<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended June 30, 1998, or
[ ] Transition Period Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Transition Period From ______ to ______.
Commission file number 0-19591
CYTEL CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 33-0245076
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(State of Incorporation) (I.R.S. Employer
Identification No.)
3525 John Hopkins Court
San Diego, California 92121
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(Address of principal executive offices)
(619) 552-3000
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(Registrant's telephone number)
Indicate by check mark whether the Registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock: $.01 par value, 32,870,387 shares outstanding as of June 30, 1998
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CYTEL CORPORATION
TABLE OF CONTENTS
PAGE
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
June 30, 1998 and December 31, 1997........................1
Condensed Consolidated Statements of Operations
for the Three and Six Months Ended June 30, 1998 and 1997..2
Condensed Consolidated Statements of Cash Flows
for the Three and Six Months Ended June 30, 1998 and 1997..3
Notes to Condensed Consolidated Financial Statements.......4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................7
PART II. OTHER INFORMATION
Items 1 to 6..........................................................10
Signatures............................................................13
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
CYTEL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30, December 31,
1998 1997
---------------- ----------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 8,418,000 $ 6,187,000
Short-term investments 8,587,000 11,616,000
Current portion of restricted cash 375,000 375,000
Prepaids and other current assets 1,654,000 1,312,000
---------------- ----------------
Total current assets 19,034,000 19,490,000
Restricted cash 519,000 656,000
Property and equipment, net 2,743,000 1,704,000
Patents, deposits and other assets 7,464,000 6,297,000
---------------- ----------------
Total assets $ 29,760,000 $ 28,147,000
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 1,537,000 $ 755,000
Deferred contract revenues 111,000 78,000
Accrued payroll and related expenses 481,000 463,000
Current portion of note payable to bank 375,000 375,000
Current portion of obligations under capital leases and equipment notes payable - 40,000
---------------- ----------------
Total current liabilities 2,504,000 1,711,000
Deferred rent payable 1,238,000 1,388,000
Note payable to bank 469,000 656,000
Minority interest in consolidated subsidiary 2,031,000 -
Stockholders' equity:
Preferred stock, $.01 par value, 10,000,000 shares authorized,
659,898 shares issued and outstanding at June 30, 1998 7,000 -
Common stock, $.01 par value, 75,000,000 and 50,000,000 shares
authorized at June 30, 1998 and December 31, 1997, respectively;
32,870,387 and 32,222,497 shares issued and outstanding at
June 30, 1998, and December 31, 1997, respectively 329,000 322,000
Additional paid-in capital 139,747,000 131,288,000
Accumulated deficit (116,542,000) (107,188,000)
Unrealized losses on available-for-sale securities (23,000) (30,000)
---------------- ----------------
Total stockholders' equity 23,518,000 24,392,000
---------------- ----------------
Total liabilities and stockholders' equity $ 29,760,000 $ 28,147,000
================ ================
</TABLE>
Note: The balance sheet at December 31, 1997 has been derived from the audited
consolidated financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
See notes to condensed consolidated financial statements.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
CYTEL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Three months ended June 30, Six months ended June 30,
1998 1997 1998 1997
---------------- ---------------- ---------------- ----------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES
Research and development $ - $ - $ - $ 1,125,000
Research grants and other income 507,000 394,000 977,000 934,000
---------------- ---------------- ---------------- ----------------
507,000 394,000 977,000 2,059,000
OPERATING EXPENSES
Research and development 4,616,000 3,971,000 8,402,000 8,498,000
General and administrative 1,508,000 792,000 2,612,000 1,627,000
---------------- ---------------- ---------------- ----------------
6,124,000 4,763,000 11,014,000 10,125,000
Minority interest in net loss of
consolidated subsidiary 120,000 - 145,000 -
Interest income, net 263,000 178,000 539,000 447,000
---------------- ---------------- ---------------- ----------------
Net loss $ (5,234,000) $ (4,191,000) $ (9,353,000) $ (7,619,000)
================ ================ ================ ================
Net loss per share - basic and diluted $ (0.16) $ (0.17) $ (0.29) $ (0.30)
================ ================ ================ ================
Shares used in computing net loss per share
- basic and diluted 32,868,409 25,135,101 32,731,607 25,120,550
================ ================ ================ ================
</TABLE>
See notes to condensed consolidated financial statements.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
CYTEL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Six months ended June 30,
1998 1997
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<S> <C> <C>
OPERATING ACTIVITIES (Unaudited)
Net loss $ (9,353,000) $ (7,619,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 361,000 479,000
Deferred rent (150,000) (103,000)
Deferred revenue 33,000 (732,000)
Minority interest in consolidated subsidiary (145,000) -
Gain on sale of equipment (9,000) (35,000)
Changes in operating assets and liabilities:
Other current assets (342,000) 28,000
Accounts payable and accrued liabilities 782,000 (839,000)
Accrued payroll and related expenses 18,000 (172,000)
----------------- -----------------
Net cash used in operating activities (8,805,000) (8,993,000)
INVESTING ACTIVITIES
Purchases of available-for-sale securities (12,903,000) (16,717,000)
Maturities of available-for-sale securities 10,268,000 12,969,000
Sales of available-for-sale securities 5,670,000 13,207,000
Proceeds from the sale of equipment 9,000 35,000
Proceeds from the sale of assets of subsidiary - 161,000
Purchases of property and equipment (1,400,000) (182,000)
Patents, deposits and other assets (267,000) (410,000)
----------------- -----------------
Net cash provided by investing activities 1,377,000 9,063,000
FINANCING ACTIVITIES
Principal payments under capital lease obligations and equipment notes payable (40,000) (249,000)
Principal payments on note payable to bank (187,000) (187,000)
Restricted cash for note payable collateral 137,000 187,000
Net proceeds from issuance of preferred stock 9,700,000 -
Net proceeds from issuance of common stock 49,000 79,000
----------------- -----------------
Net cash provided by (used in) financing activities 9,659,000 (170,000)
Increase (decrease) in cash and cash equivalents 2,231,000 (100,000)
Cash and cash equivalents at beginning of period 6,187,000 3,231,000
----------------- -----------------
Cash and cash equivalents at end of period $ 8,418,000 $ 3,131,000
================= =================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid $ 40,000 $ 68,000
================= =================
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Unrealized gains on available-for-sale securities $ 7,000 $ 13,000
================= =================
Issued common stock for non-exclusive license agreement for patent rights $ 900,000 $ -
================= =================
Promissory note and stock received for sale of assets of subsidiary $ - $ 800,000
================= =================
</TABLE>
See notes to condensed consolidated financial statements.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CYTEL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The interim unaudited condensed consolidated financial statements
contained herein have been prepared in accordance with generally accepted
accounting principles for interim financial information. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In management's
opinion, the unaudited information includes all adjustments, consisting only of
normal recurring accruals, necessary for a fair presentation of the financial
position, results of operations and cash flows for the periods presented.
Interim results are not necessarily indicative of results to be expected for the
full year. The financial statements should be read in conjunction with the
audited consolidated financial statements and footnotes thereto included in the
Registrant's Form 10-K for the year ended December 31, 1997.
The condensed consolidated financial statements include the accounts of
Cytel Corporation and its subsidiaries (Cytel or the Company). All significant
intercompany accounts and transactions have been eliminated. The minority
interest calculation is based on G.D. Searle & Co.'s (Searle) actual ownership
percentage in Epimmune Inc. (Epimmune) of 13.4%. The calculation does not
include the potential additional ownership interest that would result from the
conversion of Searle's investment in Cytel's preferred stock which is
convertible into Epimmune common stock.
Basic and diluted net loss per share is computed using the weighted
average number of common shares outstanding during the period. All potential
common shares have been excluded from the diluted net loss per share
calculations as they are antidilutive.
Effective January 1, 1998, the Company adopted the Statement of
Financial Accounting Standards No. 130 (SFAS No. 130), REPORTING COMPREHENSIVE
INCOME. SFAS No. 130 requires that all components of comprehensive income,
including net income, be reported in the financial statements in the period in
which they are recognized. Comprehensive income is defined as the change in
equity during a period from transactions and other events and circumstances from
non-owner sources. Net income and other comprehensive income, including foreign
currency translation adjustments and unrealized gains and losses on investments
shall be reported, net of their related tax effect, to arrive at comprehensive
income. Comprehensive loss is not materially different than net loss for the
periods presented.
In June 1997, the Financial Accounting Standards Board issued SFAS No.
131, DISCLOSURE ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION, which
is effective for years beginning after December 15, 1997. SFAS No. 131 amends
the requirements for public enterprises to report financial and descriptive
information about its reportable operating segments. Operating segments, as
defined by SFAS No. 131, are components of an enterprise for which financial
information is available and evaluated regularly by the Company in deciding how
to allocate resources and in assessing performance. The financial information is
required to be reported on the basis that is used internally for evaluating the
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
segment performance. The Company will adopt the new requirements retroactively
in 1998. Management has not completed its review of SFAS No. 131, but
anticipates that its adoption will not affect results of operations or financial
position, but possibly will require disclosure of segment information.
2. RESEARCH AND DEVELOPMENT AGREEMENTS
In September 1997 as part of a letter of intent, Searle purchased
2,222,222 shares of Cytel common stock for $5 million for an exclusive right to
negotiate a definitive agreement. The Company then invested $6.5 million in cash
and transferred $1.5 million in other assets to fund Epimmune. In February 1998,
Epimmune entered into a collaborative agreement with Searle to develop
immune-stimulating products for the treatment of cancer. Under the terms of the
agreement, Epimmune has granted Searle exclusive worldwide rights to its epitope
and PADRE technologies in the cancer field, excluding rights previously granted
to Takara Shuzo Co., Ltd. Biomedical Group (Takara) for the ex vivo treatment of
cancer in Japan.
