurance monies which is irrecoverable
(b) To comply with any requirements or recommendations of the insurers of
the Building
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(c) To notify the Lessors forthwith upon becoming aware of the whole or
any part of the demised premises or the Common Parts being destroyed or
damaged by any of the insured risks
TO INDEMNIFY
19. To keep the Lessors fully and effectually indemnified from and against all
liability in respect of losses damages proceedings claims costs expenses and any
other liability whatsoever arising from or in connection with
(a) the injury or death of any person
(b) damage to or destruction of any property whatsoever
(c) the infringement disturbance or destruction of any rights easements or
privileges
arising directly or indirectly out of:-
(i) the state of repair and condition or use of the demised premises or
works carried out or in the course of being carried out to the demised
premises
(ii) anything now or hereafter attached to or projecting from the demised
premises by or on behalf of the Lessee any underlessee or their respective
servants or agents or any other person under the Lessee's or underlessee`s
control
(iii) any act default or negligence of the Lessee any underlessee or their
respective servants or agents or any other person under the Lessee's or
underlessee's control
and to insure against such liability in a reputable Insurance Office
AS TO ASSIGNMENTS ETC.
20. (a) Not to assign part with possession of or charge by way of legal
mortgage in any way any part of the demised premises less than the whole
(b) Not to assign the whole of the demised premises except to a permitted
assignee and the expression "permitted assignee" shall mean a substantial
and respectable body or person whose registered office principal place of
business or address is within the United Kingdom who in the reasonable
opinion of the Lessors shall have the capacity and the qualifications
necessary to observe and perform all the provisions of this Lease and who
shall prior to any such assignment have
(i) submitted references reasonably satisfactory to the Lessors and
(ii) entered into a direct covenant under seal with the Lessors to
pay the rents reserved by and to observe and perform the covenants
conditions agreements and stipulations contained in this Lease and
on the part of the Lessee to be observed and performed and
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<PAGE>
(iii) in the case of a permitted assignee which is a private limited
company and if reasonably so required by the Lessors procured that
not less than two persons or a corporate body acceptable to the
Lessors (and in respect of whom full information shall have been
supplied to the Lessors) enter into a Deed of Guarantee in such form
as the Lessors may reasonably require (for the avoidance of doubt
like covenants conditions agreements and declarations to those
contained in the Seventh Schedule hereto being in all respects
reasonable for the purpose of such Deed of Guarantee)
(c) Not to underlet the whole or any part of the demised premises
(d) Not to share possession of the whole or any part of the demised
premises save with another member of the same group as defined by Section
42 of the Landlord and Tenant Act 1954 subject to the following conditions
(i) the relationship of landlord and tenant shall not be created
and shall not at any time during such sharing arise and
(ii) the member of the same group shall not be permitted to have
exclusive occupation of the whole or any part of the demised
premises and
(iii) the member of the same group's sharing of possession shall
determine upon their ceasing to be within the definition contained
in the said Section 42 of the Landlord and Tenant Act 1954
(e) Not to hold or occupy the demised premises or any part thereof as
trustee or agent or otherwise for the benefit of any other person
(f) Not to part with possession of the demised premises or any part
thereof except by virtue of an assignment of a kind permitted by this
Clause and with the prior written consent of the Lessors (such consent not
to be unreasonably withheld or delayed)
(g) Not without the prior consent in writing of the Lessors (such consent
not to be unreasonably refused in the case of a chargee by way of legal
mortgage reasonably acceptable to the Lessors) to charge by way of legal
mortgage in any way the whole of the demised premises
(h) Not to mortgage the demised premises or any part thereof by way of
subdemise
TO GIVE NOTICE OF ASSIGNMENTS, DEVOLUTIONS ETC.
21. (a) To produce a copy certified by a solicitor of every assignment
transfer charge Probate Letters of Administration order instrument or
other writing effecting or evidencing any transmission or devolution of
any estate or interest in the demised premises or any part thereon to the
Solicitors of the Lessors for registration within one month from the date
thereof and to pay to the Lessors' Solicitors their reasonable fees for
each such registration
24
<PAGE>
(b) Within one month of an assignment of this Lease to give to the Lessors
written notice of the person to whom future rent demands should be sent
AS TO LOSS OR ACQUISITION OF EASEMENTS
22. (a) Not to knowingly permit any easement or right comprised in belonging
to or used with the demised premises or any part thereof from being
obstructed or lost
(b) Not to give to any third party any acknowledgement that the Lessee
enjoys the access of light to any of the windows or openings in the
demised premises by the consent of such third party nor to pay to such
third party any sum of money nor to enter into any agreement with such
third party for the purpose of inducing or binding such third party to
abstain from obstructing the access of light to any such windows or
openings
(c) To take all such steps as may be necessary to prevent the acquisition
of any easement or right against over upon or under the demised premises
or any part thereof and any encroachment thereon and to give to the
Lessors immediate notice of any encroachment or threatened encroachment
upon the demised premises or any attempt to acquire any easement or right
under or over the demised premises which shall be within the Lessee's
knowledge and to do all such things as may be necessary to prevent any
encroachment being made or any new easement being acquired
TO PRODUCE PLANS/DOCUMENTS
23. If and whenever called upon so to do to produce to the Lessors or the
Surveyor all such plans documents or other evidence as the Lessors may from time
to time reasonably require to satisfy themselves that the Lessee has complied in
all respects with the provisions of the Lessee's covenants herein
NOT TO INTERFERE WITH RESERVED RIGHTS
24. Not to interrupt or interfere with the exercise of the rights contained or
referred to in the First Part of the Second Schedule hereto
TO PERMIT ENTRY FOR RELETTING ETC.
25. During the last six months before the expiration or sooner determination of
the said term or after the expiration thereof (or at any time during the said
term in the event of a sale of the Lessors' interest in the demised premises) to
permit the Lessors and the Surveyor to enter upon the demised premises and to
affix upon any suitable part or parts thereof a notice board or boards for
reletting or other disposal of the demised premises and not to remove or obscure
the same PROVIDED that such boards do not interfere with the access or the
access of light and air to and from the demised premises and at all reasonable
times in the daytime on reasonable prior notice to permit all persons authorised
by the Lessors or the Surveyor to enter and inspect the demised premises
25
<PAGE>
TO YIELD UP
26. At the expiration or sooner determination of the said term peaceably and
quietly to surrender and yield up to the Lessors the demised premises (together
with all keys thereto) so repaired maintained decorated cleansed glazed painted
and kept as herein provided and if so required by the Lessors to remove such
tenants' fixtures as the Lessors may specify the Lessee making good all damage
caused by the removal of these to the reasonable satisfaction of the Surveyor
AS TO FAILURE OF GUARANTEE AND ADDITIONAL GUARANTEES
27. Within fourteen days of the death during the said term of any person (being
an individual) who has guaranteed to the Lessors the performance of the Lessee's
covenants herein or of such person being adjudged bankrupt or entering into a
composition scheme or arrangement with or for the benefit of such person's
creditors or being a company becoming subject to an administration order or
suffering a trustee receiver or similar officer to he appointed over the whole
or any part of the company's undertaking property or assets or being the subject
of a winding up order by the Court (save for the purpose of reconstruction or
amalgamation of a solvent company not involving a realisation of assets) or
passing a resolution for winding up (save as aforesaid) or otherwise entering
into liquidation to give notice thereof to the Lessors and if so reasonably
required by the Lessors at the expense of the Lessee within twenty eight days to
procure that some other person or body acceptable to the Lessors enters into a
Deed of Guarantee in such form as the Lessors may reasonably require (for the
avoidance of doubt like covenants conditions agreements and declarations to
those contained in the Seventh Schedule hereto being in all respects reasonable
for the purpose of such Deed of Guarantee)
AS TO VALUE ADDED TAX
28. Any sums payable by the Lessee under this Lease are exclusive of Value Added
Tax and where the Lessee is required by this Lease to pay to the Lessors or any
other person any sum in respect of the supply of goods or services for Value
Added Tax purposes (or for the purposes of any substituted tax) the Lessee will
also on demand discharge any liabilities of the Lessors relating to Value Added
Tax (or substituted tax) in respect of any supply (whether or not the supply is
taxable following an election by the Lessors)
STATUTORY ACQUISITIONS
29. Not to do or omit to do any act matter or thing as a consequence whereof the
Lessors' reversion immediately expectant upon the determination of the said term
shall become liable to acquisition pursuant to any enactments
FIRE FIGHTING APPLIANCES
30. To keep the demised premises sufficiently supplied and equipped with such
suitable fire fighting and extinguishing appliances is shall from time to time
be required by law or by the local or other competent authority and by the
Lessors' insurers and such appliances shall be open to inspection and shall be
properly maintained and also not to obstruct the access to or means of
26
<PAGE>
working such appliances or the means of escape from the demised premises in case
of fire
TO CARRY OUT THE LESSEE'S NEW WORKS
31. At the Lessee's own expense forthwith to apply for and diligently seek to
obtain all licences approvals plans consents and permissions and other things
necessary for the carrying out of the Lessee's New Works from the Local Planning
Authority and from any other Authority whose approval permission or consent
shall be necessary and to comply in all respects with the enactments relating
thereto and subject to all necessary approvals and consents having been obtained
at the Lessee's expense to carry out the Lessee's New Works in compliance as
aforesaid as soon as reasonably practicable the Lessee's New Works to be
executed in a good and substantial manner employing good materials and
workmanship and in conformity in every respect with the specifications plans and
drawings which shall first have been submitted to and approved in writing by the
Surveyor such approval not to be unreasonably withheld (with such alterations
only as shall first have been authorised by the Lessors in writing) and in all
respects to the reasonable satisfaction of the Surveyor and to the satisfaction
of any relevant authority
NOT TO OBSTRUCT
32. Not to permit any vehicles to stand on the roadways comprised within the
Estate or on any other part of the Estate except on the car parking spaces
forming part of the Common Areas or other areas which shall have been designated
by the Lessors as a loading bay for the Lessee (but during the period of loading
and unloading of vehicles only) and (subject to paragraph (3) of the Second Part
of the First Schedule) not to park on or obstruct any Common Parts or any
communal part of the Estate
TO COMPLY WITH REGULATIONS
33. To comply with all reasonable regulations made by the Lessors from time to
time for the management of the Building the Estate and of any land or premises
used or to be used in common by the Lessee or jointly with any other person and
to procure that the Lessee's employees agents and all persons under the control
of the Lessee shall at all times observe and perform the same
AS TO WATER SUPPLY
34. Not to use or permit or suffer to be used the supply of water to the Estate
for any purpose other than the Lessee's purposes hereby permitted and not in any
event to use the same or permit or suffer the same to be used for research or
industrial purposes without the provision of a proper recirculation system to a
specification first approved by the Statutory Water Undertaker or otherwise in
compliance with the reasonable recommendations of the Water Authority
TO COMPLY WITH PLANNING AGREEMENTS
25. In addition to and not in substitution for or limitation of the covenants
contained herein and in particular the Lessee's covenants as to the use of the
demised premises or any part thereof to observe and perform all the
27
<PAGE>
covenants on the Lessors' part in the Planning Agreements and the agreements and
provisions of the Planning Agreements to the extent that the same affect the
demised premises or any part thereof and at all times to indemnify the Lessors
against any breach or non-observance of the same by the Lessee
THE FIFTH SCHEDULE hereinbefore referred to
LESSORS' COVENANTS
AS TO QUIET ENJOYMENT
1. That the Lessee paying the rents hereby reserved at the times and in the
manner herein appointed and performing and observing the covenants on the
Lessee's part and the conditions agreements and stipulations herein contained
may peaceably enjoy the demised premises for the said term without any lawful
interruption from the Lessors or any person lawfully claiming under or in trust
for the Lessors
TO INSURE
2. (a) That the Lessors will during the said term insure and keep insured in
an established insurance office of repute the Building (excluding all
plate and other glass therein) against the insured risks with a sum
assured to cover the following
(i) the full reinstatement value thereof (excluding the amount of
any insurance excess for which the Lessee shall be liable) to be
determined from time to time by the Lessors' Surveyor and
(ii) architect's surveyor's and other professional fees demolition
site clearance and the cost of boarding and propping including a due
allowance for cost increases over any likely rebuilding period and
(iii) three years' loss of rent and
(iv) liability attaching to the Lessors as owners or landlords of
the Building
(v) incidental expenses
AND the Lessors may insure the air conditioning (if any) central heating
installations passenger lifts hoists (or any of them) separately in such
manner and for such amount as the Lessors may from time to time reasonably
determine
(b) The Lessors shall have full power to settle and adjust with the
insurers all questions with regard to the liability of the insurers and
the amount or amounts payable under any policy
(c) The Lessors shall inform the insurers of the Lessee's interest in the
demised premises
(d) The Lessors shall whenever reasonably requested produce to the Lessee
a copy of the insurance policy or policies (or a summary of its or their
terms to include details of the exclusions and limitations imposed by the
insurers and any requirements of the insurers in relation to any of
28
<PAGE>
the matters referred to in paragraph 9 of the Fourth Schedule) and
satisfactory evidence of payment of the current premium
TO REINSTATE
3. In case the demised premises or the Common Parts or any parts thereof
respectively shall at any time during the said term be destroyed or damaged by
the insured risks so as to be unfit for occupation or use then (unless any
monies payable under any policy of the Lessors shall be refused either by reason
of any act omission neglect or default of the Lessee or their employees servants
agents independent contractors customers visitors licensees invitees or any
other person under the Lessee's control or by reason of any breach of the
provisions of Clause 18 of the Fourth Schedule to this Lease) and subject to the
Lessors obtaining all necessary consents licences or approvals (which it shall
use its best endeavours consistent with reasonable commercial prudence to
obtain) as soon as reasonably practicable and when lawful so to do the Lessors
will apply all monies received (other than in respect of loss of rent fees
demolition site clearance the cost of boarding and propping and any sums paid to
the Lessors to indemnify the Lessors for any liability as owner or as landlord
of the demised premises or the Common Parts or otherwise payable on the
occurrence of a risk not involving damage to the demised premises all of which
shall in all circumstances belong to the Lessors) by virtue of such insurance as
aforesaid towards reinstating so far as practicable the damage to the demised
premises or Common Parts or any parts thereof caused by the insured risks
TO MAINTAIN SPINE ROAD
4. To maintain the roads and footpaths shown coloured brown on Plan A and the
main spine road on the Estate until such time as they shall be adopted by the
local authority as being maintainable at the public expense
TO PROVIDE SERVICES
5. Subject to the Lessee paying the Service Charge specified in the First Part
of the Third Schedule hereto to provide the Lessors' Services in a competent
manner and in accordance with good estate management practice and in particular
(a) to maintain repair renew and otherwise keep in good repair and
condition the Building including the roof structure and foundations
thereof save such parts as are maintainable by the several lessees of the
Building (including the Lessee) in pursuance of the repairing covenants in
their respective occupational leases
(b) as often as the Lessors deem necessary and not less than every five
years to clean paint redecorate and otherwise treat to protect all the
outside wood metal brick and cement work and other external surfaces of
the Building in a workmanlike manner and in colours determined by the
Lessors
(c) to keep all fixtures and fittings in the Common Parts in good order
and repair and to replace such fittings and fixtures as and when
replacement is necessary or requisite
29
<PAGE>
(d) at all times during the said term to maintain the service channels
used in common in good order and to maintain and repair the other
appurtenances and amenities of the Building in good order and condition
and free from litter and to clean the outside surfaces of all windows at
proper intervals
PROVIDED THAT the Lessors shall not be liable to the Lessee in respect of
(i) any failure or interruption in any of the Lessors' Services by reason
of necessary repair replacement maintenance of any installation or
apparatus or their damage or destruction or by reason of mechanical or
other defect or breakdown or frost or other inclement conditions or
shortage of fuel materials water or labour or any other cause beyond the
Lessors' control provided that the Lessors use all reasonable endeavours
to restore the Lessors' Services in question as speedily as possible
(ii) any act or omission or negligence of any employee agent or other
person undertaking the Lessors' Services or any of them on behalf of the
Lessors
THE SIXTH SCHEDULE hereinbefore referred to
THE LESSEE'S NEW WORKS
The works to be carried out by the Lessee as detailed in the drawing
numbered 356-23 prepared by Ron Eggar
THE SEVENTH SCHEDULE hereinbefore referred to
GUARANTOR'S COVENANTS AND AGREEMENTS
1. The Guarantor HEREBY COVENANTS with and guarantees to the Lessors that
(a) the Lessee will at all times during the said term and until the
Lessors have beneficial occupation of the demised premises pay the rents
hereby reserved and all other sums and payments covenanted and or agreed
to be paid by the Lessee at the respective times and in manner herein
appointed for payment thereof and will also duly perform and observe and
keep the several covenants and provisions on the Lessee's part herein
contained and
(b) the Guarantor will pay and make good to the Lessors all losses
liabilities costs and expenses sustained by the Lessors through the
default of the Lessee in respect of any of the before mentioned matters
and
(c) that any neglect or forbearance of the Lessors in endeavouring to
obtain payment of the said several rents and payments as and when the same
become due or their delay to take any steps to enforce performance or
observance of the several covenants and provisions herein on the Lessee's
part contained and any time which may be given by the Lessors to the
Lessee shall not release or in any way lessen or affect the liability of
the Guarantor under the guarantee on the Guarantor's part herein contained
and
(d) if the Lessee (being a Company) shall become subject to an
administration order or be the subject of a winding up order by the Court
or otherwise go into liquidation or if the Lessee (being an
30
<PAGE>
individual) shall be adjudged bankrupt and the Liquidator or
Administrator or the Trustee of the bankrupt's estate (as the case
may be) shall disclaim this Lease and if the Lessors shall within three
months after such disclaimer by notice in writing require the Guarantor
to accept a lease of the demised premises for a term equal to the
residue which if there had been no such disclaimer would have remained
of the said term at the same rents and under the like covenants and
provisions as are reserved by and contained in the Lease (other than
the specific covenants on the part of the Guarantor contained in
Clause 6 of this Lease but imposing like requirements for a Deed of
Guarantee to those set out in the Lessee's covenants contained in the
Fourth Schedule hereto) the said new lease and the rights and
liabilities thereunder to take effect as from the date of the said
disclaimer then and in such case the Guarantor shall accept such lease
accordingly and execute and deliver to the Lessors a counterpart
thereof in all respects at the sole cost of the Guarantor and
(e) if any sums payable by the Guarantor under this Clause 1 remain
unpaid for seven days after falling due to pay to the Lessors on demand
Interest on all such amounts from the date the same respectively fell
due until the date of actual payment thereof
AGREEMENTS BY GUARANTOR
2. It is hereby agreed and declared that
(a) the Guarantor covenants as Principal Debtor and not as guarantor
and accordingly (for the avoidance of doubt)
(i) it shall not be necessary for the Lessors to resort to or
seek to enforce any other guarantee or security (whether from the
Lessee or otherwise) before claiming payment hereunder and
(ii) until all monies and liabiities due or incurred by the
Lessee to the Lessors have been paid or discharged in full
notwithstanding payment in whole or in part of the amount by the
Guarantor or any purported release or cancellation hereof the
Guarantor shall not by virtue of any such payment or by any
other means or on any other ground
(aa) claim any set off or counter claim against the Lessee
in respect of any liability on the part of the Guarantor
to the Lessors and
(bb) make or enforce any claim or right against the Lessee
or prove in competition with the Lessors or exercise any
right as a preferential creditor against the Lessee or
against the assets of the Lessee
and
(b) the Guarantor's covenants herein contained shall not be affected
or modified in any way by the liquidation or dissolution of the Lessee
or the appointment of any receiver administrator or manager and
(c) the Lessors shall be at liberty at all times without affecting or
discharging the Guarantor's liability hereunder
31
<PAGE>
(i) to vary release or modify the rights of the Lessors against the Lessee
hereunder with the prior written consent of the Lessee but without the
Guarantor's consent and
(ii) to compound with discharge release or vary the liability of the
Lessee or any other guarantor or other person and
(iii) to appropriate any payment the Lessors may receive from the Lessee
the Guarantor or any other person towards such monies due under this Lease
as the Lessors shall in their absolute discretion think fit
THE EIGHTH SCHEDULE hereinbefore referred to
Partitioning, carpets, telephone system, access control equipment, window
blinds, wiring and two secure areas
THE COMMON SEAL of THE )
MASTER FELLOWS AND )
SCHOLARS OF TRINITY ) [SEAL]
COLLEGE CAMBRIDGE was )
affixed to this Deed in the )
presence of:- )
/s/ [Illegible] Senior Bursar
/s/ [Illegible] Junior Bursar
32
<PAGE>
EXHIBIT 10.15
DATED Twenty Sixth November 1992
THE MASTER FELLOWS AND SCHOLARS OF
TRINITY COLLEGE CAMBRIDGE
- and -
IBRD EUROPE, INC.
================================================================================
LEASE
- of -
Unit 321 Phase 5 Cambridge Science Park, Milton Road, Cambridge
================================================================================
Term: 5 years plus broken quarter
Rent: (pounds)75,000 per annum
Mills & Reeve,
112 Hills Road,
Cambridge.
CB2 11 H. (LAP)
jim2819.edoc
<PAGE>
[SEAL] [SEAL]
[SEAL] [SEAL]
[SEAL] [SEAL]
[SEAL] [SEAL]
THIS LEASE is made the Twenty Sixth day of November, One thousand nine hundred
and ninety two
BETWEEN
1) ("the Lessors") THE MASTER FELLOWS AND SCHOLARS OF THE COLLEGE OF THE HOLY
AND UNDIVIDED TRINITY WITHIN THE TOWN AND UNIVERSITY OF CAMBRIDGE OF KING HENRY
THE EIGHTH'S FOUNDATION
2) ("the Lessee") IBRD EUROPE, INC. whose principal office is situate at 2525
Campus Drive Irvine California 92715 U.S.A.
NOW THIS DEED WITNESSETH as follows:-
INTERPRETATION
1. IN this Lease unless the context otherwise requires:-
(A) "the Lessors" shall include the person for the time being entitled to
the reversion immediately expectant on the determination of the said term
as herein defined
(B) "the Lessee" shall include the Lessee's successors in title and
assigns and where relevant shall include personal representatives
(C) "the Guarantor" means any person who has entered into a guarantee of
the Lessee's covenants contained in this Lease (whether by separate deed
pursuant to the provisions of this Lease or otherwise) and shall include
if it is an individual that person's personal representatives
(D) "the Surveyor" means any suitably qualified Surveyor or where
appropriate Consulting Engineers Architects and Agents employed from time
to time by the Lessors
(E) "the said term" means the total period of demise hereby granted and
(save in respect of Clause 2 hereof and in respect of the service of any
statutory notice of termination) any period of holding over or any
extension or continuance thereof whether by statute or common law where
the context so admits
(F) "service channels" means all such flues sewers drains ditches pipes
wires watercourses cables channels gutters ducts and other conductors of
services and plumbing and ventilating equipment and motors appurtenant
thereto as are now existing or which may be constructed or laid during the
said term and within the period of limitation as herein defined
(G) "Plan A" means the plan annexed hereto and marked "A" and "Plan B"
means the plan annexed hereto and marked "B"
1
<PAGE>
(H) "the demised premises" means the property hereby demised as described
in the First Part of the First Schedule hereto including all service
channels in on or under such property and fixtures and fittings (other
than tenant's fixtures and fittings) therein together with all additions
alterations and improvements to such property
(I) "the Estate" shall mean Cambridge Science Park shown edged blue on
Plan A situate adjoining Milton Road partly in the City of Cambridge and
partly in the County of Cambridgeshire together with any such further
neighbouring area in respect of which the Lessors or their lessees may
from time to time or at any time during the period of limitation receive
planning permission to develop for uses similar or ancillary to the use of
the said area edged blue and which the Lessors during the period of
limitation elect to include in Cambridge Science Park
(J) "the period of limitation" means the period of eighty years commencing
on the date hereof or such longer period as the law may permit (which
period is hereby specified as the perpetuity period applicable to this
Lease under the rule against perpetuities)
(K) "the insured risks" means loss or damage by fire aircraft and other
aerial devices or articles dropped therefrom lightning explosion riot and
civil commotion malicious damage earthquakes storm tempest flood burst
pipes impact and such other risks as the Lessors may from time to time
reasonably deem it desirable to insure against and against which they
shall at that particular time have a policy of insurance in effect subject
to the Lessors first having given to the Lessee written notice thereof and
subject also to such exclusions and limitations as the insurers may impose
(L) "the Planning Acts" means the Town and Country Planning Acts 1948 to
1990 the Planning (Hazardous Substances) Act 1990 the Planning (Listed
Buildings and Conservation Areas) Act 1990 the Local Government Planning
and Land Act 1980 and the Public Health Acts 1875 to 1969 and all notices
directions orders regulations byelaws rules and conditions under or in
pursuance of or deriving effect therefrom from time to time and any
reference herein to these or any other Act or Acts shall include a
reference to any statutory modification or re-enactment thereof for the
time being in force and any future legislation of a like nature
(M) "the Building" means the building numbered 320 (containing the block
of units numbered 321-329 (both numbers inclusive)) Cambridge Science Park
including the Common Parts (as hereinafter defined) shown for
identification purposes edged green on Plan A and all alterations and
improvements thereto and all plant and equipment machinery fittings and
furnishings now or hereafter therein but excluding tenants' fixtures and
fittings
(N) "the Lessors' neighbouring premises" means any land or buildings now
or hereafter during the period of limitation erected adjoining or
neighbouring the demised premises (whether beside under or over) which
belong to the Lessors now or hereinafter during the period of limitation
including those parts of the Building not forming part of the demised
premises
2
<PAGE>
PLAN B
GROUND FLOOR
[MAP OMITTED]
<PAGE>
CAMBRIDGE SCIENCE PARK
Plan A
[MAP OMITTED]
<PAGE>
(O) "the Common Parts" means those parts of the Building which are not
intended to be demised by an occupational tenancy from time to time
including but not limited to the entrance reception area plant room lifts
landings fire escapes toilets washrooms roadways car parks paths gardens
and kitchen facilities
(P) "the Estate Service Charge" shall mean a service rent in respect of
(a) the maintenance repair cultivation and management of the Estate
including all roads ways and paths service channels amenity grounds
and cultivated areas (whether situate thereon or otherwise serving
the same) and
(b) all such other matters whatsoever which in the reasonable
opinion of the Surveyor shall be necessary to maintain high
standards for a development of such a character including without
prejudice to the generality hereof a notional figure as certified by
the Surveyor equivalent to the reasonable market rental for the time
being of any premises provided by the Lessors on the Estate to be
used or occupied (whether with or without rental) to enable the
Lessors the Surveyor and their respective servants or employees to
implement and carry out such maintenance repairs cultivation and
management of the Estate and all other matters as aforesaid but less
any rental thereof received by the Lessors
such service charge to be in the reasonable opinion of the Surveyor such
as shall be just and equitable in all the circumstances PROVIDED ALWAYS
THAT such service rent shall not include any sum in respect of the cost of
the initial laying out or construction of the Estate or any work or costs
arising out of or in connection with such initial construction
(Q) "Interest" shall mean interest at the yearly rate of three per cent
above the base rate published from time to time by Barclays Bank PLC or
(in the event of base rate or Barclays Bank PLC ceasing to exist) such
other equivalent rate of interest as the Lessors may from time to time in
writing specify
(R) "enactments" shall include all present and future Acts of Parliament
(including but not limited to the Public Health Acts 1875 to 1969 the
Factories Act 1961 the Offices Shops and Railway Premises Act 1963 the
Fire Precautions Act 1971 the Defective Premises Act 1972 the Health and
Safety at Work etc. Act 1974 and the Planning Acts) and all notices
directions orders regulations bye-laws rules and conditions under or in
pursuance of or deriving effect therefrom and any reference herein to a
specific enactment or enactments (whether by reference to its or their
short title or otherwise) shall include a reference to any enactment
amending or replacing the same and any future legislation of a like nature
(S) "the Lessee's New Works' shall mean the works described in the Sixth
Schedule hereto
3
<PAGE>
(T) "the Planning Agreements" shall mean
(a) an agreement dated the Eighth day of November One thousand nine
hundred and seventy one made pursuant to Section 37 of the Town and
Country Planning Act 1962 between the County Council of the
Administrative County of Cambridgeshire and Isle of Ely (1) and the
Lessors (2) and
(b) an agreement dated the Nineteenth day of August One thousand
nine hundred and seventy five made pursuant to Section 52 of the
Town and Country Planning Act 1971 between the same parties and in
the same order as the Section 37 agreement and
(c) an agreement dated the Second day of February One thousand nine
hundred and eighty two made pursuant to Section 52 of the Town and
Country Planning Act 1971 between South Cambridgeshire District
Council (1) and the Lessors (2) and
(d) an agreement dated the Twenty sixth day of June One thousand
nine hundred and eighty four made pursuant to Section 52 of the Town
and Country Planning Act 1971 between South Cambridgeshire District
Council (1) and the Lessors (2) and
(e) an agreement dated the Second day of June One thousand nine
hundred and eighty eight made pursuant to Section 52 of the Town
and Country Planning Act 1971 between South Cambridgeshire District
Council (1) and the Lessors (2)
(U) words importing the masculine gender only include the feminine gender
and vice versa and include any body of persons corporate or unincorporate
words importing the singular number only include the plural number and
vice versa and the word "person" shall include any body of persons
corporate or unincorporate and all covenants by any party hereto shall be
deemed to be joint and several covenants where that party is more than
one person and any covenant by the Lessee not to do or not to do or omit
to do an act or thing shall be deemed to include an obligation not to
permit or suffer such act or thing to be done or omitted
(V) "the Yearly Rent Commencement Date" shall mean the date which is five
months after the date this Lease commences
THE DEMISE HABENDUM AND REDDENDUM
2. In consideration of the several rents and covenants on the part of the Lessee
herein reserved and contained the Lessors HEREBY DEMISE unto the Lessee ALL
THOSE the demised premises TOGETHER WITH (in common with the Lessors their
lessees and assigns and all other persons from time to time having the like
rights) the rights set out in the Second Part of the First Schedule hereto
EXCEPT AND RESERVING UNTO THE LESSORS and their successors in title assigns and
lessees and all persons from time to time properly authorised by them the
interests rights reservations and exceptions more particularly set out in the
First Part of the Second Schedule hereto TO HOLD the demised premises unto the
Lessee SUBJECT to any or all easements and other rights (if any) now subsisting
over or which may affect the same and the matters referred to in the
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documents referred to in the Second Part of the Second Schedule hereto from the
6th day of October One thousand nine hundred and ninety two to the quarter day
next subsequent to the grant hereof and thereafter for the term of five years
but determinable nevertheless as hereinafter provided YIELDING AND PAYING
THEREFOR unto the Lessors during the said term
(a) from the Yearly Rent Commencement Date yearly and proportionately for
any fraction of a year the rent of Seventy five thousand pounds
((pounds)75,000) per annum exclusive of Value Added Tax the first such
payment or a proportionate part thereof in respect of the period from the
Yearly Rent Commencement Date to the next following quarter day to be made
on the Yearly Rent Commencement Date and thereafter such rents to be paid
by equal quarterly instalments in advance on the four usual quarter days
in every year
(b) by way of further rent the Service Charge and Interim Charge specified
in the First Part of the said Third Schedule hereto to be paid on the days
and in the manner specified therein and
(c) by way of further rent on demand the rents specified in the Second
Part of the said Third Schedule
all such payments to be made without any deduction
LESSEE'S COVENANTS
3. THE Lessee HEREBY COVENANTS with the Lessors that the Lessee will at all
times during the said term duly observe and perform all the covenants and
provisions on the Lessee's part set out in the Fourth Schedule hereto and the
provisions and conditions contained in this Lease
LESSORS' COVENANTS
4. THE Lessors HEREBY COVENANT with the Lessee that the Lessors will at all
times during the said term duly observe and perform all the covenants and
provisions on the Lessors' part set out in the Fifth Schedule hereto and the
other provisions and conditions contained in this Lease
PROVISO AGREEMENT AND DECLARATION
5. PROVIDED ALWAYS and it is hereby agreed as follows:-
AS TO RE-ENTRY
(A) If and whenever the said rents hereby reserved or any part thereof
respectively shall be in arrear for twenty eight days next after the same shall
have become due whether any formal or legal demand therefor shall have been made
or not or if and whenever there shall be any breach non-observance or
non-performance by the Lessee of any of the covenants on the part of the Lessee
herein contained or if the Lessee being a Company shall become subject to an
administration order or shall suffer a trustee receiver or similar officer to be
appointed over the whole or any part of the Lessee's undertaking property or
assets or shall be the subject of a winding up order by the Court (save for the
purpose of reconstruction or amalgamation of a solvent company not involving a
realisation of assets) or
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pass a resolution for winding up (save as aforesaid) or otherwise enter into
liquidation or if the Lessee being an individual (or being more than one
individual any one of them) shall be adjudged bankrupt or shall enter into a
composition scheme or arrangement with or for the benefit of the Lessee's
creditors or suffer any distress or execution to be levied on or enforced
against the Lessee's goods then and in any such case it shall be lawful for the
Lessors to re-enter into and upon the whole of the demised premises or any part
of the demised premises in the name of the whole and thereupon this present
demise shall absolutely determine and become null and void but without prejudice
nevertheless to any right of action or remedy of the Lessors in respect of any
antecedent breach by the Lessee of any of the covenants on the Lessee's part
herein contained
AS TO NOTICES
(B) Any notice under this Lease shall be in writing and any notice
(a) to the Lessee shall be deemed to be sufficiently served if
(i) left addressed to the Lessee on the demised premises or
(ii) sent to the Lessee by recorded delivery post if within the
United Kingdom or by post at the last known address or (if a
Company) registered or principal office of the Lessee and
(b) to the Guarantor (if any) shall be deemed to be sufficiently served if
sent to the Guarantor by recorded delivery post if within the United
Kingdom or by post at the last known address or (if a Company) registered
or principal office of the Guarantor and
(c) to the Lessors shall be deemed to be sufficiently served if
(i) sent to the Lessors by recorded delivery post at the last known
address or (if a Company) registered office of the Lessors
(ii) whilst the reversion immediately expectant on the determination
of the said term is vested in the original Lessors (as named herein)
addressed to the Lessors' Senior Bursar and delivered to him
personally or sent to him by post at Trinity College Cambridge CB2
1TQ
AS TO RENT ABATEMENT
(C) In case the demised premises or any part thereof shall at any time during
the said term be so damaged by the insured risks or any of them as to be unfit
for occupation and use then (unless the insurance money shall be wholly or
partially irrecoverable by reason solely or in part of any act omission neglect
or default of the Lessee or their employees servants agents independent
contractors customers visitors licensees invitees or any other person under the
Lessee's control) the rent hereby reserved or a fair proportion thereof
according to the nature and extent of the damage sustained (the amount of such
proportion to be determined by the Surveyor acting reasonably) shall be
suspended either for the period from the date of such damage until the date when
the demised premises shall again be rendered fit for occupation and use or for
three years (whichever of the said
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periods shall be the shorter) and any dispute with reference to this proviso
shall be referred to arbitration in accordance with Clause 5 (G)
AS TO PART II LANDLORD AND TENANT ACT 1954
(D) If this Lease is within Part II of the Landlord and Tenant Act 1954 then
subject to the provisions of subsection (2) of Section 38 of that Act neither
the Lessee nor any assignee of the said term or of the demised premises shall be
entitled on quitting the demised premises to any compensation under Section 37
of that Act
AS TO WARRANTIES
(E) The Lessee hereby acknowledges and admits that the Lessors have not given or
made any representation or warranty that the use of the demised premises herein
authorised is or will remain a permitted use under the Planning Acts
AS TO LESSORS' POWERS TO DEAL WITH THE LESSORS' NEIGHBOURING PREMISES
(F) Notwithstanding anything herein contained the Lessors and all persons
authorised by the Lessors shall have power without obtaining any consent from or
making any compensation to the Lessee to deal as the Lessors may think fit
with the Lessors' neighboring premises and to erect thereon or on any part
thereof any building whatsoever and to make any repairs alterations or additions
and carry out any demolition or rebuilding whatsoever (whether or not affecting
the light or air to the demised premises) which the Lessors may think fit or
desire to do subject to the Lessors or the person exercising such power making
good any damage caused to the demised premises in the exercise of such power to
the reasonable satisfaction of the Lessee and PROVIDED THAT in the exercise of
such power the Lessors will not so far as the Lessors are able materially
restrict access to and from the demised premises
AS TO ARBITRATION
(G) If any dispute or difference shall arise between the parties hereto touching
these presents or the rights or obligations of the parties hereunder such
dispute or difference shall in the event of this Lease expressly so providing
and otherwise may by agreement between the parties be referred to a single
arbitrator to be agreed upon by the parties hereto or in default of agreement to
be nominated by the President or Vice President for the time being of the Royal
Institution of Chartered Surveyors on the application of any party in accordance
with and subject to the provisions of the Arbitration Acts 1950 and l979
AS TO LESSORS' OBLIGATIONS
(H) Nothing herein contained shall render the Lessors liable (whether by
implication of law or otherwise howsoever) to do any act or thing which the
Lessors have not expressly covenanted to carry out provide or do in the Fifth
Schedule hereto
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JURISDICTION
8. The Courts of England and Wales (or in the case of Arbitration the Arbitrator
referred to in sub-clause (G) hereof) shall have jurisdiction to determine any
difference or dispute arising hereunder and in the event of any such difference
or dispute the process whereby any Court action or proceeding or reference to
arbitration is begun or the process for any appeal arising therefrom may in
addition to any other form of service authorised by law (or in the case of
arbitration by the Arbitration Acts 1950 and 1979) in the case of the Lessee be
served on it at the offices (of Turner Kenneth Brown 100 Fetter Lane London EC4A
1DD (Ref 37) or such other place within the United Kingdom as [illegible] may
from time to time notify to the Lessors
HEADINGS
9. The headings hereto are inserted for convenience of reference only and shall
not in any manner affect the construction meaning or effect of anything herein
contained or govern the rights of the parties hereto
This instrument is executed as a deed and by its execution the parties authorise
their respective solicitors to deliver it for them on the date it is completed
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THE FIRST SCHEDULE hereinbefore referred to
FIRST PART
THE DEMISED PREMISES
ALL THAT Unit Numbered 321 forming part of the Building on Cambridge Science
Park containing approximately Four thousand eight hundred and forty five square
feet net and shown for the purposes of identification only edged red on Plan B
and including
(1) the plaster and other decorative finishes to the internal walls
(2) the raised floors including the void beneath and any service channels
therein exclusively serving the unit demised by this Lease
(3) the false ceiling including the void above and any service channels
therein exclusively serving the unit demised by this Lease
(4) the windows and the window frames and the glass therein and door
frames and doors
(5) the Lessors' fixtures and fittings and other plant machinery and
equipment referred to in the Eighth Schedule to the extent that the same
are situate within the aforesaid Unit Numbered 321
SECOND PART
THE RIGHTS
RIGHT TO SERVICES
(1) Save in relation to statutory undertakers services at all times hereafter
the right of passage of water soil electricity gas air and other services from
and to the demised premises through the service channels now in under or upon
the Building or the Estate or the Lessors' neighbouring premises and all such
rights of access for the Lessee as may from time to time be reasonably required
for the purpose of laying inspecting cleansing repairing maintaining or renewing
such service channels or any of them but the enjoyment of the aforesaid rights
shall be subject to the person or persons exercising such rights causing as
little damage or interference as is reasonably possible in the exercise of such
rights and the Lessee being liable to make good all damage to the Estate or the
Lessors' neighbouring premises thereby occasioned with all reasonable dispatch
RIGHT OF WAY
(2) The right of way for all purposes necessary for the use and enjoyment of the
demised premises for the purposes herein authorised but not further or otherwise
with or without vehicles over the roadways coloured brown on Plan A until the
same are adopted by the Local Authority as roads and footpaths maintainable at
the public expense
RIGHT TO PARK
(3) The right to park no more than twenty seven cars on the car parking spaces
comprised within the Common Parts in such spaces as may from time
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to time be specified by the Lessors but not otherwise
RIGHT OF SUPPORT
(4) The right of subjacent and lateral support shelter and protection from the
remainder of the Building
RIGHT TO USE COMMON PARTS
(5) Subject to sub-clause (3) above the right to the proper use of the Common
Parts for the purposes for which they are provided but not for any other purpose
RIGHT TO DISPLAY NAME
(6) The right to display the Lessee's name and logo on the communal sign
provided from time to time by the Lessors for that purpose in the entrance way
to the Building (subject to the Lessee obtaining the prior written approval of
the Lessors to the size and design thereof such approval not to be unreasonably
withheld or delayed)
THE SECOND SCHEDULE hereinbefore referred to
FIRST PART
EXCEPTIONS AND RESERVATIONS IN FAVOUR OF THE LESSORS
RIGHT TO SERVICES
1. At all times hereafter the tight of passage and running of appropriate
services through the service channels forming part of the demised premises and
to make connection with such service channels or any of them for the purpose of
exercising the said rights and all such rights of access for the Lessors the
Surveyor and the Lessors' lessees employees and agents and all persons from time
to time authorised by the Lessors as may from time to time be reasonably
required for the purpose of laying inspecting cleansing repairing maintaining
renewing or adding to such service channels or any of them but the enjoyment of
the aforesaid rights shall be subject to the Lessors or other the person or
persons exercising the same or having the benefit thereof being liable to make
good all damage to the demised premises thereby occasioned with reasonable
dispatch
RIGHT TO LIGHT AND AIR
2. The Lessee shall not be entitled to any right of access of light or air to
the demised premises which would restrict or interfere with the user of the
Building the Estate or any of the Lessors' neighbouring premises or any part
thereof for building or otherwise howsoever
RIGHT TO SUPPORT
3. The right to support and shelter and all other rights and privileges in the
nature of easements and quasi-easements now or hereafter belonging to or enjoyed
by the Building the Estate or the Lessors' neighbouring premises
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RIGHT TO ENTER
4. At all times during the said term the right with or without the Surveyor the
Lessors' employees workmen and agents and any persons authorised by them to
enter the demised premises on reasonable prior notice (except in emergency) for
the purpose of doing any act matter or thing in respect of which the Lessors are
permitted entry to the demised premises under the Fourth Schedule hereto upon
the terms therein stated and for all other requirements of the Lessors as in the
opinion of the Lessors shall be reasonably necessary such reservation to be in
addition to and not in substitution for or limitation of any other rights
exceptions or reservations to which the Lessors are entitled hereunder PROVIDED
THAT the Lessors or the persons exercising this right shall (as soon as
reasonably practicable) make good all damage caused to the demised premises in
the exercise of the right to the reasonable satisfaction of the Lessee
ACCESS TO COMMON PARTS
5. The right of way in the case of the Lessors on reasonable prior notice to the
Lessee (except in emergency) for the Lessors and all persons authorised by the
Lessors with or without equipment to and from those parts of the Common Parts
comprising the kitchen and toilet facilities edged blue on Plan B to enable the
same to be properly used for the purposes provided
SECOND PART
EXISTING ENCUMBRANCES
(1) The Planning Agreements
THE THIRD SCHEDULE hereinbefore referred to
THE RENTS PAYABLE BY THE LESSEE
FIRST PART
SERVICE CHARGE AND INTERIM CHARGE
DEFINITIONS
1. In this Part of this Schedule the following expressions shall have the
following meanings respectively:-
(A) "the Lessors' Services" shall mean
(1) effecting and maintaining an insurance policy or policies in
respect of the Building (excluding all plate and other glass
therein) in accordance with the provisions of clause 2 of the Fifth
Schedule of this Lease and against such liability or liabilities of
the Lessors their agents servants and workmen (including negligence)
in connection with or arising out of the Building or the occupation
maintenance or management thereof or any part thereof as the Lessors
in their absolute discretion shall think fit and all reasonable
professional fees which the Lessors may from time to time properly
incur in connection with the valuation of the Building for insurance
purposes
(2) cleaning lighting maintaining and repairing the Common Parts
including cultivating the gardens comprised therein
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(3) providing and maintaining any refuse disposal services security
services fire alarms fire fighting equipment and signage provided by
the Lessors and all other such services which are provided for the
benefit of all the lessees of the Building
(4) providing space heating and domestic water to the Building
(5) the provision of gas water electricity and other services to the
Common Parts
(6) the provision of all services and equipment to the Common Parts
from time to time including (but not limited to) lavatories and the
drains therefrom the provision of cleaning facilities for the Common
Parts and all other services provided for the use of the lessees of
the Building except in so far as the Lessors in their absolute
discretion may charge a lessee or occupier for the use thereof
directly
(7) refurnishing and decorating the Common Parts when reasonably
necessary
(8) decorating maintaining and repairing the Building in accordance
with Clause 5 of the Fifth Schedule hereto
(9) employing managing agents to perform all or any of the services
specified in this sub-clause (A) and a caretaker to manage supervise
or attend to the security of the Building including the provision of
uniforms and materials and of services provided by them
(10) the provision of any extraordinary or emergency services or
expenses incurred by the Lessors for the benefit of the Lessee and
other lessees of the Lessors relating to the Building
(11) any steps taken by the Lessors (including legal proceedings)
which the Lessors may reasonably decide in the interests of good
estate management are necessary for the benefit or protection of the
Building as a whole and any rights and easements appurtenant thereto
or which may be required by any Act of Parliament or bye-law
(12) the payment of any rates water rates taxes assessments duties
charges and impositions whatsoever (whether or not of a recurring
nature) now or hereafter during the said term assessed charged or
imposed on or in respect of those parts of the Building which are
not demised or not intended to be demised by an occupational tenancy
from time to time
(13) enforcing or attempting to enforce against any lessee of the
Building the observance of any covenant in that lessee's lease of
part of the Building the non-observance of which is or may
reasonably be considered by the Lessors to be detrimental to the
Lessors the Lessee or the other lessees of the Building
(14) the provision installation maintenance repair and renewal of
such other services and facilities and the pursuit of such other
like activities as the Lessors shall in their reasonable discretion
determine
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or provide for the Building in the interest of good estate
management
(15) any other act or thing done in the discretion of the Lessors in
or about or in connection with the Building reasonably calculated to
be for the benefit of the Lessee (either alone or in conjunction
with other lessees of the Lessors) but not otherwise provided for in
this Lease
(16) the payment of all Value Added Tax chargeable in connection
with services rendered by the Lessors for which the Service Charge
is payable
but so that the Lessors may from time to time withhold add to vary extend
or make any alterations in the rendering of the services or any of them
from time to time as appropriate if reasonably considered by the Lessors
to be for the benefit of any or all of the lessees of the Building
(B) "Accounting Period" shall mean a period commencing on the First day of
December in any year and ending on the Thirtieth day of November in the
following year
(C) "the Cost of the Lessors' Services" in respect of any Accounting
Period shall mean the aggregate of
(a) the costs and expenses incurred by the Lessors of providing the
Lessors' Services and
(b) a proper proportion (to be reasonably determined by the Surveyor
whose determination shall be final) of the Estate Service Charge
attributable to the Building and
(c) a reasonable sum by way of a provision towards a fund to cover
the cost and expense of replacing renewing maintaining repairing and
decorating the Building and replacing renewing repairing and
maintaining the plant installations and equipment therein and of any
expenditure by way of maintenance which is of a periodically
recurring nature (whether recurring regularly or irregularly)
(hereinafter called "the Fund") and the amount of such provision
towards the Fund shall be determined by the Surveyor acting
reasonably (as an expert and not as an arbitrator) and on the
assumption that each year the Service Charge shall include such
provision towards such anticipated costs so that the Fund shall
accumulate sufficient monies to cover the anticipated expenditure
whether or not the expenditure so anticipated shall occur in whole
or in part during the said term PROVIDED THAT
(i) nothing herein shall oblige the Lessors to establish the
Fund or if established to maintain the Fund sufficient in
whole or in part to cover the costs and expenses hereinbefore
specified
(ii) all such sums received by the Lessors for the Fund shall
be credited to an interest bearing deposit account separate
from the Lessors' own money and shall be held by the Lessors
upon trust during the period of eighty years from the Twenty
fifth day of December One thousand nine hundred and eighty
nine (which shall
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be the perpetuity period applicable) for the persons or
corporations who from time to time shall be tenants of the
Building to apply the same and any interest accruing thereto
for the purposes hereinbefore specified and at the expiry of
the perpetuity period any such sums unexpended shall be paid
to the persons or corporations who shall then be tenants of
the Building in shares calculated by reference to their then
contributions
(D) "the Service Charge" shall mean the proportion of the Cost of
the Lessors' Services which in the reasonable opinion of the
Surveyor shall be just and equitable in all the circumstances
PROVIDED THAT the Lessee shall not be responsible for the cost of
the Lessors' Services in respect of those parts of the Building (as
do not comprise Common Parts) which are unlet from time to time
(E) "the Interim Charge" shall mean such sum as is to be paid on
account of the Service Charge in respect of each Accounting Period
as the Lessors shall from time to time specify in writing such
Interim Charge to be based on the anticipated Cost of the Lessors'
Services for the then current Accounting Period estimated by
reference to (inter-alia) the total expenditure for the immediately
preceding Accounting Period
2. The first payment of the Interim Charge in respect of the period from
the 6th October 1992 to the next following quarter day shall be made on
the date hereof and thereafter the Interim Charge shall be paid to the
Lessors by equal quarterly payments in advance on the four usual quarter
days in each year and in case of default the same shall be recoverable
from the Lessee as rent in arrear
3. As soon as practicable after the expiration of each Accounting Period
there shall be served upon the Lessee by the Lessors or the Surveyor a
Certificate by the Surveyor containing the following information:-
(i) the amount of the Interim Charge paid by the Lessee in respect
of that Accounting Period together with any surplus carried forward
from previous Accounting Periods
(ii) the amount of the Service Charge in respect of that Accounting
Period and of any excess or deficiency of the Service Charge over
the Interim Charge
4. If the Interim Charge paid by the Lessee in respect of any Accounting
Period exceeds the Service Charge for that period the surplus of the
Interim Charge so paid over and above the Service Charge shall forthwith
be carried forward by the Lessors and credited to the account of the
Lessee in computing the Service Charge and Interim Charge payable by the
Lessee in succeeding Accounting Periods
5. If the Service Charge payable by the Lessee in respect of any
Accounting Period exceeds the Interim Charge paid by the Lessee in respect
of that Accounting Period together with any surplus from previous years
carried forward as aforesaid then subject to the provisions of Clause 6
below the Lessee shall pay the excess to the Lessors within twenty one
days of the service upon the Lessee of the Certificate referred to in
Clause 3 above and
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in case of default the same shall be recoverable from the Lessee as rent
in arrear
6. The Surveyor shall keep a proper account (with vouchers so far as
reasonably possible) of the cost of the Lessors' Services for each
Accounting Period and the Lessee shall be entitled at any time within one
month after service of the Certificate to inspect the accounts and
receipts and vouchers upon which the same is based relating to the Cost of
the Lessors' Services and to raise with the Surveyor all reasonable
questions arising thereon and to obtain satisfactory replies thereto
SECOND PART
OTHER RENTS PAYABLE UPON DEMAND
RENT FOR COMMON PARTS
1. To the extent that the same is not covered by the Service Charge
hereinbefore referred to a fair and proper proportion attributable to the
demised premises of the cost and expense of making repairing maintaining
rebuilding cleansing and operating all ways roads pavements service
channels yards bicycle stores vehicle parks and gardens fences party
structures and any installations equipment fittings fixtures easements
appurtenances or conveniences which shall belong to or be used by the
demised premises in common with other parts of the Building and with the
other buildings on the Estate and the Lessors' neighbouring premises and
with any other premises adjoining or neighbouring or over or under the
demised premises (or any of them) including architects' and surveyor's
fees properly incurred in connection with such works (such fair and
proper proportion to be certified by the Surveyor acting reasonably whose
certificate shall be final and binding on the Lessee)
INTEREST ON ARREARS
2. Interest on any monies payable by the lessee to the Lessors under any
covenant or provision of this Lease which remain unpaid in the case of
the rent reserved by clause 2 (a) of this lease and (if the Lessee has
been notified in writing of the amount of the Interim Charge for the
Accounting Period in question) the Interim Charge from the date the same
are due whether demanded or not and in other cases from the date of
written demand for seven days shall be payable by the Lessee such Interest
to be calculated from the date when such monies were due until the date of
actual payment PROVIDED THAT the provisions of this Clause shall not
prejudice any rights or remedies of the Lessors in respect of any breach
of any of the covenants on the part of the Lessee herein contained
INSURANCE EXCESS
3. If a claim arising under any policy of insurance effected by the
Lessors upon the Building shall be subject to any insurance excess the
Lessee shall reimburse or otherwise indemnify the Lessors against a fair
and proper proportion (to be conclusively determined by the Surveyor
acting reasonably whose determination shall be final) of the amount of
such excess
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THE FOURTH SCHEDULE hereinbefore referred to
LESSEE'S COVENANTS
TO PAY RENT
1. To pay to the Lessors the rents hereby reserved at the times and in the
manner herein appointed for payment thereof without any deduction set off or
(except as provided by Clause 5 (C) of this Lease) abatement whatsoever and to
pay those rents reserved in Clause 2 (a) of this Lease by standing order to the
bankers of the Lessors
TO PAY OUTGOINGS
2. To pay and discharge all rates taxes duties assessments charges impositions
