<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 September 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
-------- ----------
(State of Incorporation) (I.R.S. Employer
Identification No.)
9393 Towne Centre Drive
San Diego, California 92121
---------------------------
(Address of principal executive offices)
(619) 450-7100
--------------
(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
----- -----
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, approximately 4,987,026 shares outstanding as of
September 30, 1998 (as adjusted for the one-for-seven reverse stock split
effective November 13, 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
September 30, 1998 and December 31, 1997....................1
Condensed Consolidated Statements of Operations
for the Three and Nine Months Ended September 30, 1998 and
1997........................................................2
Condensed Consolidated Statements of Cash Flows
for the Three and Nine Months Ended September 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......................................................11-12
Signatures........................................................ ..13
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PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
<TABLE>
CYTEL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 30, December 31,
1998 1997
-------------- --------------
(UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,977,000 $ 6,187,000
Short-term investments 8,114,000 11,616,000
Current portion of restricted cash - 375,000
Prepaids and other current assets 1,525,000 1,312,000
-------------- --------------
Total current assets 17,616,000 19,490,000
Restricted cash - 656,000
Property and equipment, net 2,678,000 1,704,000
Patents 6,947,000 5,235,000
Deposits and other assets 802,000 1,062,000
-------------- --------------
Total assets $ 28,043,000 $ 28,147,000
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 2,092,000 $ 755,000
Deferred contract revenues - 78,000
Accrued payroll and related expenses 430,000 463,000
Current portion of note payable to bank - 375,000
Current portion of obligations under equipment loans and notes payable 423,000 40,000
-------------- --------------
Total current liabilities 2,945,000 1,711,000
Deferred rent payable - 1,388,000
Equipment loans and notes payable 1,466,000 656,000
Minority interest in consolidated subsidiary 1,896,000 -
Stockholders' equity:
Preferred stock, $.01 par value, 10,000,000 shares authorized,
659,898 shares issued and outstanding at September 30, 1998 7,000 -
Common stock, $.01 par value, 75,000,000 and 50,000,000 shares
authorized at September 30, 1998 and December 31, 1997, respectively;
4,987,026 and 4,603,213 shares issued and outstanding at
September 30, 1998, and December 31, 1997, respectively 50,000 46,000
Additional paid-in capital 142,671,000 131,564,000
Accumulated deficit (120,994,000) (107,188,000)
Unrealized gains (losses) on available-for-sale securities 2,000 (30,000)
-------------- --------------
Total stockholders' equity 21,736,000 24,392,000
-------------- --------------
Total liabilities and stockholders' equity $ 28,043,000 $ 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.
1
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
CYTEL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Three months ended September 30, Nine months ended September 30,
1998 1997 1998 1997
------------- ------------- ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES
Research and development $ 1,387,000 $ 1,625,000 $ 1,387,000 $ 2,750,000
Research grants and other income 387,000 196,000 1,364,000 1,131,000
------------- ------------- ------------- -------------
1,774,000 1,821,000 2,751,000 3,881,000
OPERATING EXPENSES
Research and development 5,690,000 3,807,000 14,092,000 12,305,000
General and administrative 885,000 950,000 3,497,000 2,577,000
------------- ------------- ------------- -------------
6,575,000 4,757,000 17,589,000 14,882,000
Minority interest in net loss of consolidated subsidiary 136,000 - 281,000 -
Interest income, net 213,000 169,000 752,000 615,000
------------- ------------- ------------- -------------
Net loss $ (4,452,000) $ (2,767,000) $(13,805,000) $(10,386,000)
============= ============= ============= =============
Net loss per share - basic and diluted $ (0.91) $ (0.76) $ (2.91) $ (2.88)
============= ============= ============= =============
Shares used in computing net loss per share - basic
and diluted 4,868,482 3,635,038 4,740,123 3,604,113
============= ============= ============= =============
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
CYTEL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Nine months ended September 30,
1998 1997
-------------- --------------
(UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (13,805,000) $ (10,386,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 597,000 664,000
Deferred rent (225,000) (177,000)
Deferred revenue (78,000) (158,000)
Minority interest in consolidated subsidiary (281,000) -
Gain on sale of equipment (30,000) (35,000)
Changes in operating assets and liabilities:
Other current assets (213,000) 97,000
Accounts payable and accrued liabilities 1,337,000 (659,000)
Accrued payroll and related expenses (33,000) (260,000)
-------------- --------------
Net cash used in operating activities (12,731,000) (10,914,000)
INVESTING ACTIVITIES
Purchases of available-for-sale securities (14,981,000) (23,923,000)
Maturities of available-for-sale securities 12,845,000 17,764,000
Sales of available-for-sale securities 5,670,000 16,594,000
Proceeds from the sale of equipment 104,000 35,000
Proceeds from the sale of assets of subsidiary 100,000 211,000
Expenditures related to early lease termination (226,000) -
Purchases of property and equipment (1,862,000) (240,000)
Patents (812,000) (878,000)
Deposits and other assets 160,000 207,000
-------------- --------------
Net cash provided by investing activities 998,000 9,770,000
FINANCING ACTIVITIES
Principal payments under capital lease obligations and equipment notes payable (68,000) (300,000)
Principal payments on note payable to bank (1,031,000) (281,000)
Restricted cash for note payable collateral 1,031,000 281,000
Proceeds from the issuance of equipment notes payable 1,197,000 -
Net proceeds from issuance of preferred stock 9,700,000 -
Net proceeds from issuance of common stock 2,694,000 3,045,000
-------------- --------------
Net cash provided by financing activities 13,523,000 2,745,000
Increase in cash and cash equivalents 1,790,000 1,601,000
Cash and cash equivalents at beginning of period 6,187,000 3,231,000
-------------- --------------
Cash and cash equivalents at end of period $ 7,977,000 $ 4,832,000
============== ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid $ 96,000 $ 95,000
============== ==============
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Unrealized gains on available-for-sale securities $ 32,000 $ 19,000
============== ==============
Issued common stock for non-exclusive license agreement for patent rights $ 900,000 $ -
============== ==============
Early lease termination - net debt extinguishment and asset abandonment $ 152,000 $ -
============== ==============
Promissory note and stock received for sale of assets of subsidiary $ - $ 800,000
============== ==============
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
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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.
A one-for-seven reverse split of the Company's common stock was effected
on November 13, 1998. The reverse split was approved by the Company's Board of
Directors on November 2, 1998 pursuant to authority granted to the Board of
Directors by the Company's stockholders at a special meeting held on October 30,
1998. All common share balances and net loss per share amounts presented in
these financial statements have been retroactively adjusted to reflect the
reverse stock split.
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
4
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PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
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 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 July 1998, the Company entered into an exclusive sublicense 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 VLA-4 integrin for the treatment of inflammatory
conditions. In connection with this agreement, which included the grant of an
exclusive sublicense, Elan made a $4.0 million equity investment in Cytel, of
which $2.6 million was allocated to the purchase price of 285,714 shares of the
Company's common stock and $1.4 million was allocated to the rights granted
under the exclusive sublicense and option agreement. 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.
In September 1997 as part of a letter of intent, Searle purchased 317,460
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 September
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
5
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PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
Incorporated, under which the Company received 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 84,475 shares of the
Company's common stock at $10.65 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 sublicensed 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 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 October 1998, Nextran made a payment upon exercise of an option
to enter into a second exclusive supply agreement with the Company.
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.
6
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PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
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
September 30, 1998, the Company's accumulated deficit was $121.0 million.
Results of Operations
Revenues for the three and nine months ended September 30, 1998 were $1.8
million and $2.8 million as compared to $1.8 million and $3.9 million,
respectively, for the same periods in 1997. Research and development revenues
for the first nine months of 1998 consist of funds paid by Elan under an
exclusive sublicense and option agreement entered into in July 1998. Research
and development revenues for the first nine months of 1997 consisted of funding
received under the Company's collaborative research agreements with Searle,
Nextran and Abbott. Additional research and development revenues for 1998 are
dependent upon option exercises or the achievement of milestones by the
Company's collaborators under existing collaboration agreements or the
initiation of new collaborative research and development relationships. There
can be no assurance such events will occur on a timely basis, if at all, or that
the Company will be able to establish or maintain any such collaborative
relationships. Subsequent to the quarter ended September 30, 1998, Nextran made
a payment upon exercise of an option to enter into a second exclusive supply
agreement with the Company. 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 nine months ended September 30, 1998 increased slightly from
the comparable periods in 1997.
Research and development expenses for the three and nine months ended
September 30, 1998 increased by $1.9 million and $1.8 million, respectively,
over the same periods in 1997. The increases in 1998 over 1997 are primarily
attributable to increased clinical trial costs due to accelerated patient
recruitment 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
7
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PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION
cardiopulmonary bypass 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
remain at the current level or increase slightly as patient enrollment continues
in the Cylexin clinical program. The Company incurred additional non-recurring
facilities costs in the second and third quarters of 1998 related to its recent
moves into the new manufacturing facility for Cylexin and into a new corporate
headquarters and research and development facility in September 1998. General
and administrative expenses for the nine months ended September 30, 1998
increased $0.9 million as compared to the same period in 1997 due to increased
legal costs associated with the Company's collaboration agreements, 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
through the third quarter, although some additional expense is anticipated in
the fourth quarter of 1998. The relocation to new facilities is expected to
result in a significant reduction in facilities costs in subsequent years.
Net interest income increased slightly for the three and nine months ended
September 30, 1998 over the same periods in 1997. The increase in interest
income is due to higher average cash balances overall in 1998 versus 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 August 1998, Elan made an equity investment in the
Company totaling $4.0 million, of which $2.6 million was allocated to the
purchase price of shares of the Company's common stock and $1.4 million was
allocated to the rights granted under an exclusive sublicense and option
agreement. 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 September 1998, the
Company has raised approximately $144.9 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 $14.7 million as of September 30,
1998 compared to $17.8 million at December 31, 1997. Cash, cash equivalents and
short-term investments decreased to $16.1 million as of September 30, 1998 as
compared to $17.8 million at December 31, 1997. Net cash used in operating
activities was $12.7 million and $10.9 million for the nine months ended
September 30, 1998 and 1997, respectively. The increase in net cash used in
8
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PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION
operating activities was due primarily to increased expenses on lower revenues
for the first nine months in 1998 as compared to the same period in 1997. This
increase was offset by cash provided through increased accounts payable and
accrued liabilities at September 30, 1998 as compared to the pay down of
accounts payable and accrued liabilities at September 30, 1997. Subsequent to
the quarter ended September 30, 1998, Nextran made a payment upon exercise of an
option to enter into a second exclusive supply agreement with the Company.
For the nine months ended September 30, 1998, the Company acquired an
aggregate of $1.9 million in capital equipment as compared to $0.2 million in
the first nine months of 1997. This increase is primarily 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 are being financed through two secured
term line of credit arrangements with four-year repayment terms, totaling $3.3
million, completed in July and August of 1998. One of these credit facilities
for $0.8 million was established to finance capital additions of Epimmune.
The Company's cash, cash equivalents and short-term investments are
expected to decline primarily due to the continued clinical development of
Cylexin and the conduct of its research and development 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. In an effort to maintain
sufficient resources to complete the ongoing Cylexin clinical trials, the
Company has taken numerous cost cutting measures including moving to lower cost
facilities, termination of early-stage research and development programs and a
reduction in force in November 1998.
The Company will need to raise substantial additional funds soon to
continue its current operations and to conduct research, preclinical development
and clinical trial activities. If additional funding 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 sufficient to enable the
Company to continue operations to the end of 1998. It is the Company's intention
to seek additional funding through equity or debt financing, the sale or license
of certain of its technologies or other assets or collaborative research and
development relationships with suitable corporate partners. There can be no
assurance that any such financing or transaction will be available on favorable
terms, if at all, or that any collaboration agreements to which the Company is
or may become a party will successfully reduce the Company's funding
requirements. 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.
If adequate funds are not available, the Company will be required to delay,
scale back or eliminate one or more of its drug discovery or development
programs; 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; sell itself or certain of its technologies or
other assets to a third party; cease operations; or declare bankruptcy.
9
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PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION
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.
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 Company's inability to fund clinical
development of such products, or 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.
The rules of the Nasdaq National Market System (Nasdaq NMS) require that
as a condition of the continued listing of a company's securities on the Nasdaq
NMS, a company satisfy at least one of several alternative maintenance
schedules, which generally require that a company meet certain minimum criteria
relating to its financial condition, results of operations and trading market
for its listed securities. One of such criteria is the Nasdaq NMS minimum bid
price requirement of $1.00 per share. Based on the recent trading history of the
Company's common stock, the Company decided to effect a one-for-seven reverse
split of the Company's common stock, which occurred on November 13, 1998 (the
Reverse Split). There can be no assurance that prices for shares of the common
stock after the Reverse Split will be seven times the prices for shares of the
common stock immediately prior to the Reverse Split, that the Company will be
successful in meeting the Nasdaq NMS maintenance criteria or, that, even if
these maintenance criteria are met, Nasdaq will continue to list the Company's
common stock on the Nasdaq NMS. The delisting of the Company's common stock from
the Nasdaq NMS could adversely affect the liquidity of the Company's common
stock and the ability of the Company to raise capital.
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.
10
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PART II. OTHER INFORMATION
1. Legal Proceedings
The Company is not a party to any legal proceedings.
2. Change in Securities
During the period covered by this Form 10-Q, the Company sold and issued
the following securities which were not registered under the Securities
Act of 1933, as amended (the Securities Act):
(1) In July 1998, the Company entered into a Stock Purchase Agreement
with Elan International Services Ltd. (Elan) in connection with an
exclusive sublicensing agreement entered with Elan. Pursuant to such
agreement, the Company issued 2,000,000 shares of common stock (285,714
shares, as adjusted for the one-for-seven reverse stock split effective
November 13, 1998) of the Company to Elan for an aggregate purchase price
of $4.0 million.