As part of the agreement, Searle purchased 1,032,149 shares of
Epimmune's convertible preferred stock for $6.1 million and 659,898 shares of
Cytel's convertible preferred stock for $3.9 million. Cytel simultaneously
purchased 659,898 shares of Epimmune's convertible preferred stock for $3.9
million. Searle has the right to convert the Cytel convertible preferred stock
into Cytel common stock after three years or to convert to Epimmune common stock
at any time. In addition to the $15 million investment made to date, Searle will
make milestone payments to Epimmune upon achievement of certain preclinical and
clinical milestones. Searle has the option to deliver shares of the Cytel
convertible preferred stock in lieu of up to 50% of certain milestone payments.
Searle will also pay royalties to Epimmune on product sales. In addition, Searle
has rights of first refusal with respect to newly-issued securities of Cytel,
enabling Searle to maintain its percentage ownership in Cytel. As of June 30,
1998, Cytel owned 86.6% of the outstanding capital stock of Epimmune, and Searle
owned 13.4%.
In February 1998, the Company entered into a non-exclusive licensing
agreement with Glycomed Incorporated (Glycomed), a wholly-owned subsidiary of
Ligand Pharmaceuticals Incorporated, under which the Company will receive rights
to a family of Glycomed patents relating to certain carbohydrate compounds for
the treatment of acute inflammation, including the Company's most advanced
product, Cylexin. The Company paid a license fee of $900,000 consisting of
591,327 shares of the Company's common stock at $1.52 per share. Glycomed will
receive milestone payments upon the first New Drug Application and the first FDA
approval of each licensed product. These payments may also be made in Company
stock, at the Company's option. Glycomed will also receive royalties on
worldwide net sales of a licensed or sub-licensed product.
In September 1996, the Company entered into a collaborative agreement
with Baxter Healthcare Corporation's Nextran unit (Nextran) to develop a
carbohydrate product for use in xenotransplantation. Under the agreement, the
Company will manufacture and sell a carbohydrate which Nextran will incorporate
into a xenotransplant product. Nextran made an up-front payment and purchased
shares of the Company's common stock for the right to enter into an exclusive
supply agreement. In January 1997, the Company achieved a milestone with
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
delivery of the initial batch of a bioactive carbohydrate to Nextran. As a
result, Nextran made the first milestone payment. In December 1997, Nextran paid
an option fee and purchased additional shares of the Company's common stock for
the right to extend and expand the original agreement. Nextran will make
additional payments to the Company upon option exercise, achievement of
milestones and supply of carbohydrate.
In December 1995, the Company entered into a collaborative agreement
with Abbott Laboratories (Abbott) to develop manufacturing processes for the
production of certain carbohydrates for use in nutritional products. Abbott paid
a $2 million non-refundable fee in January 1996 for an option to obtain a
worldwide license for limited applications under the Company's patents and
know-how in the area of carbohydrate synthesis. In December 1996, Abbott made
the first milestone payment to the Company in the amount of $2 million. An
additional option fee of $250,000 was earned in August 1997 and paid in two
equal installments in September 1997 and January 1998. Abbott's option to
license certain of the Company's technology under its collaboration with the
Company expired and the collaboration terminated as of July 31, 1998. Abbott and
Cytel are in disagreement regarding certain issues under the collaboration,
including whether certain carbohydrates to be used in Abbott's nutritional
products are covered by the Company's technology. The parties are continuing to
discuss possible resolution of such issues although there can be no assurance
that the parties will be able to reach a mutually acceptable resolution.
Under two agreements with Takara, which were assigned to Epimmune in
October 1997, Epimmune's technology is being applied to fungal disease targets
and cellular therapy for the treatment of cancer. Under the anti-fungal
collaboration initiated in June 1994, Takara obtained rights to any anti-fungal
products resulting from the collaboration for commercialization in Japan.
Epimmune has the right to develop products in North America, and the companies
share rights in the rest of the world. Research in the anti-fungal field, using
Epimmune technology, is now being conducted independently by Takara in Japan.
Under the cellular therapy collaboration initiated in October 1994, Takara
obtained rights to Epimmune's technology relevant to the development of ex vivo
cellular therapies for the treatment of cancer in Japan. Takara will pay
royalties to Epimmune on sales from products resulting from collaboration under
both agreements.
In May 1995, the Company entered into a collaborative agreement with
Schwarz Pharma AG (Schwarz) for the development and marketing of carbohydrate
selectin blockers, including Cylexin. Schwarz funded 75% of clinical development
costs associated with the Phase II acute myocardial infarction trial from 1995
until termination of the agreement. In April 1997, the Company and Schwarz
agreed to terminate their collaboration.
In October 1991, the Company entered into a five-year collaborative
agreement with Sumitomo Pharmaceuticals Co., Ltd. (Sumitomo) to develop drugs
based on the Company's technology for the treatment of white blood cell-mediated
diseases and cancer. Under the terms of the agreement, Sumitomo provided
research support payments of $15 million. In January 1997, the collaborative
research agreement expired. Although Sumitomo has rights to Cylexin in the
Pacific Rim, it has stated that it will not pursue Cylexin for the CPB
indication and may not pursue Cylexin for any indication.
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Except for the historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed here. Factors that could cause or contribute to such differences
include, without limitation, those discussed in this section and those discussed
in the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1997.
Since its inception in July 1987, the Company has devoted substantially
all of its resources to the discovery and development of its potential
therapeutic products. To date, the Company has not received any revenues from
the sale of products. The Company has funded its research and development
primarily from equity-derived working capital and through strategic alliances
with other companies. The Company has been unprofitable since its inception and
expects to incur substantial operating losses for the next several years. As of
June 30, 1998, the Company's accumulated deficit was $116.5 million.
RESULTS OF OPERATIONS
Revenues for the three and six months ended June 30, 1998 were $0.5
million and $1.0 million as compared to $0.4 million and $2.1 million,
respectively, for the same periods in 1997. There were no research and
development revenues for the first six months of 1998; and for the first quarter
of 1997, research and development revenues mainly consisted of funding received
under the Company's collaborative research agreements with Abbott and Nextran
for milestones achieved. Research and development revenues for 1998 are
dependent upon the achievement of milestones under existing collaboration
agreements or the initiation of new collaborative research and development
relationships. There can be no assurance that the Company will be able to
achieve such milestones on a timely basis, if at all, or to establish or
maintain any such collaborative relationships. Abbott's option to license
certain of the Company's technology under its collaboration with the Company
expired and the collaboration terminated as of July 31, 1998. Abbott and Cytel
are in disagreement regarding certain issues under the collaboration, including
whether certain carbohydrates to be used in Abbott's nutritional products are
covered by the Company's technology. The parties are continuing to discuss
possible resolution of such issues although there can be no assurance that the
parties will be able to reach a mutually acceptable resolution. Research grant
revenues for the three and six months ended June 30, 1998 increased slightly
from the comparable period in 1997.
Research and development expenses for the three months ended June 30,
1998 increased by $0.6 million as compared to the same period in 1997, but
reflected an overall decrease of $0.1 million for the six month period ended
June 30, 1998 relative to the same period in 1997. The increase for the quarter
is primarily attributable to increased clinical trial costs due to accelerated
patient recruitment within the clinical program and attendant increased costs
for manufacturing clinical supplies as well as for new manufacturing and
research and development facilities. During the remainder of 1998, clinical
trial costs are expected to further increase as patient enrollment is expected
to accelerate in the Phase II/III study of the Company's lead drug candidate,
Cylexin, for the prevention of reperfusion injury in infants following heart
surgery requiring cardiopulmonary bypass. The Company incurred additional
non-recurring facilities costs in the second quarter related to its recent move
into the new manufacturing facility for Cylexin and due to the preparation for
its move to a new headquarters and research and development facility in
September 1998. General and administrative expenses for the three and six months
ended June 30, 1998 increased $0.7 million and $1.0 million as compared to the
same periods in 1997 due to increased legal costs associated with the Company's
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PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION
collaboration agreement with Searle, additional personnel and the non-recurring
expenses associated with moving to the new facilities discussed above. The
majority of the non-recurring facilities expense allocated to both research and
development and general and administrative expense categories, associated with
moving to new facilities, was incurred in the second quarter, although some
additional expense is anticipated in the second half of 1998. These
non-recurring expenditures are expected to result in a significant reduction in
facilities costs in subsequent years.
Net interest income increased for the three and six months ended June
30, 1998 by $.1 million over the same periods in 1997. The increase in interest
income is due to higher average cash balances in the second quarter of 1998
versus the second quarter of 1997.
The Company expects to incur substantial operating losses over the next
several years due to continuing and increasing expenses associated with its
research and development programs, including preclinical testing and clinical
trials. Operating losses may fluctuate from quarter to quarter as a result of
differences in the timing of revenues and expenses incurred, and such
fluctuations may be substantial.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed operations since inception primarily through
private placements of its equity securities, two public common stock offerings,
revenues under collaborative research and development agreements, grant revenues
and interest income. In February 1998, Searle, one of the Company's research and
development collaborators, made an additional equity investment in the Company
and the Company's subsidiary, Epimmune, totaling $10.0 million. Also in February
1998, the Company issued $0.9 million in common stock in exchange for a
non-exclusive license agreement with Glycomed. Through June 1998, the Company
has raised approximately $142.2 million from the sale of equity securities. The
Company has financed its laboratory equipment and research and office facilities
primarily through capital, debt and lease financing arrangements.
The Company had net working capital of $16.5 million as of June 30, 1998
compared to $17.8 million at December 31, 1997. Cash, cash equivalents,
short-term investments and restricted cash decreased to $17.9 million as of June
30, 1998 as compared to $18.8 million at December 31, 1997. Net cash used in
operating activities was $8.8 million and $9.0 million for the six months ended
June 30, 1998 and 1997, respectively. The decrease in net cash used in operating
activities was due primarily to the timing of cash receipts from grant funding
in the current year and the pay down of current liabilities in 1997 versus the
increase in accounts payable and accrued liabilities for the same period in
1998.
