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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 1, 1999
EPIMMUNE INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
0-19591 35-0245076
(Commission File No.) (IRS Employer Identification No.)
5820 NANCY RIDGE DRIVE
SAN DIEGO, CA 92121
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (619) 860-2500
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On July 1, 1999, Cytel Corporation (the "Company") effected a merger of
its subsidiary, Epimmune Inc. (the "Subsidiary"), into the Company (the
"Merger"). Immediately prior to the Merger, the Company completed a series of
transactions (the "Exchange Transactions") in which it (i) transferred all of
the outstanding shares of the Subsidiary's Series B-1 Preferred Stock then held
by the Company to G.D. Searle & Co. ("Searle") in exchange for all of the
outstanding shares of the Company's Series B Preferred Stock, (ii) issued
859,622 shares of the Company's Series S Preferred Stock and 549,622 shares of
the Company's Series S-1 Preferred Stock to Searle in exchange for all
outstanding shares of the Subsidiary's Series B Preferred Stock and Series B-1
Preferred Stock and (iii) issued a total of 1,027,786 shares of the Company's
Common Stock to the holders of Common Stock of the Subsidiary in exchange for
all outstanding shares of the Subsidiary's Common Stock. Following the Exchange
Transactions, the Company held all of the outstanding shares of Common Stock and
Preferred Stock of the Subsidiary and completed the Merger, in which the
Subsidiary merged into the Company pursuant to Section 253 of the Delaware
General Corporation Law, with the Company remaining as the surviving entity. In
connection with the Merger, the Company assumed all of the outstanding options
to purchase Common Stock of the Subsidiary, changed its name from Cytel
Corporation to Epimmune Inc. and changed its trading symbol to "EPMN."
A description of the Merger is set forth in the Press Release issued by
the Company, dated as of July 1, 1999, a copy of which is attached hereto as
Exhibit 99.1.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION, EXHIBITS.
(a) FINANCIAL STATEMENTS
Not applicable.
(b) PRO FORMA FINANCIAL INFORMATION
Not applicable.
(c) EXHIBITS
2.1 Certificate of Ownership and Merger, filed with the
Secretary of State of the State of Delaware on July 1,
1999
3.1 Certificate of Designations of the Series S and Series
S-1 Preferred Stock filed with the Secretary of State of
the State of Delaware on June 29, 1999
10.1 Form of Common Stock Exchange Agreement
10.2 Preferred Stock Exchange Agreement, dated July 1, 1999,
by and between the Company and G.D. Searle & Co.
2.
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10.3 Investor Rights Agreement, dated July 1, 1999 by and
between the Company and G.D. Searle & Co.
99.1 Press Release, dated as of July 1, 1999 entitled
"Combination of Epimmune and Cytel Completed; Nasdaq
Trading to Begin Under New Symbol, EPMN."
3.
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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 hereunto duly authorized.
EPIMMUNE INC.
Dated: July 15, 1999 By: /s/ DEBORAH SCHUEREN
-------------------------------------
Deborah Schueren
President and Chief Executive Officer
4.
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INDEX OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
2.1 Certificate of Ownership and Merger, filed with the Secretary of
State of the State of Delaware on July 1, 1999
3.1 Certificate of Designations of the Series S and Series S-1
Preferred Stock, filed with the Secretary of State of the State
of Delaware on June 29, 1999
10.1 Form of Common Stock Exchange Agreement
10.2 Preferred Stock Exchange Agreement, dated July 1, 1999, by and
between the Company and G.D. Searle & Co.
10.3 Investor Rights Agreement, dated July 1, 1999, by and between
the Company and G.D. Searle & Co.
99.1 Press Release, dated as of July 1, 1999 entitled "Combination of
Epimmune and Cytel Completed; Nasdaq Trading to Begin Under New
Symbol, EPMN."
</TABLE>
5.
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EXHIBIT 2.1
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
EPIMMUNE INC.
INTO
CYTEL CORPORATION
- --------------------------------------------------------------------------------
Pursuant to Section 253 of the
General Corporation Law of the State of Delaware
- --------------------------------------------------------------------------------
CYTEL CORPORATION, a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Company"),
DOES HEREBY CERTIFY:
FIRST: That this Company owns all of the outstanding shares of Epimmune
Inc., a corporation organized and existing under the General Corporation Law
(the "GCL") of the State of Delaware.
SECOND: That this Company, by the following resolutions of its Board of
Directors, duly adopted at a meeting held on June 14, 1999, determined to merge
Epimmune Inc. into itself on the terms and conditions set forth in such
resolutions:
NOW, THEREFORE, BE IT RESOLVED, that the Company's wholly-owned
subsidiary, Epimmune Inc. ("Epimmune"), be merged into the Company (the
"Merger") and that the Company shall be the surviving corporation in the Merger
pursuant to Section 253 of the GCL;
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RESOLVED FURTHER, that the Merger shall become effective as of 5:00 p.m.
Eastern Daylight Time on the date of the filing of a Certificate of Ownership
and Merger in the form reviewed and approved by the Board at this meeting with
the Secretary of State of the State of Delaware in accordance with Section 253
of the GCL;
RESOLVED FURTHER, that upon the effectiveness of the Merger, the Company
shall assume all of the liabilities and obligations of Epimmune and all options
to purchase shares of Common Stock of Epimmune shall become options to purchase
the same number of shares of Common Stock of the Company (with no other changes
to the terms and conditions of such options).
RESOLVED FURTHER, that upon the effectiveness of the merger, the name of
the Company shall be changed to Epimmune Inc. and Article I of the Company's
Amended and Restated Certificate of Incorporation shall thereby be amended to
read as follows:
"I.
The name of the Corporation is Epimmune Inc."
RESOLVED FURTHER, except as stated in the prior resolution, the Amended
and Restated Certificate of Incorporation of the Company shall remain unchanged
by the Merger and in full force and effect until further amended in accordance
with the GCL;
RESOLVED FURTHER, that the proper officers of the Company be, and each
of them hereby is authorized, empowered and directed to take any action in the
name and on behalf of the Company which such officer deems necessary or
appropriate to confirm that all taxes imposed by the Delaware Franchise Tax
Board have been paid or secured with respect to Epimmune, and to take all such
further action as such officer or officers may deem necessary or advisable in
connection therewith; and
RESOLVED FURTHER, that the officers of the Company be, and each of them
hereby is, authorized and directed in the name and on behalf of the Company or
otherwise, to make all such arrangements, to do and perform all such acts and
things, and to execute and deliver all such officers' certificates and such
other instruments and documents as they may deem necessary or appropriate in
order to effectuate fully the purpose of each and all the foregoing resolutions
(hereby ratifying and confirming any and all actions taken heretofore and
hereafter to accomplish such purposes, all or singular).
2.
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IN WITNESS WHEREOF, Cytel Corporation has caused this certificate to be
signed by Robert L. Roe, M.D., its authorized officer, on July 1, 1999.
CYTEL CORPORATION
By: /s/ Robert L. Roe, M.D.
-------------------------------------
Robert L. Roe, M.D.
Acting President and
Chief Operating Officer
3.
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EXHIBIT 3.1
CERTIFICATE OF DESIGNATIONS
OF THE
SERIES S AND S-1 PREFERRED STOCK
(PAR VALUE $.01 PER SHARE)
OF
CYTEL CORPORATION
PURSUANT TO SECTION 151 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
CYTEL CORPORATION, a company organized and existing under the General
Corporation Law of the State of Delaware (the "Company"), in accordance with the
provisions of Section 103 thereof, and pursuant to Section 151 thereof, DOES
HEREBY CERTIFY:
That the Certificate of Incorporation of the Company (the "Certificate
of Incorporation") authorizes the creation of up to 10,000,000 shares of the
Company's preferred stock, par value $.01 per share (such preferred stock,
together with all other preferred stock of the Company the creation of which is
in the future authorized by the Certificate of Incorporation, referred to herein
as the "Preferred Stock"); and
That pursuant to the authority conferred upon the Board of Directors
(the "Board") by the Certificate of Incorporation of the Company, the Board on
June __, 1999, approved the creation, issuance and the voting powers of shares
of Preferred Stock to be issued in two Series and adopted the following
resolution creating a series of 859,666 shares of Preferred Stock and a series
of 549,622 shares of Preferred Stock, each designated as set forth below:
RESOLVED, that pursuant to the authority expressly granted to and vested
in the Board by provisions of the Certificate of Incorporation of the Company
and the General Corporation Law of the State of Delaware, the issuance of two
series of Preferred Stock, which shall consist of 859,666 shares and 549,622
shares, respectively, of the 10,000,000 shares of Preferred Stock which the
Company now has authority to issue, be, and the same hereby is, authorized, and
the Board hereby fixes the powers, designations, preferences and relative
participating, optional or other special rights, and the qualifications,
limitations or restrictions thereof, of the shares of each such series (in
addition to the powers, designations, preferences and relative participating,
optional or other special rights, and the qualifications, limitations or
restrictions thereof, set forth in
<PAGE> 2
the Certificate of Incorporation which may be applicable to the Preferred Stock)
authorized by this resolution as follows:
1. DESIGNATION OF SERIES S AND S-1 PREFERRED STOCK. The designation
of such series of Preferred Stock authorized by this resolution shall be
Series S Preferred Stock (the "Series S Preferred"), which shall consist
of 859,666 shares, and Series S-1 Preferred Stock (the "Series S-1
Preferred"), which shall consist of 549,622 shares. The Series S
Preferred and Series S-1 Preferred are issuable solely in whole shares
that shall entitle the holder thereof to exercise the voting rights, to
participate in the distributions and to have the benefit of all other
rights of holders of Series S Preferred and Series S-1 Preferred, as set
forth herein and in the Certificate of Incorporation.
2. DIVIDEND RIGHTS OF SERIES S PREFERRED AND SERIES S-1 PREFERRED.
So long as any shares of Series S Preferred or Series S-1 Preferred, as
applicable, shall be outstanding, no dividend, whether in cash or
property, shall be paid or declared nor shall any other distribution be
made, on any Common Stock (other than any dividend or distribution
payable solely in Common Stock of the Company), unless a dividend is
paid with respect to all outstanding shares of Series S Preferred and
Series S-1 Preferred in an amount per share (on an as-if-converted to
Common Stock basis) equal to the amount paid or set aside for each share
of Common Stock.
3. LIQUIDATION PREFERENCE.
3.1 SERIES S PREFERRED AND SERIES S-1 PREFERRED. In the
event of any voluntary or involuntary liquidation, dissolution or winding up of
the Company, before any payment shall be made in respect of any other class or
series of stock ranking junior to the Series S Preferred or Series S-1
Preferred, (i) the holders of Series S Preferred then outstanding shall be
entitled to be paid, pro rata, out of the assets of the Company available for
distribution to its stockholders, whether from capital, surplus or earnings, an
amount equal to $7.0958 per share (the "Series S Original Issue Price") (as
adjusted for any combinations, consolidations, stock distributions, stock
dividends or other recapitalizations with respect to such shares) plus any
declared but unpaid dividends on such shares, and (ii) the holders of Series S-1
Preferred then outstanding shall be entitled to be paid, pro rata, out of the
assets of the Company available for distribution to its stockholders, whether
from capital, surplus or earnings, an amount equal to $7.0958 per share (the
"Series S-1 Original Issue Price") (as adjusted for any combinations,
consolidations, stock distributions, stock dividends or other recapitalizations
with respect to such shares) plus any declared but unpaid dividends on such
shares. If, upon liquidation, dissolution or winding up of the Company, the
assets of the Company available for distribution to its stockholders shall be
insufficient to pay the holders of the
2.
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Series S Preferred and Series S-1 Preferred the full amounts to which they shall
be entitled as set forth above, then the entire assets of the Company legally
available for distribution shall be distributed pro rata among the holders of
the Series S Preferred and Series S-1 Preferred in proportion to the
preferential amount each such holder would otherwise be entitled to receive.
After setting apart or paying in full the preferential amounts due the holders
of the Series S Preferred and Series S-1 Preferred, the holders of the Series S
Preferred and Series S-1 Preferred will not be entitled to any further
participation in any distribution of the assets of the Company, and the entire
remaining assets of the Company legally available for distribution, if any,
shall be distributed among the holders of Common Stock in proportion to the
shares of Common Stock then held by them.
3.2 MERGERS, CONSOLIDATIONS AND ASSET SALES. The following
events (i) shall be deemed a liquidation, dissolution or winding up of the
Company as those terms are used in this Section 3 with respect to the Series S
Preferred, and (ii) shall not be deemed a liquidation, dissolution or winding up
of the Company as those terms are used in this Section 3 with respect to the
Series S-1 Preferred:
(a) Any consolidation or merger of the Corporation
with or into any other corporation or other entity or person, or any other
corporate reorganization, in which the stockholders of the Company immediately
prior to such consolidation, merger or reorganization, own less than fifty
percent (50%) of the Company's voting power immediately after such
consolidation, merger or reorganization, or any transaction or series of related
and integrated transactions in which in excess of fifty percent (50%) of the
Company's voting power is transferred (an "Acquisition"); or
(b) a sale, lease or other disposition (but not
including a transfer or lease by pledge or mortgage to a bona fide lender) of
all or substantially all of the assets of the Company (an "Asset Transfer").
4. CONVERSION PRIVILEGES.
4.1 RIGHTS OF CONVERSION. Subject to the other provisions of
this Certificate of Designations, each share of Series S Preferred and Series
S-1 Preferred shall be convertible, without payment of any additional
consideration by the holder thereof and at the option of such holder, into such
number of fully paid and nonassessable shares of Common Stock as is determined
by dividing the Series S Original Issue Price by the Series S Conversion Price
(as defined below) or the Series S-1 Original Issue Price by the Series S-1
Conversion Price (as defined below), as applicable, in effect at the time of
conversion, at any time and from time to time, at the office of the Company or
any transfer agent for such stock. The price at which shares of Common Stock
shall be deliverable upon conversion of Series S Preferred (the "Series S
Conversion Price") shall
3.
<PAGE> 4
initially equal $7.0958 per share, subject to adjustment as set forth below, and
the price at which shares of Common Stock shall be deliverable upon conversion
of Series S-1 Preferred (the "Series S-1 Conversion Price") shall initially
equal $7.0958 per share, subject to adjustment as set forth below.
4.2 AUTOMATIC CONVERSION. Each share of Series S and Series
S-1 Preferred shall automatically be converted into shares of Common Stock,
based on the then-effective Series S Conversion Price or Series S-1 Conversion
Price, as applicable, upon the closing of a financing, whether public or
private, in which the Company receives gross proceeds of at least $15 million
from any person or entity other than G.D. Searle & Co. or any of its affiliates
(collectively, "Searle").
