<PAGE> 1
As filed with the Securities and Exchange Commission on September 24, 1999
Registration No. 333-
================================================================================
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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EPIMMUNE INC.
(Exact name of registrant as specified in its charter)
Delaware 35-0245076
(State of Incorporation) (I.R.S. Employer Identification No.)
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5820 Nancy Ridge Drive
San Diego, California 92121
(Address of principal executive offices)
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Common Stock Issuable Upon Exercise of Options Assumed by Epimmune Inc.,
Originally Granted Under the Epimmune Inc. 1997 Stock Option Plan
(Full title of the plans)
Deborah Schueren
President and Chief Executive Officer
Epimmune Inc.
5820 Nancy Ridge Drive
San Diego, California 92121
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------
Copies to:
L. Kay Chandler, Esq.
Nancy D. Krueger, Esq.
COOLEY GODWARD LLP
4365 EXECUTIVE DRIVE, SUITE 1100
SAN DIEGO, CALIFORNIA 92121
858-550-6000
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<PAGE> 2
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
======================= ===================== ==================== ===================== ====================
Proposed Maximum Proposed Maximum
Title of Securities Amount to be Offering Aggregate Amount of
to be Registered Registered Price per Share Offering Price Registration Fee
- ----------------------- --------------------- -------------------- --------------------- --------------------
<S> <C> <C> <C> <C>
Common Stock, par 208,826 shares(1) $0.15609 $32,596 $ 9.06
value
$0.01 per share
- ----------------------- --------------------- -------------------- --------------------- --------------------
Common Stock, par 207,588 shares(1) $0.48026 $99,696 $27.72
value
$0.01 per share
- ----------------------- --------------------- -------------------- --------------------- --------------------
Common Stock, par 6,869 shares(1) $1.50080 $10,309 $ 2.87
value
$0.01 per share
======================= ===================== ==================== ===================== ====================
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(h) of the Securities Act of 1933, as
amended (the "Act"). The price per share and aggregate offering price are
based upon the actual exercise price for shares subject to the options.
The shares registered hereunder will be issued upon the exercise of stock
options assumed by Epimmune Inc., formerly known as Cytel Corporation, a
Delaware corporation (the "Registrant"), pursuant to that certain Certificate of
Ownership and Merger filed by the Registrant with the Secretary of State of the
State of Delaware on July 1, 1999. These options were originally granted to
employees of Epimmune Inc., the subsidiary of the Registrant, under its 1997
Stock Option Plan.
2.
<PAGE> 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Epimmune Inc. (the "Company") with the
Securities and Exchange Commission are incorporated by reference into this
Registration Statement:
(a) The Company's latest annual report on Form 10-K filed pursuant to
Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or either (1) the Company's latest prospectus filed pursuant to
Rule 424(b) under the Securities Act, that contains audited financial statements
for the Company's latest fiscal year for which such statements have been filed,
or (2) the Company's effective registration statement on Form 10 or 20-F filed
under the Exchange Act containing audited financial statements for the Company's
latest fiscal year.
(b) All other reports filed pursuant to Sections 13(a) or 15(d) of the
Exchange Act since the end of the fiscal year covered by the annual reports, the
prospectus or the registration statement referred to in (a) above.
(c) The description of the Company's Common Stock which is contained in
a registration statement filed under the Exchange Act, including any amendment
or report filed for the purpose of updating such description.
All reports and other documents subsequently filed by the Company
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act prior to the
filing of a post-effective amendment which indicates that all securities offered
have been sold or which deregisters all securities then remaining unsold, shall
be deemed to be incorporated by reference herein and to be a part of this
registration statement from the date of the filing of such reports and
documents.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 145 of the Delaware General Corporation Law the Company
has broad powers to indemnify its directors and officers against liabilities
they may incur in such capacities, including liabilities under the Securities
Act. The Company's By-laws require the Company to indemnify its directors and
executive officers, and permit the Company to indemnify its other officers,
employees and other agents, to the extent permitted by Delaware law. Under the
Company's By-laws, indemnified parties are entitled to indemnification to the
fullest extent permitted by law. The By-laws also require the Company to advance
litigation expenses in the case of stockholder derivative actions or other
actions, against an undertaking by the indemnified party to repay such advances
if it is ultimately determined that the indemnified party is not entitled to
indemnification.
The Company has entered into indemnity agreements with each of its
directors and executive officers. Such indemnity agreements contain provisions
which are in some respects broader than the specific indemnification provisions
contained in Delaware law.
3.
<PAGE> 4
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
<S> <C>
5.1 Opinion of Cooley Godward LLP.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Cooley Godward LLP is contained in Exhibit 5.1 to this
Registration Statement.
24 Power of Attorney is contained on the signature pages.
99.1 Epimmune Inc. 1997 Stock Option Plan.
99.2 Form of Incentive Stock Option Agreement used under Epimmune 1997
Stock Option Plan.
</TABLE>
UNDERTAKINGS
1. The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) (Section 230.424(b) of this
chapter) if, in the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
Provided, however, that paragraphs (a)(i) and (a)(ii) do not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the issuer pursuant to
section 13 or section 15(d) of the Exchange Act that are incorporated by
reference herein.
(b) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
4.
<PAGE> 5
2. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be
a new registration statement relating to the securities offered herein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
3. Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
5.
<PAGE> 6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of San Diego, State of California on September 24,
1999.
EPIMMUNE INC.
By: /S/ DEBORAH SCHUEREN
-------------------------------------
Deborah Schueren, President
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Deborah Schueren and Robert Chesnut, and
each or any one of them, his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitutes or substitute, may lawfully do or cause to be
done by virtue hereof.
6.
<PAGE> 7
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/S/ DEBORAH A. SCHUEREN President, Chief Executive September 24, 1999
------------------------------------ Officer and Chief Financial
Deborah A. Schueren Officer (Principal Executive
Officer, Principal Financial
and Accounting Officer)
/S/ HOWARD E. GREENE, JR.
------------------------------------ Director September 24, 1999
Howard E. Greene, Jr.
/S/ NICOLE VITULLO
------------------------------------ Director September 24, 1999
Nicole Vitullo
/S/ NANCY D. RASMUSSEN
------------------------------------ Director September 24, 1999
Nancy D. Rasmussen
/S/ WILLIAM T. COMER, PH.D.
------------------------------------ Director September 24, 1999
William T. Comer, Ph.D.
/S/ MICHAEL G. GREY
------------------------------------ Director September 24, 1999
Michael G. Grey
</TABLE>
7.
<PAGE> 8
EXHIBIT INDEX
<TABLE>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
5.1 Opinion of Cooley Godward LLP
23.1 Consent of Ernst & Young LLP
23.2 Consent of Cooley Godward LLP is contained in Exhibit 5 to this
Registration Statement
24 Power of Attorney is contained on the signature pages.
99.1 Epimmune Inc. 1997 Stock Option Plan
99.2 Form of Incentive Stock Option Agreement used under Epimmune Inc.
1997 Stock Option Plan.
</TABLE>
8.
<PAGE> 1
EXHIBIT 5.1
[COOLEY GODWARD LLP LETTERHEAD]
September 24, 1999
Epimmune Inc.
5820 Nancy Ridge Drive
San Diego, CA 92121
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing by Epimmune Inc. (the "Company") of a Registration Statement on
Form S-8 (the "Registration Statement") with the Securities and Exchange
Commission covering the offering of an aggregate of 423,283 shares of the
Company's Common Stock, $.01 par value, (the "Shares") pursuant to outstanding
options assumed by the Company, originally granted under the Epimmune Inc. 1997
Stock Option Plan (the "Plan").