For the six months ended June 30, 1998, the Company acquired an
aggregate of $1.4 million in capital equipment as compared to $0.2 million in
the first half of 1997. This increase is attributable to leasehold improvements
and equipment purchases for the new manufacturing facility which was completed
and ready for occupancy at the beginning of June 1998. Most of these capital
additions will be financed through a $2.5 million secured term line of credit
arrangement, with a four-year repayment term, completed in July 1998.
Subsequent to the quarter ended June 30, 1998, the Company entered into
an exclusive sublicensing and option agreement with Elan International Services
Ltd. (Elan), a subsidiary of Elan Corporation plc, granting Elan rights to a
patent involving use of antibodies that bind the VLA-4 integrin molecule for the
treatment of inflammatory conditions. In connection with this agreement, which
included the grant of an exclusive sublicense, Elan has made a $4.0 million
investment in Cytel. Elan will make additional payments upon achievement of
certain milestones as well as royalty payments on sales. In addition, Elan will
have the option to enter into a non-exclusive sublicense for patent rights to
other VLA-4 blocking compounds.
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION
The Company's cash, cash equivalents and short-term investments are
expected to decline primarily due to the continued clinical development of its
therapeutic product candidates and the conduct of its research programs. While
the Company's investments may periodically reflect unrealized losses, management
attempts to schedule the maturities of the Company's investments to coincide
with the Company's expected cash requirements.
The Company expects to incur substantial additional research and
development expenditures, including costs related to preclinical testing,
clinical trials and manufacturing, as well as marketing and distribution
expenses. It is the Company's intention to seek additional collaborative
research and development relationships with suitable corporate partners. The
suspension or termination of Cytel's collaborations with its existing corporate
partners or the inability to enter into new collaborations, the failure of any
such collaborations to be successful or the delay in their development or
commercialization of products could have a material adverse effect on the
Company's business, financial condition and results of operations. There can be
no assurance that any collaboration agreements to which the Company is or may
become a party will successfully reduce the Company's funding requirements.
Additional equity or debt financing will be required, and there can be no
assurance that these funds will be available on favorable terms, if at all. If
adequate funds are not available, the Company may be required to delay, scale
back or eliminate one or more of its drug discovery or development programs or
obtain funds through arrangements with collaborative partners or others that may
require the Company to relinquish rights to or sell certain of its technologies,
product candidates or products that the Company would not otherwise relinquish
or sell.
If additional financing is not available, Cytel anticipates its existing
available cash, cash equivalents and short-term investments, investment income
and research and development funding from collaborative agreements and research
grants will be adequate to satisfy its capital requirements and fund operating
losses through late 1998. The estimate for the period for which the Company
expects its available cash balances, investment income and estimated cash flow
from collaborative agreements and research grants to be sufficient to meet its
capital requirements is a forward-looking statement that involves certain risks
and uncertainties as set forth herein and in the Company's Form 10-K for the
year ended December 31, 1997. The Company's future capital requirements depend
on many factors, including continued scientific progress in its drug discovery
programs, the magnitude of these programs, progress with preclinical testing and
clinical trials, the time and costs involved in obtaining regulatory approvals,
the costs involved in filing, prosecuting and enforcing patent claims, competing
technological and market developments, changes in the existing collaborative
research relationships, the ability of the Company to establish and maintain
development arrangements, the cost of manufacturing scale-up and effective
commercialization activities and arrangements.
The Company is currently reviewing all equipment, systems, facilities
and software applications for Year 2000 readiness status. The Company has
determined that it will need to update some of its off-the-shelf software
applications so that its computer systems will function properly with respect to
dates in the year 2000 and beyond. The Company currently expects the project to
be substantially complete in early 1999. The cost is expected to be immaterial
and absorbed through upgrades and normal operating costs of software maintenance
contracts currently in place for these third party software products. The
project is not expected to have a significant effect on operations. In addition,
the Company will be replacing certain pieces of equipment and software that
cannot be upgraded. These replacement costs are expected to be immaterial.
As is typical in the biotechnology industry, the commercial success of
the Company will depend in part on the Company neither infringing patents issued
to competitors nor breaching the technology licenses upon which the Company's
products might be based. The Company's business is also subject to other
significant risks, including the uncertainties associated with the lengthy
regulatory approval process and with potential competition from other products.
Even if the Company's products appear promising at an early stage of
development, they may not reach the market for a number of reasons. Such reasons
include, but are not limited to, the possibilities that the potential products
will be found ineffective during clinical trials, fail to receive necessary
regulatory approvals, be difficult to manufacture on a large scale, or be
uneconomical to market.
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<PAGE>
PART II. OTHER INFORMATION
1. Legal Proceedings
The Company is not a party to any legal proceedings.
2. Change in Securities
None.
3. Defaults Upon Senior Securities
None.
4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders (the "Annual Meeting") was
held on June 12, 1998. At the Annual Meeting, the stockholders of the Company
(i) elected Howard E. Greene, Jr., Virgil Thompson, Dr. Robert L. Roe, Dr. James
C. Paulson, David L. Anderson, Dr. William T. Comer, Nicole Vitullo, David L.
Mahoney and Nancy D. Rasmussen to serve as directors of the Company until the
1999 Annual Meeting of Stockholders, (ii) approved an amendment of the Company's
Amended and Restated Certificate of Incorporation to increase the Company's
authorized shares of Common Stock from 50,000,000 shares to 75,000,000 shares,
(iii) approved an option exchange program, (iv) approved an amendment to the
Company's Employee Stock Purchase Plan to increase the aggregate number of
shares of Common Stock authorized for issuance to 750,000 shares from 500,000
shares, (v) approved amendments to the Company's 1989 Stock Option Plan and the
1994 Non-Employee Directors' Stock Option Plan to increase the aggregate number
of shares of Common Stock authorized for issuance on a combined basis under both
plans to 7,750,000 shares from 6,400,000 shares, (vi) ratified the selection of
Ernst & Young LLP, as the Company's independent auditors for the fiscal year
ending December 31, 1998.
The Company had 32,867,887 shares of Common Stock outstanding as of
April 17, 1998, the record date for the Annual Meeting. At the Annual Meeting,
holders of a total of 25,743,356 shares of Common Stock were present in person
or represented by proxy. In addition, 66,135 shares of a total 66,135 shares of
Series B Convertible Preferred Stock entitled to vote were represented in person
or by proxy at the meeting. Each such share of Series B Convertible Preferred
Stock was entitled to .788 of a vote. The following sets forth information
regarding the results of the voting at the Annual Meeting:
Proposal 1: Election of Directors
---------------------------------
Shares Voting
Director In Favor Shares Withheld
------------------------ ------------- ---------------
Howard E. Greene, Jr. 24,965,758 829,712
Virgil Thompson 24,965,758 829,712
Robert L. Roe, M.D. 24,965,758 829,712
James C. Paulson, Ph.D. 24,965,758 829,712
David L. Anderson 24,965,758 829,712
William T. Comer, Ph.D. 24,965,758 829,712
Nicole Vitullo 24,965,758 829,712
David L. Mahoney 24,965,758 829,712
Nancy D. Rasmussen 24,965,758 829,712
-10-
<PAGE>
PART II. OTHER INFORMATION
Proposal 2: Approval of an Amendment to the Company's Amended and Restated
Certificate of Incorporation
- --------------------------------------------------------------------------
Votes in favor: 24,859,944
Votes against: 900,753
Withheld: 34,773
Proposal 3: Approval of the Option Exchange Program
- ---------------------------------------------------
Votes in favor: 16,920,245
Votes against: 954,914
Withheld: 65,418
Proposal 4: Approval of an Amendment to the Employee Stock Purchase Plan
- ------------------------------------------------------------------------
Votes in favor: 14,498,277
Votes against: 3,190,147
Withheld: 59,357
Proposal 5: Approval of Amendments to the 1989 Stock Option Plan and the 1994
Non-Employee Directors' Stock Option Plan
- -----------------------------------------------------------------------------
Votes in favor: 13,298,905
Votes against: 4,365,849
Withheld: 83,027
Proposal 6: Ratification of Selection of Ernst & Young LLP, as Independent
Auditors
- --------------------------------------------------------------------------
Votes in favor: 25,659,144
Votes against: 121,384
Withheld: 14,942
5. Other Information
Pursuant to the Company's bylaws, stockholders who wish to bring matters
or propose nominees for director at the Company's 1999 annual meeting of
stockholders must provide a notice with specific information to the Company and
such notice must be delivered to or mailed and received at the principal
executive offices of the Company not later than January 4, 1999 which is the
120th day prior to the date specified in the Company's proxy statement released
in connection with the 1998 annual meeting of stockholders (unless such matters
are included in the Company's proxy statement pursuant to Rule 14a-8 under the
Securities Exchange Act of 1934, as amended).
-11-
<PAGE>
PART II. OTHER INFORMATION
6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit 3.6 Certificate of Amendment of Amended and Restated
Certificate of Incorporation.
Exhibit 3.7 Certificate of Increase of Series A Junior Participating
Preferred Stock.
Exhibit 10.5 Registrant's 1989 Stock Plan, as amended.
Exhibit 10.8 Registrant's Employee Stock Purchase Plan, as amended.
Exhibit 10.37 Registrant's Non-Employee Directors' Stock Option Plan, as
amended.
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K.
None.
-12-
<PAGE>
CYTEL CORPORATION
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CYTEL CORPORATION
Date: August 14, 1998 By: /s/ Edward C. Hall
-----------------------
Edward C.Hall
Vice President-Finance
Chief Financial Officer
(Duly Authorized Officer and
Principal Financial & Accounting
Officer)
-13-
Exhibit 3.6
CERTIFICATE OF AMENDMENT
OF AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF CYTEL CORPORATION
Cytel Corporation (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify:
FIRST: The name of the Corporation is Cytel Corporation.
SECOND: The date on which the Corporation's original Certificate
of Incorporation was filed with the Delaware Secretary of State is July 10,
1987.