The sale and issuance of securities in the transaction described above
was deemed to be exempt from registration under the Securities Act by
virtue of Section 4(2) and/or Regulation D promulgated thereunder.
The recipient represented their intention to acquire the securities for
investment purposes only and not with a view to the distribution thereof.
Appropriate legends are affixed to the stock certificate issued in such
transaction. The recipient received adequate information about the
Company.
3. Defaults Upon Senior Securities
None.
4. Submission of Matters to a Vote of Security Holders
None.
5. Other Information
None.
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PART II. OTHER INFORMATION
6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit 3.8 Certificate of Amendment of Amended and Restated
Certificate of Incorporation.
Exhibit 10.60 Sublease Agreement, between the Registrant and
Amylin Pharmaceuticals, Inc., dated as of June 1,
1998.
Exhibit 10.61 Amended and Restated Sublicense and Option
Agreement, between the Registrant and Elan
International Services Ltd., dated November 10, 1998
(with certain confidential portions deleted) (1). and
side letter entered between the Registrant and Elan
International Services, Ltd., dated November 10, 1998
Exhibit 27 Financial Data Schedule
(1) Certain confidential portions deleted subject to
the Application for Confidential Treatment pursuant
to Rule 24b-2 under the Securities Exchange Act of
1934 filed by the Registrant with the Commission
concurrently herewith.
(b) Reports on Form 8-K.
None.
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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: November 16, 1998 By:/s/ Robert L. Roe
--------------------------------
Robert L. Roe
Chief Operating Officer
(Duly Authorized Officer and
Principal Financial Officer)
By:/s/ Paula Moody
--------------------------------
Paula Moody
Controller
(Principal Accounting Officer)
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EXHIBIT 3.8
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 August 17, 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. Effective
as of the close of business on November 13, 1998 (the "Effective
Time"), each seven (7) shares of the Corporation's Common Stock, par
value $.01 per share, issued and outstanding shall, automatically and
without any action on the part of the respective holders thereof, be
converted into one (1) share of Common Stock, par value $.01 per share,
of the Corporation. No fractional shares shall be issued and, in lieu
thereof, any holder of less than one share of Common Stock entitled to
receive cash for such holder's fractional share based upon the closing
sales price of the Corporation's Common Stock as reported on the Nasdaq
National Market as of the date of the Effective Time."
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
34,909,187 shares of Common Stock and 258,378 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 WHEREOF, Cytel Corporation has caused this Certificate of
Amendment to be signed by its President this 10th day of November, 1998.
CYTEL CORPORATION
/S/ VIRGIL THOMPSON
--------------------------------
Virgil Thompson
President and Chief Executive Officer
2.
<PAGE>
Exhibit 10.60
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT ("Sublease"), is entered into as of the Effective
Date, by and between Sublessor and Sublessee:
RECITALS
A. Sublessor is presently the lessee of the Premises pursuant to that
certain Master Lease by and between Landlord, as lessor, and Sublessor, as
lessee, a copy of which is attached hereto as Exhibit A.
B. Sublessor desires to sublease the Premises to Sublessee, and Sublessee
desires to sublease from Sublessor thc Premises on all of the terms, covenants
and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants set forth in this
Sublease and for other good and valuable consideration, the receipt and adequacy
of which are hereby specifically acknowledged, the parties hereto agree as
follows:
1. SUBLEASE. Sublessor hereby subleases to Sublessee, and Sublessee hereby
subleases from Sublessor, the Premises for the Sublease Term, upon all of the
terms, covenants and conditions herein contained. In addition, Sublessor hereby
leases to Sublessee, and Sublessee hereby subleases from Sublessor, any and all
permanent improvements ("Improvements") on the Premises constructed and/or owned
by Sublessor for the Sublease Term, upon all of the terms, covenants and
conditions herein contained. As used herein, "Premises" shall include the
Premises and the Improvements.
2. BASIC LEASE PROVISIONS AND DEFINED TERMS. For convenience of the parties
certain basic provisions of this Sublease are set forth in this Paragraph 2. The
provisions set forth in this Paragraph 2 are subject to the remaining terms and
conditions of this Sublease and are to be interpreted in light of such remaining
terms and conditions.
2.1 EFFECTIVE DATE. June 1, 1998.
2.2 SUBLESSOR. Amylin Pharmaceuticals, Inc., a Delaware corporation.
2.3 SUBLESSOR'S ADDRESS. 9373 Towne Centre Drive
San Diego, California 92121
2.4 SUBLESSEE. Cytel Corporation, a Delaware corporation.
2.5 SUBLESSEE'S ADDRESS. 3525 Johns Hopkins Court
San Diego, California 92121
2.6 LANDLORD. Nippon Landic (U.S.A.), Inc., a Delaware corporation.
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2.7 LANDLORD'S ADDRESS. c/o Nexus Properties, Inc.
4350 La Jolla Village Drive, Suite 930
San Diego, California 92122
2.8 PREMISES. The portions of the premises delineated in the attached
Exhibit B at 9393 Towne Centre Drive consisting of approximately 41,794 square
feet of office and laboratory space. The parties stipulate that the square
footage of the Premises shall be as specified in the preceding sentence. While
Sublessee acknowledges that the actual square footage of the Premises may be
more or less than the stipulated square footage, the square footage of the
Premises shall not be subject to adjustment for any reason.
2.9 BASE RENT. Beginning as of the Effective Date and ending May 31,
1999, Sublessee's base rent shall be $85,677.70 per month ($2.05 per square
foot/per month). Effective June 1, 1999 through the expiration of the Sublease
Term, the base rent shall be $93,200.62 per month ($2.23 per square foot/per
month).
2.10 RENT. Base Rent and any and all additional rent.
2.11 SUBLESSEE'S PRO RATA SHARE OF OPERATING EXPENSES. Forty-eight
percent (48%) (i.e., the rentable square feet of the Premises divided by total
rentable square feet leased by Sublessor pursuant to the Master Lease).
Sublessee's Pro Rata Share of Operating Expenses is intended to allocate to
Sublessee the obligation to pay all Operating Expenses applicable to the
Premises under the Master Lease.
2.12 SECURITY DEPOSIT $85,677.70. Tenant shall, on or before June 1,
1999, increase the Security Deposit to $93,200.62.
2.13 SUBLEASE TERM. The term of this Sublease shall commence on June
1, 1998 and end, unless sooner terminated as provided herein, on May 31, 2000.
2.14 COMMENCEMENT DATE. June 1,1998.
2.15 MASTER LEASE. Master Lease Agreement between Sublessee and
Landlord, as successor in interest from Nexus/GADco - UTC, dated January 2,
1989, as amended by that certain Amendment to Lease dated as of February 23,
1989, that certain Second Amendment to Lease dated as of July 29, 1991, that
certain Third Amendment to Lease dated August 22, 1991, and that certain Fourth
Amendment to Lease dated February 26, 1997.
2.16 EXHIBITS. Exhibit A - Master Lease
Exhibit B - Premises Floor Plan
2
<PAGE>
3. CONDITION OF PREMISES.
3.1 COMMENCEMENT. Sublessor shall deliver the Premises to Sublessee in
"broom-clean" condition and in the same arrangement and condition as the
Premises now are. Sublessee acknowledges (i) that it is subleasing the Premises
"as-is" in an unfurnished condition, (ii) that Sublessor is not making any
representation or warranty concerning the condition of the Premises, and (iii)
that Sublessor is not obligated to perform any work to prepare the Premises for
Sublessee's occupancy other than to deliver the Premises in "broom-clean"
condition.
3.2 ALTERATIONS OR IMPROVEMENTS. Except as described in Paragraph 5.5
below, Sublessee acknowledges that it is not authorized to make or do any
alterations or improvements in or to the Premises without Sublessor's prior
written consent, which consent may impose additional requirements applicable to
the construction and completion of such alterations or improvements in addition
to requiring Sublessee's compliance with requirements of the Master Lease.
Sublessee shall not make or do any alterations or improvements in or to the
Premises without fully complying with all of the requirements of the Master
Lease. Before commencing any work, Sublessee shall give Sublessor at least ten
(10) days prior written notice of such work, which shall include a description
of the proposed alteration or improvement, a proposed construction schedule for
completion, and an estimate of the cost of such work. Sublessor shall not be
deemed to be unreasonable in withholding its consent to any alteration or
improvement which does not conform with the use requirements under this Sublease
or which is materially different from alterations or improvements customarily
seen in first-class office and laboratory space, as applicable.
3.3 SURRENDER. Sublessee further acknowledges that it must deliver the
Premises to Sublessor on the expiration or earlier termination of the Sublease
Term in the condition substantially the same as Sublessor delivered the Premises
to Sublessee on the Commencement Date; provided, however, all tenant
improvements constructed by Sublessee for which the Improvement Allowance
(defined below) was provided shall remain in the Premises unless Sublessor
requires that Sublessee remove same.
4. USE. The Premises shall be used and occupied by Sublessee solely for
office and laboratory uses in compliance with the Master Lease and for no other
purpose.
5. SUBRENTAL.
5.1 BASE RENTAL. Beginning with the Commencement Date and thereafter
during the Sublease Term, Sublessee agrees to pay to Sublessor the Base Rent in
advance monthly installments on the first day of each calendar month during the
Sublease Term at the Sublessor's address, or to such other person or at such
other place as Sublessor may from time to time designate in writing. Except as
otherwise specifically provided in this Sublease, Base Rent shall be payable in
lawful money without demand and without offset, abatement, counterclaim, or
setoff of any kind whatsoever.
5.2 OPERATING EXPENSES. Beginning with the Commencement Date and
thereafter during the Sublease Term, Sublessee agrees to pay to Sublessor
Sublessee's Pro Rata
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<PAGE>
Share of Operating Expenses as provided in Section 7 of the Master Lease.
Sublessor and Sublessee intend that Sublessee shall be liable for the payment of
all Operating Expenses applicable or attributable to the Premises pursuant to
the Master Lease. Sublessee shall pay to Sublessor Sublessee's Pro Rata Share of
Operating Expenses in advance monthly installments on the first day of each
calendar month during the Sublease Term at the Sublessor's address, or to such
other person or at such other place as Sublessor may from time to time designate
in writing. Sublessee shall pay to Sublessor such payments based on Landlord's
estimates of the Operating Expenses applicable to the Master Premises leased by
Sublessor pursuant to the Master Lease. Such payments for Operating Expenses
shall be in addition to amounts payable to Sublessor as Base Rent pursuant to
Paragraph 4.1 above. For the 1998 calendar year Sublessor estimates that
Sublessee's Pro Rata Share of such Operating Expenses shall total $7,522.92 per
month for government impositions as described in Section 7.1(a) of the Master
Lease and $11,284.38 per month for all other costs as described in Section
7.1(b) of the Master Lease. Notwithstanding the foregoing, however, Operating
Expenses shall be subject to adjustment as provided in Article 7 of the Master
Lease. Except as otherwise specifically provided in this Sublease, Operating
Expenses shall be payable in lawful money without demand, and without offset,
abatement, counterclaim, or setoff of any kind whatsoever.
5.3 UTILITIES. Sublessee shall pay for all water, gas, heat, light,
power, telephone and other utilities and services specially or exclusively
supplied and/or metered to the Premises or to the Premises or to Sublessee,
together with any taxes thereon.
5.4 LATE CHARGE. Sublessee hereby acknowledges that the late payment
by Sublessee to Sublessor of Rent and other sums due hereunder will cause
Sublessor to incur costs not contemplated by this Sublease, the exact amount of
which will be extremely difficult to ascertain. Such costs include processing
and accounting charges, and late charges which may be imposed on Sublessor by
the terms of the Master Lease. Accordingly, if any installment of Rent or any
other sum due hereunder to Sublessor from Sublessee shall not be received by
Sublessor within five (5) days after the date due, Sublessee shall pay to
Sublessor a late charge equal to three percent (3%) of the overdue amount. The
parties agree that the amount of such late charge represents a fair and
reasonable estimate of the costs and expenses that would be incurred by
Sublessor by reason of late payment by Sublessee. Acceptance of such late charge
by Sublessor shall in no event constitute a waiver of Sublessee's default with
respect to such overdue amount, nor shall such acceptance prevent Sublessor from
exercising any of the other rights and remedies granted hereunder or by law to
Sublessor.
5.5 IMPROVEMENT ALLOWANCE. Sublessor will provide to Sublessee an
allowance equal to $250,000 (the "Improvement Allowance") solely for
improvements to the Premises consisting generally of improvements to the
mechanical systems of the building located on the Premises and various
modifications to the lab and office portions of the Premises to accommodate
Sublessee's use, subject to Sublessee obtaining all approvals and consents
required under the Master Lease and this Sublease and otherwise complying with
all of the requirements therein. The Improvement Allowance will be from the
improvement allowance for the Premises pursuant to the Fourth Amendment to
Master Lease. Sublessor represents to its actual knowledge that the full amount
of the Improvement Allowance is available under the Master Lease for the
improvements to be made by Sublessee. Sublessor's payment of any such
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<PAGE>
Improvement Allowance shall be conditioned upon Sublessee's compliance with all
of the terms and conditions of Paragraph 6 under the Fourth Amendment to Master
Lease between Sublessor and Landlord dated February 26, 1997. Sublessor shall
pay to Sublessee such allowance after (i) Sublessee has satisfied all
requirements in Paragraph 6 of the Fourth Amendment to Master Lease for
reimbursement by Landlord of the cost (subject to the improvement allowance
described in the Fourth Amendment to Master Lease) of improvements to the
Premises, and (ii) Sublessor has obtained payment of such allowance from
Landlord. If Landlord breaches its obligation to pay such allowance, Sublessor
shall provide all necessary assistance and cooperation to Sublessee (at no
material cost or liability to Sublessor) to enforce Sublessor's rights under the
Master Lease to compel performance by Landlord to pay such allowance.