In connection with this opinion, we have examined the Registration Statement and
related prospectus, the Plan, the Company's Certificate of Incorporation and
By-laws, as amended, and such other documents, records, certificates, memoranda
and other instruments as we deem necessary as a basis for this opinion. We have
assumed the genuineness and authenticity of all documents submitted to us as
originals, the conformity to originals of all documents submitted to us as
copies thereof, and the due execution and delivery of all documents where due
execution and delivery are a prerequisite to the effectiveness thereof.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Shares, when sold and issued in accordance with the Plan, the
Registration Statement and related prospectus, will be validly issued, fully
paid, and nonassessable (except as to shares issued pursuant to certain deferred
payment arrangements, which will be fully paid and nonassessable when such
deferred payments are made in full).
We consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
COOLEY GODWARD LLP
By: /S/ L. KAY CHANDLER
----------------------------------
L. Kay Chandler
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG, LLP INDEPENDENT AUDITORS
We consent to incorporation by reference in the Registration Statement
(Form S-8) of Epimmune Inc. (formerly known as Cytel Corporation) of our report
dated February 5, 1999, except for Notes 5, 9 and 11, as to which the date is
March 29, 1999, with respect to the consolidated financial statements of
Epimmune Inc. (formerly known as Cytel Corporation) included in its Annual
Report (Form 10-K) for the year ended December 31, 1998, filed with the
Securities and Exchange Commission.
/S/ ERNST & YOUNG LLP
---------------------
ERNST & YOUNG LLP
San Diego, California
September 23, 1999
<PAGE> 1
EXHIBIT 99.1
EPIMMUNE INC.
1997 STOCK OPTION PLAN
ADOPTED DECEMBER 17, 1997
APPROVED BY SOLE STOCKHOLDER DECEMBER 18, 1997
AGREED TO BY CYTEL CORPORATION DECEMBER 18, 1997
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees, Directors and Consultants may be given an opportunity to benefit from
increases in value of the common stock of the Company ("Common Stock") through
the granting of (i) Incentive Stock Options and (ii) Nonstatutory Stock Options.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees, Directors or Consultants, to secure and retain
the services of new Employees, Directors and Consultants and to provide
incentives for such persons to exert maximum efforts for the success of the
Company and its Affiliates.
(c) The Company intends that the Options issued under the Plan shall, in
the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
Options granted pursuant to Section 6 hereof, including Incentive Stock Options
and Nonstatutory Stock Options. All Options shall be separately designated
Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and
in such form as issued pursuant to Section 6, and a separate certificate or
certificates will be issued for shares purchased on exercise of each type of
Option.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
(e) "COMPANY" means Epimmune Inc., a Delaware corporation.
(f) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided
<PAGE> 2
that the term "Consultant" shall not include Directors who are paid only a
director's fee by the Company or who are not compensated by the Company for
their services as Directors.
(g) "CONTINUOUS SERVICE" means that the Optionee's employment or service
with the Company or an Affiliate of the Company, whether in the capacity of an
Employee, a Director or a Consultant, is not interrupted or terminated. The
Optionee's Continuous Service shall not be deemed to have terminated merely
because of a change in the capacity in which the Optionee renders employment or
service to the Company or an Affiliate or the Company or a change in the entity
for which the Optionee renders such employment or service, provided that there
is no interruption or termination of the Optionee's Continuous Service. The
Board or the Chief Executive Officer of the Company, in that party's sole
discretion, may determine whether Continuous Service shall be considered
interrupted in the case of: (i) any leave of absence approved by the Board or
the Chief Executive Officer of the Company, including sick leave, military
leave, or any other personal leave; or (ii) transfers between locations of the
Company or between the Company, Affiliates or their successors.
(h) "COVERED EMPLOYEE" means the Chief Executive Officer and the four
(4) other highest compensated officers of the Company for whom total
compensation is required to be reported to stockholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.
(i) "CYTEL" means Cytel Corporation, a Delaware corporation and the
Parent of the Company at the time of the adoption of the Plan.
(j) "DIRECTOR" means a member of the Board.
(k) "DISABILITY" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(l) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(m) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(n) "FAIR MARKET VALUE" means, as of any date, the value of the Common
Stock of the Company determined as follows (and in each case prior to the
Listing Date, in a manner consistent with Section 260.140.50 of Title 10 of the
California Code of Regulations):
(1) If the Common Stock is listed on any established stock
exchange, or traded on the Nasdaq National Market or the Nasdaq SmallCap Market,
the Fair Market Value of a share of Common Stock shall be the closing sales
price for such stock (or the closing bid, if no sales were reported) as quoted
on such exchange or market (or the exchange or market with the greatest volume
of trading in Common Stock) on the day of determination, as reported in the Wall
Street Journal or such other source as the Board deems reliable;
(2) In the absence of such markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board.
2
<PAGE> 3
(o) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(p) "LISTING DATE" means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on any
securities exchange, or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system if
such securities exchange or interdealer quotation system has been certified in
accordance with the provisions of Section 25100(o) of the California Corporate
Securities Law of 1968.
(q) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act),
does not possess an interest in any other transaction as to which disclosure
would be required under Item 404(a) of Regulation S-K, and is not engaged in a
business relationship as to which disclosure would be required under Item 404(b)
of Regulation S-K; or (ii) is otherwise considered a "non-employee director" for
purposes of Rule 16b-3.
(r) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.
(s) "OFFICER" means (i) prior to the Listing Date, any person designated
by the Company as an officer and (ii) from and after the Listing Date, a person
who is an officer of the Company within the meaning of Section 16 of the
Exchange Act and the rules and regulations promulgated thereunder.
(t) "OPTION" means a stock option granted pursuant to the Plan.
(u) "OPTION AGREEMENT" means a written agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.
(v) "OPTIONEE" means a person to whom an Option is granted pursuant to
the Plan.
(w) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(x) "PLAN" means this Epimmune Inc. 1997 Stock Option Plan.
3
<PAGE> 4
(y) "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any successor
to Rule 16b-3, as in effect when discretion is being exercised with respect to
the Plan.
(z) "SECURITIES ACT" means the Securities Act of 1933, as amended.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the
Board delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible
under the Plan shall be granted Options; when and how each Option shall be
granted; whether an Option will be an Incentive Stock Option or a Nonstatutory
Stock Option; the provisions of each Option granted (which need not be
identical), including the time or times when a person shall be permitted to
receive stock pursuant to an Option; and the number of shares with respect to
which an Option shall be granted to each such person.
(2) To construe and interpret the Plan and Options granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Option Agreement, in a
manner and to the extent it shall deem necessary or expedient to make the Plan
fully effective.
(3) To amend the Plan or an Option as provided in Section 12.
(4) Generally, to exercise such powers and to perform such acts
as the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(c) The Board may delegate administration of the Plan to a Committee or
Committees of one or more members of the Board. In the discretion of the Board,
a Committee may consist solely of two or more Outside Directors, in accordance
with Code Section 162(m), or solely of two or more Non-Employee Directors, in
accordance with Rule 16b-3. If administration is delegated to a Committee, the
Committee shall have, in connection with the administration of the Plan, the
powers theretofore possessed by the Board (and references in this Plan to the
Board shall thereafter be to the Committee), subject, however, to such
resolutions, not inconsistent with the provisions of the Plan, as may be adopted
from time to time by the Board. The Board may abolish the Committee at any time
and revest in the Board the administration of the Plan. Notwithstanding anything
in this Section 3 to the contrary, the Board or the Committee may delegate to a
committee of one or more members of the Board the authority to grant Options to
eligible persons who (1) are not then subject to Section 16 of the Exchange Act
and/or (2) are either (i) not then Covered Employees and are not expected to be
Covered Employees at the time of recognition of income resulting from such
Option, or (ii) not persons with respect to whom the Company wishes to comply
with Section 162(m) of the Code.