THIRD: The Board of Directors of the Corporation, acting in
accordance with the provision of Sections 141 and 242 of the General Corporation
Law of the State of Delaware adopted resolutions at a meeting held on March 13,
1998 to amend the first paragraph of Article V of the Amended and Restated
Certificate of Incorporation of the Corporation to read in its entirety as
follows:
"The Corporation is authorized to issue two classes of shares
designated, respectively, "Common Stock" and "Preferred Stock." The
total number of shares of all classes of stock which the Corporation
has authority to issue is 85,000,000 shares, consisting of
75,000,000 shares of Common Stock, each having a par value of $.01,
and 10,000,000 shares of Preferred Stock, each having a par value of
$.01."
FOURTH: Thereafter, pursuant to a resolution of the Board of
Directors, this Certificate of Amendment of Amended and Restated Certificate of
Incorporation was submitted to the stockholders of the Corporation and was duly
approved by the required vote of stockholders of the Corporation in accordance
with Sections 228 and 242 of the Delaware General Corporation Law. The total
number of outstanding shares entitled to vote or consent to this Amendment was
32,867,887 shares of Common Stock and 66,135 shares of Series B Convertible
Preferred Stock. A majority of the outstanding shares of Common Stock and Series
B Convertible Preferred Stock, voting together as a single class, voted in favor
of this Certificate of Amendment of Amended and Restated Certificate of
Incorporation.
<PAGE>
IN WITNESS WEREOF, Cytel Corporation has caused this Certificate of
Amendment to be signed by its President and attested to by its Secretary this
30th day of June, 1998.
CYTEL CORPORATION
/S/ VIRGIL THOMPSON
------------------------------
Virgil Thompson
President and Chief Executive
Officer
ATTEST:
/S/ EDWARD C. HALL
- -----------------------------------
Edward C. Hall
Vice President, Finance, Chief Financial
Officer and Secretary
2
Exhibit 3.7
CERTIFICATE OF INCREASE
OF SERIES A JUNIOR
PARTICIPATING PREFERRED STOCK
OF CYTEL CORPORATION
(Pursuant to Section 151(g) of the
Delaware General Corporation law)
Cytel Corporation (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, hereby
certifies:
FIRST: In a Certificate of Designation Filed with the Secretary of
State of the State of Delaware on April 2, 1993, pursuant to
Section 151 of the General Corporation Law of the State of
Delaware, the Corporation was authorized to issue Three
Hundred Thousand (300,000) shares of Series A Junior
Participating Preferred Stock, as a series of the
Corporation's authorized Preferred Stock, par value $.01 per
share;
SECOND: In a Certificate of Increase of Series A Junior Participating
Preferred Stock filed with the Secretary of State of the State
of Delaware on July 5, 1995, pursuant to Section 151(g) of the
General Corporation Law of the State of Delaware, the
Corporation was authorized to issue Five Hundred Thousand
(500,000) shares of Series A Junior Participating Preferred
Stock, as a series of the Corporation's authorized Preferred
Stock, par value $.01 per share;
THIRD: The Board of Directors of the Corporation by resolution
adopted at a meeting duly called and held on March 13, 1998
duly authorized and directed that the number of shares of the
Corporation's Series A Junior Participating Preferred Stock be
increased from Five Hundred Thousand (500,000) shares to Seven
Hundred Fifty Thousand (750,000) shares.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by its duly authorized officers this 30th day of June, 1998.
CYTEL CORPORATION
/S/ VIRGIL THOMPSON
-------------------------------
Virgil Thompson
President and Chief Executive Officer
ATTEST:
/S/ EDWARD C. HALL
- ------------------------------
Edward C. Hall
Vice President, Finance, Chief Financial
Officer and Secretary
Exhibit 10.5
CYTEL CORPORATION
1989 STOCK PLAN
---------------
As Amended and Restated October 11, 1991
and Amended December 4, 1992,
March 19, 1993, March 18, 1994, March 15, 1996,
September 20, 1996, March 12, 1998 and June 12, 1998
1. PURPOSE.
(a) The purpose of the Plan is to provide a means by which selected
employees and directors of and advisors and consultants to Cytel Corporation, a
Delaware corporation (the "Company"), and its Affiliates, as defined in
subparagraph 1(b), may be given an opportunity to benefit from increases in
value of the stock of the Company through the granting of (i) incentive stock
options, (ii) nonstatutory stock options, (iii) stock bonuses, and (iv) rights
to purchase stock, all as defined below.
(b) The word "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company, as those terms are defined
in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986,
as amended (the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of
persons now employed by or serving as advisors, consultants or directors to the
Company and its Affiliates, to secure and retain the services of new
employees/persons capable of filling such positions, and to provide incentives
for such persons to exert maximum efforts for the success of the Company.
(d) The Company intends that the rights issued under the Plan ("Stock
Awards") shall, in the discretion of the Board of Directors of the Company (the
"Board") or any committee to which responsibility for administration of the Plan
has been delegated pursuant to subparagraph 2(c), be either (i) stock options
granted pursuant to paragraph 5 hereof, including incentive stock options as
that term is used in Section 422 of the Code ("Incentive Stock Options"), or
options which do not qualify as Incentive Stock Options ("Nonstatutory Stock
Options") (together hereinafter referred to as "Options"), or (ii) stock bonuses
or rights to purchase restricted stock granted pursuant to paragraph 6 hereof.
All Options shall be separately designated Incentive Stock Options or
Nonstatutory Stock Options at the time of grant, and in such form as issued
pursuant to paragraph 5, and a separate certificate or certificates shall be
issued for shares purchased on exercise of each type of Option. An Option
designated as a Nonstatutory Stock Option shall not be treated as an Incentive
Stock Option.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the
Board delegates administration to a committee, as provided in subparagraph 2(c).
1
<PAGE>
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how Stock Awards shall be
granted; whether a Stock Award will be an Incentive Stock Option, a Nonstatutory
Stock Option, a stock bonus, a right to purchase restricted stock, or a
combination of the foregoing; the provisions of each Stock Award granted (which
need not be identical), including the time or times when a person shall be
permitted to purchase or receive stock pursuant to a Stock Award; and the number
of shares with respect to which Stock Awards shall be granted to each such
person.
(ii) To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award, in a manner
and to the extent it shall deem necessary or expedient to make the Plan fully
effective.
(iii) To amend the Plan as provided in paragraph 12.
(iv) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company.
(c) The Board may delegate administration of the Plan to a committee of
the Board composed of not fewer than two (2) members (the "Committee"), all of
the members of which Committee shall be non-employee directors and may also be,
in the discretion of the Board, outside directors. If administration is
delegated to a Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by the Board,
including the power to delegate to a subcommittee of two (2) or more Outside
Directors any of the administrative powers the Committee is authorized to
exercise (and references in this Plan to the Board shall thereafter be to the
Committee or such a subcommittee), subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Board. The Board may abolish the Committee at any time and revest in
the Board the administration of the Plan.
(d) (i) The term "non-employee director," as used in this Plan, shall
mean a director who either (A) is not a current employee or officer (as defined
for purposes of Section 16 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K ("Regulation S-K") promulgated pursuant to
the Securities Act of 1933 (the "Securities Act")), does not possess an interest
in any other transaction as to which disclosure would be required under Item
404(a) of Regulation S-K, and is not engaged in a business relationship as to
which disclosure would be required under Item 404(b) of Regulation S-K; or (B)
is otherwise considered a "non-employee director" for purposes of Rule 16b-3.
2
<PAGE>
(ii) The term "outside director," as used in this Plan shall mean a
director who either (A) is not a current employee of the Company or an
"affiliated corporation" (within the meaning of the Treasury regulations
promulgated under Section 162(m) of the Code), is not a former employee of the
Company or an "affiliated corporation" receiving compensation for prior services
(other than benefits under a tax qualified pension plan), was not an officer of
the Company or an "affiliated corporation" at any time, and is not currently
receiving direct or indirect remuneration from the Company or an "affiliated
corporation" for services in any capacity other than as a director, or (B) is
otherwise considered an "outside director" for purposes of Section 162(m) of the
Code.
(e) Any requirement that an administrator of the Plan be a
"non-employee director" shall not apply if the Board or the Committee expressly
declares that such requirement shall not apply.
(f) Notwithstanding anything in this Section 2 to the contrary, the
Board or Committee may delegate to a committee of one or more members of the
Board the authority to grant options to persons not subject to the requirements
of Section 16 of the Exchange Act.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 11 relating to adjustments
upon changes in stock, the stock that may be issued pursuant to Stock Awards
granted under the Plan shall not exceed in the aggregate seven million seven
hundred fifty thousand (7,750,000) shares of the Company's common stock less the
number of shares of the Company's common stock which has been sold under, or may
be sold pursuant to outstanding options granted under, the Company's 1994
Non-Employee Directors' Stock Option Plan. If any Stock Award granted under the
Plan shall for any reason expire or otherwise terminate without having been
exercised in full, the stock not purchased under such Stock Award shall again
become available for the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
(c) An Incentive Stock Option may be granted to an eligible person
under the Plan only if the aggregate fair market value (determined at the time
the Option is granted) of the stock with respect to which incentive stock
options (as defined in the Code) granted after 1986 are exercisable for the
first time by such optionee during any calendar year under all incentive stock
option plans of the Company and its Affiliates does not exceed one hundred
thousand dollars ($100,000). If it is determined that an entire Option or any
portion thereof does not qualify for treatment as an Incentive Stock Option by
reason of exceeding such maximum, such Option or the applicable portion shall be
considered a Nonstatutory Stock Option.
4. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to employees (including
officers) of the Company or its Affiliates. A director of the Company shall not
be eligible to receive Incentive Stock Options unless such director is also an
employee (including an officer) of the Company or any Affiliate. Stock Awards
other than Incentive Stock Options may be granted only to employees (including
officers) or directors of or advisors or consultants to the Company or its
Affiliates.
