<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-28386
CELL THERAPEUTICS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Washington 91-1533912
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
201 Elliott Avenue West, Suite 400, 98119
Seattle, Washington (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
(206) 282-7100
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check [x] whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days: Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
<TABLE>
<CAPTION>
CLASS OUTSTANDING AT OCTOBER 31, 1997
----- -------------------------------
<S> <C>
Common Stock, no par value (including associ-
ated Preferred Stock Purchase Rights)........ 15,375,871
</TABLE>
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This report on Form 10-Q, including all exhibits, contains pages. The
exhibit index is located on page .
<PAGE>
CELL THERAPEUTICS, INC.
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
PART I FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
Consolidated Balance Sheets (unaudited) -- September 30, 1997 3
and December 31, 1996...........................................
Consolidated Statements of Operations (unaudited) -- Three
months and nine months ended September 30, 1997 and 1996 and the
period from September 4, 1991 (date of incorporation) to
September 30, 1997.............................................. 4
Consolidated Statements of Cash Flows (unaudited) -- Three
months and nine months ended September 30, 1997 and 1996 and the
period from September 4, 1991 (date of incorporation) to
September 30, 1997.............................................. 5
Notes to Consolidated Financial Statements...................... 6
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS........................................... 7
PART II OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K................................ 11
SIGNATURES...................................................... 13
EXHIBIT INDEX................................................... 14
</TABLE>
2
<PAGE>
PART I
ITEM 1 FINANCIAL STATEMENTS
CELL THERAPEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
ASSETS (UNAUDITED)
Current assets:
Cash and cash equivalents......................... $ 7,823,785 $ 5,483,515
Securities available-for-sale..................... 33,621,036 25,503,049
Collaboration agreement receivables............... 3,765,208 --
Prepaid expenses and other current assets......... 317,638 256,892
------------ ------------
Total current assets................................ 45,527,667 31,243,456
Property and equipment, net......................... 5,564,768 5,117,936
Notes receivable from officers, less current por-
tion............................................... 161,193 172,698
Other assets........................................ 392,170 467,603
------------ ------------
Total assets........................................ $ 51,645,798 $ 37,001,693
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................. $ 105,921 $ 651,130
Accrued expenses.................................. 3,588,564 3,065,297
Current portion of long-term obligations.......... 1,315,990 1,226,971
------------ ------------
Total current liabilities........................... 5,010,475 4,943,398
Long-term obligations, less current portion......... 1,061,551 2,004,575
Commitments
Shareholders' equity:
Preferred Stock:
Authorized shares--10,000,000:
Series A Convertible Preferred Stock, no par
value:
Designated shares--none and 146,193.272 at
September 30, 1997 and December, 31 1996,
respectively
Issued and outstanding shares--0 and
146,193.272 at September 30, 1997 and
December 31, 1996, respectively (liquidation
preference $335 per share aggregating $0 and
$48,974,746 at September 30, 1997 and
December 31, 1996, respectively)............. -- 47,366,204
Series B Convertible Preferred Stock, no par
value:
Designated shares--none and 14,925.373 at
September 30, 1997 and December 31, 1996,
respectively
Issued and outstanding shares--0 and
14,925.373 at September 30, 1997 and December
31, 1996, respectively (liquidation
preference $335 per share aggregating $0 and
$5,000,000 at September 30, 1997 and December
31, 1996, respectively)...................... -- 4,960,000
Series C Preferred Stock, no par value:
Designated shares--100,000
No shares issued and outstanding (liquidation
preference $1,000 per share)................. -- --
Common Stock, no par value:
Authorized shares--100,000,000
Issued and outstanding shares--13,063,377 and
4,943,472 at September 30, 1997 and
December 31, 1996, respectively................ 134,454,228 51,810,160
Deficit accumulated during development stage...... (88,880,456) (74,082,644)
------------ ------------
Total shareholders' equity.......................... 45,573,772 30,053,720
------------ ------------
Total liabilities and shareholders' equity.......... $ 51,645,798 $ 37,001,693
============ ============
</TABLE>
See accompanying notes.
3
<PAGE>
CELL THERAPEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 4,
THREE MONTHS ENDED NINE MONTHS ENDED 1991 (DATE OF
SEPTEMBER 30, SEPTEMBER 30, INCORPORATION)
------------------------ -------------------------- TO SEPTEMBER 30,
1997 1996 1997 1996 1997
----------- ----------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
Revenues:
Collaboration
agreements............ $ 3,629,324 $ 250,000 $ 8,896,304 $ 3,250,000 $ 18,117,110
Operating expenses:
Research and
development........... 6,099,485 3,583,362 18,726,776 10,980,238 79,597,427
General and
administrative........ 2,350,861 1,831,305 6,483,265 5,358,418 31,226,544
----------- ----------- ------------ ------------ ------------
8,450,346 5,414,667 25,210,041 16,338,656 110,823,971
----------- ----------- ------------ ------------ ------------
Loss from operations.... (4,821,022) (5,164,667) (16,313,737) (13,088,656) (92,706,861)
Other income (expense):
Investment income..... 654,344 199,168 1,836,913 746,863 5,810,672
Interest expense...... (90,917) (128,526) (296,820) (387,785) (1,949,282)
----------- ----------- ------------ ------------ ------------
Net loss................ $(4,257,595) $(5,094,025) $(14,773,644) $(12,729,578) $(88,845,471)
=========== =========== ============ ============ ============
Net loss per share...... $ (0.33) $ (1.03) $ (1.41) $ (2.58)
=========== =========== ============ ============
Shares used in
computation of net loss
per share.............. 13,031,064 4,943,021 10,454,081 4,938,161
=========== =========== ============ ============
Pro forma:
Net loss per share.... $ (0.33) $ (0.65) $ (1.23) $ (1.63)
=========== =========== ============ ============
Shares used in
computation of net
loss per share........ 13,031,064 7,851,783 11,978,161 7,797,929
=========== =========== ============ ============
</TABLE>
See accompanying notes.
4
<PAGE>
CELL THERAPEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 4,
NINE MONTHS ENDED 1991 (DATE OF
SEPTEMBER 30, INCORPORATION)
-------------------------- TO SEPTEMBER 30,
1997 1996 1997
------------ ------------ ----------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss.......................... $(14,773,644) $(12,729,578) $ (88,845,471)
Adjustments to reconcile net loss
to net cash used in operating ac-
tivities:
Depreciation and amortization.... 1,291,124 1,250,396 7,752,384
Noncash compensation expense..... 100,186 -- 100,186
Noncash research and development
expense......................... -- -- 1,155,750
Noncash interest expense......... -- -- 25,918
Noncash rent expense............. 55,582 25,047 549,870
Investment premium amortization.. (119,267) 93,023 402,794
Changes in assets and liabilities:
Collaboration agreement receiv-
ables........................... (3,765,208) -- (3,765,208)
Prepaid expenses................. (60,746) (16,375) (317,638)
Notes receivable from officers... 11,505 (8,028) (256,417)
Other assets..................... 63,025 (15,438) (420,579)
Accounts payable................. (545,209) 209,858 105,921
Accrued expenses................. 523,267 43,422 3,588,564
------------ ------------ -------------
Total adjustments.............. (2,445,742) 1,581,905 8,921,545
------------ ------------ -------------
Net cash used in operating ac-
tivities...................... (17,219,386) (11,147,673) (79,923,926)
------------ ------------ -------------
INVESTING ACTIVITIES
Purchases of securities avail-
able-for-sale................... (41,035,377) (7,055,269) (117,061,404)
Proceeds from sales of securities
available for-sale.............. 1,999,444 -- 16,889,757
Proceeds from maturities of secu-
rities available-for-sale....... 31,013,045 10,824,000 66,112,832
Purchase of property and equip-
ment............................ (1,741,378) (707,601) (13,076,314)
Dispositions of property and
equipment....................... 15,831 -- 167,300
------------ ------------ -------------
Net cash provided by (used in)
investing activities.......... (9,748,435) 3,061,130 (46,967,829)
------------ ------------ -------------
FINANCING ACTIVITIES
Sales of common stock to found-
ers............................. -- -- 80,000
Proceeds from borrowings from
stockholder..................... -- -- 850,000
Sale of common stock via initial
public offering, net of offering
costs........................... 26,802,251 -- 26,802,251
Sale of Series A Preferred Stock
via private placement, net of
offering costs.................. -- 14,970,000 47,366,204
Sale of Series B Preferred Stock
via private placement, net of
offering costs.................. -- -- 4,960,000
Sale of common stock via private
placements, net of offering
costs........................... 3,000,000 -- 52,307,084
Repurchase of common stock....... -- -- (2,522)
Proceeds from common stock op-
tions exercised................. 415,427 21,781 496,187
Proceeds from common stock war-
rants exercised................. -- 305,558 305,558
Repayment of long-term obliga-
tions........................... (909,587) (815,010) (9,380,856)
Proceeds from the issuance of
long-term obligations........... -- 616,300 10,931,634
Change in deferred offering
costs........................... -- (334,459) --
------------ ------------ -------------
Net cash provided by financing
activities.................... 29,308,091 14,764,170 134,715,540
------------ ------------ -------------
Net increase (decrease) in cash
and cash equivalents.......... 2,340,270 6,677,627 7,823,785
Cash and cash equivalents at
beginning of period........... 5,483,515 6,931,592 --
------------ ------------ -------------
Cash and cash equivalents at
end of period................. $ 7,823,785 $ 13,609,219 $ 7,823,785
============ ============ =============
Supplemental schedule of noncash
investing and financing activi-
ties:
Acquisition of equipment pursuant
to capital lease obligations.... $ -- $ -- $ 362,425
============ ============ =============
Conversion of convertible debt
and related accrued interest
into common stock............... $ -- $ -- $ 875,918
============ ============ =============
Supplemental disclosure of cash
flow information:
Cash paid during the period for
interest........................ $ 296,820 $ 390,034 $ 1,922,845
============ ============ =============
</TABLE>
See accompanying notes.