6. SECURITY DEPOSIT. Concurrently with the execution of this Sublease,
Sublessee shall deposit with Sublessor the amount of the Security Deposit, which
shall be held by Sublessor as security for the full and faithful performance by
Sublessee of its covenants and obligations under this Sublease. The Security
Deposit is not an advance deposit for Rent, an advance payment of any other
kind, or a measure of Sublessor's damage in case of Sublessee's default
hereunder. If Sublessee defaults in the full and timely performance of any or
all of Sublessee's covenant's and obligations set forth in this Sublease, then
Sublessor may, from time to time, without waiving any other remedy available to
Sublessor, use the Security Deposit, or any portion of it, to the extent
necessary to cure or remedy the default or to compensate Sublessor for all or a
part of the damages sustained by Sublessor resulting from Sublessee's default.
Sublessee shall immediately pay to Sublessor within five (5) days following
demand, the amount so applied in order to restore the Security Deposit to its
original amount, and Sublessee's failure to immediately do so shall constitute a
default under this Sublease. If Sublessee is not in default with respect to the
covenants and obligations set forth in this Sublease at the expiration or
earlier termination of the Sublease, Sublessor shall return the Security Deposit
to Sublessee after the expiration or earlier termination of this Sublease in
accordance with the provisions of California Civil Code Section 1950J.
Sublessor's obligations with respect to the Security Deposit are those of a
debtor and not a trustee. Sublessor shall not be required to maintain the
Security Deposit separate and apart from Sublessor's general and other funds and
Sublessor may commingle the Security Deposit with any of Sublessor's general or
other funds. Sublessee shall not at any time be entitled to interest on the
Security Deposit.
7. SIGNAGE. To the extent permitted under the Master Lease and subject to
all of its terms and conditions, Sublessee shall have the right to maintain
Sublessee identification signs on the Premises. The cost of such signs,
including the installation, maintenance and removal thereof, shall be at
Sublessee's sole cost and expense. If such signage is erected or installed by
Sublessee and Sublessee fails to maintain such signage, or if Sublessee fails to
remove same upon the expiration or earlier termination of the Sublease Term and
repair any damage caused by such removal, Sublessor may do so at Sublessee's
expense and Sublessee shall reimburse Sublessor for all actual costs incurred by
Sublessor to effect such removal.
8. INSURANCE. Sublessee at its own cost shall procure and continue in
effect from the Commencement Date or the date of occupancy, whichever first
occurs, and continuing throughout the Sublease Term and occupancy by Sublessee,
if any, after termination of this Sublease, combined single limit comprehensive
general liability insurance, including bodily
5
<PAGE>
injury or property damage, with limits of not less than Two Million Dollars
($2,000,000). Notwithstanding the foregoing, in the event that under the Master
Lease Sublessor is required at any time during the Sublease Term to raise its
insurance coverage limits to more than Two Million Dollars ($2,000,000), then
Sublessor may require Sublessee's insurance policy limits to be raised to the
same level required of Sublessor under the Master Lease.
8.1 The aforesaid insurance required of Sublessee shall name Sublessor
and the Landlord, and their respective agents and employees, as additional
insureds. Said insurance shall be with companies having a rating of not less
than policyholder rating of A+ and financial category rating of at least Class
XII in "Best's Insurance Guide." Sublessee shall obtain for Sublessor from the
insurance companies or cause the insurance companies to furnish certificates of
coverage to Sublessor. No such policy shall be cancelable or subject to
reduction of coverage below limits of insurance outlined in this Paragraph 8 or
other modification or cancellation except after thirty (30) days prior written
notice to Sublessor from the insurer. All such policies shall be written as
primary policies, not contributing with and not in excess of the coverage which
Sublessor may carry. Sublessee's policy may be a "blanket policy" which
specifically provides that the amount of insurance shall not be prejudiced by
other losses covered by the policy. Sublessee agrees that if Sublessee does not
take out and maintain such insurance, Sublessor may (but shall not be required
to) procure said insurance on Sublessee's behalf and charge Sublessee the
premiums for such policies together with a twenty-five percent (25%) handling
charge, payable on demand.
8.2 Sublessee assumes the risk of damage to any fixtures, goods,
inventory, merchandise, equipment, and leasehold improvements, and Sublessor
shall not be liable for injury to Sublessee's business or any loss of income
therefore relative to such damage all as more particularly heretofore set forth
within this Sublease. Sublessee, at its own cost, shall carry such insurance as
Sublessee desires for Sublessee's protection with respect to personal property
of Sublessee or business interruption.
9. SUBLEASE SUBJECT TO MASTER LEASE.
9.1 INCORPORATION OF TERMS OF MASTER LEASE. Except for the terms,
covenants and conditions set forth in Articles 1 through 6 (other than
provisions of Paragraph 6 of the Fourth Amendment to Master Lease applicable to
an allowance for improvements to the Premises, except as modified by Paragraph
6.2 of this Sublease), 9, 11, 12, 21, 31, and 38 through 40 and Sections 7.3 and
7.4, 16.1 through 16.6, 24.1 through 24.3, and 42.12 of the Master Lease and
except to the extent the terms, covenants and conditions of the Master Lease
conflict with the provisions of this Sublease, this Sublease shall be subject to
all the terms, covenants and conditions of the Master Lease to the extent such
terms, covenants, and conditions are applicable to the Premises subleased
pursuant to this Sublease, all of which are herein incorporated by reference
(collectively, the "Incorporated Provisions"). Sublessee shall not commit or
permit to be committed on the Premises or any other portion of the Project any
act or omission which violates any term or condition of the Master Lease,
including, without limitation, any term or condition of Section 41 (Hazardous
Materials) of the Master Lease. Sublessee shall have all of the rights, assume
all of the obligations and perform all of the duties of Sublessor (i.e., as
Tenant under the Master Lease) under the Incorporated Provisions to the extent
such
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rights, obligations and duties are applicable to the Premises subleased pursuant
to this Sublease. Sublessor shall have all of the rights, assume all of the
obligations and perform all of the duties of Landlord (i.e., as Sublessor under
this Sublease) under the Incorporated Provisions to the extent such rights,
obligations and duties are applicable to the Premises subleased pursuant to this
Sublease. In the event of any inconsistencies between the terms and provisions
of the Master Lease and the terms and provisions of this Sublease, the terms and
provisions of this Sublease shall govern. Subtenant acknowledges that it has
reviewed the Master Lease and is familiar with the terms and conditions thereof
9.2 MODIFICATIONS. For the purposes of incorporation herein, the terms
of the Master Lease are subject to the following additional modifications:
9.2.1 In all provisions of the Master Lease (under the terms
thereof and without regard to modifications thereof for purposes of
incorporation into this Sublease) requiring approval or consent of the Landlord,
Sublessee shall be required to obtain the approval or consent of both Sublessor
and Landlord, and whenever pursuant to the Master Lease liability for any act,
thing, omission, injury or damage is waived or indemnity is provided for the
benefit of Landlord, such waiver or indemnity shall extend to Sublessor.
9.2.2 In all provisions of the Master Lease requiring Sublessor
to submit, exhibit to, supply or provide Landlord with evidence, certificates,
or any other matter or thing, Sublessee shall be required to submit, exhibit to,
supply or provide, as the case may be, the same to both Landlord and Sublessor.
In any such instance, Sublessor shall determine if such evidence, certificate or
other matter or thing shall be satisfactory.
9.2.3 Sublessor agrees that Sublessee shall be entitled to
receive all services and repairs to be provided by Landlord to Sublessor under
the Master Lease. Sublessee shall look solely to Landlord for all such services
and shall not, under any circumstances, seek nor require Sublessor to perform
any such services, nor shall Sublessee make any claim upon Sublessor for any
damages which may arise by reason of Landlord's default under the Master Lease;
provided, however, Sublessor shall provide all necessary assistance and
cooperation to Sublessee (at no material cost or liability to Sublessor) to
enforce Sublessor's rights under the Master Lease to compel performance by
Landlord with respect to such services or repairs to which Sublessee is
entitled. Any condition resulting from a default by Landlord shall not
constitute as between Sublessor and Sublessee an eviction, actual or
constructive, of Sublessee and no such default shall excuse Sublessee from the
performance or observance of any of its obligations to be performed or observed
under this Sublease, or entitle Sublessor to receive any reduction in or
abatement of the Rent provided for in this Sublease; provided; however, if
Sublessor receives any reduction in or abatement of the rent provided for in the
Master Lease with respect to the Premises (i.e., subleased premises under this
Sublease), Sublessee shall be entitled to a comparable reduction in or abatement
of the Rent provided for in this Sublease. In furtherance of the foregoing,
Sublessee does hereby waive any cause of action any right to bring any action
against Sublessor by reason of any act or omission of Landlord under the Master
Lease, subject to the right of assistance and cooperation from Sublessor
described above and (to the extent Sublessor receives any reduction in or
abatement of the rent provided for in the Master
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Lease with respect to the Premises) the right to enjoy any comparable reduction
in or abatement of the Rent provided in this Sublease.
10. HAZARDOUS MATERIALS. Sublessee shall comply with all of the terms,
covenants and conditions of Section 41 (Hazardous Materials) of the Master
Lease. At any time prior to the expiration or earlier termination of this
Sublease or within thirty (30) days thereafter, Sublessor may require Sublessee
to obtain an environmental site assessment of the Premises from an environmental
consultant acceptable to Sublessor for the purpose of attempting to confirm that
Sublessee did not cause any contamination of the Premises. Sublessee shall pay
for the cost of the environmental site assessment.
11. NOTICES. Any notice, consent, demand, bill, statement or other
communication required or permitted to be given hereunder must be in writing and
may be given by personal delivery or by mail, and if given by mail shall be
deemed sufficiently given three (3) days after the time when deposited in United
States Mail if sent by registered or certified mail, addressed to Sublessor at
Sublessor's Address or to Sublessee at Sublessee's Address. Either party may, by
notice to the other given pursuant to this Paragraph 10, specify additional or
different addresses for notice purposes.
12. DEFAULT In the event Sublessee shall be in default of any covenant of,
or shall fail to honor any obligation under, this Sublease, Sublessor shall have
available to it against Sublessee all of the remedies available (i) to Landlord
under the Master Lease in the event of a similar default on the part of
Sublessor thereunder or (ii) at law.
13. BROKERS. Sublessor and Sublessee represent and warrant to each other
that each was represented by a broker of its own selection in connection with
the transaction contemplated in this Sublease. Sublessor and Sublessee agree
that any fees or commissions payable to either broker for its work relating to
the transaction contemplated in this Sublease shall be payable in-full by
Sublessee. Sublessee agrees to indemnify Sublessor, and hold it harmless, from
and against any and all claims, damages, losses, expenses and liabilities
(including reasonable attorneys' fees) incurred by said party as a result of a
breach of this representation and warranty by Sublessee.
14. CONSENT OF LESSOR. This Sublease shall be conditioned upon Sublessor
obtaining Landlord's written consent to this Sublease. Section 25.4 of the
Master Lease requires Sublessor to provide written notice to Landlord regarding
this Sublease. Sublessor has provided such notice as of the date of this
Sublease, and Sublessor has received from Landlord a letter dated May 18, 1998,
confirming that Landlord will not object to this Sublease (a copy of which
letter has been provided to Sublessee).
15. TERMINATION OF LEASE. If for any reason the terms of the Master Lease
shall terminate prior to the expiration of the Sublease Term, this Sublease
shall automatically be terminated and Sublessor shall not be liable to Sub
lessee by reason thereof unless said termination shall have been caused by the
default of the Sublessor under the Master Lease or is the result of Sublessor's
mutual agreement with Landlord to terminate the Master Lease outside the
parameters of the Master Lease.
8
<PAGE>
16. ADDITIONAL RENT. Any monetary obligations of Sublessee to Sublessor
under this Sublease shall be deemed to be rent.
1 7. ENTIRE AGREEMENT. This Sublease constitutes the entire understanding
between the parties with respect to the subject matter and supersedes any prior
negotiations, representations, agreements and understandings regarding the
subject matter of this Sublease.
18. MODIFICATIONS. This Sublease may not be amended, supplemented or
otherwise modified except by an instrument in writing signed by an authorized
representative of each party to this Sublease.
19. NO WAIVER. The failure of any party hereto to insist upon strict
performance of any provision of this Sublease or to exercise any right hereunder
shall not constitute a waiver of that provision of or right under this Sublease
or of any other provision of or right under this Sublease.
20. GOVERNING LAW, JURISDICTION AND VENUE. This Sublease shall be construed
and enforced in accordance with the laws of the State of California (except its
choice of law rules), and the parties hereby submit to the jurisdiction and
venue of the California courts, both state and federal.
21. DUE AUTHORIZATION. The persons executing this Sublease represent and
warrant that they have the full power and authority to enter into this Sublease
on behalf of the entities which they represent.
IN WITNESS WHEREOF, the parties hereto have executed this Sublease,
effective as of the Effective Date.
CYTEL CORPORATION, a Delaware AMYLIN PHARMACEUTICALS,
corporation INC., a Delaware corporation
By: /s/ Robert L. Roe By: /s/ Bradford J. Duft
--------------------------- ---------------------------
Its: Chief Operating Officer Its: Sr VP & General Counsel
--------------------------- ---------------------------
By: /s/ Edward C. Hall By: /s/ Joseph C. Cook, Jr.