3
<PAGE>
(b) No person shall be eligible for the grant of an Incentive Stock
Option under the Plan if, at the time of grant, such person owns (or is deemed
to own pursuant to Section 424(d) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or of any of its Affiliates unless the exercise price of such Option is
at least one hundred ten percent (110%) of the fair market value of such stock
at the date of grant and the term of such Option does not exceed five (5) years
from the date of grant.
(c) In any calendar year, no person shall be eligible to be granted
Incentive Stock and Nonstatutory Stock Options under the Plan covering an
aggregate number of shares of the Company's common stock greater than nine
hundred fifty thousand (950,000) shares.
5. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board or the Committee shall deem appropriate. The provisions
of separate Options need not be identical, but each Option shall include
(through incorporation of provisions hereof by reference in the Option or
otherwise) the substance of each of the following provisions:
(a) No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted.
(b) The exercise price of each Incentive Stock Option shall be not less
than one hundred percent (100%) of the fair market value of the stock subject to
the Option on the date the Option is granted. The exercise price of each
Nonstatutory Stock Option shall be not less than eighty-five percent (85%) of
the fair market value of the stock subject to the Option on the date the Option
is granted.
(c) The purchase price of stock acquired pursuant to an Option shall be
paid, to the extent permitted by applicable statutes and regulations, either (i)
in cash at the time the Option is exercised, or (ii) at the discretion of the
Board or the Committee, either at the time of the grant or exercise of the
Option, (A) by delivery to the Company of other common stock of the Company, (B)
according to a deferred payment or other arrangement (which may include, without
limiting the generality of the foregoing, the use of other common stock of the
Company) with the person to whom the Option is granted or to whom the Option is
transferred pursuant to subparagraph 5(d), or (C) in any other form of legal
consideration that may be acceptable to the Board or the Committee.
In the case of any deferred payment arrangement, interest shall be
payable at least annually and shall be charged at the minimum rate of interest
necessary to avoid the treatment as interest, under any applicable provisions of
the Code, of any amounts other than amounts stated to be interest under the
deferred payment arrangement.
(d) An Incentive Stock Option shall not be transferable except by will
or by the laws of descent and distribution, and shall be exercisable during the
lifetime of the person to whom the Option is granted only by such person. A
Nonstatutory Stock Option shall only be transferable by the Optionee upon such
terms and conditions as are set forth in the Option Agreement for such
Nonstatutory Stock Option, as the Board or the Committee shall determine in its
discretion.
4
<PAGE>
(e) The total number of shares of stock subject to an Option may, but
need not, be allotted in periodic installments (which may, but need not, be
equal). From time to time during each of such installment periods, the Option
may become exercisable ("vest") with respect to some or all of the shares
allotted to that period, and may be exercised with respect to some or all of the
shares allotted to such period and/or any prior period as to which the Option
was not fully exercised. During the remainder of the term of the Option (if its
term extends beyond the end of the installment periods), the Option may be
exercised from time to time with respect to any shares then remaining subject to
the Option. The provisions of this subparagraph 5(e) are subject to any Option
provisions governing the minimum number of shares as to which an Option may be
exercised.
(f) The Company may require any optionee, or any person to whom an
Option is transferred under subparagraph 5(d), as a condition of exercising any
such Option, (i) to give written assurances satisfactory to the Company as to
the optionee's knowledge and experience in financial and business matters and/or
to employ a purchaser representative reasonably satisfactory to the Company who
is knowledgeable and experienced in financial and business matters, and that he
or she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Option; and (ii) to give
written assurances satisfactory to the Company stating that such person is
acquiring the stock subject to the Option for such person's own account and not
with any present intention of selling or otherwise distributing the stock. These
requirements, and any assurances given pursuant to such requirements, shall be
inoperative if (A) the issuance of the shares upon the exercise of the Option
has been registered under a then currently effective registration statement
under the Securities Act or (B) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws.
(g) An Option shall terminate three (3) months after termination of the
optionee's employment or relationship as a advisor, consultant or director with
the Company or an Affiliate, unless (i) such termination is due to such person's
permanent and total disability, within the meaning of Section 422(c)(6) of the
Code, in which case the Option may, but need not, provide that it may be
exercised at any time within six (6) months following such termination of
employment or relationship as an advisor, consultant or director; or (ii) the
optionee dies while in the employ of or while serving as an advisor, consultant
or director to the Company or an Affiliate, or within not more than three (3)
months after termination of such relationship, in which case the Option may, but
need not, provide that it may be exercised at any time within six (6) months
following the death of the optionee by the person or persons to whom the
optionee's rights under such Option pass by will or by the laws of descent and
distribution; or (iii) the Option by its terms specifies either (A) that it
shall terminate sooner than three (3) months after termination of the optionee's
employment or relationship as an advisor, consultant or director or (B) that it
may be exercised more than three (3) months after termination of the
relationship with the Company or an Affiliate. This subparagraph 5(g) shall not
be construed to extend the term of any Option or to permit anyone to exercise
the Option after expiration of its term, nor shall it be construed to increase
the number of shares as to which any Option is exercisable from the amount
exercisable on the date of termination of the optionee's employment or
relationship as an advisor, consultant or director.
5
<PAGE>
(h) The Option may, but need not, include a provision whereby the
optionee may elect at any time during the term of his or her employment or
relationship as an advisor, consultant or director with the Company or any
Affiliate to exercise the Option as to any part or all of the shares subject to
the Option prior to the stated vesting date of the Option or of any installment
or installments specified in the Option. Any shares so purchased from any
unvested installment or Option may be subject to a repurchase right in favor of
the Company or to any other restriction the Board or the Committee determines to
be appropriate.
(i) To the extent provided by the terms of an Option, the optionee may
satisfy any federal, state or local tax withholding obligation relating to the
exercise of such Option by any of the following means or by a combination of
such means: (i) tendering a cash payment; (ii) authorizing the Company to
withhold from the shares of the common stock otherwise issuable to the
participant as a result of the exercise of the Option a number of shares having
a fair market value less than or equal to the amount of the withholding tax
obligation; or (iii) delivering to the Company owned and unencumbered shares of
the common stock having a fair market value less than or equal to the amount of
the withholding tax obligation.
6. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
Each stock bonus or restricted stock purchase agreement shall be in such
form and shall contain such terms and conditions as the Board or the Committee
shall deem appropriate. The terms and conditions of stock bonus or restricted
stock purchase agreements may change from time to time, and the terms and
conditions of separate agreements need not be identical, but each stock bonus or
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions as appropriate:
(a) The purchase price under each stock purchase agreement shall be
such amount as the Board or Committee shall determine and designate in such
agreement. Notwithstanding the foregoing, the Board or the Committee may
determine that eligible participants in the Plan may be awarded stock pursuant
to a stock bonus agreement in consideration for past services actually rendered
to the Company or for its benefit.
(b) No rights under a stock bonus or restricted stock purchase
agreement shall be assignable by any participant under the Plan, either
voluntarily or by operation of law, except where such assignment is required by
law or expressly authorized by the terms of the applicable stock bonus or
restricted stock purchase agreement.
(c) The purchase price of stock acquired pursuant to a stock purchase
agreement shall be paid either: (i) in cash at the time of purchase; (ii) at the
discretion of the Board or the Committee, according to a deferred payment or
other arrangement with the person to whom the stock is sold; or (iii) in any
other form of legal consideration that may be acceptable to the Board or the
Committee in their discretion. Notwithstanding the foregoing, the Board or the
Committee to which administration of the Plan has been delegated may award stock
pursuant to a stock bonus agreement in consideration for past services actually
rendered to the Company or for its benefit.
6
<PAGE>
(d) Shares of stock sold or awarded under the Plan may, but need not,
be subject to a repurchase option in favor of the Company in accordance with a
vesting schedule to be determined by the Board or the Committee.
(e) In the event a person ceases to be an employee of or ceases to
serve as an advisor, consultant or director to the Company or an Affiliate, the
Company may repurchase or otherwise reacquire any or all of the shares of stock
held by that person which have not vested as of the date of termination under
the terms of the stock bonus or restricted stock purchase agreement between the
Company and such person.
7. COVENANTS OF THE COMPANY.
(a) During the terms of the Stock Awards granted under the Plan, the
Company shall keep available at all times the number of shares of stock required
to satisfy such Stock Awards.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock under the Stock Awards granted under the Plan;
provided, however, that this undertaking shall not require the Company to
register under the Securities Act either the Plan, any Stock Award granted under
the Plan or any stock issued or issuable pursuant to any such Stock Award. If,
after reasonable efforts, the Company is unable to obtain from any such
regulatory commission or agency the authority which counsel for the Company
deems necessary for the lawful issuance and sale of stock under the Plan, the
Company shall be relieved from any liability for failure to issue and sell stock
upon exercise of such Stock Awards unless and until such authority is obtained.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards granted under the
Plan shall constitute general funds of the Company.
9. MISCELLANEOUS.
(a) The Board or the Committee shall have the power to accelerate the
time during which a Stock Award may be exercised or the time during which a
Stock Award or any part thereof will vest, notwithstanding the provisions in the
Stock Award stating the time during which it may be exercised or the time during
which it will vest.
(b) Neither an optionee nor any person to whom an Option is transferred
under subparagraph 5(d) shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to such Option unless
and until such person has satisfied all requirements for exercise of the Option
pursuant to its terms.
7
<PAGE>
(c) Throughout the term of any Option granted pursuant to the Plan, the
Company shall make available to the holder of such Option, not later than one
hundred twenty (120) days after the close of each of the Company's fiscal years
during the Option term, upon request, such financial and other information
regarding the Company as comprises the annual report to the stockholders of the
Company provided for in the bylaws of the Company.
