SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
Under the Securities Exchange Act of 1934
(Amendment No. ________)*
Virus Research Institute, Inc.
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(Name of Issuer)
Common Stock, $.001 par value per share
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(Title of Class of Securities)
927920108
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(CUSIP Number)
Norman W. Gorin
Chief Financial Officer
T Cell Science, Inc.
119 Fourth Avenue
Needham, MA 02194
(781) 433-0771
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(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
May 12, 1998
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [_].
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
(Continued on the following pages)
(Page 1 of 5 Pages)
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*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 or otherwise subject to the liabilities of that section of the Act but
shall be subject to all other provisions of the Act (however, see the Notes).
SCHEDULE 13D
|-----------------------| |--------------------------|
|CUSIP No 92720108 | | Page 2 of 5 Pages |
|-----------------------| |--------------------------|
|----------------------------------------------------------------------------|
| 1 | NAME OF REPORTING PERSONS |
| | S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS |
| | |
| | T Cell Sciences, Inc. IRS No. 133191702 |
|---------|------------------------------------------------------------------|
| 2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] |
| | (b) [ ] |
|---------|------------------------------------------------------------------|
| 3 | SEC USE ONLY |
| | |
|---------|------------------------------------------------------------------|
| 4 | SOURCE OF FUNDS* |
| | |
| | 00 |
|---------|------------------------------------------------------------------|
| 5 | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED |
| | PURSUANT TO ITEMS 2(d) or 2(e) [ ] |
|---------|------------------------------------------------------------------|
| 6 | CITIZENSHIP OR PLACE OF ORGANIZATION |
| | |
| | State of Delaware |
|----------------|-----|-----------------------------------------------------|
| | 7 | SOLE VOTING POWER |
| | | See response to Item 5 |
| NUMBER OF |-----|-----------------------------------------------------|
| SHARES | 8 | SHARED VOTING POWER |
| BENEFICIALLY | | See response to Item 5 |
| OWNED BY EACH |-----|-----------------------------------------------------|
| REPORTING | 9 | SOLE DISPOSITIVE POWER |
| PERSON | | 0 |
| WITH |-----|-----------------------------------------------------|
| | 10 | SHARED DISPOSITIVE POWER |
| | | 0 |
|----------------------------------------------------------------------------|
| 11 | AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON |
| | |
| | See response to Item 5 |
|---------|------------------------------------------------------------------|
| 12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) |
| | EXCLUDES CERTAIN SHARES* [ ] |
| | |
|---------|------------------------------------------------------------------|
| 13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) |
| | |
| | 34.4% |
|---------|------------------------------------------------------------------|
| 14 | TYPE OF REPORTING PERSON * |
| | |
| | CO |
|----------------------------------------------------------------------------|
*SEE INSTRUCTIONS BEFORE FILLING OUT.
2
CUSIP NO. 927920108 Page 3 of 5
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ITEM 1. SECURITY AND ISSUER.
This statement relates to the common stock, $.001 par value per share (the
"Common Stock"), of Virus Research Institute, Inc. (the "Issuer"), a Delaware
corporation with its principal executive offices at 61 Moulton Street,
Cambridge, MA 02138.
ITEM 2. IDENTITY AND BACKGROUND.
The address of the principal office and the principal business of T Cell
Sciences, Inc., a Delaware corporation ("T Cell"), is 119 Fourth Avenue,
Needham, MA 02194. T Cell is a biopharmaceutical company whose principal
business is the research and development of innovative drugs using novel
applications of immunology to prevent and treat cardiovascular, pulmonary and
immune disorders.
During the last five years, neither T Cell nor, to the knowledge of T Cell,
any executive officer or director of T Cell (i) has been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or (ii) was a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
Attached hereto as Schedule I is a list of the directors and executive
officers of T Cell which contains the following information with respect to each
such person:
(a) name;
(b) business address; and
(c) present principal occupation or employment and the name, principal
business and address of any corporation or other organization in which
such employment is conducted.
To the knowledge of T Cell, each person identified in Schedule I hereto is
a United States citizen.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
As described in Item 5 below, T Cell has been given a proxy with respect
to, but has not purchased, shares of Common Stock of the Issuer. T Cell has not
expended any funds in connection therewith.
ITEM 4. PURPOSE OF TRANSACTION.