and outgoings whatsoever (whether parliamentary local public utility or of any
other description and whether or not of a recurrent nature) now or at any time
during the said term taxed assessed charged imposed upon or payable in respect
of the demised premises or any part thereof or by the Lessors or Lessee or owner
or occupier in respect thereof
TO REPAIR AND DECORATE
3. (a) Well and substantially to cleanse maintain and repair the demised
premises and every part thereof (including all additions thereto and all
the Lessors' fixtures fittings plant and machinery therein and the service
channels forming part of the demised premises) and the drains connecting
the demised premises to and as far as their points of connection to the
drains used in common
(b) Without prejudice to the generality of sub-clause (a) hereof to paint
(or otherwise decorate) with two coats at least of good quality paint (or
other suitable materials) all such parts of the demised premises as have
been usually painted (or otherwise decorated) such painting (or other
decoration) to be in the fifth year of the said term and in the last year
of the said term (however determined but not more than once in any period
of twelve months) and otherwise as the Lessors may reasonably so require
(c) Not to remove or damage any of the Lessors' fixtures and fittings in
the demised premises and to replace with similar articles of at least
equal quality such fixtures and fittings as may be lost or worn out or
become unfit for use
PROVIDED THAT all work referred to in this Clause shall be done in a good and
workmanlike manner and to the reasonable satisfaction of the Surveyor AND
PROVIDED FURTHER THAT the liability of the Lessee under this Clause shall not
extend to damage caused by any of the insured risks unless the insurance shall
have been vitiated or insurance monies rendered irrecoverable in whole or in
part by any act omission neglect or default of the Lessee or their employees
servants agents independent contractors customers visitors licensees invitees or
any other person under the Lessee's control
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NOT TO MAKE ALTERATIONS
4. (a) Not to alter the demised premises (except as regards the carrying out
by the Lessee of the Lessee's New Works) and not to cut maim injure or
damage any part thereof (including the Lessee's New Works once these have
been completed) and not to make any alteration in the plan or elevation of
the demised premises or in the nature of the use of the demised premises
or any part thereof or to make any erection or addition whatsoever or to
carry out any development (as defined in the Planning Acts) on or to the
demised premises or any part thereof without the consent in writing of the
Lessors which shall not be unreasonably withheld or delayed (except for
the erection or alteration to the layout of non-structural demountable
partitions subject to the Lessors being supplied with full details
thereof)
(b) Without prejudice to any other rights of the Lessors immediately upon
the Lessors by notice in writing to that effect requiring them so to do to
remove all additional buildings erections works alterations on additions
whatsoever to the demised premises for which the Lessors' consent in
writing has not first been obtained pursuant to the provisions of
sub-clause (a) of this Clause (herein called "the unauthorised works") and
make good and restore the demised premises to the state and condition
thereof before the unauthorised works were carried out and if the Lessee
shall neglect to do so for twenty eight days after such notice then it
shall be lawful for the Surveyor the Lessors and the Lessors' servants
contractors agents and workmen to enter upon the demised premises and to
remove the unauthorised works and to make good and restore the same to the
state and condition existing before the carrying out of the unauthorised
works and all proper expenses of so doing shall be repaid to the Lessors
by the Lessee within seven days of a written demand in that behalf being
served on the Lessee
(c) Any consent on the part of the Lessors pursuant to the provisions of
sub-clause (a) of this Clause may be subject to such conditions as the
Lessors may reasonably require including (but not limited to)
reinstatement of the demised premises at the expiration or sooner
determination of the said term
TO PERMIT ENTRY
5. To permit the Lessors the Surveyor and their respective workmen and persons
duly authorised by them respectively on reasonable prior notice in writing
(except in emergency) at reasonable hours to enter the demised premises for the
purposes of
(a) viewing the same
(b) taking Inventories of the fixtures fittings appliances and equipment
to be yielded up at the expiration or sooner determination of the said
term
(c) inspecting for defects in and recording the condition of the demised
premises or any other breaches of covenant on the part of the Lessee
(d) inspecting cleansing maintaining repairing altering renewing or adding
to the Estate or any buildings thereon or the Lessors' neighbouring
premises or any other premises adjoining the demised premises (whether
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beside under or over) or any service channels not comprised within the
demised premises
(e) performing any covenant complying with any condition or pursuant to
any reservation contained in this Lease including but not limited to the
Lessors' obligations under Clause 5 of the Fifth Schedule
or any other reasonable purpose connected with the management of the demised
premises or the Building PROVIDED THAT the Lessors shall as soon as reasonably
practicable make good all damage to the demised premises caused by such entry to
the reasonable satisfaction of the Lessee
TO REPAIR ON NOTICE
6. (a) To make good to the reasonable satisfaction of the Surveyor within two
months or such shorter period as may be reasonable in the circumstances
(or immediately in case of emergency) any defect in or want of repair or
decoration of the demised premises for which the Lessee is liable
hereunder or any other want of compliance with any of the obligations on
the part of the Lessee under this Lease in respect of which the Lessors or
the Surveyor has given notice in writing to the Lessee
(b) If the Lessee shall not comply with sub-clause (a) hereof the Lessee
shall permit the Lessors the Surveyor and their respective workmen
(without prejudice to any other remedy of the Lessors) to enter the
demised premises and make good such defect breach or want of compliance as
aforesaid without the payment of any compensation to the Lessee and the
proper expenses of so doing (including legal costs and Surveyor's fees)
together with Interest from the date of expenditure by the Lessors shall
be paid by the Lessee to the Lessors on demand and shall be recoverable as
rent in arrear
TO PAY COST OF DAMAGE
7. Without prejudice to any other provisions herein contained to pay to the
Lessors on demand the full cost as determined by the Surveyor acting reasonably
of making good any damage to the Common Parts and/or the Building and to the
road coloured brown on Plan A and any other roads and road fittings on the
Estate including but not limited to lighting and signs or any other part of the
Estate whether occasioned by the Lessee or its employees servants agents
independent contractors customers visitors licensees invitees or any other
person under the Lessee's control
TO PAY LESSORS' COSTS
8. To pay the Lessors' reasonable and proper costs and expenses (including legal
costs and Surveyor's and other professional fees)
(a) In or in contemplation of any proceedings relating to the demised
premises under Sections 146 and/or 147 of the Law of Property Act 1925 or
the preparation and service of notices thereunder (whether or not any
right of re-entry or forfeiture has been waived by the Lessors or a notice
served under the said Section 146 is complied with by the Lessee or the
Lessee has been relieved under the provisions of the said Act and
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notwithstanding that forfeiture is avoided otherwise than by relief
granted by the Court)
(b) In the preparation and service of any Schedule of Dilapidations at any
time during or within six months after the expiry or sooner determination
of the said term
(c) In connection with the recovery of arrears of rent due from the Lessee
hereunder (including but not limited to bailiffs' commission incurred by
the Lessors of and incidental to every distress levied by the Lessors on
the Lessee's goods for the recovery of overdue rent or other sums due
under this Lease)
(d) In connection with approving plans and specifications required
hereunder and the supervision and inspection of alterations erections
additions and any other works carried out by the Lessee where the Lessors'
consent is required under this Lease
(e) In respect of any application for consent required by this Lease
whether or not such consent be granted
and the Lessors' reasonable and proper legal costs incurred in connection with
the preparation and completion of this Lease subject to a maximum of Two
thousand five hundred pounds
AS TO USE AND SAFETY
9. Save in properly designed stores or containers and in accordance with the
recommendations (if any) of any competent authority and the insurers of the
demised premises not to keep or use or permit or suffer to be kept or used upon
the demised premises any materials which are inflammable explosive or otherwise
dangerous or any machinery apparatus or equipment and any other thing which may
attack or in any way injure by percolation corrosion vibration excessive weight
or otherwise the structure of the Building the Estate or the Lessors'
neighbouring premises or the keeping or using whereof may contravene any
enactments
NOT TO USE FOR UNLAWFUL OR ILLEGAL PURPOSES OR CAUSE NUISANCE
10. Not to
(a) use or permit or suffer the demised premises or any part thereof to be
used for any unlawful illegal or immoral purpose or for the manufacture
sale or consumption of intoxicating liquors or for the manufacture sale or
consumption of Controlled Drugs as defined my the Misuse of Drugs Act 1971
(otherwise than by a practitioner or pharmacist as defined by that Act) or
for the manufacture publication or sale of any article or thing which may
in the reasonable opinion of the Lessors be pornographic offensive or
obscene or for betting gaming or lotteries or as a hotel club billiards
saloon dance hall funfair or amusement premises or for an auction or for
any noisy noxious or offensive trade or business and
(b) do or permit or suffer to be done on the demised premises or any part
thereof anything which may be or become or cause an annoyance
inconvenience nuisance damage disturbance injury or damage of or to the
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Lessors or the owners lessees or occupiers of the Building or any premises
in the Estate or the neighbourhood or which in the reasonable opinion of
the Lessors might be detrimental to the use or development of the demised
premises or of the Estate or of the Lessors' neighbouring premises (or any
of them) and to pay to the Lessors all costs charges and expenses which
may be incurred by the Lessors in abating any nuisance on or arising from
the demised premises and executing all works as may be necessary for such
purpose
(c) use any radio television video or sound system audible outside the
demised premises or play or suffer to be played any musical instrument
audible outside the demised premises
NOT TO RESIDE
11. Not to reside on the demised premises and not to create or permit or suffer
to be created any residential tenancy or residential occupation of the demised
premises or any part thereof
AS TO USER
12. Not to use the demised premises or any part thereof other than for a purpose
appropriate to a science park that is to say any one or more of the following
uses
(a) Scientific research associated with industrial production
(b) Light industrial production of a kind which is dependent on regular
consultation with either or both of the following:
(i) The Lessee's own research development and design staff
established in the Cambridge Study Area
(ii) The scientific staff or facilities of the University of
Cambridge or of local scientific institutions
(c) Ancillary buildings and works appropriate in the opinion of the
Lessors to the use of the demised premises as part of a science park
TO KEEP OPEN AND SECURITY
13. (a) Not to permit the demised premises to remain vacant or unattended
without the prior written consent of the Lessors (which the Lessors may
grant or withhold at their absolute discretion but which shall not be
withheld in respect of periods of not more than twenty eight days
connected with any assignment or underletting of the demised premises
pursuant to Clause 20 of this Fourth Schedule)
(b) Without prejudice to the generality of sub-clause (a) above to
indemnify the Lessors against any empty property rate or penal rate levied
or assessed upon the Lessors by reason of the demised premises having been
left empty
(c) To ensure that the Lessors at all times have written notice of the
name and address and telephone number of at least one keyholder of the
demised premises
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DISPLAYS AND ADVERTISEMENTS
14. Not to display or permit to be displayed on any part of the demised premises
so as to be visible from outside the demised premises any name writing notice
sign placard sticker or advertisement of whatsoever nature and not to place
leave or install any merchandise or display outside the demised premises and on
any breach by the Lessee the Lessors the Surveyor and their respective workmen
may without notice and without prejudice to any other remedy of the Lessors
remove the cause of the breach of this covenant and shall not be liable to make
good any loss or pay compensation for so doing
TO KEEP CLEAN
15. (a) Not to allow any rubbish or refuse of any description to accumulate
upon the demised premises or the Common Parts or on any other part of the
Building save in suitably located dustbins provided by the Lessee for that
purpose and so often as it shall be necessary or desirable and in any
event at least once a week to cause such dustbins to be emptied
(b) To keep the demised premises clean tidy and properly lighted
(c) To clean the inside and outside of all windows in the demised premises
at least once each month
(d) Not to bring or keep or suffer to be brought or kept upon the demised
premises or the Common Parts anything which in the reasonable opinion of
the Lessors are or may become unclean unsightly or detrimental to the
demised premises the Estate the Building or the Lessors' neighbouring
premises and nearby premises (or any of them)
(e) Not to discharge into any service channels oil grease solids or other
deleterious matter or any substance which might be or become a source of
danger or injury to the drainage system of the demised premises the
Building the Estate or the Lessors' neighbouring premises (or any of them)
or which may pollute the water of any watercourse so as to render the
Lessors liable to action or proceedings by any person or body and to keep
the service channels comprised within the demised premises unobstructed
(f) Not to do or suffer anything which may cause or tend to cause an
obstruction or blockage or disruption of the service channels in the
demised premises the Building or the Estate
TO COMPLY WITH ENACTMENTS AND GIVE NOTICE
16. (a) At the Lessee's own expense to comply with the provisions and
requirements of all enactments or of any competent national local or
statutory authority court or body so far as they still subsist and have
not been repealed and relate to or affect the demised premises on the use
thereof
(b) At the Lessee's own expense to do all works and all other things so as
to comply with sub-clause (a) of this Clause including (without prejudice
to the generality of the foregoing) the obtaining of any fire certificate
required for the demised premises
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(c) Within seven days of receipt of notice thereof to give to the Lessors
particulars of any provision or requirement of all enactments or as
prescribed or required by any competent national local or statutory
authority court or body or proposal therefor relating to the demised
premises or the Estate or the Lessors' neighbouring premises (or any of
them) or the condition or use thereof respectively and at the request of
the Lessors but at the joint cost of the Lessors and the Lessee (save when
the same relate exclusively to the demised premises when they shall be at
the cost of the Lessee) to make or join with the Lessors in making such
objection or representation against any such proposal as relates to the
demised premises as the Lessors shall reasonably deem expedient
(d) To pay to the Lessors upon demand a fair and proper proportion (to be
conclusively determined by the Surveyor acting reasonably) of all
reasonable and proper costs charges and expenses (including the Surveyor's
and other professional adviser's fees incurred by the Lessors of or
incidental to
(i) complying with all provisions and requirements of all enactments
or as prescribed or required by any competent national local or
statutory authority court or body and
(ii) doing any works and other things reasonably necessary to comply
therewith
so far as the same relate to any premises capable of being used or enjoyed
by the Lessee in common or jointly with any other person or the use
thereof
TO COMPLY WITH THE PLANNING ACTS
17. (a) At all times during the said term to comply in all respects with the
provisions and requirements of the Planning Acts and all licences consents
permissions and conditions (if any) granted or imposed thereunder so far
as the same respectively relate to or affect the demised premises or any
part thereof and to keep the Lessors fully and effectually indemnified
against all actions proceedings damages costs expenses claims and demands
whatsoever in respect of or arising out of any contravention of the
Planning Acts relating to or affecting the demised premises or any part
thereof and against the cost of any permissions and consents thereunder
and the implementation thereof
(b) In the event of the Lessors giving consent to any of the matters in
respect of which the Lessors' consent shall be required pursuant to the
provisions of any covenant or condition contained in this Lease to apply
at the cost of the Lessee to the local planning authority for all
necessary consents and permissions in connection therewith and to give
notice to the Lessors of the granting or refusal (as the case may be) of
all such consents and permissions forthwith on the receipt thereof
(c) In the event of the said planning authority agreeing to grant such
necessary consent or permission only with modifications or subject to
conditions to give to the Lessors forthwith full particulars of such
modifications or condition AND if such modifications or such conditions
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shall in the reasonable opinion of the Lessors be undesirable then the
Lessee shall not implement or proceed with the matters works or change of
use to which the application relates
(d) If the Lessee shall receive any compensation in respect of the demised
premises under or by virtue of the Planning Acts forthwith to make such
provision as is just and equitable for the Lessors to receive its due
benefit from such compensation
(e) Not to apply for or implement any planning permission in respect of
the whole or any part of the demised premises if such application or the
implementation thereof would or might give rise to any tax charge or other
levy payable by the Lessors
(f) Unless the Lessors shall otherwise direct to carry out before the
expiration or sooner determination of the said term any works stipulated
to be carried out to the demised premises by a date subsequent to such
expiration or sooner determination as a condition of the grant of any
planning permission obtained by the Lessee during the said term
NOT TO VITIATE INSURANCE
18. (a) Not to do or omit to do (or permit or suffer to be done or omitted to
be done) anything whereby the policy or policies of insurance on the
Building against the insured risks may become void or voidable or whereby
the rate of premium thereon or upon the Estate or upon the Lessors'
neighbouring premises may be increased or cause the insurers to impose
more onerous terms in such policy or policies and to repay to the Lessors
all sums paid by way of increased premiums and any expenses incurred by
the Lessors in or about any renewal of such policy or policies consequent
upon a breach of this covenant and all such sums shall be added to the
rent herein reserved and be recoverable upon demand as rent and in the
event of the Building or any part thereof being damaged by the insured
risks and the insurance money under any insurance effected against the
same being wholly or partly irrecoverable by reason solely or in part of
any act omission neglect or default of the Lessee or their employees
servants agents independent contractors customers visitors licensees
invitees or any other person under the Lessee's control then and in every
such case the Lessee will forthwith pay to the Lessors the amount of the
insurance monies which is irrecoverable
(b) To comply with any requirements or recommendations of the insurers of
the Building
(c) To notify the Lessors forthwith upon becoming aware of the whole or
any part of the demised premises or the Common Parts being destroyed or
damaged by any of the insured risks
TO INDEMNIFY
19. To keep the Lessors fully and effectually indemnified from and against all
liability in respect of losses damages proceedings claims costs expenses and any
other liability whatsoever arising from or in connection with
(a) the injury or death of any person
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(b) damage to or destruction of any property whatsoever
(c) the infringement disturbance or destruction of any rights easements or
privileges
arising directly or indirectly out of:-
(i) the state of repair and condition or use of the demised premises or
works carried out or in the course of being carried out to the demised
premises
(ii) anything now or hereafter attached to or projecting from the demised
premises by or on behalf of the Lessee any underlessee or their respective
servants or agents or any other person under the Lessee's or underlessee's
control
(iii) any act default or negligence of the Lessee any underlessee or their
respective servants or agents or any other person under the Lessee's or
underlessee's control
and to insure against such liability in a reputable Insurance Office
AS TO ASSIGNMENTS ETC.
20. (a) Not to assign part with possession of or charge by way of legal
mortgage in any way any part of the demised premises less than the whole
(b) Not to assign the whole of the demised premises except to a permitted
assignee and the expression "permitted assignee" shall mean a substantial
and respectable body or person whose registered office principal place of
business or address is within the United Kingdom who in the reasonable
opinion of the Lessors shall have the capacity and the qualifications
necessary to observe and perform all the provisions of this Lease and who
shall prior to any so such assignment have
(i) submitted references reasonably satisfactory to the Lessors and
(ii) entered into a direct covenant under seal with the Lessors to
pay the rents reserved by and to observe and perform the covenants
conditions agreements and stipulations contained in this Lease and
on the part of the Lessee to be observed and performed and
(iii) in the case of a permitted assignee which is a private limited
company and if reasonably so required by the Lessors procured that
not less than two persons or a corporate body acceptable to the
Lessors (and in respect of which full information shall have been
supplied to the Lessors) enter into a Deed of Guarantee in such form
as the Lessors may reasonably require (for the avoidance of doubt
like covenants conditions agreements and declarations to those
contained in the Seventh Schedule hereto being in all respects
reasonable for the purpose of such Deed of Guarantee)
(c) Not to underlet the whole or any part of the demised premises
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(d) Not to share possession of the whole or any part of the demised
premises save with another member of the same group as defined by Section
42 of the Landlord and Tenant Act 1954 subject to the following conditions
(i) the relationship of landlord and tenant shall not be created and
shall not at any time during such sharing arise and
(ii) the member of the same group shall not be permitted to have
exclusive occupation of the whole or any part of the demised
premises and
(iii) the member of the same group's sharing of possession shall
determine upon their ceasing to be within the definition contained
in the said Section 42 of the Landlord and Tenant Act 1954
(e) Not to hold or occupy the demised premises or any part thereof as
trustee or agent or otherwise for the benefit of any other person
(f) Not to part with possession of the demised premises or any part
thereof except by virtue of an assignment of a kind permitted by this
Clause and with the prior written consent of the Lessors (such consent not
to be unreasonably withheld or delayed)
(g) Not without the prior consent in writing of the Lessors (such consent
not to be unreasonably refused in the case of a chargee by way of legal
mortgage reasonably acceptable to the Lessors) to charge by way of legal
mortgage in any way the whole of the demised premises
(h) Not to mortgage the demised premises or any part thereof by way of
subdemise
TO GIVE NOTICE OF ASSIGNMENTS, DEVOLUTIONS ETC.
21. (a) To produce a copy certified by a solicitor of every assignment
transfer charge Probate Letters of Administration order instrument or
other writing effecting or evidencing any transmission or devolution of
any estate or interest in the demised premises or any part thereof to the
Solicitors of the Lessors for registration within one month from the date
thereof and to pay to the Lessors' Solicitors their reasonable fees for
each such registration
(b) Within one month of an assignment of this Lease to give to the Lessors
written notice of the person to whom future rent demands should be sent
AS TO LOSS OR ACQUISITION OF EASEMENTS
22. (a) Not to knowingly permit any easement on right comprised in belonging
to or used with the demised premises or any part thereof from being
obstructed or lost
(b) Not to give to any third party any acknowledgement that the Lessee
enjoys the access of light to any of the windows or openings in the
demised premises by the consent of such third party nor to pay to such
third party any sum of money nor to enter into any agreement with such
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third party for the purpose of inducing or binding such third party to
abstain from obstructing the access of light to any such windows or
openings
(c) To take all such steps as may be necessary to prevent the acquisition
of any easement or right against over upon or under the demised premises
or any part thereof and any encroachment thereon and to give to the
Lessors immediate notice of any encroachment or threatened encroachment
upon the demised premises or any attempt to acquire any easement or right
under or over the demised premises which shall be within the Lessee's
knowledge and to do all such things as may be necessary to prevent any
encroachment being made or any new easement being acquired
TO PRODUCE PLANS/DOCUMENTS
23. If and whenever called upon so to do to produce to the Lessors or the
Surveyor all such plans documents or other evidence as the Lessors may from time
to time reasonably require to satisfy themselves that the Lessee has complied in
all respects with the provisions of the Lessee's covenants herein
NOT TO INTERFERE WITH RESERVED RIGHTS
24. Not to interrupt or interfere with the exercise of the rights contained or
referred to in the First Part of the Second Schedule hereto
TO PERMIT ENTRY FOR RELETTING ETC.
25. During the last six months before the expiration or sooner determination of
the said term or after the expiration thereof (or at any time during the said
term in the event of a sale of the Lessors' interest in the demised premises) to
permit the Lessors and the Surveyor to enter upon the demised premises and to
affix upon any suitable part or parts thereof a notice board or boards for
reletting or other disposal of the demised premises and not to remove or obscure
the same PROVIDED that such boards do not interfere with the access or the
access of light and air to and from the demised premises and at all reasonable
times in the daytime on reasonable prior notice to permit all persons authorised
by the Lessors or the Surveyor to enter and inspect the demised premises
TO YIELD UP
26. At the expiration or sooner determination of the said term peaceably and
quietly to surrender and yield up to the Lessors the demised premises (together
with all keys thereto) so repaired maintained decorated cleansed glazed painted
and kept as herein provided and if so required by the Lessors to remove such
tenants' fixtures as the Lessors may specify the Lessee making good all damage
caused by the removal of these to the reasonable satisfaction if the Surveyor
AS TO FAILURE OF GUARANTEE AND ADDITIONAL GUARANTEES
27. Within fourteen days of the death during the said term of any person (being
an individual) who has guaranteed to the Lessors the performance of the Lessee's
covenants herein or of such person being adjudged bankrupt or entering into a
composition scheme or arrangement with or for the benefit
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of such person's creditors or being a company becoming subject to an
administration order or suffering a trustee receiver or similar officer to be
appointed over the whole or any part of the company's undertaking property or
assets or being the subject of a winding up order by the Court (save for the
purpose of reconstruction or amalgamation of a solvent company not involving a
realisation of assets) or passing a resolution for winding up (save as
aforesaid) or otherwise entering into liquidation to give notice thereof to the
Lessors and if so reasonably required by the Lessors at the expense of the
Lessee within twenty eight days to procure that some other person or body
acceptable to the Lessors enters into a Deed of Guarantee in such form as the
Lessors may reasonably require (for the avoidance of doubt like covenants
conditions agreements and declarations to those contained in the Seventh
Schedule hereto being in all respects reasonable for the purpose of such Deed of
Guarantee)
AS TO VALUE ADDED TAX
28. Any sums payable by the Lessee under this Lease are exclusive of Value Added
Tax and where the Lessee is required by this Lease to pay to the Lessors or any
other person any sum in respect of the supply of goods or services for Value
Added Tax purposes (or for the purposes of any substituted tax) the Lessee will
also on demand discharge any liabilities of the Lessors relating to Value Added
Tax (or substituted tax) in respect of any supply (whether or not the supply is
taxable following an election by the Lessors)
STATUTORY ACQUISITIONS
29. Not to do or omit to do any act matter or thing as a consequence whereof the
Lessors' reversion immediately expectant upon the determination of the said term
shall become liable to acquisition pursuant to any enactments
FIRE FIGHTING APPLIANCES
30. To keep the demised premises sufficiently supplied and equipped with such
suitable fire fighting and extinguishing appliances as shall from time to time
be required by law or by the local or other competent authority and by the
Lessors' insurers and such appliances small be open to inspection and shall be
properly maintained and also not to obstruct the access to or means of working
such appliances or the means of escape from the demised premises in case of fire
TO CARRY OUT THE LESSEE'S NEW WORKS
31. At the Lessee's own expense forthwith to apply for and diligently seek to
obtain all licences approvals plans consents and permissions and other things
necessary for the carrying out of the Lessee's New Works from the Local Planning
Authority and from any other Authority whose approval permission or consent
shall be necessary and to comply in all respects with the enactments relating
thereto and subject to all necessary approvals and consents having been obtained
at the Lessee's expense to carry out the Lessee's New Works in compliance as
aforesaid as soon as reasonably practicable the Lessee's New Works to be
executed in a good and substantial manner employing good materials and
workmanship and in conformity in every respect with the specifications plans and
drawings which shall first have been a submitted to and approved in writing by
the Surveyor such
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approval not to be unreasonably withheld (with such alterations only as shall
first have been authorised by the Lessors in writing) and in all respects to the
reasonable satisfaction of the Surveyor and to the satisfaction of any relevant
authority
NOT TO OBSTRUCT
32. Not to permit any vehicles to stand on the roadways comprised within the
Estate or on any other part of the Estate except on the car parking spaces
forming part of the Common Areas or other areas which shall have been designated
by the Lessors as a loading bay for the Lessee (but during the period of loading
and unloading of vehicles only) and (subject to paragraph (3) of the Second Part
of the First Schedule) not to park on or obstruct any Common Parts or any
communal part of the Estate
TO COMPLY WITH REGULATIONS
33. To comply with all reasonable regulations made by the Lessors from time to
time for the management of the Building the Estate and of any land or premises
used or to be used in common by the Lessee or jointly with any other person and
to procure that the Lessee's employees agents and all persons under the control
of the Lessee shall at all times observe and perform the same
AS TO WATER SUPPLY
34. Not to use or permit or suffer to be used the supply of water to the Estate
for any purpose other than the Lessee's purposes hereby permitted and not in any
event to use the same or permit or suffer the same to be used for research or
industrial purposes without the provision of a proper recirculation system to a
specification first approved by the Statutory Water Undertaker or otherwise in
compliance with the reasonable recommendations of the Water Authority
TO COMPLY WITH PLANNING AGREEMENTS
35. In addition to and not in substitution for or limitation of the covenants
contained herein and in particular the Lessee's covenants as to the use of the
demised premises or any part thereof to observe and perform all the covenants on
the Lessors' Part in the Planning Agreements and the agreements and provisions
of the Planning Agreements to the extent that the same affect the demised
premises or any part thereof and at all times to indemnify the Lessors against
any breach or non-observance of the same by the Lessee
THE FIFTH SCHEDULE hereinbefore referred to
LESSORS' COVENANTS
AS TO QUIET ENJOYMENT
1. That the Lessee paying the rents hereby reserved at the times and in the
manner herein appointed and performing and observing the covenants on the
Lessee's part and the conditions agreements and stipulations herein contained
may peaceably enjoy the demised premises for the said term without any lawful
interruption from the Lessors or any person lawfully claiming under or in trust
for the Lessors
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TO INSURE
2. (a) That the Lessors will during the said term insure and keep insured in
an established insurance office of repute the Building (excluding all
plate and other glass therein) against the insured risks with a sum
assured to cover the following
(i) the full reinstatement value thereof (excluding the amount of
any insurance excess for which the Lessee shall be liable) to be
determined from time to time by the Lessors' Surveyor and
(ii) architect's surveyor's and other professional fees demolition
site clearance and the cost of boarding and propping including a due
allowance for cost increases over any likely rebuilding period and
(iii) three years' loss of rent and
(iv) liability attaching to the Lessors as owners or landlords of
the Building
(v) incidental expenses
AND the Lessors may insure the air conditioning (if any) central heating
installations passenger lifts hoists (or any of them) separately in such
manner and for such amount as the Lessors may from time to time reasonably
determine
(b) The Lessors shall have full power to settle arid adjust with the
insurers all questions with regard to the liability of the insurers and
the amount or amounts payable under any policy
(c) The Lessors shall inform the insurers of the Lessee's interest in the
demised premises
(d) The Lessors shall whenever reasonably requested produce to the Lessee
a copy of the insurance policy or policies (or a summary of its or their
terms to include details of the exclusions and limitations imposed by the
insurers and any requirements of the insurers in relation to any of the
matters referred to in paragraph 9 of the Fourth Schedule) and
satisfactory evidence of payment of the current premium
TO REINSTATE
3. In case the demised premises or the Common Parts or any parts thereof
respectively shall at any time during the said term lie destroyed or damaged by
the insured risks so as to be unfit for occupation or use then (unless any
monies payable under any policy of the Lessors shall be refused either by reason
of any act omission neglect or default of the Lessee or their employees servants
agents independent contractors customers visitors licensees invitees or any
other person under the Lessee's control or by reason of any breach of the
provisions of Clause 18 of the Fourth Schedule to this Lease) and subject to the
Lessors obtaining all necessary consents licences or approvals (which it shall
use its best endeavours consistent with reasonable commercial prudence to
obtain) as soon as reasonably practicable and when lawful so to do the Lessors
will apply all monies received (other than in
29
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respect of loss of rent fees demolition site clearance the cost of boarding and
propping and any sums paid to the Lessors to indemnify the Lessors for any
liability as owner or as landlord of the demised premises or the Common Parts or
otherwise payable on the occurrence of a risk not involving damage to the
demised premises all of which shall in all circumstances belong to the Lessors)
by virtue of such insurance as aforesaid towards reinstating so far as
practicable the damage to the demised premises or Common Parts or any parts
thereof caused by the insured risks
TO MAINTAIN SPINE ROAD
4. To maintain the roads and footpaths shown coloured brown on Plan A and the
main spine road on the Estate until such time as they shall be adopted by the
local authority as being maintainable at the public expense
TO PROVIDE SERVICES
5. Subject to the Lessee paying the Service Charge specified in the First Part
of the Third Schedule hereto to provide the Lessors' Services in a competent
manner and in accordance with good estate management practice and in particular
(a) to maintain repair renew and otherwise keep in good repair and
condition the Building including the roof structure and foundations
thereof save such parts as are maintainable by the several lessees of the
Building (including the Lessee) in pursuance of the repairing covenants in
their respective occupational leases
(b) as often as the Lessors deem necessary and not less than every five
years to clean paint redecorate and otherwise treat to protect all the
outside wood metal brick and cement work and other external surfaces of
the Building in a workmanlike manner and in colours determined by the
Lessors
(c) to keep all fixtures and fittings in the Common Parts in good order
and repair and to replace such fittings and fixtures as and when
replacement is necessary or requisite
(d) at all times during the said term to maintain the service channels
used in common in good order and to maintain and repair the other
appurtenances and amenities of the Building in good order and condition
and free from litter and to clean the outside surfaces of all windows at
proper intervals
PROVIDED THAT the Lessors shall not be liable to the Lessee in respect of
(i) any failure or interruption in any of the Lessors' Services by reason
of necessary repair replacement maintenance of any installation or
apparatus or their damage or destruction or by reason of mechanical or
other defect or breakdown or frost or other inclement conditions or
shortage of fuel materials water or labour or any other cause beyond the
Lessors' control provided that the Lessors use all reasonable endeavours
to restore the Lessors' Services in question as speedily as possible
30
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(ii) any act or omission or negligence of any employee agent or other
person undertaking the Lessors' Services or any of them on behalf of the
Lessors
THE SIXTH SCHEDULE hereinbefore referred to
THE LESSEE'S NEW WORKS
The works to be carried out by the Lessee as detailed on the drawing
numbered 356/4 prepared by Ron Eggar
THE SEVENTH SCHEDULE hereinbefore referred to
GUARANTOR'S COVENANTS AND AGREEMENTS
1. The Guarantor HEREBY COVENANTS with and guarantees to the Lessors that
(a) the Lessee will at all times during the said term and until the
Lessors have beneficial occupation of the demised premises pay the rents
hereby reserved and all other sums and payments covenanted and or agreed
to be paid by the Lessee at the respective times and in manner herein
appointed for payment thereof and will also duly perform and observe and
keep the several covenants and provisions on the Lessee's part herein
contained and
(b) the Guarantor will pay and make good to the Lessors all losses
liabilities costs and expenses sustained by the Lessors through the
default of the Lessee in respect of any of the before mentioned matters
and
(c) that any neglect or forbearance of the Lessors in endeavouring to
obtain payment of the said several rents and payments as and when the same
become due or their delay to make any steps to enforce performance or
observance of the several covenants and provisions herein on the Lessee's
part contained and any time which may be given by the Lessors to the
Lessee shall not release or in any way lessen or affect the liability of
the Guarantor under the guarantee on the Guarantor's part herein contained
and
(d) if the Lessee (being a Company) small become subject to an
administration order or be the subject of a winding up order by the Court
or otherwise go into liquidation or if the Lessee (being an individual)
shall be adjudged bankrupt and the Liquidator or Administrator or the
Trustee of the bankrupt's estate (as the case may be) shall disclaim this
Lease and if the Lessors shall within three months after such disclaimer
by notice in writing require the Guarantor to accept a lease of the
demised premises for a term equal to the residue which if there had been
no such disclaimer would have remained of the said term at the same rents
and under the like covenants and provisions as are reserved by and
contained in the Lease (other than the specific covenants on the part of
the Guarantor contained in Clause 6 of this Lease but imposing like
requirements for a Deed of Guarantee to those set out in the Lessee's
covenants contained in the Fourth Schedule hereto) the said new lease and
the rights and liabilities thereunder to take effect as from the date of
the said disclaimer then and in such case the Guarantor shall accept such
lease accordingly and execute and deliver to the Lessors a counterpart
thereof in all respects at the sole cost of the Guarantor and
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(e) if any sums payable by the Guarantor under this Clause 1 remain unpaid
for seven days after falling due to pay to the Lessors on demand Interest
on all such amounts from the date the same respectively fell due until the
date of actual payment thereof
AGREEMENTS BY GUARANTOR
2. It is hereby agreed and declared that
(a) the Guarantor covenants as Principal Debtor and not as guarantor and
accordingly (for the avoidance of doubt)
(i) it shall not be necessary for the Lessors to resort to or seek
to enforce any other guarantee or security (whether from the Lessee
or otherwise) before claiming payment hereunder and
(ii) until all monies and liabilities due or incurred by the Lessee
to the Lessors have been paid or discharged in full notwithstanding
payment in whole or in part of the amount by the Guarantor or any
purported release or cancellation hereof the Guarantor shall not by
virtue of any such payment or by any other means or on any other
ground
(aa) claim any set off or counter claim against the Lessee in
respect of any liability on the part of the Guarantor to the
Lessors and
(bb) make or enforce any claim or right against the Lessee or
prove in competition with the Lessors or exercise any right as
a preferential creditor against the Lessee or against the
assets of the Lessee
and
(b) the Guarantor's covenants herein contained shall not be affected or
modified in any way by the liquidation or dissolution of the Lessee or the
appointment of any receiver administrator or manager and
(c) the Lessors shall be at liberty at all times without affecting or
discharging the Guarantor's liability hereunder
(i) to vary release or modify the rights of the Lessors against the
Lessee hereunder with the prior written consent of the Lessee but
without the Guarantor's consent and
(ii) to compound with discharge release or vary the liability of the
Lessee or any other guarantor or other person and
(iii) to appropriate any payment the Lessors may receive from the
Lessee the Guarantor or any other person towards such monies due
under this Lease as the Lessors shall in their absolute discretion
think fit
32
<PAGE>
THE EIGHTH SCHEDULE hereinbefore referred to
LESSORS' FIXTURES AND FITTINGS
General description of building
A three-storey building of about 39,000 sq. ft. designed for occupation by up to
nine companies. The premises are served by a central entrance with reception
area, main staircase, lift and lavatories.
Layout
Two main wings north and south of the central reception area with a smaller one
to the west, containing units on each floor.
A large car park provides 200 spaces next to the main entrance.
External structure
Frame: steel frame and roof trusses, 150mm reinforced
concrete floor slab.
Roof: "Eternit 2000" slates on timber rafters with
insulation.
Walls: facing brick and insulated cavity walls.
Windows: tinted, double-glazed opening windows with coated
aluminum frames. Projecting windows to first floor.
Doors: main entrance doors to ground floor west wing, fire
doors to external stairs.
Internal structure
Walls: blockwork and "Gyproc" metal stud partitions. Fire
breaks in roof and between units.
Floors: composite steel and concrete floor with raised
1500mm cavity floor systems with access at 3m
centres.
Staircases: reinforced concrete main staircase of good quality;
two secondary stairs.
Internal fittings - whole building
Floors: carpet to main reception; sheet vinyl floor in
lavatories.
Joinery: internal doors of hardwood veneer, some with glazed
apertures. Painted softwood frames and skirtings.
Satin anodised aluminium ironmongery.
Ceilings: suspended ceilings of mineral fibre tiles. Metal
perforated panels in concealed suspension system in
reception area and main stairs. Ceiling heights are
2.7m 12.5m on top floor).
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[FLOOR PLAN OMITTED]
<PAGE>
Heating: gas-fired low-pressure hot water system with
perimeter radiators.
Gas: a single gas supply is available in the building.
Plumbing: water and drainage connections available at both
ends of each unit.
Lavatories: next to each unit. Lavatories for the disabled on
ground and first floors.
Lift: central passenger lift.
Reception: an attractive main entrance with central staircase.
Internal fittings - unit 321
Floors: carpet and vinyl floor finishes to unit 321 in
accordance with McMann Interiors' plan 296/6/1 dated
February 1990.
Partitions: demountable partitions as shown on McMann Interiors'
plan 296/6/1 for unit 321.
Power: flush light fittings. Single phase and 3-phase
circuits with individual sub-metres serving the
unit. Power points within raised floors at 3m
centres, including an uninterrupted power supply
system and back up generator.
Telephone: as installed.
Security: alarm system as installed.
Cold store: as shown on McMann Interiors' plan 296/6/1
THE COMMON SEAL of THE
MASTER FELLOWS AND
SCHOLARS OF TRINITY COLLEGE CAMBRIDGE was
affixed to this Deed in the presence of:-
/s/ [ILLEGIBLE]
Senior Bursar
/s/ [ILLEGIBLE]
Junior Bursar
<PAGE>
Exhibit 10.16
DATED 29 November 1996
----------------------
(1) PEPTIDE THERAPEUTICS GROUP plc
- and -
(2) NICOLAS HIGGINS
----------------------------
DIRECTOR'S SERVICE AGREEMENT
----------------------------
PINSENT - CURTIS
Dashwood House
69 Old Broad Street
London EC2M 1NR
Tel: 0171 418 7000
Fax: 0171 418 7050
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
CLAUSE PAGE
<S> <C> <C>
1 Definitions and Interpretation ....................................... 1
2 Appointment and Term of Employment ................................... 3
3 Duties ............................................................... 3
4 Office of Director ................................................... 5
5 Remuneration ......................................................... 5
5.1 Salary ...................................................... 5
5.2 Car Allowance ............................................... 6
5.3 Schemes ..................................................... 6
5.4 Pension Scheme .............................................. 6
6 Expenses and Communications ......................................... 7
7 Life Assurance ....................................................... 7
8 Medical Expenses Insurance and PHI ................................... 7
9 Holidays ............................................................. 8
10 Sickness Injury and Absence ......................................... 8
11 Confidential Information ............................................. 9
12 Other Business Interests ............................................. 10
14 Automatic Termination ................................................ 12
15 Summary Termination .................................................. 13
16 Termination .......................................................... 14
17 Covenants by the Director ............................................ 16
18 Reconstruction Or Amalgamation ....................................... 17
19 Notices .............................................................. 17
20 Statutory and Other Information ...................................... 17
21 Miscellaneous ........................................................ 18
22 Previous Agreements .................................................. 18
SCHEDULES
1 Statutory Information ................................................ 19
2 Director's Duties .................................................... 20
</TABLE>
<PAGE>
THIS AGREEMENT is made the day of 1996
BETWEEN:
(1) PEPTIDE THERAPEUTICS GROUP plc a company incorporated in England and Wales
(registered no. 2863682), whose registered office is at 321 Cambridge
Science Park, Milton Road, Cambridge, CB4 4WG (the "COMPANY"); and
(2) NICOLAS HIGGINS of 6 South Green Road, Newnham, Cambridge CB3 9JP (the
"DIRECTOR").
IT IS AGREED that:-
1 DEFINITIONS AND INTERPRETATION
1.1 In this Agreement:-
"ASSOCIATED COMPANY" means a company which is not a subsidiary of another
but more than twenty (20) per cent of the equity share capital of which is
owned by that other;
"BOARD" means the board of directors of the Company for the time being and
includes where the context so permits any committee of the board of
directors including without limitation the Remuneration Committee and the
Audit Committee;
"COPYRIGHT WORK" and "DESIGN RIGHT WORK" mean respectively any copyright
work or design right work originated, conceived, written or made by the
Director alone or with others which relates or may relate to any product,
service, process, equipment, system or activity of the Company;
"EQUITY SHARE CAPITAL" has the meaning given to it in Section 744 of the
Companies Act 1985;
"GROUP" means:-
(i) the Company;
(ii) any holding company of the Company;
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(iii) any subsidiary of the Company or its holding company or any
associated company of any of them;
(iv) any subsidiary undertaking of the Company or its holding company or
any associated company of any of them; and
(v) any associated company or the Company or its holding company or
any subsidiary of any of them;
"GROUP COMPANY" means the Company and any other member of the Group for
the time being;
"HOLDING COMPANY" has the meaning given in Section 736 Companies Act 1985:
"INCAPACITY" means any sickness, injury, or other like cause
incapacitating the Director from performing his duties under this
Agreement and "INCAPACITATED" shall be construed accordingly;
"INVENTIONS" means any invention, discovery or improvement including,
without prejudice to the generality of the above, any know-how, design
process. drawing, formula, computer program or specification which relates
or may relate to any product, service, equipment, system or activity of
the Company;
"PEMBROKESHIRE PENSION PLAN" (previously known as the Peptide Pension
Plan) means the approved retirement benefits scheme established by trust
deed dated 10th December 1994 and made between Peptide Therapeutics
Limited, Ronald James Dart, Alan Gilbert Goodman, Daniel James William
Roach and Nicholas Blech;
"RECOGNISED INVESTMENT EXCHANGE" has the meaning given in Section 207 of
the Financial Services Act 1986;
"SUBSIDIARY" has the meaning given in Section 736 Companies Act 1985; and
"SUBSIDIARY UNDERTAKING" has the meaning given in Section 258 of the
Companies Act 1985.
1.2 Any reference to a statute or statutory provision shall he deemed to
include a reference to any statutory modification or re-enactment of it or
any enactment
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replacing it and any instrument order or regulation made under such
statute or statutory provision.
1.3 References to Clauses and Schedules are to clauses of and the schedules to
this Agreement.
1.4 The headings in this Agreement are for convenience only and shall not
affect its construction or interpretation.
2 APPOINTMENT AND TERM OF EMPLOYMENT
2.1 The Director shall serve the Company as Licensing Director of the Company.
2.2 The employment of the Director under this Agreement (which shall include
the Director's previous employment by the Company's subsidiary, Peptide
Therapeutics Limited, and shall therefore be deemed to have commenced on 4
January 1994) (subject to termination as provided in Clause(s) 15 and 16)
shall continue from the date hereof until terminated by either party
giving to the other not less than 12 months notice in writing to expire on
or any time after the date hereof.
2.3 Notwithstanding any other terms in this Agreement, the Director shall
retire at the Company's normal retirement age, which is at present 65 (the
"RETIREMENT AGE") whereupon this Agreement shall terminate. The Company
may in its absolute discretion continue to employ the Director after the
Retirement Age upon such terms as the parties to this Agreement shall
agree. Should the Retirement Age conflict with any statutory or regulatory
provision applicable to the Company, the Retirement Age shall be varied to
conform with such provision.
3 DUTIES
3.1 The Director shall during his employment under this Agreement:-
3.1.1 exercise the powers and perform the duties normally required of a
person holding the Post occupied by the Director and appropriate in
his status, qualifications and experience including but without
prejudice to the generality of the foregoing the duties set out in
Schedule 2 and such other duties as the Board may from time to time
properly and reasonably assign
3
<PAGE>
to him either in his capacity as Director or in connection
with the business of the Company or the business of any one
or more Group Companies (including serving on the board of
or any other executive body or any committee of such Group
Companies):
3.1.2 use all proper and reasonable endeavours to promote, develop
and extend the business of the Company and the Group
Companies; and
3.1.3 at all times and in all respects conform to and comply with
the proper and reasonable directions and regulations of the
Board and shall, except during holidays and periods of
absence due to ill health or incapacity, devote his full
time and attention to the performance of his duties under
this Agreement.
3.2 The Directors normal place of work shall be anywhere in the United
Kingdom provided that he may he required by the Company to travel
(whether within or outside the United Kingdom) on the business of the
Company or any Group Company.
3.3 If the Company requires the Director to work permanently at a place
which necessitates a move from his present address the Company will
reimburse the Director for all removal expenses directly and
reasonably incurred as a result of the Company's requirement.
3.4 The Director shall keep the Board properly informed (in writing if so
required by the Board) of his conduct of all business on behalf of the
Company and any Group Company and shall give to the Board all such
information as to the affairs of the Company and the Group as it shall
properly and reasonably require.
3.5 The Director shall not during the term of this Agreement without the
written consent of the Board make or seek to make on behalf of
himself or (otherwise than properly in the performance of his duties
to the Company) on behalf of any other person, firm or company any
contract or other arrangement of a commercial nature with any actual
or prospective customer, contractor or supplier of the Company or any
Group Company.
4
<PAGE>
3.6 The Director shall not during the term of this Agreement without the
consent of the Board seek or accept from any actual or prospective
customer, contractor or supplier of the Company or any Group Company
any gift, gratuity or benefit of more than a trivial value or any
hospitality otherwise than properly in the performance of his duties
to the Company or any Group Company of a kind and value not lavish,
extravagant or inappropriate.
3.7 The Company may during any period of notice to terminate the
employment of the Director under this Agreement or for the purpose of
investigating a complaint against the Director or otherwise where in
the opinion of the Board the interests of the Company so require
suspend or exclude the Director for any period not exceeding six
months from the performance of his duties on full salary and with full
entitlements to other benefits and require the Director to stay away
from any premises of the Company or any Group Company and to have no
contact with all or any officers, employees, agents, customers,
clients, suppliers or other parties involved, engaged or interested in
the operation of the business of the Company or any Group Company or
any part of them or any joint venture in which they may be engaged or
interested and during the whole or any part of any period of
suspension to undertake such work as the Board may reasonably require
and the parties agree and declare that there is no obligation on the
part of the Company to provide the Director with work to do.
4 OFFICE OF DIRECTOR
During his employment under this Agreement the Director shall not
(without prejudice to the Director's rights and remedies under this
Agreement and at common law in circumstances constituting constructive
dismissal) do anything that would cause him to be disqualified from
continuing to act as a director of the Company.
5 REMUNERATION
5.1 Salary
The Director shall be paid by way of remuneration for his services
under this Agreement a salary of (pound)83,000 per annum (or such
greater amount as the Board may in its discretion from time to time
decide or award pursuant to the Company's annual salary review)
inclusive of any directors' fees payable to him under the articles of
association of the Company and any Group Companies. The salary shall
5
<PAGE>
accrue from day to day and be paid by equal monthly instalments in
arrear on or about the 25th day (excluding weekends and public
holidays) of every month or otherwise in accordance with the Company's
policy from time to time. The Company reserves the right to deduct or
withhold from the Director's salary any amounts owing to the Company
by the Director.
5.2 Car Allowance
The Company shall pay the Director a yearly car allowance of
(pound)6,800 payable together with his salary.
5.3 Schemes
5.3.1 The Director shall be entitled to participate as from the date of this
Agreement in The Peptide Therapeutics 1996 Unapproved Share Option
Scheme and The Peptide Therapeutics 1995 Savings-Related Share Option
Scheme and The Peptide Therapeutics 1996 Approved Share Option Scheme
(together the "Scheme") for the time being in force subject to the
rules applicable to the Schemes as amended or varied from time to time
at the Company's discretion and subject always in the case of the
Peptide Therapeutics 1995 Unapproved Share Option Scheme to the
exercise by the Remuneration Committee of its discretion to grant
options under that scheme.
5.3.2 The Director shall have no right to membership of any of the Schemes
other than by virtue of his employment and any such right or benefit
which might have vested in or accrued to the Director under the
Schemes shall laps and be disregarded for the purpose of calculating
any claim by the Director arising from the termination of the
employment.
5.4 Pension Scheme
The Director shall he entitled to benefits under the Pembrokeshire
Pension Plan and the Company shall, subject to applicable Inland
Revenue limits and requirements concerning employer contributions
during the employment of the Director under this Agreement, pay as a
contribution into the Pembrokeshire Pension Plan an amount per annum
equal to 10 per cent of the Director's basis salary at the
commencement of that year.
6
<PAGE>
6 EXPENSES AND COMMUNICATIONS
6.1 The Company shall by way of reimbursement pay or procure to be paid to
the Director all reasonable travelling, hotel, entertainment and other
expenses (including payment of business mileage at the Company's rate
applying from time to time) properly incurred by him in or about the
performance of his duties under this Agreement provided that the
Director supplies such evidence as to such expenses as the Board may
reasonably require.
6.2 The Company shall provide the Director with a telephone and facsimile
in his private residence and also a mobile telephone and shall pay all
rental and call charges properly incurred in respect thereof provided
always that the Director it required by the Company provides evidence
reasonably satisfactory to the Finance Director or Chairman of the
rental and call charges incurred.
7 LIFE ASSURANCE
The Company shall during the term of this Agreement provide the
Director with life assurance cover which in the event of the
Director's death while employed under this Agreement shall pay to the
Director's chosen dependants a sum equal to four times his basic
annual salary, subject to any limits, terms and conditions imposed by
statute or the relevant insurance company including the requirement
for a medical examination.
8 MEDICAL EXPENSES INSURANCE AND PHI
8.1 The Company shall during the term of this Agreement cover the cost of
membership for the Director and the Director's spouse and dependants
of an appropriate private patients medical plan with "BUPA" or such
other reputable medical expenses insurance scheme as the Company shall
decide from time to time, subject to the rules of the scheme and the
approval of his application for membership by the relevant insurer.
8.2 The Company shall effect permanent health insurance ("PHI") for the
benefit of the Director upon such terms as shall provide for the
payment to the Director throughout the period of his ill-health or
disability with the exception of the first 26 consecutive weeks
thereof of sums at a rate per annum equal to 75 per cent of
pensionable
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<PAGE>
salary on the date such absence commences less the amount of a single
person's state sickness benefits.