4
<PAGE> 5
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 11 relating to adjustments upon
changes in stock, the stock that may be issued pursuant to Options shall not
exceed in the aggregate One Million Nine Hundred Twenty Thousand (1,920,000)
shares of Common Stock. If any Option shall for any reason expire or otherwise
terminate, in whole or in part, without having been exercised in full, the stock
not acquired under such Option shall revert to and again become available for
issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
(c) Before the Listing Date, the total number of shares issuable upon
exercise of all outstanding Options and the total number of shares provided for
under any stock bonus or similar plan of the Company shall at no time exceed the
applicable percentage as calculated in accordance with the conditions and
exclusions of Section 260.140.45 of Title 10 of the California Code of
Regulations, based on the shares of the Company which are outstanding at the
time the calculation is made.
5. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to Employees.
Nonstatutory Stock Options may be granted to Employees, Directors and
Consultants.
(b) Prior to the Listing Date, no person shall be eligible for the grant
of an Option if, at the time of grant, such person owns (or is deemed to own
pursuant to Section 424(d) of the Code) stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or of any of its Affiliates unless the exercise price of such Option is at least
one hundred ten percent (110%) of the Fair Market Value of such stock at the
date of grant and the Option is not exercisable after the expiration of five (5)
years from the date of grant. After the Listing Date this provision shall apply
only to Incentive Stock Options.
(c) Subject to the provisions of Section 11 relating to adjustments upon
changes in stock, no person shall be eligible to be granted Options covering
more than Five Hundred Thousand (500,000) shares of the Common Stock in any
calendar year. This subsection 5(c) shall not apply prior to the Listing Date
and, following the Listing Date, it shall not apply until (i) the earliest of:
(A) the first material modification of the Plan (including any increase to the
number of shares reserved for issuance under the Plan in accordance with Section
4); (B) the issuance of all of the shares of Common Stock reserved for issuance
under the Plan; (C) the expiration of the Plan; or (D) the first meeting of
Stockholders at which directors are to be elected that occurs after the close of
the third calendar year following the calendar year in which occurred the first
registration of an equity security under Section 12 of the Exchange Act; or (ii)
such other date required by Section 162(m) of the Code and the rules and
regulations promulgated thereunder.
6. OPTION PROVISIONS.
5
<PAGE> 6
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) TERM. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(b) PRICE. The exercise price of each Incentive Stock Option shall be
not less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted, and the exercise price
of each Nonstatutory Stock Option shall be not less than eighty-five percent
(85%) of the Fair Market Value of the stock subject to the Option on the date
the Option is granted. Notwithstanding the foregoing, an Option may be granted
with an exercise price lower than that set forth in the preceding sentence if
such Option is granted pursuant to an assumption or substitution for another
option in a manner satisfying the provisions of Section 424(a) of the Code.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash or (ii) at the discretion of the Board at the
time of the grant of the Option (with respect to both Incentive Stock Options
and Nonstatutory Stock Options) or at the time of exercise (with respect to
Nonstatutory Stock Options), (A) by delivery to the Company of other Common
Stock of the Company, (B) according to a deferred payment (however, payment of
the common stock's "par value," as defined in the Delaware General Corporation
Law, shall not be made by deferred payment), or other arrangement (which may
include, without limiting the generality of the foregoing, the use of other
Common Stock of the Company) with the person to whom the Option is granted or to
whom the Option is transferred pursuant to subsection 6(d), or (C) in any other
form of legal consideration that may be acceptable to the Board. In the case of
any deferred payment arrangement, interest shall be compounded at least annually
and shall be charged at the minimum rate of interest necessary to avoid the
treatment as interest, under any applicable provisions of the Code, of any
amounts other than amounts stated to be interest under the deferred payment
arrangement.
(d) TRANSFERABILITY. Prior to the Listing Date, an Option shall not be
transferable except by will or by the laws of descent and distribution, and
shall be exercisable during the lifetime of the person to whom the Option is
granted only by such person. After the Listing Date, a Nonstatutory Stock Option
may be transferred to the extent provided in the Option Agreement; provided that
if the Option Agreement does not expressly permit the transfer of a Nonstatutory
Stock Option, the Nonstatutory Stock Option shall not be transferable except by
will, by the laws of descent and distribution, to the spouse, children, lineal
ancestors and lineal descendants of the Optionee (or to a trust, limited
liability company or limited liability partnership created solely for the
benefit of the Optionee and/or the foregoing persons) or pursuant to a domestic
relations order satisfying the requirements of Rule 16 of the Exchange Act and
shall be exercisable during the lifetime of the person to whom the Option is
granted only by such person or any transferee pursuant to a domestic relations
order. Notwithstanding the foregoing, the person to whom the Option is granted
may, by delivering written notice to the
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<PAGE> 7
Company, in a form satisfactory to the Company, designate a third party who, in
the event of the death of the Optionee, shall thereafter be entitled to exercise
the Option.
(e) VESTING. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option Agreement may provide that from time to time during
each of such installment periods, the Option may become exercisable ("vest")
with respect to some or all of the shares allotted to that period and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. Prior to the Listing Date and
to the extent required by applicable law, the vesting provisions of individual
Options may vary, but Options granted to persons other officers, directors and
consultants (within the meaning of Section 260.140.41 of Title 10 of the
California Code of Regulations) in each case will provide for vesting of at
least twenty percent (20%) per year of the total number of shares subject to the
Option although vesting may be subject to reasonable conditions such as
continued employment. The provisions of this subsection 6(e) are subject to any
Option provisions governing the minimum number of shares as to which an Option
may be exercised.
(f) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event an Optionee's Continuous Service terminates (other than
upon the Optionee's death or disability), the Optionee may exercise his or her
Option (to the extent that the Optionee was entitled to exercise it at the date
of termination) but only within such period of time ending on the earlier of (i)
the date three (3) months after the termination of the Optionee's Continuous
Service (or such longer or shorter period specified in the Option Agreement,
which, prior to the Listing Date, shall not be less than thirty (30) days unless
such termination is for cause), or (ii) the expiration of the term of the Option
as set forth in the Option Agreement. If, after termination, the Optionee does
not exercise his or her Option within the time specified in the Option
Agreement, the Option shall terminate, and the shares covered by such Option
shall revert to and again become available for issuance under the Plan.
An Optionee's Option Agreement may also provide that, if the exercise of
the Option following the termination of the Optionee's Continuous Service (other
than upon the Optionee's death or disability) would be prohibited at any time
solely because the issuance of shares would violate the registration
requirements under the Securities Act, then the Option shall terminate on the
earlier of (i) the expiration of the term of the Option as described in
subsection 6(a) or (ii) the expiration of a period of three (3) months after the
termination of the Optionee's Continuous Service during which the exercise of
the Option would not be in violation of such registration requirements (if such
provisions would result in an extension of the time during which the Option may
be exercised beyond the period described in the first paragraph of this
subsection 6(f)).