5
<PAGE>
CELL THERAPEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
(1)SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited financial information of Cell Therapeutics, Inc.
(the "Company") as of September 30, 1997 and for the three and nine months
ended September 30, 1997 and 1996 has been prepared in accordance with the
instructions to Form 10-Q. In the opinion of management, such financial
information includes all adjustments (consisting only of normal recurring
adjustments) considered necessary for a fair presentation of the financial
position at such date and the operating results and cash flows for such
periods. Operating results for the three and nine month periods ended
September 30, 1997 are not necessarily indicative of the results that may be
expected for the entire year. These financial statements and the related notes
should be read in conjunction with the Company's audited annual financial
statements for the year ended December 31, 1996 included in the Company's Form
10-K for the year ended December 31, 1996, and the Company's unaudited
financial statements for the quarters ended March 31 and June 30 , 1997
included in the Company's quarterly reports on Form 10-Q for the quarters
ended March 31 and June 30, 1997.
Certain prior year balances have been reclassified to conform to the current
year presentation.
(2)SIGNIFICANT AGREEMENTS
In November 1996, cti entered into a Collaboration and License Agreement
(the "Collaboration Agreement") with Ortho Biotech, Inc. and the R.W. Johnson
Pharmaceutical Research Institute (a division of Ortho Pharmaceutical
Corporation) each of which are wholly-owned subsidiaries of Johnson & Johnson
(collectively, "Johnson & Johnson") for the joint development and
commercialization of Lisofylline ("LSF"), to prevent or reduce the toxic side
effects among cancer patients receiving high dose radiation and/or
chemotherapy followed by bone marrow transplantation ("BMT"). Johnson &
Johnson has agreed, subject to certain termination rights, to fund up to
$12,000,000 of the Company's budgeted BMT development costs per year for each
of 1997 and 1998. The Company recorded $2,629,324 and $7,896,304 of
collaboration agreement revenues related to the reimbursement of development
expenses by Johnson & Johnson for the three and nine month periods ended
September 30, 1997, respectively. In addition, in September 1997, Johnson &
Johnson exercised an option under the Collaboration Agreement to expand its
participation to include the development of LSF to include the treatment of
patients with acute myelogenous leukemia ("AML") undergoing high dose
chemotherapy. In connection with this milestone, Johnson & Johnson made a $1.0
million payment to cti, and under the expanded terms of the Collaboration
Agreement, will pay 60% of all AML development costs.
(3)NET LOSS PER SHARE
In February 1997 the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share," which is required to be adopted after December
31, 1997. Statement No. 128 supersedes Accounting Principles Board Opinion No.
15. At that time, the Company will be required to change the method currently
used to calculate net loss per share and to restate prior periods. At
September 30, 1997 and 1996 and December 31, 1996, there is no material impact
on the Company's calculations of net loss per share.
The pro forma net loss per share is computed based on net loss per share
adjusted for the assumed conversion of all outstanding shares of convertible
preferred stock into common stock at the time of issuance.
(4)SUBSEQUENT EVENT
On October 27, 1997, the Company completed a follow-on public offering of
2.3 million shares of its Common Stock at an offering price of $16.00 per
share, resulting in estimated net proceeds of approximately $34.3 million.
6
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This quarterly report on Form 10-Q contains, in addition to historical
information, forward-looking statements which involve risks and uncertainties.
When used in this Form 10-Q, the words "believes," "anticipates," "expects",
"intends" and other predictive, interpretive and similar expressions are
intended to identify such forward-looking statements. The Company's actual
results could differ significantly from the results discussed in such forward-
looking statements. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed below and in the Company's
registration statement on Form S-1, as amended and registration statement on
Form S-3. Readers are cautioned not to place undue reliance on these forward-
looking statements, which speak only as of the date of this Form 10-Q. The
Company undertakes no obligation to publicly release the results of any
revisions to these forward-looking statements which may be made to reflect
events or circumstances after the date of this Form 10-Q or to reflect the
occurrence of unanticipated events.
OVERVIEW
Cell Therapeutics, Inc. ("cti" or the "Company") focuses on the discovery,
development and commercialization of small molecule drugs that selectively
regulate the metabolism of oxidized lipids and phospholipids relevant to the
treatment of cancer and inflammatory and immune diseases. Since commencement
of operations in 1992, the Company has been engaged in research and
development activities, including conducting preclinical studies and clinical
trials, recruiting its scientific and management personnel, establishing
laboratory facilities and raising capital. The Company has not received any
revenue from the sale of products to date and does not expect to receive
revenues from the sale of products for at least the next several years.
In the fourth quarter of 1995 the Company began to receive revenue under a
collaboration agreement with an affiliate of BioChem Pharma, Inc. ("BioChem
Pharma") and in the fourth quarter of 1996 the Company began to receive
revenue under a collaboration agreement (the "Collaboration Agreement") with
subsidiaries of Johnson & Johnson ("Johnson & Johnson"). The Company expects
that its revenue sources for at least the next several years will consist
primarily of future expense reimbursements and milestone payments under its
collaboration agreements with Johnson & Johnson and BioChem Pharma, and of
interest income. The timing and amounts of such revenues will likely
fluctuate. The Company will be required to conduct significant research,
development and clinical activities during the next several years to fulfill
its obligations under the Collaboration Agreement with Johnson & Johnson.
There can be no assurance that Johnson & Johnson will not terminate the
Collaboration Agreement in accordance with its terms.
As of September 30, 1997, the Company had incurred aggregate net losses of
approximately $88.8 million since its inception. The Company expects to
continue to incur significant additional operating losses over the next
several years as its research, development and clinical trial efforts expand.
Operating losses may fluctuate from quarter to quarter as a result of
differences in the timing of expenses incurred and revenues recognized.
Through September 30, 1997, the Company's operations have been funded
primarily from the sale of equity securities, which have raised aggregate net
proceeds of approximately $133.2 million.
RESULTS OF OPERATIONS
Three months ended September 30, 1997 compared with three months ended
September 30, 1996.
During the three months ended September 30, 1997, the Company recorded
approximately $2.6 million of revenues for development cost reimbursements
from Johnson & Johnson in accordance with the Collaboration Agreement and a
$1.0 million milestone payment in connection with Johnson & Johnson exercising
its option to expand its participation under the Collaboration Agreement to
include the development of Lisofylline ("LSF") for treatment of patients with
newly diagnosed acute myelogenous leukemia ("AML") undergoing high dose
induction chemotherapy. No similar revenues were recorded for the
corresponding period of 1996.
Research and development expenses increased to approximately $6.1 million
for the three months ended September 30, 1997 from $3.6 million for the three
months ending September 30, 1996. This increase was primarily
7
<PAGE>
due to expanded research, manufacturing and preclinical related development
activities, including the recruitment of additional personnel, with respect to
LSF and, to a lesser extent, expanded manufacturing related development
activities with respect to cti's anti-cancer compound, CT-2584, the Company's
novel small molecule drug under investigation for the treatment of patients
with multidrug (e.g., chemotherapy) resistant cancers. The Company expects
that research and development expenses will increase significantly as the
Company expands its research and development programs and undertakes
additional clinical trials, including research, development and clinical
activities undertaken pursuant to the Collaboration Agreement with Johnson &
Johnson.
General and administrative expenses increased to approximately $2.4 million
for the three months ended September 30, 1997 from approximately $1.8 million
for the three months ended September 30, 1996. This increase was primarily due
to operating expenses associated with supporting the Company's increased
research and development activities. General and administrative expenses are
expected to continue to increase to support the Company's expected increase in
research, development and clinical trial efforts.
Investment income primarily consists of interest income from investment of
the Company's cash reserves. Interest expense results primarily from the
financing of laboratory and other equipment. Investment income increased to
approximately $654,000 for the three months ended September 30, 1997 from
approximately $199,000 for the three months ended September 30, 1996,
reflecting an increase in average cash balances and interest earned thereon.
The increase in average cash balances was due to the proceeds from the
Company's initial public offering and concurrent sale of common stock to
Johnson & Johnson completed late in the first quarter of 1997. Interest
expense decreased to approximately $91,000 for the three months ended
September 30, 1997 from approximately $129,000 for the three months ended
September 30, 1996. This decrease was primarily due to lower average balances
of outstanding long-term obligations.
Nine months ended September 30, 1997 compared with nine months ended
September 30, 1996.
During the nine months ended September 30, 1997, the Company recorded
approximately $7.9 million of revenues for development cost reimbursements
from Johnson & Johnson in accordance with the Collaboration Agreement and a
$1.0 million milestone payment in connection with Johnson & Johnson
excercising its option to expand its participation under the Collaboration
Agreement to include AML. During the nine months ended September 30, 1996, the
Company received a $3.0 million signing fee from Schering AG ("Schering")
pursuant to an agreement to collaborate on the funding, research, development
and commercialization of LSF and CT-2584. This agreement was terminated by
Schering in April 1996. During the nine months ended September 30, 1996, the
Company also recorded a $250,000 milestone payment from BioChem Pharma.
Research and development expenses increased to approximately $18.7 million
for the nine months ended September 30, 1997 from approximately $11.0 million
for the nine months ended September 30, 1996. This increase was primarily due
to expanded research, manufacturing, preclinical and clinical-related
development activities, including the recruitment of additional personnel with
respect to LSF and, to a lesser extent, expanded manufacturing and preclinical
related development activities with respect to cti's anti-cancer compound CT-
2584.