On May 12, 1998, T Cell, TC Merger Corp. (the "Acquisition Subsidiary") and
the Issuer entered into an Agreement and Plan of Merger (the "Merger Agreement")
pursuant to which Acquisition Subsidiary, a wholly-owned subsidiary of T Cell,
will merge with and into Issuer (the "Merger"), with Issuer surviving the Merger
as a wholly-owned subsidiary of T Cell. As an inducement to T Cell to enter into
the Merger Agreement, the Issuer and certain stockholders of the Issuer (the
"Stockholders") each entered into a proxy agreement with T Cell dated as of May
12, 1998 (collectively, the "Proxy Agreements") pursuant to which, among other
things, each Stockholder appointed T Cell his or its proxy to vote certain
shares of Common Stock held by such Stockholder with respect to certain matters
relating to the Merger, as more fully described in Item 5 below.
Except as set forth above or in Item 5, T Cell does not have any plans or
proposals concerning the Issuer with respect to the matters set forth in
subparagraphs (a) through (j) of Item 4 of this Schedule.
ITEM 5. INTEREST IN SECURITIES OF ISSUER.
Pursuant to the Proxy Agreements, each of the Stockholders appointed T Cell
his or its proxy to vote the shares of Common Stock held by each such
Stockholder, respectively, with respect to certain matters relating to the
Merger. As of May 12, 1998, the Stockholders owned an aggregate of 3,106,600
shares of Common Stock and the proxy given to T Cell applied to all of such
shares.
The proxies described above generally give T Cell the right to vote the
shares of Common Stock to which they apply (i) in favor of the adoption of the
Merger Agreement and approval of the Merger and the other transactions
contemplated by the Merger Agreement, (ii) against (x) any Acquisition Proposal,
as that term is defined in the Merger Agreement, and any proposal for any action
or agreement that would result in a breach of any covenant, representation or
warranty or any other obligation or agreement of the Issuer under the Merger
3
CUSIP NO. 927920108 Page 4 of 5
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Agreement or which could result in any of the conditions of the Issuer's
obligations under the Merger Agreement not being fulfilled and (y) any change in
the directors of the Issuer, any change in the present capitalization of the
Issuer or any amendment to the Issuer's certificate of incorporation or bylaws,
any other material change in the Issuer's corporate structure or business, or
any other action which in the case of each of the matters referred to in this
clause (ii) could reasonably be expected to impede, interfere with, delay,
postpone or adversely affect the transactions contemplated by the Merger
Agreement or the likelihood of such transactions being consummated, and (iii) in
favor of any other matter necessary for consummation of the transactions
contemplated by the Merger Agreement which is considered at any such meeting of
stockholders or in such consent.
Except as described above, neither T Cell nor, to the knowledge of T Cell,
any person named in Schedule I beneficially owns any shares of Common Stock or
has effected any transactions in Common Stock during the past 60 days.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
SECURITIES OF THE ISSUER.
The information set forth under Items 4 and 5 above and the Exhibits
attached hereto are incorporated herein by reference.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
The following documents are filed as exhibits to this statement:
Exhibit 1. Proxy Agreement, dated as of May 12, 1998, among T Cell,
Acquisition Subsidiary, and HealthCare Ventures II, L.P.
Exhibit 2. Agreement and Plan of Merger by and among T Cell Sciences, Inc.,
TC Merger Corp. and Virus Research Institute, Inc., dated as of May 12, 1998.
Including the Proxy Agreement filed herewith as Exhibit 1, a total of eight
Proxy Agreements were entered into by T Cell and certain stockholders of VRI on
May 12, 1998. All such Proxy Agreements are identical in all material respects
except (i) as to the parties thereto and the amount of Common Stock as to which
T Cell is appointed proxy and (ii) to the extent that certain of the Proxy
Agreements set forth information concerning beneficial ownership of VRI Common
Stock by the respective parties to the Proxy Agreements in schedules thereto.
Schedule II to this Schedule 13D sets forth the names of the parties and the
amount of Common Stock as to which T Cell is appointed proxy for each of the
Proxy Agreements and the information set forth in the schedules to the
applicable Proxy Agreements.
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CUSIP NO. 927920108 Page 5 of 5
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: May 21, 1998 By: /s/ Norman W. Gorin
--------------------------------
Norman W. Gorin, Vice President, Finance
and Chief Financial Officer
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SCHEDULE I (to Schedule 13D)
The name and present principal occupation or employment of each executive
officer and Director of T Cell is set forth below. Unless otherwise indicated,
the business address of each person is set forth below and the address of the
corporation or organization in which such employment is conducted is the same as
his business address. All of the persons listed below are U.S. citizens. No
person is a controlling shareholder of T Cell.