9 HOLIDAYS
9.1 The Director shall be entitled to not less than 25 days paid holiday
in each holiday year to be taken at a time or times agreed with the
Board in addition to any usual statutory, bank or other public
holidays observed by the Company, or if so required by the Company, on
other days in lieu of them. The "holiday year" of the Company shall be
1st January to 31st December.
9.2 Holiday entitlement shall accrue on a monthly basis throughout the
whole holiday year. Any holiday entitlement not taken by 1st January
in the next holiday year will he lost.
9.3 On the termination of the Director's employment under this Agreement
whenever and however it may occur the Director shall be entitled to be
paid in lieu of any holiday entitlement outstanding or as the case may
be shall be obliged to repay to the Company salary in respect of any
holiday taken in excess of his actual entitlement in each case on a
proportional basis.
9.4 The Company may require the Director to take all or part of any
outstanding holiday entitlement during a period of notice to terminate
the employment under this Agreement.
10 SICKNESS INJURY AND ABSENCE
10.1 If the Director should he prevented by sickness injury or other cause
from performing his duties under this Agreement he shall notify the
Company as soon as possible and if this incapacity continues for seven
(7) or more consecutive days he shall submit a medical practitioner's
certificate to the Company on the eighth day and weekly thereafter.
10.2 Subject to the other provisions of this Clause, the Director shall if
incapacitated sickness or injury from performing his duties be
entitled to his full remuneration and benefits during a period of such
incapacity not exceeding 26 weeks in any period of 12 months provided
that the remuneration so paid to the Director shall be taken to
8
<PAGE>
11.2 The Director shall not during his employment under this Agreement, or
at any time after, use or exploit except for the benefit of the
Company or disclose to any third party any Confidential Information
except:
11.2.1 during his employment under this Agreement in the
performance of his duties; or
11.2.2 with the express written consent of the Board; or
11.2.3 in compliance with an order of a competent court.
11.3 The Director shall during his employment under this Agreement use
reasonable endeavours to prevent the unauthorised use or disclosure of
any Confidential Information by any other officer, employee or agent
of the Company and shall be under an obligation to report to the Board
any such unauthorised use or disclosure of any Confidential
Information which comes to his knowledge.
12 OTHER BUSINESS INTERESTS
The Director shall not during the period of his employment under this
Agreement and for a period of 12 months after ceasing to be employed
under this Agreement without the written consent of the Board be
directly or indirectly engaged, concerned or interested whether as
director, officer, employee, agent, shareholder, partner, proprietor
or otherwise in any business any of the activities of which is in
competition with any of the activities of the Company or any Group
Company provided that nothing in this Clause shall preclude the
Director from holding or being otherwise interested in shares or
securities of any company quoted on any recognised investment exchange
so long as the interest of the Director in such shares or other
securities does not extend to more than five (5) per cent, of any
class of shares or other securities in the relevant company and
provided that the Director shall make full and accurate disclosure to
the Board upon request of all shares and securities which he holds or
in which he is beneficially interested.
13 COPYRIGHT INVENTIONS AND DESIGN RIGHT
13.1 It shall be a duty of the Director during his employment under this
Agreement to consider and keep under review the ways if any in which
the products, services,
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<PAGE>
processes, equipment, systems and activities of the Company might be
improved and/or enhanced.
13.2 If during his employment hereunder the Director alone or with others
makes or discovers any Invention he shall promptly disclose it to the
Board giving full particulars of it including all necessary drawings
models and specifications.
13.3 The Director agrees and acknowledges that because of the nature of his
duties and the responsibilities arising from them he has a special
obligation to further the interests of the Company so that all
Inventions made by the Director in the performance of his duties or as
a result of any special project for the Company outside the scope of
his normal duties and all rights in such Inventions shall belong to
the Company.
13.4 The Director shall promptly disclose to the Board any Copyright Work
and/or Design Right Work made by him during his employment hereunder
and hereby acknowledges that by virtue of his employment the copyright
and/or design right in any such Work vests automatically and forthwith
in the Company. If the Company shall elect to name the Director as the
author of any such Copyright Work and/or Design Right Work then the
Director hereby waives all and any moral rights in such Work and
without prejudice to the generality of the above the right to object
to derogatory treatment the Work and the Company may in its absolute
discretion make all such additions and alterations to and deletions
from and adaptations of such Copyright Work and Design Right Work as
it shall think fit.
13.5 The Director shall at the cost of the Company on demand execute all
such documents and do all such other acts as the Company shall require
to enable the Company or its nominee to obtain the full benefit of any
Invention, Copyright Work and Design Right Work to which the Company
is entitled and all rights therein and to secure such patent, utility
model, copyright or design registration or similar protection in any
part of the world as the Company may consider appropriate.
13.6 The Director hereby irrevocably appoints the Company to be his
attorney in his name and on his behalf to execute all such documents
and do all such acts as may be necessary or desirable to give effect
to this clause.
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13.7 If the Director shall during his employment hereunder make or discover
any Invention or make, originate, conceive or write any Copyright Work
or Design Right Work in which despite the previous provisions of this
Clause any intellectual property rights belong to the Director not the
Company then the Director shall if so required by the Board negotiate
in good faith with the Company for the assignment or licensing to the
Company or its nominee of such rights upon such terms as shall fairly
represent the market value of such rights and shall be agreed between
the parties or in default of agreement determined by a Member of the
Chartered Institute of Patent Agents who shall be nominated in default
of agreement by the President of that Institute for the time being and
who shall act as an expert not an arbitrator and whose decision shall
save for fraud or error manifest on the face of it be binding upon the
parties.
13.8 The Company shall not be under any obligation to take any step to
register any patent or other right in respect of or to develop or
exploit any Invention or Copyright or Design Right Work made
discovered originated conceived or written by the Director.
13.9 Nothing in this Clause shall he taken to limit or derogate from the
obligations of the Director under Clause 11 above.
14 AUTOMATIC TERMINATION
The employment of the Director under this Agreement shall terminate
automatically in the event of his ceasing to be a director of the
Company and in that event the Director shall have no claim for damages
against the Company unless he shall so cease:-
14.1 by reason of his not being re-elected as a director of the Company at
the annual general meeting of the Company held next after the
commencement of his employment: or
14.2 by reason of his not being re-elected as a director of the Company at
any annual general meeting of the Company at which he is to retire by
rotation; or
14.3 by virtue of a resolution passed by the members of the Company in
general to remove him as a director; or
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14.4 by virtue of his removal from his office as a director by notice in
writing signed by all his co-directors served in accordance with the
Company's Articles of Association; or
14.5 in circumstances where he is either wrongfully or constructively
dismissed by the Company.
and at the time of such failure to re-elect or of such removal the
Company is not otherwise entitled to determine his employment under
this Agreement.
15 SUMMARY TERMINATION
The employment of the Director under this Agreement may be terminated
by the Company immediately without notice if:-
15.1 the Director is or becomes incapacitated under this Agreement for
one hundred and eighty (180) working days in aggregate in any period
of twelve (12) months;
15.2 the Director shall be or become of unsound mind or be or become a
patient under the Mental Health Act 1983 or for any purpose of any
statute relating to mental health; or
15.3 the Director shall enter into any composition or arrangement with or
for the benefit of his creditors including a voluntary arrangement
under the Insolvency Act 1986; or
15.4 the Director shall be made the subject of a bankruptcy order or
administration under or shall apply for an interim receiving order
under the Section 253 Insolvency Act 1986; or
15.5 the Director shall commit any act of dishonesty whether relating to
the Company, any Group Company, any employee of the Company or any
Group Company or otherwise; or
15.6 the Director is guilty of any gross misconduct or commits any serious
or persistent breach of any of his obligations to the Company or any
Group Company whether under this Agreement or otherwise or refuses or
neglects to comply with any lawful
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orders or directions given to him by the Company consistent with the
terms of this Agreement; or
15.7 the Director is guilty of any conduct tending to bring himself, the
Company or any Group Company into serious disrepute; or
15.8 the Director is prohibited or disqualified from holding the office
which he holds in the Company or any Group Company in which he is
concerned or interested or if he resigns from any such office without
the prior written consent of the Company or any Group Company of which
he has been appointed a director; or
15.9 the Director is convicted of any criminal offence for which a
custodial sentence may be imposed (other than an offence under the
Road Traffic legislation in the United Kingdom or elsewhere for which
a fine or non-custodial penalty is imposed); or
15.10 the Director shall come to be addicted to or habitually under the
influence of any drug (not being a drug prescribed for him by a
medical doctor for the treatment of a condition other than drug
addiction) the possession of which is controlled by law; or
15.11 the Director is convicted of any offence regarding insider dealing
under the Criminal Justice Act 1993 or under any other present or
future statutory enactment or regulation relating to insider dealing.
16 TERMINATION
16.1 Upon the termination of the Director's employment under this Agreement
for whatever reason whether under Clause 14 or Clause 15:-
16.1.1 the Director shall at the request of the Company forthwith
resign from any and all offices whether as director or
otherwise which he holds in the Company and in any Group
Company without prejudice to any other rights accruing to
either party hereto and the Director hereby irrevocably
authorises the Company to appoint a person in his name and
on his behalf to execute all documents including any
resignations and to do all such other acts as are necessary
to give effect to this provision;
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16.1.2 the Director shall deliver to the Company forthwith all
books, documents, records, statistics, accounts and other
materials or data which is the property of the Company or
any Group Company including all copies in whatever form and
all keys and other property of the Company or any Group
Company then in his possession; and
16.1.3 the termination shall not affect those terms of this
Agreement which are expressed to have effect thereafter and
shall be without prejudice to any accrued rights or remedies
of the parties.
16.2 The Company reserves the right to make a payment in lieu of any period
of notice to terminate the employment of the Director under this
Agreement and to deduct sums equivalent to tax and national insurance
payable on any such payment.
16.3 The Director shall not at any time make any untrue statement in
relation to the Company or any Group Company, and in particular shall
not in the event of termination of his employment under this Agreement
wrongfully represent himself as being employed or connected with the
Company or any Group Company.
16.4 It shall be a fundamental term of this Agreement that the Director
shall comply at all times with the "Model Code on Directors Dealings
in Securities" as set out in Chapter 16 of the Listing Rules of the
London Stock Exchange issued from time to time (the "Model Code") and
it shall be the responsibility of the Director to make himself aware
of time provisions of the Model Code and the parties agree that any
breach by the Director of the Model Code shall at the election of the
Board be gross misconduct for the purpose of Clause 15.6. If the
Director or any other person shall effect any transaction which in the
reasonable judgement of the Board constitutes a breach on the part of
the Director of the Model Code then without prejudice to its rights
under Clause 16.1 of this Agreement the Board may by notice in writing
to the Director require him within a time stipulated in the notice to
reverse the transaction and account to a registered charity nominated
in the notice by the Board for any profit made by the Director or any
other person upon the transaction but the Company shall not be liable
to indemnify the Director or any other person for any loss made upon
such transaction.
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17 COVENANTS BY THE DIRECTOR
17.1 The Director covenants with the Company that for a period of 12 months
after the termination of his employment with the Company without the
prior written consent of the Board he will not on his own behalf or by
an agent or on behalf of any person, firm or company directly or
indirectly:-
17.1.1 canvass, solicit, deal with or entice away or attempt to
canvass, solicit, deal with or entice away any of the
business of (a) any customer of the Company or any Group
Company whether a person, firm, company, association or
government body with whom and in relation to which business
the Director shall have had dealings in the course of his
employment at any time in the period of 12 months preceding
the date of termination of his employment and/or (b) any
prospective customer of the Company or any Group Company
with which the Director shall have been directly or
indirectly involved at any time in the period of 12 months
preceding the date of termination of his employment in
seeking to obtain business for the Company or any Group
Company from any such potential customer; and
17.1.2 endeavour to entice away any person who was at the date of
such termination employed or engaged by the Company or any
Group Company in a senior capacity and with whom the
Director had dealings during the course or his employment
provided that nothing in this Clause shall prohibit in the seeking or
procuring of orders or the doing of business not relating or not
similar to the business of the Company or any Group Company.
17.2 If any covenant contained in this Clause 17 or Clause 12 shall be held
invalid or unenforceable or void but would not be so held if some part
of it were deleted, modified or varied then such provision shall apply
with such deletion, modification or variation as may be necessary to
make it valid and effective.
16
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18 RECONSTRUCTION OR AMALGAMATION
If the employment of the Director under this Agreement is terminated
by reason of the liquidation of the Company for the purpose of
reconstruction or amalgamation or other reconstructions of the Company
not involving a liquidation and the Director is offered employment
with any company, concern or undertaking resulting from the
reconstruction or amalgamation on terms and conditions not less
favourable than the terms of this Agreement then the Director shall be
obliged to accept such offer and shall have no claim against the
Company in respect of the termination of his employment under this
Agreement.
19 NOTICES
19.1 Any notice required or permitted to be given under this Agreement
shall be given in writing, delivered personally or sent by first class
pre-paid recorded delivery post (air mail if overseas) or by facsimile
to the party (provided the original is put in the post on the same
day) due to receive such notice at, in the case of the Company, its
registered office from time to time and, in the case of the Director
his address as set out in this Agreement (or such address as he may
have notified to the Company in accordance with this Clause).
19.2 Any notice delivered personally shall be deemed to be received when
delivered to the relevant address as provided in Clause 19.1 and any
notice sent by pre-paid recorded delivery post shall be deemed (in the
absence of evidence of earlier receipt) to be received 2 days after
posting (6 days if sent by air mail) and in proving the time of
despatch it shall be sufficient to show that the envelope containing
such notice was properly addressed, stamped or franked and posted. A
notice sent by facsimile shall be deemed to have been received on
receipt by the sender of a confirmatory facsimile transmission report
(provided the original was put in the post on the same day).
20 STATUTORY AND OTHER INFORMATION
Schedule 1 to this Agreement sets out information required to be given
to the Director by the Employment Rights Act 1996 so far as such terms
are not set out in the body of this Agreement.
17
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21 MISCELLANEOUS
21.1 This Agreement is governed by and shall be construed in accordance
with the laws of England.
21.2 The parties to this Agreement submit to the exclusive jurisdiction of
the English courts regarding any dispute or claim arising under this
Agreement.
21.3 No amendment to this Agreement shall he effective unless in writing
and signed by the Director and by or on behalf of the Company (other
than by the Director).
21.4 No waiver of any provision of this Agreement shall be effective unless
made in writing and signed by the Director and by or on behalf of the
Company (other than by the Director).
22 PREVIOUS AGREEMENTS
As from the date of this Agreement all previous agreements between the
Company or any Group Company and the Director relating to the
employment of the Director, shall be deemed to have been terminated
and shall cease to have effect but without prejudice to any accrued
right of the parties up to the date of termination.
IN WITNESS WHEREOF this Agreement has been duly executed as a deed by the
parties and is intended to be and is hereby delivered on the date first above
written
18
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SCHEDULE 1
(Statutory Information)
1. Continuous Employment: A period of employment with the Company's
subsidiary, Peptide Therapeutics Limited, does count as part of the
Director's continuous period of employment with this Company. Such
period commenced on 4th January 1994.
2. Hours of Work: The Director's normal hours of work are seven (7) hours
per day Monday to Friday inclusive, with a one hour break, between the
hours of 09.00 and 17.00, and such further hours as are reasonably
necessary for the performance of his duties.
3. Pensions: No contracting-out certificate is in force in respect of the
Director's employment under this Agreement.
4. Disciplinary procedure: The Director shall be expected to exhibit a
high standard of propriety in all his dealings with and in the name of
the Company and any Group Company. Any disciplinary procedures
undertaken by the Company shall at all times be carried out in a fair
and reasonable manner. The Director shall be informed of any complaint
against him, and the Director shall be given an opportunity to state
his side of the case to the Board. The Director shall have the option
of having a representative with him.
5. Grievance procedure: Subject to the Company's general policy
concerning grievance procedures from time to time in force, any
grievance should first be raised with the Chairman of the Board,
however if the grievance concerns the Chairman, the matter should be
raised with another Board member. In order to avoid misunderstandings
all grievances should be recorded in writing. If the matter cannot be
resolved then the grievance should be taken to the Board for
resolution, with the decision of the Board being final.
6. Collective agreements: There are no collective agreements which
directly affect the terms and conditions of the employment of the
Director.
19
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EXECUTED (but not delivered )
until the date hereof) AS A )
DEED by PEPTIDE )
THERAPEUTICS GROUP plc )
/s/ [ILLEGIBLE] Signature of Director
- ---------------------
[ILLEGIBLE] Name of Director
- ---------------------
/s/ [ILLEGIBLE] Signature of Director/Secretary
- ---------------------
[ILLEGIBLE] Name of Director/Secretary
- ---------------------
SIGNED (but not delivered )
until the date hereof) )
AS A DEED by )
NICOLAS HIGGINS )
in the presence of:- )
/s/ [ILLEGIBLE] Signature of Witness
- ---------------------
[ILLEGIBLE] Name of Witness
- ---------------------
[ILLEGIBLE] Address of Witness
- ---------------------
[ILLEGIBLE]
- ---------------------
[ILLEGIBLE]
- ---------------------
[ILLEGIBLE]
- ---------------------
[ILLEGIBLE] Occupation of Witness
- ---------------------
21
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[LETTERHEAD OF PEPTIDE THERAPEUTICS]
Nicolas Higgins 18th September 1998
6 South Green Road
Newnham
Cambridge
C138 9JP
Dear Nick,
I am pleased to inform you that the Remuneration Committee agreed that your
salary would increase to (pound)120,000 from 1st July 1998 and your car
allowance be increased to (pound)10,000 per annum. These payments will be
reflected in your September salary.
Yours sincerely,
/s/ Dr. John Brown
Dr. John Brown
Chief Executive
<PAGE>
Exhibit 10.17
DATED 1 MARCH 1997
(1) PEPTIDE THERAPEUTICS GROUP plc
- and -
(2) GORDON CAMERON
------------------------------------
DIRECTOR'S SERVICE AGREEMENT
------------------------------------
PINSENT o CURTIS
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
CLAUSE PAGE
<S> <C>
1 Definitions and Interpretation 1
2 Appointment and Term of Employment 3
3 Duties 3
4 Office of Director 5
5 Remuneration 5
5.1 Salary 5
5.2 Car Allowance 5
5.3 Schemes 6
5.4 Pension Scheme 6
6 Expenses and Communications 6
7 Life Assurance 7
8 Medical Expenses Insurance and PHI 7
9 Holidays 7
10 Sickness Injury and Absence 8
11 Confidential Information 9
12 Other Business Interests 10
14 Automatic Termination 12
15 Summary Termination 12
16 Termination 14
17 Covenants by the Director 15
18 Reconstruction or Amalgamation 16
19 Notices 16
20 Statutory and Other Information 17
21 Miscellaneous 17
SCHEDULES
Statutory Information 18
Director's Duties 19
</TABLE>
<PAGE>
THIS AGREEMENT is made the FIRST day of MARCH 1997
BETWEEN:
(1) PEPTIDE THERAPEUTICS GROUP plc a company incorporated in England and Wales
(registered no. 2863682), whose registered office is at 321 Cambridge
Science Park, Milton Road, Cambridge, CB4 4WG (the "Company"); and
(2) GORDON CAMERON of 6 Kimberley Road, Cambridge, CB4 1HH (the "Director").
IT IS AGREED that:-
1 DEFINITIONS AND INTERPRETATION
1.1 In this Agreement:-
"associated company" means a company which is not a subsidiary of another
but more than twenty (20) per cent of the equity share capital of which is
owned by that other;
"Board" means the board of directors of the Company for the time being and
includes where the context so permits any committee of the board of
directors including without limitation the Remuneration Committee and the
Audit Committee;
"Copyright Work" and "Design Right Work" mean respectively any copyright
work or design right work originated, conceived, written or made by the
Director alone or with others which relates or may relate to any product,
service, process, equipment, system or activity of the Company;
"equity share capital" has the meaning given to it in Section 744 of the
Companies Act 1985;
"Group" means:-
(i) the Company;
(ii) any holding company of the Company;
(iii) any subsidiary of the Company or its holding company or any
associated company or any of them;
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(iv) any subsidiary undertaking of the Company or its holding company or
any associated company of any of them; and
(v) any associated company of the Company or its holding company or any
subsidiary of any of them:
"Group Company" means the Company and any other member of the Group for
the time being;
"holding company" has the meaning given in Section 736 Companies Act 1985;
"incapacity" means any sickness, injury, or other like cause
incapacitating the Director from performing his duties under this
Agreement and "incapacitated" shall be construed accordingly;
"Inventions" means any invention, discovery or improvement including,
without prejudice to the generality of the above, any know-how, design
process, drawing, formula, computer program or specification which relates
or may relate to any product, service, process, equipment, system or
activity of the Company;
"recognised investment exchange" has the meaning given in Section 207 of
the Financial Services Act 1986:
"subsidiary" has the meaning given in Section 736 Companies Act 1985; and
"subsidiary undertaking" has the meaning given in Section 258 of the
Companies Act 1985.
1.2 Any reference to a statute or statutory provision shall be deemed to
include a reference to any statutory modification or re-enactment of it or
any enactment replacing it and any instrument order or regulation made
under such statute or statutory provision.
1.3 References to Clauses and Schedules are to clauses of and the schedules to
this Agreement.
1.4 The headings in this Agreement are for convenience only and shall not
affect its construction or interpretation.
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2 APPOINTMENT AND TERM OF EMPLOYMENT
2.1 The Director shall serve the Company as Finance Director of the Company.
2.2 The employment of the Director under this Agreement shall (subject to
termination as provided in Clause(s) 14 and l5) continue until terminated
by either party giving to the other not less than 12 months' notice in
writing.
2.3 Notwithstanding any other terms in this Agreement, the Director shall
retire at the Company's normal retirement age, which is at present 65 (the
"Retirement Age") whereupon this Agreement shall terminate. The Company
may in its absolute discretion continue to employ the Director after the
Retirement Age upon such terms as the parties to this Agreement shall
agree. Should the Retirement Age conflict with any statutory or regulatory
provision applicable to the Company, the Retirement Age shall he varied to
conform with such provision.
3 DUTIES
3.1 The Director shall during his employment under this Agreement:-
3.1.1 exercise the powers and perform the duties normally required of a
person holding the post occupied by the Director and appropriate to
his status, qualifications and experience including but without
prejudice to the generality of the foregoing the duties set out in
Schedule 2 and such other duties as the Board may from time to time
properly and reasonably assign to him either in his capacity as
Director or in connection with the business of the Company or the
business of any one or more Group Companies (including serving on
the board of or any other executive body or any committee of such
Group Companies):
3.1.2 use all proper and reasonable endeavours to promote, develop and
extend the business of the Company and the Group Companies; and
3.1.3 at all times and in all respects conform to and comply with the
proper and reasonable directions and regulations of the Board and
shall, except during holidays and periods of absence due to ill
health or other incapacity, devote
3
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his full time and attention to the performance of his duties under
this Agreement.
3.2 The Director's normal place or work shall be anywhere in the United
Kingdom which the Board may require for the proper performance and
exercise of his duties and powers and provided he may be required by the
Company to travel (whether within or outside the United Kingdom) on the
business of the Company or any Group Company.
3.3 If the Company requires the Director to work permanently at a place which
necessitates a move from his present address the Company will reimburse
the Director for all removal expenses directly and reasonably incurred as
a result of the Company's requirement.
3.4 The Director shall keep the Board properly informed (in writing if so
required by the Board) of his conduct of all business on behalf of the
Company and any Group Company and shall give to the Board all such
information as to the affairs of the Company and the Group as it shall
properly and reasonably require.
3.5 The Director shall not during the term of this Agreement without the
written consent of the Board make or seek to make on behalf of himself or
(otherwise than properly in the performance of his duties to the Company)
on behalf of any other person, firm or company any contract or other
arrangement of a commercial nature with any actual or prospective
customer, contractor or supplier of the Company or any Group Company.
3.6 The Director shall not during the term of this Agreement without the
consent of the Board seek or accept from any actual or prospective
customer, contractor or supplier of the Company or any Group Company any
gift, gratuity or benefit of more than a trivial value or any hospitality
otherwise than properly in the performance of his duties to the Company or
any Group Company of a kind and value not lavish, extravagant or
inappropriate.
3.7 The Company may during any period of notice to terminate the employment of
the Director under this Agreement or for the purpose of investigating a
complaint against the Director or otherwise where in the opinion of the
Board the interests of the Company so require suspend or exclude the
Director for any period not exceeding six months from the performance of
his duties on full salary and with full entitlements to other benefits and
require the Director to stay away from any premises of the Company
4
<PAGE>
or any Group Company and to have no contact with all or any officers,
employees, agents, customers, clients, suppliers or other parties
involved, engaged or interested in the operation of the business of the
Company or any Group Company or any part of them or any joint venture in
which they may be engaged or interested and during the whole or any part
of any period of suspension to undertake such work as the Board may
reasonably require and the parties agree and declare that there is no
obligation on the part of the Company to provide the Director with work to
do.
4 OFFICE OF DIRECTOR
During his employment under this Agreement the Director shall not (without
prejudice to the Director's rights and remedies under this Agreement and
at common law in Circumstances constituting constructive dismissal) do
anything that would cause him to be disqualified from continuing to act as
a director of the Company.
5 REMUNERATION
5.1 Salary
The Director shall he paid by way of remuneration for his services under
this Agreement a salary of (pounds)83,600 per annum (or such greater
amount as the Board may in its discretion from time to time decide or
award pursuant to the Company's annual salary review) inclusive of any
directors' fees payable to him under the articles of association of the
Company and any Group Companies. The salary shall accrue from day to day
and be paid by equal monthly instalments in arrear on or about the 25th
day (excluding weekends and public holidays) of every month or otherwise
in accordance with the Company's policy from time to time. The Company
reserves the right to deduct or withhold from the Director's salary any
amounts owing to the Company by the Director.
5.2 Car Allowance
The Director shall during the term of this Agreement be paid a car
allowance of (pounds)6,800 per annum (or such greater amount as the Board
may in its discretion from time to time decide or award) to contribute
towards the capital cost of a motor vehicle, such allowance to be paid
monthly at the same time as salary.
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5.3 Schemes
5.3.1 The Director shall be entitled to participate as from the date of this
Agreement in The Peptide Therapeutics 1995 Unapproved Share Option Scheme,
The Peptide Therapeutics 1996 Approved Share Option Scheme and The Peptide
Therapeutics 1995 Savings-Related Share Option Scheme (together the
"Schemes") for the time being in force subject to the rules applicable to
the Schemes as amended or varied from time to time at the Board's
discretion and subject always in the case of the Peptide Therapeutics 1995
Unapproved Share Option Scheme and The Peptide Therapeutics 1996 Approved
Share Option Scheme to the exercise by the Board of its discretion to
grant options under that scheme.
5.3.2 The Director shall have no right to membership of any of the Schemes other
than by virtue of his employment and any such right or benefit which might
have vested in or accrued to the Director under the Schemes shall lapse
and be disregarded for the purpose of calculating any claim by the
Director arising from the termination of the employment.
5.4 Pension Scheme
The Company shall, subject to applicable Inland Revenue limits and
requirements concerning employer contributions during the employment of
the Director under this Agreement, pay as a contribution into The Personal
Pension Plan of the Director an amount per annum equal to 10 per cent. of
the Director's basic salary at the commencement of that year.
6 EXPENSES AND COMMUNICATIONS
6.1 The Company shall by way of reimbursement pay or procure to be paid to the
Director all reasonable travelling, hotel, entertainment and other
expenses (including payment of business mileage at the Company's rate
applying from time to time) properly incurred by him in or about the
performance of his duties under this Agreement provided that the Director
supplies such evidence as to such expenses as the Board may reasonably
require.
6.2 The Company shall provide the Director with a telephone and facsimile in
his private residence and also a mobile telephone and shall pay all rental
and call charges properly incurred in respect thereof provided always that
the Director if required by the
6
<PAGE>
Company provides evidence reasonably satisfactory to the Chairman of the
rental and call charges incurred
7 LIFE ASSURANCE
The Company shall during the term of this Agreement provide the Director
with life assurance cover which in the event of the Director's death while
employed under this Agreement shall pay to the Director's chosen
dependants a sum equal to four times his basic annual salary, subject to
any limits, terms and conditions imposed by statute or the relevant
insurance company including the requirement for a medical examination.
8 MEDICAL EXPENSES INSURANCE AND PHI
8.1 The Company shall during the term of this Agreement cover the cost of
membership for the Director and the Director's spouse and dependants of an
appropriate private patients medical plan with "BUPA" or such other
reputable medical expenses insurance scheme as the Company shall decide
from time to time, subject to the rules of the scheme and the approval of
his application for membership by the relevant insurer.
8.2 The Company shall effect permanent health insurance ("PHI") for the
benefit of the Director upon such terms as shall provide for the payment
to the Director throughout the period of his ill-health or disability with
the exception of the first 26 consecutive weeks thereof of sums at a rate
per annum equal to 75 per cent. of pensionable salary on the date such
absence commences less the amount of a single person's state sickness
benefits.
9 HOLIDAYS
9.1 The Director shall be entitled to not less than 25 days' paid holiday in
each holiday year to be taken at a time or times agreed with the Board in
addition to any usual statutory, bank or other public holidays observed by
the Company, or if so required by the Company, on other days in lieu of
them. The "holiday year" of the Company shall be 1st January to 31st
December.
9.2 Holiday entitlement shall accrue on a monthly basis throughout the whole
holiday year. Any holiday entitlement in excess of 5 days not taken by 1st
January in the next holiday year will be lost. Any holiday entitlement (up
to a maximum of 5 days) carried into
7
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the next following holiday year must be taken in full by 31st March of
that year and if not will be lost.
9.3 on the termination the Director's employment under this Agreement whenever
and however it may occur the Director shall be entitled to be paid in lieu
of any holiday entitlement outstanding or as the case may be shall be
obliged to repay to the Company salary in respect of any holiday taken in
excess of his actual entitlement in each case on a proportional basis.
9.4 The Company may require the Director to take all or part of any
outstanding holiday entitlement during a period of notice to terminate the
employment under this Agreement.
10 SICKNESS INJURY AND ABSENCE
10.1 If the Director should be prevented by sickness, injury or other cause
from performing his duties under this Agreement he shall notify the
Company as soon as possible and if this incapacity continues for seven (7)
or more consecutive days he shall submit a medical practitioner's
certificate to the Company on the eighth day and weekly thereafter.
10.2 Subject to the other provisions of this Clause, the Director shall if
incapacitated by sickness or injury from performing his duties be entitled
to his full remuneration and benefits during a period or such incapacity
not exceeding 26 weeks in any period of 12 months provided that the
remuneration so paid to the Director shall be taken to include such
statutory sick pay ("SSP") if any as he is entitled to and that the
Company shall be entitled to deduct from such remuneration any social
security, national insurance or other benefit apart from SSP to which the
Director is entitled whether such benefit is in fact claimed by the
Director or not. For the purposes of SSP entitlement, the Director could
qualify for payment on each day from Monday to Friday inclusive.
10.3 If the Director is incapacitated by reason of the actionable act or
default of a third party in respect of which damages are or may be
recoverable then the Director shall promptly notify the Board and shall
keep the Board fully informed of the progress of any claim or action in
respect of such act or default. Remuneration and benefits received by the
Director during any consequent period of incapacity shall be by way of
loan by the Company and the Director shall be obliged if so required by
the Board to repay to the
8
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Company the amount of such remuneration and the value of such benefits up
to a maximum amount equal to any damages or compensation received by the
Director from the third party or any relevant insurer or indemnifier
under any judgment compromise or settlement after the deduction of the
legal costs of the Director of such claim or action.
10.4 As soon as practicable following the Director's return to work after any
period of absence or seven days or less which or any part of which has not
been authorised by the Company the Director shall if so required by the
Board complete the Company's form of self-certification for SSP purposes.
11 CONFIDENTIAL INFORMATION
11.1 In this Agreement "Confidential Information" means all information
relating to the business, finances, transactions, affairs, products,
services, processes, equipment or activities of the Company and any other
Group Company which is designated by the Company and any other Group
Company as confidential and all information relating to such matters which
comes to the knowledge of the Director in the course of the employment
under this Agreement and which by reason of its character and/or the
manner of its coming to his knowledge is evidently confidential provided
that information shall not be or shall cease to be Confidential
Information if and to the extent that it comes to be in the public domain
otherwise than as a result of the unauthorised act or default of the
Director.
11.2 The Director shall not during his employment under this Agreement, or at
any time after, use or exploit except for the benefit of the Company or
disclose to any third party any Confidential Information except:-
11.2.1 during his employment under this Agreement in the performance of
his duties; or
11.2.2 with the express written consent of the Board; or
11.2.3 in compliance with an order of a competent court.
11.3 The Director shall during his employment under this Agreement use
reasonable endeavours to prevent the unauthorised use or disclosure of any
Confidential
9
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Information by any other officer, employee or agent of the Company and
shall be under an obligation to report to the Board any such unauthorised
use or disclosure of any Confidential Information which comes to his
knowledge.
12 OTHER BUSINESS INTERESTS
The Director shall not during the period of his employment under this
Agreement and for a period of 12 months after ceasing to be employed under
this Agreement without the written consent of the Board be directly or
indirectly engaged, concerned or interested whether as director, officer,
employee, agent, shareholder, partner, proprietor or otherwise in any
business any of the activities of which is in competition with any of the
activities of the Company or any Group Company provided that nothing in
this Clause shall preclude the Director from holding or being otherwise
interested in shares or securities of any company quoted on any recognised
investment exchange so long as the interest of the Director in such shares
or other securities does not extend to more than five (5) per cent. of any
class of shares or other securities in the relevant company and provided
that the Director shall make full and accurate disclosure to the Board
upon request of all shares and securities which he holds or in which he is
beneficially interested.
13 COPYRIGHT INVENTIONS AND DESIGN RIGHT
13.1 It shall be a duty of the Director during his employment under this
Agreement to consider and keep under review the ways if any in which the
products, services, processes, equipment, systems and activities of the
Company might be improved and/or enhanced.
13.2 If during his employment hereunder the Director alone or with others makes
or discovers any Invention he shall promptly disclose it to the Board
giving full particulars of it including all necessary drawings models and
specifications.
13.3 The Director agrees and acknowledges that because of the nature of his
duties and the responsibilities arising from them he has a special
obligation to further the interests of the Company so that all Inventions
made by the Director in the performance of his duties or as a result of
any special project for the Company outside the scope of his normal
duties and all rights in such Inventions shall belong to the Company.
10
<PAGE>
13.4 The Director shall promptly disclose to the Board any Copyright Work
and/or Design Right Work made by him during his employment hereunder and
hereby acknowledges that by virtue of his employment the copyright and/or
design right in any such Work vests automatically and forthwith in the
Company. If the Company shall elect to name the Director as the author of
any such Copyright Work and/or Design Right Work then the Director hereby
waives all and any moral rights in such Work and without prejudice to the
generality of the above the right to object to derogatory treatment of the
Work and the Company may in its absolute discretion make all such
additions and alterations to and deletions from and adaptations of such
Copyright Work and Design Right Work as it shall think fit.
13.5 The Director shall at the cost of the Company on demand execute all such
documents and do all such other acts as the Company shall require to
enable the Company or its nominee to obtain the full benefit of any
Invention, Copyright Work and Design Right Work to which the Company is
entitled and all rights therein and to secure such patent, utility model,
copyright or design registration or similar protection in any part of the
world as the Company may consider appropriate.
13.6 The Director hereby irrevocably appoints the Company to be his attorney in
his name and on his behalf to execute all such documents and do all such
acts as may be necessary or desirable to give effect so this clause.
13.7 If the Director shall during his employment hereunder make or discover any
Invention or make, originate, conceive or write any Copyright Work or
Design Right Work in which despite the previous provisions of this Clause
any intellectual property rights belong to the Director not the Company
then the Director shall if so required by the Board negotiate in good
faith with the Company for the assignment or licensing to the Company or
its nominee of such rights upon such terms as shall fairly represent the
market value of such rights and shall be agreed between the parties or in
default of agreement determined by a Member of the Chartered Institute of
Patent Agents who shall be nominated in default of agreement by the
President of that Institute for the time being and who shall act as an
expert not an arbitrator and whose decision shall save for fraud or error
manifest on the face of it be binding upon the parties.
13.8 The Company shall not be under any obligation to take any step to register
any patent or other right in respect of or to develop or exploit any
Invention or Copyright or Design Right Work made discovered originated
conceived or written by the Director.
11
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13.9 Nothing in this Clause shall be taken to limit or derogate from the
obligations of the Director under Clause 11 above.
14 AUTOMATIC TERMINATION
The employment of the Director under this Agreement shall terminate
automatically, in the event of his ceasing to be a director of the Company
and in that event the Director shall have no claim for damages against the
Company unless he shall so cease;-
14.1 by reason of his not being re-elected as a director of the Company at the
annual general meeting of the Company held next after the commencement of
his employment; or
14.2 by reason or his not being re-elected as a director of the Company at any
annual general meeting of the Company at which he is to retire by
rotation; or
14.3 by virtue of a resolution passed by the members of the Company in general
meeting to remove him as a director; or
14.4 by virtue of his removal from his office as a director by notice in
writing signed by all his co-directors served in accordance with the
Company's Articles of Association; or
14.5 in circumstances where he is either wrongfully or constructively dismissed
by the Company,
and at the time of such failure to re-elect or of such removal the Company
is not otherwise entitled to determine his employment under this
Agreement.
15 SUMMARY TERMINATION
The employment of the Director under this Agreement may be terminated by
the Company immediately without notice if:-
15.1 the Director is or becomes incapacitated under this Agreement for one
hundred and eighty (180) working days an aggregate in any period of
twelve (12) months;
12
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15.2 the Director shall be or become of unsound mind or be or become a patient
under the Mental Health Act 1983 or for any purpose of any statute
relating to mental health; or
15.3 the Director shall enter into any composition or arrangement with or for
the benefit of his creditors including a voluntary arrangement under the
Insolvency Act l986; or
15.4 the Director shall be made the subject of a bankruptcy order or
administration order or shall apply for an interim receiving order under
the Section 253 Insolvency Act 1986; or
15.5 the Director shall commit any act of dishonesty whether relating to the
Company, any Group Company, any employee of the Company or any Group
Company or otherwise; or
15.6 the Director is guilty of any gross misconduct or commits any serious or
persistent breach of any of his obligations to the Company or any Group
Company whether under this Agreement or otherwise or refuses or neglects
to comply with any lawful orders or directions given to him by the Company
consistent with the terms of this Agreement; or
15.7 the Director is guilty of any conduct tending to bring himself, the
Company or any Group Company into serious disrepute; or
15.8 the Director is prohibited or disqualified from holding the office which
he holds in the Company or any Group Company in which he is concerned or
interested or if he resigns from any such office without the prior written
consent of the Company or any Group Company of which he has been appointed
a director; or
15.9 the Director is convicted of any criminal offence for which a custodial
sentence may be imposed (other than an offence under the Road Traffic
legislation in the United Kingdom or elsewhere for which a fine or
non-custodial penalty is imposed); or
15.10 the Director shall come to be addicted to or habitually under the
influence of any drug (not being a drug prescribed for him by a medical
doctor for the treatment of a condition other than drug addiction) the
possession of which is controlled by law; or
13
<PAGE>
15.11 the Director is convicted of any offence regarding insider dealing under
the Criminal Justice Act 1993 or under any other present or future
statutory enactment or regulation relating to insider dealing.
16 TERMINATION
16.1 Upon the termination of the Director's employment under this Agreement for
whatever reason whether under Clause 14 or Clause 15:-
16.1.1 the Director shall at the request of the Company forthwith resign
from any and all offices whether as director or otherwise which he
holds in the Company and in any Group Company without prejudice to
any other rights accruing to either party hereto and the Director
hereby irrevocably authorises the Company to appoint a person in
his name and on his behalf to execute all documents including any
resignations and to do all such other acts as are necessary to give
effect to this provision;
16.1.2 the Director shall deliver to the Company forthwith all books,
documents, records, statistics, accounts and other materials or
data which is the property of the Company or any Group Company
including all copies in whatever form and all keys and other
property of the Company or any Group Company then in his
possession; and
16.1.3 the termination shall not affect those terms of this Agreement
which are expressed to have effect thereafter and shall be without
prejudice to any accrued rights or remedies of the parties.
16.2 The Company reserves the right to make a payment in lieu of any period of
notice to terminate the employment or the Director under this Agreement
and to deduct sums equivalent to tax and national insurance payable on any
such payment.
16.3 The Director shall not at any time make any untrue statement in relation
to the Company or any Group Company, and in particular shall not in the
event of termination of his employment under this Agreement wrongfully
represent himself as being employed or connected with the Company or any
Group Company.
14
<PAGE>
16.4 It shall be a fundamental term of this Agreement that the Director shall
comply at all times with the "Model Code on Directors Dealings in
Securities" as set out in Chapter 16 of the Listing Rules of the London
Stock Exchange issued from time to time (the "Model Code") and it shall be
the responsibility of the Director to make himself aware of the provisions
of the Model Code and the parties agree that any breach by the Director of
the Model Code shall at the election of the Board be gross misconduct for
the purposes of Clause 15.6. If the Director or any other person shall
effect any transaction which in the reasonable judgement of the Board
constitutes a breach on the part of the Director of the Model Code then
without prejudice to its rights under Clause 16.1 of this Agreement the
Board may by notice in writing to the Director require him within a time
stipulated in the notice to reverse the transaction and account to a
registered charity nominated in the notice by the Board for any profit
made by the Director or any other person upon the transaction but the
Company shall not be liable to indemnify the Director or any other person
for any loss made upon such transaction.
17 COVENANTS BY THE DIRECTOR
17.1 The Director covenants with the Company that for a period of 12 months
after the termination of his employment with the Company without the prior
written consent of the Board he will not on his own behalf or by an agent
or on behalf of any person, firm or company directly or indirectly:-
17.1.1 canvass, solicit, deal with or entice away or attempt to canvass,
solicit, deal with or entice away any of the business of (a) any
customer of the Company or any Group Company whether a person,
firm, company, association or government body with whom and in
relation to which business the Director shall have had dealings in
the course of his employment at any time in the period of 12 months
preceding the date of termination of his employment and/or (b) any
prospective customer of the Company or any Group Company with whom
the Director shall have been directly or indirectly involved at any
time in the period of 12 months preceding the date of termination
of his employment in seeking to obtain business for the Company or
any Group Company from any such potential customer; and
17.1.2 endeavour to entice away any person who was at the date of such
termination employed or engaged by the Company or any Group Company
in a senior
15
<PAGE>
capacity and with whom the Director had dealings during the course
of his employment
provided that nothing in this Clause shall prohibit the seeking or
procuring of orders or the doing of business not relating or not similar
to the business of the Company or any Group Company.
17.2 If any covenant contained in this Clause 17 or Clause 12 shall be held
invalid or unenforceable or void but would not be so held if some part of
it were deleted, modified or varied then such provision shall apply with
such deletion, modification or variation as may be necessary to make it
valid and effective.
18 RECONSTRUCTION OR AMALGAMATION
If the employment of the Director under this Agreement is terminated by
reason of the liquidation of the Company for the purpose of reconstruction
or amalgamation or other reconstructions of the Company not involving a
liquidation and the Director is offered employment with any company,
concern or undertaking resulting from the reconstruction or amalgamation
on terms and conditions not less favourable than the terms of this
Agreement then the Director shall be obliged to accept such offer and
shall have no claim against the Company in respect of the termination of
his employment under this Agreement.
19 NOTICES
19.1 Any notice required or permitted to be given under this Agreement shall be
given in writing, delivered personally or sent by first class pre-paid
recorded delivery post (air mail if overseas) or by facsimile to the party
(provided the original is put in the post on the same day) due to receive
such notice at, in the case of the Company, its registered office from
time to time and, in the case of the Director his address as set out in
this Agreement (or such address as he may have notified to the Company in
accordance with this Clause).
19.2 Any notice delivered personally shall be deemed to be received when
delivered to the relevant address as provided in Clause 19.1 and any
notice sent by pre-paid recorded delivery post shall be deemed (in the
absence of evidence of earlier receipt) to be received 2 days after
posting (6 days if sent by air mail) and in proving the time of
16
<PAGE>
despatch it shall be sufficient to show that the envelope containing such
notice was properly addressed, stamped or franked and posted. A notice
sent by facsimile shall be deemed to have been received on receipt by the
sender of a confirmatory facsimile transmission report (provided the
original was put in the post on the same day).
20 STATUTORY AND OTHER INFORMATION
Schedule 1 to this Agreement sets out information required to be given to
the Director by the Employment Protection (Consolidation) Act 1978 so far
as such terms are not set out in the body of this Agreement.
21 MISCELLANEOUS
21.1 This Agreement is governed by and shall be construed in accordance with
the laws of England.
21.2 The parties to this Agreement submit to the exclusive jurisdiction of the
English courts regarding any dispute or claim arising under this
Agreement.
21.3 No amendment to this Agreement shall be effective unless in writing and
signed by the Director and by or on behalf of the Company (other than by
the Director).
21.4. No waiver of any provision of this Agreement shall be effective unless
made in writing and signed by the Director and by or on behalf of the
Company (other than by the Director).
IN WITNESS WHEREOF this Agreement has been duly executed as a deed by the
parties and is intended to be and is hereby delivered on the date first above
written
17
<PAGE>
SCHEDULE I
(Statutory Information)
1. Continuous Employment: Your period of employment with the Company
commenced on 9th December 1996.
2. Hours of Work: The Director's normal hours of work are seven (7) hours per
day Monday to Friday inclusive, with a one hour break, between the hours
of 09.00 and 17.30, and such further hours as are reasonably necessary for
the performance of his duties.
3. Pensions: No contracting-out certificate is in force in respect of the
Director's employment under this Agreement.
4. Disciplinary procedure: The Director shall be expected to exhibit a high
standard of propriety in all his dealings with and in the name of the
Company and any Group Company. Any disciplinary procedures undertaken by
the Company shall at all times he carried out in a fair and reasonable
manner. The Director shall be informed or any complaint against him, and
the Director shall he given an opportunity to state his side of the case
to the Board. The Director shall have the option of having a
representative with him.
5. Grievance procedure: Subject to the Company's general policy concerning
grievance procedures from time to time in force, any grievance should
first be raised with the Chairman of the Board, however if the grievance
concerns the Chairman, the matter should be raised with another Board
member. In order to avoid misunderstandings all grievances should be
recorded in writing. If the matter cannot be resolved then the grievance
should be taken to the Board for resolution, with the decision of the
Board being final.
6. Collective agreements: There are no collective agreements which directly
affect the terms and conditions of the employment of the Director.
18
<PAGE>
SCHEDULE 2
(Director's Duties)
To act as Finance Director of the Company;
To represent the Company customers, suppliers, shareholders and generally;
To report to the Board on all issues; and
To undertake such other duties as may be reasonably required from time to time.
19
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EXECUTED (but not delivered )
until the date hereof) a DEED by )
PEPTIDE THERAPEUTICS )
GROUP plc )
/s/ [ILLEGIBLE] Signature of Director
- --------------------------
/s/ [ILLEGIBLE] Name of Director
- --------------------------
/s/ [ILLEGIBLE] Signature of Secretary
- --------------------------
/s/ [ILLEGIBLE] Signature of Secretary
- --------------------------
SIGNED (but not delivered )
until the date hereof) a DEED by )
GORDON CAMERON )
in the (presence of:- )
/s/ [ILLEGIBLE] Signature of Witness
- --------------------------
/s/ [ILLEGIBLE] Name of Witness
- --------------------------
[ILLEGIBLE] Address of Witness
- --------------------------
[ILLEGIBLE]
- --------------------------
[ILLEGIBLE]
- --------------------------
[ILLEGIBLE]
- --------------------------
Secretary Occupation of Witness
- --------------------------
20
<PAGE>
321 Cambridge Science Park
Milton Road, Cambridge
Cambridgeshire CB4 4WG
United Kingdom
[LOGO]
Peptide Therapeutics Tel. [ILLEGIBLE]
Fax: [ILLEGIBLE]
Gordon Cameron 18 September, 1998
9 The Hectare
Cambridge Road
Great Shelford
Cambs CB2 5UT
Dear Gordon,
I am pleased to inform you that the Remuneration Committee agreed that your
salary would increase to (pounds)120,000 from 1st July 1998 and your car
allowance be increased to (pounds)10,000 per annum. These payments will he
reflected in your September salary.
Yours sincerely,
/s/ John Brown
Dr John Brown
Chief Executive
- --------------------------------------------------------------------------------
Peptide Therapeutics Limited registered in England Company No. 2774277
(Registered Office as above)
A Subsidiary of Peptide Therapeutics Group plc
<PAGE>
EXHIBIT 10.18
DATED 1 MARCH 1997
(1) PEPTIDE THERAPEUTICS GROUP PLC
-AND-
(2)JOHN BROWN
-----------------------------------
DIRECTOR'S SERVICE AGREEMENT
-----------------------------------
PINSENT - CURTIS
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
PAGE
CLAUSE --
- ---------
<S> <C> <C>
1 Definitions and Interpretation...................................................................... 1
2 Appointment and Term of Employment.................................................................. 3
3 Duties.............................................................................................. 3
4 Office of Director.................................................................................. 5
5 Renumeration........................................................................................ 5
5.1 Salary......................................................................................... 5
5.2 Schemes........................................................................................ 6
5.3 Pension Scheme................................................................................. 6
5.4 Car Allowance.................................................................................. 6
6 Expenses and Communications......................................................................... 7
7 Life Assurance...................................................................................... 7
8 Medical Expenses Insurance and PHI.................................................................. 7
9 Holidays............................................................................................ 8
10 Sickness Injury and Absence......................................................................... 8
11 Confidential Information............................................................................ 9
12 Other Business Interests............................................................................ 10
13 Copyright Inventions and Design Right............................................................... 11
14 Automatic Termination............................................................................... 12
15 Summary Termination................................................................................. 13
16 Termination......................................................................................... 14
17 Covenants by the Directors.......................................................................... 15
18 Reconstruction or Amalgamation...................................................................... 16
19 Notices............................................................................................. 17
20 Statutory and Other Information..................................................................... 17
21 Miscellaneous....................................................................................... 17
22 Previous Agreements................................................................................. 18
<CAPTION>
Schedules
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<S> <C> <C>
1 Statutory Information............................................................................... 19
2 Director's Duties................................................................................... 20
</TABLE>
<PAGE>
THIS AGREEMENT is made the First day of March 1997
BETWEEN:
(1) PEPTIDE THERAPEUTICS GROUP PLC a company incorporated in England and Wales
(registered no. 2863682), whose registered office is at 321 Cambridge
Science Park, Milton Road, Cambridge, CB4 4WG (the "COMPANY"); and
(2) DR. JOHN BROWN of 7 Cluny Drive, Edinburgh EH10 6DW (the "DIRECTOR").
IT IS AGREED that:--
1 DEFINITIONS AND INTERPRETATION
1.1 IN THIS AGREEMENT:
"ASSOCIATED COMPANY" means a company which is not a subsidiary of another
but more than twenty (20) per cent of the equity share capital of which is
owned by that other;
"'BOARD" means the board of directors of the Company for the time being and
includes where the context so permits any committee of the board of
directors including without limitation the Remuneration Committee and the
Audit Committee;
"COPYRIGHT WORK" and "DESIGN RIGHT WORK" mean respectively any copyright
work or design right work originated, conceived, written or made by the
Director alone or with others which relates or may relate to any product,
service, process, equipment, system or activity of the Company;
"EQUITY SHARE CAPITAL" has the meaning given to it in Section 744 of the
Companies Act 1985;
"GROUP" means:--
(i) the Company;
(ii) any holding company of the Company;
(iii) any subsidiary of the Company or its holding company or any
associated company of any of them;
(iv) any subsidiary undertaking of the Company or its holding company or
any associated company of any of them; and
(v) any associated company of the Company or its holding company or any
subsidiary of any of them;
"GROUP COMPANY" means the Company and any other member of the Group for the
time being;
"HOLDING COMPANY" has the meaning given in Section 736 Companies Act 1985;
"INCAPACITY" means any sickness, injury, or other like cause incapacitating
the Director from performing his duties under this Agreement and
"INCAPACITATED" shall be construed accordingly;
"INVENTIONS" means any invention, discovery or improvement including,
without prejudice to the generality of the above, any know-how, design
process, drawing, formula, computer program or specification which relates
or may relate to any product, service, process, equipment, system or
activity of the Company;
1
<PAGE>
"PEMBROKESHIRE PENSION PLAN" means the approved retirement benefits scheme
established by trust deed dated 10th December 1994 and made between Peptide
Therapeutics Limited, Ronald James Dart, Alan Gilbert Goodman, Daniel James
William Roach and Nicholas Blech;
"RECOGNISED INVESTMENT EXCHANGE" has the meaning given in Section 207 of the
Financial Services Act 1986;
"SUBSIDIARY" has the meaning given in Section 736 Companies Act 1985; and
"SUBSIDIARY UNDERTAKING" has the meaning given in Section 258 of the
Companies Act 1985.