(g) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous
Service terminates as a result of the Optionee's disability, the Optionee may
exercise his or her Option (to the extent that the Optionee was entitled to
exercise it at the date of termination), but only within such period of time
ending on the earlier of (i) the date twelve (12) months following such
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<PAGE> 8
termination (or such longer or shorter period specified in the Option Agreement,
which, prior to the Listing Date, in no event shall be less than six (6)
months), or (ii) the expiration of the term of the Option as set forth in the
Option Agreement. If, at the date of termination, the Optionee is not entitled
to exercise his or her entire Option, the shares covered by the unexercisable
portion of the Option shall revert to and again become available for issuance
under the Plan. If, after termination, the Optionee does not exercise his or her
Option within the time specified herein, the Option shall terminate, and the
shares covered by such Option shall revert to and again become available for
issuance under the Plan.
(h) DEATH OF OPTIONEE. In the event of the death of an Optionee during,
or within a period specified in the Option after the termination of, the
Optionee's Continuous Service, the Option may be exercised (to the extent the
Optionee was entitled to exercise the Option at the date of death) by the
Optionee's estate, by a person who acquired the right to exercise the Option by
bequest or inheritance or by a person designated to exercise the option upon the
Optionee's death pursuant to subsection 6(d), but only within the period ending
on the earlier of (i) the date eighteen (18) months following the date of death
(or such longer or shorter period specified in the Option Agreement, which,
prior to the Listing Date, in no event shall be less than six (6) months), or
(ii) the expiration of the term of such Option as set forth in the Option
Agreement. If, at the time of death, the Optionee was not entitled to exercise
his or her entire Option, the shares covered by the unexercisable portion of the
Option shall revert to and again become available for issuance under the Plan.
If, after death, the Option is not exercised within the time specified herein,
the Option shall terminate, and the shares covered by such Option shall revert
to and again become available for issuance under the Plan.
(i) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased may be subject to a repurchase right in favor of the Company or to any
other restriction the Board determines to be appropriate; provided, however,
that, prior to the Listing Date and to the extent required by applicable law,
(i) the right to repurchase at the original purchase price shall lapse at a
minimum rate of twenty percent (20%) per year over five (5) years from the date
the Option was granted, and (ii) such right shall be exercisable only within (A)
the ninety (90) day period following the termination of employment or the
relationship as a Director or Consultant, or (B) such longer period as may be
agreed to by the Company and the Optionee, and (iii) such right shall be
exercisable only for cash or cancellation of purchase money indebtedness for the
shares. Notwithstanding the foregoing, shares received on exercise of an Option
by an officer, director or consultant (within the meaning of Section 260.140.41
of Title 10 of the California Code of Regulations) may be subject to additional
or greater restrictions. Any shares repurchased pursuant to the Company's
repurchase right described in this subsection 6(i) shall be returned to and
again become available for issuance under the Plan.
(j) RIGHT OF FIRST REFUSAL. The Company may elect, prior to the Listing
Date, to exercise a right of first refusal following receipt of notice from the
Optionee of the intent to transfer all or any part of the shares exercised
pursuant to the Option. Such right of first refusal shall be exercised by the
Company no more than thirty (30) days following receipt of notice of the
Optionee's intent to transfer shares and must be exercised as to all the shares
the Optionee
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<PAGE> 9
intends to transfer unless the Optionee consents to exercise for less than all
the shares offered. The purchase of the shares following exercise shall be
completed within thirty (30) days of the Company's receipt of notice of the
Optionee's intent to transfer shares, or such longer period of time as has been
offered by the person to whom the Optionee intends to transfer the shares, or as
may be agreed to by the Company and the Optionee. Except as expressly provided
in this subsection 6(j), such right of first refusal shall otherwise comply with
any applicable provisions of the Bylaws of the Company.
(k) RE-LOAD OPTIONS. Without in any way limiting the authority of the
Board or Committee to make or not to make grants of Options hereunder, the Board
or Committee shall have the authority (but not an obligation) to include as part
of any Option Agreement a provision entitling the Optionee to a further Option
(a "Re-Load Option") in the event the Optionee exercises the Option evidenced by
the Option Agreement, in whole or in part, by surrendering other shares of
Common Stock in accordance with this Plan and the terms and conditions of the
Option Agreement. Any such Re-Load Option (i) shall be for a number of shares
equal to the number of shares surrendered as part or all of the exercise price
of such Option; (ii) shall have an expiration date which is the same as the
expiration date of the Option the exercise of which gave rise to such Re-Load
Option; and (iii) shall have an exercise price which is equal to one hundred
percent (100%) of the Fair Market Value of the Common Stock subject to the
Re-Load Option on the date of exercise of the original Option. Notwithstanding
the foregoing, a Re-Load Option which is an Incentive Stock Option and which is
granted to a 10% stockholder (as described in subsection 5(b)), shall have an
exercise price which is equal to one hundred ten percent (110%) of the Fair
Market Value of the stock subject to the Re-Load Option on the date of exercise
of the original Option and shall have a term which is no longer than five (5)
years.
Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board or Committee may designate at the time
of the grant of the original Option; provided, however, that the designation of
any Re-Load Option as an Incentive Stock Option shall be subject to the one
hundred thousand dollars ($100,000) annual limitation on exercisability of
Incentive Stock Options described in subsection 10(e) of the Plan and in Section
422(d) of the Code. There shall be no Re-Load Options on a Re-Load Option. Any
such Re-Load Option shall be subject to the availability of sufficient shares
under subsection 4(a) and shall be subject to such other terms and conditions as
the Board or Committee may determine which are not inconsistent with the express
provisions of the Plan regarding the terms of Options.
(l) RIGHT OF REPURCHASE. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to
repurchase all or any part of the vested shares exercised pursuant to the
Option; provided, however, that, prior to the Listing Date and to the extent
required by applicable law, (i) such repurchase right shall be exercisable only
within (A) the ninety (90) day period following the termination of the
Optionee's Continuous Service (or in the case of a post-termination exercise of
the Option, the ninety (90) period following such exercise), or (B) such longer
period as may be agreed to by the Company and the Optionee, (ii) such repurchase
right shall be exercisable for less than all of the vested shares only with the
Optionee's consent and (iii) such right shall be exercisable only for cash or
cancellation of purchase money indebtedness for the shares at a repurchase price
equal to the greater of the exercise price or the stock's Fair Market Value at
the time of such termination. Notwithstanding the foregoing, shares received on
exercise of an Option by an officer, director or consultant
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<PAGE> 10
(within the meaning of Section 260.140.41 of Title 10 of the California Code of
Regulations) may be subject to additional or greater restrictions specified in
the Option Agreement.
7. CANCELLATION AND RE-GRANT OF OPTIONS.
(a) The Board shall have the authority to effect, at any time and from
time to time, (i) the repricing of any outstanding Options under the Plan and/or
(ii) with the consent of any adversely affected holders of Options, the
cancellation of any outstanding Options under the Plan and the grant in
substitution therefor of new Options under the Plan covering the same or
different numbers of shares of stock, but having an exercise price per share not
less than eighty-five percent (85%) of the Fair Market Value for a Nonstatutory
Stock Option, one hundred percent (100%) of the Fair Market Value for an
Incentive Stock Option or, in the case of an Option held by a 10% stockholder
(as described in subsection 5(b)), not less than one hundred ten percent (110%)
of the Fair Market Value per share of stock on the new grant date.
Notwithstanding the foregoing, the Board may grant an Option with an exercise
price lower than that set forth above if such Option is granted as part of a
transaction to which Section 424(a) of the Code applies.