DIRECTORS
Una S. Ryan. Dr. Ryan has been the President and Chief Executive Officer of
T Cell since August 1996. Dr. Ryan's business address is T Cell Sciences, Inc.,
119 Fourth Avenue, Needham, MA 02194.
Patrick C. Kung. Dr. Kung has been President of Global Pharma Ltd., a
biopharmaceutical company, since June 1994. Dr. Kung's home address, and the
address at which his principal employment is conducted, is 5 Joseph Comee Road,
Lexington, MA 02173.
Thomas R. Ostermueller. Mr. Ostermueller has been a management consultant
with A.T. Kearney, Inc., a management consulting firm, since March 1998. Mr.
Ostermueller's business address is A.T. Kearney, Inc., 153 East 53rd Street, New
York, NY, 10022.
Harry H. Penner, Jr. Mr. Penner has been President and Chief Executive
Officer of Neurogen Corporation, a biopharmaceutical company, since December
1993. Mr. Penner's business address is Neurogen Corporation, 35 Northeast
Industrial Road, Branford, CT 06405.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Norman W. Gorin. Mr. Gorin has been Vice President, Finance and Chief
Financial Officer of T Cell since May 1996. Mr. Gorin's business address is T
Cell Sciences, Inc., 119 Fourth Avenue, Needham, MA 02194.
James L. Levin. Dr. Levin has been Director of Pharmaceutical Evaluation of
T Cell since April 1992 and Vice President of Development of that company since
December 1995. Dr. Levin's business address is T Cell Sciences, Inc., 119 Fourth
Avenue, Needham, MA 02194.
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EXHIBIT 1 (to Schedule 13D)
PROXY AGREEMENT
PROXY AGREEMENT, dated as of May 12, 1998 (this "Agreement"), among T Cell
Sciences, Inc., a Delaware corporation ("T Cell"), TC Merger Corp., a Delaware
corporation and wholly owned subsidiary of T Cell ("Acquisition Sub"), and
HealthCare Ventures II, L.P. (the "Stockholder").
WHEREAS, as of the date hereof the Stockholder has the right to vote
1,324,975 shares of common stock, par value $.001 per share, of Virus Research
Institute, Inc. (the "VRI Common Stock") (all such shares and any shares of VRI
Common Stock hereafter acquired by the Stockholder prior to the termination of
this Agreement being referred to herein as the "Shares") and no other voting
securities of VRI; and
WHEREAS, T Cell, Acquisition Sub and VRI are entering into an Agreement and
Plan of Merger, dated as of the date hereof (as the same may be amended from
time to time, the "Merger Agreement"), which provides, upon the terms and
subject to the conditions thereof, for the merger of Acquisition Sub with and
into VRI (the "Merger"); and
WHEREAS, as a condition to the willingness of T Cell and Acquisition Sub to
enter into the Merger Agreement, T Cell and Acquisition Sub have requested that
the Stockholder agree, and, in order to induce T Cell and Acquisition Sub to
enter into the Merger Agreement the Stockholder is willing to agree, to grant T
Cell an irrevocable proxy to vote the Shares pursuant to the terms and
conditions hereof; and
NOW, THEREFORE, in consideration of the promises and of the mutual
agreements and covenants set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
ARTICLE I
REPRESENTATIONS AND WARRANTIES
The Stockholder hereby represents and warrants to T Cell and Acquisition
Sub as follows:
SECTION 1.01. Due Authority. The Stockholder has full power, corporate or
otherwise, and authority to execute and deliver this Agreement and to perform
his or its obligations hereunder. This Agreement has been duly executed and
delivered by or on behalf of the Stockholder and, assuming its due
authorization, execution and delivery by T Cell and Acquisition Sub, constitutes
a legal, valid and binding obligation of the Stockholder, enforceable against
the Stockholder in accordance with its terms.
SECTION 1.02. No Conflict; Consents.