1.2 Any reference to a statute or statutory provision shall be deemed to
include a reference to any statutory modification or re-enactment of it or
any enactment replacing it and any instrument order or regulation made
under such statute or statutory provision.
1.3 References to Clauses and Schedules are to clauses of and the schedules to
this Agreement.
1.4 The headings in this Agreement are for convenience only and shall not
affect its construction or interpretation.
2 APPOINTMENT AND TERM OF EMPLOYMENT
2.1 The Director shall serve the Company as Chief Executive of the Company.
2.2 The employment of the Director under this Agreement (which shall include
the Director's previous employment by the Company's subsidiary, Peptide
Therapeutics Limited, and shall therefore be deemed to have commenced on
12th March 1995) shall (subject to termination as provided in Clause(s) 14
and 15) continue until terminated by either party giving to the other not
less than 12 months' notice in writing.
2.3 Notwithstanding any other terms in this Agreement, the Director shall
retire at the Company's normal requirement age, which is at present 65 (the
"RETIREMENT AGE") whereupon this Agreement shall terminate. The Company may
in its absolute discretion continue to employ the Director after the
Retirement Age upon such terms as the parties to this Agreement shall
agree. Should the Retirement Age conflict with any statutory or regulatory
provision applicable to the Company, the Retirement Age shall be varied to
conform with such provision.
3 DUTIES
3.1 The Director shall during his employment under this Agreement:--
3.1.1 exercise the powers and perform the duties normally required of a
person holding the post occupied by the Director and appropriate to his
status, qualifications and experience including but without prejudice to
the generality of the foregoing the duties set out in Schedule 2 and
such other duties as the Board may from time to time properly and
reasonably assign to him either in his capacity as Director or in
connection with the business of the Company or the business of any one
or more Group Companies (including serving on the board of or any other
executive body or any committee of such Group Companies);
3.1.2 use all proper and reasonable endeavors to promote, develop and
extend the business of the Company and the Group Companies; and
3.1.3 at all times and in all respects conform to and comply with the
proper and reasonable directions and regulations of the Board and shall,
except during holidays and periods of
2
<PAGE>
absence due to ill health or other incapacity, devote his full time and
attention to the performance of his duties under this Agreement.
3.2 The Director's normal place of work shall be anywhere in the United
Kingdom which the Board may require for the proper performance and exercise
of his duties and powers and provided he may be required by the Company to
travel (whether within or outside the United Kingdom) on the business of
the Company or any Group Company.
3.3 If the Company requires the Director to work permanently at a place which
necessitates a move from his present address the Company will reimburse the
Director for all removal expenses directly and reasonably incurred as a
result of the Company's requirement.
3.4 The Director shall keep the Board properly informed (in writing if so
required by the Board) of his conduct of all business on behalf of the
Company and any Group Company and shall give to the Board all such
information as to the affairs of the Company and the Group as it shall
properly and reasonably require.
3.5 The Director shall not during the term of this Agreement without the
written consent of the Board make or seek to make on behalf of himself or
(otherwise than properly in the performance of his duties to the Company)
on behalf of any other person, firm or company any contract or other
arrangement of a commercial nature with any actual or prospective customer,
contractor or supplier of the Company or any Group Company.
3.6 The Director shall not during the term of this Agreement without the
consent of the Board seek or accept from any actual or prospective
customer, contractor or supplier of the Company or any Group Company any
gift, gratuity or benefit of more than a trivial value or any hospitality
otherwise than properly in the performance of his duties to the Company or
any Group Company of a kind and value not lavish, extravagant or
inappropriate.
3.7 The Company may during any period of notice to terminate the employment of
the Director under this Agreement or for the purpose of investigating a
complaint against the Director or otherwise where in the opinion of the
Board the interests of the Company so require suspend or exclude the
Director for any period not exceeding six months from the performance of
his duties on full salary and with full entitlements to other benefits and
require the Director to stay away from any premises of the Company or any
Group Company and to have no contact with all or any officers, employees,
agents, customers, clients, suppliers or other parties involved, engaged or
interested in the operation of the business of the Company or any Group
Company or any part of them or any joint venture in which they may be
engaged or interested and during the whole or any part of any period of
suspension to undertake such work as the Board may reasonably require and
the parties agree and declare that there is no obligation on the part of
the Company to provide the Director with work to do.
4 OFFICE OF DIRECTOR
During his employment under this Agreement the Director shall not (without
prejudice to the Director's rights and remedies under this Agreement and at
common law in circumstances constituting constructive dismissal) do anything
that would cause him to be disqualified from continuing to act as a director
of the Company.
3
<PAGE>
5 REMUNERATION
5.1 SALARY
The Director shall be paid by way of remuneration for his services under
this Agreement a salary of L150,300 per annum (or such greater amount as the
Board may in its discretion from time to time decide or award pursuant to
the Company's annual salary review) inclusive of any directors' fees payable
to him under the articles of association of the Company and any Group
Companies. The salary shall accrue from day to day and be paid by equal
monthly instalments in arrear on or about the 25th day (excluding weekends
and public holidays) of every month or otherwise in accordance with the
Company's policy from time to time. The Company reserves the right to deduct
or withhold from the Director's salary any amounts owing to the Company by
the Director. On 1st January 1998, and subject only to satisfactory
performance of his duties by the Director, the salary of the Director shall
be increased to an amount not less than L167,000 per annum (or such greater
amount as the Board may in its discretion from time to time decide or award
pursuant to the Company's annual salary review).
5.2 SCHEMES
5.2.1 The Director shall be entitled to participate as from the date of
this Agreement in The Peptide Therapeutics 1995 Unapproved Share Option
Scheme, The Peptide Therapeutics 1995 Savings-Related Share Option
Scheme and The Peptide Therapeutics 1996 Approved Share Option Scheme
(together with "SCHEMES") for the time being in force subject to the
rules applicable to the Schemes as amended or varied from time to time
at the Board's discretion and subject always in the case of the Peptide
Therapeutics 1995 Unapproved Share Option Scheme and The Peptide
Therapeutics 1996 Approved Share Option Scheme to the exercise by the
Board of its discretion to grant options under that scheme.
5.2.2 The Director shall have no right to membership of any of the Schemes
other than by virtue of his employment and any such right or benefit
which might have bested in or accrued to the Director under the Schemes
shall lapse and be disregarded for the purpose of calculating any claim
by the Director arising form the termination of the employment.
5.3 PENSION SCHEME
The Director shall be entitled to benefits under the Pembrokeshire Pension
Plan and the Company shall, subject to applicable Inland Revenue limits and
requirements concerning employer contributions during the employment of the
Director under this Agreement, pay as a contribution into the Pembrokeshire
Pension Plan an amount per annum equal to 10 per cent. of the Director's
basic salary at the commencement of that year.
5.4 CAR ALLOWANCE
The Director shall during the term of this Agreement be paid a car allowance
of L12,200 per annum (or such greater amount as the Board may in its
discretion from time to time decide or award) to contribute towards the
capital cost of a motor vehicle, such allowance to be paid monthly at the
same time as salary.
6 EXPENSES AND COMMUNICATIONS
6.1 The Company shall by way of reimbursement pay or procure to be paid to the
Director all reasonable travelling, hotel, entertainment and other expenses
(including payment of business mileage at the Company's rate applying from
time to time) properly incurred by him in or about the performance of his
duties under this Agreement provided that the Director supplies such
evidence as to such expenses as the Board may reasonably require.
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6.2 The Company shall provide the Director with a telephone and facsimile in
his private residence and also a mobile telephone and shall pay all rental
and call charges properly incurred in respect thereof provided always that
the Director if required by the Company provides evidence reasonably
satisfactory to the Chairman of the rental and call charges incurred.
7 LIFE ASSURANCE
The Company shall during the term of this Agreement provide the Director
with life assurance cover which in the event of the Director's death while
employed under this Agreement shall pay to the Director's chosen dependants
a sum equal to four times his basic annual salary, subject to any limits,
terms and conditions imposed by statute or the relevant insurance company
including the requirement for a medical examination.
8 MEDICAL EXPENSES INSURANCE AND PHI
8.1 The Company shall during the term of this Agreement cover the cost of
membership for the Director and the Director's spouse and dependants of an
appropriate private patients medical plan with "BUPA" or such other
reputable medical expenses insurance scheme as the Company shall decide
from time to time, subject to the rules of the scheme and the approval of
his application for membership by the relevant insurer.
8.2 The Company shall effect permanent health insurance ("PHI") for the
benefit of the Director upon such terms as shall provide for the payment to
the Director throughout the p0period of his ill-health or disability with
the exception of the first 26 executive weeks thereof of sums at a rate per
annum equal to 75 per cent. of pensionable salary on the date such absence
commences less the amount of a single person's state sickness benefits.
9 HOLIDAYS
9.1 The Director shall be entitled to not less than 30 days' paid holiday in
each holiday year to be taken at a time or times agreed with the Board in
addition to any usual statutory, bank or other public holidays observed by
the Company, or if so required by the Company, on other days in lieu of
them. The "holiday year" of the Company shall be 1st January to 31st
December.
9.2 Holiday entitlement shall accrue on a monthly basis throughout the whole
holiday year. Any holiday entitlement in excess of 5 days not taken by 1st
January in the next holiday year will be lost. Any holiday entitlement (up
to a maximum of 5 days carried into the next following holiday year must be
taken in full by 31st March of that year and if not will be lost.
9.3 On the termination of the Director's employment under this Agreement
whenever and however it may occur the Director shall be entitled to be paid
in lieu of any holiday entitlement outstanding or as the case may be shall
be obliged to repay to the Company salary in respect of any holiday taken
in excess of his actual entitlement in each case on a proportional basis.
9.4 The Company may require the Director to take all or part of any
outstanding holiday entitlement during a period of notice to terminate the
employment under this Agreement.
10 SICKNESS INJURY AND ABSENCE
10.1 If the Director shall be prevented by sickness, injury or other cause
from performing his duties under this Agreement he shall notify the Company
as soon as possible and if this incapacity continues for seven (7) or more
consecutive days he shall submit a medical practitioner's certificate to
the Company on the eighth day and weekly thereafter.
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10.2 Subject to the other provisions of this Clause, the Director shall if
incapacitated by sickness or injury from performing his duties to his full
remuneration and benefits during a period of such incapacity not exceeding
26 weeks in any period of 12 months provided that the remuneration so paid
to the Director shall be taken to include such statutory sick pay ("SSP")
if any as he is entitled to and that the Company shall be entitled to
deduct from such remuneration any social security, national insurance or
other benefit apart from SSP to which the Director is entitled whether such
benefit is in fact claimed by the Director or not. For the purposes of SSP
entitlement, the Director could qualify for payment on each day from Monday
to Friday inclusive.
10.3 If the Director is incapacitated by reason of the actionable act or
default of a third party in respect of which damages are or may be
recoverable then the Director shall promptly notify the Board and shall
keep the Board fully informed of the progress of any claim or action in
respect of such act or default. Remuneration and benefits received by the
Director during any consequent period of incapacity shall be by way of loan
by the Company and the Director shall be obliged if so required by the
Board to repay to the Company the amount of such remuneration and the value
of such benefits up to a maximum amount equal to any damages or
compensation received by the Director from the third or any relevant
insurer or indemnifier under any judgment compromise or settlement after
the deduction of the legal costs of the Director of such claim or action.
10.4 As soon as practicable following the Director's return to work after any
period of absence of seven days or less which or any part of which has not
been authorised by the Company the Director shall if so required by the
Board complete the Company's form of self-certification for SSP purposes.
11 CONFIDENTIAL INFORMATION
11.1 In this Agreement "CONFIDENTIAL INFORMATION" means all information
relating to the business, finances, transactions, affairs, products,
services, processes, equipment or activities of the Company and any other
Group Company which is designated by the Company and any other Group
Company as confidential and all information relating to such matters which
comes to the knowledge of the Director in the course of the employment
under this Agreement and which by reason of its character and/or the manner
of its coming to his knowledge is evidently confidential provided that
information shall not be or shall cease to be Confidential Information if
and to the extent that it comes to be in the public domain otherwise than
as a result of the unauthorised act or default of the Director.
11.2 The Director shall not during his employment under this Agreement, or at
any time after, use or exploit except for the benefit of the Company or
disclose to any third party any Confidential Information except:--
11.2.1 during his employment under this Agreement in the performance of his
duties; or
11.2.2 with the express written consent of the Board; or
11.2.3 in compliance with an order of a competent court.
11.3 The Director shall during his employment under this Agreement use
reasonable endeavors to prevent the unauthorised use or disclosure of any
Confidential Information by any other officer, employee or agent of the
Company and shall be under an obligation to report to the Board any such
unauthorised use or disclosure of any Confidential Information which comes
to his knowledge.
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12 OTHER BUSINESS INTERESTS
The Director shall not during the period of his employment under this
Agreement and for a period of 12 months after ceasing to be employed under
this Agreement, without the written consent of the Board be directly or
indirectly engaged, concerned or interested whether as director, officer,
employee, agent, shareholder, partner, proprietor or otherwise in any
business any of the activities of which is in competition with any of the
activities of the Company or any Group Company proved that nothing in this
Clause shall preclude the Director from holding or being otherwise
interested in shares or securities of any company quoted on ay recognised
investment exchange so long as the interest of the Director in such shares
or other securities does not extend to more than five (5) per cent. of any
class of shares or other securities in the relevant company and provided
that the Director shall make full and accurate disclosure to the Board upon
request of all shares and securities which he holds or in which he is
beneficially interested.
13 COPYRIGHT INVENTIONS AND DESIGN RIGHT
13.1 It shall be a duty of the Director during his employment under this
Agreement to consider and keep under review the ways if any in which the
products, services, processes, equipment, systems and activities of the
Company might be improved and/or enhanced.
13.2 If during his employment hereunder the Director alone or with others
makes or discovers any Invention he shall promptly disclose it to the Board
giving full particulars of it including all necessary drawings models and
specifications.
13.3 The Director agrees and acknowledges that because of the nature of his
duties and the responsibilities arising from them he has a special
obligation to further the interests of the Company so that all Inventions
made by the Director in the performance of his duties or as a result of any
special project for the Company outside the scope of his normal duties and
all rights in such Inventions shall belong to the Company.
13.4 The Director shall promptly disclose to the Board any Copyright Work
and/or Design Right Work made by him during his employment hereunder and
hereby acknowledges that by virtue of his employment the copyright and/or
design right in any such Work vests automatically and forthwith in the
Company. If the Company shall elect to name the Director as the author of
any such Copyright Work and/or Design Right Work then the Director hereby
waives all and any moral rights in such Work and without prejudice to the
generality of the above the right to object to derogatory treatment of the
Work and the Company may in its absolute discretion make all such additions
and alterations to the deletions from and adaptations of such Copyright
Work and Design Right Work as it shall think fit.
13.5 The Director shall at the cost of the Company on demand execute all such
documents and do all such other acts as the Company require to enable the
Company or its nominee to obtain the full benefit of any Invention,
Copyright Work and Design Right Work to which the Company is entitled and
all rights therein and to secure such patent, utility model, copyright or
design registration or similar protection in any part of the world as the
Company may consider appropriate.
13.6 The Director hereby irrevocably appoints the Company to be his attorney
in his name and on his behalf to execute all such documents and do all such
acts as may be necessary or desirable to give effect to this clause.
13.7 If the Director shall during his employment hereunder make or discover
any Invention or make, originate, conceive or write any Copyright Work or
Design Right Work in which despite the previous provisions of this Clause
any intellectual property rights belong to the Director not the
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Company then the Director shall if so required by the Board negotiate in
good faith with the Company for the assignment or licensing to the Company
or its nominee of such rights upon such terms as shall fairly represent the
market value of such rights and shall be agreed between the parties or in
default of agreement determined by a Member of the Chartered Institute of
Patent Agents who shall be nominated in default of agreement by the
President of that Institute for the time being and who shall act as an
expert not an arbitrator and whose decision shall save for fraud or error
manifest on the face of it be binding upon the parties.
13.8 The Company shall not be under any obligation to take any step to
register any patent or other right in respect of or to develop or exploit
any Invention of Copyright or Design Right Work made discovered originated
conceived or written by the Director.
13.9 Nothing in this Clause shall be taken to limit or derogate from the
obligations of the Director under Clause 11 above.
14 AUTOMATIC TERMINATION
The employment of the Director under this Agreement shall terminate
automatically in the event of his ceasing to be a director of the Company
and in that event the Director shall have no claim for damages against the
Company unless he shall so cease:-
14.1 by reason of his not being re-elected as a director of the Company at the
annual general meeting of the Company held next after the commencement of
his employment; or
14.2 by reason of his not being re-elected as a director of the Company at any
annual general meeting of the Company at which he is to retire by rotation;
or
14.3 by virtue of a resolution passed by the members of the Company in general
meeting to remove him as a director; or
14.4 by virtue of his removal from his office as a director by notice in
writing signed by all his co-directors served in accordance with the
Company's Articles of Association; or
14.5 in circumstances where he is either wrongfully or constructively
dismissed by the Company,
and at the time of such failure to re-elect or of such removal the Company
is not otherwise entitled to determine his employment under this Agreement.
15 SUMMARY TERMINATION
The employment of the Director under this Agreement may be terminated by
the Company immediately without notice if:-
15.1 the Director is or becomes incapacitated under this Agreement for one
hundred and eighty (180) working days in aggregate in any period of twelve
(12) months;
15.2 the Director shall be or become of unsound mind or be or become a patient
under the Mental Health Act 1983 or for any purpose of any statute relating
to mental health; or
15.3 the Director shall enter into any composition or arrangement with or for
the benefit of his creditors including a voluntary arrangement under the
Insolvency Act 1986; or
15.4 the Director shall be made the subject of a bankruptcy order or
administration order or shall apply for an interim receiving order under
the Section 253 Insolvency Act 1986; or
15.5 the Director shall commit any act of dishonesty whether relating to the
Company, any Group Company, any employee of the Company or any Group
Company or otherwise; or
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15.6 the Director is guilty of any gross misconduct or commits any serious or
persistent breach of any of his obligations to the Company or any Group
Company whether under this Agreement or otherwise or refuses or neglects to
comply with any lawful orders or directions given to him by the Company
consistent with the terms of this Agreement; or
15.7 the Director is guilty of any conduct tending to bring himself, the
Company or any Group Company into serious disrepute; or
15.8 the Director is prohibited or disqualified from holding the office which
he holds in the Company or any Group Company in which he is concerned or
interested or if he resigns from any such office without the prior written
consent of the Company or any Group Company of which he has been appointed
a director; or
15.9 the Director is convicted of any criminal offence for which a custodial
sentence may be imposed (other than an offence under the Road Traffic
legislation in the United Kingdom or elsewhere for which a fine or
non-custodial penalty is imposed); or
15.10 the Director shall come to be addicted to or habitually under the
influence of any drug (not being a drug prescribed for him by a medical
doctor for the treatment of a condition other than drug addiction) the
possession of which is controlled by laws; or
15.11 the Director is convicted of any offence regarding insider dealing under
the Criminal Justice Act 1993 or under any other present or future
statutory enactment or regulation relating to insider dealing.
16 TERMINATION
16.1 Upon the termination of the Director's employment under this Agreement
for whatever reason whether under Clause 14 or Clause 15.
16.1.1 the Director shall at the request of the Company forthwith resign
from any and all offices whether as director or otherwise which he holds
in the Company and in any Group Company without prejudice to any other
rights accruing to either party hereto and the Director hereby
irrevocably authorises the Company to appoint a person in his name and
on his behalf to execute all documents including any resignations and to
do all such other acts as are necessary to give effect to this
provision;
16.1.2 the Director shall deliver to the Company forthwith all books,
documents, records, statistics, accounts and other materials or data
which is the property of the Company or any Group Company including all
copies in whatever form and all keys and other property of the Company
or any Group Company then in his possession; and
16.1.3 the termination shall not affect those terms of this Agreement which
are expressed to have effect thereafter and shall be without prejudice
to any accrued rights or remedies of the parties.
16.2 The Company reserves the right to make a payment in lieu of any period of
notice to terminate the employment of the Director under this Agreement and
to deduct sums equivalent to tax and national insurance payable on any such
payment.
16.3 The Director shall not at any time make any untrue statement in relation
to the Company or any Group Company, and in particular shall not in the
event of termination of his employment under this Agreement wrongfully
represent himself as being employed or connected with the Company or any
Group Company.
16.4 If shall be a fundamental term of this Agreement that the Director shall
comply at all times with the "Model Code on Directors Dealings in
Securities" as set out in Chapter 16 of the Listing
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Rules of the London Stock Exchange issued from time to time (the "MODEL
CODE") and it shall be the responsibility of the Director to make himself
aware of the provisions of the Model Code and the parties agree that any
breach by the Director of the Model Code shall at the election of the Board
be gross misconduct of the purposes of Clause 15.6. If the Director or any
other person shall effect any transaction which in the reasonable judgement
of the Board constitutes a breach on the part of the Director of the Model
Code then without prejudice to its rights under Clause 16.1 of this
Agreement the Board may by notice in writing to the Director require him
within a time stipulated in the notice to reverse the transaction and
account to a registered charity nominated in the notice by the Board for
any profit made by the Director or any other person upon the transaction
but the Company shall not be liable to indemnify the Director or any other
person for any loss made upon such transaction.
17 COVENANTS BY THE DIRECTOR
17.1 The Director covenants with the Company that a period of 12 months after
the termination of his employment with the Company without the prior
written consent of the Board he will not on his own behalf or by an agent
or on behalf of any person, firm or company directly or indirectly;-
17.1.1 canvass, solicit, deal with or entice away or attempt to canvass,
solicit, deal with or entice away any of the business of (a) any
customer of the Company or any Group Company whether a person, firm,
company, association or government body with whom and in relation to
which business the Director shall have had dealings in the course of his
employment at any time in the period of 12 months preceding the date of
termination of his employment and/or (b) any prospective customer of the
Company or any Group Company with whom the Director shall have been
directly and indirectly involved at any time in the period of 12 months
preceding the date of termination of his employment in seeking to obtain
business for the Company or any Group Company from any such potential
customer; and
17.1.2 endeavour to entice away any person who was at the date of such
termination employed or engaged by the Company or any Group Company in a
senior capacity and with whom the Director had dealings during the
course of his employment
provided that nothing in this Clause shall prohibit the seeking or
procuring of orders or the doing of business not relating or not similar to
the business of the Company or any Group Company.
17.2 If any covenant contained in this Clause 17 or Clause 12 shall be held
invalid or unenforceable or void but would not be so held if some part of
it were deleted, modified or varied then such provision shall apply with
such deletion, modification or variation as may be necessary to make it
valid and effective.
18 RECONSTRUCTION OR AMALGAMATION
If the employment of the Director under this Agreement is terminated by
reason of the liquidation of the Company for the purpose of reconstruction
or amalgamation or other reconstructions of the Company not involving a
liquidation and the Director is offered employment with any company,
concern or undertaking resulting from the reconstruction or amalgamation on
terms and conditions not less favourable than the terms of this Agreement
then the Director shall be obliged to accept such offer and shall have no
claim against the Company in respect of the termination of his employment
under this Agreement.
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19 NOTICES
19.1 Any notice required or permitted to be given under this Agreement shall
be given in writing, delivered personally or sent by first class pre-paid
recorded delivery post (air mail if overseas) or by facsimile to the party
(provided the original is put in the post on the same day) due to receive
such notice at, in the case of the Company, its registered office from time
to time and, in the case of the Director his address as set out in this
Agreement (or such address as he may have notified to the Company in
accordance with this Clause).
19.2 Any notice delivered personally shall be deemed to be received when
delivered to the relevant address as provided in Clause 19.1 and any notice
sent by pre-paid recorded delivery post shall be deemed (in the absence of
evidence of earlier receipt) to be received 2 days after posting (6 days if
sent by air mail) and in proving the time of despatch it shall be
sufficient to show that the envelope containing such notice was properly
addressed, stamped or franked and posted. A notice sent by facsimile shall
be deemed to have been received on receipt by the sender of a confirmatory
facsimile transmission report (provided the original was put in the post on
the same day).
20 STATUTORY AND OTHER INFORMATION
Schedule 1 to this Agreement sets out information required to be given to
the Director by the Employment Protection (Consolidation) Act 1978 so far
as such terms are not set out in the body of this Agreement.
21 MISCELLANEOUS
21.1 This Agreement is governed by and shall be construed in accordance with
the laws of England.
21.2 The parties to this Agreement submit to the exclusive jurisdiction of the
English courts regarding any dispute or claim arising under this Agreement.
21.3 No amendment to this Agreement shall be effective unless in writing and
signed by the Director and by or on behalf of the Company (other than by
the Director).
21.4 No waiver of any provision of this Agreement shall be effective unless
made in writing and signed by the Director and by or on behalf of the
Company (other than by the Director).
22 PREVIOUS AGREEMENTS
As from the date of this Agreement all previous agreements between the
Company or any Group Company and the Director relating to the employment of
the Director, shall be deemed to have been terminated and shall cease to
have effect but without prejudice to any accrued right of the parties up to
the date of termination.
IN WITNESS WHEREOF this Agreement has been duly executed as a deed by the
parities and is intended to be and is hereby delivered on the date first above
written.
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SCHEDULE 1
(STATUTORY INFORMATION)
1. CONTINUOUS EMPLOYMENT: A period of employment with the Company's
subsidiary, Peptide Therapeutics Limited, does count as part of the
Director's continuous period of employment with this Company. Such period
commenced on 12th March 1995.
2. HOURS OF WORK: The Director's normal hours of work are seven and a half
(7.5) hours per day Monday to Friday inclusive, with a one hour break,
between the hours of 09.00 and 17.30, and such further hours as are
reasonably necessary for the performance of his duties.
3. PENSIONS: No contracting-out certificate is in force in respect of the
Director's employment under this Agreement.
4. DISCIPLINARY PROCEDURE: The Director shall be expected to exhibit a high
standard of propriety in all his dealings with and in the name of the
Company and any Group Company. Any disciplinary procedures undertaken by
the Company shall at all times be carried out in a fair and reasonable
manner. The Director shall be informed of any complaint against him, and
the Director shall be given an opportunity to state his side of the case to
the Board. The Director shall have the option of having a representative
with him.
5. GRIEVANCE PROCEDURE: Subject to the Company's general policy concerning
grievance procedures from time to time in force, any grievance should first
be raised with the Chairman of the Board, however if the grievance concerns
the Chairman, the matter should be raised with another Board member. In
order to avoid misunderstandings all grievances should be recorded in
writing. If the matter cannot be resolved then the grievance should be
taken to the Board for resolution, with the decision of the Board being
final.
6. COLLECTIVE AGREEMENTS: There are no collective agreements which directly
affect the terms and conditions of the employment of the Director.
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SCHEDULE 2
(DIRECTOR'S DUTIES)
To act as Chief Executive of the Company;
To represent the Company to customers, suppliers, shareholders and generally;
To co-ordinate all activities of the Group;
To report to the Board on all issues; and
To undertake such other duties as may be reasonably required from time to time.
<TABLE>
<S> <C>
EXECUTED (BUT NOT DELIVERED UNTIL THE DATE )
HEREOF) AS A DEED BY PEPTIDE THERAPEUTICS )
GROUP PLC )
)
/s/ N.A. HIGGINS Signature of Director
- -------------------------------------------- Name of Director
N.A. Higgins
/s/ NICKOLAS BLECH Signature of Secretary
- -------------------------------------------- Name of Secretary
Nickolas Blech
SIGNED (BUT NOT DELIVERED UNTIL THE DATE )
HEREOF) AS A DEED BY DR. JOHN BROWN IN THE )
PRESENCE OF:-- ) /s/ John Brown
)
/s/ Joanna Rees SIGNATURE OF WITNESS
JOANNA REES NAME OF WITNESS
100 PRINCES MEWS ADDRESS OF WITNESS
ROYSTON
HERTS
S98-9BL
SECRETARY OCCUPATION OF WITNESS
</TABLE>
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Exhibit 10.19
[LETTERHEAD OF PEPTIDE THERAPEUTICS]
Strictly Private and Confidential
Mr. Alan Dalby 25th March 1998
Chairman
Reckitt & Colman plc
One Burlington Lane
London
W4ZRW
Dear Alan
Non-Executive Directorship
I am delighted that you have agreed to be appointed as a Non-Executive Director
of the Board. The purpose of this letter (the "Agreement") is formally to
confirm the terms of your appointment as a Non-Executive Director of Peptide
Therapeutics Group plc (the "Company").
1 Term of Appointment
1.1 Subject to Clauses 1.2 and 7 you shall serve the Company as a
Non-Executive Director from 1 May 1998 unless terminated by either party
giving the other not less than three months' notice in writing to
terminate these arrangements whereupon this Agreement shall terminate on
the expiry of such notice. Subject to the payment of fees on retirement in
accordance with Clause 1.2, no compensation for loss of office will be due
to you.
1.2 If, on your retirement by rotation as a Director of the Company in
accordance with the requirements of the Company's Articles of Association
("Articles"), you are not re-elected as a Director of the Company for any
reason, then in such circumstances your appointment shall terminate
automatically with immediate effect (for the avoidance of doubt, without
any period of notice) and the only fees to which you shall be entitled in
respect of these arrangements shall be such fees as have accrued due on a
daily basis up to the time such termination together with out of pocket
expenses reasonably and properly incurred up to that time.
1.3 Subject to Clauses 1.1, 1.2 and 7 your appointment under this Agreement
shall terminate on whichever is the earlier of:-
1.3.1 the date of expiry of the notice period specified in Clause 1.1; and
1.3.2 your ceasing to be a Director for any reason under the Articles.
<PAGE>
1.4 Your appointment under this Agreement shall be subject:-
1.4.1 to your re-election as a Director at the next Annual General Meeting
following the date of your appointment under this Agreement;
1.4.2 your re-election on retirement by rotation at any subsequent Annual
General Meeting at which, pursuant to the Articles of the Company,
you are required to retire by rotation; and
1.4.3 to the provisions of the Articles.
2 Powers and Duties
2.1 You shall exercise such powers and perform such duties as are appropriate
to your role as a Non-Executive Director of the Company.
2.2 You shall comply with all reasonable directions from, and all regulations
of, the Company including, without prejudice to the generality of the
foregoing, all regulations from time to time in force with respect to
confidentiality, dealings in shares and notifications required to be made
by a Director to the Company or any other regulatory body under the
Companies Acts 1985 and 1989, the Articles or any other regulations of the
Company. In addition, you will observe the terms and conditions of The
City Code on Takeovers and Mergers and the continuing obligations under
the London Stock Exchange Listing Rules as the same are applicable to the
Company and its Directors from time to time.
2.3 Your duties as a Non-Executive Director will normally require attendance
at all Main Board Meetings and General Meetings of the Company as well as
making such time available as is necessary to prepare for those meetings
and dealing with such matters as might normally be expected of a
Non-Executive Director.
2.4 You will also be asked to serve as a member of the Remuneration Committee
and the Audit Committee.
2.5 Main Board Meetings are held at regular intervals on dates which will be
advised well in advance. You will be required to attend Main Board
Meetings and such other Main Board Meetings as you and the Company shall
agree from time to time. Further you will be required to attend at least
two meetings of each of Remuneration Committee and Audit Committee. Such
meetings will be held, whenever possible, on the same date as the Main
Board Meetings.
2.6 You will be provided with reports on at least a quarterly basis outlining
the current performance of the Company and you will be welcome to see
further information of the Company at any time. You will also be most
welcome to visit any of the Company's operations as and when time permits.
<PAGE>
3 Remuneration
3.1 A directors' fee ("Retainer") of (Pounds)15,000 per annum (or such higher
amount as the Board may from time to time determine and notify to you in
writing) is payable monthly in arrears. The Retainer is non-pensionable
and will be reviewed every year by the Remuneration Committee of the Board
and any proposed increase is to be approved by the Board.
3.2 In addition, a flat fee of (Pounds)2,500 per annum is payable monthly in
arrears in respect of each committee of the Company of which you are a
member.
3.3 Payment of the fees will be made on or around the twenty fifth day of each
month. Your fees under this Agreement will be paid to you net of any
deductions the Company is required by law to make such as income tax under
the PAYE system or national insurance contributions.
4 Expenses
4.1 You will be reimbursed by the Company in respect of all reasonable
travelling, hotel and incidental or other out of pocket expenses which are
reasonably and properly incurred in attending and returning from Meetings
of the Board or Committee of the Board or general meetings of the Company
or any other meetings which as a Director you are entitled or invited to
attend in the course of your duties under this Agreement provided that on
request you shall provide such vouchers or other evidence of actual
payment of such expenses that may reasonably be required.
4.2 The Company shall reimburse you for any fees and expenses you incur in
taking advice from the Company's financial and legal advisers or other
independent financial and legal advisers in relation to the performance of
your duties. Before seeking such advice you should first consult either
the Chairman of the Board or another Non-Executive Director of the
Company. If you take such advise you should again consult the Chairman or
another Non-Executive Director once the fees and expenses you have
incurred exceed (Pounds)5,000.
5 Confidentiality
5.1 You shall not, either during the term of your appointment or thereafter:-
5.1.1 use to the detriment or prejudice of the Company and its subsidiary
undertakings (the "Group" and "Group Company" shall be construed
accordingly as any of such companies) or divulge or communicate to
any person any trade secret or any other confidential information
concerning the business or affairs of the Company or the Group
(except to employees or directors of any Group Company whose
province it is to know the same) which may have come to your
knowledge during the term of your appointment under this Agreement;
or
<PAGE>
5.1.2 use for your own purpose or for any other than those of the Group
any information of knowledge of a confidential nature which you may
from time to time acquire in relation to any member of the Group but
so that this restriction shall cease to apply to any information or
knowledge which may come it to the public domain (otherwise than
through your own default).
5.2 You shall not, during the term of your directorship nor for a period of 6
months after the termination therof be or become a director or employee or
agent of any company, business or enterprise or have or acquire any
material financial interest in any enterprise which at the time when you
accept such directorship, employment or agency, or acquire such interest,
competes or is likely to compete or have a significant business
relationship with any member or the Group without the prior consent of the
Board in writing (such consent not to be unreasonable withheld or
delayed).
6 Fringe benefits
You shall not be entitled to any pension, bonus, share option or any other
fringe benefit of the Company.
7 Termination
7.1 Without prejudice to the generality of the foregoing the Company may by
notice in writing immediately terminate the arrangements set out herein if
you shall.
7.1.1 be in breach of any term set out in this Agreement which in the case
of a breach capable of remedy is not remedied by you within 21 days
of receipt by your of a notice from the Company specifying the
breach and requiring it to be remedied.
7.1.2 be incompetent, guilty of gross misconduct and/or any serious or
persistant negligence or misconduct in respect of your obligations
under this Agreement; and
7.1.3 fail or refuse after a written warning to carry out the duties
reasonably and properly required of you under this Agreement.
7.2 Upon the termination of these arrangements for whatever reason you shall
at the request of the Board and without claim for compensation forthwith
resign from office as a Director of the Company and from all other offices
held by you in any Group Company (if any) and the Company is irrevocably
authorised to appoint a nominee to act on your behalf to execute all
documents and to do all things necessary to give effect to this provision.
<PAGE>
7.3 You shall promptly whenever requested by the Company and in any event upon
your ceasing to be a Director of the Company deliver up to the Company all
lists of clients or customers and all other documents, papers and records
which may have been prepared by you or have come into your possession as a
Director of the Company. You shall not be entitled to and shall not retain
any copies thereof. Title and copyright therein shall vest in the Company.
8 Notices
Any written notice required to be given hereunder by either party to the
other should be served by sending the same by registered or recorded
delivery post to the last known address of the other party and any receipt
issued by the person or authorities shall be conclusive evidence of the
fact an date of posting of such notice.
9 Governing Law
The arrangement set out in this Agreement shall be governed by English Law
and the English Courts shall have exclusive jurisdiction over any claim or
dispute arising under this Agreement.
10 Miscellaneous
The Company Secretary will supply you with any information in relation to
the Company which you may require. The company requires that you complete
a Form 288 which includes your formal consent to being appointed and a
Directors' Declaration Card which is required in connection with the
Listings Rules of the London Stock Exchange. You will consent to make all
relevant disclosures required by the London Stock Exchange and any other
relevant body and as required by law. The above documents are enclosed and
should be returned to the Company Secretary at your earliest convenience.
Please would you confirm your acceptance of the above terms by signing and
returning the attached copy of this Agreement.
Yours sincerely
/s/ Dr. John Brown
Dr. John Brown
Chief Executive of Peptide Therapeutics Group pic
I confirm my acceptance of the above terms.
/s/ Alan Dalby
- ----------------------------
<PAGE>
Exhibit 10.20
[Letterhead of Peptide Therepeutics]
Alan Smith
The Hays 30 April 1998
235 Cotes Road
Barrow upon Soar
Loughborough
Leids LE12 8JR
Dear Alan,
Non Executive Directorship
In furtherance to the board changes effective from 1st May 1998, I wish to
clarify your position regarding the remuneration committee and the audit
committee.
The Appointment Letter (dated 1st January 1998) shall continue in full force and
effect, save the following:
1. Paragragh 2.4 shall be deleted and replaced with the following wording
"you will serve as Chairman of the Audit Committee for which services you
will receive (in addition to the retainer referred to in paragragh 3.1
below) a fee of (Pounds) 5,000 per annum which will be payable in
accordance with the payment provisions contained in paragraph 3.1. You
will not be required to serve on the Remuneration Committee.
2. Paragraph 3.2 shall be deleted.
Please would you confirm your acceptance of the above terms by signing and
returning the attached copy of this letter.
Yours sincerely,
/s/ Gordon Cameron
Gordon Cameron
Company Secretary
I confirm my acceptance of the above terms
/s/ Alan Smith 7th May 1998
- ------------------------------------
Alan Smith
<PAGE>
[LOGO]
[LETTERHEAD OF PEPTIDE THERAPEUTICS]
Strictly Private and Confidential
Alan Smith 1 January 1998
The Hays
235 Cotes Road
Barrow upon Soar
Loughborough
Leeds
LE12 8JR
Dear Alan
Non-Executive Directorship
I am delighted that you have agreed to be re-appointed as a Non-Executive
Director of the Board. The purpose of this letter (the "Agreement") is formally
to confirm the terms of your re-appointment as a Non-Executive Director of
Peptide Therapeutics Group plc (the "Company") and its subsidiaries, Peptide
Therapeutics Limited and Peptide Mimetics Limited.
1 Term of Appointment
1.1 Subject to Clauses 1.2 and 7 you shall serve the Company as a
Non-Executive Director from 1 January 1998 unless terminated by either
party giving the other not less than three months' notice in writing to
terminate these arrangements whereupon this Agreement shall terminate on
the expiry of such notice. Subject to the payment of fees on retirement in
accordance with Clause 1.2, no compensation for loss of office will be due
to you.
1.2 If, on your retirement by rotation as a Director of the Company in
accordance with the requirements of the Company's Articles of Association
("Articles"), you are not re-elected as a Director of the Company for any
reason, then in such circumstances your appointment shall terminate
automatically with immediate effect (for the avoidance of doubt, without
any period of notice) and the only fees to which you shall be entitled in
respect of these arrangements shall be such fees as have accrued due on a
daily basis up to the time of such termination together with out of pocket
expenses reasonably and properly incurred up to that time.
1.3 Subject to Clauses 1.1, 1.2 and 7 your appointment under this Agreement
shall terminate on whichever is the earlier of:
1.3.1 the date of expiry of the notice period specified in Clause 1.1; and
1.3.2 your ceasing to be a Director for any reason under the Articles.
1
<PAGE>
[LOGO]
1.4 Your reappointment under this Agreement shall be subject:-
1.4.1 to your re-election as a Director at the next Annual General Meeting
following the date of your appointment under this Agreement;
1.4.2 your re-election on retirement by rotation at any subsequent Annual
General Meeting at which, pursuant to the Articles of the Company,
you are required to retire by rotation; and
1.4.3 to the provisions of the Articles.
2 Powers and Duties
2.1 You shall exercise such powers and perform such duties as are appropriate
to your role as a Non-Executive Director of the Company.
2.2 You shall comply with all reasonable directions from, and all regulations
of, the Company including, without prejudice to the generality of the
foregoing, all regulations from time to time in force with respect to
confidentiality, dealings in shares and notifications required to be made
by a Director to the Company or any other regulatory body under the
Companies Acts 1985 and 1989, the Articles or any other regulations of the
Company. In addition, you will observe the terms and conditions of The
City Code on Takeovers and Mergers and the continuing obligations under
the London Stock Exchange Listing Rules as the same are applicable to the
Company and its Directors from time to time.
2.3 Your duties as a Non-Executive Director will normally require attendance
at all Main Board Meetings and General Meetings of the Company as well as
making such time available as is necessary to prepare for those meetings
and dealing with such matters as might normally be expected of a
Non-Executive Director.
2.4 You will also be asked to serve as a member of the Remuneration Committee
and Chairman of the Audit Committee.
2.5 Main Board Meetings are held at regular intervals on dates which will be
advised well in advance. You will be required to attend Main Board
Meetings and such other Main Board Meetings as you and the Company shall
agree from time to time. Further you will be required to attend at least
two meetings of the Remuneration Committee and Audit Committee. Such
meetings will be held, whenever possible, on the same date as the Main
Board Meetings.
2.6 You will be provided with reports on at least a quarterly basis outlining
the current performance of the Company and you will be welcome to see
further information on the Company at any time. You will also be most
welcome to visit any of the Company's operations as and when time permits.
2
<PAGE>
[LOGO]
3 Remuneration
3.1 A directors' fee ("Retainer") of (Pounds) 15,000 per annum (or such higher
amount as the Board may from time to time determine and notify to you in
writing) is payable monthly in arrears. Payment will be made to you on or
around the twenty-fifth day of each month less any deductions of Income
Tax and National Insurance as required by the Inland Revenue. The Retainer
is non-pensionable and will be reviewed every year by the Remuneration
Committee of the Board and any proposed increase is to be approved by the
Board.
3.2 In addition, a flat fee of (Pounds) 2,500 per annum is payable monthly in
arrears in respect of each committee of the Company of which you are a
member. Payment will be made on or around the twenty-fifth of each month.
4 Expenses
4.1 You will be reimbursed by the Company in respect of all reasonable
travelling, hotel and incidental or other out of pocket expenses which are
reasonably and properly incurred in attending and returning from Meetings
of the Board or Committees of the Board or general meetings of the Company
or any other meetings which as a Director you are entitled or invited to
attend in the course of your duties under this Agreement provided that on
request you shall provide such vouchers or other evidence of actual
payment of such expenses that may reasonably be required.
4.2 The Company shall reimburse you for any fees or expenses you incur in
taking advice from the Company's financial and legal advisers or other
independent financial and legal advisers in relation to the performance of
your duties. Before seeking such advice you should first consult either
the Chairman of the Board or another Non-Executive Director of the
Company. If you take such advice you should again consult the Chairman or
another Non-Executive Director once the fees and expenses you have
incurred exceed (Pounds) 5,000.
5 Confidentiality
5. You shall not, either during the term of your appointment or thereafter:-
5.1.1 use to the detriment or prejudice of the Company and its subsidiary
undertakings (the "Group" and "Group Company" shall be construed
accordingly as any of such companies) or divulge or communicate to
any person any trade secret or any other confidential information
concerning the business or affairs of the Company or the Group
(except to employees or directors of any Group Company whose
province it is to know the same) which may have come to your
knowledge during the term of your appointment under this Agreement;
or
3
<PAGE>
[LOGO]
5.1.2 use for your own purpose or for any purpose other than those of the
Group any information or knowledge of a confidential nature which
you may from time to time acquire in relation to any member of the
Group but so that this restriction shall cease to apply to any
information or knowledge which may come into the public domain
(otherwise than through your own default).
5.2 You shall not, during the term of your directorship nor for a period of 6
months after the termination thereof be or become a director or employee
or agent of any company, business or enterprise or have or acquire any
material financial interest in any enterprise which at the time when you
accept such directorship, employment or agency, or acquire such interest,
competes or is likely to compete or have a significant business
relationship with any member of the Group without the prior consent of the
Board in writing (such consent not to be unreasonably withheld or
delayed).
6 Fringe benefits and deductions
You shall not be entitled to any pension, bonus, share option or any other
fringe benefits of the Company. Your fees under this Agreement will be
paid to you net of any deductions the Company is required by law to make
such as income tax under the PAYE system or national insurance
contributions.
7 Termination
7.1 Without prejudice to the generality of the foregoing the Company may by
notice in writing immediately terminate the arrangements set out herein if
you shall:-
7.1.1 be in breach of any terms set out in this Agreement which in the
case of a breach capable of remedy is not remedied by you within 21
days of receipt by you of a notice from the Company specifying the
breach and requiring it to be remedied;
7.1.2 be incompetent, guilty or gross misconduct and/or any serious or
persistent negligence or misconduct in respect of your obligations
under this Agreement; and
7.1.3 fail or refuse after a written warning to carry out the duties
reasonably and properly required of you under this Agreement.
7.2 Upon the termination of these arrangements for whatever reason you shall
at the request of the Board and without claim for compensation forthwith
resign from office as a Director of the Company and from all other offices
held by you in any Group Company (if any) and the Company is irrevocably
authorized to appoint a nominee to act on your behalf to execute all
documents and to do all things necessary to give effect to this provision.
4
<PAGE>
[LOGO]
7.3 You shall promptly whenever requested by the Company and in any event upon
your ceasing to be a Director of the Company deliver up to the Company all
lists of clients or customers and all other documents, papers and records
which may have been prepared by you or have come into your possession as a
Director of the Company. You shall not be entitled to and shall not retain
any copies thereof. Title and copyright therein shall vest in the Company.
8 Notices
Any written notice required to be given hereunder by either party to the
other should be served by sending the same by registered or recorded
delivery post to the last known address of the other party and any receipt
issued by the person or authorities shall be conclusive evidence of the
fact and date of posting of such notice.
9 Governing Law
The arrangements set out in this Agreement shall be governed by English
Law and the English Courts shall have exclusive jurisdiction over any
claim or dispute arising under this Agreement.
11 Miscellaneous
The Company Secretary will supply you with any information in relation to
the Company which you may require. You will consent to make all relevant
disclosures required by the London Stock Exchange and any other relevant
body and as required by law.
Please would you confirm your acceptance of the above terms by signing and
returning the attached copy of this Agreement.
Yours sincerely
/s/ John Brown
Dr. John Brown
Chief Executive of Peptide Therapeutics Group plc
I confirm by acceptance of the above terms.
/s/ Alan Smith
- -----------------------------
Alan Smith
5
<PAGE>
EXHIBIT 10.21
Brian Mansel Richards
La Ronde, Rue du Hamel, Le Mont Saint,
Castel, Guernsey GY5 7QJ
Strictly Private and Confidential
The Directors
Peptide Therapeutics Group PLC
321 Cambridge Science Park
Milton Road
Cambridge CB4 4WG
1st May 1998
Dear Sirs
Non-Executive Directorship
I hereby resign from the position of Chairman of the Board of Peptide
Therapeutics Group PLC (the "Company"). On acceptance of my resignation as
Chairman of the Company I wish my appointment as a Non-Executive Director of the
Company to continue in accordance with the terms of the letter of appointment
between the Company and myself dated 1 March 1997 (the "Appointment Letter").
The Appointment Letter shall continue in full force and effect, save for the
following:
1. The words "and Chairman" shall be deleted from wherever they appear in the
introductory paragraph and paragraphs 1.1, 2.1 and 2.3.
2. Paragraph 2.4 shall be deleted and replaced with the following wording:
"You will serve as Chairman of the Remuneration Committee for which
services you will receive (in addition to the Retainer referred to in
paragraph 3.1 below) a fee of (pound)5,000 per annum which will be payable
in accordance with the payment provisions contained in paragraph 3.1. You
will not be required to serve on the Audit Committee."
3. The figure of (pound)60,000 per annum in paragraph 3.1 shall be amended to
read "(pound)15,000 per annum".
In addition to the above I am offering my resignation as Non-Executive Director
of Peptide Therapeutics Limited.
I confirm that I have no claims whatsoever against the Company for any reason in
respect of or arising out of my position as Chairman of the Company.
<PAGE>
To indicate its acceptance of my resignation as Chairman of the Company and
Non-Executive Director of Peptide Therapeutics Limited and my continued
appointment as a Non-Executive Director of the Company the Company should
approve and countersign this letter where indicated below.
Yours faithfully
/s/ BRIAN MANSEL RICHARDS
- -------------------------
BRIAN MANSEL RICHARDS
/s/ GORDON CAMERON
- -------------------------
Signed for and on behalf of
PEPTIDE THERAPEUTICS GROUP PLC
<PAGE>
Strictly Private and Confidential
Brian Mansel Richards
Richmond House
Woodway Road
Sibford Ferris
Oxfordshire
OX15 5RF
1 March 1997
Dear Brian
Appointment as Non-Executive Director
I am delighted that you have agreed to continue on the Board of Peptide
Therapeutics Group plc ("the Company") as a Non-Executive Director and Chairman.
The purpose of this letter (the "Agreement") is formally to confirm the terms of
your appointment as a Non-Executive Director and Chairman of the Company.
1 Term of Appointment
1.1 Subject to Clauses 1.2 and 7 you shall serve the Company as a
Non-Executive Director Chairman until such time as your appointment is
terminated by either party giving the other not less than twelve months'
notice in writing to terminate these arrangements whereupon this Agreement
Shall terminate on the expiry of such notice. Subject to the payment of
fees on retirement in accordance with Clause 1.2, no compensation for loss
of office will be due to you.
1.2 If, on your retirement by rotation as a Director of the Company in
accordance with the requirements of the Company's Articles of Association
("Articles"), you are not re-elected as a Director of the Company for any
reason, then in such circumstances your appointment shall terminate
automatically with immediate effect (for the avoidance of doubt, without
any period of notice) and the only fees to which you shall be entitled in
respect of these arrangements shall be such fees as have accrued due on a
daily basis up to the time of such termination together with out of pocket
expenses reasonably and properly incurred up to that time.
1.3 Subject to Clauses 1.1, 1.2 and 7 your appointment under this Agreement
shall terminate on whichever is the earlier of:-
1.3.1 the date of expiry of the period specified in Clause 1.1; and
1.3.2 your ceasing to be Director for any reason under the Articles.
1
<PAGE>
Your signature to the duplicate copy of this Agreement shall constitute
your irrevocable resignation as a Director of the Company (and any
subsidiary of the Company of which you are then a Director) with effect
from the expiry date of any notice of termination served pursuant to
clause 1.1 above.
1.4 Your appointment under this Agreement shall be subject:-
1.4.1 your re-election on retirement by rotation at any subsequent Annual
General Meeting at which, pursuant to the Articles of the Company,
you are required to retire by rotation; and
1.4.2 to the provisions of the Articles.
2 Powers and Duties
2.1 You shall exercise such powers end perform such duties as are appropriate
to your role as Non-Executive Director and Chairman of the Company.
2.2 You shall comply with all reasonable directions from, and all regulations
of the Company including, without prejudice to the generality of the
foregoing, all regulations from time to time in force with respect to
confidentiality, dealings in shares and notifications required to be made
by a Director to the Company or any other regulatory body under the
Companies Acts 1985 and 1989, the Articles or any other regulations of the
Company. In addition, you will observe the terms and conditions of The
City Code on Takeovers and Mergers and the continuing obligations under
the London Stock Exchange Listing Rules as the same are applicable to the
Company and its Directors from time to time.
2.3 Your duties as a Non-Executive Director and Chairman will normally require
attendance at all Main Board Meetings and General Meetings of the Company
as well as making such time available as is necessary to prepare for those
meetings and dealing with such matters as might normally be expected of a
Non-Executive Director and Chairman.