General and administrative expenses increased to approximately $6.5 million
for the nine months ended September 30, 1997 from approximately $5.4 million
for the nine months ended September 30, 1996. This increase was primarily due
to operating expenses associated with supporting the Company's increased
research, development and clinical activities, offset in part by legal costs
associated with the Schering agreement discussed above during the nine months
ended September 30, 1996.
Investment income increased to approximately $1.8 million for the nine
months ended September 30, 1997 from approximately $747,000 for the nine
months ended September 30, 1996. This increase was primarily associated with
interest earnings on a higher average cash balance between the nine month
periods due to the proceeds of the Company's initial public offering and
concurrent sale of common stock to Johnson & Johnson completed late in the
first quarter of 1997. Interest expense decreased to approximately $297,000
for the nine months ended September 30, 1997 from approximately $388,000 for
the nine months ended September 30, 1996. This decrease was primarily due to
lower average balances of outstanding long-term obligations.
8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations since inception primarily through
the sale of equity securities. As of September 30, 1997, the Company had
raised aggregate net proceeds of approximately $133.2 million from such
financing activities, including approximately $26.8 million net proceeds from
the sale of common stock in its initial public offering in March 1997 and $3.0
million from the sale of common stock to Johnson & Johnson concurrent with the
closing of the Company's initial public offering. The remaining proceeds of
approximately $103.4 million were raised from private placements of Series A
and B Convertible Preferred Stock and Common Stock, a bridge loan and the
exercise of stock options and warrants. In addition, the Company financed the
purchase of approximately $11.4 million of property and equipment through
financing agreements, of which approximately $1.8 million remained outstanding
as of September 30, 1997.
The Company's principal sources of liquidity are its cash balances, cash
equivalents, securities available-for-sale and collaboration agreement
receivables, which totaled approximately $45.2 million as of September 30,
1997. The Company invests in U.S. government obligations and other highly
rated liquid debt instruments.
The Company expects that its capital requirements will increase as the
Company expands its research and development programs and undertakes
additional clinical trials. In connection with such expansion, the Company
expects to incur substantial expenditures for hiring additional management,
scientific and administrative personnel, for planned expansion of its
facilities, and for the purchase or lease of additional equipment.
The Company does not expect to generate a positive cash flow from operations
for several years due to substantial additional research and development
costs, including costs related to drug discovery, preclinical testing,
clinical trials, manufacturing costs and operating expenses associated with
supporting such activities. The Company expects that its existing capital
resources, including the net proceeds from the October 1997 follow-on public
offering, and the interest earned thereon, combined with anticipated funding
from Johnson & Johnson under the Collaboration Agreement, will enable the
Company to maintain its current and planned operations at least through the
middle of 1999. In the event that Johnson & Johnson were to terminate its
participation in the Collaboration Agreement prior to such date, the Company
expects that it would eliminate certain presently planned development
activities. Furthermore, the Company will need to raise substantial additional
capital to fund its operations beyond such time. The Company's future capital
requirements will depend on, and could increase as a result of, many factors,
including; the continuation of the Company's collaboration with Johnson &
Johnson; continued scientific progress in its research and development
programs; the magnitude of such programs; the terms of any additional
collaborative arrangements that the Company may enter into; the progress of
preclinical testing and clinical trials; the time and costs involved in
obtaining regulatory approvals; the costs involved in preparing, filing,
prosecuting, maintaining, enforcing and defending patent claims; competing
technological and market developments; changes in collaborative relationships;
the ability of the Company to establish research, development and
commercialization arrangements pertaining to products other than those covered
by existing collaborative arrangements; the cost of establishing manufacturing
facilities; the cost of commercialization activities and the demand for the
Company's products if and when approved.
The Company intends to raise additional funds through additional equity or
debt financings, research and development financings, collaborative
relationships, or otherwise. The Company may engage in these capital raising
activities even if it does not have an immediate need for additional capital
at that time. There can be no assurance that any such additional funding will
be available to cti or, if available, that it will be on acceptable terms. If
additional funds are raised by issuing equity securities, further dilution to
existing shareholders may result. If adequate funds are not available, cti may
be required to delay, reduce the scope of, or eliminate one or more of its
research, development and clinical activities. If the Company seeks to obtain
funds through arrangements with collaborative partners or others, such
partners may require cti to relinquish rights to certain of its technologies,
product candidates or products that the Company would otherwise seek to
develop or commercialize itself.
9
<PAGE>
As of September 30, 1997, the Company had available for Federal income tax
purposes net operating loss carryforwards of approximately $85 million and
research and development credit carryforwards of approximately $2.5 million.
These carryforwards begin to expire in 2007. The Company's ability to utilize
its net operating loss and research and development credit carryforwards is
subject to an annual limitation in future periods pursuant to the "change in
ownership" rules under Section 382 of the Internal Revenue Code of 1986.
FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company operates in a rapidly changing environment that involves a
number of risks, some of which are outside of the Company's control. The
following discussion highlights some of these risks and others are discussed
elsewhere herein and in other documents filed by the Company with the
Securities and Exchange Commission.
The time frame for market success for any of the Company's potential
products is long and uncertain. The Company is at its development stage and
its technology is unproven. All of the Company's proposed products are in
research or development and will require significant additional research and
development efforts prior to any commercial use, including extensive
preclinical and clinical testing as well as lengthy regulatory approval. There
can be no assurance that the Company's research and development and clinical
trial efforts will be successful, that its lead drug candidate, LSF, or any of
its other proposed products, will prove to be safe and efficacious in clinical
trials or meet applicable regulatory standards, that unforeseen problems will
not develop with the Company's technologies or applications, or that any
commercially successful products will ultimately be developed by the Company.
The Company faces substantial competition from a variety of sources, both
direct and indirect. There can be no assurance that research and discoveries
by others will not render some or all of the Company's programs or products
noncompetitive or obsolete or that the Company will be able to keep pace with
technological developments or other market factors.
The Company is dependent on the future payments from Johnson & Johnson under
the Collaboration Agreement to continue the development and commercialization
of LSF as presently planned. There can be no assurance that Johnson & Johnson
will be able to establish effective sales and distribution capabilities or
will be successful in gaining market acceptance for LSF, that Johnson &
Johnson will devote sufficient resources to the commercialization of products
under the Collaboration Agreement or that Johnson & Johnson will not terminate
the Collaboration Agreement in accordance with its terms. The Company's
products under development have never been manufactured on a commercial scale
and there can be no assurance that such products can be manufactured at a cost
or in quantities necessary to make them commercially viable. However, the
Company has initiated commercial scale manufacturing in early 1997. The
Company currently has no internal manufacturing facilities and has no
experience in sales, marketing or distribution. If the Company develops any
additional products with commercial potential outside of the Johnson & Johnson
collaboration, it may seek to enter into collaborative arrangements with other
parties which have established manufacturing, sales, marketing and
distribution capabilities or may need to develop such resources on its own.
The foregoing risks reflect the Company's early stage of development and the
nature of the Company's industry and potential products. Other risk factors
that may affect the Company's future results include competition,
uncertainties regarding protection of patents and proprietary rights,
government regulation and uncertainties regarding pharmaceutical pricing and
reimbursement.
10
<PAGE>
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
11.1 Computation of net loss and pro forma net loss per share
27.1 Financial Data Schedule
99.1 Registrant's 1996 Employee Stock Purchase Plan (as amended)
99.2 Stock Purchase Agreement for Registrant's 1996 Employee Stock
Purchase Plan (as amended)
99.3 Enrollment/Change Form for Registrant's 1996 Employee Stock
Purchase Plan (as amended)
99.4 Nonstatutory Stock Option Agreement for Registrant's 1994 Equity
Incentive Plan
99.5 Incentive Stock Option Agreement for Registrant's 1994 Equity
Incentive Plan
(B) REPORTS ON FORM 8-K
None.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized:
CELL THERAPEUTICS, INC.
(Registrant)
Dated: November 13, 1997 By: /s/ James A. Bianco, M.D.
--------------------------------
James A. Bianco, M.D.
President and Chief Executive
Officer
Dated: November 13, 1997 By: /s/ Louis A. Bianco
---------------------------------
Louis A. Bianco
Executive Vice President,
Finance and Administration
(Principal Financial Officer,
Chief Accounting Officer)
12
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
11.1 Computation of net loss and pro forma net loss per share
27.1 Financial Data Schedule
99.1 Registrant's 1996 Employee Stock Purchase Plan (as amended)
99.2 Stock Purchase Agreement for Registrant's 1996 Employee
Stock Purchase Plan (as amended)
99.3 Enrollment/Change Form for Registrant's 1996 Employee Stock
Purchase Plan (as amended)
99.4 Nonstatutory Stock Option Agreement for Registrant's 1994
Equity Incentive Plan
99.5 Incentive Stock Option Agreement for Registrant's 1994
Equity Incentive Plan
</TABLE>
13
<PAGE>
EXHIBIT 11.1
CELL THERAPEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
COMPUTATION OF NET LOSS AND PRO FORMA NET LOSS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ --------------------------
1997 1996 1997 1996
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Net loss................. $(4,257,595) $(5,094,025) $(14,773,644) $(12,729,578)
=========== =========== ============ ============
Shares used in
computation of net loss
per share:
Weighted average common
shares outstanding..... 13,031,064 4,943,021 10,454,081 4,938,161
=========== =========== ============ ============
Net loss per share....... $ (0.33) $ (1.03) $ (1.41) $ (2.58)
=========== =========== ============ ============
Pro forma:
Net loss................ $(4,257,595) $(5,094,025) $(14,773,644) $(12,729,578)
=========== =========== ============ ============
Shares used in
computation of net loss
per share: 13,031,064 4,943,021 10,454,081 4,938,161
Weighted average common
shares outstanding....