4.3 MECHANICS OF CONVERSION. Before any holder of Series S
Preferred or Series S-1 Preferred shall be entitled to convert the same into
shares of Common Stock pursuant to Section 4(a) hereof, and before the Company
shall be obligated to issue certificates for shares of Common Stock upon the
automatic conversion of the Series S Preferred and Series S-1 Preferred pursuant
to Section 4(b) hereof, such holder shall surrender the certificate or
certificates thereof, duly endorsed, at the office of the Company or of any
transfer agent for such stock, and shall give written notice to the Company at
such office that such holder elects to convert the same and shall state therein
the name or names in which such holder wishes the certificate or certificates
for shares of Common Stock to be issued (except that no such written notice of
intent to convert shall be necessary in the event of an automatic conversion
pursuant to Section 4(b) hereof). The Company shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Series S
Preferred or Series S-1 Preferred or its nominee or nominees, a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled as aforesaid, together with cash in lieu of any fractional shares.
Such conversion shall be deemed to have been made immediately prior to the close
of business on the date of surrender of the shares of Series S Preferred or
Series S-1 Preferred to be converted, except that, in the case of an automatic
conversion pursuant to Section 4(b) hereof, such conversion shall be deemed to
have been made on the date of the financing referred to in Section 4(b) hereof.
The person or persons entitled to receive the shares of Common Stock issuable
upon such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on such date.
4.4 ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the Company
shall at any time or from time to time after the date that the first share of
Series S Preferred and S-1 Preferred is issued (the "Original Issue Date")
effect a subdivision of the outstanding Common Stock without a corresponding
subdivision of the Preferred Stock, the Series S Conversion Price and Series S-1
Conversion Price in effect immediately before that subdivision shall be
proportionately decreased. Conversely, if the Company shall at any time or from
time to time after the Original Issue Date combine
4.
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the outstanding shares of Common Stock into a smaller number of shares without a
corresponding combination of the Preferred Stock, the Series S Conversion Price
and Series S-1 Conversion Price in effect immediately before the combination
shall be proportionately increased. Any adjustment under this Section 4(d) shall
become effective at the close of business on the date the subdivision or
combination becomes effective.
4.5 ADJUSTMENT FOR COMMON STOCK DIVIDENDS AND DISTRIBUTIONS.
If the Company at any time or from time to time after the Original Issue Date
makes, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in additional
shares of Common Stock, in each such event the Series S Conversion Price and
Series S-1 Conversion Price that are then in effect shall be decreased as of the
time of such issuance or, in the event such record date is fixed, as of the
close of business on such record date, by multiplying the Series S Conversion
Price and Series S-1 Conversion Price then in effect by a fraction (i) the
numerator of which is the total number of shares of Common Stock issued and
outstanding immediately prior to the time of such issuance or the close of
business on such record date, and (ii) the denominator of which is the total
number of shares of Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date plus the
number of shares of Common Stock issuable in payment of such dividend or
distribution; provided, however, that if such record date is fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Series S Conversion Price and Series S-1 Conversion Price
shall be recomputed accordingly as of the close of business on such record date
and thereafter the Series S Conversion Price and Series S-1 Conversion Price
shall be adjusted pursuant to this Section 4(e) to reflect the actual payment of
such dividend or distribution.
4.6 ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. If
the Company at any time or from time to time after the Original Issue Date
makes, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in securities of
the Company other than shares of Common Stock, in each such event provision
shall be made so that the holders of the Series S Preferred and Series S-1
Preferred shall receive upon conversion thereof, in addition to the number of
shares of Common Stock receivable thereupon, the amount of other securities of
the Company which they would have received had their Series S Preferred and
Series S-1 Preferred been converted into Common Stock on the date of such event
and had they thereafter, during the period from the date of such event to and
including the conversion date, retained such securities receivable by them as
aforesaid during such period, subject to all other adjustments called for during
such period under this Section 4 with respect to the rights of the holders of
the Series S Preferred and Series S-1 Preferred or with respect to such other
securities by their terms.
5.
<PAGE> 6
4.7 ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND
SUBSTITUTION. If at any time or from time to time after the Original Issue Date,
the Common Stock issuable upon the conversion of the Series S Preferred or
Series S-1 Preferred is changed into the same or a different number of shares of
any class or classes of stock, whether by recapitalization, reclassification or
otherwise (other than a subdivision or combination of shares or stock dividend
or a reorganization, merger, consolidation or sale of assets provided for
elsewhere in this Section 4 or in Section 2 above), in any such event each
holder of Series S Preferred or Series S-1 Preferred shall have the right
thereafter to convert such stock into the kind and amount of stock and other
securities and property receivable upon such recapitalization, reclassification
or other change by holders of the maximum number of shares of Common Stock into
which such shares of Series S Preferred or Series S-1 Preferred could have been
converted immediately prior to such recapitalization, reclassification or
change, all subject to further adjustment as provided herein or with respect to
such other securities or property by the terms thereof.
4.8 REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF
ASSETS. If at any time or from time to time after the Original Issue Date, there
is a capital reorganization of the Common Stock (other than a subdivision or
combination of shares or stock dividend or a reorganization, merger,
consolidation or sale of assets provided for elsewhere in this Section 4 or,
with respect to the Series S Preferred, an Acquisition or Asset Transfer
provided for in Section 3), as a part of such capital reorganization, provision
shall be made so that the holders of the Series S Preferred or Series S-1
Preferred shall thereafter be entitled to receive upon conversion of the Series
S Preferred or Series S-1 Preferred the number of shares of stock or other
securities or property of the Company to which a holder of the number of shares
of Common Stock deliverable upon conversion would have been entitled on such
capital reorganization, subject to adjustment in respect of such stock or
securities by the terms thereof. In any such case, appropriate adjustment shall
be made in the application of the provisions of this Section 4 with respect to
the rights of the holders of Series S Preferred or Series S-1 Preferred after
the capital reorganization to the end that the provisions of this Section 4
(including adjustment of the Series S Conversion Price or Series S-1 Conversion
Price then in effect and the number of shares issuable upon conversion of the
Series S Preferred or Series S-1 Preferred) shall be applicable after that event
and be as nearly equivalent as practicable.
4.9 SALE OF SHARES BELOW SERIES S CONVERSION PRICE.
(a) If the Company issues or sells, or is deemed by
the express provisions of this Section 4(i) to have issued or sold, Additional
Shares of Common Stock (as hereinafter defined), other than as a dividend or
other distribution on any class of stock as provided in Section 4(e) above, and
other than a subdivision or combination of shares of Common Stock as provided in
Section 4(d) above, for an Effective Price (as hereinafter defined) less than
the then effective Series S Conversion Price then, and in
6.
<PAGE> 7
each such case, the then existing Series S Conversion Price shall be reduced, as
of the opening of business on the date of such issue or sale, to a price
determined by multiplying the Series S Conversion Price by a fraction (1) the
numerator of which shall be (A) the number of shares of Common Stock deemed
outstanding (as defined below) immediately prior to such issue or sale, plus (B)
the number of shares of Common Stock which the aggregate consideration received
(as determined by the provisions of Section 4(i)(ii)) by the Company for the
total number of Additional Shares of Common Stock so issued would purchase at
such Series S Conversion Price, and (2) the denominator of which shall be (A)
the number of shares of Common Stock deemed outstanding (as defined below)
immediately prior to such issue or sale plus (B) the total number of Additional
Shares of Common Stock so issued. For the purposes of the preceding sentence,
the number of shares of Common Stock deemed to be outstanding as of a given date
shall be the sum of (a) the number of shares of Common Stock actually
outstanding, (b) the number of shares of Common Stock into which the then
outstanding shares of Series S Preferred could be converted if fully converted
on the day immediately preceding the given date, and (c) the number of shares of
Common Stock which could be obtained through the exercise or conversion of all
other rights, options and convertible securities on the day immediately
preceding the given date.
(b) For the purpose of making any adjustment
required under this Section 4(i), the consideration received by the Company for
any issue or sale of securities shall (A) to the extent it consists of cash, be
computed at the net amount of cash received by the Company after deduction of
any underwriting or similar commissions, compensation or concessions paid or
allowed by the Company in connection with such issue or sale but without
deduction of any expenses payable by the Company, (B) to the extent it consists
of property other than cash, be computed at the fair value of that property as
determined in good faith by the Board of Directors, and (C) if Additional Shares
of Common Stock, Convertible Securities (as hereinafter defined) or rights or
options to purchase either Additional Shares of Common Stock or Convertible
Securities are issued or sold together with other stock or securities or other
assets of the Company for a consideration which covers both, be computed as the
portion of the consideration so received that may be reasonably determined in
good faith by the Board of Directors to be allocable to such Additional Shares
of Common Stock, Convertible Securities or rights or options.
(c) For the purpose of the adjustment required under
this Section 4(i), if the Company issues or sells any rights or options for the
purchase of, or stock or other securities convertible into, Additional Shares of
Common Stock (such convertible stock or securities being herein referred to as
"Convertible Securities") and if the Effective Price of such Additional Shares
of Common Stock is less than the Series S Conversion Price, the Company shall be
deemed to have issued at the time of the issuance of such rights or options or
Convertible Securities the maximum number of Additional
7.
<PAGE> 8
Shares of Common Stock issuable upon exercise or conversion thereof and to have
received as consideration for the issuance of such shares an amount equal to the
total amount of the consideration, if any, received by the Company for the
issuance of such rights or options or Convertible Securities, plus, in the case
of such rights or options, the minimum amounts of consideration, if any, payable
to the Company upon the exercise of such rights or options, plus, in the case of
Convertible Securities, the minimum amounts of consideration, if any, payable to
the Company (other than by cancellation of liabilities or obligations evidenced
by such Convertible Securities) upon the conversion thereof; provided that if,
in the case of Convertible Securities, the minimum amounts of such consideration
cannot be ascertained, but are a function of antidilution or similar protective
clauses, the Company shall be deemed to have received the minimum amounts of
consideration without reference to such clauses; provided further that if the
minimum amount of consideration payable to the Company upon the exercise or
conversion of rights, options or Convertible Securities is reduced over time or
on the occurrence or non-occurrence of specified events other than by reason of
antidilution adjustments, the Effective Price shall be recalculated using the
figure to which such minimum amount of consideration is reduced; provided
further that, if the minimum amount of consideration payable to the Company upon
the exercise or conversion of such rights, options or Convertible Securities is
subsequently increased, the Effective Price shall be again recalculated using
the increased minimum amount of consideration payable to the Company upon the
exercise or conversion of such rights, options or Convertible Securities. No
further adjustment of the Series S Conversion Price, as adjusted upon the
issuance of such rights, options or Convertible Securities, shall be made as a
result of the actual issuance of Additional Shares of Common Stock on the
exercise of any such rights or options or the conversion of any such Convertible
Securities. If any such rights or options or the conversion privilege
represented by any such Convertible Securities shall expire without having been
exercised, the Series S Conversion Price as adjusted upon the issuance of such
rights, options or Convertible Securities shall be readjusted to the Series S
Conversion Price which would have been in effect had an adjustment been made on
the basis that the only Additional Shares of Common Stock so issued were the
Additional Shares of Common Stock, if any, actually issued or sold on the
exercise of such rights or options or rights of conversion of such Convertible
Securities, and such Additional Shares of Common Stock, if any, were issued or
sold for the consideration actually received by the Company upon such exercise,
plus the consideration, if any, actually received by the Company for the
granting of all such rights or options, whether or not exercised, plus the
consideration received for issuing or selling the Convertible Securities
actually converted, plus the consideration, if any, actually received by the
Company (other than by cancellation of liabilities or obligations evidenced by
such Convertible Securities) on the conversion of such Convertible Securities,
provided that such readjustment shall not apply to prior conversions of Series S
Preferred.
8.
<PAGE> 9
(d) "Additional Shares of Common Stock" shall mean
all shares of Common Stock issued by the Company or deemed to be issued pursuant
to this Section 4(i), whether or not subsequently reacquired or retired by the
Company, other than (A) shares of Common Stock issued upon conversion of the
Series S Preferred or Series S-1 Preferred; (B) shares of Common Stock and/or
options, warrants or other Common Stock purchase rights, and the Common Stock
issued pursuant to such options, warrants or other rights (as adjusted for any
stock dividends, combinations, splits, recapitalizations and the like) after the
Original Issue Date to employees, officers or directors of, or consultants or
advisors to, the Company or any subsidiary pursuant to stock purchase or stock
option plans or other arrangements that are approved by the Board or to former
employees, officers or directors of the Company or any subsidiary in connection
with severance arrangements that are approved by the Board; (C) shares of Common
Stock issued pursuant to the exercise of options, warrants or convertible
securities outstanding as of the Original Issue Date issued or granted pursuant
to stock purchase or stock option plans or other arrangements that were approved
by the Board or to former employees, officers or directors of the Company or any
subsidiary in connection with severance arrangements that were approved by the
Board; or (D) rights issued pursuant to the Company's Share Purchase Rights Plan
and shares of Common Stock issued pursuant thereto. The "Effective Price" of
Additional Shares of Common Stock shall mean the quotient determined by dividing
the total number of Additional Shares of Common Stock issued or sold, or deemed
to have been issued or sold by the Company under this Section 4(i), into the
aggregate consideration received, or deemed to have been received by the Company
for such issue under this Section 4(i), for such Additional Shares of Common
Stock.
4.10 NO IMPAIRMENT. The Company will not, by amendment of its
Certificate of Incorporation, by filing a Certificate of Designation or through
any reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Company but will at all times in good faith assist in
the carrying out of all the provisions of this Section 4 and in the taking of
all such action as may be necessary or appropriate in order to protect the
conversion rights of the holders of Preferred Stock against impairment.
4.11 CERTIFICATES AS TO ADJUSTMENTS. Upon the occurrence of
each adjustment or readjustment of the number of shares of Common Stock issuable
upon conversion of a share of Series S Preferred or Series S-1 Preferred
pursuant to this Section 4, the Company at its expense shall promptly compute
such adjustment or readjustment in accordance with the terms hereof and prepare
and furnish to each holder of Series S Preferred or Series S-1 Preferred a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The Company
shall, upon the written request at any time of any holder of Series
9.
<PAGE> 10
S Preferred or Series S-1 Preferred, furnish or cause to be furnished to such
holder a like certificate prepared by the Company setting forth (i) such
adjustments and readjustments, (ii) the Series S Conversion Price or Series S-1
Conversion Price at the time in effect, and (iii) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the conversion of the Series S Preferred or Series S-1 Preferred.
4.12 NOTICES OF RECORD DATE. In the event of any taking by
the Company of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any security or
right convertible into or entitling the holder thereof to receive additional
shares of Common Stock, or any right to subscribe for, purchase or otherwise
acquire any shares of stock of any class or any other securities or property, or
to receive any other right, the Company shall mail to each holder of Series S
Preferred and Series S-1 Preferred at least 10 days prior to the date specified
therein, a notice specifying the date on which any such record is to be taken
for the purpose of such dividend, distribution, security or right, and the
amount and character of such dividend, distribution, security or right.