2.4 You will also be asked to serve as a member of the Audit Committee and of
the Remuneration Committee. In addition, you may from time to time be
required to serve as a Director of one or more subsidiaries of the
Company.
2.5 Main Board Meetings are held at regular intervals on dates which will be
advised well in advance. You will be required to attend Main Board
Meetings and such other Board Meetings as you and the Company shall agree
from time to time. Further you will be required to attend at least two
meetings of each of the Remuneration Committee and Audit Committee. Such
meetings will be held, whenever possible. on the same date as the Main
Board Meetings.
2.6 You will be provided with reports on at least a quarterly basis outlining
the current performance of the Company and you will be welcome to see
further information on the Company at any time. You will also be most
welcome to visit any of the Company's operations as and when time permits.
3 Remuneration
3.1 A directors' fee ("Retainer") of (pound)60,000 per annum (or such higher
amount as the Board may from time to time determine and notify to you in
writing) is payable by equal monthly
2
<PAGE>
instalments in arrear on or about the 25th day (excluding weekends and
public holidays) of every month subject to the delivery of invoices to the
Company. The Retainer is non-pensionable and will be reviewed every year
by the Remuneration Committee of the Board and any proposed increase is to
be approved by the Board.
3.2 From the date of this Agreement the Company shall continue during the term
of the Agreement to provide you with your existing company car up to the
expiry of the lease of such car on 16th September 1997 ("the Remaining
Lease Period"). During the Remaining Lease Period the Company will pay all
the running costs for this car, including the cost of insurance, testing,
repair, maintenance and fuel including that in relation to private
motoring. You shall take good care of the car and ensure that it is at all
times in a roadworthy condition and that all requirements and conditions
of any insurance policy relating to it are observed and you shall return
the car and its keys to the Company at its registered office (or any place
the Company may reasonably nominate) immediately upon termination of this
Agreement however arising or at the end of the Remaining Lease Period
(whichever first occurs). Following the expiry of the Remaining Lease
Period the Company shall have no obligation to provide you with a car or
to pay any of your private motoring costs.
4 Expenses
4.1 You will be reimbursed by the Company in respect of all reasonable
travelling, hotel and incidental or other out of pocket expenses which are
reasonably and properly incurred in attending and returning from Meetings
of the Board or Committees of the Board or general meetings of the Company
or any other meetings which as a Director you are entitled or invited to
attend in the course of your duties under this Agreement provided that on
request you shall provide such vouchers or other evidence of actual
payment of such expenses that may reasonably be required.
4.2 The Company shall reimburse you for any fees or expenses you incur in
taking advice from the Company's financial and legal advisers or other
independent financial and legal advisers in relation to the performance of
your duties. Before seeking such advice you should first consult another
Non-Executive Director of the Company. If you take such advice you should
again consult another Non-Executive Director once the fees end expenses
you have incurred exceed (pound)5,000, or further fees and expenses of
(pound)5,000 have been incurred since such previous consultation.
5 Confidentiality
5.1 You shall not, either during the term of your appointment or thereafter:-
5.1.1 use to the detriment or prejudice of the Company and its subsidiary
undertakings (the "Group" and "Group Company" shall he construed
accordingly as any of such companies) or divulge or communicate to
any person any trade secret or any other confidential information
concerning the business or affairs of the Company or the Group
(except to employees or directors of any Group Company whose
province it is to know the same) which may have come to your
knowledge during the term of your appointment under this Agreement;
or
5.1.2 use for your own purpose or for any purpose other than those of the
Group any information or knowledge of a confidential nature which
you may from time to time acquire in relation to any member of the
Group but so that this restriction shall cease to
3
<PAGE>
apply to any information or knowledge which may come into the public
domain (otherwise than through your own default).
5.2 You shall not, during the term of your employment as a director nor for a
period of 6 months after the termination thereof be or become a director
or employee or agent of any company. business or enterprise or have or
acquire any material financial interest in any enterprise which at the
time when you accept such directorship, employment or agency, or acquire
such interest, competes or is likely to compete or have a significant
business relationship with any member of the Group without the prior
consent of the Board in writing (such consent not to be unreasonably
withheld or delayed).
6 Fringe benefits and deductions
You shall not be entitled to any pension, bonus or any other fringe
benefits of the Company (save that, for the avoidance of doubt, your
current entitlement to share options of the Company shall be unaffected by
this Agreement). Your fees under this Agreement will be paid to you net of
any deductions the Company is required by law to make such as income tax
under the PAYE system or national insurance contributions.
7 Termination
7.1 Without prejudice to the generality of the foregoing the Company may by
notice in writing immediately terminate the arrangements set out herein if
you shall:-
7.1.1 be in breach of any terms set out in this Agreement which in the
case of a breach capable of remedy is not remedied by you within 21
days of receipt by you of a notice from the Company specifying the
breach and requiring it to be remedied;
7.1.2 be incompetent, guilty of gross misconduct and/or any serious or
persistent negligence or misconduct in respect of your obligations
under this Agreement; and
7.1.3 fail or refuse after a written warning to carry out the duties
reasonably and properly required of you under this Agreement.
7.2 Upon the termination of these arrangements for whatever react you shall at
the request of the Board and without claim for compensation forthwith
resign from office as a Director of the Company and from all other offices
held by you in any Group Company (if any) and the Company is irrevocably
authorised to appoint a nominee to act on your behalf to execute all
documents and to do all things necessary to give effect to this provision.
7.3 You shall promptly whenever requested by the Company and in any event upon
your ceasing to be a Director of the Company deliver up to the Company all
lists of clients or customers and all other documents, papers and records
which may have been prepared by you or have come into your possession as a
Director of the Company. You shall not be entitled to and shall not retain
any copies thereof. Title and copyright therein shall vest in the Company.
8 Notices
Any written notice required to be given hereunder by either party to the
other should be served by sending the same by registered or recorded
delivery post to the last known address of the
4
<PAGE>
other party and any receipt issued by the person or authorities shall be
conclusive evidence of the fact and date of posting of such notice.
9 Governing Law
The arrangements set out in this Agreements shall be governed by English
Law and the English Courts shall have exclusive jurisdiction over any
claim or dispute arising under this Agreement.
11 Miscellaneous
The Company Secretary will supply you with a copy of the Company's
Memorandum and Articles of Association and any other information in
relation to the Company which you may require. He will also request that
you complete a Form 288 which includes your formal consent to being
appointed (and which must be filed with the Registrar of Companies) and a
Directors' Declaration Card (a copy of which is enclosed) to be delivered
to the London Stock Exchange in connection with the application for
admission to the Official List and will ask you to make the other relevant
disclosures required by law.
12 Previous Agreements
As from the date of this Agreement all previous agreements between the
Company or any Group Company and you relating to your employment or
directorship with the Group, shall be deemed to have been terminated and
shall cease to have effect but without prejudice to any accrued right of
the parties up to the date of termination.
Please, would you confirm your acceptance of the above terms by signing and
returning the attached copy of this Agreement.
Yours sincerely
/s/ Dr John Brown
- -------------------------
Dr John Brown
Chief Executive of Peptide Therapeutics Group, plc
I confirm my acceptance of the above terms.
/s/ Brian Mansel Richards
- -------------------------
Brian Mansel Richards
5
<PAGE>
EXHIBIT 10.22
[LOGO]
Peptide Therapeutics
321 Cambridge Science Park
Milton Road, Cambridge
Cambridgeshire CB4 4WG
United Kingdom
Tel: +44 (0) 1223 423 333
Fax: +44 (0) 1223 423 111
Strictly Private and Confidential
Alan Gilbert Goodman
16 Cantelupe Road
Haslingfield
Cambridge CB3 7LU
14th July 1998
Dear Alan
Appointment as a Non-Executive Director
I am delighted that you have agreed to continue on the Board of Peptide
Therapeutics Group plc ("the Company") as a Non-Executive Director and Chairman.
The purpose of this letter (the "Agreement") is formally to confirm the terms of
your appointment as a Non-Executive Director and Chairman of the Company with
effect from 1st May 1998.
1. Term of Appointment
1.1. Subject to Clauses 1.2 and 7 you shall serve the Company as a
Non-Executive Director and Chairman until such time as your appointment is
terminated by either party giving the other not less than three months'
notice in writing to terminate these arrangements whereupon this Agreement
shall terminate on the expiry of such notice. Subject to the payment of
any fees on termination in accordance with Clause 1.2, no compensation for
loss of office will be due to you.
1.2. If, on your retirement by rotation as a Director of the Company in
accordance with the requirements of the Company's Articles of Association
("Articles"), you are not re-elected as a Director of the Company for any
reason, then in such circumstances your appointment shall terminate
automatically with immediate effect (for the avoidance of doubt, without
any period of notice) and the only fees to which you shall be entitled in
respect of these arrangements shall be such fees accrued on a daily basis
up to the time of such termination together with out of pocket expenses
reasonably and properly incurred up to that time.
1.3. Subject to Clauses 1.1, 1.2 and 7 your appointment under this Agreement
shall terminate on whichever is the earlier of:
1.3.1 the date of expiry of the notice period specified in Clause 1.1; and
Peptide Therapeutics Limited registered in England Company No. 2774777
(Registered Office as above)
A Subsidiary of Peptide therapeutics Group plc
<PAGE>
1.3.2 your ceasing to be a Director for any reason under the Articles.
Your signature to the duplicate copy of this Agreement shall constitute
your irrevocable resignation as a Director of the Company (and any
subsidiary of the Company of which you are then a Director) with effect
from the expiry date of any notice of termination served pursuant to
clause 1.1 above.
1.4. Your appointment under this Agreement shall be subject:-
1.4.1 to your re-election on retirement by rotation at any subsequent
Annual General Meeting at which, pursuant to the Articles of the
Company. you are required to retire by rotation; and
1.4.2 to the provisions of the Articles.
2. Powers and Duties
2.1. You shall exercise such powers and perform such duties as are appropriate
to your role as a Non-Executive Director and Chairman of the Company.
2.2. You shall comply with all reasonable directions from, and all regulations
of the Company including, without prejudice to the generality of the
foregoing, all regulations from time to time in force with respect to
confidentiality, dealings in shares and notifications required to be made
by a Director to the Company or any other regulatory body under the
Companies Acts 1985 and 1989, the Articles or any other regulations of the
Company. In addition, you will observe the terms and conditions of The
City Code on Takeovers and Mergers and the continuing obligations under
the London Stock Exchange Listing Rules as the same are applicable to the
Company and its Directors from time to time.
2.3. Your duties as a Non-Executive Director and Chairman will normally require
attendance at all Main Board Meetings and General Meetings of the Company
as well as making such time available as is necessary to prepare for those
meetings and dealing with such matters as might normally be expected of a
Non-Executive Director and Chairman.
2.4. You will also be asked to serve as a member of the Audit Committee and of
the Remuneration Committee. In addition, you may from time to time be
required to serve as a Director of one or more subsidiaries of the
Company.
2.5. Main Board Meetings are held at regular intervals on dates that will be
advised well in advance. You will be required to attend Main Board
Meetings and such other Board Meetings as you and the Company shall agree
from time to time. Further you will normally be required to attend the
meetings of each of the Remuneration Committee and Audit Committee. Such
meetings will be held, whenever possible, on the same date as the Main
Board Meetings.
<PAGE>
2.6. You will be provided with reports on at least a quarterly basis outlining
the current performance of the Company and you will be welcome to see
further information on the Company at any time. You will also be most
welcome to visit any of the Company's operations as and when time permits.
3. Remuneration
3.1. A directors' fee ("Retainer") of(pound)60,000 per annum (or such higher
amount as the Board may from time to time determine and notify to you in
writing) is payable by equal monthly instalments in arrears on or about
the 25th day (excluding weekends and public holidays) of every month. The
Retainer is non-pensionable and will be reviewed every year by the
Remuneration Committee of the Board and any proposed increase is to be
approved by the Board.
4. Expenses
4.1 You will be reimbursed by the Company in respect of all reasonable
travelling, hotel and incidental or other out of pocket expenses which are
reasonably and properly incurred in the course of carrying out your duties
under this Agreement provided that on request you shall provide such
vouchers or other evidence of payment of such expenses that may reasonably
be required.
4.2 The Company shall reimburse you for any fees or expenses you incur in
taking advice from the Company's financial and legal advisers or other
independent financial and legal advisers in relation to the performance of
your duties. Before seeking such advice you should first consult another
Non-Executive Director of the Company. If you take such advice you should
again consult another Non-Executive Director once the fees and expenses
you have incurred exceed (pound)5,000, or further fees and expenses of
(pound)5,000 have been incurred since such previous consultation.
5. Confidentiality
5.1 You shall not, either during the term of your appointment or thereafter;
5.1.1 use to the detriment or prejudice of the Company and its subsidiary
undertakings (the "Group" and "Group Company" shall be construed
accordingly as any of such companies) or divulge or communicate to
any person any trade secret or any other confidential information
concerning the business or affairs of the Company or the Group which
may have come to your knowledge at any time during the term of your
appointment under this Agreement or under any previous agreements
entered into between you and any Group Company ("Confidential
Information"), except to:
5.1.1.1 employees or directors of any Group Company; and/or
5.1.1.2 any and all advisors or consultants to any Group Company
(for so long as they remain advisors or consultants),
including for the avoidance of doubt but not limited to N M
Rothschild & Sons Limited, HSBC Securities,
<PAGE>
Arthur Andersen, Pinsent Curtis and Reddie & Grose and any
company which is a licensee or potential licensee of any
Group Company and/or a corporate investor (excluding any
companies in which you have a material financial interest)
in any Group Company; and/or
5.1.1.3 any person with whom you are dealing in pursuit of
fulfilling your obligations under this agreement including
seeking legal advice under clause 4.2 of this agreement,
in each case where such party's province is to know the same; or
5.1.2 use for your own purpose or for any purpose other than those of the
Group any Confidential Information.
5.2 For the purposes of this clause 5 Confidential Information shall exclude:
5.2.1 any information or knowledge which is or may come into the public
domain (otherwise than through your own default); and
5.2.2 any information or knowledge which is known to a third party and
which the third party obtained otherwise than from yourself and in
respect or which the third party has no obligations of
confidentiality whatsoever.
5.3 For the avoidance of doubt nothing in this clause 5 shall prevent you from
disclosing any information including Confidential Information if required
to do so by:
5.3.1 law or by a court of competent jurisdiction; and/or
5.3.2 any competent regulatory body.
5.4 You shall not, during the term of your appointment as a director nor for a
period of six months after the termination thereof be or become a director
or employee or agent of any company, business or enterprise or have or
acquire any material financial interest in any enterprise which at the
time when you accept such directorship, employment or agency, or acquire
such interest, competes or is likely to compete or have a significant
business relationship with any member of the Group without the prior
consent of the Board in writing (such consent not to be unreasonably
withheld or delayed). For the purposes of this clause 5.4 the Board:
5.4.1 consents to you becoming or continuing as a director of any and all
of the following: Advanced Technology Management Limited
Agel Limited
Amura Limited
Ative Limited
ATM Investments Limited
ATM Global Investments Limited
CeNeS Limited
Oxford Biomedica plc
<PAGE>
Quantum Healthcare Limited and any and all
company(ies) in which it makes an investment
5.4.2 consents to you becoming and being both a Limited and a general
partner in the Quantum Healthcare Fund.
6 Fringe benefits and deductions
You shall not be entitled to any pension, bonus or any other fringe
benefits of the Company (save that, for the avoidance of doubt, your
current entitlement to share options of the Company shall be unaffected by
this Agreement). Your fees under this Agreement will be paid to you net of
any deductions the Company is required by law to make such as income tax
under the PAYE system or National Insurance contributions.
7 Termination
7.1 Without prejudice to the generality of the foregoing the Company may by
notice in writing immediately terminate the arrangements set out herein if
you shall:
7.1.1 be in breach of any terms set out in this Agreement which in the
case of a breach capable of remedy is not remedied by you within 21
days of receipt by you of a notice from the Company specifying the
breach and requiring it to be remedied;
7.1.2 be incompetent, guilty of gross misconduct and/or any serious or
persistent negligence or misconduct in respect of your obligation
under this Agreement; and
7.1.3 fail or refuse after a written warning to carry out the duties
reasonably and properly required of you under this Agreement.
7.2 Upon the termination of these arrangements for whatever reason you shall
at the request of the Board and without claim for compensation forthwith
resign from office as a Director of the Company and from all other offices
held by you in any Group Company (if any) and the Company is irrevocably
authorised to appoint a nominee to act on your behalf to execute all
documents and to do all things reasonably necessary to give effect to this
provision.
7.3 You shall promptly, having been allowed sufficient time to make the copies
referred to below, whenever reasonably requested by the Company and in any
event upon your ceasing to be a Director of the Company deliver up to the
Company all Confidential Information in your possession. You shall be
entitled to keep retain and use for the purposes of clause 5.3 above one
copy thereof, provided that you provide the Company with a complete list
of all such documents copied. Title and copyright therein shall vest in
the Company.
<PAGE>
8 Notices
Any notice required to be given pursuant to this agreement by either party
to the other should be delivered by hand or served by sending the same by
registered or recorded delivery post to the last known address of the
other party and any receipt issued by the person or authorities shall be
conclusive evidence of the fact and date of posting of such notice.
Notice will be deemed delivered if delivered by hand on the date so
delivered and if by registered or recorded delivery 48 hours after the
date posted.
9 Governing Law
The arrangements set out in this Agreement shall be governed by English
Law and the English Courts shall have exclusive jurisdiction over any
claim or dispute arising under this Agreement.
10 Previous Agreements
As from the date of this Agreement all previous agreements between the
Company or any Group Company and you relating to your employment or
directorship with the Group, shall be deemed to have been terminated and
shall cease to have effect and you shall cease to be an employee of the
Company from the date of this letter without prejudice to any accrued
right of the parties up to the date of termination.
Please would you confirm your acceptance of the above terms by signing and
returning the attached copy of this Agreement.
Yours sincerely
/s/ Dr John Brown
Dr John Brown
Chief Executive of Peptide Therapeutics Group plc
I hereby accept and confirm my agreement to the terms of my appointment as set
out above.
/s/ Alan Gilbert Goodman
- ------------------------
Alan Gilbert Goodman
<PAGE>
Exhibit 10.23
THE PEPTIDE THERAPEUTICS GROUP PLC
1994 UNAPPROVED SHARE OPTION SCHEME
This Scheme, which has been established by a resolution of the board of
directors of Peptide Therapeutics Group plc passed on 13th May 1994 comprises:
- - the rules of The Peptide Therapeutics Group plc 1994 Unapproved Share
Option Scheme; and
- - the form of Share Option Contract to be used for the purposes of the
Scheme (as set out in the Schedule to these rules).
<PAGE>
THE PEPTIDE THERAPEUTICS GROUP PLC l994 UNAPPROVED SHARE OPTION SCHEME
INTRODUCTION
This Scheme, which has been established by a resolution of the board of
directors of the Company passed on 13th May 1994 provides for benefits in the
form of options to acquire ordinary shares in the Company to be granted to
selected employees and directors of the Company.
WHAT IS AN "OPTION"?
An "option" is a contractual right, as against the Company, to become a
shareholder by subscribing for shares in the Company in the future subject to
certain terms and conditions which are embodied in the rules of the Scheme.
Those rules also set out the limitations imposed upon the directors' powers to
grant such options.
An option does not form part of an employee's entitlement under his or her
employment contract.
TAX TREATMENT OF AN OPTION
Under existing tax rules no charge to tax should arise upon the grant of an
option.
When the option is exercised the option holder will be liable to income tax on
the amount of the difference between the market value at the date of exercise of
the shares over which the option is exercised and the price paid for them.
If the shares are not disposed of as soon as the option is exercised a charge to
capital gains tax might arise when the shares are ultimately disposed of if they
are disposed of for more then the market value of the shares at the date the
option is exercised. If the shares are not disposed of as soon as the option is
exercised and are ultimately disposed of for less than their market value at the
date the option is exercised, the Option-holder should be entitled to a capital
loss, but that loss can only be set-off against capital
1
<PAGE>
gains and cannot be set-off against the liability to income tax in respect of
the exercise of the option.
The Company does not undertake to advise Option-holders on the tax consequences
of an option. Any Option-holder who is unsure of the tax liabilities which may
arise should take appropriate professional advice.
2
<PAGE>
RULES OF THE PEPTIDE THERAPEUTICS GROUP PLC 1994 UNAPPROVED
SHARE OPTION SCHEME
1. DEFINITIONS
1.1 In these rules (unless the context otherwise requires) the following words
and phrases have the meanings given below:
"Auditors" means the auditors for the time being of the
Company;
"Company" means Peptide Therapeutics Group plc
(registered in England with no. 2863682);
"control" has the same meaning as in section 840 of
the Taxes Act;
"Date of Grant" means, in respect of any Option, the date on
which that Option was granted in accordance
with rule 2;
"Directors" means the board of directors of the Company
or a duly constituted committee of the
board;
"Eligible Employee" means a director or employee of any company
within the Group;
"Exercise Price" the price per Share payable upon the
exercise of an Option (as determined in
accordance with rule 3 below);
"Group" means the Company and every other company
which is a Subsidiary and of which the
Company has control;
3
<PAGE>
"London Stock Exchange" The International Stock Exchange of the
United Kingdom and the Republic of Ireland
Limited;
"Option" means a right to subscribe for Shares
granted pursuant to and in accordance with
the rules of this Scheme;
"Option-holder" means a person who has subsisting rights
under an Option (including, upon the death
of such a person, his personal
representatives);
"Ordinary Share Capital" means issued ordinary share capital of the
Company which for the avoidance of doubt
excludes any preference shares of the
Company.
"the Schedule" means the Schedule to these rules as
mentioned in rule 2;
"Scheme" means The Peptide Therapeutics Group plc
1994 Unapproved Share Option Scheme as set
out in these rules and the Schedule as
amended from time to time;
"Shares" means fully-paid ordinary shares in the
capital of the Company;
"Subsidiary" any company which is for the time being both
a subsidiary (as defined in section 736 of
the Companies Act 1985) of the Company and
under the control of the Company;
"Taxes Act" means the Income and Corporation Taxes Act
1988;
4
<PAGE>
1.2 References to any enactment includes a reference to that enactment as it
may be from time to time modified extended or re-enacted.
1.3 Words denoting the singular shall include the plural and words denoting
the masculine gender shall include the feminine and vice versa.
1.4 References to rules are to the rules of this Scheme as amended from time
to time.
2. GRANT OF OPTIONS
2.1 The Directors, on behalf of the Company, may, if they in their absolute
discretion so decide, grant Options from time to time in accordance with
the provisions of this Scheme to any person who is an Eligible Employee.
2.2 An Option shall be exercisable only subject to and in accordance with the
terms and conditions of a share option contract which is in the form of
the Schedule to these rules (as amended from time to time).
2.3 It shall be a condition precedent to the grant of an Option that the
person to whom it is granted agrees by executing the share option contract
mentioned in rule 2.2 as a deed to accept and be bound by the rules of the
Scheme.
2.4 No payment shall be required as consideration for the grant of an Option.
3. EXERCISE PRICE
The subscription price per Share payable upon the exercise of an Option shall,
subject to rule 5, be determined by the Directors but shall not in any event be
less than the nominal value of a Share.
5
<PAGE>
4. LIMITS ON GRANTING OF OPTIONS
The aggregate nominal value of Shares in respect of which Options may be granted
on any day shall not, when added to the aggregate nominal value of all Shares in
respect of which Options have previously been granted (but excluding any Shares
in respect of which Options have lapsed and ceased to be exercisable), in any
event exceed L148,149.
5. VARIATION OF SHARE CAPITAL
5.1 In the event of any increase or variation of the Ordinary Share Capital by
way of capitalisation or rights issue, or sub-division, consolidation or
reduction or any other variation of the Ordinary Share Capital, the
Directors may in their absolute discretion make such adjustments as they
consider appropriate:
(a) to the number of Shares which are subject to any Option, and/or
(b) to the subscription price per Share upon the exercise of an Option,
and/or
(c) where such an Option has been exercised but no Shares have been
allotted or transferred, to the number of Shares which may be so
allotted or transferred and the subscription price payable for each
such Share
(d) the minimum number of Shares over which the Option may be exercised
on any occasion.
PROVIDED THAT
(i) except in the case of a capitalisation issue or a sub-division
of the Shares, any such adjustment made by the Directors is
confirmed in writing by the Auditors to be in their opinion
fair and reasonable provided always that the requirement for
the auditors to confirm that adjustments are fair and
reasonable only applies where
6
<PAGE>
the Directors have actually made an adjustment; and
(ii) the subscription price per Share payable upon the exercise of
an Option is not reduced below the nominal value of a Share.
5.2 As soon as reasonably practicable after making any adjustment pursuant to
rule 5.1, the Directors shall give notice in writing to every
Option-holder affected thereby.
6. MISCELLANEOUS
6.1 The Company shall at all times keep available sufficient authorised but
unissued Shares to satisfy the exercise in full of all the Options for the
time being remaining capable of being exercised under this Scheme.
6.2 The Directors may from time to time vary these rules, make any further
rules and establish such procedure for the administration and
implementation of this Scheme as they think fit and in the event of any
dispute or disagreement as to the interpretation of this Scheme or of any
such rules, regulations or procedure or as to any question or right
arising from or related to this Scheme, the decision of the Directors
shall (except as regards any matter required to be determined by the
Auditors hereunder) be final and binding upon all persons.
6.3 In any matter in which they are required to act hereunder, the Auditors
shall be deemed to be acting as experts and not as arbitrators and the
Arbitration Acts 1950-1979 shall not apply hereto.
6.4 The costs of the administration and implementation of this Scheme shall be
borne by the Company.
7
<PAGE>
SCHEDULE
(AS MENTIONED IN RULE 2 OF THIS SCHEME)
PEPTIDE THERAPEUTICS GROUP PLC
THE PEPTIDE THERAPEUTICS GROUP PLC 1994 UNAPPROVED SHARE OPTION SCHEME
SHARE OPTION CONTRACT
Option-holder: ........................................................
of .....................................................
........................................................
Date of Grant: ........................................................
Number of Shares: ........................................................
Peptide Therapeutics Group plc HEREBY GRANTS to the Option-holder named above
and the Option-holder HEREBY ACCEPTS the grant to him of the right, exercisable
only subject to and in accordance with the terms and conditions set out in this
Share Option Contract, to subscribe for the number of Shares shown above at a
subscription price of L........ per Share (the "Exercise Price").
1. DEFINITIONS
1.1 In this Share Option Contract:
"Auditors" means the auditors for the time being of the
Company;
"City Code" means the City Code on Takeovers and
Mergers;
8
<PAGE>
"the Company" means Peptide Therapeutics Group plc
(registered in England with no. 2863682);
"Connected Person" has the meaning set out in section 839
Income and Corporation Taxes Act 1988;
"control" has the same meaning as in section 840 of
the Taxes Act;
"Date of Grant" means the date of grant of this Option as
shown above;
"Directors" means the board of directors of the Company
or a duly appointed committee of the board;
"Excluded Persons" (1) Each of the following companies
incorporated in the Isle of Man:
Bethersdon Limited (Company No: 65035)
Corston Limited (Company No: 65036)
Exminister Limited (Company No: 65037)
Frensham Limited (Company No: 65038)
Humberston Limited (Company No: 65039)
Martincroft Limited (Company No: 65040)
Strixton Limited (Company No: 65041)
Shawford Limited (Company No: 65064);
(2) Any of the following companies
incorporated in England and Wales;
9
<PAGE>
Prelude Technology Investments Limited
(Company No: 1869933)
ATM Investments Limited (Company No:
2695666)
(3) Prelude Technology Fund II Limited
Partnership;
(4) Each of the following individuals:
Dr Dennis Stanworth
Ian Lewin
Valerie Jones
Julien Kirby
Sarita Nayyar
Alan Goodman
Timothy McCarthy
Daniel Roach; and
(5) Any person (including any trust) which
is a Connected Person in relation to
whom any of the persons listed at (1),
(2), (3) and (4) above;
"the Group" means the Company and each and every
company which is for the time being a
Subsidiary;
"Listing" means the admission of the Shares to or the
granting of permission for the Shares to be
dealt on a Securities Market;
"Model Code" means the Model Code for transactions in
securities by directors, certain employees
and persons connected with them issued by
the London Stock Exchange from time to
10
<PAGE>
time;
"the Option" means the right hereby granted to subscribe
for Shares and which is exercisable only
subject to and in accordance with the terms
and conditions of this Share Option Contract
(as amended from time to time pursuant to
clause 9);
"Option-holder" means the person to whom the Option has been
granted or, in the event of his death, his
Personal Representatives;
"Ordinary Share Capital" means issued share capital of the Company
other than fixed-rate preference shares;
"Personal Representatives" means the executors (or, as the case may be,
the executor or executrix) of the will of a
deceased Option-holder or former
Option-holder or the administrators (or, as
the case may be, the administrator or
administratix) of an Option-holder who has
died intestate, being in either case a
person or persons who has or have proved to
the satisfaction of the Company Secretary of
the Company his or their title as such;
"Purchaser" means the person or persons who have agreed
to purchase shares in the Company pursuant
to a Sale;
"Sale" means the acquisition by any person, or by
persons (other than an Excluded Person or
any Excluded Persons) who in relation to
each other are Connected Persons or acting
in concert within the meaning of the City
11
<PAGE>
Code, of such number of shares in the
Company as, when added to any shares in the
Company already held or owned by them,
confer in aggregate more then 50% of the
total voting rights conferred by all the
shares in the capital of the Company for the
time being in issue and conferring the right
to vote at all general meetings of the
Company;
"Scheme" means The Peptide Therapeutics Group plc
1994 Unapproved Share Option Scheme;
"Securities Market" means an approved EC Market or an approved
securities market as defined in the
Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1992;
"Shares" means fully-paid ordinary shares in the
capital of the Company;
"Subsidiary" any company which is for the time being both
a subsidiary (as defined in section 736 of
the Companies Act 1985) of the Company and
under the control of the Company;
"the Taxes Act" means the Income and Corporation Taxes Act
1988;
1.2 A Sale shall be treated as having taken place when an unconditional
legally binding agreement for the Sale has been signed or when a
conditional legally binding agreement for the Sale becomes unconditional.
1.3 References to any enactment includes a reference to that enactment as it
may be from time to time modified, extended or re-enacted.
12
<PAGE>
1.4 Words denoting the singular shall include the plural and words denoting
the masculine gender shall include the feminine and vice versa.
1.5 References to clauses are to clauses of this Share Option Contract.
1.6 The clause headings are for ease of reference only and are not to be taken
as affecting the interpretation of this Share Option Contract.
2. INDEPENDENCE OF OPTION
2.1 The grant of an Option does not form part of the Option-holder's
entitlement to remuneration or benefits pursuant to his contract of
employment nor does the existence of a contract of employment between any
person and the Company or any Subsidiary or former Subsidiary give such
person any right or entitlement to have an Option granted to him in
respect of any number of Shares or any expectation that an Option might be
granted to him whether subject to any conditions or at all.
2.2 The rights and obligations of the Option-holder under the terms of his
office or employment with the Company or any other member of the Group
shall not be affected by the grant of this Option.
2.3 Without prejudice to the rights of an Option-holder under clauses 4.5 and
4.6, the rights of the Option-holder under the terms of this Share Option
Contract shall not afford the Option-holder any rights or additional
rights to compensation or damages in consequence of the loss or
termination of his office or employment with any member of the Group for
any reason whatsoever.
2.4 The Option-holder shall not be entitled to any compensation or damages for
any loss or potential loss which he may suffer by reason of being unable
to exercise the Option in consequence of the loss or termination of his
office or employment with any member of the Group for any reason
whatsoever.
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<PAGE>
3. NON-TRANSFERABILITY OF THE OPTION
3.1 During his lifetime only the Option-holder may exercise the Option.
3.2 The Option shall immediately lapse and cease to be exercisable if:
3.2.1 it is transferred or assigned (other than to Personal
Representatives upon the death of the Option-holder), mortgaged,
charged or otherwise disposed of by the Option-holder; or
3.2.2 the Option-holder is adjudicated bankrupt or a bankruptcy order is
made against the Option-holder pursuant to Chapter I of Part IX of
the Insolvency Act l986.
4. EXERCISE OF THE OPTION - GENERAL RULES
4.1 Notwithstanding the following provisions of this contract, the Option may
not in any event be exercised after the seventh anniversary of the Date of
Grant.
4.2 The Option may be exercised in whole or in part any time after (but not
before) the first of the following to occur, namely:
4.2.1 the making of an application for Listing;
4.2.2 the receipt of notice from the Directors that negotiations for a
Sale are proceeding; and
4.2.3 the receipt of notice from the Directors that notice has been
given to the shareholders of the Company of a general meeting at
which a resolution for the voluntary winding-up of the Company is
to be proposed.
4.3 Except as otherwise provided in clauses 4.5 and 4.6, the Option will lapse
and cease to be exercisable in the event that the Option-holder ceases to
hold office or employment within the Group or gives notice to terminate
his contract of employment with any company within the Group.
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<PAGE>
4.4 For the purposes of clauses 4.3 and 4.6 an Option-holder shall not be
treated as causing to hold office or employment within the Group unless
and until he no longer holds an office or employment with any company
within the Group.
4.5 If the Option-holder dies before the Option has been exercised in full and
before the Option has lapsed or ceased to be exercisable the Option may be
exercised by his Personal Representatives at any of the times and subject
to the same conditions as the Option could have been exercised by the
Option-holder had he not died.
4.6 If the Option-holder ceases to hold office or employment within the Group
by reason of being incapable by reason of mental or physical illness
certified by a qualified medical practitioner of continuing in the
employment for which he was employed clause 4.3 shall not apply and the
Option may be exercised at any of the times and subject to the same
conditions as if the Option-holder had not ceased to hold office or
employment within the Group.
4.7 In the event that the Shares have been admitted to the Official List of
the London Stock Exchange an Option-holder will not be entitled to
exercise an Option at any time when to do so would contravene the Model
Code.
5. EXERCISE OF THE OPTION - LISTING AND WINDING-UP
5.1 This clause 5 only applies if the first of the events mentioned in clause
4.2 to occur is the making of an application for Listing or the giving of
notice from the shareholders of the Company of a general meeting at which
a resolution for the voluntary winding-up of the Company is to be
proposed.
5.2 Subject to clauses 4.1, 4.3 and 4.7 if the first of the events mentioned
in clause 4.2 to occur is the making of an application for Listing, the
Option may be exercised in accordance with the following provisions of
this clause any time after such an application has been
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<PAGE>
made.
5.3 Subject to clauses 4.1, 4.3 and 4.7 if notice is given to shareholders of
the Company of a general meeting at which a resolution for the voluntary
winding-up of the Company is to be proposed the Directors shall give
notice in writing to the Optionholders as soon as reasonably practicable
and the Option-holder may exercise the Option in accordance with the
following provisions of this clause at any time before the commencement of
the winding-up.
5.4 Where the Option-holder becomes entitled to exercise the Option as a
result of the occurrence of the event mentioned in clause 4.2.1 or the
event mentioned in clause 4.2.3, the Option shall be exercised only by the
Option-holder serving a written notice upon the Company which:
5.4.1 specifies the number of Shares in respect of which the Option is
exercised on that occasion which in any event shall not:
(a) exceed the number of Shares in respect of which the Option
subsists and in respect of which it may then be exercised and
which have not been specified for this purpose in a prior
notice served by the Option-holder in accordance with this
clause; nor
(b) be less than 1000 Shares or, if the number of Shares in
respect of which the Option subsists is smaller than 1000
Shares, the whole of that number; and
5.4.2 is accompanied by payment of an amount equal to the product of the
number of Shares specified in the notice and the subscription
price per Share payable upon exercise of the Option;
and is otherwise in the form set out in Schedule 1 to this contract or in such
other form as the Directors may prescribe and is accompanied by such documents
as the Directors may from time to time prescribe.
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<PAGE>
5.5 Insofar as the Option is not exercised in full it shall lapse and cease to
be exercisable upon the commencement of the winding-up of the Company.
6. EXERCISE OF THE OPTION - SALE
6.1 This clause 6 shall only apply if the first of the events mentioned in
clause 4.2 to occur is a Sale.
6.2 Subject to clauses 4.1, 4.3 and 4.7, the Option may be exercised in
accordance with the following provisions of this clause 6 immediately
before the Sale and only if the Option-holder agrees to immediately sell
all the Shares acquired as a result of the exercise of the Option to the
Purchaser at the same price per Share as is accepted by the other
shareholders of the Company and insofar as the Option is not exercised in
full it shall lapse and cease to be exercisable immediately after the Sale
takes place.
6.3 The Directors shall give notice in writing to the Option-holders before a
Sale takes place specifying:
6.3.1 that negotiations are proceeding for a Sale;
6.3.2 details of the price per share which the prospective purchaser is
offering at the time the notice is given; and
6.3.3 the period during which the Option must be exercised.
6.4 Any notice given by the Directors to the Option-holders in accordance with
clause 6.3 shall be given in sufficient time before a binding agreement
for the Sale (whether conditional or unconditional) is signed to allow the
Option-holders an opportunity to exercise their Options, being at least 5
business days before the date on which such agreement is signed.
6.5 Any Option-holder who intends to exercise his Option immediately before
the Sale shall within the period specified by the Directors serve a
17
<PAGE>
notice on the Company in the form contained in Schedule 2 to this Share
Option Contract or such other form as the Directors may determine ("a
Conditional Exercise Notice") specifying:
6.5.1 the number of Shares over which the Option-holder wishes to
exercise his Option (which shall not in any event exceed the
number of Shares in respect of which that Option subsists); and
6.5.2 the minimum price (if any) at which the Option-holder is prepared
to sell the Shares which he will acquire on the exercise of the
Option to the Purchaser.
6.6 A Conditional Exercise Notice given in accordance with clause 6.5 may not
be withdrawn.
6.7 Subject to clause 6.10 the service of a Conditional Exercise Notice in
accordance with clause 6.5 shall constitute the Company the
Option-holder's agent for the sale of all the Shares specified in the
Conditional Exercise Notice to the Purchaser on terms which are no less
favourable than the terms on which the shares are acquired by the
Purchaser from the other shareholders of the Company provided that the
price at which the Company shall sell the Shares as agent for the
Option-holder shall not be less than the price specified in the
Conditional Exercise Notice or, if no price is specified, shall exceed the
Exercise Price.
6.8 If the Company is able to sell the Shares to the Purchaser in accordance
with clause 6.7 the Directors may appoint any person nominated by them to
be the attorney of an Option-holder to sign any agreement and to complete,
execute and deliver in the name of and on behalf of the Option-holder any
stock transfer form and any other documents necessary to transfer the
Shares over which the Option is exercised to the Purchaser against payment
of the purchase money to the Company.
6.9 The Company may receive the purchase money on behalf of an
18
<PAGE>
Option-holder and give a valid discharge to the Purchaser for it. The
Company will pay the purchase money received by it in respect of the Sale
of an Option-holder's Shares to the Option-holder as soon as reasonably
practicable following receipt.
6.10 A Conditional Exercise Notice served in accordance with clause 6.5 shall
not constitute a valid exercise of an Option unless:
6.10.1 there is a Sale; and
6.10.2 the agreement for the Sale provides for a consideration for the
Sale of at least the price per Share specified by the
Option-holder in the Conditional Exercise Notice or if no such
price is specified a price exceeding the Exercise Price
and if and only if the conditions in clause 6.10.1 and 6.10.2 are
satisfied the Option shall be deemed to have been exercised immediately
before the time that a Sale takes place.
6.11 If a Conditional Exercise Notice has been served by an Option-holder but
has failed to constitute a valid exercise of an Option, the Company shall
repay any monies paid by the Option-holder as the Exercise Price for the
Option as soon as reasonably practicable after the Directors become aware
that the Sale will not proceed or, if a Sale takes place, as soon as
reasonably practicable after the Sale.
7. ALLOTMENT AND ISSUE OF SHARES
7.1 Within the period of 15 days beginning with the date on which a notice of
exercise served pursuant to clause 5.4 (exercise following application for
Listing or notice of winding-up) is duly received by the Company the
Directors on behalf of the Company shall procure that the Option-holder is
allotted the number of Shares in respect of which the Option is then
exercised.
7.2 As soon as reasonably practicable after an Option is deemed to have been
exercised in accordance with clause 6 (exercise following Sale)
19
<PAGE>
the Directors on behalf of the Company shall procure that the
Option-holder is allotted the number of Shares in respect of which the
Option is exercised.
7.3 As soon as reasonably practicable after allotting any Shares pursuant to
clause 7.1, the Directors on behalf of the Company shall:
7.3.1 issue to the Option-holder a definitive share certificate or such
acknowledgement of shareholding as is prescribed from time to time
in respect of the Shares so allotted;
7.3.2 if at the date on which Shares are allotted pursuant to clause 7.1
shares of the same class have been admitted to the Official List
of the Stock Exchange apply to the Council of the London Stock
Exchange for those Shares to be admitted to the Official List; and
7.3.3 if the Option remains partially unexercised, either amend the
Share Option Contract so as to indicate the number of Shares in
respect of which the Option subsists, or issue to the
Option-holder a new Share Option Contract which shall contain all
the information which would have been contained in such an amended
Share Option Contract.
7.4 If any Shares are allotted pursuant to clause 7.2 the Directors shall
retain any share certificate in respect of those shares on behalf of the
Option-holder and shall hand the certificate over to the Purchaser when
the Sale is completed.
7.5 The allotment or any Shares under the Scheme shall be subject to the
Memorandum and Articles of Association of the Company and to obtaining any
consents required under any statutory or regulatory provision from time to
time in force.
7.6 All Shares allotted under the Scheme shall rank pari passu in all respects
with the Shares for the time being in issue save as regards any rights
attaching to such Shares by reference to a record date prior
20
<PAGE>
to the date of such allotment.
8. VARIATION OF SHARE CAPITAL
In the event of any increase or variation of the Ordinary Share Capital by way
of capitalisation or rights issue, sub-division, consolidation or reduction or
any other variation of the Ordinary Share Capital, the Directors on behalf of
the Company may in their absolute discretion, by giving notice in writing to the
Option-holder, make such adjustments as they consider appropriate:
8.1.1 to the number of Shares which are subject to the Option; and/or
8.1.2 to the Exercise Price; and/or
8.1.3 where the Option has been exercised but no Shares have been
allotted in accordance with clause 7, to the number of Shares
which may be so allotted and the Exercise Price; and/or
8.1.4 the minimum number of Shares specified in clause 5.4.1(b) over
which the Option may be exercised on any occasion
PROVIDED THAT
(a) except in the case of a capitalisation issue or a sub-division of
the Shares, any such adjustment made by the Directors is confirmed
in writing by the Auditors to be in their opinion fair and
reasonable provided always that the requirement for the auditors to
confirm that adjustments are fair and reasonable only applies where
the Directors have actually made an adjustment; and
(b) the price per Share payable upon the exercise of the Option is not
reduced below the nominal value of a Share.
21
<PAGE>
9. AMENDMENT OF THE SHARE OPTION CONTRACT
The Company end the Option-holder may, by deed, amend the terms of this
Share Option Contract.
10. SERVICE OF DOCUMENTS
10.1 Except as otherwise provided in the Scheme, any notice or document to be
given by, or on behalf of, the Directors or the Company to the
Option-holder in accordance or in connection with this Share Option
Contract shall be duly given if delivered to him (if he is a director or
employee of a member of the Group) at his place of work or sent through
the post in a pre-paid envelope to the address last known to the Company
to be his address and if so sent shall be deemed to have been duly given
on the date of posting.
10.2 Any notice or document so sent to an Option-holder shall be deemed to have
been duly given notwithstanding that such Option-holder is then deceased
(and whether or not the Company has notice of his death) except where his
legal personal representatives have established their title to the
satisfaction of the Company and supplied to the Company an address to
which documents are to be sent.
10.3 Any notice in writing or document to be submitted or given to the
Directors or the Company in accordance at in connection with this Share
Option Contract may be delivered, sent by post, telex or facsimile
transmission but shall not in any event be duly given unless it is
actually received by the secretary of the Company or such other individual
as may from time to time be nominated by the Directors for the purposes of
this Share Option Contract and whose name and address is notified to the
Option-holder.
11. INFORMATION TO OPTION-HOLDERS FOLLOWING LISTING
Following a Listing, Option-holders shall be entitled to receive copies of
all accounts, circulars and notices (other than proxy or voting forms)
sent to holders of Shares but shall have no right to attend
22
<PAGE>
general meetings of the Company.
12. RENUNCIATION OF OPTION
Notwithstanding anything contained in this share option contract an
Option-holder, or following the death of an Option-holder his Personal
Representatives, may at any time renounce an Option by notice in writing
to the Company and following such a renunciation the Option will lapse and
cease to be exercisable.
This Share Option Contract has been executed by the parties to it AS A DEED on
the Date of Grant first shown above
23
<PAGE>
SCHEDULE 1
THE PEPTIDE THERAPEUTICS GROUP PLC 1994 EXECUTIVE SHARE OPTION SCHEME
NOTICE OF EXERCISE OF OPTION (FOLLOWING LISTING OR NOTICE OF WINDING-UP)
To: Company Secretary
Peptide Therapeutics Group plc
Beech House
Melbourn Science Park
Cambridge Road
Melbourn
Cambridgeshire
SG8 6TB
I hereby exercise the Option granted to me on .............. in respect of
all/.........* of the shares over which the Option subsists, and request the
allotment to me of those shares in accordance with the Rules of the Scheme and
the Memorandum and Articles of Association of the Company.
I enclose a cheque made payable to Peptide Therapeutics Group plc in the sum of
L.............. being the aggregate Exercise Price of the Option in
respect of such shares.
Name (block letters)
.........................................
Address
.........................................
.........................................
.........................................
Signature
....................... Date ...........
NOTES:-
1. This form must be accompanied by payment of the Exercise Price for the
shares in respect of which the Option is exercised.
2. The Option may not be exercised in respect of less than 1,000 shares or
(if less) all of the shares over which the Option subsists.
3. Where the Option is exercised by personal representatives, an office copy
of the Probate or Letters of Administration should accompany the form.
4. IMPORTANT. The Company does not undertake to advise you on the tax
24
<PAGE>
consequences of exercising your Option. If you are unsure of the tax
liabilities which may arise, you should take appropriate professional
advice before exercising your Option.
*Delete/insert number as appropriate
25
<PAGE>
SCHEDULE 2
THE PEPTIDE THERAPEUTICS GROUP PLC 1994 EXECUTIVE SHARE OPTION SCHEME
CONDITIONAL NOTICE OF EXERCISE OF OPTION (SALE 0F COMPANY)
To: Company Secretary
Peptide Therapeutics Group plc
Beech House
Melbourn Science Park
Cambridge Road
Melbourn
Cambridgeshire
SG8 6TB
1. I hereby exercise the Option granted to me on ............ (insert date of
grant) in respect of [all/...........]* of the shares over which the
Option subsists upon condition that the following events occur;
1.1 there is a Sale
l.2 the agreement for the Sale provides that the consideration for the
Sale will be the payment by the Purchaser or at least the price per
share specified in 2 below or, if no such price is specified, the
Exercise Price.
2. I hereby appoint the company as my agent to sell the Shares specified in
this notice for a price per share [of at least L........./ exceeding
the Exercise Price]** and I appoint such person as the Directors may
nominate to be my attorney to sign any agreement to effect such sale and
to complete, execute and deliver in my name and on my behalf any stock
transfer form and any other documents necessary to transfer the Shares
specified in 1 above to the Purchaser.
3. I enclose a cheque made payable to Peptide Therapeutics Group plc in the
sum of L........... being the aggregate Exercise Price of such
shares.
4. I execute and deliver this document as a Deed in the presence of the
witness specified below.
Name ...............................
Address.............................
....................................
....................................
Signature .......................... Date ............................
Witness name .......................
Witness address ....................
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<PAGE>
....................................
....................................
Witness signature ..................
NOTES:-
1. This form must be accompanied by payment of the Exercise Price for the
shares in respect of which the Option is exercised.
2. The Option may not be exercised in respect of less than 1000 shares or (if
less) all of the shares over which the Option subsists.
3. Where the Option is exercised by personal representatives, an office copy
of the Probate or Letters of Administration should accompany the form.
4. The form must be signed in the presence of a witness who should not be
related to you.
5. IMPORTANT. The Company does not undertake to advise you on the tax
consequences of exercising your Option. If you are unsure of the tax
liabilities which may arise, you should take appropriate professional
advice before exercising your Option.
* Delete/insert number as appropriate
** Delete/insert purchase price as appropriate
27
<PAGE>
SIGNED (but not delivered until the )
Date of Grant) as a deed by ....... )
................ in the presence of: ) ..................................
Witness signature:
Witness name:
Witness occupation:
Witness address:
EXECUTED (but not delivered until the )
Date of Grant) as a deed by PEPTIDE )
THERAPEUTICS GROUP PLC acting by:- )
Director ...................................
Director/Secretary .........................
28
<PAGE>
Exhibit 10.24
RULES OF THE PEPTIDE THERAPEUTICS
1995 SAVINGS-RELATED SHARE OPTION SCHEME
This is a copy of the rules of The Peptide Therapeutics 1995 Savings-Related
Share Option Scheme to be proposed for establishment by the Shareholders
of the Company on 3rd November 1995
......................