Weighted average common
shares giving effect
to conversion of con-
vertible preferred
stock to common stock
at the time of pre-
ferred stock issu-
ance.................. -- 2,908,762 1,524,080 2,859,768
----------- ----------- ------------ ------------
Total.................. 13,031,064 7,851,783 11,978,161 7,797,929
=========== =========== ============ ============
Net loss per share...... $ (0.33) $ (0.65) $ (1.23) $ (1.63)
=========== =========== ============ ============
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JUNE 30,
1997 10Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 7,823,785
<SECURITIES> 33,621,036
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 45,527,667
<PP&E> 12,919,094
<DEPRECIATION> 7,354,326
<TOTAL-ASSETS> 51,645,798
<CURRENT-LIABILITIES> 5,010,475
<BONDS> 1,061,551
0
0
<COMMON> 134,454,228
<OTHER-SE> (88,880,456)
<TOTAL-LIABILITY-AND-EQUITY> 51,645,798
<SALES> 0
<TOTAL-REVENUES> 8,896,304
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 25,210,041
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 296,820
<INCOME-PRETAX> (14,773,644)
<INCOME-TAX> 0
<INCOME-CONTINUING> (14,773,644)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,773,644)
<EPS-PRIMARY> (1.41)
<EPS-DILUTED> (1.41)
</TABLE>
<PAGE>
Exhibit 99.1
CELL THERAPEUTICS, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. The Cell Therapeutics, Inc. 1996 Employee Stock Purchase Plan
-------
(the "Plan") is intended to encourage ownership of stock by employees of Cell
----
Therapeutics, Inc., a Washington corporation (the "Company"), and certain
-------
affiliates, and to provide additional incentive for the employees to promote the
success of the business of the Company and any such affiliates. It is intended
that the Plan shall be an "employee stock purchase plan" within the meaning of
Section 423 of the Code.
2. Definitions. As used in this Plan, the following terms shall have the
-----------
meanings set forth below:
(a) "Base Salary" means the regular gross base salary paid to an
-----------
Optionee by one or more Participating Employers during such individual's period
of participation in the Plan, plus any pre-tax contributions made by the
Optionee to any Code Section 401(k) salary deferral plan or any Code Section 125
cafeteria benefit program now or hereafter established by the Company or any
Related Corporation. The following items of compensation shall not be included
in Base Salary: (i) all overtime payments, bonuses, commissions (other than
those functioning as base salary equivalents), profit-sharing distributions and
other incentive-type payments and (ii) any and all contributions (other than
Code Section 401(k) or Code Section 125 contributions) made on the Optionee's
behalf by the Corporation or any Related Corporation under any employee benefit
or welfare plan now or hereafter established.
(b) "Beneficiary" means the person designated as beneficiary on the
-----------
Optionee's Enrollment Form, if no such beneficiary is named or no such
Enrollment Form is in effect at the Optionee's death, his or her beneficiary as
determined under the provisions of the Company's program of life insurance for
employees.
(c) "Board" means the Board of Directors of the Company.
-----
(d) "Change in Control" means any of the following:
-----------------
(i) the direct or indirect sale or exchange by the shareholders
of the Company of all or substantially all of the Stock where the shareholders
of the Company before such sale or exchange do not retain, directly or
indirectly, at least a majority of the beneficial interest in the voting stock
of the Company;
(ii) a merger in which the shareholders of the Company before
such merger do not retain, directly or indirectly, at least a majority of the
beneficial interest in the voting stock of the Company;
1
<PAGE>
(iii) the sale, exchange or transfer of all or substantially all
of the Company's assets (other than a sale, exchange or transfer to one or more
corporations or other entities where the shareholders of the Company before such
sale, exchange or transfer retain, directly or indirectly, at least a majority
of the beneficial interest in the voting stock of the corporation(s) or other
entities to which the assets were transferred).
(e) "Code" means the Internal Revenue Code of 1986, as amended, or any
----
statute successor thereto, and any regulations issued from time to time
thereunder.
(f) "Committee" means a committee of the Board consisting of not less
---------
than two directors of the Company who are not employees of the Company or any
Related Corporation, each appointed by the Board from time to time to serve at
its pleasure for the purpose of carrying out the responsibilities of the
Committee under the Plan. Each member of the Committee will be "disinterested"
within the meaning of Rule 16b-3 of the Securities Exchange Act of 1934, as
amended. For any period during which no such committee is in existence, all
authority and responsibility assigned to the Committee under this Plan shall be
exercised, if at all, by the Board.
(g) "Eligible Employee" means a person who is employed by any
-----------------
Participating Employer on a basis under which he or she is regularly expected to
render more than twenty (20) hours of service per week for more than five (5)
months per calendar year for earnings considered wages under Code Section
3401(a).
(h) "Enrollment Form" means the Enrollment/Change Form whereby an
---------------
Optionee authorizes a Participating Employer to withhold payroll deductions from
his or her Base Salary and is otherwise in such form as the Committee may
specify.
(i) "Fair Market Value" means, as of any given date, the last reported
-----------------
sales price of the Stock as reported on the Nasdaq National Market for such date
or, if either no such sale is reported or the Stock is not publicly traded on or
as of such date, the fair market value of the Stock as determined by the
Committee in good faith based on the available facts and circumstances at the
time.
(j) "Offering Commencement Date" means any date on which Options are
--------------------------
granted under the Plan as determined by the Committee pursuant to Section 8.
(k) "Offering Period" means a period of approximately six months'
---------------
duration, beginning on an Offering Commencement Date and ending, subject to
Section 9.6, on the last business day of the sixth calendar month ending after
such date, during which Options are granted and outstanding under the Plan
pursuant to a determination by the Committee under Section 4.
(l) "Offering Termination Date" means the last business day of an
-------------------------
Offering Period, on which Options must, if ever, be exercised.
2
<PAGE>
(m) "Option" means an option to purchase shares of Stock granted
------
under the Plan.
(n) "Optionee" means an Eligible Employee to whom an Option is
--------
granted.
(o) "Option Shares" means shares of Stock purchasable under an Option.
-------------
(p) "Participating Employer" means the Company or any Related
----------------------
Corporation which is designated by the Committee as a corporation whose Eligible
Employees are to receive Options as of a particular Offering Commencement Date.
(q) "Related Corporation" means any corporation which is or during the
-------------------
term of the Plan becomes a parent corporation of the Company, as defined in
Section 424(e) of the Code, or a subsidiary corporation of the Company, as
defined in Section 424(f) of the Code.
(r) "Stock" means the common stock, without par value, of the Company.
-----
(s) "Stock Purchase Agreement" means the Stock Purchase Agreement
------------------------
under which an Optionee agrees to such terms and such other provisions governing
his or her participation in the Plan (not inconsistent with the Plan) as the
Committee may deem advisable.
3. Term of Plan. The Plan shall become effective upon (a) the adoption
------------
of the Plan by the Board, subject to the approval of the Plan by the
shareholders of the Company within 12 months of such adoption and (b) the
effectiveness of a registration statement on Form S-8 under the Securities Act
of 1933, as amended, covering the shares of Stock subject to the Plan. No Option
shall be granted under the Plan on or after the tenth anniversary of such
approval but Options theretofore granted may extend beyond that date.
4. Administration. The Plan shall be administered by the Committee, which
--------------
shall determine from time to time whether to grant Options under the Plan as of
any date otherwise qualifying as an Offering Commencement Date. The Committee
shall further determine which (if any) Related Corporation shall be
Participating Employers as of each Offering Commencement Date. The Committee
shall have authority in its discretion to interpret the Plan, to prescribe,
amend and rescind rules and regulations relating to determining the terms of
Options granted under the Plan, and to make all other determinations necessary
or advisable for the administration of the Plan. Any determination of the
Committee shall be final and binding upon all persons having or claiming any
interest under the Plan or under any Option granted pursuant to the Plan.
3
<PAGE>
5. Amendment and Termination. The Board may terminate or amend the Plan
-------------------------
at any time and from time to time. No termination of or amendment to the Plan
may materially adversely affect the rights of an Optionee with respect to any
Option held by the Optionee as of the date of such termination or amendment
without the Optionee's consent.
6. Shares of Stock Subject to the Plan. No more than an aggregate of
-----------------------------------
285,714 shares of Stock may be issued or delivered pursuant to the exercise of
Options granted under the Plan. Shares to be delivered upon the exercise of
Options may be either shares of Stock which are authorized but unissued or
shares of Stock held by the Company in its treasury. If an Option expires or
terminates for any reason without having been exercised in full, the unpurchased
shares subject to the Option shall become available for other Options granted
under the Plan. The Company shall, at all times during which Options are
outstanding, reserve and keep available shares of Stock sufficient to satisfy
such Options, and shall pay all fees and expenses incurred by the Company in
connection therewith. In the event of any capital change in the outstanding
Stock as contemplated by Section 9.6, the number and kind of shares of Stock
reserved and kept available by the Company shall be appropriately adjusted.
7. Eligibility. Each individual who is an Eligible Employee on any
-----------
Offering Commencement Date of any Offering Period under the Plan may enter such
Offering Period on such date, provided he or she remains an Eligible Employee
and provided, further, he or she meets all of the following requirements:
(a) Such Eligible Employee will not, after grant of the Option, own
stock possessing 5% or more of the total combined voting power or value of all
classes of stock of the Company or of any Related Corporation. For purposes of
this subparagraph (a), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of the employee, and stock which the employee
may purchase under outstanding options shall be treated as stock owned by the
employee.