(d) Nothing in the Plan or any instrument executed or Stock Award
granted pursuant thereto shall confer upon any eligible employee, advisor,
consultant, director or holder of Stock Awards under the Plan any right to
continue in the employ of the Company or any Affiliate (or to continue acting as
an advisor, consultant or director) or shall affect the right of the Company or
any Affiliate to terminate the employment or consulting relationship or
directorship of any eligible employee, advisor, consultant, director or holder
of Stock Awards under the Plan with or without cause. In the event that a holder
of Stock Awards is permitted or otherwise entitled to take a leave of absence,
the Company shall have the unilateral right to (i) determine whether such leave
of absence will be treated as a termination of employment or relationship as
advisor, consultant or director for purposes of paragraphs 5(g) or 6(e) hereof
and corresponding provisions of any outstanding Stock Awards, and (ii) suspend
or otherwise delay the time or times at which exercisability or vesting would
otherwise occur with respect to any outstanding Stock Awards under the Plan.
10. CANCELLATION AND RE-GRANT OF OPTIONS.
(a) The Board or the Committee shall have the authority to effect, at
any time and from time to time, with the consent of the affected optionees, (i)
the repricing of any or all outstanding Options under the Plan and/or (ii) the
cancellation of any or all outstanding Options under the Plan and the grant in
substitution therefor of new Options under the Plan covering the same or
different numbers of shares of common stock, but having an exercise price per
share not less than eighty-five percent (85%) of the fair market value (one
hundred percent (100%) of the fair market value in the case of an Incentive
Stock Option or, in the case of a 10% stockholder (as defined in subparagraph
4(c)), not less than one hundred and ten percent (110%) of the fair market value
per share of common stock on the new grant date.
(b) Shares subject to an option canceled under this Section 10 shall
continue to be counted against the maximum award of options permitted to be
granted to any person pursuant to subsection 4(c) of the Plan. The repricing of
an option under this Section 10, resulting in a reduction of the exercise price,
shall be deemed to be a cancellation of the original option and the grant of a
substitute option; in the event of such repricing, both the original and the
substituted options shall be counted against the maximum awards of options
permitted to be granted to any person pursuant to subsection 4(c) of the Plan.
The provisions of this subsection 10(b) shall be applicable only to the extent
required by Section 162(m) of the Code.
11. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject
to any Stock Award granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), the Plan and outstanding
Stock Awards will be appropriately adjusted in the class(es) and maximum number
of shares subject to the Plan and the class(es) and number of shares and price
per share of stock subject to outstanding Stock Awards.
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(b) In the event of: (i) a dissolution or liquidation of the Company;
(ii) a merger or consolidation in which the Company is not the surviving
corporation; or (iii) a reverse merger in which the Company is the surviving
corporation but the shares of the Company's common stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise then at the discretion of
the Board or Committee, and to the extent permitted by applicable law: (A) any
surviving corporation shall assume any Stock Awards outstanding under the Plan
or shall substitute similar Stock Awards for those outstanding under the Plan,
(B) such Stock Awards shall continue in full force and effect, or (C) respect to
Stock Awards held by persons then performing services as employees of or as
advisors, consultants or directors for the Company and its Affiliates, as the
case may be, the Company may either (1) arrange to pay a cash settlement for
such Stock Awards equal to the difference between the amount to be paid for an
equivalent amount of stock pursuant to such corporate transaction and the
exercise price under such Stock Award, or (2) accelerate the time during which
such Stock Awards become vested or may be exercised and terminate the Stock
Awards not exercised prior to such event.
12. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 11 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(i) Increase the number of shares reserved for Stock Awards under
the Plan;
(ii) Modify the requirements as to eligibility for participation in
the Plan to the extent such modification requires stockholder approval in order
for the Plan to satisfy the requirements of Section 422(b) of the Code or to
comply with the requirements of Rule 16b-3 promulgated under the Exchange Act;
or
(iii) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to satisfy the requirements
of Section 422(b) of the Code or to comply with the requirements of Rule 16b-3
promulgated under the Exchange Act.
(b) The Board may in its sole discretion submit any other amendment to
the Plan for stockholder approval, including, but not limited to, amendments to
the Plan intended to satisfy the requirements of Section 162(m) of the Code and
the regulations promulgated thereunder regarding the exclusion of
performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide optionees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to employee Incentive Stock
Options and/or to bring the Plan and/or Incentive Stock Options granted under it
into compliance therewith.
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(d) Rights and obligations under any Stock Award granted before
amendment of the Plan shall not be altered or impaired by any amendment of the
Plan unless (i) the Company requests the consent of the person to whom the Stock
Award was granted and (ii) such person consents in writing.
13. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on December 31, 2000. No Stock
Awards may be granted under the Plan while the Plan is suspended or after it is
terminated.
(b) Rights and obligations under any Stock Award granted while the Plan
is in effect shall not be altered or impaired by suspension or termination of
the Plan, except with the consent of the person to whom the Stock Award was
granted.
14. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no Stock
Awards granted under the Plan shall be exercisable unless and until the Plan has
been approved by the stockholders of the Company, and, if required, an
appropriate permit has been issued by the Commissioner of Corporations of the
State of California.
Exhibit 10.8
CYTEL CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
Adopted October 12, 1991
Amended March 27, 1995
Amended March 12, 1998
1. PURPOSE.
(a) The purpose of the Employee Stock Purchase Plan (the "Plan") is to
provide a means by which employees of Cytel Corporation, a Delaware corporation
(the "Company"), and its Affiliates, as defined in subparagraph 1(b), which are
designated as provided in subparagraph 2(b), may be given an opportunity to
purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company, as those terms are defined
in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986,
as amended (the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of
its employees, to secure and retain the services of new employees, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
(d) The Company intends that the rights to purchase stock of the
Company granted under the Plan be considered options issued under an "employee
stock purchase plan" as that term is defined in Section 423(b) of the Code.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors (the
"Board") of the Company unless and until the Board delegates administration to a
Committee, as provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(i) To determine when and how rights to purchase stock of the
Company shall be granted and the provisions of each offering of such rights
(which need not be identical).
(ii) To designate from time to time which Affiliates of the Company
shall be eligible to participate in the Plan.
(iii) To construe and interpret the Plan and rights granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan, in a manner and to the extent it
shall deem necessary or expedient to make the Plan fully effective.
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(iv) To amend the Plan as provided in paragraph 13.
(v) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company.
(c) The Board may delegate administration of the Plan to a Committee
composed of not fewer than two (2) members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 12 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to rights granted
under the Plan shall not exceed in the aggregate seven hundred fifty thousand
(750,000) shares of the Company's $.01 par value common stock (the "Common
Stock"). If any right granted under the Plan shall for any reason terminate
without having been exercised, the Common Stock not purchased under such right
shall again become available for the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. GRANT OF RIGHTS; OFFERING.
The Board or the Committee may from time to time grant or provide for
the grant of rights to purchase Common Stock of the Company under the Plan to
eligible employees (an "Offering") on a date or dates (the "Offering Date(s)")
selected by the Board or the Committee. Each Offering shall be in such form and
shall contain such terms and conditions as the Board or the Committee shall deem
appropriate. If an employee has more than one right outstanding under the Plan,
unless he or she otherwise indicates in agreements or notices delivered
hereunder: (1) each agreement or notice delivered by that employee will be
deemed to apply to all of his or her rights under the Plan, and (2) a right with
a lower exercise price (or an earlier-granted right, if two rights have
identical exercise prices), will be exercised to the fullest possible extent
before a right with a higher exercise price (or a later-granted right, if two
rights have identical exercise prices) will be exercised. The provisions of
separate Offerings need not be identical, but each Offering shall include
(through incorporation of the provisions of this Plan by reference in the
Offering or otherwise) the substance of the provisions contained in paragraphs 5
through 8, inclusive.
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5. ELIGIBILITY.
(a) Rights may be granted only to employees of the Company or, as the
Board or the Committee may designate as provided in subparagraph 2(b), to
employees of any Affiliate of the Company. Except as provided in subparagraph
5(b), an employee of the Company or any Affiliate shall not be eligible to be
granted rights under the Plan, unless, on the Offering Date, such employee has
been in the employ of the Company or any Affiliate for such continuous period
preceding such grant as the Board or the Committee may require, but in no event
shall the required period of continuous employment be equal to or greater than
two (2) years. In addition, unless otherwise determined by the Board or the
Committee and set forth in the terms of the applicable Offering, no employee of
the Company or any Affiliate shall be eligible to be granted rights under the
Plan, unless, on the Offering Date, such employee's customary employment with
the Company or such Affiliate is at least twenty (20) hours per week and at
least five (5) months per calendar year.
(b) The Board or the Committee may provide that, each person who,
during the course of an Offering, first becomes an eligible employee of the
Company or designated Affiliate will, on a date or dates specified in the
Offering which coincides with the day on which such person becomes an eligible
employee or occurs thereafter, receive a right under that Offering, which right
shall thereafter be deemed to be a part of that Offering. Such right shall have
the same characteristics as any rights originally granted under that Offering,
as described herein, except that:
(i) the date on which such right is granted shall be the "Offering
Date" of such right for all purposes, including determination of the exercise
price of such right;
(ii) the Purchase Period (as defined below) for such right shall
begin on its Offering Date and end coincident with the end of such Offering; and
(III) the Board or the Committee may provide that if such person first becomes
an eligible employee within a specified period of time before the end of the
Purchase Period (as defined below) for such Offering, he or she will not receive
any right under that Offering.
(c) No employee shall be eligible for the grant of any rights under the
Plan if, immediately after any such rights are granted, such employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of this
subparagraph 5(c), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any employee, and stock which such employee
may purchase under all outstanding rights and options shall be treated as stock
owned by such employee.
(d) An eligible employee may be granted rights under the Plan only if
such rights, together with any other rights granted under "employee stock
purchase plans" of the Company and any Affiliates, as specified by Section
423(b)(8) of the Code, do not permit such employee's rights to purchase stock of
the Company or any Affiliate to accrue at a rate which exceeds twenty-five
thousand dollars ($25,000) of fair market value of such stock (determined at the
time such rights are granted) for each calendar year in which such rights are
outstanding at any time.