(a) The execution and delivery of this Agreement by the Stockholder do
not, and the performance by the Stockholder of his or its obligations under this
Agreement and the compliance by the Stockholder with any provisions hereof do
not, conflict with or violate any law, statute, rule, regulation, order, writ,
judgment or decree applicable to the Stockholder or the Stockholder's Shares, or
result in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or encumbrance on any of the Stockholder's Shares
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which the
Stockholder is a party or by which the Stockholder or the Stockholder's Shares
are bound, except to the extent that such conflict, violation, breach or default
does not have a material adverse effect on the property or business of the
Stockholder.
(b) The execution and delivery of this Agreement by the Stockholder do
not, and the performance of this Agreement by the Stockholder will not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority by the Stockholder
except for applicable requirements, if any, of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act") and except where the
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not reasonably be expected to prevent
or delay the performance by the Stockholder of his or its obligations under this
Agreement in any material respect.
7
(c) Except as set forth in Schedule A to this Agreement or pursuant to
this Agreement, no other person or entity has any right directly or indirectly
to vote or control or affect the voting of the Shares.
SECTION 1.03. Title to Shares.
(a) Except as set forth in Schedule A to this Agreement or pursuant to
this Agreement, the Stockholder is the record or beneficial owner of the Shares
(or in any event, has the full and complete right to vote, acting alone) free
and clear of any proxy or voting restriction. The Shares constitute all of the
voting securities of VRI owned of record or beneficially by the Stockholder.
(b) Except as set forth in Schedule A to this Agreement or pursuant to
this Agreement, the Stockholder has, and during the Proxy Term (as hereinafter
defined) will have (except as a result of transfers permitted by Section 2.01),
sole power of disposition with respect to all of his or its Shares, and the sole
voting power with respect to the matters set forth in Article II hereof with
respect to all of his or its Shares.
SECTION 1.04. No Encumbrances. Except as set forth in Schedule A or
pursuant to this Agreement to this Agreement, the Shares and the certificates
representing the Shares are now held by the Stockholder, or by a nominee or
custodian for the benefit of the Stockholder, free and clear of all proxies,
voting trusts and voting agreements, understandings or arrangements providing
for any right on the part of any person other than the Stockholder to vote the
Shares free and clear of all liens, claims, security interests and any other
encumbrances whatsoever except any such encumbrances or proxies arising under
this Agreement.
SECTION 1.05. Acknowledgment of Reliance. The Stockholder understands and
acknowledges that T Cell and Acquisition Sub are entering into the Merger
Agreement in reliance upon the Stockholder's execution and delivery of this
Agreement and the accuracy of the Stockholder's representations and warranties
herein.
SECTION 1.06. Brokers. Neither T Cell nor Acquisition Sub shall be
obligated or otherwise liable for any broker's, finder's, financial adviser's or
other similar fee or commission in connection with the transactions contemplated
hereby based upon arrangements made by or on behalf of the Stockholder.
T Cell and Acquisition Sub hereby represent and warrant to the Stockholder
as follows:
SECTION 1.07. Due Authority. T Cell and Acquisition Sub have full power,
corporate or otherwise, and authority to execute and deliver this Agreement and
to perform their obligations hereunder. This Agreement has been duly executed
and delivered by or on behalf of T Cell and Acquisition Sub and assuming their
due authorization, execution and delivery by each Stockholder and VRI,
constitutes a legal, valid and binding obligation of T Cell and Acquisition Sub,
enforceable against T Cell and Acquisition Sub in accordance with its terms.
SECTION 1.08. No Conflict; Consents.
(a) The execution and delivery of this Agreement by T Cell and
Acquisition Sub do not, and the performance by T Cell and Acquisition Sub of the
obligations contemplated by this Agreement and the compliance by T Cell and
Acquisition Sub with any provisions hereof do not and will not, (i) conflict
with or violate any law, statute, rule, regulation, order, writ, judgment or
decree applicable to T Cell or Acquisition Sub, (ii) conflict with or violate
the charter or bylaws of T Cell or Acquisition Sub or (iii) result in any breach
of or constitute a default (or an event that with notice or lapse of time or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which T Cell or Acquisition Sub is a party or by which either of
them is bound, except to the extent that such conflict, violation, breach or
default does not have a material adverse effect on the property or businesses of
T Cell or Acquisition Sub.