(b) Upon grant of the Option, the employee's rights to purchase stock
under all employee stock purchase plans (as defined in Section 423(b) of the
Code) of the Company and its Related Corporations will not accrue at a rate
which exceeds $25,000 of fair market value of the stock (determined as of the
grant date) for each calendar year in which such option is outstanding at any
time. The accrual of rights to purchase stock shall be determined in accordance
with Section 423(b)(8) of the Code.
8. Offering Commencement Dates. Options shall be granted on the first
---------------------------
business day of any calendar month which is designated by the Committee as the
beginning of an Offering Period.
4
<PAGE>
9. Terms and Conditions of Options.
-------------------------------
9.1 General. An Optionee shall be granted a separate Option on each
-------
Offering Commencement Date for each Offering Period in which he or she
participates. All Options granted on a particular Offering Commencement Date
shall comply with the terms and conditions set forth in Sections 9.2 through
9.10.
9.2 Purchase Price. The purchase price of Option Shares shall be 85%
--------------
of the lower of (a) the Fair Market Value of the shares as of the Offering
Commencement Date and (b) the Fair Market Value of the shares as of the Offering
Termination Date.
9.3 Restrictions on Transfer. Options may not be assigned,
------------------------
transferred, pledged or otherwise disposed of, except by will or under the laws
of descent and distribution. An Option may not be exercised by anyone other
than the Optionee during the lifetime of the Optionee. The Optionee shall agree
in the Stock Purchase Agreement to notify the Company of any transfer of the
shares within two (2) years of the Offering Commencement Date of those shares.
The Company shall have the right to place a legend on all stock certificates
instructing the transfer agent to notify the Company of any transfer of the
shares.
9.4 Expiration. Each Option shall expire at the close of business on
----------
the Offering Termination Date or on such earlier date as may result from the
operation of Section 9.5 or by action of the Committee taken pursuant to Section
9.6.
9.5 Termination of Employment of Optionees. If an Optionee ceases
--------------------------------------
for any reason to be an Eligible Employee, whether due to death, retirement,
voluntary severance, involuntary severance, transfer, or disaffirmation of a
Related Corporation with the Company, his or her Option shall immediately
expire, and the Optionee's accumulated payroll deductions shall be returned to
the Optionee or his or her Beneficiary, as the case may be, by the Company. For
purposes of this Section 9.5, an Optionee shall be deemed to be employed
throughout any leave of absence for military service, illness or other bona fide
purpose which does not exceed the longer of ninety (90) days or the period
during which the Optionee's reemployment rights are guaranteed by statute or by
contract. If the Optionee does not return to active employment prior to the
termination of such period, his or her employment shall be deemed to have ended
on the ninety-first (91st) day of such leave of absence.
9.6 Capital Changes Affecting the Stock. In the event that, between
-----------------------------------
the Offering Commencement Date and the Offering Termination Date of an Option, a
stock dividend is paid or becomes payable in respect of the Stock or there
occurs a split-up or contraction in the number of shares of Stock, appropriate
adjustments shall be made to (i) the maximum number and class of securities
issuable under the Plan, (ii) the maximum number and class of securities
purchasable per Optionee on any one Offering Termination Date and (iii) the
number and class of securities and the price per share in effect under each
outstanding
5
<PAGE>
Option in order to prevent the dilution or enlargement of benefits thereunder.
In the event of a Change in Control, the Committee, in its sole discretion,
shall either (a) provide that Options granted under the Plan shall be fully
exercisable to the extent of each Optionee's accumulated withholdings for the
Offering Period as of a date prior to the Change in Control or (b) arrange with
the surviving, continuing, successor or purchasing corporation, as the case may
be, that such corporation assume the Company's rights and obligations under the
Plan. In the event that, after the Offering Commencement Date, there occurs a
dissolution or liquidation of the Company, except pursuant to a transaction to
which Section 424(a) of the Code applies, each Option shall terminate, but the
Optionee shall have the right to exercise his or her Option prior to such
dissolution or liquidation.
9.7 Payroll Deductions. An Optionee may purchase shares under his or
------------------
her Option during any particular Offering Period by completing and returning to
the Human Resources department of the Company at least ten (10) days prior to
the beginning of such Offering Period the Stock Purchase Agreement and the
Enrollment Form indicating the percentage, in any multiple of one percent (1%)
up to a maximum of ten percent (10%), of his or her Base Salary which is to be
withheld each payroll period. The Optionee shall not be permitted to change the
percentage of Base Salary withheld during an Offering Period. However, the
Optionee may withdraw any or all of his or her accumulated payroll deductions by
submitting to the Human Resources department of the Company a new Enrollment
Form no later than one (1) business day prior to the Offering Termination Date
whereupon his or her payroll deduction for the remainder of the Offering Period
shall cease and he or she shall not be permitted to re-enroll in such Offering
Period. Any Stock Purchase Agreement and Enrollment Form in effect for an
Offering Period shall remain in effect as to any subsequent Offering Period
unless revoked by a withdrawal of the Optionee's accumulated payroll deduction
amounts (in which case submission of new Enrollment Form and Stock Purchase
Agreement shall be required for participation in a future Offering Period) or
modified by submission of a new Enrollment Form, or until the Optionee's
termination of employment for any reason.
9.8 Exercise of Options/Excess Payroll Deductions.
---------------------------------------------
(a) On the Offering Termination Date, the Optionee may purchase
that number of whole shares of Stock obtained by dividing the amount collected
from the Optionee through payroll deductions during the Offering Period ending
with that Offering Termination Date by the purchase price in effect for the
Optionee for that Offering Termination Date. However, the maximum number of
shares of Stock purchasable by any on Optionee on any Offering Termination Date
shall not exceed eight hundred (800) shares, subject to periodic adjustments in
the event of certain changes in the Company's capitalization. Any payroll
deductions not applied to the purchase of Stock by reason of the limitation on
the maximum number of shares purchasable by each Optionee on the Offering
Termination Date shall be promptly refunded.
6
<PAGE>
(b) If the total number of shares which all Optionees elect to
purchase, together with any shares already purchased under the Plan, exceeds the
total number of shares which may be purchased under the Plan pursuant to Section
6, the number of shares which each Optionee is permitted to purchase shall be
decreased pro rata based on the Optionee's accumulated payroll deductions in
--- ----
relation to all accumulated payroll deductions currently being withheld under
the Plan. The payroll deductions of each Participant, to the extent in excess
of the aggregate purchase price payable for the Common Stock pro-rated to such
individual shall be promptly refunded.
(c) If the number of shares purchasable includes a fraction, such
number shall be adjusted to the next smaller whole number and the purchase price
shall be adjusted accordingly. Any payroll deductions not applied to the
purchase of Stock on any Offering Termination Date because they are not
sufficient to purchase a whole share of Stock shall be held for the purchase of
Stock on the next Offering Termination Date.
Accumulated payroll deductions not withdrawn prior to the Offering
Termination Date shall be automatically applied by the Company toward the
purchase of whole shares of Stock.
9.9 Delivery of Stock. Except as provided below, within a reasonable
-----------------
time after the Offering Termination Date, the Company shall deliver or cause to
be delivered to the Optionee a certificate or certificates for the number of
shares purchased by the Optionee. A stock certificate representing the number
of shares purchased will be issued in the Optionee's name only, or if his or her
Enrollment Form so specifies, in the name of the employee and another person of
legal age as joint tenants with rights of survivorship. If any law or
applicable regulation of the Securities and Exchange Commission or other body
having jurisdiction in the premises shall require that the Company or the
Optionee take any action in connection with the shares being purchased under the
Option, delivery of the certificate or certificates for such shares shall be
postponed until the necessary action shall have been completed, which action
shall be taken by the Company at its own expense, without unreasonable delay.
The Optionee shall have no rights as a shareholder in respect of shares for
which he or she has not received a certificate.
Notwithstanding the foregoing, the Company may elect to hold for the
benefit of the Optionee any shares otherwise to be delivered to the Optionee
pursuant to this Section 9.9, or to deliver the same to such agent or agents of
the Company for the benefit of the Optionee as the Company may select, for the
period during which the transfer of such shares is limited by this Plan and by
Section 423 of the Code (and thereafter, until the Optionee requests delivery of
such shares of Stock in writing). In that event, the Optionee shall have all of
the rights of a shareholder in the shares so held by the Company or its agent,
except as limited by the restriction on transferability, from and after the
issuance of the same and the Company or its agent shall adopt reasonable
procedures to enable the Optionee to
7
<PAGE>
exercise such rights. In the event of the Optionee's death while any shares are
so held, such shares shall be delivered to the Optionee's Beneficiary promptly
following the Committee's receipt of evidence satisfactory to the Committee of
the Optionee's death.
9.10 Return of Accumulated Payroll Deductions. In the event that the
----------------------------------------
Optionee or his or her Beneficiary is entitled to the return of accumulated
payroll deductions, whether by reason of voluntary withdrawal, termination of
employment, retirement, death, or in the event that accumulated payroll
deductions exceed the price of shares purchased (except if for the reason that
accumulated payroll deductions were insufficient to cover the purchase price of
one whole share of Stock), such amount shall be returned by the Company to the
Optionee or the Beneficiary, as the case may be, as soon as practicable
following the Offering Termination Date of the Offering Period in which the same
were deducted. Accumulated payroll deductions held by the Company shall not
bear interest nor shall the Company be obligated to segregate the same from any
of its other assets.
10. No Enlargement of Employment Rights. Neither the establishment or
-----------------------------------
continuation of the Plan nor the grant of any Option hereunder shall be deemed
to give any employee the right to be retained in the employ of the Company or a
Related Corporation, or any successor to either, or to interfere with the right
of the Company or such Corporation or successor to discharge the employee at any
time.