Chairman
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
RULE PAGE
<S> <C> <C>
1 DEFINITIONS 1
2 INVITATIONS TO APPLY FOR OPTIONS 5
3 THE EXERCISE PRICE 6
4 APPLICATIONS FOR OPTIONS 7
5 ACCEPTANCE AND SCALING-DOWN OF 8
APPLICATIONS
6 GRANT OF OPTIONS 8
7 NON-TRANSFERABILITY OF OPTIONS 9
8 LIMITS OF THIS SCHEME 9
9 LIMITS ON INDIVIDUAL CONTRIBUTIONS 10
10 RELATIONSHIP WITH SERVICE CONTRACT 11
11 EXERCISE OF OPTIONS 11
12 MANNER OF EXERCISE OF OPTIONS 13
13 RECONSTRUCTION OR WINDING-UP 15
14 CHANGE OF CONTROL 16
15 VARIATION OF SHARE CAPITAL 19
16 ALTERATION OF THIS SCHEME 19
17 SERVICE OF DOCUMENTS 20
18 MISCELLANEOUS 21
</TABLE>
<PAGE>
DRAFT: CAR/10.10.95
RULES OF
THE PEPTIDE THERAPEUTICS 1995 SAVINGS-RELATED SHARE OPTION SCHEME
1 DEFINITIONS
1.1 In this Scheme unless the context otherwise requires:
"Acquisition
Cost" in relation to the exercise of an Option, means an
amount equal to the product of:
(a) the maximum number of Shares in respect of which
that Option is capable of being exercised (or, such
lessor number as is specified in the notice given
pursuant to rule 12.2); and
(b) the Exercise Price in relation to such Shares;
"Announcement
Date" means a date on which notification is given to the
London Stock Exchange of the annual or half-yearly
results of the Company;
"Applicant" means a person to whom an invitation to apply for an
Option is issued and who in response to that invitation
submits to the Company an application in accordance with
rule 4.2;
"Application
Date" means in relation to any invitation to apply for an
Option, such date as shall be determined by the
Directors to be the last day upon which an application
for an Option may he submitted by any person to whom an
invitation has been issued pursuant to rule 2 (which,
shall be a date not less than 14 days after the date on
which that invitation was issued);
"the Approval
Date" means the date upon which the Company receives notice
that this Scheme has bean approved by the Inland Revenue
pursuant to Schedule 9 to the Taxes Act;
"Associated
Company" means any company which, in relation to the Company, is
as associated company as that term is defined for the
1
<PAGE>
purposes of paragraph 23 of Schedule 9 to the Taxes Act
by section 187(2) of the Taxes Act;
"the Auditors" means the auditors for the time being of the Company;
"the Bonus Date" means in relation to any Employee's Savings Contract,
the earliest date on which a bonus is due or, where the
Optionholder has indicated (pursuant to rule 4.1.3) that
he intends to seek the maximum bonus available, the
earliest date on which that maximum bonus is due
thereunder;
"the Company" means Peptide Therapeutics Group plc (registered in
England no 2863682);
"Contributions" means in relation to any Employee's Savings Contract,
weekly or monthly savings contributions paid, payable or
proposed to be paid;
"control" has the meaning given in section 840 of the Taxes Act;
"the Date of
Grant" in relation to any Option, means the date on which that
Option is granted;
"Dealing Day" means a day on which the London Stock Exchange is open
for business;
"the Directors" means the board of directors for the time being of the
Company or a duly constituted committee of that board;
"Eligible
Employee" means any Employee (other than an Employee precluded
from participating in this Scheme by virtue of paragraph
8 or 26(3) of Schedule 9) who, in relation to an Option,
either:
(a) at the Date of Grant;
(i) has been continuously employed by one
or more Participating Companies
throughout the period of 5 years less
43 days immediately preceding the date
of issue of the invitation to apply
for such Option (or such shorter
period immediately preceding that date
as the Directors may from time to time
determine); and
2
<PAGE>
(ii) is chargeable to tax in respect of his
office or employment under Case 1 of
Schedule E; or
(b) is nominated by the Directors as an Eligible
Employee for the purposes of this Scheme;
"Employee" means any employee (including directors) of any
Participating Company;
"other Employees'
Share Schemes" means any other employee share option or share incentive
scheme (except this Scheme) established by the Company
under which shares have been or may be issued by the
Company;
"Employee's
Savings Contract" in relation to an Eligible Employee or an Optionholder,
means the Savings Contract entered into by that person
in connection with the grant to him of an Option (and
any reference to "his Savings Contract" shall be
construed accordingly);
"the Exercise
Price" in relation to Shares subject to any Option, means the
price per Share payable upon the exercise of an Option
as determined in accordance with rule 3;
"Flotation" means the occasion on which shares in the Company are
first admitted to the Official List of the London Stock
Exchange;
"the London Stock
Exchange" means The International Stock Exchange of the United
Kingdom and the Republic of Ireland Limited;
"the maximum
bonus" means the bonus payable pursuant to the Savings Contract
upon the completion of sixty monthly (or the equivalent
weekly) contributions and on the seventh anniversary of
the starting date of the Savings Contract having been
reached;
"the Model Code" means the Model Code for Securities Transactions by
Directors of Listed Companies issued by the London
Stock Exchange from time to time;
"Option" means a right to acquire Shares which;
3
<PAGE>
(a) is granted in accordance with rule 6; and
(b) is subject to the rules of this Scheme as
varied from time to time pursuant to rule 16; and
(c) has neither been exercised nor ceased to be
exercisable;
"Option
Certificate" means a certificate issued by the Company in respect of
any Option;
"Optionholder" means a person who has been granted an Option or, where
the context so requires, the personal representatives of
such a person;
"Ordinary Share
Capital" means issued share capital of the Company (other than
fixed-rate preference shares);
"Participating
Company" means the Company and any Subsidiary to which the
Directors have resolved that this Scheme shall extend
and have not subsequently resolved that this Scheme
shall cease to extend;
"Relevant Savings
Body" in relation to an Employee's Savings Contract, means the
Savings Body which is a party to that Contract;
"Repayment Value" in relation to an Employee's Savings Contract, means the
aggregate amount of all the Contributions payable
thereunder together with the amount of such bonus as
would be due on the Bonus Date;
"Savings Body" any bank or building society which operates an SAYE
Scheme and is approved by the Directors for the purposes
of this Scheme;
"Savings
Contract" means a savings contract entered into under an SAYE
Scheme;
"SAYE Scheme" means a certified contractual savings scheme within the
meaning of section 326 of the Taxes Act which has been
approved by the Inland Revenue for the purposes of
Schedule 9;
"Schedule 9" means Schedule 9 to the Taxes Act;
"this Scheme" means the Peptide Therapeutics 1995 Savings-Related
Share
4
<PAGE>
Option Scheme as set out in these rules as amended from
time to time;
"Shares" means fully-paid ordinary shares in the capital of the
Company which satisfy the conditions set out in
paragraphs 10-14 of Schedule 9;
"standard bonus" means the bonus payable pursuant to the Savings Contract
upon the completion of sixty monthly (or the equivalent
weekly) contributions and on the fifth anniversary of
the starting date of the Savings Contract having been
reached;
"Subsidiary" means any company which is for the time being both a
subsidiary (as defined in section 736 of the Companies
Act 1985) of the Company and under the control of the
Company;
"Subscription
Options" means rights to subscribe for Shares granted in
accordance with and subject to the rules of this Scheme;
"the Taxes Act" means the Income and Corporation Taxes Act 1988;
1.2 Words and expressions not defined in this rule 1 have the same meanings as
in section 185 of the Taxes Act and Schedule 9.
1.3 Any reference to any enactment includes a reference to that enactment as
from time to time modified extended or re-enacted.
1.4 Any reference to the exercise of an Option includes a reference to the
exercise of an Option in respect of a lesser number of Shares than the
maximum permitted under rule 12.1.1 or 12.1.2.
1.5 Words denoting the masculine gender shall include the feminine.
1.6 Words denoting the singular shall include the plural and vice versa.
1.7 References to rules are to the rules of this Scheme.
2 INVITATIONS TO APPLY FOR OPTIONS
2.1 Subject to the following provisions of this rule 2, the Directors may, if
in their discretion they so decide, issue to all persons who are, or may
at the intended Date of Grant be, Eligible Employees invitations in
writing (which may be in the form of notices for the general attention of
Employees and to which the particular attention of individual Employees is
drawn by notices issued with pay and salary advice slips) to apply for
Options.
2.2 Such invitations may only be issued:
5
<PAGE>
2.2.1 within the period beginning with the Approval Date and ending 14
days after shares in the Company are first admitted to the Official
List of the London Stock Exchange; and
2.2.2 thereafter, during the period of 42 days beginning with the day
following an Announcement Date.
2.3 In the event of the Company being restricted by statute, order or
regulation (including any regulation, order or requirement imposed on the
Company by the London Stock Exchange or any other regulatory authority)
from issuing invitations within any period as mentioned in rule 2.2.2, the
Directors may issue such invitations at any time during the period of 30
days beginning with the date on which such restriction is removed.
2.4 Each such invitation shall:
2.4.1 be in the same terms as all other such invitations issued on the
same occasion; and
2.4.2 invite the person to whom it is addressed to apply for an Option in
respect of the whole number of Shares for which the Acquisition Cost
payable would be as nearly as may be equal to, but not exceed, the
amount which would be the Repayment Value of the Employee's Savings
Contract; and
2.4.3 specify the form and manner in which each such person may apply for
an Option and the Application Date in relation to such invitation
which shall not be less than 14 days from after the date of such
invitation; and
2.4.4 identify the Savings Body; and
2.4.5 otherwise be in such form as the Directors may determine.
2.5 On any occasion on which invitations are issued, the Directors may in
their discretion determine and announce the maximum Contributions that can
be made and/or the maximum number of Shares in respect of which Options
will be granted in response to applications made pursuant to the
invitations issued on that occasion.
2.6 No invitation may be issued after the tenth anniversary of the date on
which this Scheme is approved by shareholders of the Company.
3 THE EXERCISE PRICE
3.1 Subject to the following provisions of this rule 3, and any adjustment in
accordance with rule 15, the price per Share payable upon the exercise of
Options granted on any occasion shall be determined by the Directors but
shall be not less than 80 per cent (rounded up to the nearest whole penny)
of:
6
<PAGE>
3.1.1 the market value of a Share on the day immediately preceding the day
on which the invitations to apply for such Options are issued (as
determined in accordance with the provisions of Part VIII of the
Taxation of Chargeable Gains Act 1992 and agreed in advance as
between the Company and the Inland Revenue); or
3.1.2 if shares in the Company have been admitted to the Official List of
the London Stock Exchange, the average of the middle market
quotations of a Share as derived from the Daily Official List of the
London Stock Exchange for the 3 consecutive Dealing Days immediately
preceding the issue of invitations to apply for the grant of such
Options.
3.2 The Exercise Price payable upon the exercise of a Subscription Option
shall not in any event be less than the nominal value of a Share.
4 APPLICATIONS FOR OPTIONS
4.1 Any person to whom an invitation has been issued pursuant to rule 2 may
apply for an Option by submitting to the person specified in the
invitation an application which:
4.1.1 is received at such address as shall be stipulated in the invitation
not later than the Application Date; and
4.1.2 specifies the amount of the Contributions proposed to be paid under
the Employee's Savings Contract and authorizes the Participating
Company which employs the Applicant to deduct such amount (or such
lesser amount as may be appropriate in consequence of the
application of rule 5) from his pay and to complete the application
referred to in rule 4.1.4 in respect of such amount or such lesser
amount; and
4.1.3 if the terms of the invitation so permit, indicates whether or not
the Applicant intends to seek the maximum bonus or the standard
bonus available under the Employee's Savings Contract; and
4.1.4 includes an application for a Savings Contract in a form approved by
the Relevant Savings Body; and
4.1.5 is duly completed and signed by the Applicant; and
4.1.6 otherwise complies with such terms and conditions as may have been
specified in those invitations; and
4.1.7 is subject to the Applicant being an Eligible Employee at the Date
of Grant; and
4.1.8 is otherwise in such form as the Directors may determine.
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4.2 The total number of Shares in respect of which, any application for an
Option shall be made shall be the whole number of Shares for which the
Acquisition Cost payable would be as nearly as may be equal to but not
exceed the Repayment Value of the Employee's Savings Contract if the
amount of each of the Contributions payable under that Savings Contract
was equal to the maximum amount specified in such application pursuant to
rule 4.1.2.
4.3 In the event that no application is received by the Application Date in
response to an invitation such invitation shall be deemed to have been
declined.
4.4 No Applicant shall make more than one application or be granted more than
one Option in response to the issue of invitations on any one occasion.
4.5 It shall be the responsibility of the Optionholder to comply with any
requirements to be fulfilled in order to obtain or obviate the necessity
of any such consent.
5 ACCEPTANCE AND SCALING-DOWN OF APPLICATIONS
5.1 Subject to rule 5.2, each application shall be accepted to the extent of
the total number of Shares in respect of which that application is made.
5.2 If the total number of Shares in respect of which applications have been
made would result in any of the limits in rule 8 being exceeded then the
number of Shares in respect of which each application is accepted shall be
reduced in accordance with the following provisions of this rule 5.
5.3 The number of Shares in respect of which each application shall be
accepted shall be reduced as nearly as may be on a proportionate basis to
the extent necessary to ensure that none of the limits in rule 8 is
exceeded SAVE THAT the number of Shares in respect of which any
application shall be accepted shall not be reduced below the number for
which the Acquisition Cost payable would be as nearly as may be equal to,
but not exceed. the Repayment Value of the Employee's Savings Contract if
the Contributions were L10 monthly ("the Minimum Number of Shares").
5.4 The provisions of rule 5.3 shall, if necessary, be applied repeatedly
until either none of the limits in rule 8 will be exceeded or the number
of Shares in respect of which each application would be accepted is
reduced to the Minimum Number of Shares.
5.5 If, notwithstanding the provisions of rules 5.2 to 5.4 (inclusive) any one
or more of the limits in rule 8 would still be exceeded then the selection
of applications for acceptance shall be made by a ballot conducted by the
Directors.
5.6 As soon as reasonably practicable after the Application Date in relation
to invitations issued
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on any occasion, the Directors shall determine the maximum number of
Shares in respect of which each application may be accepted.
6 GRANT OF OPTIONS
6.1 Subject to the following provisions of this rule 6, Options for which
invitations are issued on any occasion shall be granted within the period
of 30 days beginning with the day (or, as the case may be, the first of
the three Dealing Days) by reference to which the market value of a Share
was determined as mentioned in rule 3.1.
6.2 If on any occasion it is necessary to reduce the number of Shares in
respect of which applications are accepted then rule 6.1 shall take effect
as if the reference therein to a period of 30 days was a reference to 35
days.
6.3 No payment shall be required in respect of the grant of any Option.
6.4 As soon as reasonably practicable after the Date of Grant in relation to
any Option, the Company shall issue to the Optionholder in respect of that
Option an Option Certificate in such form as it may from time to time
determine but including a statement of:
6.4.1 the Date of Grant; and
6.4.2 the maximum number of Shares in respect of which the Option is
granted; and
6.4.3 the Exercise Price.
7 NON-TRANSFERABILITY OF OPTIONS
7.1 During his Lifetime only the individual to whom an Option is granted may
exercise that Option.
7.2 An Option shall immediately cease to be exercisable if:
7.2.1 it is transferred or assigned (other than to personal
representatives upon the death of the Optionholder), mortgaged,
charged or otherwise disposed of by the Optionholder; or
7.2.2 the Optionholder is adjudicated bankrupt or a bankruptcy order is
made against the Optionholder pursuant to Chapter I of Part IX of
the Insolvency Act 1986; or
7.2.3 the Optionholder is otherwise deprived (otherwise than on death) of
the legal or beneficial ownership of the Option by operation of law
or doing or omitting to do anything which causes him to be so
deprived.
8 LIMITS OF THIS SCHEME
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8.1 The number of Shares in respect of which Subscription Options may be
granted on any day, when added to:
8.1.1 the number of Shares in respect of which Options have previously
been granted (and, if not exercised, have not then ceased to be
exercisable); and
8.1.2 the number of Shares issued or in respect of which rights to
subscribe for Shares have previously been granted (and have neither
been exercised nor have then ceased to be exercisable) under any
other Employees' Share Scheme in the period of 10 years ending on
that day
shall not exceed 10 per cent of the Ordinary Share Capital on that day.
8.2 The number of Shares in respect of which Subscription Options may be
granted on any day in a given year, when added to:
8.2.1 the number of Shares in respect of which Subscription Options have
previously been granted in that year and the four preceding years
(and which, if not exercised, have not ceased to be exercisable);
and
8.2.2 the number of Shares issued or in respect of which any rights to
subscribe for Shares have previously been granted in that year and
the four preceding years (and which have neither been exercised nor
have then ceased to be exercisable) under any other Employees' Share
Scheme
shall not exceed 5 per cent of the Ordinary Share Capital on that day.
8.3 For the purposes of rule 8.2, 'year' means a calendar year beginning 1st
January.
8.4 The total number of Shares in respect of which Options may be granted in
response to applications made by Eligible Employees pursuant to
invitations issued on any occasion may not exceed the maximum (if any)
determined and published by the Directors on that occasion pursuant to
rule 2.5.
8.5 For the purposes of rules 8.1 and 8.2, Shares in respect of which
Subscription Options are granted before Flotation shall be left out of
account.
9 LIMITS ON INDIVIDUAL CONTRIBUTIONS
9.1 The aggregate amount of an Employee's Contributions under this Scheme when
added to the aggregate amount of his or her contributions under any other
Savings Contract may not exceed the monthly sum specified in rule 9.2.
9.2 The sum mentioned in rule 9.1 is L250 or such other maximum amount
(not exceeding such other maximum amount per month specified from time to
time in sub-paragraph (2) of
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paragraph 24 of Schedule 9) as the Directors may determine SAVE THAT if on
any occasion the Directors shall determine for these purposes a sum ("the
new limit") which is less than the maximum aggregate of the monthly
contributions applicable on any previous occasion then that determination
shall be made without prejudice to any Options previously granted to an
Optionholder or to any Employee's Savings Contract previously entered into
by any Optionholder if the aggregate monthly savings contributions payable
by that Optionholder under such Savings Contract would thereby exceed the
new limit.
9.3 The amount of an Employee's Contributions shall not be less than L10
or such other minimum amount per month specified from time to time in
sub-paragraph (2) of paragraph 24 of Schedule 9,
9.4 In the event that an Optionholder gives, or under the terms of his Savings
Contract is deemed to have given, notice to the Relevant Savings Body that
he intends to stop paying contributions under his Savings Contract, the
balance of the sixty monthly contributions payable thereunder shall be
deemed, for the purposes of rule 9.2, to be payable by him on a monthly
basis until the earliest date on which the standard bonus would, but for
such cessation, have been payable.
10 RELATIONSHIP WITH SERVICE CONTRACT
10.1 The grant of an Option does not form part of the Optionholder's
entitlement to remuneration or benefits pursuant to his contract of
employment nor does the existence of a contract of employment between any
person and the Company or any present or past Subsidiary or Associated
Company give such person any right or entitlement to have an Option
granted to him in respect of any number of Shares or any expectation that
an Option might be granted to him whether subject to any conditions or at
all.
10.2 The rights and obligations of an Optionholder under the terms of his
contract of employment with the Company or any present or past Subsidiary,
or Associated Company shall not be affected by the grant of an Option.
10.3 The rights granted to an Optionholder upon the grant of an Option shall
not afford the Optionholder any rights or additional rights to
compensation or damages in consequence of the loss or termination of his
office or employment with the Company or any present or past Subsidiary,
or Associated Company, for any reason whatsoever.
10.4 An Optionholder shall not be entitled to any compensation or damages for
any loss or potential loss which he may suffer by reason of being unable
to exercise an Option in
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consequence of the loss or termination of his office or employment with
the Company or any present or past Subsidiary, or Associated Company for
any reason whatsoever.
11 EXERCISE OF OPTIONS
11.1 Subject to the following provisions of this rule 11 and rules 12. 13 and
14, an Option shall only be exercisable within the period of 6 months
after the Bonus Date and if not then exercised shall lapse and cease to be
exercisable at the end of that period.
11.2 Subject to rule 11.9, if an Optionholder ceases to hold office or
employment within the Group or by reason of:
11.2.1 injury or disability (evidenced to the satisfaction of the
Directors); or
11.2.2 dismissal by reason of redundancy (within the meaning of the
Employment Protection (Consolidation) Act 1978); or
11.2.3 retirement on reaching either age 65 or any other age at which he
is bound to retire in accordance with the terms of his contract or
employment; or
11.2.4 the company with which he holds office or employment by virtue of
which he is eligible to participate in this Scheme ceasing to be an
Associated Company or a member of the Group; or
11.2.5 the fact that the office or employment by virtue of which he is
eligible to participate in this Scheme relates to a business or
part of a business which is transferred to a person which is
neither an Associated Company or a member of the Group
or, at the discretion of the Directors, an early retirement more than
three years after the Date of Grant then his Option may be exercised to
the extent permitted by rule 12.1.2 only during the period of 6 months
commencing on the date on which the Optionholder shall have ceased to be
an Employee, and if it is not then exercised that Option shall lapse and
cease to be exercisable at the end of that period.
11.3 If before an Option has lapsed or otherwise been exercised the
Optionholder attains age 65 but continues to be an Employee he may,
subject to rule 11.9, exercise the Option to the extent permitted by rule
12.1.2 during the period of six months commencing on his attaining such
age.
11.4 Subject to rule 11.9, if an Optionholder dies, his personal
representatives may exercise that Option:
11.4.1 if he dies before the Bonus Date, to the extent permitted by rule
12.1.2 during the
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period of 12 months commencing on the date of his death;
11.4.2 if he dies within the period of 6 months after the Bonus Date,
during the period of 12 months commencing on the Bonus Date but
thereafter that Option shall lapse and cease to be exercisable.
11.5 If at any time an Optionholder ceases to be an Employee for any reason
other than those mentioned in rules 11.2 or 11.4, 13 or 14 any Option
which he holds shall lapse and cease to be exercisable upon such
cessation.
11.6 No Optionholder shall be treated for the purposes of rules 11.2 or 11.5 as
ceasing to be an Employee unless and until he no longer holds office or
employment with any member of the Group or with any Associated Company or
any other Company of which the Company has control.
11.7 If the Optionholder obtains repayment of the Contributions under his
Savings Contract the relevant Option or Options shall cease to be
exercisable forthwith unless such Option is then exercisable by reason of
rules 11, 13 or 14.
11.8 Except as provided in rule 11.4, no Option shall be capable of being
exercised later than six mouths after the Bonus Date.
11.9 No Option granted before Flotation shall be capable of being exercised
unless Flotation has occurred at the date of exercise.
11.10 In deciding whether and when to exercise an Option an Optionholder shall
have regard to the Model Code.
11.11 No Option may be exercised more than once.
11.12 No Option may be exercised by (or by the personal representatives of) any
Optionholder who is (or at the date of his death was):
11.12.1 not an Employee (unless the Option is exercisable pursuant to
rules 11.2, 11.3 or 11.4); or
11.12.2 ineligible to participate in this Scheme at that time by virtue of
paragraph 8 of Schedule 9.
12 MANNER OF EXERCISE OF OPTIONS
12.1 An Option may only ever be exercised in respect of such number of Shares
as is mentioned below:
12.1.1 where the Option is exercisable pursuant to rule 11.1 or 11.4.2,
the maximum number of Shares in respect of which it shall subsist;
or
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12.1.2 where the Option is exercisable pursuant to rule 11.2, 11.3, 11.4.1
or to rules 13 or 14. that number of Shares for which the
Acquisition Cost payable is most nearly equal to but does not
exceed the aggregate amount of Contributions paid under the
Employee's Savings Contract (excluding the amount of any monthly or
weekly contribution the due date of payment of which is more than
one calendar month or one week, as appropriate, after the date on
which repayment is made under the Employee's Savings Contract)
together with the amount of any bonus and interest received or due
thereunder as at that date or (if less) the maximum number of
Shares in respect of which the Option shall subsist; or
12.1.3 in either case, such lesser number of Shares (which, unless the
Option is exercised in full, may not be less than 100 Shares) as
the Optionholder may specify in the notice of exercise given to the
Company pursuant to rule 12.2.
12.2 An Option may be exercised by the Optionholder giving notice in writing to
the Company (or to such person at such address as may from time to Time be
notified to Optionholders by the Company) which:
12.2.1 is given at any time when the Option is exercisable; and
12.2.2 specifies the number of Shares in respect of which the Option is
being exercised in accordance with rule 12.1 (save that this rule
12.2.2 shall not apply if the Option is exercised before the Bonus
Date); and
12.2.3 unless the Directors otherwise permit is accompanied by the Option
Certificate relating to that Option; and
12.2.4 (as the Directors determine and notify to Optionholders) contains
or is accompanied by either an application to the Relevant Savings
Body for repayment of the Contributions paid under the Employee's
Savings Contract up to the date of exercise of the Option together
with any bonus or interest accrued due thereunder (which
application shall provide for such repayment to he made to the
Company) or is accompanied by a cheque for the Acquisition Cost
together with evidence of the termination of the Employee's Savings
Contract; and
12.2.5 is otherwise in such form and accompanied by such documents as the
Directors may determine.
12.3 As soon as reasonably practicable after receiving a notice of exercise
given pursuant to rule 12.2 the Directors (or such other person as is
notified to the Optionholders by the Company pursuant to rule 12.2) shall,
if they have so determined and notified Optionholders, procure
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that the application for repayment of the Contributions plus bonus or
interest is delivered to the Relevant Savings Body.
12.4 Within 30 days after the date on which the Company (or such other person
as is notified to Optionholders by the Company) shall have received the
proceeds of the Employee's Savings Contract the Directors on behalf of the
Company shall or shall procure:
12.4.1 the application of the monies comprised in that repayment so far as
necessary in payment of the Acquisition Cost for the number of
Shares in respect of which the Option is then exercised; and
12.4.2 that an account is made to the Optionholder (or any balance
remaining; and
12.4.3 subject to rule 12.5, the allotment and issue to the Optionholder
(or otherwise procure the transfer to the Optionholder of) the
number of Shares in respect of which the Option is then exercised;
and
as soon as reasonably practicable thereafter:
12.4.5 if at that time Shares are listed on the Official List of the
London Stock Exchange, procure that the Shares allotted to the
Optionholder are admitted to the Official List; and
12.4.6 issue to the Optionholder a definitive share certificate or such
acknowledgement of shareholding as is prescribed from time to time
in respect of the Shares so allotted or transferred.
12.5 The Directors may (or may procure), if the Optionholder so requests, allot
and issue (or transfer) some or all of such Shares to:
12.5.1 a nominee of the Optionholder provided that beneficial ownership or
such Shares shall be vested in the Optionholder; or
12.5.2 to a plan manager (or his nominee) of single company plan on terms
that such Shares shall be in the beneficial ownership of the
Optionholder notwithstanding that title to such Shares shall be
vested in the plan manager or his nominee or jointly in one of them
and the Optionholder
and for the purposes of this rule the terms 'plan manager' and 'single
company plan' shall have the meanings they bear in the Personal Equity
Plan Regulations 1989 (SI 1989/469 as amended).
12.6 All Shares allotted or transferred upon the exercise of any Option shall
rank equally in all respects with the Shares for the time being in issue
save as regards any rights attaching to such Shares by reference to a
record data prior to the date of such allotment or transfer.
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12.7 The allotment or transfer of Shares pursuant to the exercise of an Option
shall be subject to the Memorandum and Articles of Association of the
Company and to any necessary consents of any governmental or other
authorities under any enactments or regulations from time to time in force
and it shall be the responsibility of the Optionholder to comply with any
requirements to be fulfilled in order to obtain or obviate the necessity
of any such consent.
13 RECONSTRUCTION OR WINDING-UP
13.1 If the court sanctions a compromise or arrangement proposed far the
purposes of or in connection with a scheme for the reconstruction of the
Company or its amalgamation pursuant to section 425 of the Companies Act
1985 the Optionholder shall, subject to rule 11.9, be entitled to exercise
his Option to the extent permitted by rule 12.1.2 during the period of 6
months commencing on the date on which the court sanctions the compromise
or arrangement, and thereafter the Option shall cease to be exercisable.
13.2 In the event of notice being given to the holders of Shares of a
resolution for the voluntary winding-up of the Company, notice of the same
shall forthwith be given by the Directors to all Optionholders and each
Optionholder shall, subject to rule 11.9, be entitled to exercise his
Option to the extent permitted by rule 12.1.2 at any time within the
period of six months commencing on the date on which the resolution is
passed (but not in any event more than six months after the Bonus Date)
and thereafter the Option shall lapse and cease to be exercisable.
13.3 All Options shall immediately lapse and cease to be exercisable upon the
commencement of a winding-up of the Company.
14 CHANGE OF CONTROL
14.1 If, as a result of either:
14.1.1 a general offer to acquire the whole of the Ordinary Share Capital
which is made on a condition such that if it is satisfied the
person making the offer will have control of the Company; or
14.1.2 a general offer to acquire all the shares in the Company of the
same class as the Shares
the Company shall come under the control of another person or persons the
Directors shall as soon as reasonably practicable thereafter notify every
Optionholder accordingly, and the Optionholder shall, subject to rule
11.9, be entitled to exercise his Option to the extent
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permitted by rule 12.1.2 within 6 months of the date when the person
making the offer has obtained control of the Company and any condition
subject to which the offer is made has been satisfied (but not in any
event more than six months after the Bonus Date) and to the extent the
Option has not been exercised it shall upon the expiration of the said
period cease to be exercisable and shall only remain in existence for the
purpose of forming the subject of an offer (if any) made pursuant to the
rule 14.3 and shall lapse upon the expiry of the "appropriate period" as
defined the rule 14.4 if such offer is made but is not accepted by the
Optionholder.
14.2 If at any time any person becomes entitled or bound to acquire Shares
under sections 428 to 430F of the Companies Act 1985 the Optionholder
shall, subject to rule 11.9, be entitled to exercise his Option to the
extent permitted in rule 12.1.2 at any time when that person remains so
entitled or bound (but not in any event more than six months after the
Bonus Date) and to the extent the Option has not been exercised it shall
upon the expiration of the said period cease to be exercisable and shall
only remain in existence for the purpose of forming the subject of an
offer (if any) made pursuant to rule 14.3 and shall lapse upon the expiry
of the "appropriate period" as defined in rule 14.4 if such offer is made
but is not accepted by the Optionholder.
14.3 If any company (in this rule referred to as "the acquiring company"):
14.3.1 obtains control of the Company as a result of making a general
offer;
(a) to acquire the whole of the Ordinary Share Capital of the
Company which is made on a condition such that if it is
satisfied the person making the offer will have control of
the Company; or
(b) to acquire all the shares in the Company which are of the
same class as the Shares;
14.3.2 obtains control of the Company in pursuance of a compromise or
arrangement sanctioned by the court made under section 425 of the
Companies Act 1985; or
14.3.3 becomes bound or entitled to acquire Shares under sections 428 to
430F (inclusive) of the Companies Act 1985
an Optionholder may, at any time within the appropriate period as
mentioned in rule 14.4, by agreement with the acquiring company, release
his rights under his Option in consideration of the grant to him of rights
to acquire shares in the acquiring company or any other company falling
within sub-paragraphs (b) and (c) of paragraph 10 of Schedule 9 (read and
construed as if references in those provisions to the company were
references to the
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acquiring company) PROVIDED THAT:
(a) such rights will be exercisable only in accordance with the
provisions of this Scheme as it had effect immediately before the
release of the rights referred to above (read and construed as
mentioned in rule 14.5);
(b) the shares to which the new rights relate satisfy the provisions of
paragraphs 10 to 14 of Schedule 9;
(c) the total market value, immediately before such release, of the
Share. in respect of the Option then subsists is equal to the total
market value, immediately after such grant, of the shares in respect
of which new rights are granted to the Optionholder; and
(d) the total amount payable by the Optionholder for the acquisition of
shares upon exercise of the new rights is equal to the total amount
that would have been payable for the acquisition of Shares upon
exercise of the Option.
14.4 In rule 14.3 "the appropriate period" means;
14.4.1 in a case falling within rule 14.3.1 the period of six months
beginning with the time when the person making the offer has
obtained control of the Company and any condition or conditions
subject to which the offer is made has or have been satisfied or
waived;
14.4.2 in a case falling within rule 14.3.2 the period of six months
beginning with the time when the court sanctions the compromise or
arrangement; and
14.4.3 In a case falling within rule 14.3.3 the period during which the
acquiring company remains bound or entitled as mentioned in that
paragraph;
14.5 For the purposes mentioned in paragraph (a) of the proviso to rule 14.3
the provisions of this Scheme shall be read and construed as if:
14.5.1 references to "the Company" in rules 12, 13, 14 and 18 were
references to the company in respect of whose shares the new rights
are granted;
14.5.2 references to "Shares" in rules 12, 13, 14, 15 and 18 were
references to such shares;
14.5.3 reference to "Option" in rules 7, 11, 12, 13, 14, 15 and 18 were
references to such rights;
14.5.4 references to "Optionholder" in rules 7, 11, 12, 13, 14, 15, 16
and 17 were references to the persons to whom such rights are
granted;
14.5.5 references to "Ordinary Share Capital" in rules 14 and 15 were
references to the
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ordinary share capital (other than fixed rate preference shares) of such
company; and
14.5.7 references to "the Directors" in rules 13, 15 and 17 were
references to the directors of such company; and
14.5.8 references to "the Exercise Price" in rule 15 were references to
the price per share payable upon the exercise of such new rights;
14.6 Rights granted pursuant to rule 14.3 shall be regarded (for the purposes
of section 185 to the Taxes Act and Schedule 9 and for the purposes of the
subsequent application of the provisions of this Scheme as having been
granted on the Date of Grant of the corresponding rights released as
mentioned in rule 14.3
14.7 Apart from rules 14.3 and 14.4 a person shall be deemed to have control of
a company if he and others acting in concert with him have together
obtained control of it.
15 VARIATION OF SHARE CAPITAL
15.1 In the event of any alteration of the Ordinary Share Capital by way of a
capitalisation or rights issue or by way of sub-division, consolidation,
reduction or any other variation in the share capital of the Company, the
Directors may make such adjustment as they consider appropriate:
15.1.1 to the aggregate number or amount of Shares subject to any Option;
and/or
15.1.2 to the Exercise Price payable to each Share under any such Option;
and/or
15.1.3 where an Option has been exercised but no Shares have been allotted
or transferred in accordance with rule 12.5, to the number of
Shares which may be so allotted or transferred and the Acquisition
Cost in relation to such Shares
PROVIDED THAT:
(a) no such adjustment is made without the prior approval of the Board
of Inland Revenue; and
(b) except in the case of a capitalisation issue any such adjustment is
confirmed in writing by the Auditors to be in their opinion fair and
reasonable; and
(c) the aggregate Acquisition Cost payable by an Optionholder on the
exercise of all his Options is not materially altered; and
(d) the Exercise Price in relation to any Subscription Options is not
reduced below the nominal value of those Shares; and
(e) the number of Shares as so adjusted has been rounded down to the
nearest whole
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number and the Exercise Price as so adjusted has been rounded up to
the nearest whole penny;
15.2 As soon as reasonably practicable after making any adjustment pursuant to
rule 15.1 the Directors shall give notice in writing thereof to every
Optionholder affected thereby and may call in any option certificates for
endorsement or replacement.
16 ALTERATION OF THIS SCHEME
16.1 Prior to the Approval Date the Directors may make any alteration or
addition to this Scheme as may be necessary or appropriate to ensure that
this Scheme complies with the conditions for approval of this Scheme by
the Board of Inland Revenue as set out in Schedule 9 or any requirements
of the London Stock Exchange.
16.2 The Directors may at any time after the Approval Date alter or add to any
of the provisions of this Scheme in any respect PROVIDED THAT:
16.2.1 no alteration or addition to any provision of this Scheme shall
take effect until approved by the Board of Inland Revenue; and
16.2.2 no such alteration or addition shall be made to the advantage of
existing or new Optionholders without the prior approval by
ordinary resolution of the shareholders of the Company in general
meeting SAVE THAT the provisions of this rule 16.2.2 shall not
apply to the extent that such alteration or addition is in the
opinion of the Directors a minor amendment which is necessary or
appropriate:
(a) to benefit the administration of this Scheme; or
(b) to take account of any change in legislation; or
(c) to maintain Inland Revenue approval of this Scheme or
maintain favourable tax, exchange control or regulatory
treatment for Optionholders or for the Company or for any
Subsidiary.
16.3 As soon as reasonably practicable after making any alteration or addition
under this rule 16 the Directors shall give notice in writing thereof to
every Optionholder (if any) affected thereby.
17 SERVICE OF DOCUMENTS
17.1 Except as otherwise provided in this Scheme, any notice or document to be
given to any person in accordance or in connection with this Scheme shall
be duly given:
17.1.1 if he is an Employee or an officer or employee of an Associated
Company, by
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delivering it to him at his place of work; or
17.1.2 if it is posted in a pre-paid envelope to the address last known to
the Company to be his address and if so sent shall be deemed to
have been duly given on the date of posting.
17.2 Any notice or document so sent to an Optionholder shall be deemed to have
been duly given notwithstanding that such Optionholder is then deceased
(and whether or not the Company has notice of his death) except where his
legal personal representatives have established their title to the
satisfaction of the Company and supplied to the Company an address to
which documents are to be sent.
17.3 Any notice in writing or document to be submitted or given to the
Directors or the Company in accordance or in connection with this Scheme
may be delivered, sent by post, telex or facsimile transmission but shall
not in any event be duly given unless it is actually received by the
secretary of the Company or such other individual as may from time to time
be nominated by the Directors for the purposes of this Scheme and whose
name and address is notified to Optionholders.
18 MISCELLANEOUS
18.1 The Company shall at all times keep available sufficient authorised but
unissued Shares to satisfy the exercise in full all the Subscription
Options for the time being remaining capable of being exercised under this
Scheme.
18.2 No Option to purchase existing Shares shall be granted by any person
unless that person beneficially owns such Shares at the Date of Grant.
18.3 The Directors may from time to time make and vary such rules and
regulations not inconsistent herewith and establish such procedures for
the administration and implementation of this Scheme as they think fit and
in the event of any dispute or disagreement as to the interpretation of
this Scheme or of any such rules, regulations or procedures or as to any
question or right arising from or related to this Scheme, the decision of
the Directors shall (except as regards any matter required to be
determined by the Auditors hereunder) be final and binding upon all
persons.
18.4 In any matter in which they are required to act hereunder, the Auditors
shall be deemed to be acting as experts and not as arbitrators and the
Arbitration Acts 1950-1979 shall not apply hereto.
18.5 The costs of the administration and implementation of this Scheme shall be
borne by the
21
<PAGE>
Company.
18.6 The Company shall not be obliged to provide Optionholders with copies of
any notices, circulars or other documents sent to holders of Shares.
22
<PAGE>
(FORM OF OPTION CERTIFICATE INITIALLY PROPOSED TO BE USED)
THE PEPTIDE THERAPEUTICS 1995
SAVINGS-RELATED SHARE OPTION SCHEME
("the Scheme")
OPTION CERTIFICATE
THIS DOCUMENT IS IMPORTANT A form of notice for use by the Optionholder for the
exercise of the option is set out overleaf
Name of Optionholder Number of Shares .....................
...................................... Exercise Price .....................
Address of Maximum total
Optionholder ......................... Acquisition Cost .....................
...................................... Term of savings
contract 5 years/7 years*
......................................
Date of Grant ........................ Grantor .....................
THIS IS TO CERTIFY that the Optionholder named above was on the above date
granted in accordance with the Scheme an option [to acquire/subscribe for]* the
above number of Ordinary Shares of [ ] each in the capital of Peptide
Therapeutics Group plc at the above price per share. The option is personal to
the Optionholder and may not be transferred, assigned, mortgaged, pledged or
otherwise disposed of by him or her. The option is exercisable subject to and in
accordance with the rules of the Scheme.
.............................
[ ] for and on behalf of
[Peptide Therapeutics Group plc] [.............................]**
[*delete as appropriate]
<PAGE>
[TO BE PRINTED ON THE REVERSE OF THE OPTION CERTIFICATE]
NOTICE OF EXERCISE
In order to exercise the option referred to overleaf, you should:-
(i) complete and sign this document;
[(ii) complete and sign an application for repayment under the related
savings contract (stating that repayment should be made to Peptide
Therapeutics Group plc/.................*);
[(iii) send a cheque for the amount of the aggregate exercise price within
the prescribed time together with a closing statement of your
savings account to .....................];*
(iv) return this document and the application (if (ii) applies) within
the prescribed time (as stated in the Explanatory Leaflet) to
[ ].
1. *I/We hereby exercise the option referred to in the Option Certificate
overleaf in respect of ................ Ordinary Shares. [Insert the
number of shares in respect of which the option is exercised. If the
option is exercised before completion of the savings contract this may be
left blank. In this event you will be allotted the maximum number of
shares for which the acquisition cost does not exceed the proceeds of that
contract (together with any interest accrued due thereunder). Note, unless
the Option is exercised in full, it must be exercised over a minimum of
100 shares]
2. Grounds for exercise (please specify) ....................................
..........................................................................
..........................................................................
[3. *I/we enclose herewith a duly completed application for repayment to
Peptide Therapeutics Group plc/...............* of the *monthly/weekly
contributions under the savings contract referred to therein (together
with any bonus or interest accrued due thereunder), which the Board of
Directors of the Company are hereby authorised to submit to the savings
body with which the savings Contract was made.]*
[3. *I/We enclose herewith a cheque in the sum of L.......................
together with a statement issued by the ..............................
[insert name of savings body] evidencing that the account has been
closed.]*
*Insert Grantor name/Delete as appropriate Full Name .........................
Address ...........................
...................................
Signature .........................
Date ..............................
<PAGE>
Exhibit 10.25
RULES OF
THE PEPTIDE THERAPEUTICS
1995 UNAPPROVED SHARE OPTION SCHEME
This is a copy of The Peptide Therapeutics 1995 Unapproved Share Option
Scheme established by an ordinary resolution of the shareholders of the
Company on 8th November 1995
REB/CAR/65561.11.4/PMC
<PAGE>
INDEX
-----
<TABLE>
<CAPTION>
Rule Page
- ---- ----
<S> <C> <C>
1 Definitions 1
2 Eligibility 3
3 Exercise Price 4
4 Grant of Options 4
5 Relationship with Contract of
Employment 5
6 Non-transferability of Options 6
7 Performance-Related Conditions of
Exercise 6
8 Exercise of Options 7
9 Manner of Exercise of Options 9
10 Overall Limits on the Granting of
Options 10
11 Individual Limit on the Granting of
Options 11
12 Demerger, Reconstruction or Winding-up 12
13 Take-over 13
14 Variation of Share Capital 13
15 Alteration of Scheme 14
16 Service of Documents 15
17 Miscellaneous 15
</TABLE>
<PAGE>
RULES OF
THE PEPTIDE THERAPEUTICS 1995 UNAPPROVED SHARE OPTION SCHEME
1. DEFINITIONS
1.1 In this Scheme unless the context otherwise requires:-
"an Announcement Date" means a date of notification to the
London Stock Exchange of the annual or
half yearly results of the Company;
"Associated Company" means any company which, in relation to
the Company, is an associated company as
that term is defined in section 416 of
the Taxes Act;
"the Auditors" means the auditors for the time being of
the Company;
"the Committee" means the Remuneration Committee of the
board of directors of the Company or
such other committee comprising a
majority of non-executive directors of
the Company to which the directors of
the Company delegate responsibility for
the operation of this Scheme;
"the Company" means Peptide Therapeutics Group plc
(registered in England no 2863682);
"control" has the meaning given in section 840 of
the Taxes Act;
"the Date of Grant" in relation to any Option, means the
date on which that Option is granted in
accordance with rule 4.5;
"Dealing Day" means a day on which the London Stock
Exchange is open for business;
"Executive" means a director or employee of any
member of the Group who is required to
devote substantially the whole of his
time to his duties under his contract of
employment and in any event not less
than 25 hours per week (excluding meal
breaks) disregarding normal holiday
entitlement;
"other Employees' Share Scheme" means:-
(a) The Peptide Therapeutics 1995
Savings-Related Share Option Scheme
to be
1
<PAGE>
established by the shareholders of
the Company; and
(b) any other employees' share scheme
(except this Scheme) established by
the Company under which shares have
been or may be issued by the
Company;
"the Exercise Price" means the price per Share payable
upon the exercise of an Option (as
determined in accordance with rule
3);
"Flotation" means the occasion on which shares
in the Company are first admitted to
the Daily Official List of the
London Stock Exchange;
"the Group" means the Company and each and every
company which is for the time being a
Subsidiary;
"the London Stock Exchange" means the International Stock Exchange
of the United Kingdom and the Republic
of Ireland Limited;
"Market Value" in relation to any Share in respect of
which an Option is to be, or has been
granted means:
(a) the market value of a Share as at
the Date of Grant as determined in
accordance with Part VIII of the
Taxation of Chargeable Gains Act
1992; or
(b) if at the Date of Grant Shares have
been admitted to the Daily Official
list of the London Stock Exchange,
the average of the middle market
quotations of a Share as derived
from the Daily Official List of the
London Stock Exchange for the 3
consecutive Dealing Days last
preceding the Date of Grant;
"the Model Code" means the code adopted by the Company
which contains provisions similar in
purpose and effect to the provisions of
the Model Code for Securities
Transactions by Directors of Listed
Companies
2
<PAGE>
issued by the London Stock Exchange from
time to time;
"Options" means a right to acquire Shares granted
in accordance with and subject to the
rules of this Scheme;
"Optionholder" means a person who has been granted an
Option or, if that person has died and
where the context requires, his legal
personal representatives;
"Ordinary Share Capital" means the issued share capital of the
Company other than fixed-rate preference
shares;
"this Scheme" means the Peptide Therapeutics 1995
Unapproved Share Option Scheme as set
out in these rules and amended from time
to time;
"Shares" means fully-paid ordinary shares in the
capital of the Company;
"Subsidiary" means any company which is for the time
being both a subsidiary (as defined in
section 736 of the Companies Act 1985)
of the Company and under the control of
the Company;
"Subscription Options" means rights to subscribe for Shares
granted in accordance with and subject
to the rules of this Scheme;
"the Taxes Act" means the Income and Corporation Taxes
Act 1988;
"Year of Assessment" means a year beginning on any 6 April
and ending on the following 5 April;
1.2 Any reference to any enactment includes a reference to that enactment as
from time to time modified extended or re-enacted.
1.3 Words denoting the masculine gender shall include the feminine.
1.4 Words denoting the singular shall include the plural and vice versa.
1.5 References to rules are to the rules of this Scheme.
2. ELIGIBILITY
2.1 Options shall not be granted to, nor exercised by any person:
2.1.1 unless (subject to rules 8.3 to 8.6 inclusive and 12.1) he is an
Executive;
2.1.2 after Flotation, if such grant or exercise would contravene the
Model Code;
3
<PAGE>
2.2 Options shall not be granted to any person within the period of 2 years
ending with the date on which that person is bound to retire in accordance
with the terms of his contract of employment.
2.3 Subject to rules 2.1 and 2.2 the Committee shall have an absolute
discretion as to the selection of persons to whom Options may be granted.
3 EXERCISE PRICE
3.1 Subject to rule 3.2 and any adjustment being made pursuant to rule 14, the
Exercise Price shall be determined by the Committee but if at the relevant
date shares in the Company have been or were admitted to the Official List
of the London Stock Exchange shall be not less than Market Value.
3.2 The Exercise Price in respect of a Subscription Option shall not in any
event be less than the nominal value of a Share.
4 GRANT OF OPTIONS
4.1 The Committee shall have the power, exercisable on behalf of the Company
in accordance with the terms of this Scheme, to grant rights to subscribe
for Shares.
4.2 An Option may only be granted:
4.2.1 at any time before shares in the Company are first admitted to the
Official List of the London Stock Exchange; or
4.2.2 at any time ending on the 14th day after the date shares in the
Company are first admitted to the Official List of the London Stock
Exchange;
4.2.3 during the period of 42 days beginning with the day following an
Announcement Date; or
4.2.4 within a period of 14 days immediately after the person to whom it
is granted first becomes an Executive.
4.3 In the event of the Company being restricted by statute, order or
regulation (including any regulation, order or requirement imposed on the
Company by the London Stock Exchange or any other regulatory authority)
from granting an Option within any period as mentioned in rule 4.2, an
Option may be granted at any time during the period of 42 days beginning
with the date on which such restriction is removed.
4.4 No Option may be granted after the tenth anniversary of the date on which
this Scheme is approved by shareholders of the Company.
4.5 An Option shall be granted by the grantor executing a deed and issuing to
the Optionholder an option certificate which contains an undertaking by the
Optionholder (duly executed as a deed) to be bound by the rules of this
Scheme which specifies:
4
<PAGE>
4.5.1 the Date of Grant;
4.5.2 the number of Shares in respect of which the Option is granted;
4.5.3 the Exercise Price;
4.5.4 the last date on which the Option may be exercised by reason of rule
8.1;
4.5.5 (if appropriate) that the exercise of the Option is subject to such
performance-related conditions as have been imposed by the Committee
(with the consent of the grantor where appropriate) pursuant to rule
7
and is otherwise to such form as the Committee may from time to time
determine.
4.6 The Option holder shall be entitled to renounce, surrender or cancel, or
agree to the cancellation of, an Option within the period of 30 days
immediately following the Date of Grant and if an Option is so renounced,
surrendered or cancelled it shall be deemed for the purposes of rules 10
and 11 as never having been granted.
5 RELATIONSHIP WITH CONTRACT OF EMPLOYMENT
5.1 The grant of an Option does not form part of the Optionholder's entitlement
to remuneration or benefits pursuant to his contract of employment nor does
the existence of a contract of employment between any person and the
Company or any Subsidiary or Associated Company or former Subsidiary or
former Associated Company give such person any right or entitlement to have
an Option granted to him in respect of any number of Shares or any
expectation that an Option might be granted to him whether subject to any
conditions or at all.
5.2 The rights and obligations of an Optionholder under the terms of his
contract of employment with the Company or any Subsidiary or Associated
Company or former Subsidiary or former Associated Company shall not be
affected by the grant of an Option.
5.3 The rights granted to an Optionholder upon the grant of an Option shall not
afford the Optionholder any rights or additional rights to compensation or
damages in consequence of the loss or termination of his office or
employment with the Company or any Subsidiary or Associated Company or
former Subsidiary or former Associated Company for any reason whatsoever.
5.4 An Optionholder shall not be entitled to any compensation or damages for
any loss or potential loss which he may suffer by reason of being unable to
exercise an Option in consequence of the loss or termination of his office
or employment with the Company or any Subsidiary or Associated Company or
former Subsidiary or former Associated Company for any reason whatsoever.
5
<PAGE>
6 NON-TRANSFERABILITY OF OPTIONS
6.1 During his lifetime only the individual to whom an Option is granted may
exercise that Option.
6.2 An Option shall immediately cease to be exercisable if:
6.2.1 it is transferred or assigned (other than to his personal
representatives upon the death of the Optionholder), mortgaged,
charged or otherwise disposed of by the Optionholder; or
6.2.2 the Optionholder is adjudicated bankrupt or a bankruptcy order is
made against the Optionholder pursuant to Chapter I of Part IX of
the Insolvency Act 1986; or
6.2.3 the Optionholder is otherwise deprived (otherwise than on death) of
the legal or beneficial ownership of the Option by operation of law
or doing or omitting to do anything which causes him to be so
deprived.
7 PERFORMANCE RELATED CONDITIONS OF EXERCISE
7.1 The exercise of an Option may by its terms, be made conditional upon the
performance of the Company and/or any Subsidiary and/or the Optionholder
over such period and measured against such objective criteria as may be
determined by the Committee having due regard to the guidance on share
option schemes issued from time to time by the investment committees
representing institutional shareholders of the Company. Any such
determination may include provision for an Option to become unconditional
during any part or parts of such period from time to time, and the
Committee shall notify to each Optionholder in writing the terms of any
such condition applicable to his Option before such Option is granted and
shall subsequently notify the Optionholder in writing as to when the
exercise of such Option has become unconditional PROVIDED THAT subject to
rule 7.2 the question of whether an Option can or cannot be exercised on
any occasion shall not be determined or determinable at the discretion of
any person.
7.2 After an Option has been granted the Committee may, in appropriate
circumstances, amend any condition on the exercise of that Option imposed
pursuant to rule 7.1 PROVIDED THAT no such amendment shall be made unless
an event has occurred or events have occurred in consequence of which the
Committee reasonably considers, having due regard to the interests of
shareholders of the Company, that the terms of the existing
performance-related condition(s) or other objective criteria imposed on the
exercise of the Option should be so varied for the purpose of ensuring that
either the objective criteria against which the performance of the Company
and/or any Subsidiary and/or the Optionholder will then be measured will be
a fairer measure of such
6
<PAGE>
performance or that any amended performance target will afford a more
effective incentive to Optionholders and will be no more difficult to
satisfy than were the original conditions when first set.
8 EXERCISE OF OPTIONS
8.1 An Option may not in any event be exercised later than the seventh
anniversary of the Date of Grant or such shorter period as the Committee
shall determine at the Date of Grant.
8.2 Save as provided in rules 8.3, 8.4, 8.5, 8.6, 12 and 13, an Option may not
be exercised earlier than the third anniversary of the Date of Grant or
such other period as the Committee shall determine at the Date of Grant.
8.3 An Option granted before Flotation shall not in any event be exercisable
unless Flotation has occurred at the date of exercise.
8.4 If an Optionholder dies then an Option granted to him which, at the time of
his death, had neither been exercised in full nor had ceased to be
exercisable may be exercised by his personal representatives within the
period of 12 months beginning with the date of his death notwithstanding
that any performance-related condition or other objective criteria subject
to which such Option is then exercisable is not then satisfied and if not
then exercised shall lapse and cease to be exercisable at the end of that
period.
8.5 If an Optionholder ceases to hold office or employment within the Group by
reason of:
8.5.1 injury or disability (evidenced to the satisfaction of the
Committee); or
8.5.2 dismissal by reason of redundancy (within the meaning of the
Employment Protection (Consolidation) Act 1978); or
8.5.3 retirement on or after reaching age 65 or such other age at which he
is bound to retire in accordance with the terms of his contract of
employment; or
8.5.4 early retirement with the agreement of the board of directors of the
Company; or
8.5.5 the company with which he holds office or employment by virtue of
which he is eligible to participate in this Scheme ceasing to be an
Associated Company or a member of the Group; or
8.5.6 the fact that the office or employment by virtue of which he is
eligible to participate in this Scheme relates to a business or part
of a business which is transferred to a company which is neither an
Associated Company nor a member of the Group.
then, subject to rule 8.4, an Option granted to him may be exercised
notwithstanding that any performance-related condition or other objective
criteria subject to which such
7
<PAGE>
Option is then exercisable is not then satisfied, within the period of 6
months beginning with the date on which the Optionholder so ceases to hold
office or employment and, if not then exercised shall lapse and cease to be
exercisable at the end of that period.