(b) The repricing of an Option under this Section 7, resulting in a
reduction of the exercise price, shall be deemed to be a cancellation of the
original Option and the grant of a substitute Option.
8. COVENANTS OF THE COMPANY.
(a) During the terms of the Options, the Company shall keep available at
all times the number of shares of stock required to satisfy such Options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares under Options; provided, however, that this undertaking
shall not require the Company to register under the Securities Act the Plan, any
Option or any stock issued or issuable pursuant to any such Option. If, after
reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems necessary
for the lawful issuance and sale of stock under the Plan, the Company shall be
relieved from any liability for failure to issue and sell stock upon exercise of
such Options unless and until such authority is obtained.
9. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.
10. MISCELLANEOUS.
(a) Subject to any applicable provisions of the California Corporate
Securities Law of 1968 and related regulations relied upon as a condition of
issuing securities pursuant to the Plan, the Board shall have the power to
accelerate the time at which an Option may first be exercised or the time during
which an Option or any part thereof will vest, notwithstanding the provisions
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<PAGE> 11
in the Option stating the time at which it may first be exercised or the time
during which it will vest.
(b) Neither an Employee, Director or a Consultant nor any person to whom
an Option is transferred in accordance with the Plan shall be deemed to be the
holder of, or to have any of the rights of a holder with respect to, any shares
subject to such Option unless and until such person has satisfied all
requirements for exercise of the Option pursuant to its terms.
(c) To the extent required by applicable law, throughout the term of any
Option, the Company shall deliver to the holder of such Option, not later than
one hundred twenty (120) days after the close of each of the Company's fiscal
years during the term of such Option, a balance sheet and an income statement.
This subsection 10(c) shall not apply (i) after the Listing Date, or (ii) when
issuance is limited to key employees whose duties in connection with the Company
assure them access to equivalent information.
(d) Nothing in the Plan or any instrument executed or Option granted
pursuant thereto shall confer upon any Employee, Consultant or other holder of
Options any right to continue in the employ of the Company or any Affiliate or
to continue serving as a Consultant or a Director, or shall affect the right of
the Company or any Affiliate to terminate the employment of any Employee with or
without notice and with or without cause, or the right to terminate the
relationship of any Consultant pursuant to the terms of such Consultant's
agreement with the Company or Affiliate or service as a Director pursuant to the
Company's Bylaws and the provisions of the corporate law of the state in which
the Company is incorporated.
(e) To the extent that the aggregate Fair Market Value (determined at
the time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.
(f) The Company may require any person to whom an Option is granted, or
any person to whom an Option is transferred in accordance with the Plan, as a
condition of exercising or acquiring stock under any Option, (1) to give written
assurances satisfactory to the Company as to such person's knowledge and
experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters, and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the Option; and (2) to give written assurances satisfactory
to the Company stating that such person is acquiring the stock subject to the
Option for such person's own account and not with any present intention of
selling or otherwise distributing the stock. The foregoing requirements, and any
assurances given pursuant to such requirements, shall be inoperative if (i) the
issuance of the shares upon the exercise or acquisition of stock under the
Option has been registered under a then currently effective registration
statement under the Securities Act, or (ii) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such
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<PAGE> 12
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the transfer
of the stock.
(g) To the extent provided by the terms of an Option Agreement, the
person to whom an Option is granted may satisfy any federal, state or local tax
withholding obligation relating to the exercise or acquisition of stock under an
Option by any of the following means (in addition to the Company's right to
withhold from any compensation paid to such person by the Company) or by a
combination of such means: (1) tendering a cash payment; (2) authorizing the
Company to withhold shares from the shares of the Common Stock otherwise
issuable to the participant as a result of the exercise or acquisition of stock
under the Option; or (3) delivering to the Company owned and unencumbered shares
of the Common Stock of the Company.
11. ADJUSTMENTS UPON CHANGES IN STOCK.
If any change is made in the stock subject to the Plan, or subject to
any Option, without the receipt of consideration by the Company (through merger,
consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan will be appropriately adjusted in the class(es) and maximum
number of shares subject to the Plan pursuant to subsection 4(a), and the
outstanding Options will be appropriately adjusted in the class(es) and number
of shares and price per share of stock subject to such outstanding Options. Such
adjustments shall be made by the Board, the determination of which shall be
final, binding and conclusive. (The conversion of any convertible securities of
the Company shall not be treated as a "transaction not involving the receipt of
consideration by the Company".)
12. CHANGE IN CONTROL OF THE COMPANY.
(a) Any of the following with respect to the Company shall constitute a
"Change in Control of the Company": (1) a dissolution, liquidation, or sale of
all or substantially all of the assets of the Company; (2) a merger or
consolidation in which the Company is not the surviving corporation; (3) a
reverse merger in which the Company is the surviving corporation but the shares
of stock of the Company outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise; (4) the individuals who, as of the date of the
adoption of this Plan, are members of the Board (the "Incumbent Company Board"),
cease for any reason to constitute at least 50% of the Board, provided, however,
that if the election, or nomination for election, by the stockholders of the
Company of any new director was approved by a vote of at least 50% of the
Incumbent Company Board, such new director shall, for purposes of this
subsection 12(a), be considered as a member of the Incumbent Company Board or
(5) the acquisition by any person, entity or group within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act, or any comparable successor provisions
(excluding any employee benefit plan, or related trust, sponsored or maintained
by the Company or any Affiliate of the Company of the beneficial ownership
within the meaning of Rule 13d-3 promulgated under the Exchange Act, or
comparable successor rule) (a "Control Group") of securities of the Company
representing at least fifty percent (50%) of the combined voting power entitled
to vote in the election of directors of the Company (a "Control Group
Acquisition").
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(b) In the event of a Change of Control of the Company where there is a
surviving or acquiring corporation, the surviving or acquiring corporation shall
assume Options outstanding under the Plan or shall substitute similar options
(including an option to acquire the same consideration paid to stockholders in
the transaction described in subsection 12(a)) for those outstanding under the
Plan. If such surviving or acquiring corporation is unable or refuses to assume
or continue such Options, or to substitute similar options for those outstanding
under the Plan, then, with respect to Options held by persons whose Continuous
Service has not terminated and subject to any applicable provisions of law
relied upon as a condition of issuing securities pursuant to the Plan, the time
during which such Options vest and may be exercised shall be accelerated prior
to the Change in Control.
(c) In the event of a Change of Control of the Company where there is no
surviving or acquiring corporation, then, with respect to Options held by
persons whose Continuous Service has not terminated and subject to any
applicable provisions of law relied upon as a condition of issuing securities
pursuant to the Plan, the time during which such Options vest and may be
exercised shall be accelerated prior to the Change in Control of the Company.
(d) In the event of a Control Group Acquisition prior to the Listing
Date where there is an acceleration of the vesting and exercisability of the
Options prior to such Control Group Acquisition pursuant to subsection 12(b) or
(c), then in addition to such acceleration of the vesting and exercisability of
the Options, each Optionee who holds an Option outstanding under the Plan and
each Optionee who holds shares acquired upon exercise of an Option shall be
entitled to a "Control Group Alternative Right." A "Control Group Alternative
Right" means a right to receive from the Company within fifteen (15) days after
the Control Group Acquisition a payment of cash or, if the Control Group is a
corporation, then, at the option of the Optionee, shares of the Common Stock of
the Control Group in exchange for (i) the cancellation or surrender of the
Option and (ii) the repurchase of any shares of Common Stock of the Company
acquired by the Optionee upon exercise of the Option. For purposes of such
Control Group Alternative Right, the Fair Market Value of a share of the Common
Stock of the Company shall be measured by the higher of the following prior
purchases of the Company's securities (taking into account whether the prior
purchase is for Common Stock or preferred stock and the rights, preferences and
privileges of any such preferred stock): (A) the purchase price for the last
purchase of securities of the Company by the Control Group, (B) the average of
the purchase prices for the last three (3) purchases of securities of the
Company by the Control Group or (C) the average of the purchase prices for all
purchases of securities of the Company by the Control Group.