4.13 ISSUE TAXES. The holders of Series S Preferred and
Series S-1 Preferred shall pay any and all issue, transfer and other taxes that
may be payable in respect of any issue or delivery of shares of Common Stock on
conversion of shares of Series S Preferred and Series S-1 Preferred pursuant
hereto.
4.14 RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Company shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series S Preferred and Series S-1 Preferred,
such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of the Series S
Preferred and Series S-1 Preferred; and if at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient to effect the
conversion of all then outstanding shares of the Series S Preferred and Series
S-1 Preferred, the Company will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose, including, without limitation, engaging in best efforts to obtain the
requisite stockholder approval of any necessary amendment to the Certificate of
Incorporation. All shares of Common Stock which are issuable upon such
conversion shall, when issued, be duly and legally issued, fully paid and
nonassessable and free of all taxes, liens and charges.
4.15 FRACTIONAL SHARES. No fractional share shall be issued
upon the conversion of any share or shares of Series S Preferred or Series S-1
Preferred. All shares
10.
<PAGE> 11
of Common Stock (including fractions thereof) issuable upon conversion of more
than one share of Series S Preferred or Series S-1 Preferred by a holder thereof
shall be aggregated for purposes of determining whether the conversion would
result in the issuance of any fractional share. If, after the aforementioned
aggregation, the conversion would result in the issuance of a fraction of a
share of Common Stock, the Company shall, in lieu of issuing any fractional
share, pay the holder otherwise entitled to such fraction a sum in cash equal to
the fair market value of such fraction on the date of conversion (as determined
in good faith by the Board).
4.16 NOTICES. Any notice required by the provisions of this
Section 4 shall be in writing and shall be deemed effectively given: (i) upon
personal delivery to the party to be notified, (ii) when sent by confirmed
facsimile if sent during normal business hours of the recipient; if not, then on
the next business day, (iii) five days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (iv) one business
day after deposit with a nationally recognized overnight courier, specifying
next day delivery, with written verification of receipt. All notices shall be
addressed to each holder of record at the address of such holder appearing on
the books of the Company.
5. VOTING RIGHTS.
5.1 Except as provided in this Section 5 or as otherwise
from time to time required by law, the Series S Preferred and Series S-1
Preferred shall vote together with the Common Stock as a single class. The
holder of each share of Series S Preferred and Series S-1 Preferred shall be
entitled to that number of votes equal to the number of shares of Common Stock
into which such share would (on the applicable record date) then be converted
upon the application of Section 4(a) above and shall be entitled to notice of
all stockholders' meetings in accordance with the By-laws of the Company.
5.2 Notwithstanding anything contained in Section 5(a) to
the contrary, if on any given day any shares of Series S Preferred and Series
S-1 Preferred held by Searle (the "Shares") when aggregated with all other
shares of voting capital stock of the Company held by Searle and its affiliates
would (if not for this Section 5(b)) entitle Searle and its affiliates to vote
more than 19.9% of the outstanding Common Stock of the Company (assuming the
conversion of all such Shares into Common Stock of the Company pursuant to the
respective terms thereof), then for such day the number of Shares which cause
such 19.9% threshold to be exceeded shall be entitled to no vote.
Shares which for such day shall be entitled to no vote shall be
identified as follows: (i) as between Shares which are Series S Preferred and
Shares which are Series S-1 Preferred, in the same proportion as the proportion
between the total number of shares of Series S Preferred held by G.D. Searle &
Co. and its affiliates on such day and
11.
<PAGE> 12
the total number of shares of Series S-1 Preferred held by G.D. Searle & Co. and
its affiliates on such day; and (ii) as between G.D. Searle & Co. and each of
its affiliates, first up to all Shares held by whichever of such entities holds
the most Shares on such day, second up to all Shares held by whichever of such
entitles holds the next-most Shares on such day, and so on.
12.
<PAGE> 13
IN WITNESS WHEREOF, Cytel Corporation has caused this Certificate to be
signed by its Acting President, this 29th day of June, 1999.
CYTEL CORPORATION
By: /s/ Robert L. Roe
-------------------------------------
Title: Acting President & C.O.O.
----------------------------------
13.
<PAGE> 1
EXHIBIT 10.1
COMMON STOCK EXCHANGE AGREEMENT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
1. Agreement To Issue and Exchange..............................................1
1.1 Authorization of Shares......................................................1
1.2 Issuance and Exchange........................................................1
2. Closing Date; Delivery.......................................................1
2.1 Closing......................................................................1
2.2 Delivery.....................................................................1
3. Representations And Warranties Of Cytel......................................1
3.1 Organization, Good Standing and Qualification................................2
3.2 Authorization; Due Execution.................................................2
3.3 Capitalization...............................................................2
3.4 Valid Issuance of Shares.....................................................3
4. Representations and Warranties of the Epimmune Stockholder...................3
4.1 Requisite Power and Authority................................................3
4.2 Purchase Entirely for Own Account............................................3
4.3 Disclosure of Information....................................................3
4.4 Investment Experience........................................................3
4.5 Restricted Securities........................................................4
5. Conditions of the Epimmune Stockholder's Obligations.........................4
5.1 Representations and Warranties...............................................4
5.2 Performance..................................................................4
5.3 Delivery of Shares...........................................................4
5.4 Proceedings and Documents....................................................4
6. Conditions of Cytel's Obligations............................................5
6.1 Representations and Warranties...............................................5
6.2 Performance..................................................................5
6.3 Exchange of Epimmune Stock...................................................5
6.4 Preferred Stock Exchange Agreement...........................................5
6.5 Stock Repurchase Agreement...................................................5
6.6 Common Stock Exchange Agreements.............................................5
6.7 Proceedings and Documents....................................................5
7. Miscellaneous................................................................5
7.1 Successors and Assigns.......................................................5
7.2 Governing Law................................................................6
7.3 Counterparts.................................................................6
7.4 Titles and Subtitles.........................................................6
7.5 Delays or Omissions..........................................................6
7.6 Notices......................................................................6
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
7.7 Finder's Fee.................................................................7
7.8 Amendments and Waivers.......................................................7
7.9 Severability.................................................................7
7.10 Entire Agreement.............................................................7
7.11 Further Assurances...........................................................7
7.12 Survival.....................................................................7
7.13 Pronouns.....................................................................7
</TABLE>
ii.
<PAGE> 4
COMMON STOCK EXCHANGE AGREEMENT
This COMMON STOCK EXCHANGE AGREEMENT (this "Agreement") is made as of
July __, 1999 (the "Effective Date"), by and among CYTEL CORPORATION, a Delaware
corporation ("Cytel") and ____________ (the "Epimmune Stockholder" and together
with the other holders of Epimmune Common Stock, the "Epimmune Stockholders").
WHEREAS, the Epimmune Stockholder owns ______ outstanding shares of
Common Stock, par value $0.001, of Epimmune Inc. (the "Epimmune Stock"); and
WHEREAS, Cytel desires to issue ______ shares of its Common Stock, par
value $0.01 (the "Cytel Stock"), to the Epimmune Stockholder in exchange for the
Epimmune Stock, and the Epimmune Stockholder desires to exchange the Epimmune
Stock for the Cytel Stock.
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. AGREEMENT TO ISSUE AND EXCHANGE.
1.1 AUTHORIZATION OF SHARES. Cytel has authorized the
issuance of up to an aggregate of 1,027,782 shares of Cytel Stock to the
Epimmune Stockholders.
1.2 ISSUANCE AND EXCHANGE. Subject to the terms and
conditions hereof, at the Closing (as hereinafter defined) Cytel hereby agrees
to issue to the Epimmune Stockholder the Cytel Stock in exchange for the
Epimmune Stock owned by the Epimmune Stockholder, and the Epimmune Stockholder
agrees to exchange the Epimmune Stock for the Cytel Stock.
2. CLOSING DATE; DELIVERY.
2.1 CLOSING. Subject to the terms of Sections 5 and 6, the
closing of the issuance and exchange of the Cytel Stock and the exchange of the
Epimmune Stock under this Agreement (the "Closing") shall be held on the date
hereof. The Closing shall take place at the offices of Cooley Godward LLP, 4365
Executive Drive, Suite 1100, San Diego, California 92121.
<PAGE> 5
2.2 DELIVERY. At the Closing, subject to the terms and
conditions hereof, Cytel shall deliver to the Epimmune Stockholder a certificate
dated the Closing Date and representing the number of shares of Cytel Stock to
be issued to such Epimmune Stockholder at the Closing, and the Epimmune
Stockholder shall deliver certificates representing the Epimmune Stock owned by
the Epimmune Stockholder to Cytel.
3. REPRESENTATIONS AND WARRANTIES OF CYTEL.
Cytel hereby represents and warrants to the Epimmune Stockholder
as of the Effective Date of this Agreement as follows:
3.1 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.
3.2 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 has the requisite corporate
power to issue and exchange the shares of Cytel Stock. All corporate action on
the part of Cytel, its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement has been taken. This
Agreement has been duly authorized, executed and delivered by Cytel, and, upon
due execution and delivery by the Epimmune Stockholder, 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.
3.3 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, of which 500,000 shares have been
designated Series A Preferred Stock, 659,898 shares have been designated Series
B Preferred Stock, 859,666 shares have been designated Series S Preferred Stock
and 549,622 shares have been designated Series S-1 Preferred Stock. As of the
close of business on the date of this Agreement, there were 4,997,343 shares of
Common Stock, no shares of Series A Preferred Stock and no shares of Series B
Preferred Stock issued and outstanding. Other than, as of the date of this
Agreement, (a) options to purchase 303,261 shares of Common Stock issued, and
529,508 shares of Common Stock available for future option grants, to certain
employees, officers, directors, consultants and advisors of Cytel, (b) 21,584
shares of Common Stock to be issued under Cytel's Employee Stock Purchase Plan,
(c) warrants to purchase 28,571 shares of Common Stock issued to certain
investors, (d) warrants to purchase
2.
<PAGE> 6
235,200 shares of Common Stock issued to certain executive officers pursuant to
their severance agreements and additional warrants to purchase Common Stock that
may be issued pursuant to such severance agreements, (e) those shares of Common
Stock to be issued under Cytel's Rights Agreement, (f) 859,666 shares of Series
S Preferred Stock and 549,622 shares of Series S-1 Preferred Stock to be issued
to G.D. Searle & Co. ("Searle") in exchange for the outstanding shares of Series
B Preferred Stock and Series B-1 Preferred Stock of Epimmune, (g) 423,283 shares
of Common Stock reserved for issuance upon the exercise of outstanding options
to purchase Common Stock of Epimmune that will be assumed by Cytel and (h) the
rights to purchase equity securities of Cytel granted to Searle, there are no
subscriptions, options, warrants, rights or agreements (contingent or
otherwise), including without limitation, conversion rights, preemptive rights,
rights of first refusal or other rights or agreements, providing for the
issuance by Cytel of Common Stock or other equity securities of Cytel. The
shares of Cytel Stock to be acquired by the Epimmune Stockholders will
constitute as of the Closing (a) approximately 13.8% of the outstanding shares
of Common Stock of Cytel on an as-converted, undiluted (except for assumed
conversion of all outstanding Preferred Stock) basis, and (b) approximately
11.5% of the outstanding Common Stock of Cytel on an as-converted, fully diluted
basis, assuming conversion of all outstanding Preferred Stock and exercise of
all outstanding rights, warrants and options to acquire Common Stock.
3.4 VALID ISSUANCE OF SHARES. The Cytel Stock when issued
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, free of all taxes, liens and charges (other than Cytel's
repurchase rights which shall for the Epimmune Stockholder be the same as
Epimmune's repurchase rights as to his or her Epimmune Shares), and, based in
part upon the representations of the Epimmune Stockholder in this Agreement,
will be issued in compliance with all applicable federal and state securities
laws.
4. REPRESENTATIONS AND WARRANTIES OF THE EPIMMUNE STOCKHOLDER.
The Epimmune Stockholder hereby makes the following
representations and warranties to Cytel, as of the Effective Date and the
Closing, as follows:
4.1 REQUISITE POWER AND AUTHORITY. The Epimmune Stockholder
has all necessary power and authority under all applicable provisions of the law
to execute and deliver this Agreement and to carry out its provisions and, at
the Closing, will have the requisite power to exchange the Epimmune Stock for
the Cytel Stock. All action on the part of the Epimmune Stockholder necessary
for the lawful execution and delivery of this Agreement has been taken. Upon
execution and delivery, this Agreement will be a
3.
<PAGE> 7
valid and binding obligation of the Epimmune Stockholder, 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.
4.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. The Cytel Stock to be
issued to such Epimmune Stockholder will be acquired for investment for the
Epimmune Stockholder's own account, not as a nominee or agent, and not with a
view to the resale or distribution of any part thereof, and the Epimmune
Stockholder has no present intention of selling, granting any participation in,
or otherwise distributing the same (subject to the disposition of the Epimmune
Stockholder's property being at all times within its control). By executing this
Agreement, the Epimmune Stockholder further represents that such Epimmune
Stockholder 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 Cytel Stock.
4.3 DISCLOSURE OF INFORMATION. The Epimmune Stockholder has
received all the information that he or she has requested and that he or she
considers necessary or appropriate for deciding whether to enter into this
Agreement and to acquire the Cytel Stock. The Epimmune Stockholder further
represents that he or she has had an opportunity to ask questions and receive
answers from Cytel regarding the terms and conditions of the offering of the
Cytel Stock.
4.4 INVESTMENT EXPERIENCE. The Epimmune Stockholder is an
investor in securities of companies in the development stage and acknowledges
that he or she is able to fend for himself or herself, can bear the economic
risk of his or her investment and has such knowledge and experience in financial
or business matters that he or she is capable of evaluating the merits and risks
of the investment in the Cytel Stock.
4.5 RESTRICTED SECURITIES. The Epimmune Stockholder
understands that (a) the Cytel Stock has not been registered under the
Securities Act by reason of a specific exemption therefrom, that such securities
must be held by him or her indefinitely and that the Epimmune Stockholder must,
therefore, bear the economic risk of such investment indefinitely, unless in
each case a subsequent disposition thereof is registered under the Securities
Act or is exempt from such registration; (b) each certificate representing the
Cytel Stock will be endorsed with the following legend:
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
4.
<PAGE> 8
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
and (c) Cytel will instruct any transfer agent not to register the transfer of
the Cytel Stock (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 any longer in order to establish
or enforce compliance with any provisions of the Securities Act or this
Agreement. In addition, each certificate will be subject to joint escrow
instructions pursuant to the Stock Repurchase Agreement to be entered pursuant
to Section 6.5.
5. CONDITIONS OF THE EPIMMUNE STOCKHOLDER'S OBLIGATIONS.
The obligations of the Epimmune Stockholder under this Agreement
are subject to the fulfillment on or before the Closing of each of the following
conditions, any of which may be waived by the Epimmune Stockholder (and which
conditions shall be deemed to have been fulfilled or waived upon the occurrence
of the Closing):
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Cytel contained in Section 3 shall be true and correct in all
material respects on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of said date.