8.6 If an Optionholder ceases to hold office or employment within the Group for
any reason other than those set out in rules 8.4 and 8.5 then, subject to
rule 8.4, an Option granted to him may only be exercised with the approval
of the Committee given in writing (notwithstanding that any
performance-related condition or other objective criteria subject to which
such Option is then exercisable is not then satisfied) and within the
period of 6 months beginning with the date on which the Optionholder so
ceases to hold office or employment (or such shorter period as the
Committee may determine) and if not then exercised shall lapse and cease to
be exercisable at the end of that period SAVE THAT if no such approval is
given by the Committee to the Optionholder within the period of 3 months
beginning with the date on which such Optionholder ceases to hold office or
employment within the Group then such Option shall lapse and cease to be
exercisable at the end of that period.
8.7 For the purposes of this rule:
8.7.1 an Optionholder shall not be treated as having ceased to hold office
or employment within the Group unless and until he no longer holds office
or employment with any member of the Group or with any Associated Company;
and
8.7.2 in the event that the Optionholder ceases to hold office or
employment within the Group other than by reason of gross misconduct,
dishonesty, drug addiction, misconduct, bringing any company within the
Group into disrepute or other circumstances warranting summary dismissal
under the terms of his contract of employment and in circumstances where
due notice of termination of employment has not been given by the Company,
his date of cessation of office or employment shall for the purposes of
this Scheme be taken to be the date on which such notice period would have
terminated had such notice been given.
8.8 In deciding whether and when to exercise an Option an Optionholder
shall have regard to the Model Code.
8.9 A female Executive whose employment has been terminated in circumstances
such that, pursuant to Part III of the Employment Protection
(Consolidation) Act 1978 she has a right to return to work, shall be deemed
for the purposes of this rule 8 as not having ceased to be employed within
the Group or with any Associated Company until such time as she is no
longer capable, pursuant to Part III, of exercising a right to return to
work and shall be deemed not to have ceased to be still employed if she
exercises that right.
8
<PAGE>
9 MANNER OF EXERCISE OF OPTIONS
9.1 An Option shall be exercised only by the Optionholder serving a written
notice upon the Company which:
9.1.1 specifies the number of Shares in respect of which that Option is
exercised which in any event shall not:
(a) exceed the number of Shares in respect of which that Option
subsists and which have not been specified for this purpose in
a prior notice served by the Optionholder in accordance with
this rule 9; nor
(b) be less than 1,000 Shares or, if the number of Shares in
respect of which the Option subsists is smaller than 1,000
Shares, the whole of that number; and
9.1.2 is accompanied by payment of an amount equal to the product of the
number of Shares specified in the notice and the Exercise Price; and
9.1.3 unless the Committee otherwise permits, is accompanied by the option
certificate in respect of that Option
and is otherwise in such form as the Committee may from time to time
determine.
9.2 Within the period of 30 days beginning with the date on which the Company
receives a notice of exercise which complies with rule 9.1, the Company
shall allot to the Optionholder (or otherwise procure the transfer to the
Optionholder of) the Shares specified in the notice.
9.3 Subject to rule 9.4, as soon as reasonably practicable after allotting or
procuring the transfer of any Shares pursuant to rule 9.2, the board of
directors on behalf of the Company or other grantor shall procure:
9.3.1 the issue to the Optionholder of a definitive share certificate or
such acknowledgement of shareholding as is prescribed from time to
time in respect of the Shares so allotted or transferred; and
9.3.2 if on that date shares in the Company are listed on the Daily
Official List of the London Stock Exchange, that any Shares so
allotted are admitted to the Daily Official List of the London Stock
Exchange; and
9.3.3 if the Option remains partially unexercised, that either the option
certificate issued to the Optionholder pursuant to rule 4.5 is
amended so as to indicate the number of Shares in respect of which
the Option subsists, or issue to the Optionholder a new option
certificate which shall contain all the information which would have
been contained in such an amended option certificate.
9.4 Some or all of the Shares acquired upon the exercise of an Option may, if
the
9
<PAGE>
Optionholder so requests, be issued or transferred to a nominee of the
Optionholder provided that beneficial ownership of such Shares shall be
vested in the Optionholder.
9.5 The allotment or transfer of any Shares under this Scheme shall be subject
to the Memorandum and Articles of Association of the Company and to any
necessary consents or any governmental or other authorities (whether in the
United Kingdom or overseas) under any enactments or regulations from time
to time in force. It shall be the responsibility of the Optionholder to
comply with any requirements to be fulfilled in order to obtain or obviate
the necessity of any such consent.
9.6 All Shares allotted or transferred under this Scheme shall rank equally in
all respects with the Shares for the time being in issue save as regards
any rights attaching to such Shares by reference to a record date prior to
the date of such allotment or transfer.
10 OVERALL LIMITS ON THE GRANTING OF OPTIONS
10.1 The number of Shares in respect of which Subscription Options may be
granted on any day, when added to:
10.1.1 the number of Shares in respect of which Subscription Options have
previously been granted (and which, if not exercised, have not
ceased to be exercisable); and
10.1.2 the number of Shares issued or in respect of which rights to
subscribe for Shares have previously been granted (and have neither
been exercised nor have then ceased to be exercisable) in the period
of 10 years ending on that day pursuant to any other executive share
option or executive share incentive scheme
shall not exceed 5 per cent of the Ordinary Share Capital on that day.
10.2 The number of Shares in respect of which Subscription Options may be
granted on any day, when added to:
10.2.1 the number of Shares in respect of which Subscription Options have
previously been granted (and, if not exercised, have not then ceased
to be exercisable); and
10.2.2 the number of Shares issued or in respect of which any rights to
subscribe for Shares have previously been granted (and have neither
been exercised, nor have then ceased to be exercisable) in the
period of 10 years ending on that day under any other Employees'
Share Scheme
shall not exceed 10 per cent of the Ordinary Share Capital on that day.
10.3 The number of Shares in respect of which Subscription Options may be
granted on any day in a given year, when added to:
10
<PAGE>
10.3.1 the number of Shares in respect of which Subscription Options have
previously been granted in that year and the two preceding years
(and which, if not exercised, have not ceased to be exercisable);
and
10.3.2 the number of Shares issued or in respect of which any rights to
subscribe for Shares have previously been granted in that year and
the two preceding years (and have been neither exercised nor have
then ceased to be exercisable) under any other Employees' Share
Scheme
shall not exceed 5 per cent of the Ordinary Share Capital on that day.
10.4 The number of Shares in respect of which Subscription Options may be
granted on any day in a given year, when added to:
10.4.1 the number of Shares in respect of which Subscription Options have
previously been granted in that year and the two preceding years
(and which, if not exercised, have not ceased to be exercisable);
and
10.4.2 the number of Shares issued or in respect of which any rights to
subscribe for Shares have previously been granted in that year and
the two preceding years (and have been neither exercised nor have
then ceased to be exercisable) under any other executive share
option scheme or executive share incentive scheme
shall not exceed 3 per cent of the Ordinary Share Capital on that day.
10.5 For the purposes of rules 10.4 and 10.5 'year' means a calendar year
beginning 1st January.
10.6 For the purposes of this rule 10, Shares issued or in respect of which
rights to subscribe have been granted pursuant to this Scheme or any other
Employees' Share Scheme before the date on which shares in the Company were
first admitted to the Official List of the London Stock Exchange shall be
left out of account.
11 INDIVIDUAL LIMIT ON THE GRANTING OF OPTIONS
11.1 No Option shall be granted to an Executive if or insofar as it would cause
the aggregate market value of Shares in respect of which rights to acquire
Shares are then held by that Executive under this Scheme or any other share
option scheme (not being a savings-related share option scheme) to exceed
or further exceed four times the amount of the emoluments (excluding
benefits in kind) expressed as an annual rate then payable to such
Executive by the Company or any Subsidiary.
11.2 For the purposes of this rule 11:
11.2.1 the market value of a Share in respect of which an Option has been
or is to be granted shall be taken as the Exercise Price payable
upon the exercise of
11
<PAGE>
such Option or, if less, the minimum price per Share which could
have been determined by the Committee pursuant to rule 3 to be the
Exercise Price in relation to that Option; and
11.2.2 the market value of Shares in respect of which other rights to
acquire Shares have been granted shall have the same meaning as in
Part VIII of the Taxation of Chargeable Gains Act 1992 and shall be
calculated as at the time such other rights were granted.
11.3 Any Option renounced, surrendered or cancelled in respect of any number of
shares otherwise than within the period of 30 days mentioned in rule 4.6
shall be treated for the purposes of rule 11.1 as if it were still capable
of being exercised in respect of such number of Shares.
11.4 For the purposes of this rule 11, Shares issued or in respect of which
rights to subscribe have been granted pursuant to this Scheme or any
Employees' Share Scheme before the date of adoption of this Scheme by
shareholders of the Company or under the Peptide Therapeutics Group plc
1994 Unapproved Share Option Scheme shall be left out of account.
12 DEMERGER, RECONSTRUCTION OR WINDING-UP
12.1 Subject to rules 8.1 and 8.3, in the event that notice is given to
shareholders of the Company of a proposed demerger of the Company or of any
Subsidiary the Committee may give notice to Optionholders that Options may
then be exercised (notwithstanding that any performance-related condition
or other objective criteria subject to which any Option is then exercisable
is not then satisfied) within such period (not exceeding 30 days) as the
Committee may specify in such notice to Optionholders SAVE THAT no such
notice to Optionholders shall be given unless the Auditors have confirmed
in writing to the Committee that (disregarding any performance-related
condition subject to which any Option is then exercisable) the interests
of Optionholders would or might be substantially prejudiced if before the
proposed demerger has effect Optionholders could not exercise their Options
and be registered as the holders of the Shares thereupon acquired.
12.2 Subject to rules 8.1 and 8.3, if the court sanctions a compromise or
arrangement proposed for the purposes of or in connection with a scheme for
the reconstruction of the Company or its amalgamation pursuant to section
425 of the Companies Act 1985 the Optionholder shall be entitled to
exercise his Option during the period of 6 months commencing on the date on
which the court sanctions the compromise or arrangement, and thereafter the
Option shall cease to be exercisable notwithstanding that any
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<PAGE>
performance-related condition subject to which such Option is then
exercisable is not then satisfied.
12.3 In the event of notice being given to holders of Shares of a resolution for
the voluntary winding-up of the Company, an Option may, subject to rules
8.1 and 8.3, be exercised at any time before the commencement of the
winding-up.
12.4 All Options shall immediately lapse and cease to be exercisable upon the
commencement of a winding-up of the Company.
13 TAKE-OVER
13.1 Subject to rules 8.1 and 8.3, if, as a result of either:
13.1.1 a general offer to acquire the whole of the Ordinary Share Capital
which is made on a condition such that if it is satisfied the person
making the offer will have control of the Company; or
13.1.2 a general offer to acquire all the shares in the Company of the same
class as the Shares
the Company shall come under the control of another person or persons, the
Optionholder shall, notwithstanding that any performance-related condition
subject to which an Option is then exercisable is not then satisfied, be
entitled to exercise his Option within the period of 6 months of the date
when the person making the offer has obtained control of the Company and
any condition subject to which the offer is made has been satisfied.
13.2 Subject to rules 8.1 and 8.3, if at any time any person becomes entitled or
bound to acquire shares in the Company under sections 428 to 430F
(inclusive) of the Companies Act 1985 the Optionholder shall,
notwithstanding that any performance-related condition subject to which an
Option is then exercisable is not then satisfied, be entitled to exercise
his Option at any time when that person remains so entitled or bound.
13.3 For the purposes of this rule 13 a person shall be deemed to have control
of a company if he and others acting in concert with him have together
obtained control of it.
14 VARIATION OF SHARE CAPITAL
14.1 In the event of any alteration of the Ordinary Share Capital by way of
capitalisation or rights issue, or sub-division, consolidation or reduction
or any other variation in the share capital of the Company the Committee
may make such adjustment as it considers appropriate:
14.1.1 to the aggregate number or amount of Shares subject to any Option;
and/or
14.1.2 to the Exercise Price payable for each Share under any such Option;
and/or
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14.1.3 where an Option has been exercised but no Shares have been allotted
in accordance with rule 9.2, to the number of Shares which may be so
allotted and the Exercise Price payable for each such Share
PROVIDED THAT:
(a) except in the case of a capitalisation issue, any such adjustment is
confirmed in writing by the Auditors to be in their opinion fair and
reasonable; and
(b) the Exercise Price in relation to the Shares in respect of which any
Subscription Option has been granted is not reduced below the
nominal value of those Shares; and
(c) the number of Shares as so adjusted has been rounded down to the
nearest whole number and the Exercise Price as so adjusted has been
rounded up to the nearest whole penny.
14.2 As soon as reasonably practicable after making any adjustment pursuant to
rule 14.1, the Committee shall give notice in writing thereof to every
Optionholder affected thereby and shall at the written request of any such
Optionholder and upon the surrender of any option certificates which he
holds deliver to him a revised option certificate in respect of his Option.
15 ALTERATION OF SCHEME
15.1 The board of directors of the Company may at any time alter or add to any
of the provisions of this Scheme in any respect PROVIDED THAT no such
alteration or addition shall be made to the advantage of existing or new
Optionholders without the prior approval by ordinary resolution of the
shareholders of the Company in general meeting SAVE THAT the provisions of
this rule 15 shall not apply to the extent that such alteration or addition
is in the opinion of the Directors:
15.1.1 a minor amendment which is necessary or appropriate to benefit the
administration of this Scheme; or
15.1.2 necessary or appropriate to take account of any change in
legislation; or
15.1.3 necessary or appropriate to maintain favourable tax treatment of
this Scheme or maintain favourable tax, exchange control or
regulatory treatment for Optionholders or for the Company or for any
Subsidiary.
15.2 As soon as reasonably practicable after making any alteration or addition
under this rule 15 the board of directors of the Company shall give notice
in writing thereof to every Optionholder (if any) affected thereby.
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16 SERVICE OF DOCUMENTS
16.1 Except as otherwise provided in this Scheme, any notice or document to be
given to any individual in accordance or in connection with this Scheme
shall be duly given:
16.1.1 if he holds office or employment within the Group, by delivering it
to him at his place of work; or
16.1.2 if it is posted in a pre-paid envelope to his address last known to
the Company and if so sent it shall be deemed to have been given on
the date of posting.
16.2 Any notice or document so sent to an Optionholder shall be deemed to have
been duly given notwithstanding that such Optionholder is then deceased
(and whether or not the Company has notice of his death) except where his
legal personal representatives have established their title to the
satisfaction of the Company and supplied to the Company an address to which
documents are to be sent.
16.3 Any notice in writing or document to be submitted or given to the Committee
or board of directors of the Company or the Company in accordance or in
connection with this Scheme may be delivered, sent by post, telex, or
facsimile transmission but shall not in any event be duly given unless it
is actually received by the secretary of the Company or such other
individual as may from time to time be nominated by the Committee or the
board of directors of the Company (as appropriate) for the purposes of this
Scheme and whose name and address is notified to Optionholders.
17 MISCELLANEOUS
17.1 The Company shall at all times keep available sufficient authorised but
unissued Shares to satisfy the exercise in full of all the Subscription
Options for the time being remaining capable of being exercised under this
Scheme.
17.2 No Option to purchase existing Shares shall be granted by any person unless
that person beneficially owns such Shares at the Date of Grant.
17.3 The board of directors of the Company may from time to time make and vary
such rules and regulations not inconsistent herewith and establish such
procedures for the administration and implementation of this Scheme as they
think fit and in the event of any dispute or disagreement as to the
interpretation of this Scheme or of any such rules, regulations or
procedures or as to any question or right arising from or related to this
Scheme, the decision of the Committee shall (except as regards any matter
required to be determined by the Auditors hereunder) be final and binding
upon all persons.
17.4 In any matter in which they are required to act hereunder, the Auditors
shall be deemed to be acting as experts and not as arbitrators and the
Arbitration Acts 1950-1979 shall
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not apply hereto.
17.5 The costs of the administration and implementation of this Scheme shall be
borne by the Company.
17.6 The Company shall not be obliged to provide optionholders with copies of
any notices, circulars or other documents sent to holders of shares.
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[Option Certificate]
THE PEPTIDE THERAPEUTICS 1995 UNAPPROVED SHARE OPTION SCHEME
OPTION CERTIFICATE
Name of Optionholder:
-------------------------------
Address of Optionholder:
-------------------------------
-------------------------------
-------------------------------
-------------------------------
Date of Grant:
-------------------------------
Number of Shares:
-------------------------------
Exercise Price:
-------------------------------
PEPTIDE THERAPEUTICS GROUP plc [_______________]* HEREBY GRANTS to the
Optionholder named above an Option to [subscribe for/acquire]* the above number
of Shares in the Company at the above Exercise Price.
The Option is exercisable subject to and in accordance with the rules of The
Peptide Therapeutics 1995 Unapproved Share Option Scheme as they are amended
from time to time. It may not normally be exercised before the third**
anniversary of the Date of Grant.
[Exercise of the Option is also subject to the performance-related
condition(s) of exercise set out in the Appendix to this Option Certificate.]*
In accordance with rule 8.1, the Option may not in any event be exercised later
than the seventh** anniversary of the Date of Grant shown above.
The Option is not transferable but may be exercised by your personal
representatives in the event of your death.
An Optionholder, whether or not a director of any company, shall not be entitled
to exercise an Option at any time when to do so would contravene the provisions
of the Company's Code governing share dealings by directors and employees.
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EXHIBIT 10.26
Ref: REB/65561 0006 6/DP
RULES OF
THE PEPTIDE THERAPEUTICS 1996
APPROVED SHARE OPTION SCHEME
This is a copy of The Peptide Therapeutics 1996 Approved Share Option
Scheme produced to the Annual General Meeting of the Company
held on 21 June 1996 and initialled by the Chairman for
the purposes of identification only
/s/ [Illegible]
-----------------------------
Chairman
PINSENT - CURTIS
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
CLAUSE PAGE
<S> <C> <C>
1 INTERPRETATION 1
2 ELIGIBILITY 4
3 EXERCISE PRICE 5
4 GRANT OF OPTIONS 5
5 RELATIONSHIP WITH CONTRACT OF EMPLOYMENT 6
6 NON-TRANSFERABILITY OF OPTIONS 7
7 PERFORMANCE-RELATED CONDITIONS OF EXERCISE 7
8 EXERCISE OF OPTIONS 8
9 MANNER OF EXERCISE OF OPTIONS 10
10 OVERALL LIMITS ON THE GRANTING 0F OPTIONS 11
11 INDIVIDUAL LIMITS ON THE GRANTING OF OPTIONS 12
12 DEMERGER, RECONSTRUCTION OR WINDING-UP 13
13 TAKEOVER 14
14 VARIATION OF SHARE CAPITAL 17
15 ALTERATION OF THIS SCHEME 17
16 SERVICE OF DOCUMENTS 18
17 MISCELLANEOUS 19
OPTION CERTIFICATE
NOTICE OF EXERCISE OF OPTION
APPENDIX
</TABLE>
<PAGE>
PEPTIPE THERAPEUTICS GROUP plc
RULES OF
THE PEPTIDE THERAPEUTICS 1996 APPROVED SHARE OPTION SCHEME
1 INTERPRETATION
1.1 In this Scheme (unless the context otherwise requires) the following words
and phrases have the meanings given below:
"an Announcement Date" means a date of notification to the
London Stock Exchange of the annual or
half yearly results of the Company;
"the Approval Date" means the date on which the Company
receives notice that this Scheme has
been approved by the Inland Revenue
pursuant to Schedule 9;
"Associated Company" means any company which, in relation to
the Company, is an associated company as
that term is defined by section 416 of
the Taxes Act;
"the Auditors" means the auditors of the Company for
the time being;
"the Board" means the board or directors of the
Company;
"Close Company" has the same meaning as in Chapter I of
Part XI of the Taxes Act SAVE THAT in
determining whether a company is a close
company for the purposes of this Scheme,
sections 414(1)(a) and 415 of that Act
shall be disregarded;
"the Committee" means the Remuneration Committee of the
board of directors of the Company or
such other committee comprising a
majority of non-executive directors of
the company to whom the Board delegate
responsibility for the operation of this
Scheme;
"the Company" means Peptide Therapeutics Group plc
(registered no 2863682);
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"control" has the meaning given in section 840 of
the Taxes Act:
"the Date of Grant" in relation to any Option, means the
date on which that Option is granted in
accordance with rule 4;
"Dealing Day" means a day on which the London Stock
Exchange is open for business;
"other Employees' Share Scheme" means:-
(a) the Peptide Therapeutics 1995
Savings-Related Share Option
Scheme established by the
Company on 3 November 1995;
(b) the Peptide Therapeutics 1995
Unapproved Share Option Scheme
established by the Company on
3 November 1995; and
(c) any employees' share scheme
(except this Scheme)
established by the Company
under which shares have been
or may be issued by the
Company;
"Executive" subject to rule 8.8, means any employee
of any member of the Group and any
director of any member of the Group who
is required to devote substantially the
whole of his time to his duties under
his contract of employment and in any
event not for less than 25 hours per
week (excluding meal breaks)
disregarding normal holiday entitlement;
"the Exercise Price" means the price per Share payable upon
the exercise of an Option (as determined
in accordance with rule 3);
"the Group" means the Company and each and every
company which is for the time being a
Subsidiary;
"the London Stock Exchange" means the London Stock Exchange Limited;
"Market Value" in relation to any Share in respect of
which an Option is to be, or has been,
granted means:-
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(a) the market value of such Share
as on the day immediately
preceding the Date of Grant as
determined in accordance with
Part VIII of the Taxation of
Chargeable Gains Act 1992 and
as agreed in advance between
the Company and the Shares
Valuation Division of the
Inland Revenue; or
(b) if at the relevant Date of
Grant Shares have been or were
admitted to the Official List,
the average of the middle
market quotations of a Share
as derived from the Official
List for the period of three
consecutive Dealing Days last
preceding such Date of Grant;
"Material Interest" has the meaning given in section 187(3)
of the Taxes Act;
"Model Code" means the code adopted by the Company
which contains provisions similar in
purpose and effect to the provisions of
the Model Code for Securities
Transactions by Directors of Listed
Companies issued by the London Stock
Exchange from time to time;
"Official List" means the Daily Official List of the
London Stock Exchange;
"Option" means a right to acquire Shares granted
in accordance with and subject to the
rules of this Scheme;
"Optionholder" means a person who has been granted an
Option or, if that person has died where
the context so requires, the personal
representatives of such a person;
"Ordinary Share Capital" means the issued share capital of the
Company other than fixed-rate preference
shares;
"Personal Representatives" means in relation to an Optionholder the
legal
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<PAGE>
personal representatives of the
Optionholder (being either the executors
of his will to whom a valid grant of
probate has been made or, if he died
intestate, the duly appointed
administrator(s) of his estate) who have
produced to the Committee evidence of
their appointment as such;
"Schedule 9" means Schedule 9 to the Taxes Act;
"this Scheme" means The Peptide Therapeutics 1996
Approved Share Option Scheme as set out
in these rules and amended from time to
time;
"Shares" means fully-paid ordinary shares in the
capital of the Company which satisfy the
requirements of paragraphs 10-14
(inclusive) of Schedule 9;
"Subscription Options" means rights to subscribe for Shares
granted in accordance with and subject
to the rules of this Scheme;
"Subsidiary" means any company which is for the time
being both a subsidiary (as defined in
section 736 of the Companies Act 1985)
of the Company and under the control of
the Company;
"the Taxes Act" means the Income and Corporation Taxes
Act 1988.
1.2 Words and expressions not defined in this rule 1 have the same meanings as
in section 185 of the Taxes Act and Schedule 9.
1.3 Any reference to any enactment includes a reference to that enactment as
from time to time modified, extended or re-enacted.
1.4 Words denoting the masculine gender shall include the feminine.
1.5 Words denoting the singular shall include the plural and vice versa.
1.6 References to rules are to the rules of this Scheme.
2 ELIGIBILITY
2.1 Subject to the following provisions of this rule 2, the Board shall have
an absolute discretion as to the selection of persons whom Options may be
granted.
4
<PAGE>
2.2 Options shall not be granted to, nor exercised by, any person:
2.2.1 unless (subject to rules 2.3, 8.3, 8.4, 8.5 and 12.1) he is an
Executive;
2.2.2 at any time when he has, or has within the preceding 12 months had,
a Material Interest in a Close Company being either the Company or a
company which has control of the Company or is a member of a
consortium which owns the Company;
2.2.3 if such grant or exercise would contravene the Model Code.
2.3 Options shall not be granted to any person within the period of 2 years
ending with the date on which that person is bound to retire in accordance
with the terms of his contract of employment.
2.4 No Option shall be granted to a director of the Company unless such grant
has been approved in advance by the Committee.
3 EXERCISE PRICE
3.1 Subject to rule 3.2 and any adjustment being made pursuant to rule 14, the
Exercise Price shall be determined by the Board but shall not be less than
Market Value.
3.2 The Exercise Price in respect of a Subscription Option shall not in any
event be less than the nominal value of a Share.
4 GRANT OF OPTIONS
4.1 The Board shall have the power, exercisable on behalf of the Company in
accordance with the rules of this Scheme, to grant rights to subscribe for
Shares.
4.2 An Option may be granted:-
4.2.1 during the period of 42 days beginning with the date shareholders
approve this Scheme;
4.2.2 during a period of 42 days beginning with the day following an
Announcement Date;
4.2.3 within a period of 14 days immediately after the person to whom it
is granted first becomes an Executive.
4.3 In the event of the Company being restricted by statute, order or
regulation (including any regulation, order or requirement imposed on the
Company by the London Stock Exchange or any other regulatory authority)
from granting an Option within any period as mentioned in rule 4.2, the
Board may grant an Option at any time during the period of 42
5
<PAGE>
days beginning with the date on which such restriction is removed.
4.4 No Option may be granted after the tenth anniversary of the date on which
shareholders of the Company approve the establishment of this Scheme.
4.5 An Option shall be granted by the grantor executing a deed and issuing to
the Optionholder an option certificate which contains an undertaking by
the Optionholder (duly executed as a deed) to be bound by the rules of
this Scheme and which specifies:
4.5.1 the Date of Grant;
4.5.2 the number of Shares in respect of which the Option is granted;
4.5.3 the Exercise Price;
4.5.4 the last date on which the Option may be exercised by reason of rule
8.1;
4.5.5 that the exercise of the Option is subject to such
performance-related condition (if any) as has been imposed (with the
consent of the grantor where appropriate) pursuant to rule 7;
4.5.6 the grantor
and is otherwise in such form as the Board may from time to time
determine.
4.6 The Optionholder shall be entitled to renounce, surrender or cancel, or
agree to the cancellation of, an Option within the period of 30 days
immediately following the Date of Grant and if an Option is so renounced,
surrendered or cancelled it shall be deemed for the purposes of rules 10
and 11 as never having been granted.
5 RELATIONSHIP WITH CONTRACT OF EMPLOYMENT
5.1 The grant of an Option does not form part of the Optionholder's
entitlement to remuneration or benefits pursuant to his contract of
employment nor does the existence of a contract of employment between any
person and the Company or any past or present Subsidiary or Associated
Company give such person any right or entitlement to have an Option
granted to him in respect of any number of Shares or any expectation that
an Option might be granted to him whether subject to any conditions or at
all.
5.2 The rights and obligations or an Optionholder under the terms of his
contract of employment with the Company or any past or present Subsidiary
or Associated Company shall not be affected by the grant or an Option.
5.3 The rights granted to an Optionholder upon the grant of an Option shall
not afford the Optionholder any rights or additional rights to
compensation or damages in consequence of the loss or termination of his
office or employment with the Company or any past or
6
<PAGE>
present Subsidiary or Associated Company for any reason whatsoever.
5.4 An Optionholder shall not be entitled to any compensation or damages for
any loss or potential loss which he may suffer by reason of being unable
to exercise an Option in consequence or the loss or termination of his
office or employment with the Company or any past or present Subsidiary or
Associated Company for any reason whatsoever.
6 NON-TRANSFERABILITY OF OPTIONS
6.1 During his lifetime only the individual to whom an Option is granted may
exercise that Option.
6.2. An Option shall immediately cease to be exercisable if:
6.2.1 it is transferred or assigned (other than to his personal
representatives upon the death of the Optionholder), mortgaged,
charged or otherwise disposed of by the Optionholder; or
6.2.2 the Optionholder is adjudicated bankrupt or a bankruptcy order is
made against the Optionholder pursuant to Chapter I of Part IX of
the Insolvency Act 1986;
6.2.3 the Optionholder is otherwise deprived (otherwise than on death) of
the legal or beneficial ownership of the Option by operation of law
or by doing or omitting to do anything which causes him to be so
deprived.
7 PERFORMANCE-RELATED CONDITIONS OF EXERCISE
7.1 The exercise of an Option may by its terms be made conditional upon the
performance of the Company and, if the Board so determines, upon the
performance of a Subsidiary and/or the Optionholder over such period and
measured against such objective criteria as may be determined by the Board
or such other objective conditions as may be determined by the Board SAVE
THAT, in the case of an Option to be granted to a director of the Company,
the Committee shall determine the conditions of exercise. Any such
determination may include provision for the Option to become wholly or
partly unconditional during any part or parts of such period from time to
time, and the Board shall notify to each Optionholder in writing the terms
of any such condition applicable to his Option and shall subsequently
notify the Optionholder in writing as to when the exercise of such Option
has become unconditional PROVIDED THAT, subject to rule 7.2, the question
of whether an Option can or cannot be exercised on any occasion shall not
be determined or determinable at the discretion of any person.
7
<PAGE>
7.2 After an Option has been granted the Committee may, in appropriate
circumstances, amend any condition on the exercise of that Option imposed
pursuant to rule 7.1 PROVIDED THAT no such amendment shall be made:
7.2.1 unless the Inland Revenue confirm that the approved status of this
Scheme is not affected by such amendment; and
7.2.2 unless an event has occurred or events have occurred in consequence
of which the Committee considers that the terms of the existing
performance-related condition(s) imposed on the exercise of the
Option should be so varied for the purpose of ensuring that either
the objective criteria against which the performance of the Company
and/or the Subsidiary and/or the Optionholder will then be measured
or other objective conditions will be a fairer measure of such
performance or that any amended performance target will afford a
more effective incentive to Optionholders and will be no more
difficult to satisfy than were the original conditions when first
set.
8 EXERCISE OF OPTIONS
8.1 An Option shall lapse and cease to be exercisable upon the tenth
anniversary of the Date of Grant.
8.2 Save as provided in rules 8.3, 8.4, 8.5, 12 and 13, an Option may not be
exercised earlier than the third anniversary of the Date of Grant or such
later time as the Board may specify at the time of grant.
8.3 Subject to rule 8.1 if an Optionholder dies then an Option granted to him
which, at the time of his death had neither been exercised in full nor had
ceased to be exercisable, may be exercised by his Personal Representatives
within the period of 12 months beginning with the date of his death
notwithstanding that any performance-related condition subject to which
such Option is then exercisable is not then satisfied and if not then
exercised shall lapse and cease to be exercisable at the end of that
period.
8.4 If an Optionholder ceases to be an Executive by reason of:
8.4.1 injury or disability (evidenced to the satisfaction of the Board);
or
8.4.2 dismissal by reason of redundancy (within the meaning of the
Employment Protection (Consolidation) Act 1978); or
8.4.3 retirement on or after reaching age 65 or such other age at which he
is bound to retire in accordance with the terms of his contract of
employment; or
8
<PAGE>
8.4.4 the company with which he holds office or employment by virtue of
which he is eligible to participate in this Scheme ceasing to be an
Associated Company or a member of the Group; or
8.4.5 the fact that the office or employment by virtue of which he is
eligible to participate in this Scheme relates to a business or part
of a business which is transferred to a company which is neither an
Associated Company nor a member of the Group
then, subject to rules 8.1 and 8.3, an Option granted to him may only be
exercised within 6 months beginning with the date of which the
Optionholder ceases to be an Executive notwithstanding that any
performance-related condition subject to which such Option is then
exercisable is not then satisfied and, if not then exercised, shall lapse
and cease to be exercisable at the end of that period.
8.5 If an Optionholder ceases to be an Executive for any reason other than as
mentioned in rules 8.3, 8.4, 12 or 13 then, subject to rule 8.3, an Option
granted to him may be exercised within the period of six months beginning
with the date of such cessation (or such shorter period as the Board may
determine) notwithstanding that any performance-related condition of
exercise subject to which such Option is then exercisable is not then
satisfied but only with the approval of the Board and if not then
exercised the Option shall lapse and cease to be exercisable at the end of
that period SAVE THAT if no such approval is given by the Board to the
Optionholder within the period of 3 months beginning with the date on
which such Optionholder ceased to be an Executive then such Option shall
lapse and cease to be exercisable at the end of that period.
8.6 In deciding whether and when to exercise an Option an Optionholder shall
have regard to the Model Code.
8.7 For the purposes of this rule 8:-
8.7.1 an Optionholder shall not be treated as having ceased to be an
Executive unless and until he no longer holds office or employment
with any member of the Group or with any Associated Company; and
8.7.2 in the event that the Optionholder ceases to be an Executive other
than by reason of gross misconduct, dishonesty, drug addiction,
misconduct, bringing any company within the Group into disrepute or
other circumstances warranting summary dismissal under the terms of
his contract of employment and in circumstances where due notice of
termination of employment has not been given
9
<PAGE>
by the Company, his date of cessation shall for the purposes of this
Scheme be taken to be the date on which such notice period would
have terminated had such notice been given.
8.8 A female Executive whose employment has been terminated in circumstances
such that, pursuant to Part III of the Employment Protection
(Consolidation) Act 1978 she has a right to return to work, shall be
deemed for the purposes of this rule 8 as not having ceased to be employed
within the Group or with any Associated Company until such time as she is
no longer capable, pursuant to Part III, of exercising a right to return
to work and shall be deemed not to have ceased to be so employed if she
exercises that right.
9 MANNER OF EXERCISE OF OPTIONS
9.1 An Option shall be exercised only by the Optionholder serving a written
notice upon the Company (acting as agent for the grantor) which:
9.1.1 specifies the number of Shares in respect of which that Option is
exercised which in any event shall not:
(i) exceed the number of Shares in respect of which that Option
subsists and which have not been specified for this purpose in
a prior notice served by the Optionholder in accordance with
this rule 9; nor
(ii) be less than 25% of the Shares over which the Option is then
held or, if less, 1,000 Shares or, if the number of Shares in
respect of which the Option subsists is smaller than 1,000
Shares, the whole of that number; and
9.1.2 is accompanied by payment of an amount equal to the product of the
number of Shares specified in the notice and the Exercise Price; and
9.1.3 unless the Board otherwise permits, is accompanied by the option
certificate in respect of that Option
and is otherwise in such form as the Board may from time to time
determine.
9.2 Within the period of 30 days beginning with the date on which the Company
receives a notice of exercise which complies with rule 9.1, the Company
shall allot to the Optionholder (or otherwise procure the transfer to the
Optionholder of) the Shares specified in the notice.
9.3 Subject to rule 9.4, as soon as reasonably practicable after allotting (or
procuring the transfer of) any Shares pursuant to rule 9.2, the Board on
behalf of the Company or other
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<PAGE>
grantor shall procure:
9.3.1 the issue to the Optionholder of a definitive share certificate or
such acknowledgement of shareholding as is prescribed from time to
time in respect of the Shares so allocated or transferred; and
9.3.2 if on that date shares in the Company are listed on the Official
List, that such Shares are admitted to the Official List; and
9.3.3 if the Option remains partially unexercised, that either the option
certificate issued to the Optionholder pursuant to rule 4.5 is
amended so as to indicate the number of Shares in respect of which
the Option subsists, or issue to the Optionholder a new option
certificate which shall contain all the information which would have
been contained in such an amended Option certificate.
9.4 The Board may, if the Optionholder so requests, issue (or procure the
transfer of) some or all of such Shares to a nominee of the Optionholder
provided that beneficial ownership of such Shares shall be vested in the
Optionholder.
9.5 The allotment or transfer of any Shares under this Scheme shall be subject
to the Memorandum and Articles of Association of the Company and to any
necessary consents of any governmental or other authorities (whether in
the United Kingdom or otherwise) under any enactments or regulations from
time to time in force and it shall be the responsibility of the
Optionholder to comply with any requirements to be fulfilled in order to
obtain or obviate the necessity of such consent.
9.6 All Shares allotted or transferred under this Scheme shall rank equally in
all respects with the Shares for the time being in issue save as regards
any rights attaching to such Shares by reference to a record date prior to
the date of such allotment or transfer.
10 OVERALL LIMITS ON THE GRANTING OF OPTIONS
10.1 The number or Shares in respect of which Subscription Options may be
granted on any day in a given year, when added to:
10.1.1 the number of Shares in respect of which Subscription Options have
previously been granted (and, if not exercised, have not then
ceased to be exercisable); and
10.1.2 the number of Shares in respect of which any rights to subscribe
for Shares have previously been granted (and have been neither
exercised nor ceased to be exercisable) under any other Employees'
Share Scheme in that year and the
11
<PAGE>
nine preceding years
shall not exceed 10 percent of the Ordinary Share Capital on that day.
10.2 For the purposes of this rule 10, Shares issued or in respect of which
rights to subscribe have been granted pursuant to this Scheme or any other
Employee's Share Scheme before the date on which shares in the Company
were first admitted to the Official List shall be left out of account.
11. INDIVIDUAL LIMITS ON THE GRANTING OF OPTIONS
11.1 No Option shall be granted to an Executive if or insofar as it would cause
the aggregate market value of Shares in respect of which rights to acquire
Shares are then held by that Executive under this Scheme or any other
share option scheme (not being a savings-related share option scheme) to
exceed or further exceed four times the amount of the emoluments
(excluding benefits-in-kind) expressed as an annual rate then payable to
such Executive by the Company or any Subsidiary.
11.2 The number of Shares in respect of which an Option is granted to an
Executive shall be limited, and the Option shall take effect, so that the
aggregate market value of Shares which may be acquired upon the exercise
of that Option, when added to:
11.2.1 the aggregate market value of Shares in respect of which Options
have previously been granted (and have not then been exercised nor
ceased to be exercisable); and
11.2.2 the aggregate market value of Shares in respect of which rights to
acquire such Shares have been obtained by that Executive under any
other share Option scheme approved under Schedule 9 (not being a
savings-related share option scheme) which has been established by
the Company or by any Associated Company (and have not then been
exercised nor ceased to be exercisable)
shall not exceed or further exceed L30,000.
11.3 For the purposes of this rule 11:
11.3.1 the market value of a Share in respect of which an Option has been
or is to be granted shall be taken as the Exercise Price payable
upon the exercise of such Option or, if less, the minimum price per
Share which could have been determined pursuant to rule 3 to be the
Exercise Price in relation to that Option; and
11.3.2 the market value of Shares in respect of which other rights to
acquire Shares
12
<PAGE>
have been granted shall have the same meaning as in Part VIII of the
Taxation of Chargeable Gains Act 1992 and shall be calculated as at
the time such other rights were granted.
11.4 Any Option renounced, surrendered or cancelled in respect of any number of
shares otherwise than within the period of 30 days mentioned in rule 4.6
shall be treated for the purposes of rule 11.1 as if it were still capable
of being exercised in respect of such number of Shares.
11.5 For the purposes of rule 11.2, there shall be left out of account any
Shares in respect of which Options have been granted on or after 17 July
1995 in which, on the assumption that the L30,000 limitation imposed
by rule 11.2 had effect at all times on or after 17 July 1995, would (by
virtue of Section 115 Finance Act 1996) be treated as being rights
obtained otherwise then in accordance with the provisions of an approved
share option scheme, within the meaning of Section 185 of the Taxes Act,
other than a savings related share option scheme.
11.6 For the purposes of rule 11.1, shares issued or in respect of which rights
to subscribe have been granted pursuant to this Scheme or any Employees'
Share Scheme (including the Peptide Therapeutics Group plc 1994 Unapproved
Share Option Scheme) before the date on which shares in the Company were
first admitted to the Official List shall be left out of account.
12 DEMERGER, RECONSTRUCTION OR WINDING-UP
12.1 Subject to rule 8.1 in the event that notice is given to shareholders of
the Company of a proposed demerger of the Company or of any Subsidiary the
Board may give notice to Optionholders that Options may then be exercised
(notwithstanding that any performance-related condition subject to which
any Option is then exercisable is not then satisfied) within such period
(not exceeding 30 days) as the Board may specify in such notice to
Optionholders SAVE THAT no such notice to Optionholders shall be given
unless the Auditors have confirmed in writing to the Board that
(disregarding any performance-related condition subject to which any
Option is then exercisable) the interests of Optionholders would or might
be substantially prejudiced if before the proposed demerger has effect
Optionholders could not exercise their Options and be registered as the
holders of the Shares thereupon acquired.
12.2 Subject to rules 8.1 and 8.3, if a court sanctions a compromise or
arrangement proposed
13
<PAGE>
for the purposes of or in connection with a scheme for the reconstruction
of the Company or its amalgamation pursuant to section 425 of the
Companies Act 1985 the Optionholder shall be entitled to exercise his
Option (notwithstanding that any performance-related condition to which
the exercise of the Option is then subject is not then satisfied) during
the period of 6 months commencing on the date on which the court sanctions
the compromise or arrangement, and if not then exercised shall lapse and
cease to be exercisable at the end of that period.
12.3 In the event of notice being given to holders of Shares of a resolution
for the voluntary winding-up of the Company, an Option may, subject to
rules 8.1 and 8.2, be exercised (notwithstanding that any
performance-related condition to which the exercise of the Option is then
subject is not then satisfied) at any time before the commencement of the
winding-up and if not then exercised shall lapse and cease to be
exercisable at the end of that period.
12.4 All Options shall immediately lapse and cease to be exercisable upon the
commencement of a winding-up of the Company.
13 TAKEOVER
13.1 Subject to rule 8.1, if as a result of either:
13.1.1 a general offer to acquire the whole of the Ordinary Share Capital
which is made on a condition such that if it is satisfied the
person making the offer will have control of the Company; or
13.1.2 a general offer to acquire all the shares in the Company of the
same class as the Shares
the Company shall come under the control of another person or persons, the
Optionholder shall, notwithstanding that any performance-related condition
to which the exercise of the Option is then subject is not then satisfied,
be entitled to exercise his Option within the period of 6 months of the
date when the person making the offer has obtained control of the Company
and any condition subject to which the offer is made has been satisfied
and to the extent that the Option is not then exercised it shall upon the
expiration of that period cease to be exercisable and shall only remain in
existence for the purpose of forming the subject of an offer (if any) made
pursuant to rule 13.4 and shall lapse upon the expiry of the "appropriate
period" as defined in rule 13.5 if such offer is made but is not accepted
by the Optionholder.
14
<PAGE>
13.2 Subject to rule 8.1, if at any time any person becomes entitled or bound
to acquire shares in the Company under sections 428 to 430F (inclusive) of
the Companies Act 1985 the Optionholder shall, notwithstanding that any
performance-related condition to which the exercise of the Option is then
subject is not then satisfied, be entitled to exercise his Option at any
time when that person remains so entitled or bound and to the extent that
the Option is not then exercised it shall upon the expiration of that
period cease to be exercisable and shall only remain in existence for the
purpose of forming the subject of an offer (if any) made pursuant to rule
13.4 and shall lapse upon the expiry of the "appropriate period" as
defined in rule 13.5 if such offer is made but is not accepted by the
Optionholder.
13.3 For the purposes of this rule 13 a person shall be deemed to have control
of a company if he and others acting in concert with him have together
obtained control of it.
13.4 If any company (in this rule referred to as "the acquiring company"):
13.4.1 obtains control of the Company as mentioned in rule 13.1; or
13.4.2 obtains control of the Company in pursuance of a compromise or
arrangement sanctioned by the court under section 425 of the
Companies Act 1985; or
13.4.3 becomes bound or entitled to acquire shares under sections 428 to
430F (inclusive) of the Companies Act 1985
an Optionholder may, at any time within the appropriate period as defined
in rule 13.5, by agreement with the acquiring company and notwithstanding
that any performance-related condition subject to which an Option is then
exercisable is not then satisfied, release his rights under his Option in
consideration of the grant to him of rights to acquire shares in the
acquiring company or any other company falling within sub-paragraphs (b)
or (c) of paragraph 10 of Schedule 9 PROVIDED THAT:
(i) such rights will be exercisable only in accordance with the
provisions of this Scheme as it had effect immediately before the
release of the rights referred to above (read and construed as
mentioned in rule 13.6); and
(ii) the shares to which the new rights relate satisfy the provisions of
paragraphs 10 to 14 of Schedule 9; and
(iii) the total market value, immediately before such release, of the
Shares in respect of which the Option then subsists is equal to the
total market value, immediately after such grant, of the shares in
respect of which the new rights are granted to the Optionholder;
and
15
<PAGE>
(iv) the total amount payable by the Optionholder for the acquisition of
shares upon exercise of the new rights is equal to the total amount
that would have been payable for the acquisition of Shares upon
exercise of the Option.
l3.5 In rule 13.4 "the appropriate period" means:
13.5.1 in a case falling within rule 13.4.1, the period of six months
beginning with the time when the person making the offer has
obtained control of the Company and any condition or conditions
subject to which the offer is made has or have been satisfied or
waived;
13.5.2 in a case falling within rule 13.4.2, the period of six months
beginning with the time when the court sanctions the compromise or
arrangement; and
13.5.3 in a case falling within rule 13.4.3, the period during which the
acquiring company remains bound or entitled as mentioned in that
paragraph.
13.6 For the purposes mentioned in rule 13.4.3 (i) the provisions of this
Scheme shall be read and construed as if:
13.6.1 references to "the Company" in rules 5, 7, 8, 9, 11, 12, 13, 14, 16
and 17 were references to the company in respect of whose shares
the new rights are granted;
13.6.2 references to "Shares" in rules 5, 9, 11, 12, 13, 14 and 17 were
references to such shares;
13.6.3 references to "Option" in rules 5, 6, 8, 9, 11, 12, 13, 14 and 17
were references to such rights;
13.6.4 references to "Optionholder" in rules 5, 6, 7, 8, 9, 12, 13 14, 15,
16 and 17 were references to the persons to whom such rights are
granted;
13.6.5 references to "Ordinary Share Capital" in rules 13 and 14 were
references in the ordinary share capital (other than fixed rate
preference shares) of such company;
13.6.6 references to "the Exercise Price" in rules 9, 11 and 14 were
references to the price per share payable upon the exercise of such
new rights;
13.6.7 references to "the Board" in rules 14, 15, 16 and 17 were
references to the board of directors or the acquiring company.
13.7 Rights granted pursuant to rule 13.4 shall be regarded for the purposes of
section 185 to the Taxes Act and Schedule 9 and for the purposes of the
subsequent application of the provisions of this Scheme as having been
granted on the Date of Grant of the
16
<PAGE>
corresponding rights as mentioned in rule 13.4.
14 VARIATION OF SHARE CAPITAL
14.1 In the event of any alteration of the Ordinary Share Capital by way of
capitalisation or rights issue, sub-division, consolidation or reduction
or any other variation in the share capital of the Company the Board may
make such adjustment as it considers appropriate:
14.1.1 to the aggregate number or amount of Shares subject to any Option;
and/or
14.1.2 to the Exercise Price payable for each Share under any such Option;
and/or
14.1.3 where an Option to subscribe for Shares has been exercised but no
Shares have been allotted in accordance with rule 9.2, to the
number of Shares which may be so allotted and the Exercise Price
payable for each such Share
PROVIDED THAT:
(i) no such adjustment is made unless the Board of the Inland Revenue
have approved the adjustment; and
(ii) except in the case of a capitalisation issue, any such adjustment
is confirmed in writing by the Auditors to be in their opinion fair
and reasonable; and
(iii) the Exercise Price in relation to the Shares in respect of which
any Subscription Option has been granted is not reduced below the
nominal value of those shares; and
(iv) the number of Shares as so adjusted has been rounded down to the
nearest whole number and the Exercise Price has been rounded up to
the nearest whole penny.
14.2 As soon as reasonably practicable after making any adjustment pursuant to
rule 14.1, the Board shall give notice in writing thereof to every
Optionholder affected thereby and shall, at the written request of any
such Optionholder and upon the surrender of any option certificates which
he holds, deliver to him a revised option certificate in respect of his
Option.
15 ALTERATION OF THIS SCHEME
15.1 Prior to the Approval Date, the Board may make any alteration or addition
to this Scheme as may be necessary to ensure that this Scheme complies
with the conditions for approval of this Scheme by the Board of Inland
Revenue as set out in Schedule 9 and/or the comments of the London Stock
Exchange PROVIDED THAT any such alteration or
17
<PAGE>
addition is not materially disadvantageous to the shareholders of the
Company.
15.2 At any time after the Approval Date, the Board may from time to time alter
or add to any of the provisions of this Scheme PROVIDED THAT no such
alteration or addition shall take effect:-
15.2.1 to the advantage of existing or future Optionholders without the
prior approval by ordinary resolution of the shareholders (except
for minor amendments which are necessary or appropriate to benefit
the administration of this Scheme, to take account of any change in
legislation or to obtain or maintain favourable tax, exchange
control or regulatory treatment for existing or future
Optionholders or for the Company or any other member of the Group);
15.2.2 where such alteration or addition requires approval to maintain the
approved status of the Scheme under Schedule 9, until the Inland
Revenue have confirmed their approval in writing.
15.3 As soon as reasonably practicable after making any alteration or addition
under this rule 15 the Board shall give notice in writing thereafter to
every Optionholder (if any) affected thereby.
16 SERVICE OF DOCUMENTS
16.1 Except as otherwise provided in this Scheme, any notice or document to be
given by, or on behalf of, the Board, the Company, the Committee or any
grantor to any person in accordance or in connection with this Scheme
shall be duly given:
16.1.1 if he is an Executive or holds office or employment with any
Associated Company, by delivering it to him at his place of work;
or
16.1.2 if he is an Executive or holds office or employment with any
Associated Company, by sending a facsimile transmission or any
other electronic communication to a current facsimile or electronic
communication number addressed to him at his place of work or his
address last known to the Company and if so sent it shall be deemed
to have been duly given at the time of transmission;
16.1.3 if it is posted in a pre-paid envelope to his address last known to
the Company and if so sent it shall be deemed to have been given on
the date of posting.
16.2 Any notice or document so sent to an Executive and/or Optionholder shall
be deemed to have been duly given notwithstanding that such Executive
and/or Optionholder is then
18
<PAGE>
deceased (and whether or not the Company has notice of his death) except
where his Personal Representatives have established their title to the
satisfaction of the Company and supplied to the Company an address to
which documents are to be sent.
16.3 Any notice in writing or document to be submitted or given to the Board,
the Company, the Committee or any grantor in accordance or in connection
with this Scheme may be delivered, sent by post, telex, or facsimile
transmission but shall not in any event be duly given unless it is
actually received by the secretary of the Company or such other individual
as may from time to time be nominated by the grantor or the Board (as
appropriate) for the purposes of this Scheme and whose name and address is
notified to Executives and/or Optionholders.
17 MISCELLANEOUS
17.1 The Company shall at all times keep available sufficient authorised but
unissued Shares to satisfy the exercise in full of all the Subscription
Options for the time being remaining capable of being exercised under this
Scheme.
17.2 No Option to purchase existing Shares shall be granted by any person
unless that person beneficially owns such number of Shares at the Date of
Grant.
17.3 The Board may from time to time make and vary such rules and regulations
not inconsistent herewith and establish such procedures for the
administration and implementation of this Scheme as it thinks fit and in
the event oF any dispute or disagreement as to the interpretation of this
Scheme or of any such rules, regulations or procedures or as to any
question or right arising from or related to this Scheme, the decision of
the Committee shall (except as regards any matter required to be
determined by the Auditors hereunder) be final and binding upon all
persons.
17.4 In any matter in which they are required to act hereunder, the Auditors
shall be deemed to be acting as experts and not as arbitrators and the
Arbitration Acts 1950-1979 shall not apply hereto.
17.5 The costs of the administration and implementation of this Scheme shall be
borne by the Company.
17.6 The Company shall not be obliged to provide Optionholders with copies of
any notices, circulars or other documents sent to holders of Shares.
----------------------------------
19
<PAGE>
PEPTIDE THERAPEUTICS GROUP plc
THE PEPTIDE THERAPEUTICS 1996
APPROVED SHARE OPTION SCHEME
OPTION CERTIFICATE
Name of Optionholder:
-------------------------------------------------------
Address of Optionholder:
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
Date of Grant:
-------------------------------------------------------
Number of Shares:
-------------------------------------------------------
Exercise Price:
-------------------------------------------------------
Grantor:
-------------------------------------------------------
[PEPTIDE THERAPEUTICS GROUP plc] [_____________]* HEREBY GRANTS to the
Optionholder named above an Option to [subscribe for/acquire]* the above number
of Shares in the Company at the above Exercise Price.