---------------------------- ---------------------------
Its: CFO Its: Chairman and CEO
---------------------------- ---------------------------
9
<PAGE>
Exhibit 10.61
=========================================
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. ss.ss.200.80(b)(4),
200.83 and 240.24b-2
=========================================
AMENDED AND RESTATED
SUBLICENSE AND OPTION AGREEMENT
THIS AMENDED AND RESTATED SUBLICENSE AND OPTION AGREEMENT (the
"Agreement") is entered into as of November 10, 1998, by and between CYTEL
CORPORATION, a Delaware corporation having offices at 9393 Towne Centre Drive,
San Diego, California ("Cytel"), and ELAN INTERNATIONAL SERVICES LTD., a Bermuda
corporation and wholly-owned subsidiary of Elan Corporation, p1c, having offices
at 102 St. James Court, Flatts, Smiths FLO4, Bermuda ("Elan").
WHEREAS, Cytel has entered into an Exclusive License Agreement
(the "License Agreement") with the Fred Hutchinson Cancer Research Center
("FHCRC") pursuant to which Cytel holds an exclusive license to the Patent
Rights (as defined below); and
WHEREAS, pursuant to the Sublicense and Option Agreement
between Cytel and Elan (the "First Agreement"), dated as of July 22, 1998 (the
"Effective Date"), Cytel granted to Elan, and Elan obtained from Cytel, an
exclusive sublicense and an option to receive a non-exclusive sublicense under
the License Agreement to Cytel's rights under the Patent Rights on the terms and
subject to the conditions set forth in the First Agreement; and
WHEREAS, Cytel and Elan agree to amend and restate the First
Agreement as set forth herein.
Now, THEREFORE, in consideration of the mutual covenants and
promises hereinafter set forth, the parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 "AFFILIATE" means any corporation or other entity which controls,
is controlled by, or is under common control with, a party. A corporation or
other entity shall be regarded as in control of another corporation or entity if
it owns or directly or indirectly controls more than 50% of the voting
securities or other ownership interest of the other corporation or entity, or if
it possesses, directly or indirectly, the power to direct or cause the direction
of the management and policies of the corporation or other entity.
<PAGE>
-2-
1.2 "ANTIBODY FIELD" means the making, using, selling and importing of
Sublicensed Products that are antibodies directed against VLA-4 for treatment of
inflammatory diseases.
1.3 "BLA" means a Biological License Application filed pursuant to the
requirements of the FDA.
1.4 "COMBINATION PRODUCT(S)" has the meaning set forth in Section 4.5.
1.5 "CONFIDENTIAL INFORMATION" means any confidential information of a
party, including information related to the Patent Rights, and any other
information relating to any compound, research project, work in process, future
development, scientific, engineering, manufacturing, marketing, business plan,
financial or personnel matter relating to such party, its present or future
products, sales, suppliers, customers, employees, investors or business, whether
in oral, written, graphic or electronic form. Confidential Information shall not
include any information which the receiving party can prove by competent
evidence:
(a) is now, or hereafter becomes, through no act or failure to act
on the part of the receiving party, generally known or available;
(b) is known by the receiving party at the time of receiving such
information, as evidenced by its records;
(c) is hereafter furnished to the receiving party by a Third
Party, as a matter of right and without restriction on disclosure; or
(d) is the subject of a written permission to disclose provided by
the disclosing party.
1.6 "CONTROL" means possession of the ability to grant a license or
sublicense as provided for herein without violating the terms of any agreement
or other arrangement with any Third Party.
<PAGE>
-3-
1.7 "FDA" means the United States Food and Drug Administration.
1.8 "FIRST COMMERCIAL SALE" of a Sublicensed Product means the first
sale for use or consumption of such Sublicensed Product in a country. Sale to an
Affiliate shall not constitute a First Commercial Sale unless the Affiliate is
the end user of the Sublicensed Product.
1.9 "IND" means an Investigational New Drug Application filed with the
FDA to commence human clinical testing of a Sublicensed Product, or the
equivalent application in any other country or jurisdiction.
1.10 "NDA" means a New Drug Application or Product License Application,
as appropriate, filed pursuant to the requirements of the FDA.
1.11 "NET SALES" means the gross amounts invoiced for sales of
Sublicensed Products by Elan, its Affiliates and sublicensees to a Third Party
not a sublicensee of Elan or its Affiliates, less (a) discounts actually
granted, (b) credits, rebates or allowances actually granted upon claims,
damaged goods, rejections or returns of Sublicensed Products, including recalls,
(c) freight, postage, shipping and insurance charges actually allowed or paid
for delivery of Sublicensed Products, to the extent billed, and (d) taxes,
duties or other governmental charges (other than income taxes) levied on,
absorbed or otherwise imposed on sales of Sublicensed Products. Consideration
paid to Elan from its Affiliates or sublicensees in the form of fees,
milestones, collaboration payments or supply payments shall not constitute Net
Sales hereunder if such consideration is not intended to and does not result in
a reduction, credit, allowance, rebate or other offset against payment of any
royalties otherwise payable for any Sublicensed Product sold or otherwise
transferred to a Third Party.
1.12 "OPTION" has the meaning set forth in Section 3.1.
1.13 "OPTION PERIOD" has the meaning set forth in Section 3.2.
1.14 "PATENTS RIGHTS" means the rights and claims in and to the
inventions described in, and rights covered by, United States patents and patent
applications claiming priority to U.S. Serial No. [...***...] filed [...***...],
as well as all continuations, continuations-in part, divisions by reference and
renewals thereof, and foreign counterparts thereof.
<PAGE>
-4-
1.15 "PEPTIDE FIELD" means the making, using, selling and importing of
Sublicensed Products that are peptides or agents directed against VLA-4 for
treatment of inflammatory diseases.
1.16 "PHASE III" means that portion of a clinical development program
which provides for the continued trials of a Sublicensed Product on sufficient
numbers of patients to establish the safety and efficacy of a Sublicensed
Product for the desired claims and indications, as more specifically defined by
the rules and regulations OF the FDA and corresponding rules and regulations in
other countries or jurisdictions.
1.17 "ROYALTY TERM" means, in the case of any Sublicensed Product in
any country, the period of time commencing on the First Commercial Sale in such
country and ending upon the expiration of the last to expire of the Patent
Rights covering such Sublicensed Product in such country.
1.18 "SUBLICENSE FEE" has the meaning set forth in Section 4.1.
1.19 "SUBLICENSED PRODUCT" means any product, the manufacture, use or
sale of which would, but for the rights granted to Elan hereunder, infringe a
valid claim of a patent within the Patent Rights in the country in which such
activity occurs.
1.20 "TERM" has the meaning set forth in Section 9.1.
1.21 "THIRD PARTY" means any entity other than Elan or Cytel or an
Affiliate of Elan or Cytel.
1.22 "VLA-4" means very late activating antigen.
- ---------------------------
*Confidential Treatment Requested.
<PAGE>
-5-
ARTICLE 2
GRANT OF SUBLICENSE
2.1 SUBLICENSE GRANT. During the Term and subject to the terms and
conditions of this Agreement, Cytel hereby grants to Elan a worldwide, exclusive
sublicense, including the right to grant sublicenses under Section 2.2, under
the Patent Rights to make, have made, use and sell Sublicensed Products in the
Antibody Field. Notwithstanding the foregoing, FHCRC shall retain the right to
use the Patent Rights for its educational and research purposes and to grant
nonexclusive licenses to use the Patent Rights for non-commercial research
purposes only.
2.2 SUBLICENSES.
(a) Elan shall have the right to grant sublicenses consistent with
this Agreement, including, without limitations, the provisions relating to
FHCRC.
(b) Except for any sublicense to an Affiliate, including for
purposes of this Agreement, Axogen Limited ("Axogen"), Elan shall not grant any
sublicense in the Antibody Field without FHCRC's prior written consent, which
consent shall not be unreasonably withheld. All sublicenses granted by Elan
hereunder shall include a requirement that the sublicensee use its best efforts
to bring the subject matter of the sublicense into commercial use as quickly as
is reasonably possible and shall expressly bind the sublicensee to meet its
obligations to FHCRC under the License Agreement.
(c) Elan shall provide to Cytel within 45 days following the end
of each calendar quarter during the Term (i) a written summary specifying the
name of each sublicensee, territory and scope of the rights sublicensed
hereunder during that quarter, and (ii) copies of all relevant portions of any
sublicense agreement executed during that quarter relating to the calculation of
royalties due to Cytel under this Agreement. Notwithstanding the grant of a
sublicense by Elan or its Affiliates hereunder, Elan shall remain obligated to
pay all royalties due to Cytel with respect to the sale of Sublicensed Products
by its sublicensee.
2.3 TERMINATION OF LICENSE AGREEMENT. Upon termination of the License
Agreement, the sublicense(s) granted to Elan hereunder shall remain in effect
and shall be assigned to FHCRC.
<PAGE>
-6-
ARTICLE 3
GRANT OF OPTION
3.1 OPTION GRANT. Subject to the terms and conditions of this
Agreement, Cytel hereby grants to Elan an option (the "Option"), exercisable
during the Option Period, to receive a non-exclusive sublicense under the Patent
Rights to make, have made, use and sell Sublicensed Products in the Peptide
Field on financial terms to be negotiated and agreed to by the parties, but not
to exceed those set forth on Exhibit A attached hereto.
3.2 OPTION EXERCISE. Elan may exercise the Option at any time during
the period beginning on the Effective Date and ending 30 days after Elan
receives written notice from Cytel of the first to occur of [...***...] (the
"Option Period"). If, during the Option Period, Elan notifies Cytel in writing
that Elan has exercised the Option to obtain a non-exclusive sublicense under
Section 3.1, such sublicense shall become effective upon the execution of a
definitive sublicense agreement.
3.3 [...***...]. If, during the Term, Cytel sublicenses the Patent
Rights to a Third Party in the Peptide Field [...***...], then Cytel shall
provide to Elan an opportunity to sublicense the Patent Rights in the Peptide
Field [...***...].
ARTICLE 4
PAYMENT OBLIGATIONS; ESCROW
4.1 SUBLICENSE FEE. In partial consideration for the grant of the
sublicense set forth in Section 2.1 and the Option set forth in Section 3. 1,
Elan shall purchase 2,000,000 shares of Cytel's Common Stock at $2.00 per share
on the Effective Date in accordance with the terms and conditions of the Stock
Purchase Agreement set forth on Exhibit B attached hereto.
4.2 MILESTONES. Within 30 days after achievement of each of the
milestones set forth below for each Sublicensed Product in the Antibody Field,
Elan shall pay to Cytel the non- refundable milestone payment set forth below:
- ---------------------------
*Confidential Treatment Requested.
<PAGE>
-7-
(a) [...***...] upon the later OF [...***...] OR [...***...] from
the Effective Date; and
(b) [...***...] upon [...***...].
4.3 ROYALTIES.
(a) Elan shall pay to Cytel a royalty equal to [...***...] of Net
Sales of Sublicensed Products in the Antibody Field.
(b) If Elan is required to pay royalties to [...***...] to use,
sell or import a Sublicensed Product in the Antibody Field [...***...], then
Elan shall be entitled to a credit against the royalty payments due Cytel
hereunder with respect to such Sublicensed Product, which credit shall be equal
to [...***...]; PROVIDED, HOWEVER, that in no event shall the royalty payable to
Cytel with respect to such Sublicensed Product be reduced below an amount equal
to [...***...] of Net Sales of such Sublicensed Product.
(c) Royalties for sales of any Sublicensed Product in any given
country shall be paid for a period equal to the Royalty Term for such
Sublicensed Product in such country.
4.4 ESCROW. In the event [...***...], then all milestone payments
payable to Cytel under Section 4.2 of this Agreement shall be placed into an
escrow account when due. All amounts in such escrow account shall be distributed
(a) to Cytel upon a determination by the USPTO or a court of competent
jurisdiction, as applicable, that Cytel and/or FHCRC [...***...] or (b) to Elan
upon a determination by the USPTO or a court of competent jurisdiction, as
applicable, that [...***...].
- ---------------------------
*Confidential Treatment Requested.
<PAGE>
-8-
4.5 COMBINATION PRODUCTS. In the event that a product sold by Elan or
its Affiliates is comprised in part of a Sublicensed Product and in part of one
or more other active components ("Combination Products"), Net Sales shall be
determined by multiplying the amounts actually received by Elan or its
Affiliates attributable to such Combination Products by the Combination
Allocated Portion (as defined below). The "Combination Allocated Portion" shall
mean the fraction A/B, where A is the gross selling price of the Sublicensed
Product sold separately and B is the gross selling price of the Combination
Product. In the event that no such separate sales are made, the "Combination
Allocated Portion" shall mean the fraction C/(C+D) where C is the fully
allocated cost of the Sublicensed Product and D is the fully allocated cost of
such other active components, such standard costs being determined using
standard accounting procedures. Prior to the sale of such Combination Products
requiring a determination of the values of C and D, Elan shall notify Cytel of
such sale and, within 30 days of receipt of such notice by Cytel, Elan and Cytel
shall determine and agree upon the values of C and D.
ARTICLE 5
PAYMENTS; RECORDS; AUDITS
5.1 PAYMENT; REPORTS. Royalty payments shall be calculated and reported
for each six month period ending June 30th and December 31st. All royalty
payments due to Cytel under this Agreement shall be paid within 45 days after
June 30th and December 31st, unless otherwise specifically provided herein. Each
payment of royalties shall be accompanied by a report in sufficient detail to
permit confirmation of the accuracy of the royalty payment made, including,
without limitation, Net Sales, the royalties payable in United States dollars,
the method used to calculate the royalty and the exchange rates used.