5.2 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.
5.3 DELIVERY OF SHARES. Cytel shall have tendered delivery
of the Cytel Stock specified in Section 1 at the Closing.
5.4 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 the Epimmune Stockholder, and he or she shall have received all
such counterpart original and certified or other copies of such documents as he
or she may reasonably request.
6. CONDITIONS OF CYTEL'S OBLIGATIONS.
The obligations of Cytel under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by the
Epimmune
5.
<PAGE> 9
Stockholder, any of which may be waived by Cytel (and which conditions shall be
deemed to have been fulfilled or waived upon the occurrence of the Closing):
6.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Epimmune Stockholder contained in Section 4 hereof shall be
true and correct in all material respects on and as of the Closing with the same
effect as though such representations and warranties had been made on and as of
said date.
6.2 PERFORMANCE. The Epimmune Stockholder shall have
performed and complied with all agreements, obligations and conditions in this
Agreement, if any, that he or she is required to perform or comply with on or
before the Closing.
6.3 EXCHANGE OF EPIMMUNE STOCK. The Epimmune Stockholder
shall have tendered delivery of the Epimmune Stock at the Closing.
6.4 PREFERRED STOCK EXCHANGE AGREEMENT. The Preferred Stock
Exchange Agreement to be entered between Cytel and G.D. Searle & Co. shall have
been executed and delivered by the parties thereto so that the closing
thereunder occurs simultaneously with the closing.
6.5 STOCK REPURCHASE AGREEMENT. The Epimmune Stockholder
shall have entered into a Stock Repurchase Agreement giving Cytel the same
repurchase rights for the Cytel Stock as were applicable as to Epimmune for the
Epimmune Stock.
6.6 COMMON STOCK EXCHANGE AGREEMENTS. Each of the other
Epimmune Stockholders shall have entered into a Common Stock Exchange Agreement
substantially similar to this Agreement.
6.7 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.
7. MISCELLANEOUS.
7.1 SUCCESSORS AND ASSIGNS. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
heirs, personal representations, successors and assigns of the parties. Nothing
in this Agreement, express or implied, is intended to confer upon any party
other than the parties hereto or their respective heirs, personal
representations, successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
6.
<PAGE> 10
7.2 GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of California, as applied to contracts
executed and performed entirely within the State of California, without regard
to conflicts of laws rules.
7.3 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.
7.4 TITLES AND SUBTITLES. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.5 DELAYS OR OMISSIONS. It is agreed that no delay or
omission to exercise any right, power or remedy accruing to any party, upon any
breach, default or noncompliance by another party under this Agreement shall
impair any such right, power or remedy, nor shall it be construed to be a waiver
of any such breach, default or noncompliance, or any acquiescence therein, or of
or in any similar breach, default or noncompliance thereafter occurring. It is
further agreed that any waiver, permit, consent or approval of any kind or
character of any breach, default or noncompliance under this Agreement or any
waiver on such party's part of any provisions or conditions of this Agreement
must be in writing and shall be effective only to the extent specifically set
forth in such writing. All remedies, either under this Agreement, by law, or
otherwise afforded to any party, shall be cumulative and not alternative.
7.6 NOTICES. Any notice or report required or permitted to
be given or made under this Agreement by one of the parties hereto to the other
shall be in writing, delivered personally or by facsimile (and promptly
confirmed by personal delivery or courier) or courier, postage prepaid,
addressed to such other party at its address indicated below, or to such other
address as the addressee shall have last furnished in writing to the addressor
and shall be effective upon receipt by the addressee.
Cytel: Cytel Corporation
5820 Nancy Ridge Drive
San Diego, California 92121
Attention: President
Tel: (858) 860-2500
Fax: (858) 860-2600
7.
<PAGE> 11
with a copy to: Cooley Godward LLP
4365 Executive Drive, Suite 1100
San Diego, California 92121
Attention: Frederick T. Muto, Esq.
Tel: (858) 550-6000
Fax: (858) 453-3555
The Epimmune Stockholder: [ ]
7.7 FINDER'S FEE. Each party represents that he, she or it
neither is nor will be obligated for any finders' fee or commission in
connection with this transaction. Each Epimmune Stockholder agrees, severally
and not jointly, 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
such Epimmune Stockholder is responsible. Cytel agrees to indemnify and hold
harmless the Epimmune Stockholders 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.
7.8 AMENDMENTS AND WAIVERS. Except as specified in the
preambles of Sections 5 and 6, any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively) only with the
written consent of Cytel and a majority in interest of the Epimmune
Stockholders.
7.9 SEVERABILITY. If one or more provisions of this
Agreement is held to be unenforceable under applicable law, such provision shall
be excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
7.10 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties hereto with regard to the subject matter hereof
and supersedes all prior or contemporaneous agreements, negotiations,
understandings and representations whether written or oral.
7.11 FURTHER ASSURANCES. Each party hereto agrees to do such
further actions and things, and to execute and deliver such additional
agreements and instruments, as either party may reasonably request of the other
to effectuate the transactions contemplated by this Agreement.
8.
<PAGE> 12
7.12 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by any party and the
closing of the transactions contemplated hereby.
7.13 PRONOUNS. All pronouns contained herein, and any
variations thereof, shall be deemed to refer to the masculine, feminine or
neutral, singular or plural, as to the identity of the parties hereto may
require.
9.
<PAGE> 13
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
CYTEL CORPORATION
By
--------------------------------------
Title
-----------------------------------
THE EPIMMUNE STOCKHOLDER
----------------------------------------
----------------------------------------
<PAGE> 1
EXHIBIT 10.2
CYTEL CORPORATION
PREFERRED STOCK EXCHANGE AGREEMENT
JULY 1, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
1. Agreement To Issue and Exchange Stock........................................1
1.1 Authorization of Shares by Cytel.............................................1
1.2 Authorization of Exchange by Searle..........................................1
1.3 Issuance and Exchange........................................................1
2. Closing Date; Delivery.......................................................2
2.1 Closing......................................................................2
2.2 Delivery.....................................................................2
3. Representations And Warranties Of Cytel......................................2
3.1 Organization, Good Standing and Qualification................................2
3.2 Authorization; Due Execution.................................................2
3.3 Capitalization...............................................................2
3.4 Valid Issuance of Shares.....................................................3
3.5 Governmental Consents........................................................3
3.6 SEC Filings..................................................................3
3.7 No Conflict..................................................................4
3.8 Absence of Litigation........................................................4
3.9 Confidentiality..............................................................4
3.10 Resale Form S-3 Eligibility..................................................4
3.11 Bylaws.......................................................................5
4. Representations and Warranties of Searle.....................................5
4.1 Authorization; Due Execution.................................................5
4.2 Purchase Entirely for Own Account............................................5
4.3 Disclosure of Information....................................................5
4.4 Investment Experience........................................................5
4.5 Accredited Investor..........................................................5
4.6 Restricted Securities........................................................5
5. Conditions of Searle's Obligations...........................................6
5.1 Representations and Warranties...............................................6
5.2 Performance..................................................................6
5.3 Delivery of Shares...........................................................6
5.4 Investor Rights Agreement....................................................6
5.5 Filing of Certificate of Designations........................................6
5.6 Common Stock Exchange Agreements.............................................7
5.7 Proceedings and Documents....................................................7
5.8 Legal Opinion................................................................7
6. Conditions of Cytel's Obligations............................................7
6.1 Representations and Warranties...............................................7
6.2 Performance..................................................................7
</TABLE>
i.
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
6.3 Delivery of Shares...........................................................7
6.4 Investor Rights Agreement....................................................7
6.5 Proceedings and Documents....................................................7
7. Miscellaneous................................................................7
7.1 Successors and Assigns.......................................................7
7.2 Governing Law................................................................8
7.3 Counterparts.................................................................8
7.4 Titles and Subtitles.........................................................8
7.5 Assignment...................................................................8
7.6 Delays or Omissions..........................................................8
7.7 Notices......................................................................8
7.8 Finder's Fee.................................................................9
7.9 Expenses.....................................................................9
7.10 Amendments and Waivers.......................................................9
7.11 Severability................................................................10
7.12 Entire Agreement............................................................10
7.13 Further Assurances..........................................................10
7.14 Survival....................................................................10
</TABLE>
ii.
<PAGE> 4
PREFERRED STOCK EXCHANGE AGREEMENT
This PREFERRED STOCK EXCHANGE AGREEMENT (this "Agreement") is made as of
July 1, 1999 (the "Effective Date"), by and between CYTEL CORPORATION, a
Delaware corporation ("Cytel") and G.D. SEARLE & CO., a Delaware corporation
("Searle").
WHEREAS, Searle owns all of the outstanding shares of Series B Preferred
Stock, par value $0.001 (the "Epimmune Series B"), and all of the outstanding
shares of Series B-1 Preferred Stock, par value $0.001 (the "Epimmune Series
B-1"), of Epimmune Inc., a Delaware corporation ("Epimmune"); and
WHEREAS, Cytel desires to (a) issue all the authorized shares of its
Series S Preferred Stock, par value $0.01 (the "Cytel Series S"), to Searle in
exchange for the Epimmune Series B and (b) issue all the authorized shares of
its Series S-1 Convertible Preferred Stock, par value $0.01 (the "Cytel Series
S-1"), to Searle in exchange for the Epimmune Series B-1, and Searle desires to
exchange Epimmune Series B and Epimmune Series B-1 for the Cytel Series S and
Cytel Series S-1.
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. AGREEMENT TO ISSUE AND EXCHANGE STOCK.
1.1 AUTHORIZATION OF SHARES BY CYTEL. Cytel has duly
authorized (a) the issuance of the Cytel Series S and Cytel Series S-1 to Searle
and (b) the issuance of shares of Common Stock of Cytel to be issued upon any
conversion of the Cytel Series S and Cytel Series S-1 (the "Cytel Conversion
Shares"). The Cytel Series S and Cytel Series S-1 (collectively the "Shares")
shall have the rights, preferences, privileges and restrictions set forth in the
Certificate of Designations of Cytel, in the form attached hereto as Exhibit A
(the "Certificate of Designations").
1.2 AUTHORIZATION OF EXCHANGE BY SEARLE. On or prior to the
Closing, Searle authorized (a) the exchange of its Epimmune Series B for Cytel
Series S and (b) the exchange of its Epimmune Series B-1 for Cytel Series S-1.
1.3 ISSUANCE AND EXCHANGE. Subject to the terms and
conditions hereof, at the Closing, (a) Cytel hereby agrees to (i) issue to
Searle all 859,666 shares of
<PAGE> 5
Cytel Series S in exchange for all of the 1,032,149 shares of Epimmune Series B
owned by Searle and (ii) issue to Searle all 549,622 shares of Cytel Series S-1
in exchange for all of the 659,898 shares of Epimmune Series B-1 owned by
Searle, and Searle agrees to (i) exchange all of its Epimmune Series B for
859,666 shares of Cytel Series S and (ii) exchange all of its Epimmune Series
B-1 for 549,622 shares of Cytel Series S-1.
2. CLOSING DATE; DELIVERY.
2.1 CLOSING. Subject to the terms of Section 6, the closing
of the issuance and exchange of Cytel Series S and Cytel Series S-1 for Epimmune
Series B and Epimmune Series B-1, pursuant to Section 1.3 above (the "Closing")
shall be held on the date hereof. The closing shall take place at the offices of
Cooley Godward LLP, 4365 Executive Drive, Suite 1100, San Diego, California
92121.
2.2 DELIVERY. At the Closing, subject to the terms and
conditions hereof, Cytel shall deliver to Searle certificates dated the Closing
Date and representing the number of shares of Cytel Series S and Cytel Series
S-1 to be issued and exchanged at the Closing and Searle shall deliver to Cytel
certificates, duly endorsed for transfer to Cytel, representing the Epimmune
Series B and Epimmune Series B-1 owned by Searle.
3. REPRESENTATIONS AND WARRANTIES OF CYTEL.
Except as set forth in the attached Schedule of Exceptions, Cytel hereby
represents and warrants to Searle as of the date of this Agreement as follows:
3.1 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.
3.2 AUTHORIZATION; DUE EXECUTION. Cytel has the requisite
corporate power and authority to enter into this Agreement and the Investor
Rights Agreement substantially in the form attached hereto as Exhibit B (the
"Investor Rights Agreement") (this Agreement and the Investor Rights Agreement
are collectively referred to as the "Agreements") and to perform its obligations
under the terms of the Agreements and, has the requisite corporate power to
issue the Cytel Series S and Cytel Series S-1. All corporate action on the part
of Cytel, its officers and directors necessary for the authorization, execution
and delivery and performance of the Agreements has been taken. No approval or
authorization by the stockholders of Cytel is required for the consummation of
the transactions contemplated by the Agreements. Each of the
2
<PAGE> 6
Agreements has been duly authorized, executed and delivered by Cytel, and, upon
due execution and delivery by Searle, 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.
3.3 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, of which 500,000 shares have been
designated Series A Preferred Stock, 659,898 shares have been designated Series
B Preferred Stock, 859,666 shares have been designated Series S Preferred Stock
and 549,622 shares have been designated Series S-1 Preferred Stock. As of the
close of business on the date of this Agreement, there were 4,997,343 shares of
Common Stock, no shares of Series A Preferred Stock and no shares of Series B
Preferred Stock issued and outstanding. Other than, as of the date of this
Agreement, (a) options to purchase 303,261 shares of Common Stock issued, and
529,508 shares of Common Stock available for future option grants, to certain
employees, officers, directors, consultants and advisors of Cytel, (b) 21,584
shares of Common Stock to be issued under Cytel's Employee Stock Purchase Plan,
(c) warrants to purchase 28,571 shares of Common Stock issued to certain
investors, (d) warrants to purchase 235,200 shares of Common Stock issued to
certain executive officers pursuant to their severance agreements and additional
warrants to purchase Common Stock that may be issued pursuant to such severance
agreements, (e) those shares of Common Stock to be issued under Cytel's Rights
Agreement, (f) 1,027,782 shares of Common Stock to be issued to certain
stockholders of Epimmune in exchange for the outstanding shares of Common Stock
of Epimmune, (g) 423,283 shares of Common Stock reserved for issuance upon the
exercise of outstanding options to purchase Common Stock of Epimmune that will
be assumed by Cytel and (h) the rights to purchase equity securities of Cytel
granted to Searle under the Agreements, there are no subscriptions, options,
warrants, rights or agreements (contingent or otherwise), including without
limitation, conversion rights, preemptive rights, rights of first refusal or
other rights or agreements, providing for the issuance by Cytel of Common Stock
or other equity securities of Cytel. The Shares to be acquired by Searle will
constitute as of the Closing (a) approximately 19.0% of the outstanding shares
of Common Stock of Cytel on an as-converted, otherwise undiluted basis, and (b)
approximately 15.7% of the outstanding Common Stock of Cytel on an as-converted,
fully diluted basis, assuming exercise of all outstanding rights, warrants and
options to acquire Common Stock.