13. CHANGE IN CONTROL OF CYTEL.
(a) Any of the following with respect to Cytel at such time that Cytel
owns at least fifty percent (50%) of the total combined voting power of all
classes of stock of the Company shall constitute a "Change in Control of Cytel":
(1) a dissolution, liquidation, or sale of all or substantially all of the
assets of Cytel; (2) a merger or consolidation in which Cytel is not the
surviving corporation; (3) a reverse merger in which Cytel is the surviving
corporation but the shares of the common stock of Cytel outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise; (4) the individuals who,
as of the date of the adoption of this Plan, are members of the
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<PAGE> 14
Board of Directors of Cytel (the "Incumbent Cytel Board"), cease for any reason
to constitute at least 50% of the Board of Directors of Cytel, provided,
however, that if the election, or nomination for election, by the stockholders
of Cytel of any new director was approved by a vote of at least 50% of the
Incumbent Cytel Board, such new director shall, for purposes of this subsection
13(a), be considered as a member of the Incumbent Cytel Board, or (5) after the
Listing Date, the acquisition by any person, entity or group within the meaning
of Section 13(d)(3) or 14(d)(2) of the Exchange Act, or any comparable successor
provisions (excluding any employee benefit plan, or related trust, sponsored or
maintained by Cytel or any Affiliate of Cytel of the beneficial ownership within
the meaning of Rule 13d-3 promulgated under the Exchange Act, or comparable
successor rule) of securities of Cytel representing at least fifty percent (50%)
of the combined voting power entitled to vote in the election of directors of
Cytel.
(b) In the event of a Change of Control of Cytel where is there a
surviving or acquiring corporation, the surviving or acquiring corporation shall
(1) offer Optionees who hold Options outstanding under the Plan the right to
have such Options assumed by the surviving or acquiring corporation or to
substitute similar options (including an option to acquire the same
consideration paid to stockholders of Cytel in the transaction described in
subsection 13(a)) for those outstanding under the Plan and (2) offer Optionees
who hold shares of the Common Stock of the Company acquired upon exercise of an
Option the right to exchange such shares for the same consideration paid to
stockholders of Cytel in the transaction described in subsection 13(a). For
purposes of such assumption, substitution or exchange, the Fair Market Value of
a share of the Common Stock of the Company shall be determined as provided in
subsection 13(e).
(c) If such surviving or acquiring corporation is unable or refuses to
assume or continue such Options, or to substitute similar options for those
outstanding under the Plan or if there is no surviving or acquiring corporation
upon a Change in Control of Cytel, then, subject to any applicable provisions of
law relied upon as a condition of issuing securities pursuant to the Plan, the
time during which outstanding Options vest and may be exercised shall be
accelerated prior to the Change in Control of Cytel.
(d) Each Optionee who holds an Option outstanding under the Plan which
has not been assumed or substituted for by the surviving or acquiring
corporation upon a Change in Control of Cytel and each Optionee who holds shares
acquired upon exercise of an Option which have not been exchanged by the
surviving or acquiring corporation upon a Change in Control of Cytel shall be
entitled to a "Cytel Alternative Right." A "Cytel Alternative Right" means a
right to receive from Cytel a payment of cash or, at the option of the Optionee
shares of the Common Stock of Cytel in exchange for (i) the cancellation or
surrender of the Option and (ii) the repurchase of any shares of Common Stock of
the Company acquired upon exercise of the Option. For purposes of such Cytel
Alternative Right, the Fair Market Value of a share of the Common Stock of the
Company shall be determined as provided in subsection 13(e).
(e) The Fair Market Value of a share of the Common Stock of the Company
for purposes of this Section 13 shall be established by the following method:
(1) The Fair Market Value of a share shall be determined in a
manner consistent with Section 260.140.50 of Title 10 of the California Code of
Regulations and shall be
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<PAGE> 15
determined as if there had been a sale of the Company's business on a
going-concern basis to an independent, third-party acquiror.
(2) As soon as possible and on seven (7) days written notice the
Company shall have called an organizational meeting at the Company headquarters
for the Optionees at which meeting the Optionees shall elect a chair and shall
adopt procedures for the conduct of their business with respect to the Cytel
Alternative Right.
(3) Decisions of the Optionees shall be made either (i) by a
majority of the votes cast at a duly held meeting of the Optionees at which a
quorum representing a majority of the Optionee shares is either in person or by
proxy, present and voting on the issue, or (ii) by the written consent of a
majority of the Optionee shares. "Optionee shares" for this purpose shall mean
the aggregate of the exercised shares held directly by the Optionees and the
unexercised shares represented by outstanding Options.
(4) Within thirty (30) days after the Optionees' organizational
meeting either Cytel and the Optionees shall have agreed to a Fair Market Value
of a share or each party shall have selected a person experienced in the
valuation of businesses, such as a business appraiser, investment banker, or
venture capitalist ("Appraiser"), who, within forty-five (45) days after the
Optionees' organizational meeting, shall have determined the Fair Market Value
of a share of the Common Stock of the Company on the date of the Change in
Control of Cytel. If either party fails to have its appraisal completed within
said 45-day period, then such party shall be deemed to have accepted the
determination of the Appraiser of the other party.
(5) If the difference between the two Appraisals is less than
five percent (5%), then the Fair Market Value of the shares of Common Stock of
the Company shall conclusively be deemed to be the average of such two
Appraisals. Otherwise, within fifteen (15) days thereafter the two Appraisers
shall have selected a third Appraiser paid for jointly by Cytel and the Company
and the Third Appraiser shall have established the Fair Market Value of a share
of the Common Stock of the Company within the range established by the first two
Appraisals.
(6) All reasonable and necessary costs of the Appraisal by the
Optionees and of calling and holding Optionee meetings shall be paid by jointly
by the Company and Cytel.
14. AMENDMENT OF THE PLAN AND OPTIONS.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 11 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company to the extent stockholder approval is necessary for the Plan to
satisfy the requirements of Section 422 of the Code, Rule 16b-3 or any Nasdaq or
securities exchange listing requirements.
(b) The Board may in its sole discretion submit any other amendment to
the Plan for stockholder approval, including, but not limited to, amendments to
the Plan intended to satisfy the requirements of Section 162(m) of the Code and
the regulations thereunder regarding the exclusion of performance-based
compensation from the limit on corporate deductibility of compensation paid to
certain executive officers.
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<PAGE> 16
(c) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide eligible
Employees, Directors or Consultants with the maximum benefits provided or to be
provided under the provisions of the Code and the regulations promulgated
thereunder relating to Incentive Stock Options and/or to bring the Plan and/or
Incentive Stock Options granted under it into compliance therewith.
(d) Rights under any Option granted before amendment of the Plan shall
not be impaired by any amendment of the Plan unless (i) the Company requests the
consent of the person to whom the Option was granted and (ii) such person
consents in writing.
(e) The Board at any time, and from time to time, may amend the terms of
any one or more Options; provided, however, that the rights under any Option
shall not be impaired by any such amendment unless (i) the Company requests the
consent of the person to whom the Option was granted and (ii) such person
consents in writing.
15. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate ten (10) years from the date the
Plan is adopted by the Board or approved by the stockholders of the Company,
whichever is earlier. No Options may be granted under the Plan while the Plan is
suspended or after it is terminated.
(b) Rights and obligations under any Option granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except
with the consent of the person to whom the Option was granted.
16. EFFECTIVE DATE OF PLAN.
The Plan shall become effective on December 17, 1997, the date adopted
by the Board, but no Options granted under the Plan shall be exercised unless
and until the Plan has been approved by the stockholders of the Company, which
approval shall be within twelve (12) months before or after the date the Plan is
adopted by the Board.
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<PAGE> 17
EPIMMUNE INC.
NOTICE OF GRANT OF INCENTIVE STOCK OPTION
[Optionee]
[Social Security Number]
You have been granted an incentive stock option by buy Epimmune Inc. Common
Stock as follows:
Incentive Stock Option Grant Number
Date of Grant
----------------------------
Date of Termination
----------------------
Vesting Commencement Date
----------------
Stock Option Plan
1997
Exercise Price Per Share
$--------------
Total Number of Shares Subject to
Option
-----------------------------------
By your signature below, you:
a. Acknowledge receipt of the Option Grant Agreement, the 1997 Stock
Option Plan (the "Plan"), the Notice of Exercise and the Early Exercise Stock
Purchase Agreement (the attachments referenced below) and understand that all
rights and liabilities with respect to this option are set forth in the Option
Grant Agreement and the Plan; and
b. Acknowledge that as of the date of grant of this option, it sets
forth the entire understanding between the undersigned optionee and the Company
and its affiliates regarding the acquisition of stock in the Company and
supersedes all prior oral and written agreements on that subject with the
exception of (i) the options previously granted and delivered to the undersigned
under stock option plans of the Company, and (ii) the following agreements only:
NONE
-------------
(Initial)
OTHER
----------------------------------------
----------------------------------------
----------------------------------------
Date:
- -------------------------------
OPTIONEE
ATTACHMENTS:
<PAGE> 18
Epimmune Inc. Incentive Stock Option Agreement
Epimmune Inc. 1997 Stock Option Plan
Notice of Exercise
Early Exercise Stock Purchase Agreement
2
<PAGE> 1
EXHIBIT 99.2
EPIMMUNE INC.
INCENTIVE STOCK OPTION AGREEMENT
(EARLY EXERCISE)
EXEMPT FROM QUALIFICATION UNDER
SECTION 25102(o) OF THE
CALIFORNIA CORPORATIONS CODE
Epimmune Inc. (the "Company"), pursuant to its 1997 Stock Option Plan
(the "Plan"), has granted to you, the optionee named on the Notice of Grant of
Stock Option to which this Incentive Stock Option Agreement is attached (the
"Notice of Grant"), an option to purchase shares of the common stock of the
Company ("Common Stock"). This option is intended to qualify as an "incentive
stock option" within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code").
The grant hereunder is in connection with and in furtherance of the
Company's compensatory benefit plan for participation of the Company's employees
(including officers), directors and consultants and is intended to comply with
the provisions of Rule 701 promulgated by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act"). The grant
of this option and the issuance of shares upon the exercise of this option are
also intended to be exempt from the securities qualification requirements of the
California Corporations Code pursuant to Section 25102(o) of that code. Defined
terms not explicitly defined in this agreement but defined in the Plan shall
have the same definitions as in the Plan.
The details of your option are as follows:
1. TOTAL NUMBER OF SHARES SUBJECT TO THIS OPTION. The total number of
shares of Common Stock subject to this option is set forth under "Total Number
of Shares Subject to Option" on the Notice of Grant.
2. VESTING. Subject to the limitations contained herein, 1/4th of the
shares will vest 12 months after the "Vesting Commencement Date" as stated on
the Notice of Grant, and 1/48th of the shares will vest each month thereafter
until either (i) your Continuous Service (as defined in the Plan) terminates for
any reason, or (ii) this option becomes fully vested.
3. EXERCISE PRICE AND METHOD OF PAYMENT.
(a) EXERCISE PRICE. The exercise price of this option is set forth
under "Exercise Price Per Share" on the Notice of Grant, being not less than the
fair market value of the Common Stock on the "Date of Grant" as stated on the
Notice of Grant.
(b) METHOD OF PAYMENT. Payment of the exercise price per share is due
in full upon exercise of all or any part of each installment which has accrued
to you. You may
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<PAGE> 2
elect, to the extent permitted by applicable statutes and regulations, to make
payment of the exercise price under one of the following alternatives:
(i) Payment of the exercise price per share in cash (including
check) at the time of exercise;
(ii) Payment pursuant to a program developed under Regulation T
as promulgated by the Federal Reserve Board which, prior to the issuance of
Common Stock, results in either the receipt of cash (or check) by the Company or
the receipt of irrevocable instructions to pay the aggregate exercise price to
the Company from the sales proceeds;
(iii) Provided that at the time of exercise the Company's Common
Stock is publicly traded and quoted regularly in the Wall Street Journal,
payment by delivery of already-owned shares of Common Stock, held for the period
required to avoid a charge to the Company's reported earnings, and owned free
and clear of any liens, claims, encumbrances or security interests, which Common
Stock shall be valued at its fair market value on the date of exercise; or
(iv) Payment by a combination of the methods of payment
permitted by subsection 3(b)(i) through 3(b)(iii) above.
4. EXERCISE PRIOR TO VESTING PERMITTED.
(a) Subject to the provisions of this option you may elect at any
time during your Continuous Service to exercise the option as to any part or all
of the shares subject to this option at any time during the term hereof,
including without limitation, a time prior to the date of earliest exercise
("vesting") stated in Section 2 hereof; provided, however, that:
(i) a partial exercise of this option shall be deemed to cover
first vested shares and then the earliest vesting installment of unvested
shares;
(ii) any shares so purchased from installments which have not
vested as of the date of exercise shall be subject to the purchase option in
favor of the Company as described in the Early Exercise Stock Purchase Agreement
attached to the Notice of Grant;
(iii) you shall enter into an Early Exercise Stock Purchase
Agreement in the form attached to the Notice of Grant with a vesting schedule
that will result in the same vesting as if no early exercise had occurred; and
(iv) the date of exercisability of any share(s) subject to this
option under this Section 4 shall be delayed, if necessary (i.e., because the
aggregate fair market value of any shares subject to incentive stock options
granted you by the Company or any Affiliate of the Company (valued as of their
grant date) would otherwise become exercisable for the first time during any
calendar year in an amount exceeding $100,000), until the earliest date
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<PAGE> 3
permissible in order to preserve treatment under Section 421 of the Code of each
share subject to this option.
(b) EXPIRATION OF EARLY EXERCISE ELECTION. The election provided in
this Section 4 to purchase shares upon the exercise of this option prior to the
vesting dates shall cease upon termination of your Continuous Service and may
not be exercised after the date thereof.
5. WHOLE SHARES. This option may not be exercised for any number of
shares which would require the issuance of anything other than whole shares.
6. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary
contained herein, this option may not be exercised unless the shares issuable
upon exercise of this option are then registered under the Securities Act or, if
such shares are not then so registered, the Company has determined that such
exercise and issuance would be exempt from the registration requirements of the
Securities Act.