5.2 EXCHANGE RATE; MANNER AND PLACE OF PAYMENT. All payments hereunder
shall be payable in United States dollars. With respect to each six month
period, for countries other than the United States, whenever conversion of
payments from any foreign currency shall be required, such conversion shall be
made using the average of the daily exchange rates for such currency quoted by
Citibank, N.A. for each of the last five banking days of each calendar quarter.
All payments owed under this Agreement shall be made by wire transfer to a bank
account designated by Cytel, unless otherwise specified in writing by Cytel.
<PAGE>
-9-
5.3 LATE PAYMENTS. In the event that any payment, including royalty
payments, due hereunder is not made when due, the payment shall accrue interest
beginning 15 days from that date due at the rate of [...***...] per month;
PROVIDED HOWEVER, that in no event shall such rate exceed the maximum legal
annual interest rate. The payment of such interest shall not limit Cytel from
exercising any other rights it may have as a consequence of the lateness of any
payment.
5.4 RECORDS AND AUDITS. During the Term and for a period of three years
thereafter, Elan shall keep complete and accurate records in sufficient detail
to permit Cytel and/or FHCRC to confirm the accuracy of all payments due
hereunder. Cytel and/or FHCRC shall have the right to cause an independent,
certified public accountant reasonably acceptable to Elan to audit such records
to confirm royalty payments for the preceding year. Such audits may be exercised
during normal business hours no more than once in any 12-month period upon
reasonable prior written notice to Elan. Cytel and/or FHCRC, as applicable,
shall bear the full cost of such audit, unless such audit discloses an
underpayment of more than 5% of the amount due under this Agreement. In such
case, Elan shall bear the full cost of such audit. In all events, Elan shall pay
any underpayment with interest in accordance with Section 5.3.
5.5 TAXES. All taxes levied on account of the royalties and other
payments accruing to Cytel under this Agreement shall be paid by Cytel for its
own account, including taxes levied thereon as income to Cytel. If provision is
made in law or regulation for withholding, such tax shall be deducted from the
royalty or other payment made by Elan to the proper taxing authority and a
receipt of payment of the tax secured and promptly delivered to Cytel. Each
party agrees to reasonably assist the other party in claiming exemption from
such deductions or withholdings under any double taxation or similar agreement
or treaty from time to time in force.
5.6 PROHIBITED PAYMENTS. Notwithstanding any other provision of this
Agreement, if Elan is prevented from paying any such royalty by virtue of the
statutes, laws, codes or governmental regulations of the country from which the
payment is to be made, then such royalty may be paid by depositing funds in the
currency in which accrued to Cytel's account in a bank acceptable to Cytel in
the country whose currency is involved.
- ---------------------------
*Confidential Treatment Requested.
<PAGE>
-10-
ARTICLE 6
CONFIDENTIALITY
During the term of this Agreement and for a period of five years
thereafter, each party shall maintain all Confidential Information of the other
party as confidential and shall not disclose any Confidential Information of the
other party to any Third Party or use any Confidential Information of the other
party for any purpose, except (a) as expressly authorized by this Agreement, (b)
as required by law, rule, regulation or court order (provided that the
disclosing party shall (i) advise the other party promptly of any such
disclosure requirement in order to permit such other party to undertake efforts
to restrict or limit the required disclosure; and (ii) use commercially
reasonable efforts to obtain confidential treatment of any such information
required to be disclosed and shall provide the other party with a copy prior to
such disclosure), or (c) to its Affiliates, sublicensees, employees, agents,
consultants and other representatives, to accomplish the purposes of this
Agreement so long as such persons are under an obligation of confidentiality no
less stringent than as set forth herein. Each party may use such Confidential
Information only to the extent required to accomplish the purposes of this
Agreement. Each party shall use at least the same standard of care as it uses to
protect its own Confidential Information to ensure that its Affiliates,
sublicensees, employees, agents, consultants and other representatives do not
disclose or make any unauthorized use of Confidential Information of the other
party. Each party shall promptly notify the other upon discovery of any
unauthorized use or disclosure of the Confidential Information of the other
party.
ARTICLE 7
INTELLECTUAL PROPERTY RIGHTS
7.1 APPLICATION, PROSECUTION AND MAINTENANCE OF PATENT RIGHTS. FHCRC
shall file, prosecute and maintain all patent applications and patents included
in the Patent Rights at Cytel's expense. Cytel shall provide Elan a timely
opportunity to comment and shall consider in good faith the incorporation of
such comments on the filing, prosecution and maintenance of all patent
applications and patents included in the Patent Rights.
<PAGE>
-11-
7.2 INFRINGEMENT BY THIRD PARTIES. Cytel shall have the first right, at
its own expense and by counsel of its own choice, to bring and control any
action against a Third Party in connection with any infringement of the Patent
Rights. If the matter relates to the Antibody Field, Elan shall have the right,
at its own expense, to be represented in such action by counsel of its own
choice. If with regard to any infringement of the Patent Rights that is relevant
to the Antibody Field, Cytel or FHCRC fails to bring an action within 90 days
following the notice of alleged infringement, then Elan shall have the right, at
its own expense and by counsel of its own choice, to bring such action, and
Cytel and FHCRC shall have the right, at their own expense, to be represented in
such action by counsel of their own choice. If Elan elects to commence a patent
infringement action to enforce the Patent Rights, Elan shall have the right to
invoke Cytel's rights under Section 8.2 of the License Agreement. Neither party
shall have the right to settle any patent infringement litigation in A manner
that diminishes the rights of the other party or of FHCRC without the consent of
such other party or of FHCRC, as appropriate.
7.3 If Elan elects to commence an infringement action as described in
Section 7.2, Elan may reduce, by [...***...], the royalty due to Cytel earned
under the Patent Rights subject to suit by the amount of the expenses and costs
of such action, including reasonable attorney fees. In the event such expenses
and costs exceed the amount of royalties withheld by Elan for any calendar year,
Elan may to that extent reduce the royalties due to Cytel from Elan in
succeeding calendar years, but never by more than [...***...] of the royalty due
in any one year.
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*Confidential Treatment Requested.
<PAGE>
-12-
7.4 Recoveries or reimbursements from an infringement action shall
first be applied to reimburse Elan, Cytel and FHCRC for litigation costs not
paid from royalties withheld pursuant to Section 7.3 (if any) and then to
reimburse FHCRC for royalties withheld. Any remaining recoveries or
reimbursements shall be shared equally by Elan and FHCRC.
ARTICLE 8
REPRESENTATIONS, WARRANTIES AND COVENANTS
8.1 CORPORATE POWER. Each party hereby represents and warrants that it
is duly organized, validly existing and in good standing under the laws of the
state of its incorporation and has full corporate power and authority to enter
into this Agreement and to carry out the provisions hereof.
8.2 DUE AUTHORIZATION. Each party hereby represents and warrants that
such party is duly authorized to execute and deliver this Agreement and to
perform its obligations hereunder.
8.3 BINDING AGREEMENT. Each party hereby represents and warrants that
this Agreement is a legal and valid obligation binding upon it and is
enforceable in accordance with its terms. The execution, delivery and
performance of this Agreement by such party does not conflict with any
agreement, instrument or understanding, oral or written, to which it is a party
or by which it may be bound, nor violate any law or regulation of any court,
governmental body or administrative or other agency having authority over it.
8.4 DUE DILIGENCE. Elan shall use its best efforts to develop and
commercialize Sublicensed Products in the Antibody Field as quickly as is
reasonably possible. Any Sublicensed Products produced for sale in the United
States shall be manufactured substantially in the United States. Except as
modified herein, Elan hereby agrees to be bound by its obligations to FHCRC
under the License Agreement.
8.5 DISCLAIMER OF WARRANTIES. EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATION OR WARRANTY TO THE OTHER PARTY
OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF
NON-INFRINGEMENT, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
<PAGE>
-13-
8.6 LIMITATION OF LIABILITY. NEITHER PARTY SHALL BE ENTITLED TO RECOVER
FROM THE OTHER PARTY ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES
IN CONNECTION WITH THE PATENT RIGHTS OR ANY LICENSE GRANTED HEREUNDER.
8.7 INDEMNIFICATION BY ELAN. Elan hereby agrees to save, defend,
indemnify and hold harmless Cytel, FHCRC and their directors, officers,
employees and agents from and against any and all suits, claims, actions,
demands, liabilities, expenses and losses, including reasonable legal expense
and attorneys' fees Losses"), arising directly or indirectly out of the practice
by Elan of any sublicense granted hereunder, except to the extent such Losses
result from the negligence or willful misconduct of Cytel, FHCRC or their
respective directors, officers, employees and agents, as applicable. In the
event Cytel or FHCRC seeks indemnification under this Section 8.7, such party
shall inform Elan of a claim as soon as reasonably practicable after it receives
notice of the claim, shall permit Elan to assume direction and control of the
defense of the claim (including the right to settle the claim solely for
monetary consideration), and shall cooperate as requested (at the expense of
Elan) in the defense of the claim.
ARTICLE 9
TERM; TERMINATION
9.1 TERM. This Agreement shall commence as of the Effective Date and
shall continue until the last day of the Royalty Term, unless terminated earlier
as provided herein (the "TERM").
9.2 TERMINATION. Either party may terminate this Agreement prior to the
expiration of the term of this Agreement upon the occurrence of any of the
following:
(a) Upon or after a petition in bankruptcy, adjudication or
bankruptcy, insolvency, dissolution or winding up of the other party (other than
dissolution or winding up for the purposes of reconstruction or amalgamation);
(b) Upon or after the breach of any material provision of this
Agreement by the other party if the breaching party has not cured such breach
within 45 days after written notice thereof by the non-breaching party;
<PAGE>
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(c) Elan shall have the right to terminate this Agreement prior to
its expiration upon 60 days' written notice to Cytel.
9.3 EFFECT OF TERMINATION.
(a) Upon termination of this Agreement by Cytel pursuant to
Sections 9.2 or 9.3, (i) all rights to the Patent Rights shall revert to Cytel,
and (ii) any sublicenses granted hereunder by Elan shall terminate.
(b) Upon termination of this Agreement by Elan pursuant to Section
9.2, the sublicense granted under Section 2.1 and the sublicense granted under
Section 3.1, if Elan has exercised the Option, shall remain in effect so long as
Elan does not breach its obligations to Cytel under this Agreement.
(c) Expiration or termination of this Agreement shall not relieve
the parties of any obligation accruing prior to such expiration or termination.
The provisions of Sections 5.4, 8.5, 8.6, 8.7 and 9.4 and Articles 1, 6 and 10
shall survive termination or expiration of this Agreement.
ARTICLE 10
MISCELLANEOUS
10.1 FORCE MAJEURE. Neither party shall be held liable or responsible
to the other party nor be deemed to have defaulted under or breached this
Agreement for failure or delay in fulfilling or performing any term of this
Agreement when such failure or delay is caused by or results from causes beyond
the reasonable control of the affected party, including, without limitation,
fire, floods, earthquakes, natural disasters, embargoes, war, acts of war
(whether war be declared or not), insurrections, riots, civil commotions,
strikes, lockouts or other labor disturbances, acts of God or acts, omissions or
delays in acting by any governmental authority or the other party.
<PAGE>
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10.2 ASSIGNMENT. Except as expressly provided hereunder, neither this
Agreement nor any rights or obligations hereunder may be assigned or otherwise
transferred by either party without the prior written consent of the other party
(which consent shall not be unreasonably withheld); PROVIDED, HOWEVER, that
either party may assign this Agreement and its rights and obligations hereunder
without the other party's consent (a) in connection with the transfer or sale of
all or substantially all of the business of such party to which this Agreement
relates to another party, whether by merger, sale of stock, sale of assets or
otherwise, or (b) to any Affiliate, including with respect to Elan, Axogen.
Notwithstanding the foregoing, any such assignment to an Affiliate shall not
relieve the assigning party of its responsibilities for performance of its
obligations under this Agreement. The rights and obligations of the parties
under this Agreement shall be binding upon and inure to the benefit of the
successors and permitted assigns of the parties. Any assignment not in
accordance with this Agreement shall be void.
10.3 PUBLICITY. The parties agree that neither party shall originate
any press release or other public announcement, written or oral, or otherwise
make any disclosure relating to the existence or terms of or performance under
this Agreement without the prior written approval of the other party, except as
may otherwise be required by law and then provided the disclosing party has
provided the other party with a copy and opportunity to comment prior to such
disclosure.
10.4 SEVERABILITY. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
10.5 NOTICES. Any notices or communications provided for in this
Agreement to be made by either of the parties to the other shall be in English
in writing and delivered personally or sent by registered or certified mail,
postage paid, by overnight delivery service such as FedEx or UPS or by
facsimile, with confirmation of receipt, addressed as follows:
IF TO CYTEL: CYTEL CORPORATION
9393 Towne Center Drive
San Diego, CA 92121
Attn: President
Fax No. (619) 552-8801
IF TO ELAN: ELAN INTERNATIONAL SERVICES LTD.
102 St. James Court
Flatts Smiths, FL04 Bermuda
Attention: President
Facsimile: (441) 292-2224
<PAGE>
-16-
COPY TO: ELAN PHARMACEUTICALS, INC.
800 Gateway Blvd.
South San Francisco, CA 94080
Attention: General Counsel
Facsimile: (650) 875-3620
Either party may by like notice specify or change an address to which
notices and communications shall thereafter be sent. Notices sent by facsimile
shall be effective upon confirmation of receipt, notices sent by mail or
overnight delivery service shall be effective upon receipt, and notices given
personally shall be effective when delivered.
10.6 GOVERNING LAW. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of California, without
regard to its choice of law provisions.