3.4 VALID ISSUANCE OF SHARES. The Shares when issued 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, free of all taxes, liens and
3
<PAGE> 7
charges, and, based in part upon the representations of Searle in this
Agreement, will be issued in compliance with all applicable federal and state
securities laws.
3.5 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 the Agreements, 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.
3.6 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, none of the SEC Filings currently 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. Except as
disclosed in the SEC Filings, since March 31, 1999, (i) there has been no
material adverse change in the condition, financial or otherwise, of Cytel and
its subsidiaries considered as a whole, or in the business, operations, or
prospects of Cytel and its subsidiaries considered as a whole, whether or not
arising in the ordinary course of business, and (ii) there has been no dividend
or distribution of any kind declared, paid or made by Cytel on any class of its
capital stock.
3.7 NO CONFLICT. The execution, delivery and performance by
Cytel of the Agreements do not and will not violate any provision of Cytel's
Certificate of Incorporation or By-laws, any provision of any 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
4
<PAGE> 8
regulations of the Securities and Exchange Commission (the "SEC") or any
regulatory commission of any jurisdiction) currently in effect having
applicability to Cytel.
3.8 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, singly or in the aggregate, 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.
3.9 CONFIDENTIALITY. Cytel hereby represents, warrants and
covenants that it shall maintain in confidence, and shall not use or disclose
without prior written consent of Searle, the terms of this Agreement and any
information identified in writing as confidential that is furnished to it by
Searle 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 Searle's written records, or (d) required to be
disclosed pursuant to applicable law, regulation or order or requirement of a
court, administrative agency or other government body (including the securities
laws of any applicable jurisdiction). Cytel further covenants that it shall
return to Searle all tangible materials containing such information upon request
by Searle. Cytel and Searle acknowledge and agree that Cytel will be required to
disclose the issuance of the Shares contemplated by this Agreement pursuant to
applicable securities laws and regulations, including the filing of the
Agreements as required.
3.10 RESALE FORM S-3 ELIGIBILITY. Cytel is, and as of the
consummation of the transactions contemplated by the Agreements will be,
eligible to register Common Stock for resale on Form S-3 under the Securities
Act (or any form that the SEC deems to be a replacement therefor).
3.11 BYLAWS. The Bylaws of Cytel, in the form attached hereto
as Exhibit C, have been duly authorized and adopted by all necessary action on
the part of Cytel and its officers, directors and shareholders and are true and
complete and in full force and effect.
4. REPRESENTATIONS AND WARRANTIES OF SEARLE.
Searle hereby makes the following representations and warranties to
Cytel as of the date hereof and the Closing:
5
<PAGE> 9
4.1 AUTHORIZATION; DUE EXECUTION. Searle has the requisite
corporate power and authority to enter into the Agreements and to perform its
obligations under the terms of the Agreements and, has the requisite corporate
power to exchange the Epimmune Series B and Epimmune Series B-1 for the Shares.
All corporate action on the part of Searle, its officers, directors and
stockholder necessary for the authorization, execution and delivery and
performance of the Agreements has been taken. Each of the Agreements has been
duly authorized, executed and delivered by Searle, and, upon due execution and
delivery by Cytel, will be a valid and binding agreement of Searle, 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.
4.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. The Shares to be
purchased by Searle (including the underlying Cytel Conversion Shares) will be
acquired for investment for Searle's own account, not as a nominee or agent, and
not with a view to the resale or distribution of any part thereof, and Searle
has no present intention of selling, granting any participation in, or otherwise
distributing the same (subject to the disposition of Searle's property being at
all times within its control). By executing this Agreement, Searle further
represents that Searle 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 (or the
underlying Cytel Conversion Shares).
4.3 DISCLOSURE OF INFORMATION. Searle 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 acquire the Shares.
Searle 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.
4.4 INVESTMENT EXPERIENCE. Searle 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.
Searle also represents it has not been organized solely for the purpose of
acquiring the Shares.
4.5 ACCREDITED INVESTOR. Searle 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 of 1933, as amended (the
"Securities Act").
4.6 RESTRICTED SECURITIES. Searle understands that (a) the
Shares (including the underlying Cytel Conversion Shares) have not been
registered under the
6
<PAGE> 10
Securities Act by reason of a specific exemption therefrom, that such securities
must be held by it indefinitely and that Searle must, therefore, bear the
economic risk of such investment indefinitely, unless in each case a subsequent
disposition thereof is registered under the Securities Act or is exempt from
such registration; (b) each certificate representing the Shares (including the
underlying Cytel Conversion Shares) will be endorsed with the following legend:
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 SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED.
and (c) Cytel will instruct any transfer agent not to register the transfer of
the Shares or the Cytel Conversion 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 any longer in order to establish or enforce compliance with any
provisions of the Securities Act or this Agreement.
5. CONDITIONS OF SEARLE'S OBLIGATIONS.
The obligations of Searle under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, any of
which may be waived by the Investor (and which conditions shall be deemed to
have been fulfilled or waived upon the occurrence of the Closing):
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Cytel contained in Section 3 shall be true and correct in all
material respects on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of said date.
5.2 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.
5.3 DELIVERY OF SHARES. Cytel shall have tendered delivery
of the Shares specified in Section 1 at the Closing.
5.4 INVESTOR RIGHTS AGREEMENT. The Investor Rights Agreement
in substantially the form attached hereto as Exhibit B shall have been executed
and delivered by Cytel and Epimmune.
7
<PAGE> 11
5.5 FILING OF CERTIFICATE OF DESIGNATIONS. The Certificate
of Designations in substantially the form attached hereto as Exhibit A which has
been filed with the Secretary of State of Delaware shall not have been amended.
5.6 COMMON STOCK EXCHANGE AGREEMENTS. The Common Stock
Exchange Agreements to be entered between Cytel and each of the holders of
Common Stock of Epimmune shall have been executed and delivered by the parties
thereto so that the Closing thereunder occurs simultaneously with the Closing.
5.7 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 Searle, and it shall have received all such counterpart original
and certified or other copies of such documents as it may reasonably request.
5.8 LEGAL OPINION. An opinion of counsel to Cytel in the
form attached hereto as Exhibit D shall have been delivered to Searle at the
Closing.
6. CONDITIONS OF CYTEL'S OBLIGATIONS.
The obligations of Cytel under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by
Searle, any of which may be waived by Cytel (and which conditions shall be
deemed to have been fulfilled or waived upon the occurrence of the Closing):
6.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Searle contained in Section 4 hereof shall be true and correct in
all material respects on and as of the Closing with the same effect as though
such representations and warranties had been made on and as of said date.
6.2 PERFORMANCE. Searle 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 DELIVERY OF SHARES. Searle shall have tendered delivery
of the Epimmune Series B and Epimmune Series B-1 specified in Section 1 at the
Closing.
6.4 INVESTOR RIGHTS AGREEMENT. The Investor Rights Agreement
in substantially the form attached hereto as Exhibit B shall have been executed
and delivered by Searle.
6.5 PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the Closing and
all documents
8
<PAGE> 12
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.
7. MISCELLANEOUS.
7.1 SUCCESSORS AND ASSIGNS. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
heirs, personal representatives, successors and assigns of the parties. Nothing
in this Agreement, express or implied, is intended to confer upon any party
other than the parties hereto or their respective heirs, personal
representatives, successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
7.2 GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of California, as applied to contracts
executed and performed entirely within the State of California, without regard
to conflicts of laws rules.
7.3 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.4 TITLES AND SUBTITLES. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.5 ASSIGNMENT. This Agreement may not be assigned or
otherwise transferred, nor, except as expressly provided hereunder, may any
right or obligations hereunder be assigned or transferred, by either party
without the written consent of the other party; provided, however, that either
Cytel or Searle may, without such consent, assign this Agreement and its rights
and obligations hereunder (a) in connection with the transfer or sale of all or
substantially all of its business, if such assets include substantially all of
the assets relating to its performance of its respective obligations hereunder
or (b) in the event of its merger or consolidation with another company at any
time during the term of this Agreement. Any purported assignment in violation of
the preceding sentence shall be void. Any other permitted assignee shall also
assume all obligations of its assignor under this Agreement.
7.6 DELAYS OR OMISSIONS. It is agreed that no delay or
omission to exercise any right, power or remedy accruing to any party, upon any
breach, default or noncompliance by another party under the Agreements shall
impair any such right, power or remedy, nor shall it be construed to be a waiver
of any such breach, default or
9
<PAGE> 13
noncompliance, or any acquiescence therein, or of or in any similar breach,
default or noncompliance thereafter occurring. It is further agreed that any
waiver, permit, consent or approval of any kind or character of any breach,
default or noncompliance under the Agreements or any waiver on such party's part
of any provisions or conditions of the Agreements must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under the Agreements by law, or otherwise afforded to any
party, shall be cumulative and not alternative.
7.7 NOTICES. Any notice or report required or permitted to
be given or made under this Agreement by one of the parties hereto to the other
shall be in writing, delivered personally or by facsimile (and promptly
confirmed by personal delivery or courier) or courier, postage prepaid,
addressed to such other party at its address indicated below, or to such other
address as the addressee shall have last furnished in writing to the addressor
and shall be effective upon receipt by the addressee.
Cytel: Cytel Corporation
5820 Nancy Ridge Drive
San Diego, California 92121
Attention: President
Tel: (858) 860-2500
Fax: (858) 860-2600
with a copy to: Cooley Godward LLP
4365 Executive Drive, Suite 1100
San Diego, California 92121
Attention: Frederick T. Muto, Esq.
Tel: (858) 550-6000
Fax: (858) 453-3555
Searle: G.D. Searle & Co.
5200 Old Orchard Road
Skokie, IL 60077
Attention: Vice President, Global Business Development
Tel: (847) 982-7000
Fax: (847) 581-4070
with a copy to: G.D. Searle & Co.
5200 Old Orchard Road
Skokie, IL 60077
Attention: Assistant General Counsel
Tel: (847) 982-7000
Fax: (847) 581-4045
10
<PAGE> 14
7.8 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. Searle 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 Searle or any of its officers, partners, employees or
representatives is responsible. Cytel agrees to indemnify and hold harmless
Searle 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.
7.9 EXPENSES. Irrespective of whether the Closing is
effected, each party shall bear its own costs with respect to the negotiation,
execution, delivery and performance of this Agreement.
7.10 AMENDMENTS AND WAIVERS. Except as specified in the
preambles of Sections 5 and 6, any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively) only with the
written consent of Cytel and Searle.
7.11 SEVERABILITY. If one or more provisions of this
Agreement is held to be unenforceable under applicable law, such provision shall
be excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
7.12 ENTIRE AGREEMENT. The Agreements constitute the entire
agreement between the parties hereto with regard to the subject matter hereof
and thereof and supersede all prior or contemporaneous agreements, negotiations,
understandings and representations, whether written or oral.
7.13 FURTHER ASSURANCES. Each party hereto agrees to do such
further actions and things, and to execute and deliver such additional
agreements and instruments, as either party may reasonably request of the other
to effectuate the transactions contemplated by this Agreement.
7.14 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by either party and
the closing of the transactions contemplated hereby.
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<PAGE> 15
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
CYTEL CORPORATION
By /s/ Robert L. Roe, M.D.
--------------------------------------
Title Acting President
-----------------------------------
G.D. SEARLE & CO.
By /s/ G. de Schutter
--------------------------------------
Title Chief Executive Officer
-----------------------------------
<PAGE> 1
EXHIBIT 10.3
CYTEL CORPORATION
INVESTOR RIGHTS AGREEMENT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C> <C>
1. General......................................................................2
1.1 Definitions..................................................................2
2. Restrictions on Transfer; Registration.......................................3
2.1 Restrictions on Transfer.....................................................3
2.2 "Piggy-back" Registrations...................................................4
(c) Limitation on Subsequent Registration Rights..........................4
2.3 Form S-3 Registration........................................................5
2.4 Expenses of Registration.....................................................6
2.5 Obligations of the Company...................................................6
2.6 Termination of Registration Rights...........................................7
2.7 Furnishing Information.......................................................7
2.8 Indemnification..............................................................8
2.9 Assignment of Registration Rights...........................................10
2.10 "Market Stand-Off" Agreement................................................10
2.11 Rule 144 Reporting..........................................................10
3. Covenants of the Company....................................................11
3.1 Delivery of Financial Statements............................................11
3.3 Preferred Approval..........................................................11
3.5 Inspection Rights...........................................................12
3.6 Insider Transactions........................................................12
3.7 Directors' Fees and Expenses................................................12
3.8 Confidentiality of Records..................................................12
3.9 Bylaws......................................................................12
3.10 Standstill Agreement........................................................12
4. Right of First Refusal......................................................13
6. Indemnification.............................................................15
6.1 Indemnification of Searle...................................................15
6.2 Notice of Claims by Searle..................................................15
6.3 Indemnification of Cytel....................................................16
6.4 Notice of Claims by Cytel...................................................16
6.5 Third Party Claims..........................................................16
7. Miscellaneous...............................................................17
7.1 Governing Law...............................................................17
7.2 Survival....................................................................17
7.3 Successors and Assigns......................................................17
7.4 Severability................................................................17
7.5 Amendment and Waiver........................................................17
7.7 Delays or Omissions.........................................................18
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
7.8 Notices.....................................................................18
7.9 Titles and Subtitles........................................................19
7.10 Pronouns....................................................................19
7.11 Counterparts................................................................19
</TABLE>
ii.
<PAGE> 4
CYTEL CORPORATION
INVESTOR RIGHTS AGREEMENT
This INVESTOR RIGHTS AGREEMENT (the "Investor Rights Agreement") is
entered into as of the 1st day of July, 1999, by and among CYTEL CORPORATION, a
Delaware corporation ("Cytel" or the "Company"), G.D. SEARLE & CO., a Delaware
corporation ("Searle" or the "Investor") and, solely for purposes of Section 7.6
hereof, Epimmune Inc., a Delaware corporation ("Epimmune").