(b) The execution and delivery of this Agreement by T Cell and
Acquisition Sub do not, and the performance of this Agreement by T Cell and
Acquisition Sub will not, require any consent, approval, authorization or permit
of, or filing with or notification to, any governmental or regulatory authority
by T Cell or Acquisition Sub except for applicable requirements, if any, of the
Exchange Act and except where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
reasonably be expected to prevent or delay the performance by T Cell or
Acquisition Sub of their obligations under this Agreement in any material
respect.
SECTION 1.09. Brokers. The Stockholder shall not be obligated or otherwise
liable for any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated hereby based upon
arrangements made by T Cell or Acquisition Sub.
8
SECTION 1.10. Tax Matters. The Stockholder has, and as of the Effective
Date (as defined in the Merger Agreement) will have, no plan or intent (a
"Plan"), and is not aware of any Plan on the part of other VRI stockholders, to
engage in a sale, exchange, transfer, pledge, disposition, or any other
transaction that results in a direct or indirect transfer of the risk of
ownership (a "Sale") of any shares of VRI Common Stock (other than pursuant to
the Merger) or of any of the shares of T Cell Common Stock that will be received
in the Merger to either VRI or T Cell, or any person related to either VRI or T
Cell. For purposes of this section, the determination of whether a person is
related to T Cell and/or VRI shall be made in accordance with Treasury
Regulation Section 1.368-1(e)(3). If any of the Stockholder's representations in
this section cease to be true at any time prior to the Effective Time, then the
Stockholder will deliver to each of T Cell and VRI, prior to the Effective Time,
a written statement to that effect, signed by the Stockholder.
ARTICLE II
CERTAIN COVENANTS OF THE STOCKHOLDER
The Stockholder hereby covenants and agrees with T Cell and Acquisition Sub
as follows:
SECTION 2.01. Transfer of Shares. Except as otherwise provided herein,
during the Proxy Term (as hereinafter defined) the Stockholder shall not (a)
sell, tender, transfer, pledge, encumber, assign or otherwise dispose of any of
the Shares, (b) deposit the Shares into a voting trust or enter into a voting
agreement or arrangement with respect to the Shares or grant any proxy or power
of attorney with respect thereto, (c) enter into any contract, option or other
arrangement or undertaking with respect to the direct or indirect sale,
transfer, pledge, encumbrance, assignment or other disposition of any voting
securities of VRI, or (d) take any action that would make any representation or
warranty of the Stockholder contained herein untrue or incorrect or have the
effect of preventing or disabling the Stockholder from performing the
Stockholder's obligations under this Agreement; provided, however, that the
Stockholder may transfer or pledge any of the Shares to a person or entity with
prior written consent of T Cell and Acquisition Sub, which consent shall not be
unreasonably withheld, it being understood that withholding consent shall not be
unreasonable if, without limitation, T Cell and Acquisition Sub determine such
transfer or pledge may eliminate or reduce in any manner the certainty or
likelihood of the Shares being voted as contemplated by this Agreement for any
reason, including without limitation the financial condition, identity or
location of the transferee or pledgee, any applicable legal restrictions or any
other reason; provided further that no such transfer or pledge shall be made
unless prior thereto the proposed transferee or pledgee shall have entered into
a written agreement with T Cell and Acquisition Sub, containing terms and
conditions reasonably satisfactory to T Cell and Acquisition Sub, in which such
transferee or pledgee shall agree to be bound by all the terms and conditions of
this Agreement.
SECTION 2.02. Voting of Shares; Further Assurances.
(a) The Stockholder, by this Agreement, with respect to those Shares
that the Stockholder owns of record, does hereby constitute and appoint T Cell,
or any nominee of T Cell, with full power of substitution, during and for the
Proxy Term (as hereinafter defined), as the Stockholder's true and lawful
attorney and irrevocable proxy, for and in the Stockholder's name, place and
stead, to vote each of such Shares as the Stockholder's proxy, at every meeting
of the stockholders of VRI or any adjournment thereof or in connection with any
written consent of VRI's stockholders, (i) in favor of the adoption of the
Merger Agreement and approval of the Merger and the other transactions
contemplated by the Merger Agreement, (ii) against (x) any Acquisition Proposal,
as that term is defined in the Merger Agreement, and any proposal for any action
or agreement that would result in a breach of any covenant, representation or
warranty or any other obligation or agreement of VRI under the Merger Agreement
or which could result in any of the conditions of VRI's obligations under the
Merger Agreement not being fulfilled and (y) any change in the directors of VRI,
any change in the present capitalization of VRI or any amendment to VRI's
certificate of incorporation or bylaws, any other material change in VRI's
corporate structure or business, or any other action which in the case of each
of the matters referred to in this clause (ii) could reasonably be expected to
impede, interfere with, delay, postpone or adversely affect the transactions
contemplated by the Merger Agreement or the likelihood of such transactions
being consummated, and (iii) in favor of any other matter necessary for
consummation of the transactions contemplated by the Merger Agreement which is
considered at any such meeting of stockholders or in such consent. The
Stockholder further agrees to cause the Shares owned by the Stockholder
beneficially to be voted in accordance with the foregoing. The Stockholder
intends this proxy to be irrevocable and coupled with an interest during the
Proxy Term (as hereinafter defined) and hereby revokes any proxy previously
granted by the Stockholder with respect to the Shares.