10.7 ENTIRE AGREEMENT; AMENDMENT. This Agreement sets forth all of the
covenants, promises, agreements, warranties, representations, conditions and
understandings between the parties hereto with respect to the subject matter
hereof, and supersedes and terminates all prior agreements and understanding
between the parties with respect to the subject matter hereof There are no
covenants, promises, agreements, warranties, representations, conditions or
understandings with respect to the subject matter hereof, either oral or
written, between the parties other than as set forth herein. No subsequent
alteration, amendment, change or addition to this Agreement shall be binding
upon the parties hereto unless reduced to writing and signed by the respective
authorized officers of the parties.
10.8 HEADINGS. The captions contained in this Agreement are not a part
of this Agreement, but are merely guides or labels to assist in locating and
reading the several Articles hereof.
10.9 INDEPENDENT CONTRACTORS. It is expressly agreed that Cytel and
Elan shall be independent contractors and that the relationship between the two
parties shall not constitute a partnership, joint venture or agency of any kind.
Neither party shall have the authority to make any statements, representations
or commitments of any kind, or to take any action, which shall be binding on the
other party, without the prior written consent of the other party.
<PAGE>
-17-
10.10 WAIVER. Except as specifically provided for herein, the waiver
from time to time by either of the parties of any of their rights or their
failure to exercise any remedy shall not operate or be construed as a continuing
waiver of the same rights or remedies or of any other of such party's rights or
remedies provided in this Agreement.
10.11 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
<PAGE>
-18-
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first set forth above.
CYTEL CORPORATION ELAN INTERNATIONAL SERVICES LTD.
By:/s/ Virgil Thompson By:/s/ Kevin Insley
------------------------- ------------------------
Name: Virgil Thompson Name: Kevin Insley
----------------------- ---------------------
Title: President and CEO Title: President
---------------------- --------------------
<PAGE>
A-1
EXHIBIT A
TERMS OF SUBLICENSE IN THE PEPTIDE FIELD
1. SUBLICENSE
Upon exercise of the Option, Cytel shall grant to Elan a
worldwide, non-exclusive sublicense, including the limited right to grant
sublicenses under Section 2, under the Patent Rights to make, have made, use and
sell Sublicensed Products in the Peptide Field.
2. SUBLICENSES
(a) Upon exercise of the Option, Elan shall have the right to
grant sublicenses under the Patent Rights to make, have made, use and sell
Sublicensed Products in the Peptide Field to any party with whom Elan has or is
entering into a contractual relationship with to develop or market a Product in
the Peptide Field; PROVIDED, HOWEVER, that the intellectual property licensed
under such contractual relationship is not limited solely to the Patent Rights.
Notwithstanding the foregoing, if such contractual relationship is to be entered
into with [...***...] or any entity for which the contractual relationship is
limited to the sole grant of the Patent Rights, Elan and Cytel agree to
cooperate to negotiate terms mutually acceptable to both Elan and Cytel.
(b) Elan shall not grant any sublicense without FHCRC's prior
written consent, which consent shall not be unreasonably withheld. All
sublicenses granted by Elan hereunder shall include a requirement that the
sublicensee use its best efforts to bring the subject matter of the sublicense
into commercial use as quickly as is reasonably possible and shall expressly
bind the sublicensee to meet Cytel's obligations to FHCRC under the License
Agreement.
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*Confidential Treatment Requested.
A-1
<PAGE>
(c) Elan shall provide to Cytel within 45 days following the end
of each calendar quarter during the term of a definitive sublicense agreement
(i) a written summary specifying the name of each sublicensee, territory and
scope of the rights sublicensed hereunder during that quarter, and (ii) copies
of all relevant portions of any sublicense agreement executed during that
quarter relating to the calculation of royalties due to Cytel under a definitive
sublicense agreement. Notwithstanding the grant of a sublicense by Elan or its
Affiliates hereunder, Elan shall remain obligated to pay all royalties due to
Cytel with respect to the sale of Sublicensed Products by its sublicensee.
3. MILESTONES
(a) PEPTIDE FIELD (IF ELAN IS NOT DEVELOPING SUBLICENSED PRODUCTS
IN THE ANTIBODY FIELD). If Elan exercises the Option and has terminated its
program to develop Sublicensed Products in the Antibody Field at the time of
achievement of the first milestone event under Section 3(b)(i), within 30 days
after achievement of each of the milestones set forth below for each Sublicensed
Product in the Peptide Field, Elan shall pay to Cytel the non-refundable
milestone payment set forth below:
(i) [...***...] upon [...***...]; and
(ii) [...***...] upon [...***...].
(b) PEPTIDE FIELD (IF ELAN IS DEVELOPING SUBLICENSED PRODUCTS IN
BOTH THE PEPTIDE FIELD AND THE ANTIBODY FIELD). If Elan exercises the Option and
has not terminated its program to develop Sublicensed Products in the Antibody
Field (i.e., Elan is developing or marketing Sublicensed Products in the
Antibody Field) at the time of achievement of the first milestone event under
Section 3(b)(i), within 30 days after achievement of each of the milestones set
forth below for each Sublicensed Product in the Peptide Field, Elan shall pay to
Cytel the nonrefundable milestone payment set forth below:
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*Confidential Treatment Requested.
A-2
<PAGE>
(i) [...***...] upon [...***...];
(ii) [...***...] upon [...***...]; and
(iii) [...***...] upon [...***...].
4. ROYALTIES
(a) If Elan exercises the Option, Elan shall pay to Cytel a
royalty equal to [...***...] of Net Sales of Sublicensed Products in the Peptide
Field.
(b) If Elan is required to pay royalties to a Third Party to make,
have made, use or sell a Sublicensed Product in the Peptide Field to avoid
infringing such Third Party's patent rights, then Elan shall be entitled to a
credit against the royalty payments due Cytel hereunder with respect to such
Sublicensed Product, which credit shall be equal to [...***...] of royalties
actually paid to such Third Party; PROVIDED, HOWEVER, that in no event shall the
royalty payable to Cytel with respect to such Sublicensed Product be reduced
below an amount equal to [...***...] of Net Sales of such Sublicensed Product.
(c) Royalties for sales of any Sublicensed Product in any given
country shall be paid for a period equal to the Royalty Term for such
Sublicensed Product in such country.
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*Confidential Treatment Requested.
A-3
<PAGE>
EXHIBIT B
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made as of July 22,
1998 (the "Effective Date") by and between CYTEL CORPORATION, a Delaware
corporation ("Cytel"), and ELAN INTERNATIONAL SERVICES LTD., a Bermuda
corporation and a wholly-owned subsidiary of Elan Corporation, plc ("Elan").
RECITALS
WHEREAS, Cytel and Elan have entered into that certain Sublicense and
Option Agreement of even date herewith (the "Sublicense Agreement"); and
WHEREAS, in connection with, and as a condition of Cytel entering into,
the Sublicense Agreement, Elan agrees to purchase from Cytel shares of Cytel's
Common Stock on the terms and subject to the conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and agreements contained herein, the parties hereto, intending
to be legally bound, do hereby agree as follows:
AGREEMENT
1. DEFINITIONS
Capitalized terms used but not otherwise defined herein shall have the
meanings given such terms in the Sublicense Agreement.
2. PURCHASE AND SALE OF SHARES
Subject to the terms and conditions hereof, at the Closing (as defined
below), Elan shall purchase from Cytel, and Cytel shall issue and sell to Elan,
2,000,000 shares of Cytel's Common Stock, par value $0.01 per share (the
"Shares"), at a purchase price equal to $2.00 per share.
3. CLOSING DATE; DELIVERY
3.1 CLOSING. Subject to the terms of Sections 6 and 7, the closing of
the sale and purchase of the Shares under this Agreement (the "Closing") shall
be held at 10:00 a.m. (Pacific Time) on the Effective Date, at the offices of
Cytel, 3525 John Hopkins Court, San Diego, California, or at such time and place
as Cytel and Elan may agree.
1.
<PAGE>
3.2 DELIVERY. At the Closing, subject to the terms and conditions
hereof, Cytel shall deliver to Elan a stock certificate, registered in the name
of Elan, representing the Shares dated as of the Closing against payment of the
purchase price therefore by wire transfer, unless other means of payment shall
have been agreed upon by Cytel and Elan.
4. REPRESENTATIONS AND WARRANTIES OF CYTEL
Cytel hereby makes the following representations and warranties to
Elan, except as set forth in the Schedule of Exceptions attached hereto as
Exhibit A:
4.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. Cytel is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
carry on its business. Cytel is duly qualified to transact business and is in
good standing in each jurisdiction in which the failure so to qualify would have
a material adverse effect on its business or properties.
4.2 AUTHORIZATION; DUE EXECUTION. Cytel has the requisite corporate
power and authority to enter into this Agreement and to perform its obligations
under the terms of this Agreement and, at the Closing will have the requisite
corporate power to sell the Shares. All corporate action on the part of Cytel,
its officers, directors and stockholders necessary for the authorization,
execution and delivery of this Agreement have been taken. This Agreement has
been duly authorized, executed and delivered by Cytel, and, upon due execution
and delivery by Elan, this Agreement will be a valid and binding agreement of
Cytel, enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally or by equitable principles.
4.3 CAPITALIZATION. The authorized capital stock of Cytel consists of
75,000,000 shares of Common Stock, par value $0.01, and 10,000,000 shares of
Preferred Stock, par value $0.01. As of June 30, 1998, there were 32,870,387
shares of Common Stock and 659,898 Shares of Series B Preferred Stock issued and
outstanding.
4.4 VALID ISSUANCE OF SHARES. The Shares, upon the Closing, when
issued, sold and delivered in accordance with the terms hereof for the
consideration set forth herein, will be duly and validly authorized and issued,
fully paid and nonassessable and, based in part upon the representations of Elan
in this Agreement, will be issued in compliance with all applicable federal and
state securities laws.
4.5 GOVERNMENTAL CONSENTS. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
federal, state, local or provincial governmental authority on the part of Cytel
is required in connection with the consummation of the transactions contemplated
by this Agreement, except for notices required or permitted to be filed with
certain state and federal securities commissions after the Closing which notices
will be filed on a timely basis.
2.
<PAGE>
4.6 SEC FILINGS. Cytel has timely filed all reports, registration
statements and other documents required to be filed by it (the "SEC Filings")
under the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder (the "Securities Act"), and the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated thereunder (the
"Exchange Act"). The SEC Filings were prepared in accordance and complied in all
material respects with the applicable requirements of the Securities Act or the
Exchange Act, as the case may be. None of such forms, reports and statements,
including, without limitation, any financial statements, exhibits and schedules
included therein and documents incorporated therein by reference, at the time
filed, declared effective or mailed, as the case may be, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. Except to the
extent information contained in any of the SEC Filings has been revised,
corrected or superseded by a later filing of any such form, report or document
filed prior to the Effective Date, none of the SEC Filings contains an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
4.7 NO CONFLICT. The execution, delivery and performance by Cytel of
this Agreement do not violate any provision of Cytel's Certificate of
Incorporation or Bylaws, any provision of any contract, arrangement or
agreement, order, writ, judgment, injunction, decree, determination or award to
which Cytel is a party or by which it is bound, or, to Cytel's knowledge, any
law, rule or regulation (including, without limitation, the rules and
regulations of the Securities and Exchange Commission (the "SEC") or any
regulatory commission of any jurisdiction) currently in effect having
applicability to Cytel.
4.8 ABSENCE OF LITIGATION. Except as disclosed in the SEC Filings,
there is no action, suit, proceeding or investigation (including any such matter
related to Cytel's intellectual property) pending or currently threatened
against Cytel or its properties before any court or governmental agency, which
would have a material adverse effect on Cytel's business, operations or assets,
taken as a whole (nor, to the best of Cytel's knowledge, is there any basis
therefor). There is no action, suit, proceeding or investigation which Cytel
currently intends to initiate.
4.9 CONFIDENTIALITY. Cytel hereby represents, warrants and covenants
that it shall maintain in confidence, and shall not use or disclose without
prior written consent of Elan, the terms of this Agreement and any information
identified in writing as confidential that is furnished to it by Elan in
connection with this Agreement. This obligation of confidentiality shall not
apply, however, to any information (a) in the public domain through no
unauthorized act or failure to act by Cytel, (b) lawfully disclosed to Cytel by
a third party who possessed such information without any obligation of
confidentiality, (c) lawfully developed by Cytel independent of any disclosure
by Cytel as supported by Elan's written records, or (d) required, upon the
advice of counsel to Cytel and after consultation with Elan, to be disclosed
under the rules and regulations of the SEC. Cytel further covenants that it
shall return to Elan all tangible materials containing such information upon
request by Elan.
3.
<PAGE>
5. REPRESENTATIONS AND WARRANTIES OF ELAN
Elan hereby makes the following representations and warranties to Cytel
as of the Effective Date and the Closing:
5.1 AUTHORIZATION; DUE EXECUTION. Elan has the requisite corporate
power and authority to enter into this Agreement and to perform its obligations
under the terms of this Agreement and, at the Closing, will have the requisite
corporate power to purchase the Shares. All corporate action on the part of
Elan, its officers, directors and stockholders necessary for the authorization,
execution and delivery of this Agreement have been taken. This Agreement has
been duly authorized, executed and delivered by Elan, and, upon due execution
and delivery by Cytel, this Agreement will be a valid and binding agreement of
Elan, enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally or by equitable principles.
5.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made with Elan
in reliance upon Elan's representation to Cytel, which by Elan's execution of
this Agreement confirms, that the Shares to be purchased by Elan will be
acquired for investment for Elan's own account, not as a nominee or agent, and
not with a view to the resale or distribution of any part thereof, and that Elan
has no present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, Elan further represents that
Elan does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participation to such person or to any third
person, with respect to any of the Shares.
5.3 DISCLOSURE OF INFORMATION. Elan has received all the information
that it has requested and that it considers necessary or appropriate for
deciding whether to enter into this Agreement and to purchase the Shares. Elan
further represents that it has had an opportunity to ask questions and receive
answers from Cytel regarding the terms and conditions of the offering of the
Shares.