RECITALS
WHEREAS, in connection with certain transactions between Cytel and the
stockholders of Epimmune involving the exchange of Epimmune stock for Cytel
stock, Searle will exchange its shares of Series B and Series B-1 Preferred
Stock of Epimmune (the "Epimmune Preferred") for 859,666 newly issued shares of
Series S Preferred Stock of Cytel and 549,622 newly issued shares of Series S-1
Preferred Stock of Cytel (collectively, the "Shares"), pursuant to that certain
Preferred Stock Exchange Agreement of even date herewith, by and between Searle
and the Company (the "Preferred Stock Exchange Agreement" and, together with
this Investor Rights Agreement, the "Agreements");
WHEREAS, in connection with its holdings of Epimmune Preferred, Searle
possesses certain registration, information and other rights pursuant to an
existing Investor Rights Agreement dated as of February 27, 1998 by and among
Epimmune, Searle and the Company (the "Prior Agreement");
WHEREAS, Epimmune, Searle and the Company desire to terminate the Prior
Agreement, and Searle desires to accept the rights created pursuant hereto in
lieu of the rights granted to it under the Prior Agreement, with the Prior
Agreement being superseded and of no further force or effect as of the date
hereof;
WHEREAS, Cytel and Searle are parties to Stock Purchase Agreements dated
as of September 18, 1997 (the "1997 Agreement") and February 27, 1998 (the "1998
Agreement"), and Cytel and Searle desire that Sections 8.1, 8.2, 8.3, 8.4, 9 and
10 of the 1997 Agreement and Sections 7.1, 7.2, 7.3 7.4, 8, 9 and 10 of the 1998
Agreement be superseded by certain sections of this Agreement, so that such
sections are the sole agreement with respect to the obligations and rights
contained in such sections; and
<PAGE> 5
WHEREAS, as a condition of entering into the Preferred Stock Exchange
Agreement, Searle has requested that the Company extend to it registration
rights, information rights and other rights as set forth below.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement and in the Preferred Stock Exchange Agreement, the parties mutually
agree as follows:
1. GENERAL.
1.1 DEFINITIONS. As used in this Investor Rights Agreement
the following terms shall have the following respective meanings:
"COMMON STOCK" means the Common Stock of the Company.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"HOLDER" means any person or entity owning of record Registrable
Securities that have not been sold to the public or any assignee of record of
such Registrable Securities in accordance with Section 2.8 hereof.
"QUALIFIED OFFERING" means the Company's first firm commitment
underwritten public offering of its Common Stock registered under the Securities
Act after the date of this Agreement in which the Company receives gross
proceeds of at least $15 million.
"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
effectiveness of such registration statement or document.
"REGISTRABLE SECURITIES" means (i) Common Stock of the Company
issued or issuable upon conversion of the Shares; and (ii) any Common Stock of
the Company issued as (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, such
above-described securities. Notwithstanding the foregoing, Registrable
Securities shall not include any securities sold by a person to the public
either pursuant to a registration statement or Rule 144 or sold in a private
transaction in which the transferor's rights under Section 2 of this Agreement
are not assigned.
"REGISTRATION EXPENSES" shall mean all expenses incurred by the
Company in complying with Sections 2.2 and 2.3 hereof, including, without
limitation, all
2
<PAGE> 6
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, reasonable fees and disbursements of counsel for the
Company, reasonable fees and disbursements not to exceed twenty-five thousand
dollars ($25,000) of a single special counsel for the Holders, 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 the
Company which shall be paid in any event by the Company).
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"SELLING EXPENSES" shall mean all underwriting discounts and
selling commissions applicable to the sale.
"SHARES" shall mean outstanding shares of the Company's Series S
Preferred Stock and Series S-1 Preferred Stock.
"SEC" or "COMMISSION" means the Securities and Exchange
Commission.
2. RESTRICTIONS ON TRANSFER; REGISTRATION.
2.1 RESTRICTIONS ON TRANSFER.
(a) Each Holder agrees not to make any disposition
of all or any portion of the Shares or Registrable Securities unless and until:
(i) There is then in effect a registration
statement under the Securities Act covering such proposed disposition and such
disposition is made in accordance with such registration statement; or
(ii) (A) The transferee has agreed in writing
to be bound by the terms of this Agreement, (B) such Holder shall have notified
the Company of the proposed disposition and shall have furnished the Company
with a detailed statement of the circumstances surrounding the proposed
disposition, and (C) if reasonably requested by the Company, such Holder shall
have furnished the Company with an opinion of counsel, reasonably satisfactory
to the Company, that such disposition will not require registration of such
shares under the Securities Act. It is agreed that the Company will not require
opinions of counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
(iii) Notwithstanding the provisions of
paragraphs (a)(i) and (a)(ii) above, no such registration statement or opinion
of counsel shall be necessary for a transfer by a Holder which is (A) a
partnership to its partners or former partners in accordance with partnership
interests, (B) a corporation to its stockholders in accordance with their
interest in the corporation, (C) a limited liability company to its members or
3
<PAGE> 7
former members in accordance with their interest in the limited liability
company, or (D) to the Holder's family member or trust for the benefit of an
individual Holder, provided the transferee will be subject to the terms of this
Agreement to the same extent as if he were an original Holder hereunder.
(b) Each certificate representing Shares or
Registrable Securities shall (unless otherwise permitted by the provisions of
the Agreement) be stamped or otherwise imprinted with a legend substantially
similar to the following (in addition to any legend required under applicable
state securities laws, as provided elsewhere in this Agreement or any other
applicable agreement or instrument):
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. THEY MAY NOT BE OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR
UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED."
(c) The Company shall be obligated to reissue
promptly unlegended certificates at the request of any holder thereof if the
Holder shall have obtained an opinion of counsel (which counsel may be counsel
to the Company) reasonably acceptable to the Company to the effect that the
securities proposed to be disposed of may lawfully be so disposed of (with no
need for compliance with Rule 144) without registration, qualification or
legend.
(d) Any legend endorsed on an instrument pursuant to
applicable state securities laws and the stop-transfer instructions with respect
to such securities shall be removed upon receipt by the Company of an order of
the appropriate blue sky authority authorizing such removal.
2.2 "PIGGY-BACK" REGISTRATIONS. In the event that shares of
the Company's equity securities held by any selling stockholder are included in
a registration statement under the Securities Act for purposes of the Company's
Qualified Offering, the Company shall notify all Holders of Registrable
Securities in writing at least thirty (30) days prior to the filing of such
registration statement and will afford each such Holder an opportunity to
include in such registration statement all or part of such Registrable
Securities held by such Holder on a pro rata basis with the securities of such
other selling stockholders to be included in the Registration Statement. Each
Holder desiring to include in any such registration statement all or any part of
the Registrable Securities held
4
<PAGE> 8
by it shall, within twenty (20) days after the above-described notice from the
Company, so notify the Company in writing.
(a) UNDERWRITING. The right of any such Holder to be
included in a registration pursuant to this Section 2.2 shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting to the extent provided
herein. All Holders proposing to distribute their Registrable Securities through
such underwriting shall enter into an underwriting agreement in customary form
with the underwriter or underwriters selected for such underwriting by the
Company. Notwithstanding any other provision of this Agreement, if the
underwriter determines in good faith that marketing factors require a limitation
of the number of shares to be underwritten, the number of shares that may be
included in the underwriting shall be allocated, first, to the Company; and
second, to any stockholder of the Company (including the Holders) on a pro rata
basis based on the total number of Registrable Securities held by the Holders
and securities held by such other stockholders; provided that no such reduction
shall reduce the securities being offered by the Company for its own account to
be included in the registration and underwriting.
(b) RIGHT TO TERMINATE REGISTRATION. The Company
shall have the right to terminate or withdraw any registration initiated by it
under this Section 2.2 prior to the effectiveness of such registration whether
or not any Holder has elected to include securities in such registration. The
Registration Expenses of such withdrawn registration shall be borne by the
Company in accordance with Section 2.4 hereof.
(c) LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS.
After the date of this Agreement, the Company shall not enter into any agreement
with any holder or prospective holder of any securities of the Company that
would grant such holder piggy-back registration rights senior to those granted
to the Holders hereunder unless the Company also grants such registration rights
to the Holders; provided, however, that this limitation shall not apply to any
registration rights granted with respect to any registration of shares of the
Company's equity securities under the Securities Act subsequent to the Qualified
Offering.
2.3 FORM S-3 REGISTRATION. In case the Company shall receive from
the Investor (or any transferee permitted by Section 7.3) a written request or
requests that the Company effect a registration on Form S-3 (or any successor to
Form S-3) or any similar short-form registration statement and any related
qualification or compliance with respect to all or a part of the Registrable
Securities owned by the Investor, the Company will:
(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other Holders
of Registrable Securities;
5
<PAGE> 9
(b) not include in any such proposed registration
any securities of any other holder without the prior written consent of the
Investor;
(c) permit the Investor to select the underwriter(s)
and/or manager(s) to administer the offering of such Registrable Securities; and
(d) as soon as practicable, effect such registration
and all such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of the
Investor's Registrable Securities as are specified in such request; provided,
however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 2.3:
(i) if Form S-3 (or any successor or similar
form) is not available for such offering by the Investor other than due to a
breach of any representation, warranty, covenant or agreement of the Company
contained in this Agreement, in which event the Company shall effect such
proposed registration on Form S-1 (or any successor or similar form);
(ii) if the Investor, together with the
holders of any other securities of the Company permitted by the Investor to be
included in such registration, propose to sell Registrable Securities and such
other securities (if any) at an aggregate price to the public of less than five
hundred thousand dollars ($500,000);
(iii) if within thirty (30) days of receipt of
a written request from the Investor pursuant to Section 2.3(a), the Company
gives notice to the Holders of the Company's intention to make a public offering
within ninety (90) days;
(iv) if the Company shall furnish to the
Holders a certificate signed by the Chairman of the Board of Directors of the
Company stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its stockholders
for such Form S-3 registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3 registration
statement for a period of not more than ninety (90) days after receipt of the
request of the Investor under this Section 2.3; provided, that such right to
delay a request shall be exercised by the Company not more than once in any
twelve (12) month period;
(v) if the Company has already effected one
(1) registration on Form S-3 pursuant to this Section 2.3; or
(vi) in any particular jurisdiction in which
the Company would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration, qualification or
compliance.
6
<PAGE> 10
Subject to the foregoing, the Company shall file a Form S-3 registration
statement covering the Registrable Securities and other securities so requested
to be registered as soon as practicable after receipt of the request or requests
of the Investor.
2.4 EXPENSES OF REGISTRATION. Except as specifically
provided herein, all Registration Expenses incurred in connection with any
registration under Section 2.2 or Section 2.3 herein shall be borne by the
Company. All Selling Expenses incurred in connection with any registrations
hereunder, shall be borne by the holders of the securities so registered pro
rata on the basis of the number of shares so registered. The Company shall not,
however, be required to pay for expenses of any registration proceeding begun
pursuant to Section 2.3, the request of which has been subsequently withdrawn by
the Investor unless the withdrawal is based upon material adverse information
concerning the Company of which the Investor was not aware at the time of such
request. If the Holders are required to pay the Registration Expenses, such
expenses shall be borne by the holders of securities (including Registrable
Securities) requesting such registration in proportion to the number of shares
for which registration was requested. If the Company is not required to pay the
Registration Expenses of a withdrawn offering pursuant to this Section 2.4, then
the Investor shall not forfeit its rights pursuant to Section 2.3 to an S-3
registration.
2.5 OBLIGATIONS OF THE COMPANY. Whenever required to effect
the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use all reasonable
efforts to cause such registration statement to become effective, and, upon the
request of the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for up to ninety (90)
days or, if earlier, until the Holder or Holders have completed the distribution
related thereto.
(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 number 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.
7
<PAGE> 11
(d) Use all 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 the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions.
(e) In the event of any underwritten public
offering, enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing underwriter(s) of such
offering. Each Holder participating in such underwriting shall also enter into
and perform its obligations under such an agreement.
(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.
(g) Furnish, at the request of a majority of the
Holders participating in the registration, on the date that such Registrable
Securities are delivered to the underwriters for sale, if such securities are
being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion, dated as of such date, of
the counsel representing the Company for the purposes of such registration, in
form and substance as is customarily given to underwriters in an underwritten
public offering, addressed to the underwriters, if any, and (ii) a letter dated
as of such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering, addressed
to the underwriters, if any.
(h) Notwithstanding the foregoing, if, at any time
following the effectiveness of the Registration Statement, the Company shall
have determined that the Company may be required to disclose any material
corporate development, the Company may suspend the effectiveness of the
Registration Statement until such time as an amendment to the Registration
Statement has been filed by the Company and declared effective by the SEC or
until such time as the Company has filed an appropriate report with the SEC
pursuant to the Exchange Act, which suspension shall be concluded as quickly as
reasonably possible by the Company consistent with advice of counsel (a
"Suspension Period"), by giving notice to the Holders participating in the
registration.
8
<PAGE> 12
Each Holder agrees that, upon receipt of any notice from the Company of a
Suspension Period, such Holder will not sell any Shares pursuant to the
Registration Statement until (i) such Holder is advised in writing by the
Company that the use of the applicable prospectus may be resumed, (ii) such
Holder has received copies of any additional or supplemental or amended
prospectus, if applicable, and (iii) such Holder has received copies of any
additional or supplemental filings which are incorporated or deemed to be
incorporated by reference in such prospectus.
2.6 TERMINATION OF REGISTRATION RIGHTS. All registration
rights granted to a Holder under this Section 2 shall terminate and be of no
further force and effect upon the earlier of (i) completion of the distribution
of the Company's Common Stock in the Company's Qualified Offering or the sale of
all of its Registrable Securities pursuant to a Form S-3 registration statement
filed under Section 2.3, or (ii) the date that all Registrable Securities held
by and issuable to such Holder (and its affiliates) may be sold under Rule 144
during any ninety (90) day period.
2.7 FURNISHING INFORMATION. It shall be a condition
precedent to the obligations of the Company to take any action pursuant to
Section 2.2 or Section 2.3 that the selling Holders shall furnish to the Company
such information regarding themselves, the Registrable Securities held by them
and the intended method of disposition of such securities as shall be required
to effect the registration of their Registrable Securities.
2.8 INDEMNIFICATION. In the event any Registrable Securities
are included in a registration statement under Section 2.2 or Section 2.3:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the partners, officers, directors and
legal counsel of each Holder, any underwriter (as defined in the Securities Act)
for such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Securities Act or the Exchange Act, against any
losses, claims, damages, expenses (including attorney fees) or liabilities
(joint or several) to which they may become subject under the Securities Act,
the Exchange Act or other federal or state law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations (collectively a
"Violation") by the Company: (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law in connection with the offering
covered by
9
<PAGE> 13
such registration statement; and the Company will reimburse each such Holder,
partner, officer or director, underwriter or controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided however,
that the indemnity agreement contained in this Section 2.8(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company, which consent
shall not be unreasonably withheld, nor shall the Company be liable in any such
case for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by such Holder, partner, officer, director, underwriter
or controlling person of such Holder.