11. Tax Withholding. If, at any time, the Company or any Related
---------------
Corporation is required, under applicable laws and regulations, to withhold, or
to make any deduction of any taxes or take any other action in connection with
any exercise of an Option or transfer of shares of Stock, the Company or such
Related Corporation shall have the right to deduct from all amounts paid in cash
any taxes required by law to be withheld therefrom, and in the case of shares of
Stock, the Optionee or his or her estate or Beneficiary shall be required to pay
the Company or such Related Corporation the amount of taxes required to be
withheld, or, in lieu thereof, the Company or such Related Corporation shall
have the right to retain, or sell without notice, a sufficient number of shares
of Stock to cover the amount required to be withheld, or to make other
arrangements with respect to withholding as it shall deem appropriate.
12. Governing Law. The Plan and all Options and actions taken
-------------
thereunder shall be governed by and construed in accordance with the laws of the
State of Washington, without regard to the conflict of laws principles thereof.
8
<PAGE>
Exhibit 99.2
CELL THERAPEUTICS, INC.
STOCK PURCHASE AGREEMENT
------------------------
I hereby elect to participate in the 1996 Employee Stock Purchase Plan (the
"ESPP") beginning with the offering period specified below, and I hereby
subscribe to purchase shares of Common Stock of Cell Therapeutics, Inc. (the
"Company") in accordance with the provisions of this Agreement and the ESPP. I
hereby authorize payroll deductions from each of my paychecks following my entry
into the ESPP in the 1% multiple of my earnings (not to exceed 10%) specified in
my attached Enrollment/Change Form.
Offering periods under the ESPP will run from the first business day in
January to the last business day in June each year, and from the first business
day in July to the last business day in December each year. However, the
initial offering period under the ESPP will begin on December 1, 1997 and end on
June 30, 1998. My participation will automatically remain in effect from one
offering period to the next in accordance with this Agreement and my payroll
deduction authorization, unless I withdraw from the ESPP or change the rate of
my payroll deduction, or unless my employment status changes. I may change the
rate of my payroll deductions to become effective at the start of any subsequent
offering period by filing a new Enrollment/Change Form at least one (1) business
day prior to the start date of such offering period.
My payroll deductions will be accumulated for the purchase of shares of the
Company's Common Stock on the last business day of each offering period. The
purchase price per share shall be equal to 85% of the lower of (i) the fair
-----
market value per share of Common Stock on the start date of the offering period
or (ii) the fair market value per share on the last day of that offering period.
I will also be subject to ESPP restrictions (i) limiting the maximum number of
shares which I may purchase on any one purchase date to such number of shares
established by the Plan Administrator, and (ii) prohibiting me from purchasing
more than $25,000 worth of Common Stock for each calendar year my purchase right
remains outstanding.
I may withdraw from the ESPP by filing a new Enrollment/Change Form in
which I indicate my voluntary withdrawal at least one (1) business day prior to
the last day of the offering period. The Company will refund all my payroll
deductions for that offering period as soon as practicable following the last
day of that offering period. I may not rejoin that particular offering period at
any later date. Upon the termination of my employment for any reason, including
death or disability, or my loss of eligible employee status, my participation in
the ESPP will immediately cease and all my payroll deductions for the offering
period in which my employment terminates or my loss of eligibility occurs will
automatically be refunded to me.
If I take an unpaid leave of absence, my payroll deductions will
immediately cease, and any payroll deductions for the offering period in which
my leave begins will, at my election, either be refunded or applied to the
purchase of shares of Common Stock at the end of that offering period. Upon my
return to active service, my payroll deductions will automatically resume at the
rate in effect when my leave began, provided I am an eligible employee under the
ESPP at that time.
A stock certificate for the shares purchased on my behalf at the end of
each offering period will automatically be deposited into a brokerage account
which the Company will designate and open on my behalf. I will notify the
Company of any sale or disposition of my ESPP shares which occurs within two (2)
years after the start date of the offering period in which those shares were
purchased, and I will satisfy all applicable income and employment tax
withholding requirements at the time of such sale or disposition. The Company
has the right to retain, or sell without notice, a sufficient number of the
shares purchased on my behalf under the ESPP to cover the amount required to be
withheld, or to make other arrangements with respect to withholding as the
Company deems appropriate.
The Company has the right, exercisable in its sole discretion, to amend or
terminate the ESPP at any time, with such amendment or termination to become
effective immediately following the exercise of outstanding purchase rights at
the end of any current offering period. Should the Company elect to terminate
the ESPP, I will have no further rights to purchase shares of Common Stock
pursuant to this Agreement.
I have received a copy of the official Plan Summary and Prospectus
summarizing the major features of the ESPP. I have read this Agreement and the
Prospectus and hereby agree to be bound by the terms of both this Agreement and
the ESPP. The effectiveness of this Agreement is dependent upon my eligibility
to participate in the ESPP.
Date: , 199
------------------------- ---- ---------------------------------
Signature of Employee
Entry Date: , 199 Printed Name:
------------------- ---- --------------------
<PAGE>
Exhibit 99.3
CELL THERAPEUTICS, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN ("ESPP")
ENROLLMENT/CHANGE FORM
Action Complete Sections:
------ ------------------
SECTION 1: [_] New Enrollment 2, 3, 6, 7 and sign attached
---
ACTIONS Stock Purchase Agreement
[_] Payroll Deduction Change 2, 4, 7
[_] Terminate Payroll Deductions 2, 5, 7
[_] Beneficiary Change 2, 6, 7
[_] Leave of Absence 2, 6, 7
================================================================================
SECTION 2:
Name _________________________________________________________
PERSONNEL Last First MI Dept.
DATA
Home or Mailing Address ______________________________________
Street
___________________________________________________________
City State Zip Code
Social Security #: [_][_][_]-[_][_]-[_][_][_][_]
================================================================================
<TABLE>
<S> <C> <C>
SECTION 3: Effective with the Offering
Period Beginning: Payroll Deduction Amount: _____% of total base salary.*
NEW [_] January 1, 199___
ENROLLMENT [_] July 1, 199___ * Must be a multiple of 1% up to a maximum of 10% of
base salary
[_] Initial Offering Period -- December 1, 1997
====================================================================================================================================
SECTION 4: Effective with the Offering I authorize the following new level of payroll
Period Beginning: deductions: _____% of base salary*
CHANGE [_] January 1, 199___
PAYROLL [_] July 1, 199___ * Must be a multiple of 1% up to a maximum of 10% of
DEDUCTIONS base salary
NOTE: You may change your rate of payroll deductions to become effective as of the start date of the next offering
---- period by filing the change form at least one (1) business day prior to the start date of such offering
period.
====================================================================================================================================
SECTION 5: Effective with the Your election to terminate your payroll deductions for the
Pay Period Beginning: _______________________ balance of the offering period must be received by the Human
TERMINATE Month, Day and Year Resources Dept. at least one (1) business day prior to the applicable
PAYROLL purchase date, and you may not rejoin that offering period at a later
DEDUCTIONS date. You will not be able to resume participation in the ESPP until
a new offering period begins.
</TABLE>
NOTE: In connection with your voluntary termination of payroll
---- deductions, your ESPP payroll deductions collected to date in the
current offering period will be refunded to you as soon as
practicable following the filing of your withdrawal form. In
addition, if your employment terminates for any reason or your
eligibility status changes ((less than)20 hrs/wk or
(less than)5 months/yr), you will immediately cease to
participate in the ESPP, and your ESPP payroll deductions
collected in that offering period will automatically be refunded
to you.
================================================================================
SECTION 6: In connection with my leave of absence, I elect the following
action with respect to my ESPP payroll deductions to date:
LEAVE OF
ABSENCE in the current offering period:
[_] Purchase shares of Cell Therapeutics, Inc. at end of the
period
OR
[_] Refund ESPP payroll deductions collected
NOTE: If you take an unpaid leave of absence, your payroll deductions
---- will immediately cease. Upon your return to active service, your
payroll deductions will automatically resume at the rate in
effect for you at the time you went on leave, provided you are
still an eligible employee under the Plan.
================================================================================
SECTION 7: Beneficiary(ies) Relationship of Beneficiary(ies)
---------------- --------------------------------
BENEFICIARY
_______________________________ ________________________________
_______________________________ ________________________________
================================================================================
SECTION 8:
AUTHORIZATION
I understand my certificate will be issued in street name and delivered to the
brokerage account designated by Cell Therapeutics, Inc.
__________________ ___________________________________
Date Signature of Employee
<PAGE>
Exhibit 99.4
CELL THERAPEUTICS, INC.
1994 EQUITY INCENTIVE PLAN
NONSTATUTORY STOCK OPTION AGREEMENT
-----------------------------------
THIS AGREEMENT is entered into as of grantdate~, between CELL THERAPEUTICS,
INC., a Washington State corporation (the "Company"), and firstname~ name~ (the
"Optionee").
RECITALS
--------
A. The Company has approved and adopted the Cell Therapeutics, Inc., 1994
Equity Incentive Plan (the "Plan"), pursuant to which the Plan administrator
(the "Committee") is authorized to grant to employees of the Company and to
other persons in the Company's service selected by the Committee, options to
purchase common stock, without par value, of the Company (the "Common Stock");
and
B. The option granted hereunder is intended to be a nonstatutory stock
option which does not meet the requirements of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code").
AGREEMENT
---------
NOW, THEREFORE, the Company hereby grants to Optionee the option to
purchase, upon the terms and conditions set forth herein and in the Plan,
shares~ shares of Common Stock (the "Option").
1. EXERCISE PRICE.
---------------
The exercise price for the Option shall be optionprice~ per share.