5.4 INVESTMENT EXPERIENCE. Elan is an investor in securities of
companies in the development stage and acknowledges that it is able to fend for
itself, can bear the economic risk of its investment and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Shares. Elan also represents it has
not been organized solely for the purpose of acquiring the Shares.
5.5 ACCREDITED INVESTOR. Elan is an "accredited investor" as such term
is defined in Rule 501 of the General Rules and Regulations prescribed by the
SEC pursuant to the Securities Act.
4.
<PAGE>
5.6 RESTRICTED SECURITIES. Elan understands that (a) the Shares have
not been, registered under the Securities Act by reason of a specific exemption
therefrom, that such securities must be held by it indefinitely and that Elan
must, therefore, bear the economic risk of such investment indefinitely, unless
a subsequent disposition thereof is registered under the Securities Act or is
exempt from such registration; (b) each certificate representing the Shares will
be endorsed with the following legends:
(i) THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS
TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO CYTEL THAT SUCH REGISTRATION IS NOT REQUIRED.
(ii) Any legend required to be placed thereon by Cytel's
Bylaws or under applicable state securities laws;
and (c) Cytel will instruct any transfer agent not to register the transfer of
the Shares (or any portion thereof) unless the conditions specified in the
foregoing legends are satisfied, until such time as a transfer is made, pursuant
to the terms of this Agreement, and in compliance with Rule 144 or pursuant to a
registration statement or, if the opinion of counsel referred to above is to the
further effect that such legend is not required in order to establish compliance
with any provisions of the Securities Act or this Agreement.
5.7 CONFIDENTIALITY. Elan hereby represents, warrants and covenants
that it shall maintain in confidence, and shall not use or disclose without
prior written consent of Cytel, the terms of this Agreement and any information
identified in writing as confidential that is furnished to it by Cytel in
connection with this Agreement. This obligation of confidentiality shall not
apply, however, to any information (a) in the public domain through no
unauthorized act or failure to act by Elan, (b) lawfully disclosed to Elan by a
third party who possessed such information without any obligation of
confidentiality, (c) lawfully developed by Elan independent of any disclosure by
Cytel as supported by Elan's written records, or (d) required to be disclosed
pursuant to an order or requirement of a court, administrative agency or other
government body (including the securities laws of any applicable jurisdiction).
Elan further covenants that it shall return to Cytel all tangible materials
containing such information upon request by Cytel.
6. CONDITIONS OF ELAN'S OBLIGATIONS
The obligations of Elan under Section 2 of this Agreement to purchase
the Shares at the Closing are subject to the fulfillment on or before the
Closing of each of the following conditions, any of which may be waived by Elan:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Cytel contained in Section 4 shall be true and correct in all material
respects on and as of the Closing.
5.
<PAGE>
6.2 PERFORMANCE. Cytel shall have performed and complied with all
agreements, obligations and conditions in this Agreement, if any, that are
required to be performed or complied with by it on or before the Closing.
6.3 COMPLIANCE CERTIFICATE. The President or a Vice President of Cytel
shall have delivered to Elan at the Closing a certificate certifying that the
conditions specified in Sections 6.1 and 6.2 have been fulfilled. 6.4
PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in connection
with the transactions contemplated at the Closing and all documents incident
thereto shall be reasonably satisfactory in form and substance to Elan, and it
shall have received all such counterpart original and certified or other copies
of such documents as it may reasonably request.
6.5 SUBLICENSE. The Sublicense Agreement is a valid and enforceable
agreement and is in full force and effect.
7. CONDITIONS OF CYTEL'S OBLIGATIONS
The obligations of Cytel to Elan under this Agreement are subject to
the fulfillment on or before the Closing of each of the following conditions by
Elan, any of which may be waived by Cytel:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Elan contained in Section 5 hereof shall be true and correct in all material
respects on and as of the Closing.
7.2 PERFORMANCE. Elan shall have performed and complied with all
agreements, obligations and conditions in this Agreement, if any, that are
required to be performed or complied with by it on or before the Closing.
7.3 COMPLIANCE CERTIFICATE. The President or other duly authorized
officer of Elan shall have delivered to Cytel at the Closing a certificate
certifying that the conditions specified in Sections 7.1 and 7.2 have been
fulfilled.
7.4 PAYMENT OF PURCHASE PRICE. Elan shall have tendered delivery of the
purchase price for the Shares specified in Section 2 at the Closing.
7.5 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to
Cytel, and it shall have received all such counterpart original and certified or
other copies of such documents as it may reasonably request.
6.
<PAGE>
8. REGISTRATION RIGHTS
8.1 CERTAIN DEFINITIONS. When used in this Section 8 of this Agreement,
the following terms shall have the following respective meanings:
(a) "FORM S-3" means Form S-3 under the Securities Act as in
effect on the date of this Agreement, or any substantially similar, equivalent
or successor form under the Securities Act.
(b) "HOLDER" means Elan or any transferee of registration rights
under Section 8.10 hereof who then holds any outstanding Registrable Securities.
(c) "REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
(d) "REGISTRABLE SECURITIES" means (i) the Shares, and (ii)
shares of Cytel Common Stock issued in respect of the Shares by reason of any
stock split, stock dividend, recapitalization or similar event which have not
been sold to the public in either case until such Shares are sold pursuant to an
effective registration statement.
(e) "REGISTRATION EXPENSES" means all expenses incurred by Cytel
in complying with Sections 8.2, 8.3 and 8.4 hereof, including, without
limitation, all registration, qualification and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel, blue sky fees and expenses, and
the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of Cytel which
shall be paid in any event by Cytel).
(f) "SELLING EXPENSES" means all underwriting discounts and
selling commissions applicable to the applicable sale.
8.2 DEMAND REGISTRATION.
(a) Subject to the conditions of this Section 8.2, if Cytel
shall receive a written request from the Holders of 50% or more of the
Registrable Securities then outstanding (the "Initiating Holders") that Cytel
file a registration statement under the Securities Act covering the registration
of Registrable Securities having an aggregate offering price to the public in
excess of $2,000,000 (a "Qualified Public Offering"), then Cytel shall, within
30 days of the receipt thereof, give written notice of such request to all
Holders, and subject to the limitations of this Section 8.2, use its best
efforts to effect, as soon as practicable but in no event later than 60 days of
the receipt of the request, the registration under the Securities Act of all
Registrable Securities that the Holders request to be registered.
7.
<PAGE>
(b) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise Cytel as a part of their request made pursuant to this
Section 8.2 and Cytel shall include such information in the written notice
referred to in Section 8.2(a). In such event, the right of any Holder to include
its Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall enter into an underwriting agreement in customary form
with the underwriter or underwriters selected for such underwriting by a
majority in interest of the Initiating Holders (which underwriter or
underwriters shall be reasonably acceptable to Cytel). Holders shall have no
obligation to make any representations or warranties other than with respect to
their ownership of Shares. Holders shall have no indemnification obligations
other than with respect to information about such Holders provided in writing by
such Holders for inclusion in the registration statement. Notwithstanding any
other provision of this Section 8.2, if the underwriter advises Cytel that
marketing factors require a limitation of the number of securities to be
underwritten (including Registrable Securities) then Cytel shall so advise all
Holders of Registrable Securities which would otherwise be underwritten pursuant
hereto, and the number of shares that may be included in the underwriting shall
be allocated to the Holders of such Registrable Securities on a pro rata basis
based on the number of Registrable Securities held by all such Holders
(including the Initiating Holders). Any Registrable Securities excluded or
withdrawn from such underwriting shall be withdrawn from the registration.
(c) Cytel shall not be required to effect a registration
pursuant to this Section 8.2:
(i) prior to the first anniversary of the date of this
Agreement; or
(ii) after Cytel has effected one registration pursuant to
this Section 8.2, and such registrations have been declared or ordered effective
and has complied with the other obligations of Cytel under this Agreement; or
(iii) if Cytel shall furnish to the requesting Holders a
certificate signed by the President of Cytel stating that in the good faith
judgment of the Board of Directors of Cytel it would be seriously detrimental to
Cytel or its stockholders for the registration statement to be filed at the date
filing would be required, in which case Cytel shall have an additional period of
not more than 120 days within which to file such registration statement;
PROVIDED, HOWEVER, that Cytel shall not use this right more than once in any 12
month period.
8.3 COMPANY REGISTRATION.
(a) If, at any time or from time to time, Cytel shall determine
to register any of its securities, either for its own account or the account of
a security holder or holders exercising their respective demand registration
rights, other than a registration relating solely to employee benefit plans on
Form S-8 or similar forms which may be promulgated in the future or a
registration on Form S-4 or similar forms which may be promulgated in the future
relating solely to a SEC Rule 145 or similar transaction, Cytel will (i)
promptly give to each Holder written notice thereof and (ii) include in such
registration (and any related qualification under Blue Sky laws or other
compliance), and in any underwriting involved therein, all Registrable
Securities of such Holders as specified in a written request or requests made
within 15 days after receipt of such written notice from Cytel.
8.
<PAGE>
(b) If the registration of which Cytel gives notice is for a
registered public offering involving an underwriting, Cytel shall so indicate in
the notice given pursuant to Section 8.3(a). In such event the right of any
Holder to registration pursuant to this Section 8.3 shall be conditioned upon
such Holder's agreeing to participate in such underwriting and in the inclusion
of such Holder's Registrable Securities in the underwriting to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall (together with Cytel and the other holders distributing
their securities through such underwriting) enter into an underwriting agreement
in customary form with the underwriter or underwriters selected for such
underwriting by Cytel or by other holders exercising any demand registration
rights. Holders shall have no obligation to make any representations or
warranties other than with respect to their ownership of Shares. Holders shall
have no indemnification obligations other than with respect to information about
such Holders provided in writing by such Holders for inclusion in the
registration statement. If any Holder disapproves of the terms of any such
underwriting, such Holder may elect to withdraw therefrom by written notice to
Cytel and the underwriter. Any securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration. Notwithstanding any
other provision of this Section 8.3, if the underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten, the underwriter may exclude some or all of the shares of
Registrable Securities from such registration and underwriting.
8.4 FORM S-3 REGISTRATION. Each Holder shall have the right to request
registrations on Form S-3 (such requests shall be in writing and shall state the
number of shares of Registrable Securities to be disposed of and the intended
method of disposition of such shares by each such Holder), subject only to the
following limitations:
(a) Cytel shall not be obligated to cause a registration on Form
S-3 to become effective prior to 180 days following the effective date of a
Cytel-initiated registration (other than a registration effected solely to
qualify an employee benefit plan or to effect a business combination pursuant to
Rule 145);
(b) Cytel shall not be required to effect a registration
pursuant to this Section 8.4 unless the Holder or Holders requesting such a
registration propose to dispose of shares of Registrable Securities having an
aggregate disposition price (before deduction of underwriting discounts and
expenses of sale) of at least $1,000,000;
(c) Cytel shall not be required to effect a registration
pursuant to this Section 8.4 if Cytel shall furnish to the requesting Holders a
certificate signed by the President of Cytel stating that in the good faith
judgment of the Board of Directors of Cytel it would be seriously detrimental to
Cytel or its stockholders for the registration statement to be filed at the date
filing would be required, in which case Cytel shall have an additional period of
not more than 120 days within which to file such registration statement;
PROVIDED, HOWEVER, that Cytel shall not use this right more than once in any 12
consecutive month period; and
9.
<PAGE>
(d) Cytel shall not be required to effect a registration
pursuant to this Section 8.4 more often than once in any 12 consecutive month
period.
Cytel shall give notice to all Holders of the receipt of a request for
registration pursuant to this Section 8.4 and shall use its best efforts to
cause all Registrable Securities that such Holders have requested, within 15
days after receipt of such written notice, be registered in accordance with this
Section 8.4 to be registered under the Securities Act. Subject to the foregoing,
Cytel will use its best efforts to effect promptly any registration pursuant to
this Section 8.4.
8.5 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Sections 8.2, 8.3 and 8.4 (exclusive of Selling Expenses but inclusive of the
reasonable fees and expenses of any special counsel to the selling Holders)
shall be borne by Cytel. All Selling Expenses incurred in connection with any
registrations hereunder shall be borne by the holders of the securities
registered pro rata on the basis of the number of shares registered.
8.6 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by Cytel pursuant to this Section 8, Cytel
will keep each Holder advised in writing as to the initiation of each
registration, qualification and compliance and as to the completion thereof. At
its expense Cytel will:
(a) Keep such registration, qualification or compliance
effective for a period of 120 days or until the Holder or Holders have completed
the distribution described in the registration statement relating thereto,
whichever first occurs;
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them;
(d) Use its reasonable efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that Cytel shall not be required in connection therewith or as
a condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions;
10.
<PAGE>
(e) Subject to Sections 8.2(b) and 8.3(b), in the event of any
underwritten public offering, enter into and perform its obligations under an
underwriting agreement, in usual and customary form, with the managing
underwriter of such offering. Each Holder participating in such underwriting
shall also enter into and perform its obligations under such an agreement; and
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
8.7 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Section 8.2, 8.3 and 8.4:
(a) To the extent permitted by law, Cytel will indemnify each
Holder, each of its officers, directors, employees and partners, and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
with respect to which registration, qualification or compliance has been
effected pursuant to this Section 8, and each underwriter, if any, and each
person who controls any underwriter within the meaning of Section 15 of the
Securities Act, against all expenses, claims, losses, damages and liabilities
(or actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, offering circular or other
document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, or any violation by Cytel of any rule or
regulation promulgated under the Securities Act applicable to Cytel and relating
to action or inaction required of Cytel in connection with any such
registration, qualification or compliance, and will reimburse each such Holder,
each of its officers and directors and partners, and each person controlling
such Holder, each such underwriter and each person who controls any such
underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action; PROVIDED, HOWEVER, that the indemnity agreement set
forth in this Section 8.7(a) shall not apply to amounts paid in settlement of
any such claim, loss damage, liability or action if such settlement is effected
without the consent of Cytel, which consent shall not be unreasonably withheld;
PROVIDED FURTHER, that Cytel will not be liable in any such case to the extent
that any such claim, loss, damage, liability or expense arises out of or is
based on any untrue statement or omission or alleged untrue statement or
omission, made in reliance upon and in conformity with written information
furnished to Cytel by an instrument duly executed by such Holder or underwriter
and stated to be specifically for use therein.