(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, qualifications or compliance is being
effected, indemnify and hold harmless the Company, each of its directors, its
officers, and legal counsel and each person, if any, who controls the Company
within the meaning of the Securities Act, any underwriter and any other Holder
selling securities under such registration statement or any of such other
Holder's partners, directors or officers or any person who controls such Holder,
against any losses, claims, damages, expenses (including attorney fees), or
liabilities (joint or several) to which the Company or any such director,
officer, counsel, controlling person, underwriter or other such Holder, or
partner, director, officer or controlling person of such other Holder may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder under an
instrument duly executed by such Holder and stated to be specifically for use in
connection with such registration; and each such Holder will reimburse any legal
or other expenses reasonably incurred by the Company or any such director,
officer, counsel, controlling person, underwriter or other Holder, or partner,
officer, director or controlling person of such other Holder in connection with
investigating or defending any such loss, claim, damage, liability or action if
it is judicially determined that there was such a Violation; provided, however,
that the indemnity agreement contained in this Section 2.8(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; provided further, that in no event shall any
indemnity under this Section 2.8 exceed the proceeds from the offering received
by such Holder.
(c) Promptly after receipt by an indemnified party
under this Section 2.8 of notice of the commencement of any action (including
any governmental
10
<PAGE> 14
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 2.8, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 2.8, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 2.8.
(d) If the indemnification provided for in this
Section 2.8 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any losses, claims, damages or liabilities
referred to herein, the indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall to the extent permitted by applicable law
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability 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 Violation(s) that resulted
in such loss, claim, damage or liability, as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party shall be determined by a court of law by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission to state a material fact relates to information supplied by
the indemnifying party or by the indemnified party and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission; provided, that in no event shall any contribution by
a Holder hereunder exceed the proceeds from the offering received by such
Holder.
(e) The obligations of the Company and Holders under
this Section 2.8 shall survive completion of any offering of Registrable
Securities in a registration statement. No indemnifying party, in the defense of
any such claim or litigation, shall, except with the consent of each indemnified
party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation.
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2.9 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause
the Company to register Registrable Securities pursuant to this Section 2 (and
related obligations) may be assigned by a Holder to a transferee or assignee of
Registrable Securities which (i) is a subsidiary, affiliate, parent, general
partner, limited partner or retired partner of a Holder, or (ii) is a Holder's
family member, a trust for the benefit of an individual Holder or such Holder's
family members or a partnership or other entity all of whose beneficial
ownership is held by the Holder or such Holder's family members; provided,
however, (A) the transferor shall, within ten (10) days after such transfer,
furnish to the Company written notice of the name and address of such transferee
or assignee and the securities with respect to which such registration rights
are being assigned and (B) such transferee shall agree to be subject to all
restrictions set forth in this Agreement.
2.10 "MARKET STAND-OFF" AGREEMENT. If requested by the
Company or the representative of the underwriters of Common Stock (or other
securities) of the Company, each Holder shall not sell or otherwise transfer or
dispose of any Common Stock (or other securities) of the Company held by such
Holder (other than those included in the registration) for a period specified by
the representative of the underwriters, in any case not to exceed the following
time periods:
(a) one hundred eighty (180) days following the
Qualified Offering of the Company, provided that the Company, all officers and
directors of the Company and any other selling stockholders enter into similar
agreements (subject to customary exceptions); and
(b) one hundred twenty (120) days following any
registered offering of the Common Stock of the Company other than the Qualified
Offering; provided, however, that any such request shall be made no more
frequently than once every eight (8) months.
The obligations described in this Section 2.10 shall not apply to a
registration relating solely to employee benefit plans on Form S-1 or Form S-8
or similar forms that may be promulgated in the future, or a registration
relating solely to a Commission Rule 145 transaction on Form S-4 or similar
forms that may be promulgated in the future. The Company may impose
stop-transfer instructions with respect to the shares of Common Stock (or other
securities) subject to the foregoing restriction until the end of said periods.
2.11 RULE 144 REPORTING. With a view to making available to
the Holders the benefits of certain rules and regulations of the SEC which may
permit the sale of the Registrable Securities to the public without
registration, the Company agrees to use its best efforts to:
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(a) Make and keep public information available, as
those terms are understood and defined in SEC Rule 144 or any similar or
analogous rule promulgated under the Securities Act;
(b) File with the SEC, in a timely manner, all
reports and other documents required of the Company under the Exchange Act; and
(c) So long as a Holder owns any Registrable
Securities, furnish to such Holder forthwith upon request: a written statement
by the Company as to its compliance with the reporting requirements of said Rule
144 of the Securities Act, and of the Exchange Act (at any time after it has
become subject to such reporting requirements); a copy of the most recent annual
or quarterly report of the Company; and such other reports and documents as a
Holder may reasonably request in availing itself of any rule or regulation of
the SEC allowing it to sell any such securities without registration.
3. COVENANTS OF THE COMPANY.
3.1 DELIVERY OF FINANCIAL STATEMENTS. So long as the
Investor holds any of the Shares, the Company shall deliver to the Investor
copies of its Forms 10-K and 10-Q as filed with the SEC, and other public
announcements and releases made by the Company.
3.2 COMPLIANCE CERTIFICATE. For so long as Searle holds at
least 5% of the Company's outstanding capital stock (determined on a
fully-diluted, as-converted basis), as soon as practicable after the end of each
fiscal year of the Company, and in any event within one hundred twenty (120)
days thereafter, the Company will furnish to Searle a certificate executed by an
officer of the Company certifying that the terms of the Series S Preferred Stock
and Series S-1 Preferred Stock and the terms of all other material agreements
between Searle and the Company, other than that certain License and
Collaboration Agreement dated as of February 27, 1998 between Searle and
Epimmune (the "Collaboration Agreement") and any other agreements entered into
between Searle and Epimmune or the Company in connection with the Collaboration
Agreement, have been complied with.
3.3 PREFERRED APPROVAL. For so long as any of the Shares
remain outstanding, the Company shall not without the prior written consent of
the holders of a majority of the Series S Preferred Stock and Series S-1
Preferred Stock, voting together as a single class, (i) amend the Company's
Certificate of Incorporation in a manner that specifically and adversely affects
the rights, preferences and privileges of the Series S Preferred Stock or Series
S-1 Preferred Stock with respect to liquidation preference, voting or dividends,
or (ii) enter into any agreement which by its terms restricts the
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<PAGE> 17
Company's performance of the terms of the Series S Preferred Stock, the Series
S-1 Preferred Stock, the Preferred Stock Exchange Agreement or this Investor
Rights Agreement; provided that no such consent shall be required with respect
to any Acquisition or Asset Transfer (as defined in the Company's Certificate of
Designations of the Series S and Series S-1 Preferred Stock) or the creation or
issuance by the Company of any series of Preferred Stock with rights,
preferences or privileges senior to or pari passu with the Series S Preferred
Stock or Series S-1 Preferred Stock. For purposes of clarification, Section 3(b)
shall apply to the Series S Preferred Stock with regard to such Acquisition or
Asset Transfer. The rights set forth in this Section 3.3 shall run with the
Series S Preferred Stock or Series S-1 Preferred Stock to each transferee or
assignee of Shares.
3.4 BOARD REPRESENTATION. For so long as Searle holds at
least 5% of the Company's outstanding capital stock (determined on a
fully-diluted, as-converted basis), the Company shall include one representative
designated by Searle on the management slate of nominees to the Company's Board
of Directors.
3.5 INSPECTION RIGHTS. For so long as the Company is
obligated to include a Searle representative as a nominee to the Company's Board
of Directors (the "Designated Director"), Searle shall have the right to visit
and inspect any of the properties of the Company or any of its subsidiaries, and
to discuss the affairs, finances and accounts of the Company or any of its
subsidiaries with its directors, officers, employees and independent public
accountants, and to review such information as is reasonably requested all at
such reasonable times and as often as may be reasonably requested.
3.6 INSIDER TRANSACTIONS. For so long as Searle holds at
least 5% of the Company's outstanding capital stock (determined on a
fully-diluted, as-converted basis), the Company shall not without the approval
of a majority of the Board of Directors, with all non-interested Directors
voting and the approval of the Designated Director, authorize or enter into any
transactions with any director or management employee, or such director's or
employee's immediate family, other than indemnification and employment related
transactions on customary terms.
3.7 DIRECTORS' FEES AND EXPENSES. For so long as the
Designated Director is a member of the Company's Board of Directors the Company
covenants to (i) reimburse the Designated Director for all reasonable costs
associated with attending meetings of the Board of Directors, and (ii) pay the
Designated Director any compensation paid to other members of the Company's
Board of Directors in connection with the performance of their duties as a
Director.
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3.8 CONFIDENTIALITY OF RECORDS. Searle agrees to keep
confidential, and to use its best efforts to insure that its authorized
representatives keep confidential, any information furnished or made available
to it hereunder in accordance with Section 3.9 of the Preferred Stock Exchange
Agreement.
3.9 BYLAWS. The Company shall not, without prior written
consent of Searle, take any action to amend Section 21(b) of Article IV of the
Company's Bylaws. This Section 3.9 shall expire and terminate on the earlier of
(i) the closing of a financing, whether public or private, in which the Company
receives gross proceeds of at least $15 million from any person or entity other
than Searle or any of its affiliates, or (ii) the date on which Searle shall own
less than 5% of the Company's outstanding capital stock (determined on a
fully-diluted, as-converted basis).
3.10 STANDSTILL AGREEMENT. The Investor hereby covenants and
agrees that, prior to December 31, 2000, it will not, nor will it permit any of
its affiliates (including parents, subsidiaries or other related entities) to,
purchase or otherwise acquire or offer or agree to acquire, directly or
indirectly, beneficial ownership of any additional equity securities of the
Company (or rights or options to purchase such securities) after the Closing in
an amount that would cause the Investor to own, on a fully diluted basis,
capital stock representing more than 19% of the outstanding shares of Common
Stock of the Company, without the prior written consent of the Company;
provided, however, that this clause shall not apply to (i) the issuance of the
Shares pursuant to the Preferred Stock Exchange Agreement, or (ii) 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; or (iii) conversion of the Shares
to the Company's Common Stock.
4. RIGHT OF FIRST REFUSAL.
4.1 AMENDMENT AND RESTATEMENT OF SECTION 8 OF THE 1998
AGREEMENT. The parties agree that this Section 4 shall supersede, amend and
restate Section 8 of the 1998 Agreement so that this Section 4 is the sole
agreement with respect to the obligations and rights contained in this Section
4.
4.2 SUBSEQUENT OFFERINGS. The Investor shall have a right of
first refusal to purchase its pro rata share of all Equity Securities, as
defined below, that the Company may, from time to time, propose to sell and
issue after the date of this Agreement, other than the Equity Securities
excluded by Section 4.7 hereof. The Investor's pro rata share is equal to the
ratio of (a) the number of shares of Common Stock purchased pursuant to Sections
2.1 and 2.2 of the 1997 Agreement, plus the number of Shares purchased pursuant
to the Preferred Stock Exchange Agreement, plus the number of shares of Common
Stock (and the number of shares of Common Stock issued
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or issuable upon the conversion of any Equity Securities) previously purchased
pursuant to this Section 4, held by the Investor or any transferee pursuant to
Section 7.3, to (b) the total number of shares of the Company's outstanding
Common Stock (including all shares of Common Stock issued or issuable upon the
conversion of any Equity Securities or upon exercise of any outstanding warrants
or options) immediately prior to the issuance of the Equity Securities. The term
"Equity Securities" shall mean (i) any Common Stock, Preferred Stock or other
security of the Company, (ii) any security convertible, with or without
consideration, into any Common Stock, Preferred Stock or other security
(including any option, warrant or other right to purchase such a convertible
security), (iii) any security carrying any option, warrant or right to subscribe
to or purchase any Common Stock, Preferred Stock or other security, or (iv) any
such option, warrant or right.
4.3 EXERCISE OF RIGHT OF FIRST REFUSAL. If the Company
proposes to issue any Equity Securities, it shall give the Investor written
notice of its intention, describing the Equity Securities, the price and the
terms and conditions upon which the Company proposes to issue the same. The
Investor shall have forty-five (45) days from the giving of such notice to agree
to purchase its pro rata share of the Equity Securities for the price and upon
the terms and conditions specified in the notice by giving written notice to the
Company and stating therein the quantity of Equity Securities to be purchased;
provided, however, if the Company reasonably requests in the Company's original
notice that the Investor respond within thirty (30) days (due to timing
considerations relating to the closing of the issuance of such Equity
Securities), then the Investor shall be required to respond to such notice
within thirty (30) days. Notwithstanding the foregoing, the Company shall not be
required to offer or sell such Equity Securities to the Investor if doing so
would cause the Company to be in violation of applicable federal securities laws
by virtue of such offer or sale; provided, however, the Company agrees to use
its reasonable best efforts to take whatever action may be necessary or
appropriate to comply with applicable federal securities laws in connection with
such offer or sale.
4.4 ISSUANCE OF EQUITY SECURITIES TO OTHER PERSONS. If the
Investor fails to exercise in full the right of first refusal, the Company shall
have ninety (90) days thereafter to sell the Equity Securities in respect of
which the Investor's right was not exercised, at a price and upon general terms
and conditions materially no more favorable to the purchasers thereof than
specified in the Company's notice to the Investor pursuant to Section 4.3
hereof. If the Company has not sold such Equity Securities within ninety (90)
days of the notice provided pursuant to Section 4.3, the Company shall not
thereafter issue or sell any Equity Securities, without first offering such
securities to the Investor in the manner provided above.
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4.5 TERMINATION OF RIGHT OF FIRST REFUSAL. The right of
first refusal established by this Section 4 shall terminate on the first to
occur of (a) September 17, 2002, or (b) the first date on which the Investor
sells, assigns or otherwise transfers any of the Shares, excluding, however,
transfers pursuant to Section 7.3.
4.6 NO TRANSFER OF RIGHT OF FIRST REFUSAL. The right of
first refusal established by this Section 4 may not be assigned or transferred,
except as otherwise provided in Section 7.3.
4.7 EXCLUDED SECURITIES. The right of first refusal
established by Sections 4.2, 4.3 and 4.4 shall have no application to any of the
following Equity Securities:
(a) shares of Common Stock (and/or options, warrants
or other Common Stock purchase rights issued pursuant to such options, warrants
or other rights) issued or to be issued to employees, officers or directors of,
or consultants or advisors to the Company or any subsidiary, pursuant to stock
purchase or stock option plans or other compensatory arrangements that are
approved by the Board of Directors;
(b) stock issued pursuant to any rights, agreements,
options or warrants outstanding as of the date of this Agreement, and stock
issued pursuant to any rights, agreements, options or warrants granted after the
date of this Agreement provided that the right of first refusal established by
this Section 4 did not apply to the initial sale or grant by the Company of such
rights, agreements, options or warrants;
(c) any Equity Securities issued for consideration
other than cash pursuant to a merger, consolidation, acquisition or similar
business combination whereby the stockholders of the Company will own more than
fifty percent (50%) of the voting power of the combined entity;
(d) shares of Common Stock issued in connection with
any stock split, stock dividend or recapitalization by the Company;
(e) shares of Common Stock issued upon conversion of
any Equity Securities;
(f) any Equity Securities issued pursuant to any
equipment leasing arrangement; and
(g) shares of the Company's Common Stock or
Preferred Stock issued in connection with strategic transactions involving the
Company and any third party, including (i) joint ventures, manufacturing,
marketing, corporate partnering or distribution arrangements, or (ii) technology
transfer, research or development
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arrangements; provided that such strategic transactions and the issuance of
shares therein, has been approved by the Company's Board of Directors.