2. VESTING SCHEDULE.
-----------------
The Option shall not be exercisable until it has vested. The Option shall
vest according to the following schedule:
Number of Options
Vesting Date Eligible for Exercise Vesting Type
------------ --------------------- ------------
p1vestdate~ p1shares~ p1vesttype~
p2vestdate~ p2shares~ p2vesttype~
p3vestdate~ p3shares~ p3vesttype~
p4vestdate~ p4shares~ p4vesttype~
<PAGE>
3. LIMITED TRANSFERABILITY OF OPTION.
---------------------------------
This Option may, in connection with the Optionee's estate plan, be assigned
in whole or in part during Optionee's lifetime to one or more members of the
Optionee's immediate family or to a trust established for the exclusive benefit
of one or more such family members. The assigned portion shall be exercisable
only by the person or persons who acquire a proprietary interest in the Option
pursuant to such assignment. The terms applicable to the assigned portion shall
be the same as those in effect for this Option immediately prior to such
assignment and shall be set forth in such documents issued to the assignee as
the Company may deem appropriate. Should the Optionee die while holding this
Option, then this Option shall be transferred in accordance with Optionee's will
or the laws of descent and distribution of the state or country of Optionee's
domicile at the time of death.
4. COMPLIANCE WITH SECURITIES LAWS.
-------------------------------
By accepting the Option, Optionee represents and agrees for himself/herself
and all persons who acquire rights in the Option through Optionee, that none of
the shares of Common Stock purchased upon exercise of the Option will be
distributed in violation of applicable federal and state laws and regulations.
If requested by the Company, Optionee shall furnish evidence satisfactory to the
Company (including a written and signed representation letter and a consent to
be bound by all transfer restrictions imposed by applicable law, legend
condition or otherwise) to that effect, prior to delivery of the purchased
shares of Common Stock.
5. TERMINATION OF OPTION.
---------------------
A vested Option shall terminate, to the extent not previously exercised,
upon the occurrence of one of the following events:
(i) ten (10) years from the date of grant; or p1expiredate~;
(ii) the expiration of three (3) months from the date of Optionee's
termination of employment or service with the Company for any reason other than
death or because Optionee becomes disabled (within the meaning of Section
22(e)(3) of the Code) (unless the exercise period is extended by the Committee
until a date not later than the expiration date of the Option); or
(iii) the expiration of one (1) year from the date of death of
Optionee or the cessation of employment of Optionee from the Company because
Optionee becomes disabled (within the meaning of Section 22(e)(3) of the Code)
(unless the exercise period is extended by the Committee until a date not later
than the expiration date of the Option).
2
<PAGE>
If Optionee's employment or contractual relationship is terminated from the
Company by death, any Option held by Optionee shall be exercisable only by the
person or persons to whom such Optionee's rights under such Option shall pass by
Optionee's will or by the laws of descent and distribution of the state or
country of Optionee's domicile at the time of death. Each unvested Option
granted pursuant hereto shall terminate upon Optionee's termination of
employment or service with the Company, for any reason whatsoever, including
death or disability.
6. CHANGES IN CAPITAL STRUCTURE.
----------------------------
Except with respect to transactions referred to in paragraph 13 of the
Plan, if the outstanding shares of Common Stock of the Company are hereafter
increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of the Company or of another corporation by
reason of any recapitalization, reclassification, stock split, combination of
shares or stock dividend, the number and kind of shares and Option price shall
be proportionately adjusted as set forth in paragraph 11 of the Plan.
7. EXERCISE OF OPTION.
------------------
Each exercise of the Option shall be by means of delivery of a notice of
election to exercise (which may be in the form attached hereto as Exhibit "A")
to the Treasury Operations Department of the Company at its principal executive
office, specifying the number of shares of Common Stock to be purchased and
accompanied by payment in any of the following forms: (i) certified or cashier's
bank check payable to the order of the Company, (ii) transfer of immediately
available federal funds, (iii) shares of Common Stock held by Optionee (or any
other person or persons exercising the Option) for the requisite period
necessary to avoid a charge to the Company's earnings for financial reporting
purposes and valued at fair market value as determined pursuant to paragraph 6
(b) (iv) of the Plan or (v) through a special sale and remittance procedure
pursuant to which Optionee (or any other person or persons exercising the
Option) shall concurrently provide irrevocable instructions (A) to a Company-
designated brokerage firm to effect the immediate sale of the purchased shares
and remit to the Company, out of the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate exercise price payable for the
purchased shares plus all applicable Federal, state and local income and
employment taxes required to be withheld by the Company by reason of such
exercise and (B) to the Company to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete the sale
transaction.
If other than Optionee, any person or persons exercising the Option shall
furnish to the Company appropriate documentation that such person or persons
have the right to exercise the Option.
3
<PAGE>
8. OPTIONEE ACKNOWLEDGMENTS.
------------------------
Optionee acknowledges that he or she has read and understands the terms of
this Nonstatutory Stock Option Agreement and the Plan, and that:
(a) The issuance of shares of Common Stock pursuant to the exercise of
the Option, and any resale of the shares of Common Stock, may only be effected
in compliance with applicable state and federal laws and regulations, and that
Optionee may be required to execute and deliver representations and warranties
to that effect prior to the exercise of any portion of the Option;
(b) Optionee is not entitled to any rights as a shareholder with
respect to any shares of Common Stock issuable hereunder until Optionee becomes
a shareholder of record;
(c) The shares of Common Stock subject hereto may be adjusted in the
event of certain changes in the capital structure of the Company or for any
other reason required or permitted by the Plan;
(d) As a condition to the exercise of the Option, Optionee shall make
such arrangements as the Committee requires for the satisfaction of any federal,
state or local withholding tax obligations; and
(e) This Agreement does not constitute an employment agreement nor
does it entitle Optionee to any specific employment or contractual relationship
or to any employment or contractual relationship for a period of time, and that
Optionee's continued employment or contractual relationship with the Company, if
any, shall be at will and is subject to termination in accordance with the
Company's prevailing policies and any other agreement between the Optionee and
the Company.
9. PROFESSIONAL ADVICE.
-------------------
The acceptance and exercise of the Option and the sale of Common Stock
issued pursuant to the exercise of the Option may have consequences under
federal and state tax and securities laws which may vary depending on the
individual circumstances of Optionee. Accordingly, Optionee acknowledges that
Optionee has been advised to consult his or her personal legal and tax advisor
in connection with this Agreement and Optionee's dealings with respect to the
Option or the Common Stock.
10. NOTICES.
-------
Any notice required or permitted to be made or given hereunder shall be
mailed or delivered personally to the addresses set forth below, or as changed
from time-to-time by written notice to the other:
4
<PAGE>
If to the Company: Cell Therapeutics, Inc.
201 Elliott Avenue West, Suite 400
Seattle, Washington 98119
Attn.: Legal Affairs Dept.
If to the Optionee: firstname~ name~
address1~
address2~
address3~
address4~
11. AGREEMENT SUBJECT TO PLAN.
-------------------------
The Option and this Agreement evidencing and confirming the same are
subject to the terms and conditions set forth in the Plan and in any amendments
to the Plan existing now or in the future, which terms and conditions are
incorporated herein by reference. A copy of the official Plan Summary and
Prospectus describing the Plan has been delivered to Optionee. Should any
conflict exist between the provisions of the Plan, as amended from time to time
and described in such Prospectus, and those of this Agreement, the provisions of
the Plan shall govern and control. This agreement and the Plan comprise the
entire understanding between the Company and Optionee with respect to the Option
and shall be construed and enforced under the Laws of the State of Washington.
CELL THERAPEUTICS, INC.
BY: _____________________________
ITS: _____________________________
OPTIONEE
BY: _____________________________
firstname~ name~
5
<PAGE>
EXHIBIT "A"
NOTICE OF ELECTION TO EXERCISE
------------------------------
This Notice of Election to Exercise shall constitute proper notice pursuant
to Section 6(g) of the Cell Therapeutics, Inc. 1994 Equity Incentive Plan (the
"Plan") and Section 7 of that certain Nonstatutory Stock Option Agreement (the
"Agreement") dated as of ____________________ between Cell Therapeutics, Inc.
(the "Company") and the undersigned.
The undersigned hereby elects to purchase _______________________ shares of
the Company's Common Stock (the "Purchased Shares"), at a purchase price of
$________ per share, for aggregate consideration of $__________________ (the
"Aggregate Exercise Price"), pursuant to that certain option granted to the
undersigned under the Agreement and in accordance with the terms and conditions
set forth in the Agreement and the Plan. Such Aggregate Exercise Price, in the
form specified in Section 7 of the Agreement, accompanies this Notice.
Alternatively, the undersigned may utilize the special broker-dealer sale and
remittance procedure specified in Section 7 of the Agreement to effect payment
of the Aggregate Exercise Price. The undersigned desires to complete this
transaction on the following date: ______________________.
The undersigned has executed this Notice this ______ day of
__________________________.
________________________________
firstname~ name~
________________________________
Social Security Number
6
<PAGE>
Exhibit 99.5
CELL THERAPEUTICS, INC.
1994 EQUITY INCENTIVE PLAN
INCENTIVE STOCK OPTION AGREEMENT
--------------------------------
THIS AGREEMENT is entered into as of grantdate~, between CELL THERAPEUTICS,
INC., a Washington State corporation (the "Company"), and firstname~ name~ (the
"Optionee").
RECITALS
--------
A. The Company has approved and adopted the Cell Therapeutics, Inc., 1994
Equity Incentive Plan (the "Plan"), pursuant to which the Plan administrator
(the "Committee") is authorized to grant to employees of the Company and to
other persons in the Company's service selected by the Committee, options to
purchase common stock, without par value, of the Company (the "Common Stock");
and
B. The option granted hereunder is intended to be an Incentive Stock
Option which meets the requirements of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code").