7. TERM. The term of this option commences on the Date of Grant and
expires on the "Date of Termination" as stated on the Notice of Grant, which
date shall be no more than ten (10) years from Date of Grant unless this option
expires sooner as set forth below or in the Plan. In no event may this option be
exercised on or after the Date of Termination. This option shall terminate prior
to the Date of Termination of its term as follows: three (3) months after the
termination of your Continuous Service unless one of the following circumstances
exists:
(a) Your termination of Continuous Service is due to your disability.
This option will then expire on the earlier of the Date of Termination or twelve
(12) months following such termination of Continuous Service. You should be
aware that if your disability is not considered a permanent and total disability
within the meaning of Section 422(c)(6) of the Code, and you exercise this
option more than three (3) months following the date of your termination of
employment, your exercise will be treated for tax purposes as the exercise of a
"nonstatutory stock option" instead of an "incentive stock option."
(b) Your termination of Continuous Service is due to your death or
your death occurs within three (3) months following your termination of
Continuous Service. This option will then expire on the earlier of the Date of
Termination or eighteen (18) months after your death.
(c) If during any part of such three (3) month period you may not
exercise your option solely because of the condition set forth in Section 6
above, then your option will not expire until the earlier of the Date of
Termination or until this option shall have been exercisable for an aggregate
period of three (3) months after your termination of Continuous Service.
However, this option may be exercised following termination of
Continuous Service only as to that number of shares as to which it was
exercisable on the date of termination of Continuous Service under the
provisions of Section 2 of this option.
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<PAGE> 4
In order to obtain the federal income tax advantages associated with an
"incentive stock option," the Code requires that at all times beginning on the
Date of Grant and ending on the day three (3) months before the date of the
option's exercise, you must be an employee of the Company or an Affiliate of the
Company, except in the event of your death or permanent and total disability.
The Company has provided for continued vesting or extended exercisability of
your option under certain circumstances for your benefit, but cannot guarantee
that your option will necessarily be treated as an "incentive stock option" if
you provide services to the Company or an Affiliate of the Company as a
consultant or exercise your option more than three (3) months after the date
your employment with the Company and all Affiliates of the Company terminates.
8. EXERCISE.
(a) This option may be exercised, to the extent specified above, by
delivering a notice of exercise (in a form designated by the Company) together
with the exercise price to the Secretary of the Company, or to such other person
as the Company may designate, during regular business hours, together with such
additional documents as the Company may then require pursuant to the Plan.
(b) By exercising this option you agree that:
(i) as a precondition to the completion of any exercise of this
option, the Company may require you to enter an arrangement providing for the
payment by you to the Company of any tax withholding obligation of the Company
arising by reason of (1) the exercise of this option; (2) the lapse of any
substantial risk of forfeiture to which the shares are subject at the time of
exercise; or (3) the disposition of shares acquired upon such exercise;
(ii) you will notify the Company in writing within fifteen (15)
days after the date of any disposition of any of the shares of the Common Stock
issued upon exercise of this option that occurs within two (2) years after the
Date of Grant or within one (1) year after such shares of Common Stock are
transferred upon exercise of this option; and
(iii) the Company (or a representative of the underwriters) may,
in connection with the first underwritten registration of the offering of any
securities of the Company under the Securities Act, require that you not sell or
otherwise transfer or dispose of any shares of Common Stock or other securities
of the Company during such period (not to exceed one hundred eighty (180) days)
following the effective date of the registration statement of the Company filed
under the Securities Act as may be requested by the Company or the
representative of the underwriters. You further agree that the Company may
impose stop-transfer instructions with respect to securities subject to the
foregoing restrictions until the end of such period.
9. TRANSFERABILITY. This option is not transferable, except by will or
by the laws of descent and distribution, and is exercisable during your life
only by you. Notwithstanding the foregoing, by delivering written notice to the
Company, in a form satisfactory to the Company,
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<PAGE> 5
you may designate a third party who, in the event of your death, shall
thereafter be entitled to exercise this option.
10. RIGHT OF REPURCHASE. The Company may elect, prior to the Listing
Date as defined in the Plan, to repurchase all or any part of the vested shares
you exercised pursuant to this option; provided, however, that (i) such
repurchase right shall be exercisable only within (A) the ninety (90) day period
following the termination of your Continuous Service (or in the case of a
post-termination exercise of the Option, the ninety (90) period following such
exercise), or (B) such longer period as may be agreed to by the Company and you,
(ii) such repurchase right shall be exercisable for less than all of the vested
shares only with your consent and (iii) such right shall be exercisable only for
cash or cancellation of purchase money indebtedness for the shares at a
repurchase price equal to the greater of the exercise price or the stock's fair
market value at the time of such termination.
The Company's Right of Repurchase shall be exercisable by giving written
notice (accompanied by payment for the shares) to you within ninety (90)
calendar days after the later of such termination of Continuous Service or a
proper purchase of shares following such termination of Continuous Service.
To ensure that shares subject to this Right of Repurchase will be
available for repurchase, the Company may require you to deposit the certificate
evidencing the shares which you purchase upon exercise of this option with an
agent designated by the Company under the terms and conditions of an escrow
agreement approved by the Company. If the Company does not require such deposit
as a condition of exercise of this option, the Company reserves the right at any
time to require you to so deposit the certificate in escrow. As soon as
practicable after the expiration of this Right of Repurchase, the agent shall
deliver to you the shares and any other property no longer subject to such
restriction. In the event the shares and any other property held in escrow are
subject to the Company's exercise of its Right of Repurchase, the notices
required to be given to you shall be given to the escrow agent, and any payment
required to be given to you shall be given to the escrow agent. Within thirty
(30) days after payment by the Company for the shares, the escrow agent shall
deliver the shares which the Company has purchased to the Company and shall
deliver the payment received from the Company to you. If, from time to time,
there is any stock dividend, stock split or other change in the character or
amount of any of the outstanding stock of the corporation the stock of which is
subject to the provisions of this option, then in such event any and all new,
substituted or additional securities to which you is entitled by reason of your
ownership of the shares acquired upon exercise of this option shall be
immediately subject to this Right of Repurchase with the same force and effect
as the shares subject to this Right of Repurchase immediately before such event.
11. OPTION NOT A SERVICE CONTRACT. This option is not an employment
contract and nothing in this option shall be deemed to create in any way
whatsoever any obligation on your part to continue in the employ of the Company,
or of the Company to continue your employment with the Company. In addition,
nothing in this option shall obligate the Company or any Affiliate of the
Company, or their respective stockholders, Board of Directors, officers or
employees to continue any relationship which you might have as a Director or
Consultant for the Company or Affiliate of the Company.
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<PAGE> 6
12. NOTICES. Any notices provided for in this option or the Plan shall
be given in writing and shall be deemed effectively given upon receipt or, in
the case of notices delivered by the Company to you, five (5) days after deposit
in the United States mail, postage prepaid, addressed to you at the address
specified below or at such other address as you hereafter designate by written
notice to the Company.
13. GOVERNING PLAN DOCUMENT. This option is subject to all the
provisions of the Plan, a copy of which is attached to the Notice of Grant and
its provisions are hereby made a part of this option, including without
limitation the provisions of Section 6 of the Plan relating to option
provisions, and is further subject to all interpretations, amendments, rules and
regulations which may from time to time be promulgated and adopted pursuant to
the Plan. In the event of any conflict between the provisions of this option and
those of the Plan, the provisions of the Plan shall control.
Dated:
----------------------------
Very truly yours,
EPIMMUNE INC.
By
---------------------------------------
Duly authorized on behalf
of the Board of Directors
6