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(e) Officers of the Company and any designated Affiliate shall be
eligible to participate in Offerings under the Plan, provided, however, that the
Board may provide in an Offering that certain employees who are highly
compensated employees within the meaning of Section 423(b)(4)(D) of the Code
shall not be eligible to participate.
6. RIGHTS; PURCHASE PRICE.
(a) On each Offering Date, each eligible employee, pursuant to an
Offering made under the Plan, shall be granted the right to purchase up to the
number of shares of Common Stock of the Company purchasable with a percentage
designated by the Board or the Committee not exceeding fifteen percent (15%) of
such employee's Earnings (as defined in Section 7(a)) during the period which
begins on the Offering Date (or such later date as the Board or the Committee
determines for a particular Offering) and ends on the date stated in the
Offering, which date shall be no more than twenty-seven (27) months after the
Offering Date (the "Purchase Period"). In connection with each Offering made
under this Plan, the Board or the Committee shall specify a maximum number of
shares which may be purchased by any employee as well as a maximum aggregate
number of shares which may be purchased by all eligible employees pursuant to
such Offering. In addition, in connection with each Offering which contains more
than one Exercise Date (as defined in the Offering), the Board or the Committee
may specify a maximum aggregate number of shares which may be purchased by all
eligible employees on any given Exercise Date under the Offering. If the
aggregate purchase of shares upon exercise of rights granted under the Offering
would exceed any such maximum aggregate number, the Board or the Committee shall
make a pro rata allocation of the shares available in as nearly a uniform manner
as shall be practicable and as it shall deem to be equitable.
(b) The purchase price of stock acquired pursuant to rights granted
under the Plan shall be not less than the lesser of:
(i) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Offering Date; or
(ii) an amount equal to eighty-five percent (85%) of the fair
market value of the stock on the Exercise Date.
7. PARTICIPATION; WITHDRAWAL; TERMINATION.
(a) An eligible employee may become a participant in an Offering by
delivering a participation agreement to the Company within the time specified in
the Offering, in such form as the Company provides. Each such agreement shall
authorize payroll deductions of up to the maximum percentage specified by the
Board or the Committee of such employee's Earnings during the Purchase Period.
"Earnings" is defined as the total compensation paid to an employee, including
all salary, wages (including amounts elected to be deferred by the employee,
that would otherwise have been paid, under any cash or deferred arrangement
established by the Company), overtime pay, commissions, bonuses, and other
remuneration paid directly to the employee, but excluding profit sharing, the
cost of employee benefits paid for by the Company, education or tuition
reimbursements, imputed income arising under any Company group insurance or
benefit program, traveling expenses, business and moving expense reimbursements,
income received in connection with stock options, contributions made by the
Company under any employee benefit plan, and similar items of compensation. The
payroll deductions made for each participant shall be credited to an account for
such participant under the Plan and shall be deposited with the general funds of
the Company. A participant may reduce (including to zero), increase or begin
such payroll deductions after the beginning of any Purchase Period only as
provided for in the Offering. A participant may make additional payments into
his or her account only if specifically provided for in the Offering and only if
the participant has not had the maximum amount withheld during the Purchase
Period.
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(b) At any time during a Purchase Period a participant may terminate
his or her payroll deductions under the Plan and withdraw from the Offering by
delivering to the Company a notice of withdrawal in such form as the Company
provides. Such withdrawal may be elected at any time prior to the end of the
Purchase Period except as provided by the Board or the Committee in the
Offering. Upon such withdrawal from the Offering by a participant, the Company
shall distribute to such participant all of his or her accumulated payroll
deductions (reduced to the extent, if any, such deductions have been used to
acquire stock for the participant) under the Offering, without interest, and
such participant's interest in that Offering shall be automatically terminated.
A participant's withdrawal from an Offering will have no effect upon such
participant's eligibility to participate in any other Offerings under the Plan
but such participant will be required to deliver a new participation agreement
in order to participate in subsequent Offerings under the Plan.
(c) Rights granted pursuant to any Offering under the Plan shall
terminate immediately upon cessation of any participating employee's employment
with the Company and any designated Affiliate, for any reason, and the Company
shall distribute to such terminated employee all of his or her accumulated
payroll deductions (reduced to the extent, if any, such deductions have been
used to acquire stock for the terminated employee), under the Offering, without
interest. In the event that an employee is permitted or otherwise entitled to
take a military, sick leave, or other bona fide leave of absence, for purposes
of this Plan the employee will be deemed to have terminated employment with the
Company or any designated Affiliate on the 91st day of such leave, unless the
employee's right to reemployment upon the expiration of such leave is guaranteed
either by statute or contract.
(d) Rights granted under the Plan shall not be transferable, and shall
be exercisable only by the person to whom such rights are granted.
(e) A participant's right to receive stock under the Plan may be
conditioned upon the participant making arrangements satisfactory to the Company
to insure that the amount of any federal or other withholding tax required to be
withheld as a result of the disposition of such stock by the participant is made
available to the Company for timely payment of such tax.
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8. EXERCISE.
(a) On each exercise date, as defined in the relevant Offering (an
"Exercise Date"), each participant's accumulated payroll deductions and other
additional payments specifically provided for in the Offering (without any
increase for interest) will be applied to the purchase of whole shares of stock
of the Company, up to the maximum number of shares permitted pursuant to the
terms of the Plan and the applicable Offering, at the purchase price specified
in the Offering. No fractional shares shall be issued upon the exercise of
rights granted under the Plan. The amount, if any, of accumulated payroll
deductions remaining in each participant's account after the purchase of shares
which is less than the amount required to purchase one share of stock on the
final Exercise Date of an Offering shall be held in each such participant's
account for the purchase of shares under the next Offering under the Plan,
unless such participant withdraws from such next Offering, as provided in
subparagraph 7(b), or is no longer eligible to be granted rights under the Plan,
as provided in paragraph 5, in which case such amount shall be distributed to
the participant after said final Exercise Date, without interest. The amount, if
any, of accumulated payroll deductions remaining in any participant's account
after the purchase of shares which is equal to the amount required to purchase
whole shares of stock on the final Exercise Date of an Offering shall be
distributed in full to the participant after such Exercise Date, without
interest.
(b) No rights granted under the Plan may be exercised to any extent
unless the Plan (including rights granted thereunder) is covered by an effective
registration statement pursuant to the Securities Act of 1933, as amended (the
"Securities Act"). If on an Exercise Date of any Offering hereunder the Plan is
not so registered, no rights granted under the Plan or any Offering shall be
exercised on said Exercise Date and the Exercise Date shall be delayed until the
Plan is subject to such an effective registration statement, except that the
Exercise Date shall not be delayed more than two (2) months and the Exercise
Date shall in no event be more than twenty-seven (27) months from the Offering
Date. If on the Exercise Date of any Offering hereunder, as delayed to the
maximum extent permissible, the Plan is not registered, no rights granted under
the Plan or any Offering shall be exercised and all payroll deductions
accumulated during the purchase period (reduced to the extent, if any, such
deductions have been used to acquire stock) shall be distributed to the
participants, without interest.
9. COVENANTS OF THE COMPANY.
(a) During the terms of the rights granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such rights.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the rights granted under the
Plan. If, after reasonable efforts, the Company is unable to obtain from any
such regulatory commission or agency the authority which counsel for the Company
deems necessary for the lawful issuance and sale of stock under the Plan, the
Company shall be relieved from any liability for failure to issue and sell stock
upon exercise of such rights unless and until such authority is obtained.
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to rights granted under the
Plan shall constitute general funds of the Company.
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11. RIGHTS AS A STOCKHOLDER.
A participant shall not be deemed to be the holder of, or to have any
of the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until certificates representing such shares shall have
been issued.
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject
to any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), the Plan and outstanding
rights will be appropriately adjusted in the class(es) and maximum number of
shares subject to the Plan and the class(es) and number of shares and price per
share of stock subject to outstanding rights.
(b) In the event of: (1) a dissolution or liquidation of the Company;
(2) a merger or consolidation in which the Company is not the surviving
corporation; (3) a reverse merger in which the Company is the surviving
corporation but the shares of the Company's Common Stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise; or (4) any other capital
reorganization in which more than fifty percent (50%) of the shares of the
Company entitled to vote are exchanged, then, as determined by the Board in its
sole discretion (i) any surviving corporation may assume outstanding rights or
substitute similar rights for those under the Plan, (ii) such rights may
continue in full force and effect, or (iii) participants' accumulated payroll
deductions may be used to purchase Common Stock immediately prior to the
transaction described above and the participants' rights under the ongoing
Offering terminated.
13. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 12 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(i) Increase the number of shares reserved for rights under the
Plan;
(ii) Modify the provisions as to eligibility for participation in
the Plan (to the extent such modification requires stockholder approval in order
for the Plan to obtain employee stock purchase plan treatment under Section 423
of the Code or to comply with the requirements of Rule 16b-3 promulgated under
the Securities Exchange Act of 1934, as amended ("Rule 16b-3")); or
(iii) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to obtain employee stock
purchase plan treatment under Section 423 of the Code or to comply with the
requirements of Rule 16b-3. It is expressly contemplated that the Board may
amend the Plan in any respect the Board deems necessary or advisable to provide
eligible employees with the maximum benefits provided or to be provided under
the provisions of the Code and the regulations promulgated thereunder relating
to employee stock purchase plans and/or to bring the Plan and/or rights granted
under it into compliance therewith.
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(b) Rights and obligations under any rights granted before amendment of
the Plan shall not be altered or impaired by any amendment of the Plan, except
with the consent of the person to whom such rights were granted or except as
necessary to comply with any laws or governmental regulation.
14. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on August 1, 2001. No rights may be
granted under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any rights granted while the Plan is
in effect shall not be altered or impaired by suspension or termination of the
Plan, except with the consent of the person to whom such rights were granted or
except as necessary to comply with any laws or governmental regulation.
15. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no
rights granted under the Plan shall be exercised unless and until the Plan has
been approved by the stockholders of the Company.