AGREEMENT
---------
NOW, THEREFORE, the Company hereby grants to Optionee the option to
purchase, upon the terms and conditions set forth herein and in the Plan,
shares~ shares of Common Stock (the "Option").
1. EXERCISE PRICE.
---------------
The exercise price for the Option shall be optionprice~ per share.
2. VESTING SCHEDULE.
-----------------
The Option shall not be exercisable until it has vested. The Option shall
vest according to the following schedule:
<TABLE>
<CAPTION>
Number of Options
Vesting Date Eligible for Exercise Vesting Type
- ----------------------- --------------------- ------------
<S> <C> <C>
p1vestdate~ p1shares~ p1vesttype~
p2vestdate~ p2shares~ p2vesttype~
p3vestdate~ p3shares~ p3vesttype~
p4vestdate~ p4shares~ p4vesttype~
</TABLE>
<PAGE>
3. OPTION NOT TRANSFERABLE.
-----------------------
The Option is not assignable or transferable, either voluntarily or by
operation of law, except by will or the laws of descent and distribution of the
state or country of Optionee's domicile at the time of death and may be
exercised, during Optionee's lifetime, only by Optionee.
4. COMPLIANCE WITH SECURITIES LAWS.
-------------------------------
By accepting the Option, Optionee represents and agrees for himself/herself
and all persons who acquire rights in the Option through Optionee, that none of
the shares of Common Stock purchased upon exercise of the Option will be
distributed in violation of applicable federal and state laws and regulations.
If requested by the Company, Optionee shall furnish evidence satisfactory to the
Company (including a written and signed representation letter and a consent to
be bound by all transfer restrictions imposed by applicable law, legend
condition or otherwise) to that effect, prior to delivery of the purchased
shares of Common Stock.
5. TERMINATION OF OPTION.
---------------------
A vested Option shall terminate, to the extent not previously exercised,
upon the occurrence of one of the following events:
(i) ten (10) years from the date of grant; or p1expiredate~;
(ii) the expiration of three (3) months from the date of Optionee's
termination of employment with the Company for any reason other than death or
because Optionee becomes disabled (within the meaning of Section 22(e)(3) of the
Code) (unless the exercise period is extended by the Committee until a date not
later than the expiration date of the Option); or
(iii) the expiration of one (1) year from the date of death of Optionee or
the cessation of employment of Optionee from the Company because Optionee
becomes disabled (within the meaning of Section 22(e)(3) of the Code) (unless
the exercise period is extended by the Committee until a date not later than the
expiration date of the Option).
If Optionee's employment is terminated from the Company by death, any
Option held by Optionee shall be exercisable only by the person or persons to
whom such Optionee's rights under such Option shall pass by Optionee's will or
by the laws of descent and distribution of the state or country of Optionee's
domicile at the time of death.
Each unvested Option granted pursuant hereto shall terminate upon
Optionee's termination of employment or service with the Company, for any reason
whatsoever, including death or disability.
2
<PAGE>
7. CHANGES IN CAPITAL STRUCTURE
----------------------------
Except with respect to transactions referred to in paragraph 13 of the
Plan, if the outstanding shares of Common Stock of the Company are hereafter
increased or decreased or changed into or exchanged for a different number of
kind of shares or other securities of the Company or of another corporation by
reason of any recapitalization, reclassification, stock split, combination of
shares or stock dividend, the number and kind of shares and Option price shall
be proportionately adjusted as set forth in paragraph 11 of the Plan.
8. EXERCISE OF OPTION.
------------------
Each exercise of the Option shall be by means of delivery of a notice of
election to exercise (which may be in the form attached hereto as Exhibit "A")
to the Treasury Operations Department of the Company at its principal executive
office, specifying the number of shares of Common Stock to be purchased and
accompanied by payment in any of the following forms: (i) certified or cashier's
bank check payable to the order of the Company, (ii) transfer of immediately
available federal funds, (iii) shares of Common Stock held by Optionee (or any
other person or persons exercising the Option) for the requisite period
necessary to avoid a charge to the Company's earnings for financial reporting
purposes and valued at fair market value as determined pursuant to paragraph 6
(b) (iv) of the Plan or (v) through a special sale and remittance procedure
pursuant to which Optionee (or any other person or persons exercising the
Option) shall concurrently provide irrevocable instructions (A) to a Company-
designated brokerage firm to effect the immediate sale of the purchased shares
and remit to the Company, out of the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate exercise price payable for the
purchased shares plus all applicable Federal, state and local income and
employment taxes required to be withheld by the Company by reason of such
exercise and (B) to the Company to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete the sale
transaction.
If other than Optionee, any person or persons exercising the Option shall
furnish to the Company appropriate documentation that such person or persons
have the right to exercise the Option.
9. OPTIONEE ACKNOWLEDGMENTS.
------------------------
Optionee acknowledges that he or she has read and understands the terms of
this Incentive Stock Option Agreement and the Plan, and that:
(a) The issuance of shares of Common Stock pursuant to the exercise of
the Option, and any resale of the shares of Common Stock, may only be effected
in compliance with applicable state and federal laws and regulations, and that
Optionee may be required to execute and deliver representations and warranties
to that effect prior to the exercise of any portion of the Option;
3
<PAGE>
(b) Optionee is not entitled to any rights as a shareholder with
respect to any shares of Common Stock issuable hereunder until Optionee becomes
a shareholder of record;
(c) The shares of Common Stock subject hereto may be adjusted in the
event of certain changes in the capital structure of the Company or for any
other reason required or permitted by the Plan;
(d) As a condition to the exercise of the Option, Optionee shall make
such arrangements as the Committee requires for the satisfaction of any federal,
state or local withholding tax obligations; and
(e) This Agreement does not constitute an employment agreement nor
does it entitle Optionee to any specific employment or contractual relationship
or to any employment or contractual relationship for a period of time, and that
Optionee's continued employment with the Company, if any, shall be at will and
is subject to termination in accordance with the Company's prevailing policies
and any other agreement between the Optionee and the Company.
10. PROFESSIONAL ADVICE.
-------------------
The acceptance and exercise of the Option and the sale of Common Stock
issued pursuant to the exercise of the Option may have consequences under
federal and state tax and securities laws which may vary depending on the
individual circumstances of Optionee. Accordingly, Optionee acknowledges that
Optionee has been advised to consult his or her personal legal and tax advisor
in connection with this Agreement and Optionee's dealings with respect to the
Option or the Common Stock.
11. NOTICES.
-------
Any notice required or permitted to be made or given hereunder shall be mailed
or delivered personally to the addresses set forth below, or as changed from
time-to-time by written notice to the other:
If to the Company: Cell Therapeutics, Inc.
201 Elliott Avenue West, Suite 400
Seattle, Washington 98119
Attn.: Legal Affairs Dept.
If to the Optionee: firstname~ name~
address1~
address2~
address3~
address4~
4
<PAGE>
12. AGREEMENT SUBJECT TO PLAN.
-------------------------
The Option and this Agreement evidencing and confirming the same are
subject to the terms and conditions set forth in the Plan in any amendments to
the Plan existing now or in the future, which terms and conditions are
incorporated herein by reference. A copy of the official Plan Summary and
Prospectus describing the principal terms of the Plan has been delivered to
Optionee. Should any conflict exist between the provisions of the Plan, as
amended from time to time and as described in such Prospectus, and those of this
Agreement, the provisions of the Plan shall govern and control. This agreement
and the Plan comprise the entire understanding between the Company and Optionee
with respect to the Option and shall be construed and enforced under the Laws of
the State of Washington.
13. OPTIONS IN EXCESS OF ANNUAL LIMIT.
---------------------------------
The aggregate fair market value (determined at the date of grant) of the
share of common stock with respect to which Incentive Stock Options are
exercisable for the first time by Optionee during any calendar year (granted
under the Plan and any other Incentive Stock Options plans (within the meaning
of Section 422 of the Code) of the Company, related corporations or a
predecessor corporation) shall not exceed $100,000, or such other limit as may
be prescribed by the Code as it may be amended from time to time. Any portion
of the Option which exceeds Optionee's annual limit shall not be void but rather
shall automatically be deemed Nonstatutory stock options (i.e. stock options
that do not qualify under Section 422 of the Code).
CELL THERAPEUTICS, INC.
COMPANY
BY:
-------------------------------------
ITS:
------------------------------------
OPTIONEE
BY:
-------------------------------------
firstname~ name~
Social Security No.
---------------------
5
<PAGE>
EXHIBIT "A"
NOTICE OF ELECTION TO EXERCISE
------------------------------
This Notice of Election to Exercise shall constitute proper notice pursuant
to Section 6(g) of the Cell Therapeutics, Inc. 1994 Equity Incentive Plan (the
"Plan") and Section 7 of that certain Incentive Stock Option Agreement (the
"Agreement") dated as of between Cell Therapeutics, Inc.
--------------------
(the "Company") and the undersigned.
The undersigned hereby elects to purchase shares of
-----------------------
the Company's Common Stock (the "Purchased Shares"), at a purchase price of
$ per share, for aggregate consideration of $ (the
-------- ------------------
"Aggregate Exercise Price"), pursuant to that certain option granted to the
undersigned under the Agreement and in accordance with the terms and conditions
set forth in the Agreement and the Plan. Such Aggregate Exercise Price, in the
form specified in Section 7 of the Agreement, accompanies this Notice.
Alternatively, the undersigned may utilize the special broker-dealer sale and
remittance procedure specified in Section 7 of the Agreement to effect payment
of the Aggregate Exercise Price. The undersigned desires to complete this
transaction on the following date: .
----------------------
The undersigned has executed this Notice this day of
. ------
- --------------------------
---------------------------------------
firstname~ name~
---------------------------------------
Social Security Number
6