The Option is exercisable subject to and in accordance with the rules of The
Peptide Therapeutics Group plc 1996 Approved Share Option Scheme as they are
amended from time to time. It may not normally be exercised before the third
anniversary of the Date of Grant.**
Exercise of the Option is also subject to the performance-related condition(s)
of exercise set out in the Appendix to this Option Certificate.
In accordance with rule 8 the Option many not in any event be exercised later
than the tenth anniversary of the Date of Grant shown above.
The Option is not transferable but may be exercised by your Personal
Representatives in the event of your death.
Executed as a deed by PEPTIDE )
THERAPEUTICS GROUP PLC ) --------------------------------
[__________]* acting by:- ) DIRECTOR
DATE:
----------------------- --------------------------------
SECRETARY/DIRECTOR
* INSERT NAME OF GRANTOR/DELETE AS APPROPRIATE.
** SUBSTITUTE RELEVANT PERIOD IN THE EVENT THE BOARD DETERMINE AN INCREASED
PERIOD PURSUANT TO RULE 8.2.
<PAGE>
I HEREBY AGREE to accept the grant of this Option and agree and undertake to be
bound by the terms and conditions set out in the rules of The Peptide
Therapeutics 1996 Approved Share Option Scheme and the performance-related
condition(s) of exercise set out in the Appendix to this Option Certificate.
SIGNED (but not delivered until the date )
hereof) as a deed by ___________________ )
_____________ in the presence of: ) ------------------------------
(OPTIONHOLDER SIGNATURE)
Witness signature:
--------------------------------
Witness name (PRINT):
--------------------------------
Address:
--------------------------------
--------------------------------
Occupation:
--------------------------------
Date
--------------------------------
<PAGE>
[Notice of Exercise to be attached to the Option Certificate]
THE PEPTIDE THERAPEUTICS 1996 APPROVED SHARE OPTION SCHEME
NOTICE OF EXERCISE OF OPTION
To: Company Secretary, The Peptide Therapeutics Group plc (PRINT REGISTERED
OFFICE ADDRESS)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
I hereby exercise the Option referred to overleaf in respect of all/_______* of
the shares over which the Option subsists, and request the allotment or transfer
to me of those shares in accordance with the Rules of the Scheme and the
Memorandum and Articles of Association of the Company.
I enclose a cheque made payable to The Peptide Therapeutics Group plc/_______**
in the sum of L_______ being the aggregate Exercise Price of such shares.
Name (BLOCK LETTERS) Address
- --------------------------------- -------------------------------------
Signature
------------------------ -------------------------------------
Date
---------------------------- -------------------------------------
* INSERT NUMBER/DELETE AS APPROPRIATE
** INSERT NAME OF GRANTOR/DELETE AS APPROPRIATE
NOTES:-
1. This Notice of Exercise must be accompanied by payment of the Exercise
Price for the shares in respect of which the Option is exercised.
2. The Option may not be exercised in respect of less than 25% of the shares
over which the Option is then held or, if less, 1,000 shares or (if less)
all of the shares over which the Option subsists.
3. Where the Option is exercised by Personal Representatives, an office copy
of the Probate or Letters of Administration should accompany the form.
4. The Scheme has been approved by the Inland Revenue in accordance with
section 185 and Schedule 9 of the Income and Corporation Taxes Act 1988.
There is no charge to income tax on the receipt of a right to acquire
shares under such a scheme. Under current tax rules no charge to tax will
arise on the exercise of the Option if it is exercised:-
<PAGE>
(a) in accordance with the rules of the Scheme (as amended from time to
time with the consent of the Inland Revenue) at a time when the
Scheme is approved by the Inland Revenue; and
(b) more than three years after the date of grant or, if earlier, upon
the death of the Optionholder; and
(c) (except when exercised upon the death of the Optionholder) not less
than three years after the exercise, in whole or in part, of any
option (whether under this Scheme or any other scheme, other than a
savings-related share option scheme, approved under Schedule 9 of
the Income and Corporation Taxes Act, 1988) in circumstances where
the Optionholder qualifies for such favourable tax treatment.
Further, provided an Option is exercised within these statutory time
limits no charge to income tax will arise on any subsequent growth in
value of the shares acquired. If the Option is not so exercised then,
under current tax rules, income tax will normally then be charged on the
amount of the difference between the total exercise price paid and the
market value of the shares acquired at that time.
5. IMPORTANT. NEITHER THE COMPANY NOR THE GRANTOR UNDERTAKES TO ADVISE YOU ON
THE TAX CONSEQUENCES OF EXERCISING YOUR OPTION. IF YOU ARE UNSURE OF THE
TAX LIABILITIES WHICH MAY ARISE, YOU SHOULD TAKE APPROPRIATE PROFESSIONAL
ADVICE BEFORE EXECUTING YOUR OPTION.
6. An Optionholder whether or not a director of any company shall not be
entitled to exercise an Option at any time when to do so would contravene
the provisions of the Company's Code governing share dealings by directors
and employees.
<PAGE>
Exhibit 10.27
RULES OF
THE PEPTIDE THERAPEUTICS SHARE INCENTIVE PLAN
This is a copy of the rules of The Peptide Therapeutics Share Incentive Plan
which was produced to an Annual General Meeting of Peptide
Therapeutics Group plc on 8 June 1998 and initialled by the
Chairman for the purposes of identification only
/s/ [ILLEGIBLE]
..............................
Chairman
PINSENT - CURTIS
<PAGE>
THE PEPTIDE THERAPEUTICS SHARE INCENTIVE PLAN
---------------------------------------------
INDEX
-----
<TABLE>
<CAPTION>
Rule Page
- ---- ----
<S> <C> <C>
1 This Plan 1
2 Interpretation 1
3 Participation 5
4 Grant of Basic Annual Awards 6
5 Exercise of Basic Annual Awards and Matching Awards 7
6 Grant of Long-Term Incentive Awards 8
7 Exercise of a Long-Term Incentive Award 9
8 Retention of Shares and Award of Loyalty Shares 10
9 Exercise: General 11
10 Transfer of Shares 13
11 PAYE, National Insurance Contributions and Tax Consequences 13
12 Independence of Option 14
13 Variation of Share Capital 15
14 Trustees to Rely on Company Information 15
15 Allocation of Funds 15
16 Subscription for Shares 16
17 Limitations on Subscription for Shares 16
18 Amendment of this Plan 16
19 Service of Documents 17
20 Miscellaneous 17
Appendix 19
</TABLE>
<PAGE>
Schedule I : Exercise and Lapse of Basic Annual Awards and
Matching Awards 21
Schedule II : Exercise and Lapse of Long Term Incentive Awards 24
<PAGE>
RULES OF THE PEPTIDE THERAPEUTICS SHARE INCENTIVE PLAN
1 THIS PLAN
This employees' share scheme has been approved and established by
resolution dated ................. 1998 of Peptide Therapeutics
Employees' Trustees Limited (as trustee of The Peptide Therapeutics
Employees' Share Trust) in the exercise of its powers under clause 2 of
the Trust Deed and has been approved by shareholders of the Company (by
ordinary reso1ution passed on 8 June 1998).
2 INTERPRETATION
2.1 In this Plan the following words and expressions shall have the meanings
given below:
"AUDITORS" the auditors of the Company for the time
being
"BASIC ANNUAL AWARD" an Option granted as mentioned in rule
4.1
"BONUS" the gross amount of a cash bonus payment
awarded to an Eligible Employee by his
employer company or any other member of
the Group by reason of his employment
within the Group being a bonus paid at or
after the end of and in respect of a
given year (or, in the case of a
newly-appointed Eligible Employee, part
of a year)
"THE COMMITTEE" the Remuneration Committee of the board
of directors of the Company and in the
event of a change of control of the
Company, the Remuneration Committee in
place immediately before change of
control
"THE COMPANY" Peptide Therapeutics Group plc
(registration
1
<PAGE>
no.2863682)
"DATE OF GRANT" in relation to a Matching Award, the date
on which a Basic Annual Award was granted
under this Plan and, in the case of a
Basic Annual Award and a Long-Term
Incentive Award, the date on which the
Trustee grants such Award
"DEALING DAY" a day on which the London Stock Exchange
is open for business
"ELIGIBLE EMPLOYEE" an employee of any member of the Group
who is obliged by the terms or his
contract of employment to devote
substantially the whole of his working
time to the business of the Group
"FINANCIAL YEAR" a financial year of the Company
"THE GROUP" the Company and any company which is for
the time being a subsidiary of the
Company (as that term is defined in
section 736 of the Companies Act 1985)
"THE LONDON STOCK EXCHANGE" the London Stock Exchange Limited
"LONG-TERM INCENTIVE AWARD" a right to acquire Shares granted by the
Trustee pursuant to rule 6
"LOYALTY SHARES" Shares transferred to a Participant as
mentioned in rule 8
"MARKET VALUE" in relation to any Share on a given date,
the average of the middle market
quotations of a Share as derived from
2
<PAGE>
the Daily Official List of the London
Stock Exchange for the 3 consecutive
Dealing Days last preceding that date
"MATCHING AWARD" an Option granted as mentioned in rule
4.4
"THE MODEL CODE" the code adopted by the Company which
contains provisions similar in purpose
and effect to the provisions of the Model
Code for Securities Transactions by
Directors of Listed Companies issued by
the London Stock Exchange from time to
time
"ORDINARY SHARE CAPITAL" the issued ordinary share capital of the
Company
"OPTION" a Basic Annual Award, a Matching Award
or, as the case may be, a Long-Term
Incentive Award
"OPTIONHOLDER" a person to whom a subsisting Option has
been granted or, in the event of his
death, his Personal Representatives
"PARTICIPANT" a person (including an Optionholder) who
has agreed to accept and be bound by the
terms of this Plan
"PARTICIPATING COMPANY" the Company and any Subsidiary being a
company to which the Trustees and the
Committee have resolved this Plan shall
extend and have not subsequently resolved
that this Plan shall cease to extend
"PERFORMANCE TARGET" the condition subject to which rights
granted under a Long-Term Incentive Award
shall become vested as determined in
accordance with rule 6.5
3
<PAGE>
"PERSONAL REPRESENTATIVES" means, in relation to a Participant, the
legal personal representatives of the
Participant (being either the executors
of his will to whom a valid grant of
probate has been made or, if he dies
intestate, the duly appointed
administrator(s) of his estate) who have
produced to the Trustees evidence of
their appointment as such
"PLAN" the terms and conditions of The Peptide
Therapeutics Share Incentive Plan as
amended from time to time pursuant to
rule 18
"SHARES" fully paid ordinary shares in the capital
of the Company (or in the event of a
reconstruction or re-organisation of the
Company, shares representing such
ordinary shares)
"THE TRUST" the employees trust known as The Peptide
Therapeutics Employees' Trust constituted
by a deed dated 23 October 1995 and as
amended from time to time
"THE TRUSTEE" Peptide Therapeutics Employees' Trustees
Limited (incorporated and resident in
Jersey no. 63268) or other trustee or
trustees for the time being of the Trust
2.2 For the purposes of interpretation of this Plan unless the context
otherwise requires:
2.2.1 references to rules and schedules are to rules and schedules of
this Plan and no account should be taken of the rule headings
which have been inserted for ease of reference only;
2.2.2 words denoting the singular shall include the plural and vice
versa;
4
<PAGE>
2.2.3 words denoting the masculine gender shall include the feminine
gender;
2.2.4 references to any statutory provisions shall be read and construed
as references to such provision as amended or re-enacted from time
to time.
2.3 Reference to rights being or becoming vested are to such rights becoming
capable of being exercised either immediately or, subject to the
Participant continuing to hold office or employment within the Group, at
some future time.
3 PARTICIPATION
3.1 Subject to the Model Code, the Trustee (acting on the recommendation of
the Committee but subject always to the exercise of its discretion) may in
its discretion and from time to time issue an invitation to any person who
is then an Eligible Employee inviting such person to participate in this
Plan by:
3.1.1 accepting the grant by the Trustee of a right to acquire Shares as
is mentioned in rule 4 (Basic Annual Awards); and/or
3.1.2 accepting the grant by the Trustee of a right to acquire Shares as
mentioned in rule 6 (Long Term Incentive Awards).
3.2 It is intended by the Company and the Trustee that Basic Annual Awards (as
mentioned in rule 4.1) may, subject always to the exercise by the Trustee
of its discretion, be made in substitution for the whole or any part (and
in the case of directors of the Company for up to one half only) of the
amount of any discretionary cash bonus award which an Eligible Employee
might otherwise have been awarded by the Company (or any other member of
the Group) SAVE THAT insofar as the Trustee in the exercise of its
discretion does not make any such award to an Eligible Employee such
Eligible Employee shall have no right entitlement or expectation to
receive any sum or other benefit in lieu of such award either from the
Trustee or from any member of the Group.
3.3 In selecting any Eligible Employee to whom such invitation to apply for a
Long-Term Incentive
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Award (as mentioned in rule 6) is granted, the Trustee and the Committee
shall liaise together with a view to identifying those Eligible Employees
who are expected to make a significant contribution to the future success
of the Group.
3.4 An Option may only be granted:
3.4.1 during the period of 42 days after this Plan is approved by
shareholders of the Company in general meeting; and thereafter
3.4.2 during the period of 42 days beginning with the day following the
date of notification to the London Stock Exchange of the annual
results of the Company;
3.4.3 within a period of 14 days immediately after the person to whom it
is granted first becomes an Eligible Employee.
3.5 In the event of the Trustee being restricted by statute, order or
regulation (including any regulation, order or requirement imposed on the
Trustee by the London Stock Exchange or any other regulatory authority)
from granting an Option within any period as mentioned in rule 3.4, the
Trustee may grant an Option at any time during the period of 42 days
beginning with the date on which such restriction is removed.
3.6 No invitation to participate in this Plan shall be issued after 8 June
2008.
4 GRANT OF BASIC ANNUAL AWARDS
4.1 Subject to the Model Code and to rule 4.4, the Trustee (acting on the
recommendation of the Committee but subject always to its discretion) may
from time to time invite any Eligible Employee who has or is expected to
be awarded a bonus on that occasion, to accept on the terms of this Plan
the grant by the Trustee of a right, exercisable only subject to and in
accordance with the following terms of this Plan, to acquire from the
Trustee such number of Shares as the Trustee shall, in its discretion,
notify to the Eligible Employee ("a Basic Annual Award").
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4.2 Any person to whom such invitation is issued may accept the grant by the
Trustee of such right by delivering to the Trustee a duly completed form
of acceptance in such form as the Trustee may from time to time determine.
4.3 A Basic Annual Award shall be granted by the Trustee executing as a deed a
certificate in such form as the Trustee shall determine.
4.4 Insofar as the Trustee determines to make, and an Eligible Employee duly
accepts, a Basic Annual Award, the Trustee may (but shall not be obliged
to) grant to such Eligible Employee the right, exercisable only subject to
and in accordance with the following terms of this Plan, to acquire from
the Trustee at least one additional Share for every four Shares in respect
of which such Basic Annual Award is made and accepted ("a Matching Award")
or if different, such number of Shares as (in consequence of any one or
more corporate reorganisation or reconstruction or variation of share
capital of the Company) is then equivalent to, or represents, every four
Shares originally so acquired by the Participant upon the exercise of such
Basic Annual Award.
5 EXERCISE OF BASIC ANNUAL AWARDS AND MATCHING AWARDS
5.1 Subject to this rule 5 and rules 9 (giving of notice) and 11 (PAYE and NI)
a Basic Annual Award shall be exercisable subject to and in accordance
with the provisions in Schedule I to this Plan.
5.2 Subject to this rule 5 and rules 9 (giving of notice) and 11 (PAYE and NI)
a Matching Award shall be exercisable subject to and in accordance with
the provisions in Schedule I to this Plan.
5.3 The price payable to the Trustee upon exercise of either a Basic Annual
Award or a Matching Award on any occasion shall be L1.
5.4 Except in the event the Optionholder dies, a Basic Award and a Matching
Award may not in any event be exercised more than one year and six months
after its Relevant Date of Grant. Insofar as such Awards are not so
exercised they shall immediately lapse and cease to be exercisable.
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6 GRANT OF LONG-TERM INCENTIVE AWARDS
6.1 Subject to the Model Code, the Trustee (acting on the recommendation of
the Committee but subject always to the exercise of its discretion) may
from time to time invite any Eligible Employee to accept on the terms of
this Plan the grant by the Trustee of a right exercisable only subject to
and in accordance with the following terms of this Plan to acquire such
number of Shares as the Trustee shall, in its discretion, notify to the
Eligible Employee ("a Long-Term Incentive Award"). A Long-Term Incentive
Award shall only be exercisable to the extent rights granted under it have
vested.
6.2 The aggregate Market Value of Shares in respect of which a Long-Term
Incentive Award shall be granted to any Eligible Employee on any occasion
shall not exceed 100 per cent of his current annual rate of basic salary
(excluding benefits-in-kind).
6.3 A Long-Term Incentive Award shall not be granted to any individual within
the period of 2 years immediately preceding his anticipated retirement
date.
6.4 Any person to whom such invitation is issued may accept the grant by the
Trustee of a Long-Term Incentive Award by delivering to the Trustee a duly
completed form of acceptance in such form as the Trustee may from time to
time determine.
6.5 The extent to which a Long-Term Incentive Award becomes vested (ie it has
become exercisable either immediately or in the future in respect of any
number or percentage of the Shares over which it subsists) shall be
conditional upon the performance of the Company (over such period and
measured against specified objective criteria) or such other conditions as
may be determined by the Trustee (upon the recommendation of the Committee
but subject always to the exercise of the Trustee's discretion)
("Performance Target"). If and insofar as rights granted under a Long-Term
Incentive Award do not become vested they shall immediately lapse and
cease to be exercisable.
6.6 The Trustee (acting upon the recommendation of the Committee but subject
always to the exercise of its discretion) shall determine the terms of the
Performance Target as it shall apply to any grant of a Long-Term Incentive
Award so as to ensure that the criteria used will afford
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real incentives to Participants and will, if the specified conditions are
met, reflect the achievement of real growth in value for shareholders in
the Company PROVIDED THAT in determining what is to be the appropriate
Performance Target in relation to the grant of a Long-Term Incentive Award
on any occasion, the Trustee shall have proper regard to the objects and
purposes of the Trust.
6.7 After a Long-Term Incentive Award has been granted, the Trustee may, in
appropriate circumstances, amend the terms of the Performance Target as it
applies to such Long-Term Incentive Award PROVIDED THAT no such variation
shall be made:
6.7.1 without the prior consent of the Committee; and
6.7.2 unless an event has occurred or events have occurred in consequence
of which the Trustee reasonably considers that the terms of the
existing Performance Target should be so varied for the purpose of
ensuring that either the objective criteria against which the
performance of the Company will then be measured will be a fairer
measure of such performance or that the Performance Target as so
amended will afford a more effective incentive to the Participant
and will be no more difficult to satisfy than was the original
Performance Target when first set.
6.8 The Performance Target intended to be applied to the exercise of Long-Term
Incentive Awards granted in the financial year ending 31 December 1998 is
set out in the Appendix to this Plan.
7 EXERCISE OF A LONG-TERM INCENTIVE AWARD
7.1 Subject to this rule 7 and rules 9 (giving of notice) and 11 (PAYE and NJ)
a Long-Term Incentive Award shall be exercisable subject to and in
accordance with the provisions of Schedule II to this Plan.
7.2 Subject to the provisions of Schedule II to the Plan, a Long-Term
Incentive Award shall normally become exercisable during a period of 6
months following the date on which the Remuneration Committee confirms in
writing to the Trustee and to the Participant that such Award has become
vested in respect of a given number or proportion of the Shares over which
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it is held. Insofar as the Award is not exercised within such period it
shall immediately lapse and cease to be exercisable.
7.3 The price payable to the Trustee upon exercise of a Long-Term Incentive
Award on any occasion shall be L1.
8 RETENTION OF SHARES AND AWARD OF LOYALTY SHARES
8.1 A Participant who exercises a Long-Term Incentive Award in accordance with
the rules of this Plan may throughout the period beginning with the
exercise of a Long-Term Incentive Award in respect of any number of Shares
and ending on the earlier of:
8.1.1 the second anniversary of the date of vesting; and
8.1.2 the date on which the Participant ceases to hold office or
employment with a member of the Group (and does not thereafter
continue to hold office or employment with any other member of the
Group) for any reason being a date not less than the first
anniversary of the date of vesting; and
8.1.3 a change in control of the Company as defined in paragraph 5 of
Schedule II
opt to allow some or all of the Shares to remain registered in the name of
the Trustee, as nominee of the Participant and deposit the share
certificates or other acknowledgement of the shareholding relating to such
proportion of Shares so acquired (other than such Shares as are mentioned
in rule 8.3) with the Trustee such that the Participant retains full
beneficial ownership of all the Shares acquired upon such exercise of that
Long-Term Incentive Award.
8.2 If the Participant does deposit his Shares with the Trustee as outlined in
rule 8.1, the Trustee may (acting on the recommendation of the Committee
but subject always to its discretion), at the end of that period, transfer
to the Participant by way of gift up to one Share for every four Shares
actually deposited by the Participant upon such exercise of the Long-Term
Incentive Award or, if different, such number of Shares as (in consequence
of any one or more corporate re-organisation or reconstruction or
variation of share capital of the Company) is then equivalent
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to, or represents, every four Shares originally so acquired by the
Participant upon such exercise.
8.3 The Shares referred to in rule 8.1 are Shares disposed of by the
Participant by way of sale for the best consideration in money that can
reasonably be obtained at the time of sale being not more than such number
of Shares as would realise for the Participant (after deduction of any
dealing costs and expenses but without regard to any capital gains tax
chargeable on or in consequence of such disposal) a sum of money which is
as nearly as may be equal to:
(A X B), where:
8.3.1 A is the whole or such part of the aggregate value of the Shares
acquired by the Participant upon the exercise of rights granted
under a Long-Term Incentive Award on which the Participant is then
assessed to income tax ("the Taxable Value"); and
8.3.2 B is the highest percentage rate at which income tax is or may then
be charged on such Taxable Value.
8.4 The Trustee shall not transfer to a Participant any additional Shares
pursuant to rule 8.2 unless the Participant has first delivered to the
Trustee a declaration in writing (in such form as the Trustee may from
time to time specify) executed as a deed that the Participant has at all
times since the transfer date maintained beneficial ownership of the
Shares deposited with the Trustee pursuant to rule 8.1 and that he has not
assigned, charged, or otherwise disposed of his beneficial interest in
such Shares or in any shares representing such Shares.
9 EXERCISE: GENERAL
9.1 During his lifetime only the person to whom an Option is granted may
exercise that Option.
9.2 An Option shall immediately lapse and cease to be exercisable if:-
9.2.1 it is transferred or assigned (other than to his Personal
Representatives upon the death of the Optionholder), mortgaged,
charged or otherwise disposed of by the Optionholder; or
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9.2.2 the Optionholder is adjudicated bankrupt or an interim order is made
because he intends to propose a voluntary arrangement to his
creditors under the Insolvency Act 1986; or
9.2.3 the Optionholder makes or proposes a voluntary arrangement under the
Insolvency Act 1986, or any other scheme or arrangement in relation
to his debts, with his creditors or any section of them.
9.3 If an Award may not be exercised at any particular time because at that
time the Participant is (or would be) in any way restricted from doing so
by reason of any statutory, regulatory or other legal provision or rule or
the provisions of the Model Code or any other requirement or guidance
issued by the London Stock Exchange or on behalf of institutional
investors in the Company or any other body and which relates to dealings
in Shares by directors or employees or any member of the Group the
Participant may exercise the Option at any time during a period of 14 days
beginning with the date such restriction is removed.
9.4 An Award shall be exercisable only by the Optionholder serving notice in
writing upon the Trustee which:
9.4.1 states that the notice is given pursuant to this rule 9;
9.4.2 states the number of Shares in respect of which the Option is
exercised on that occasion;
9.4.3 states the Date of Grant;
9.4.4 states that the rights being exercised on that occasion are rights
granted under a Basic Annual Award or, as the case may be, a
Matching Award or a Long-Term Incentive Award;
9.4.5 is accompanied by payment of the exercise price of L1;
9.4.6 includes a statement signed by a member of the Committee confirming
that the Optionholder remains entitled to exercise the Option on
that occasion;
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9.4.7 is signed by the Optionholder; and
9.4.8 states, in the event the rights being exercised are rights granted
under a Long-Term Incentive Award, the number of Shares (if any)
which are to remain registered in the name of the Trustee, as
nominee of the Participant pursuant to rule 8.1.
9.5 The exercise of any Award shall be subject to rule 11.
10 TRANSFER OF SHARES
10.1 Subject to rules 10.2 and 11, as soon as practicable after the Trustee
receives a notice of exercise complying with rule 9, the Trustee shall
procure the transfer to, or to the order of, the Optionholder of the
Shares in respect of which the Option is properly exercised upon that
occasion SAVE THAT if at any time within the period of 14 days beginning
with the day on which the Trustee receives a notice of exercise of an
Award, the Trustee is restricted in any way from dealing in Shares by
reason of any statutory, regulatory or other legal provision or rule or
the provision of the Model Code or any other requirement or guidance
issued by the London Stock Exchange or on behalf of institutional
investors in the Company or any other body and which relates to dealings
in Shares by directors or employees or any member of the Group, the
Trustee shall not be obliged to transfer Shares in consequence of such
exercise until the end of the period of 14 days beginning with the day on
which the Trustee is no longer restricted from so dealing.
10.2 Any transfer of Shares or of any interest in Shares pursuant to this Plan
shall be subject to the Memorandum and Articles of Association of the
Company and to the Trustee or the Company obtaining any consents required
under any statutory or regulatory provisions from time to time in force
and it shall be the responsibility of the Participant to comply with or
obtain or obviate the necessity of any such consent.
11 PAYE, NATIONAL INSURANCE CONTRIBUTIONS AND TAX CONSEQUENCES
If in consequence of the PAYE Regulations (or otherwise) the Trustee or
the Company or any
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other member of the Group is obliged to account to any person (including
the revenue authorities) for any tax, National Insurance contributions
(other than secondary contributions) or any other tax charge levy or other
sum (whether under the laws of the United Kingdom or elsewhere) in respect
of the grant or exercise of any rights under this Plan and/or any transfer
of Shares pursuant to this Plan, the Trustee shall not be obliged to
transfer such Shares unless and until the Participant has paid to the
Trustee, or other person as is referred to in this rule, such sum as is,
in the opinion of the Trustee (after having consulted with the Committee),
sufficient to indemnify them in full against any and all such liabilities.
12 INDEPENDENCE OF OPTION
12.1 The grant of an Option does not form part of the Optionholder's
entitlement to remuneration of benefits pursuant to his contract of
employment nor does the existence of a contract of employment between any
person and the Company, or any present or past member of the Group or
Associated Company, give such person any right or entitlement to have an
Option granted to him in respect of any number of Shares or an expectation
that an Option might be granted to him whether subject to any conditions
or at all.
12.2 The rights and obligations of a Participant under the terms of his office
or employment with the Company or any other present or past member of the
Group or Associated Company shall not be affected by his Participation in
this Plan.
12.3 The rights of a Participant under the terms of an Option shall not afford
the Participant any rights or additional rights to compensation or damages
in consequence of the loss or termination of his office or employment with
the Company or any present or past member of the Group or Associated
Company for any reason whatsoever.
12.4 The Participant shall not be entitled to any compensation or damages for
any loss or potential loss which he may suffer by reason of being unable
to exercise an Option or receive any Loyalty Shares pursuant to rule 8 in
consequence of the loss or termination of his office or employment with
the Company or any present or past member of the Group or Associated
Company for any reason whatsoever.
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13 VALUATION OF SHARE CAPITAL
In the event of any variation of the Ordinary Share Capital by way of
capitalisation or rights issue, or any sub-division, consolidation,
reduction or other variation of the Ordinary Share Capital, the Trustee
may (upon the recommendation of the Committee, but subject always to its
discretion) by giving notice in writing to the Optionholder, make such
adjustments as it considers appropriate to the number of Shares which are
subject to the Option PROVIDED THAT except in the case of a capitalisation
or subdivision issue, any such adjustment is confirmed in writing by the
Auditors to be in their opinion fair and reasonable.
14 TRUSTEE TO RELY ON COMPANY INFORMATION
The Trustee shall be entitled to rely without further enquiry on all
information supplied to the Trustee by the Company or any other members of
the Group for the purposes of this Plan.
15 ALLOCATION OF FUNDS
15.1 The Company may from time to time procure the payment of sums by a
Participating Company to the Trustee for the purpose of enabling the
Trustee to acquire Shares.
15.2 The aggregate amount to be paid to the Trustee in any Financial Year shall
be such amount (if any) as the Committee may determine SAVE THAT in case
of payments made by a Subsidiary the amount of any such payment shall be
determined by agreement between the Company and the directors of such
Subsidiary.
15.3 A Participating Company shall only pay to the Trustee such sums as are
required in connection with the acquisition of Shares by the Trustee for
the purpose of providing benefits to Eligible Employees who are for the
time being in the service of that Participating Company at the Date of
Award.
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16 SUBSCRIPTION FOR SHARES
Subject to rule 17 the Trustee may apply sums received from Participating
Companies in subscribing for shares at not less than Market Value.
17 LIMITATIONS ON SUBSCRIPTIONS FOR SHARES
17.1 The number of Shares for which the Trustee may subscribe on any day shall
not, when added to the number of Shares which have previously been issued
pursuant to rights to subscribe for Shares or in respect of which rights
to subscribe for Shares have previously been granted (and have neither
been exercised nor ceased to be exercisable) by the Company (whether
pursuant to this Plan or any other employees' share scheme) in that year
and the nine preceding years, exceed 10 per cent of the Ordinary Share
Capital on that day.
17.2 For the purposes of rule 17.1 Shares in respect of which options have been
granted under The Peptide Therapeutics 1994 Share Option Scheme shall be
left out of account as shall any Shares in respect of which options have
been granted prior to the date Shares were admitted to the London Stock
Exchange.
18 AMENDMENT OF THIS PLAN
18.1 The Trustee may at any time alter or add to any of the provisions of this
Plan in any respect PROVIDED THAT no such alteration or addition shall be
made:
18.1.1 without the prior consent in writing of the Committee;
18.1.2 which imposes any additional burden or adversely affects any member
of the Group without the prior consent of the Company in writing.
18.2 No amendment to the advantage of Participants shall be made to this Plan
to the rules regarding eligibility, limitations (overall and individual)
on the number and value of Shares put under Awards under this Plan, the
basis of a Participant's entitlement to Shares, the adjustment of
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such rights on a variation of share capital and this rule 18 without the
prior approval of an ordinary resolution of shareholders of the Company
(except for minor amendments to benefit the administration of this Plan,
to take account of a change in legislation or to obtain or maintain
favourable tax, exchange control or regulatory treatment for Participants
or for any member of the Group).
19 SERVICE OF DOCUMENTS
19.1 Except as otherwise provided in this Plan any notification, document,
payment or other communication to a Participant shall be duly given if
delivered to him (if he is an Eligible Employee) at his place of work or
sent by electronic mail or facsimile transmission or through the post in a
pre-paid envelope to the address last known to the Company to be his
address and if so sent shall be deemed to have been duly given on the date
of transmission of the mail or facsimile or the date of posting (as
appropriate).
19.2 Any notice or document so sent to a Participant shall be deemed to have
been duly given notwithstanding that such Participant is then deceased
(and whether or not the Company has notice of his death) except where his
Personal Representatives have established their title to the satisfaction
of the Company and supplied to the Company an address to which documents
are to be sent.
19.3 Any notice in writing or document to be submitted or given to the Trustee,
the Committee or the Company in accordance or in connection with this Plan
may be delivered, sent by post, telex, electronic mail or facsimile
transmission but shall not in any event be duly given unless it is
actually received by the secretary of the Company at its registered office
or by such other individual as may from time to time be nominated by the
Trustee for the purposes of this Plan and whose name and address is
notified to Participants.
20 MISCELLANEOUS
20.1 Any stamp duty or stamp duty reserve tax payable in respect of a transfer
of Shares to or at the direction of a Participant shall be paid by the
Trustee (who shall be reimbursed by the Company).
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20.2 The decision of the Trustee in any dispute or question affecting any
Eligible Employee Optionholder or Participant or any member or former
member of the Group under this Plan shall be final and conclusive subject,
whenever required under the provisions of this Plan, to the concurrence of
the Auditors.
20.3 The Trustee (acting with the consent of the Committee) may from time to
time make and vary such rules and regulations not inconsistent herewith
and establish such procedures for the administration and implementation of
this Plan as it thinks fit and in the event of any dispute or disagreement
as to the interpretation of this Plan or of any such rules, regulations or
procedures or as to any question or right arising from or related to this
Plan, the decision of the Trustee shall (except as regards any matter
required to be determined by the Auditors hereunder) be final and binding
upon all persons.
20.4 In any matter in which they are required to act hereunder, the Auditors
shall be deemed to be acting as experts and not as arbitrators and the
Arbitration Acts of 1996 shall not apply hereto.
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APPENDIX
THE PERFORMANCE TARGET FOR INITIAL LONG TERM INCENTIVE AWARDS
Except as otherwise expressly provided in the Plan, the right to exercise a
Long-Term Incentive Awards shall be subject to the following condition (which
must be read subject to the following notes):
If the percentage growth in the market capitalisation of the Company in the
period of three consecutive years since the time of grant is less than 50 per
cent then the Long-Term Incentive Award shall immediately lapse and cease to be
exercisable.
If the percentage growth in the market capitalisation of the Company in the
period of three consecutive years since the time of grant equals or exceeds 50
per cent then the initial value of Shares awarded under a Long-Term Incentive
Award shall become vested (as mentioned in rule 6) in respect of 25% of the
Shares over which it subsists.
Insofar as the Base Target Threshold is further exceeded by up to a maximum of
25% then the initial value of Shares awarded under a Long-Term Incentive Award
shall become vested in respect at an additional 37.5% of the Shares over which
it subsists.
Insofar as the Base Target Threshold is further exceeded by up to a maximum of
50% then the initial value of Shares awarded under a Long-Term Incentive Award
shall become vested in respect of an additional 50% of the Shares over which it
subsists.
The initial value of shares in respect of which such rights will vest will
increase on a straight line basis between the thresholds.
Notes:
1 For the purposes of the Performance Target set out above the market
capitalisation of the Company shall be determined by multiplying the share
price at the relevant date by the number of ordinary shares of the Company
in issue on the relevant date.
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2 The percentage growth in the market capitalisation of the Company shall be
calculated as follows:
A - B x 100
----- ---
B 1
where:
A is the market capitalisation of the Company on the third anniversary
of the relevant date of grant; and
B is the market capitalisation of the Company on the date of grant,
being...............
3 The opinion of the Company's auditors as to whether and the extent to
which the Performance Target is exceeded at any time in relation to any
Award shall be final and binding on both the Trustee and the Optionholder.
4 The provisions of rule 6.7 shall apply to this Performance Target.
5 The target set out above shall not have effect so as to restrict the
exercise of the Award which would otherwise be exercisable by virtue of
clauses 2 to 8 (inclusive) of Schedule II to the Plan.
6 The number of Shares which shall become vested on any occasion shall be
rounded to the nearest whole number.
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SCHEDULE I
EXERCISE AND LAPSING OF BASIC ANNUAL AWARDS (AND MATCHING AWARDS)
1 NORMAL EXERCISE PROVISIONS
1.1 Subject to the following provisions of this Schedule, a Basic Annual Award
shall become exercisable upon the first anniversary of the Date of Grant
or, if earlier, the date on which the Optionholder ceases to hold office
or employment with a member of the Group (and does not thereafter continue
to hold office or employment with any other member of the Group) for any
reason.
1.2 Subject to the following provisions of this Schedule, a Matching Award
shall become exercisable on or after the first anniversary of its Date of
Grant.
1.3 Except in the event the Optionholder dies, a Basic Award and a Matching
Award may not in any event be exercised more than one year and six months
after its Relevant Date of Grant. Insofar as such Awards are not so
exercised they shall immediately lapse and cease to be exercisable.
2 DEATH
If an Optionholder dies rights granted to him under a Basic Annual Award
may be exercised by his Personal Representatives within the period of 12
months beginning with the date of death and if and insofar as such rights
are not then exercised in full they shall lapse and cease to be
exercisable at the end of that period. Rights granted to any Participant
in the form of a Matching Award shall immediately lapse and cease to be
exercisable on the date of death.
3 LEAVING FOR OTHER REASONS
3.1 If an Optionholder ceases to hold office or employment with any member of
the Group (and does not therefore hold office or employment with any other
member of the Group) for any
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reason a Basic Annual Award (and a Matching Award, but only if it is more
than one year from the date of grant of the Basic Annual Award by
reference to which the Matching Award was made) may, subject to clause 2
of this Schedule, be exercised within a period of three months from the
date of cessation and if and insofar as such rights are not then exercised
in full they shall lapse and cease to be exercisable at the end of that
period.
3.2 A female employee whose employment has been terminated in circumstances
such that, pursuant to Part III of the Employment Rights 1996, she has a
right to return to work, shall be deemed for the purposes of this Plan as
not having ceased to hold office or be employed with any member of the
Group until such time as she is no longer capable, pursuant to Part III,
of exercising her right to return to work and shall be deemed not to have
ceased to so hold office or be so employed if she exercises that right.
4 DEMERGER, RECONSTRUCTION OR WINDING-UP
4.1 Subject to clause 2 of this Schedule, in the event that notice is given to
shareholders of the Company of a resolution to approve the reconstruction
amalgamation or demerger of the Company or of any other member of the
Group the Trustee may make such provision for the early exercise of the
Basic Annual Award as the Trustee shall, in the exercise of its discretion
(having regard to the recommendation of the Committee but always in the
exercise of its discretion), consider appropriate to take proper account
of such circumstances PROVIDED THAT no such provision shall be made
without the consent of the Committee. A Matching Award shall also be so
exercisable unless one year has not, at such notice date, lapsed since the
grant of the Basic Annual Award to which it relates, in which event the
Matching Award shall immediately cease to be exercisable.
4.2 All Awards shall immediately lapse and cease to be exercisable upon the
commencement of a winding-up of the Company.
5 CHANGE OF CONTROL
5.1 Subject to the provisions of clause 5.2 of this Schedule, in the event
that any person:-
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<PAGE>
5.1.1 obtains control of the Company as a result of making a general
offer:-
(i) to acquire the whole of the issued share capital of the
Company made subject to a condition such that if it is
satisfied the person making the offer will have control of the
Company; or
(ii) to acquire all the shares in the Company which are of the same
class as the Shares; or
5.1.2 obtains control of the Company in pursuance of a compromise or
arrangement sanctioned by the Court made under Section 425 of the
Companies Act 1985; or
5.1.3 becomes bound or entitled to acquire Shares under Sections 428 to
430(F) (inclusive) of the Companies Act 1985
then, subject to clause 2 of this Schedule rights granted under a Basic
Annual Award (and a Matching Award, but only if a year has elapsed since
the date of grant of the relevant Basic Annual Award by reference to which
the Matching Award has been made) may be exercised in respect of all the
Shares over which such Options subsists within such reasonable period as
the Trustee shall notify to the Optionholder in writing and insofar as any
such rights are not then exercised in full by the end of that period they
shall lapse and cease to be exercisable at the end of that period.
6 GENERAL
The exercise of a Basic Annual Award and Matching Award shall be subject
to rules 9, 10 and 11 of the Plan.
23
<PAGE>
SCHEDULE II
EXERCISE AND LAPSING OF LONG-TERM INCENTIVE AWARDS
1 NORMAL EXERCISE PROVISIONS
Subject to the provisions of this Schedule II, a Long-Term Incentive Award
shall normally become exercisable during a period of 6 months following
the date on which the Remuneration Committee confirms in writing to the
Trustee and to the Participant that such Award has become vested in
respect of a given number or proportion of the Shares over which it is
held. Insofar as the Award is not exercised within such period it shall
immediately lapse and cease to be exercisable.
2. DEATH IN SERVICE
2.1 If an Optionholder dies in service rights to acquire a proportion of the
Shares in respect of which a Long-Term Incentive Award are deemed to
become vested (corresponding to such proportion of the period over which
the performance of the Company is measured - as fell before the date of
death) may be exercised by his Personal Representatives within the period
of 12 months beginning with the date of death and if such rights are not
then exercised they shall lapse and cease to be exercisable. For these
purposes Shares shall be deemed to become vested if and to the extent that
the Committee is of the opinion (and confirms such opinion in writing to
the Trustee) that the performance of the Company, judged as at the time of
death, is such that the Performance Target is likely to be exceeded to a
particular extent so that a given percentage of the Shares in respect of
which such rights were granted will be likely to become vested and
accordingly the Personal Representatives may only exercise such rights in
respect of the said proportion of such percentage of those Shares.
2.2 In giving their opinion as mentioned in clause 2.1 of this Schedule the
Committee shall act as experts not as arbitrators and their decision shall
be final and finding on the Personal Representatives.
24
<PAGE>
3 DISABILITY, INJURY, REDUNDANCY, RETIREMENT ETC
3.1 If an Optionholder ceases to hold the office or employment with any member
of the Group (and does not thereafter continue to hold office or
employment with any other member of the Group) by reason of:
3.1.1 disability or injury evidenced to the satisfaction of the Trustee;
3.1.2 redundancy (as that term is defined for the purposes of the
Employment Rights Act 1996); or
3.1.3 retirement on or after reaching the age at which the Optionholder is
anticipated to retire in accordance with the terms of his contract
of employment
then rights to acquire a proportion of the Shares in respect of which a
Long-Term Incentive Award becomes vested (corresponding to such proportion
of the period over which the Performance Target is measured during which
the Optionholder has held office or employment within the Group) may be
exercised by the Optionholder within the period(s) of 6 months immediately
after notification that such rights have first become exercisable (or if
later, the period of 12 months beginning with the date of the
Optionholder's death) and if such rights are not then exercised within
such period(s) they shall lapse and cease to be exercisable SAVE THAT if
in the opinion of the Trustee the circumstances of such cessation are
exceptional then the Trustee may, in the exercise of its discretion,
permit the Optionholder so to exercise such rights in respect of a greater
proportion of such Shares.
4 DISMISSAL
An Optionholder who is dismissed from office or employment with any member
of the Group shall not be entitled to exercise rights granted under a
Long-Term Incentive Award unless, and to the extent that, the Trustee
(upon the recommendation of the Committee but always in the exercise of
its absolute discretion) shall in the exercise of its discretion determine
and notify to the Optionholder in writing but so that if the Trustee does
not make any such determination within the period of 3 months beginning
with the date of dismissal, all such rights granted to
25
<PAGE>
the Optionholder under this Plan shall lapse and cease to be exercisable.
5 LEAVING FOR OTHER REASONS
If an Optionholder ceases to hold office or employment with any member the
Group (and does not thereafter continue to hold office or employment with
any other member of the Group) for any reason other than those mentioned
in clauses 2 or 3 or clauses 7 or 8 of this Schedule then he shall not be
entitled to exercise rights granted under a Long Term Incentive Award and
such rights shall immediately lapse unless he has held such office or
employment for more than one year since the grant date of the Long Term
Incentive Award and the Trustee (upon the recommendation of the Committee
but always in the exercise of its absolute discretion) decides in the
exercise of its discretion to so determine and notify to the Optionholder
in writing within the period of 3 months beginning with the date of such
cessation SAVE THAT the Optionholder shall only be entitled in such
circumstances to acquire up to such proportion of Shares in respect of
which the Long-Term Incentive Award has vested as corresponds to such
proportion of the period over which the Performance Target is measured
during which the Optionholder has held office or employment within the
Group. If and insofar as such rights are not then exercised they shall
lapse and cease to be exercisable at the end of that period.
6 FEMALE EMPLOYEES AND THE RIGHT TO RETURN TO WORK
A female employee whose employment has been terminated in circumstances
such that, pursuant so Part III of the Employment Rights 1996, she has a
right to return to work, shall be deemed for the purposes of this Plan as
not having ceased to hold office or be employed with any member of the
Group until such time as she is no longer capable, pursuant to Part III,
of exercising her right to return to work and shall be deemed not to have
ceased to hold such office or be so employed if she exercises that right.
7 DEMERGER, RECONSTRUCTION OR WINDING-UP
7.1 Subject to clause 2 of this Schedule, in the event that notice is given to
shareholders of the Company of a resolution to approve the reconstruction
amalgamation or demerger of the
26
<PAGE>
Company or of any other member of the Group the Trustee may make such
provision for the variation and/or early exercise of a Long Term Incentive
Award as the Trustee shall, in the exercise of its discretion (having
regard to the recommendation of the Committee), consider appropriate to
take proper account of such circumstances PROVIDED THAT:
7.1.1 in exercising such discretion for this purpose the Trustee shall
have due regard to the objectives of the Company and the Trustee in
establishing this Plan (as described in the latter to shareholders
of the Company dated 15 May 1998); and
7.1.2 no such provision shall be made without the consent of the
Committee.
7.2 All Awards shall immediately lapse and cease to be exercisable upon the
commencement of a winding-up of the Company.
8 CHANGE OF CONTROL
8.1 Subject to the provisions of clause 8.2 of this Schedule, in the event
that any person:-
8.1.1 obtains control of the Company as a result of making a general
offer:-
(i) to acquire the whole of the issued share capital of the
Company made subject to a condition such that if it is
satisfied the person making the offer will have control of the
Company; or
(ii) to acquire all the Shares in the Company which are of the same
class as the Shares; or
8.1.2 obtains control at the Company in pursuance of a compromise or
arrangement sanctioned by the Court made under Section 425 of the
Companies Act 1985; or
8.1.3 becomes bound or entitled to acquire Shares under Sections 428 to
430(F) (inclusive) of the Companies Act 1985
27
<PAGE>
then, subject to, clause 2 of this Schedule, rights granted under a
Long-Term Incentive Award may then be exercised during the period and if
and to the extent that the Trustee (upon the recommendation and with the
consent of the Committee) does in the exercise of its discretion determine
and notify to the Optionholder in writing and if any such rights are not
then exercised within such period as the Trustee shall determine and
notify to the Optionholder such rights shall lapse and cease to be
exercisable at the end of such period.
9 GENERAL
The exercise of a Long-Term Incentive Award shall be subject to rules 9,
10 and 11 of the Plan.
28
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF PEPTIDE THERAPEUTICS GROUP PLC
<TABLE>
<CAPTION>
Name of Subsidiary Jurisdiction of Formation
- ------------------ --------------------------
<S> <C>
Peptide Therapeutics Limited England and Wales
Peptide Mimetics Limited England and Wales
Peptide Therapeutics Employees' Trustees Limited Jersey, Channel Islands
Cambium Limited England and Wales
Peach Acquisition Corp. State of Delaware, United States
Orange Acquisition Corp. State of Delaware, United States
</TABLE>
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT CHARTERED ACCOUNTANT
As independent chartered accountants, we hereby consent to the use of our report
dated 1 May 1998 and to all references to our firm included in this Registration
Statement.
/s/ ARTHUR ANDERSEN
Cambridge, England
9 February 1999
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement of Peptide
Therapeutics Group plc on Form F-4 of our report, dated March 27, 1998, on
our audits of the consolidated financial statements of OraVax, Inc. as of
December 31, 1996 and 1997 and for each of the three years in the period
ended December 31, 1997.
We also consent to the inclusion in this registration statement of our
report, dated March 27, 1998, on our audits of the combined financial
statements of OraVax Merieux Co. and Merieux OraVax Co. (both development
stage enterprises) as of December 31, 1996 and 1997 and for the period from
inception (March 31, 1995) through December 31, 1995 and for the years ended
December 31, 1996 and 1997.
We also consent to the references to our firm under the caption "Experts."
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
February 9, 1999
<PAGE>
EXHIBIT 23.4
CONSENT OF LANCE K. GORDON TO SERVE AS A DIRECTOR
I hereby consent to the reference to me as a person who has agreed to become a
director of Peptide Therapeutics Group plc, which reference is under the
headings "The Merger--Interests of Certain Persons in the Merger" and
"Management After the Merger--Executive Officers and Directors" in the
Prospectus/Proxy Statement constituting a part of this Registration Statement on
Form F-4.
/s/ Lance K. Gordon
----------------------------
Lance K. Gordon
Cambridge, Massachusetts
February 8, 1999
<PAGE>
EXHIBIT 23.5
CONSENT OF HAMBRECHT & QUIST LLC
We hereby consent to the inclusion of our opinion letter dated
November 9, 1998 to the Board of Directors of OraVax, Inc. as Annex B to the
Prospectus/Proxy Statement which forms a part of the Registration Statement
on Form F-4 relating to the proposed merger of Peach Acquisition Corp., a
wholly-owned subsidiary of Peptide Therapeutics Group plc, with and into
OraVax, Inc. and to the references to us and to such opinion in the
Prospectus/Proxy Statement under the captions "Summary--OraVax's Reasons for
the Merger," "--Fairness Opinion of OraVax's Financial Advisor," "Background
and Reasons for the Merger--Background of the Merger," "--OraVax's ReasonS
for the Merger," and "--Opinion of Financial Advisor to the Board of
Directors." In giving such consent, we do not admit and we disclaim that we
come within the category of persons whose consent is required under Section 7
of the Securities Act of 1933, as amended, or the rules and regulations
issued by the Securities and Exchange Commission thereunder.
HAMBRECHT & QUIST LLC
February 3, 1999 By: /S/ DENNIS J. PURCELL
----------------------
Name: Dennis J. Purcell
Title: Managing Director
<PAGE>
ORAVAX, INC.
Dear Stockholder:
Please take note of the important information enclosed with this proxy ballot.
There is an issue related to the Company that requires your immediate attention
and approval. This issue is discussed in detail in the enclosed Prospectus/Proxy
Statement.
Your vote counts, and you are strongly encouraged to exercise your right to vote
your shares.
Please mark the box on the proxy card to indicate how your shares shall be
voted. Then sign and date the card, detach it and return your proxy vote in the
enclosed postage paid envelope.
Your vote must be received prior to the Special Meeting of Stockholders to be
held on , 1999.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
OraVax, Inc.
<PAGE>
ORAVAX, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
SPECIAL MEETING OF STOCKHOLDERS -- , 1999
P Those signing on the reverse side, revoking any prior proxies, hereby
R appoint(s) Lance K. Gordon, Brigid A. Makes and John M. Westcott, Jr., or
O each or either of them with full power of substitution, as proxies for
X those signing on the reverse side to act and vote all shares of stock of
Y OraVax, Inc. (the "Company") which the undersigned would be entitled to
vote if personally present at the Special Meeting of Stockholders of the
Company to be held on , 1999 and at any adjournments thereof as
indicated upon all matters referred to on the reverse side and described in
the Prospectus/Proxy Statement for the Meeting, and, in their discretion,
upon any other matters which may properly come before the Meeting.
Attendance of the undersigned at the Meeting or at any adjournment thereof
will not be deemed to revoke this proxy unless those signing on the reverse
side shall revoke this proxy in writing.
<TABLE>
<S> <C> <C>
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
--------------------------------------------------- ---------------------------------------------------
--------------------------------------------------- ---------------------------------------------------
--------------------------------------------------- ---------------------------------------------------
</TABLE>
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE>
[X] Please mark votes as in this example. This proxy when properly executed will
be voted in the manner directed by the undersigned stockholder(s). If no other
indication is made, the proxies shall vote FOR the approval of the Merger
Agreement. A vote FOR the approval of the Merger Agreement is recommended by the
Board of Directors.
Adoption of the Restated Plan and Agreement of Acquisition, as amended, dated
as of November 10, 1998, among OraVax, Inc., Peptide Therapeutics Group plc
and Peach Acquisition Corp.
_____ For _____ Against _____ Abstain
Mark box at right if comments or
address change have
been made on the reverse side of this
card. / /
PLEASE VOTE, DATE AND SIGN BELOW AND
RETURN PROMPTLY IN ENCLOSED ENVELOPE.
Please sign this proxy exactly as
your name appears hereon. Joint
owners should each sign personally.
Trustees and other fiduciaries should
indicate the capacity in which they
sign. If a corporation or
partnership, the signature should be
that of an authorized officer who
should state his or her title.
<TABLE>
<S> <C>
Signature: Date:
Signature: Date:
</TABLE>