5. CONVERSION COVENANTS.
5.1 OPTIONAL CONVERSION. The parties agree that, at the
option of Searle, all of the shares of Series S-1 Preferred Stock (or the shares
of Common Stock issued upon automatic conversion of the Series S-1 Preferred
Stock ) may be, in whole or in part, applied to the milestone payments due under
the Collaboration Agreement for (a) the start of any Phase III clinical trial
for a Product (as defined in the Collaboration Agreement), other than the first
Phase III clinical trial for such Product, (b) upon submission of a new drug
application or (c) Product launch (the "Milestone Option"); provided that in no
event shall less than 50% of any such milestone payment be made in cash;
provided further that the Series S-1 Preferred Stock shall have a value of
$7.0958 per share for purposes of this Section 5 and that shares of Common Stock
issued upon conversion of the Series S-1 Preferred Stock shall have a value
equal to the Series S-1 Conversion Price applicable at the time of conversion.
5.2 MECHANICS OF CONVERSION. In the event that Searle elects
the Milestone Option, it shall surrender the certificate or certificates
representing the shares of Series S-1 Preferred Stock, duly endorsed, at the
office of the Company or of any transfer agent for the Company's Preferred
Stock, and shall give written notice to the Company at such office of the
milestone payments to which it elects to apply the same pursuant to the
Milestone Option. Such payment shall be deemed to have been made immediately
prior to the close of business on the date of such surrender of the shares of
Series S-1 Preferred Stock to be applied toward milestone payments pursuant to
the Milestone Option. All shares of Series S-1 Preferred Stock surrendered as
payment shall be deemed cancelled as of such date.
6. INDEMNIFICATION.
6.1 INDEMNIFICATION OF SEARLE. Cytel agrees to indemnify and
hold harmless Searle and its permitted successors and assigns from and against
any and all (i) liabilities, losses, costs or damages ("Loss") and (ii)
reasonable attorneys' and accountants' fees and expenses, court costs and all
other reasonable out-of-pocket expenses ("Expense") incurred by Searle or its
permitted successors and assigns arising from (A) any breach or failure to
perform by Cytel of any of its covenants or agreements contained in this
Agreement (except to the extent indemnification therefor is already provided
pursuant to Section 2.8 hereof); or (B) any breach of any warranty or the
inaccuracy of any representation of Cytel contained in the Preferred Stock
Exchange Agreement.
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6.2 NOTICE OF CLAIMS BY SEARLE. If any person indemnified
under Section 6.1 hereof believes it has suffered or incurred any Loss or
incurred any Expense as to which it is entitled to indemnification under Section
6.1 hereof, such person shall so notify Cytel promptly in writing describing
such Loss or Expense, the amount thereof, if known, and the method of
computation of such Loss or Expense, all with reasonable particularity and
containing a reference to the provisions of this Agreement, or any agreement or
instrument contemplated hereby, or any certificate delivered pursuant hereto or
thereto in respect of which such Loss or Expense shall have occurred; and if any
action at law or suit in equity is instituted by or against a third party with
respect to which any such indemnified person intends to claim any Loss or
Expense under Section 6.1, such indemnified person shall promptly notify the
indemnifying party of such action or suit; provided that failure to give such
notice shall not abrogate or diminish Cytel's obligations under Section 6.1 if
Cytel has or receives timely actual knowledge of the existence of any such claim
by any other means or except to the extent such failure prejudices Cytel.
6.3 INDEMNIFICATION OF CYTEL. Searle agrees to indemnify and
hold harmless Cytel and its permitted successors and assigns from and against
any and all Loss and Expense incurred by Cytel and its permitted successors and
assigns arising from (i) any breach or failure to perform by Searle of any of
its covenants or agreements contained in this Agreement (except to the extent
indemnification therefor is already provided pursuant to Section 2.8 hereof); or
(ii) any breach of any warranty or the inaccuracy of any representation of
Searle contained in the Preferred Stock Exchange Agreement.
6.4 NOTICE OF CLAIMS BY CYTEL. If any person indemnified
under Section 6.3 believes that it has suffered or incurred any Loss or incurred
any Expense as to which it is entitled to indemnification under Section 6.3,
such person shall so notify Searle or person responsible for such
indemnification promptly in writing describing such Loss or Expense, the amount
thereof, if known, and the method of computation of such Loss or Expense, all
with reasonable particularity and containing a reference to the provisions of
this Agreement, or any agreement or instrument contemplated hereby, or any
certificate delivered pursuant hereto or thereto in respect of which such Loss
or Expense shall have occurred; and if any action at law or suit in equity is
instituted by or against a third party with respect to which any such
indemnified party intends to claim any Loss or Expense under Section 6.3, such
indemnified party shall promptly notify the indemnifying party of such action or
suit; provided that failure to give such notice shall not abrogate or diminish
Searle's obligations under Section 6.3 if Searle has or receives timely actual
knowledge of the existence of any such claim by any other means or except to the
extent such failure prejudices Searle.
6.5 THIRD PARTY CLAIMS. The indemnifying party shall have
the right to participate in, and, to the extent the it so desires, jointly with
any other indemnitor
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similarly noticed, to assume the defense of any third party claim, demand,
action or other proceeding with counsel selected by the indemnifying party;
provided, however, that the indemnified party shall have the right to retain its
own counsel, with the fees and expenses to be paid by the indemnifying party, if
representation of the indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between the indemnified party and any other party represented by such
counsel in such proceedings. So long as the indemnifying party has received
notice of any third party claim, demand, action or proceeding for which any
indemnified party intends to claim any Loss or Expense, and within a reasonable
period thereafter the indemnifying party has assumed the defense thereof, the
indemnity obligations under this Section 6 shall not apply to amounts paid in
settlement of such third party claim, demand, action or proceeding if such
settlement is effected without the consent of the indemnifying party, which
consent shall not be unreasonably withheld or delayed. The indemnifying party
may not settle or otherwise consent to an adverse judgment in any such third
party claim, demand, action or proceeding action that diminishes the rights or
interests of the indemnified party without the prior express written consent of
the indemnified party. The indemnified party, its employees and agents, shall
cooperate reasonably with the indemnifying party and its legal representatives
in the investigation of any third party claim, demand, action or proceeding
covered by this Section 6.
7. MISCELLANEOUS.
7.1 GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of California, as applied to contracts
executed and performed entirely within the State of California, without regard
to conflicts of laws rules.
7.2 SURVIVAL. The representations, warranties, covenants,
and agreements made herein shall survive any investigation made by any Holder
and the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
7.3 SUCCESSORS AND ASSIGNS. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
permitted successors and assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective permitted successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement. This Agreement may not be
assigned or otherwise transferred, nor, except as expressly
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provided hereunder, may any right or obligations hereunder be assigned or
transferred, by either party without the written consent of the other party;
provided, however, that either the Company or the Investor may, without such
consent, assign this Agreement and its rights and obligations hereunder (a) in
connection with the transfer or sale of all or substantially all of its
business, if such assets include substantially all of the assets relating to its
performance of its respective obligations hereunder or (b) in the event of its
merger or consolidation with another company at any time during the term of this
Agreement. Any purported assignment in violation of the preceding sentence shall
be void. Any permitted assignee shall also assume all obligations of its
assignor under this Agreement.
7.4 SEVERABILITY. If one or more provisions of this
Agreement is held to be unenforceable under applicable law, such provision shall
be excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
7.5 AMENDMENT AND WAIVER.
(a) Except as otherwise expressly provided, any
provision of this Agreement (other than Sections 2.3, 3, 4, 5, 6 and 7.5(b)) may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively) only upon the
written consent of the Company and the Holders of at least a majority of the
Registrable Securities. Any amendment or waiver of any provisions of this
Agreement (other than Sections 3, 4, 5, 6 and 7.5(b)) effected in accordance
with this Agreement shall be binding upon each Holder and the Company. By
acceptance of any benefits under this Agreement, Holders of Registrable
Securities hereby agree to be bound by the provisions hereunder.
(b) Except as otherwise expressly provided, any
provision of Sections 2.3, 3, 4, 5, 6 and 7.5(b) of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively) only upon the
written consent of the Company and Searle.
7.6 TERMINATION OF PROVISIONS OF PRIOR AGREEMENTS. Cytel,
Searle and Epimmune acknowledge and agree that the Prior Agreement is hereby
terminated and superseded in its entirety by this Agreement. Cytel and Searle
acknowledge and agree that Sections 8.1, 8.2, 8.3, 8.4, 9 and 10 of the 1997
Agreement and Sections 7.1, 7.2, 7.3, 7.4, 8, 9 and 10 of the 1998 Agreement are
hereby terminated and superseded in their entirety by the applicable sections of
this Agreement. Cytel, Searle and Epimmune acknowledge and agree that the Voting
Agreement, dated February, 1998, entered by and among Cytel, Searle and Epimmune
is hereby terminated.
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7.7 DELAYS OR OMISSIONS. It is agreed that no delay or
omission to exercise any right, power, or remedy accruing to any Holder, upon
any breach, default or noncompliance of the Company under this Agreement shall
impair any such right, power, or remedy, nor shall it be construed to be a
waiver of any such breach, default or noncompliance, or any acquiescence
therein, or of any similar breach, default or noncompliance thereafter
occurring. It is further agreed that any waiver, permit, consent, or approval of
any kind or character on any Holder's part of any breach, default or
noncompliance under the Agreement or any waiver on such Holder's part of any
provisions or conditions of this Agreement must be in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement, by law, or otherwise afforded to Holders,
shall be cumulative and not alternative.
7.8 NOTICES. Any notice or report required or permitted to
be given or made under this Agreement by one of the parties hereto to the other
shall be in writing, delivered personally or by facsimile (and promptly
confirmed by personal delivery or courier) or courier, postage prepaid,
addressed to such other party at its address indicated below, or to such other
address as the addressee shall have last furnished in writing to the addressor
and shall be effective upon receipt by the addressee.
THE COMPANY: Cytel Corporation
5820 Nancy Ridge Drive
San Diego, California 92121
Attention: President
Tel: (858) 860-2500
Fax: (858) 860-2600
with a copy to: Cooley Godward LLP
4365 Executive Drive, Suite 1100
San Diego, California 92121
Attention: Frederick T. Muto, Esq.
Tel: (858) 550-6000
Fax: (858) 453-3555
SEARLE: G.D. Searle & Co.
5200 Old Orchard Road
Skokie, IL 60077
Attention: Vice President, Global Business Development
Tel: (847) 982-7000
Fax: (847) 581-4070
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with a copy to: G.D. Searle & Co.
5200 Old Orchard Road
Skokie, IL 60077
Attention: Assistant General Counsel
Tel: (847) 982-7000
Fax: (847) 581-4045
7.9 TITLES AND SUBTITLES. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.10 PRONOUNS. All pronouns contained herein and any
variations thereof shall be deemed to refer to the masculine, feminine or
neuter, singular or plural, as the identity of the parties hereto may require.
7.11 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.
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IN WITNESS WHEREOF, the parties hereto have executed this Investor
Rights Agreement as of the date set forth in the first paragraph hereof.
COMPANY: INVESTORS:
CYTEL CORPORATION G.D. SEARLE & CO.
By: /S/ ROBERT L. ROE By: /S/ G. DE SCHUTTER
------------------------------- -------------------------------------
Title: Acting President & C.O.O. Title: CEO
---------------------------- ----------------------------------
ACKNOWLEDGED AND AGREED
SOLELY FOR PURPOSES OF
SECTION 7.6 HEREOF:
EPIMMUNE INC.
By: /S/ DEBORAH SCHUEREN
-------------------------------
Title: President
-------------------------------
<PAGE> 1
EXHIBIT 99.1
Combination of Epimmune and Cytel Completed; Nasdaq Trading to Begin Under New
Symbol, EPMN
SAN DIEGO--(BW HealthWire)--July 1, 1999--Epimmune Inc. announced today that it
has completed the merger with Cytel Corp. (Nasdaq:CYTL), as previously announced
on June 15, 1999.
The company has been renamed Epimmune Inc. and, effective July 2, 1999, its
stock will begin trading on Nasdaq under the symbol "EPMN." The company will
focus on building and realizing value from Epimmune's proprietary vaccine
technology.
"The transition from Cytel to Epimmune is now complete," commented Deborah
Schueren, Epimmune's president and chief executive officer. "With a healthy cash
position, a modest burn rate, a strong collaboration with Searle, and a broad
pipeline of proprietary product candidates, Epimmune is well positioned to
advance products into development and build value for its shareholders."
Epimmune is a leader in the field of T-cell recognition and activation, with
nearly 30 patents and more than 150 pending applications covering its
proprietary EIS(TM), EpiGene(TM) and PADRE(TM) technologies.
-- The Epitope Identification System (EIS(TM)) is Epimmune's
proprietary platform that enables the identification and
validation of T-cell epitopes from any protein or gene sequence.
-- The EpiGene vaccine construct contains a DNA vector encoding a
"designer antigen," which includes select epitope sequences from
multiple antigens of the target disease. EpiGene vaccines are
designed to elicit a broad array of conserved helper and
cytotoxic T-cells to seek out and destroy diseased cells.
-- PADRE is a family of proprietary molecules that are potent,
synthetic, "universal" T-helper epitopes. hen combined with
antigens, PADRE induces important "co-stimulatory" signals which
potentiate antigen-specific immune responses.
The company is applying this expertise to the development of novel vaccines or
infectious diseases and cancer. In the cancer field, Epimmune is collaborating
with G.D. Searle & Co., a wholly-owned subsidiary of Monsanto to develop immune
stimulating products for the treatment of breast, colon and lung cancer.
Epimmune is also pursuing development of therapeutic vaccines for hepatitis B,
hepatitis C and HIV, and prophylactic vaccines for hepatitis C, HIV and malaria.
For more information please visit our Web site at www.epimmune.com.
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This press release includes forward-looking statements that reflect management's
current views of future events. Actual results may differ materially from the
above forward-looking statements due to a number of important factors, including
but not limited to the risks associated with the enforcement of patent rights,
the Company's ability to develop vaccines using epitopes, the achievement of
research and development objectives by the Company and any collaborator, the
timing and cost of conducting human clinical trials, the regulatory approval
process, and the possibility that testing may reveal undesirable and unintended
side effects or other characteristics that may prevent or limit the commercial
use of proposed products. These factors are more fully discussed in Cytel's most
recent Forms 10-K and 10-Q.
CONTACT: Epimmune Inc.
Deborah Schueren, 858/860-2513
or
IR PR Strategies, llc
Susan Atkins, 858/451-0772
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