8
Exhibit 10.37
CYTEL CORPORATION
1994 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
ADOPTED ON MARCH 18, 1994
APPROVED BY STOCKHOLDERS
ON JUNE 17,1994
AMENDED ON MARCH 15, 1996, SEPTEMBER 20, 1996,
MARCH 21, 1997 AND MARCH 12, 1998
1. PURPOSE.
(a) The purpose of the 1994 Non-Employee Directors' Stock Option Plan
(the "Plan") is to provide a means by which each director of Cytel Corporation
(the "Company") who is not otherwise an employee of the Company or of any
Affiliate of the Company (each such person being hereafter referred to as a
"Non-Employee Director") will be given an opportunity to purchase stock of the
Company.
(b) The word "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company as those terms are defined
in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986,
as amended from time to time (the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of
persons now serving as Non-Employee Directors of the Company, to secure and
retain the services of persons capable of serving in such capacity, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
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2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors of the
Company (the "Board") unless and until the Board delegates administration to a
committee, as provided in subparagraph 2(b).
(b) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 10 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to options granted
under the Plan shall not exceed in the aggregate seven million seven hundred
fifty thousand (7,750,000) shares of the Company's common stock less the number
of shares of the Company's common stock which has been sold under, or may be
sold pursuant to outstanding stock awards granted under, the Company's 1989
Stock Plan. If any option granted under the Plan shall for any reason expire or
otherwise terminate without having been exercised in full, the stock not
purchased under such option shall again become available for the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
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4. ELIGIBILITY.
(a) Options shall be granted only to Non-Employee Directors of the
Company.
5. NON-DISCRETIONARY GRANTS.
(a) Each person who is, after the Adoption Date, elected for the first
time to be a Non-Employee Director shall, upon the date of his initial election
to be a Non-Employee Director by the Board or stockholders of the Company, be
granted an option to purchase twenty-five thousand (25,000) shares of common
stock of the Company on the terms and conditions set forth herein.
(b) On January 1 of each year, commencing with January 1, 1995, each
person who is then a Non-Employee Director and has been a Non-Employee Director
for at least three (3) months shall be granted an option to purchase five
thousand (5,000) shares of common stock of the Company on the terms and
conditions set forth herein.
6. OPTION PROVISIONS.
Each option shall contain the following terms and conditions:
(a) The term of each option commences on the date it is granted and,
unless sooner terminated as set forth herein, expires on the date ("Expiration
Date") ten (10) years from the date of grant. If the optionee's service as a
director or employee of or consultant to the Company or any Affiliate terminates
for any reason or for no reason, the option shall terminate on the earlier of
the Expiration Date or the date three (3) months following the date of
termination of all such service; PROVIDED, HOWEVER, that if such termination of
service is due to the optionee's death, the option shall terminate on the
earlier of the Expiration Date or six (6) months following the date of the
optionee's death. In any and all circumstances, an option may be exercised
following termination of the optionee's service as a director or employee of or
consultant to the Company or any Affiliate only as to that number of shares as
to which it was exercisable on the date of termination of all such service under
the provisions of subparagraph 6(e).
3
<PAGE>
(b) Subject to subparagraph 4(b), the exercise price of each option
shall be one hundred percent 100% of the fair market value of the stock subject
to such option on the date such option is granted.
(c) The exercise price of stock acquired pursuant to each option shall
be paid, to the extent permitted by applicable statutes and regulations, either
(i) in cash at the time of exercise; or (ii) by delivery of shares of common
stock of the Company already owned by the optionee, held for the period required
to avoid a charge to the Company's reported earnings, and owned free and clear
of any liens, claims, encumbrances or security interest, which common stock
shall be valued at fair market value on the date preceding the date of exercise;
or (iii) by a combination of such methods of payment.
Notwithstanding the foregoing, this option may be exercised pursuant to
a program developed under Regulation T as promulgated by the Federal Reserve
Board which results in the receipt of cash (or check) by the Company prior to
the issuance of shares of the Company's common stock.
4
<PAGE>
(d) Except as otherwise expressly provided in an optionholder's option
agreement, an option shall not be transferable except by will or by the laws of
descent and distribution, and shall be exercisable during the lifetime of the
person to whom the option is granted only by such person or by his guardian or
legal representative.
(e) The option shall become exercisable in installments over a period
of four (4) years from the date of grant on a daily basis at the rate of
twenty-five percent (25%) per year of the total number of shares subject to the
option; provided that prior to the first anniversary of the date of commencement
of the optionee's service as a Non-Employee Director, the option shall not be
exercisable for any number of shares; and provided further that the optionee
has, during the entire period prior to such vesting date, continuously served as
a director or as an employee of or consultant to the Company or any Affiliate of
the Company, whereupon such option shall become fully exercisable in accordance
with its terms with respect to that portion of the shares represented by that
installment.
(f) The Company may require any optionee, or any person to whom an
option is transferred under subparagraph 6(d), as a condition of exercising any
such option: (i) to give written assurances satisfactory to the Company as to
the optionee's knowledge and experience in financial and business matters; and
(ii) to give written assurances satisfactory to the Company stating that such
person is acquiring the stock subject to the option for such person's own
account and not with any present intention of selling or otherwise distributing
the stock. These requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise of the option has been registered under a then-currently-effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), or (ii), as to any particular requirement, a determination is
made by counsel for the Company that such requirement need not be met in the
circumstances under the then-applicable securities laws.
5
<PAGE>
(g) Notwithstanding anything to the contrary contained herein, an
option may not be exercised unless the shares issuable upon exercise of such
option are then registered under the Securities Act or, if such shares are not
then so registered, the Company has determined that such exercise and issuance
would be exempt from the registration requirements of the Securities Act.
7. COVENANTS OF THE COMPANY.
(a) During the terms of the options granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the options granted under the
Plan; PROVIDED, HOWEVER, that this undertaking shall not require the Company to
register under the Securities Act either the Plan, any option granted under the
Plan, or any stock issued or issuable pursuant to any such option. If the
Company is unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the lawful issuance
and sale of stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell stock upon exercise of such options.
6
<PAGE>
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to options granted under the
Plan shall constitute general funds of the Company.
9. MISCELLANEOUS.
(a) Neither an optionee nor any person to whom an option is transferred
under subparagraph 6(d) shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to such option unless
and until such person has satisfied all requirements for exercise of the option
pursuant to its terms.
(b) Throughout the term of any option granted pursuant to the Plan, the
Company shall make available to the holder of such option, not later than one
hundred twenty (120) days after the close of each of the Company's fiscal years
during the option term, upon request, such financial and other information
regarding the Company as comprises the annual report to the stockholders of the
Company provided for in the By-laws of the Company and such other information
regarding the Company as the holder of such option may reasonably request.
(c) Nothing in the Plan or in any instrument executed pursuant thereto
shall confer upon any Non-Employee Director any right to continue in the service
of the Company or any Affiliate or shall affect any right of the Company, its
Board or stockholders or any Affiliate to terminate the service of any
Non-Employee Director with or without cause.
7
<PAGE>
(d) No Non-Employee Director, individually or as a member of a group,
and no beneficiary or other person claiming under or through him, shall have any
right, title or interest in or to any option reserved for the purposes of the
Plan except as to such shares of common stock, if any, as shall have been
reserved for him pursuant to an option granted to him.
(e) In connection with each option made pursuant to the Plan, it shall
be a condition precedent to the Company's obligation to issue or transfer shares
to a Non-Employee Director, or to evidence the removal of any restrictions on
transfer, that such Non-Employee Director make arrangements satisfactory to the
Company to insure that the amount of any federal or other withholding tax
required to be withheld with respect to such sale or transfer, or such removal
or lapse, is made available to the Company for timely payment of such tax.
10. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject
to any option granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), the Plan and outstanding
options will be appropriately adjusted in the class(es) and maximum number of
shares subject to the Plan and the class(es) and number of shares and price per
share of stock subject to outstanding options.
8
<PAGE>
(b) In the event of: (1) a merger or consolidation in which the Company
is not the surviving corporation; (2) a reverse merger in which the Company is
the surviving corporation but the shares of the Company's common stock
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise; or (3) any other capital reorganization in which more than fifty
percent (50%) of the shares of the Company entitled to vote are exchanged, the
time during which options outstanding under the Plan may be exercised shall be
accelerated and the options terminated if not exercised prior to such event.
11. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan,
PROVIDED, HOWEVER, that the Board shall not amend the plan more than once every
six months, with respect to the provisions of the plan which relate to the
amount, price and timing of grants, other than to comport with changes in the
Code, the Employee Retirement Income Security Act, or the rules thereunder.
Except as provided in paragraph 10 relating to adjustments upon changes in
stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(i) Increase the number of shares which may be issued under
the Plan;
(ii) Modify the requirements as to eligibility for
participation in the Plan (to the extent such modification requires stockholder
approval in order for the Plan to comply with the requirements of Rule 16b-3);
or
9
<PAGE>
(iii) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to comply with the
requirements of Rule 16b-3.
(b) Rights and obligations under any option granted before any
amendment of the Plan shall not be altered or impaired by such amendment unless
(i) the Company requests the consent of the person to whom the option was
granted and (ii) such person consents in writing.
12. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on March 17, 2004. No options may be
granted under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any option granted while the Plan is
in effect shall not be altered or impaired by suspension or termination of the
Plan, except with the consent of the person to whom the option was granted.
(c) The Plan shall terminate upon the occurrence of any of the events
described in Section 10(b) above.
13. EFFECTIVE DATE OF PLAN; CONDITIONS OF EXERCISE.
(a) The Plan shall become effective upon adoption by the Board of
Directors, subject to the condition subsequent that the Plan is approved by the
stockholders of the Company.
(b) No option granted under the Plan shall be exercised or exercisable
unless and until the condition of subparagraph 13(a) above has been met.
10
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<PERIOD-END> JUN-30-1998
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