11.
<PAGE>
(b) To the extent permitted by law, each Holder will, if
Registrable Securities held by such Holder are included in the securities as to
which such registration, qualification or compliance is being effected,
indemnify Cytel, each of its directors, officers and employees, each
underwriter, if any, of Cytel's securities covered by such a registration
statement, each person who controls Cytel or such underwriter within the meaning
of Section 15 of the Securities Act, and each other such Holder, each of its
officers, directors, employees and partners and each person controlling such
Holder within the meaning of Section 15 of the Securities Act, against all
expenses, claims, losses, damages and liabilities (or actions in respect
thereof) including any of the foregoing incurred in settlement of any litigation
commenced or threatened, arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any amendment or
supplement thereto, incident to any such registration, qualification or
compliance or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances in which they were made, not
misleading, or any violation by Cytel of any rule or regulation promulgated
under the Securities Act applicable to Cytel in connection with any such
registration, qualification, or compliance, and will reimburse Cytel, such
Holders, such directors, officers, partners, persons, underwriters or control
persons for any legal or any other expenses reasonably incurred in connection
with investigation, preparing or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document or any amendment or supplement thereto in reliance upon and in
conformity with written information furnished to Cytel by an instrument duly
executed by such Holder and stated to be specifically for use therein; PROVIDED,
HOWEVER, that the indemnity agreement set forth in this Section 8.7(b) shall not
apply to amounts paid in settlement of any such claim, loss, damage, liability
or action if such settlement is effected without the consent of the Holder,
which consent shall not be unreasonably withheld; PROVIDED FURTHER, that the
obligations of such Holders hereunder shall be limited to an amount equal to the
proceeds to each such Holder of Registrable Securities sold as contemplated
herein.
(c) Each party entitled to indemnification under this Section
8.7 (the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at its own
expense, and provided further that the failure of any Indemnified Party to give
notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 8.7 unless such failure resulted in actual
detriment to the Indemnifying Party. No Indemnifying Party, in the defense of
any such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party a release from all liability in respect of
such claim or litigation.
12.
<PAGE>
(d) If the indemnification provided for in this Section 8.7 is
held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party hereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) The obligations of Cytel and Holders under this Section 8.7
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 8 and otherwise.
8.8 INFORMATION BY HOLDER. The Holder or Holders of Registrable
Securities included in any registration shall furnish to Cytel such information
as Cytel may request in writing regarding such Holder or Holders and the
distribution proposed by such Holder or Holders and as shall be required in
connection with any registration, qualification or compliance referred to in
this Section 8.
8.9 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the SEC which may at any time permit the sale
of the Registrable Securities to the public without registration, Cytel agrees
to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act;
(b) File with the SEC in a timely manner all reports and other
documents required of Cytel under the Exchange Act; and
(c) So long as a Holder owns any Registrable Securities, to
furnish to such Holder upon request a written statement by Cytel as to its
compliance with the reporting requirements of Rule 144 and of the Securities Act
and the Exchange Act, a copy of the most recent annual or quarterly report of
Cytel, and such other reports and documents of Cytel as a Holder may reasonably
request in availing itself of any rule or regulation of the SEC allowing a
Holder to sell any such securities without registration.
8.10 TRANSFER OF REGISTRATION RIGHTS. The rights to cause Cytel to
register securities granted under Sections 8.2, 8.3 and 8.4 may be assigned or
otherwise conveyed to a transferee or assignee of Registrable Securities, who
shall be considered a "Holder" for purposes of this Section 8, provided that (a)
Cytel is given written notice by such Holder at the time of or within a
reasonable time (but not more than 30 days) after said transfer, stating the
name and address of said transferee or assignee and identifying the securities
with respect to which such registration rights are being assigned, and (b) the
transferee acquires at least 500,000 Shares in a private transaction.
13.
<PAGE>
8.11 TERMINATION OF REGISTRATION RIGHTS. The registration rights
granted pursuant to this Section 8 shall terminate (a) upon the third
anniversary of the Effective Date, or (b) as to any particular Holder, at such
time as all Registrable Securities held by such Holder can be sold without
compliance with the registration requirements of the Securities Act pursuant to
Rule 144 (including Rule 144(k)) promulgated thereunder.
9. COVENANTS
9.1 DELIVERY OF FINANCIAL STATEMENTS. So long as Elan holds the Shares
Cytel shall deliver to Elan copies of its Forms 10-K and 10-Q as filed with the
SEC.
9.2 STANDSTILL AGREEMENT. Athena hereby covenants and agrees that it
will not, nor will it permit any of its affiliates (including parents,
subsidiaries or other related entities) to, purchase or otherwise acquire,
directly or indirectly, any additional equity securities of Cytel (or rights or
options to purchase such securities) after the Closing under this Agreement
without the prior written approval of Cytel's Board of Directors; PROVIDED,
however, that this clause shall not apply to any securities issued with respect
to the Shares pursuant to a stock split, stock dividend, recapitalization or
reclassification approved by a disinterested majority of the Company's Board of
Directors.
9.3 "MARKET STAND-OFF" AGREEMENT. Elan hereby agrees that during a
reasonable and customary period of time specified by Cytel and an underwriter of
Common Stock or other securities of Cytel following the effective date of a
Registration Statement of Cytel filed under the Securities Act (which period
shall not exceed 180 days), to the extent requested by Cytel and such
underwriter, it shall not, nor will it permit any of its affiliates (including
parents, subsidiaries or other related entities) to, directly or indirectly,
sell, contract to sell (including, without limitation, any short sale), grant
any option to purchase or otherwise transfer or dispose of any securities of
Cytel held by any of them during such period. In order to enforce the foregoing
covenant, Cytel may impose stop-transfer instructions with respect to the
securities held by Elan and its affiliates that are subject to the foregoing
restriction until the end of such period.
10. MISCELLANEOUS
10.1 FORCE MAJEURE. Neither party shall be held liable or responsible
to the other party nor be deemed to have defaulted under or breached this
Agreement for failure or delay in fulfilling or performing any term of this
Agreement when such failure or delay is caused by or results from causes beyond
the reasonable control of the affected party, including, without limitation,
fire, floods, earthquakes, natural disasters, embargoes, war, acts of war
(whether war be declared or not), insurrections, riots, civil commotions,
strikes, lockouts or other labor disturbances, acts of God or acts, omissions or
delays in acting by any governmental authority or the other party.
14.
<PAGE>
10.2 ASSIGNMENT. Except as expressly provided hereunder, neither this
Agreement nor any rights or obligations hereunder may be assigned or otherwise
transferred by either party without the prior written consent of the other party
(which consent shall not be unreasonably withheld)[; PROVIDED, HOWEVER, that
either party may assign this Agreement and its rights and obligations hereunder
without the other party's consent (a) in connection with the transfer or sale of
all or substantially all of the business of such party to which this Agreement
and the Sublicense Agreement relate to another party, whether by merger, sale of
stock, sale of assets or otherwise, or (b) to any Affiliate. Notwithstanding the
foregoing, any such assignment to an Affiliate shall not relieve the assigning
party of its responsibilities for performance of its obligations under this
Agreement. The rights and obligations of the parties under this Agreement shall
be binding upon and inure to the benefit of the successors and permitted assigns
of the parties. Any assignment not in accordance with this Agreement shall be
void.
10.3 FINDER'S FEE. Each party represents that it neither is nor will be
obligated for any finders' fee or commission in connection with this
transaction. Elan agrees to indemnify and hold harmless Cytel from any liability
for any commission or compensation in the nature of a finders' fee (and the
costs and expenses of defending against such liability or asserted liability)
for which Elan or any of its officers, employees or representatives is
responsible. Cytel agrees to indemnify and hold harmless Elan from any liability
for any commission or compensation in the nature of a finder's fee (and the
costs and expenses of defending against such liability or asserted liability)
for which Cytel or any of its officers, employees or representatives is
responsible.
10.4 PUBLICITY. The parties agree that neither party shall originate
any press release or other public announcement, written or oral, or otherwise
make any disclosure relating to the existence or terms of or performance under
this Agreement without the prior written approval of the other party, except as
may otherwise be required by law.
10.5 SEVERABILITY. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
10.6 GOVERNING LAW. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of California, without
regard to its choice of law provisions.
10.7 NOTICES. Any notices or communications provided for in this
Agreement to be made by either of the parties to the other shall be in English
in writing and delivered personally or sent by registered or certified mail,
postage paid, by overnight delivery service such as FedEx or UPS or by
facsimile, with confirmation of receipt, addressed as follows:
IF TO CYTEL: CYTEL CORPORATION
3525 John Hopkins Court
San Diego, CA 92121
Attn: President
Fax No. (619) 552-8801
15.
<PAGE>
IF TO ELAN: ELAN INTERNATIONAL SERVICE LTD.
102 St. James Court
Flatts Smiths, FL04 Bermuda
Attention: President
Facsimile: (441) 292-2224
COPY TO: ATHENA NEUROSCIENCES, INC.
800 Gateway Blvd.
South San Francisco, CA 94080
Attention: General Counsel
Facsimile: (650) 875-3620
Either party may by like notice specify or change an address to which
notices and communications shall thereafter be sent. Notices sent by facsimile
shall be effective upon confirmation of receipt, notices sent by mail or
overnight delivery service shall be effective upon receipt, and notices given
personally shall be effective when delivered.
10.8 ENTIRE AGREEMENT; AMENDMENT. This Agreement sets forth all of the
covenants, promises, agreements, warranties, representations, conditions and
understandings between the parties hereto with respect to the subject matter
hereof, and supersedes and terminates all prior agreements and understanding
between the parties with respect to the subject matter hereof. There are no
covenants, promises, agreements, warranties, representations conditions or
understandings with respect to the subject matter hereof, either oral or
written, between the parties other than as set forth herein. No subsequent
alteration, amendment, change or addition to this Agreement shall be binding
upon the parties hereto unless reduced to writing and signed by the respective
authorized officers of the parties.
10.9 HEADINGS. The captions contained in this Agreement are not a part
of this Agreement, but are merely guides or labels to assist in locating and
reading the several Articles hereof.
10.10 WAIVER. Except as specifically provided for herein, the waiver
from time to time by either of the parties of any of their rights or their
failure to exercise any remedy shall not operate or be construed as a continuing
waiver of the same rights or remedies or of any other of such party's rights or
remedies provided in this Agreement.
10.11 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
16.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
CYTEL CORPORATION ELAN INTERNATIONAL SERVICES LTD.
By:____________________________ By:____________________________
Name:__________________________ Name:__________________________
Title:_________________________ Title:_________________________
STOCK PURCHASE AGREEMENT
<PAGE>
EXHIBIT A
SCHEDULE OF EXCEPTIONS
None
<PAGE>
ELAN INTERNATIONAL SERVICES LTD.
102 St. James Court
Flatt Smiths, FL04 Bermuda
CYTEL CORPORATION November 10, 1998
9393 Towne Center Drive
San Diego, California 92121
Gentlemen:
Reference is hereby made to the Sublicense and Option Agreement by and
between Cytel Corporation ("Cytel") and Elan International Services Ltd.
("Elan"), dated as of July 22, 1998, as amended and restated on November 10,
1998 (the "Agreement"). Capitalized terms used herein shall have the meanings
set forth in the Agreement.
In connection with the Agreement, we have agreed that as of July 22,
1998 Elan is entitled to appoint one representative to Cytel's Board of
Directors, subject to certain conditions. Accordingly, in consideration of the
mutual agreements and representations contained herein and in the Agreement, we
agree that:
(i) So long as Elan and its Affiliates continue to own at least 5% of
the outstanding shares of Cytel's Common Stock, Elan shall be entitled to
appoint one representative (which representative shall be approved by Cytel's
Board of Directors, such approval not to be unreasonably withheld) to Cytel's
Board of Directors, and, in connection therewith, Cytel shall give such
representative copies of all notices, minutes, consents and other materials,
financial or otherwise (including annual budgets and operating plans), which
Cytel provides to its Board of Directors.
For purposes of this Letter, "Affiliate" means any corporation or other
entity which controls, is controlled by, or is under common control with, a
party. A corporation or other entity shall be regarded as in control of another
corporation or entity if it owns or directly or indirectly controls more than
50% of the voting securities or other ownership interest of the other
corporation or entity, or if it possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of the corporation
or other entity;
<PAGE>
(ii) except as herein specifically amended or supplemented, the
Agreement shall continue in full force in accordance with its terms; and
(iii) the provisions of this letter shall be deemed by the parties to
be effective as of July 22, 1998, NUNC PRO TUNC.
Please acknowledge your agreement to the foregoing by executing this
letter in the space provided below.
Very truly yours,
ELAN INTERNATIONAL SERVICES LTD.
By: /s/ Kevin Insley
-------------------------------
Name: Kevin Insley
Title: President
Accepted and Agreed to as of
the date first above written:
CYTEL CORPORATION
By: /s/ Virgil Thompson
--------------------------------
Name: Virgil Thompson
Title: President and CEO
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