(b) The Stockholder hereby further agrees, with respect to any Shares
not voted pursuant to paragraph (a) above, that during the Proxy Term (as
hereinafter defined), at any meeting of stockholders of VRI, however called, or
in connection with any written consent of VRI's stockholders, the Stockholder
shall vote (or
9
cause to be voted) the Shares held of record or beneficially by the Stockholder,
except as specifically requested in writing by T Cell in advance, (i) in favor
of the adoption of the Merger Agreement and approval of the Merger and the other
transactions contemplated by the Merger Agreement, (ii) against (x) any
Acquisition Proposal, as that term is defined in the Merger Agreement, and any
proposal for any action or agreement that would result in a breach of any
covenant, representation or warranty or any other obligation or agreement of VRI
under the Merger Agreement or which could result in any of the conditions of
VRI's obligations under the Merger Agreement not being fulfilled or (y) any
change in the directors of VRI, any change in the present capitalization of VRI
or any amendment to VRI's certificate of incorporation or bylaws, any other
material change in VRI's corporate structure or business, or any other action
which in the case of each of the matters referred to in this clause (ii) could
reasonably be expected to, impede, interfere with, delay, postpone or adversely
affect the transactions contemplated by the Merger Agreement or the likelihood
of such transactions being consummated, and (iii) in favor of any other matter
necessary for consummation of the transactions contemplated by the Merger
Agreement which is considered at any such meeting of stockholders or in such
consent, and in connection therewith to execute any documents which are
necessary or appropriate in order to effectuate the foregoing.
(c) The Stockholder further agrees, with respect to any voting
securities of T Cell, held of record or beneficially by the Stockholder that
during the Proxy Term (as hereinafter defined), at any meeting of stockholders
of T Cell, however called, or in connection with any written consent of T Cell's
stockholders, the Stockholder shall vote (or cause to be voted) and cause its
affiliates to vote (or cause to be voted) such voting securities of T Cell (i)
in favor of the issuance of the T Cell Common Stock and the T Cell Warrants
(each as defined in the Merger Agreement) and any other matter necessary for
consummation of the transactions contemplated by the Merger Agreement which is
considered at any such meeting of stockholders or in such consent and (ii)
against any matter which could reasonably be expected to, impede, interfere
with, delay, postpone or adversely affect the transactions contemplated by the
Merger Agreement or the likelihood of such transactions being consummated.
(d) For the purposes of this Agreement, "Proxy Term" shall mean the
period from the execution of this Agreement until the earliest of (x) the
Effective Time and (y) the termination of the Merger Agreement.
(e) The Stockholder agrees that the Stockholder will not enter into any
agreement or understanding with any person or entity or take any action during
the Proxy Term which will permit any person or entity to vote or give
instructions to vote the Shares in any manner inconsistent with the terms of
this Section 2.02. The Stockholder further agrees to take such further action
and execute such other instruments as may be necessary to effectuate the intent
of this Agreement, including without limitation, any number of proxies and other
documents permitting T Cell to vote the Shares or to direct the record owners
thereof to vote the Shares in accordance with this Agreement.
SECTION 2.03. Certain Events. The Stockholder agrees that this Agreement
and the obligations hereunder shall attach to the Stockholder's Shares and shall
be binding upon any person or entity to which legal or beneficial ownership of
the Shares shall pass, whether by operation of law or otherwise, including
without limitation, if applicable, the Stockholder's heirs, guardians,
administrators or successors.
SECTION 2.04. No Solicitation. During the Proxy Term, the Stockholder in
his or its capacity as such shall not, nor shall it authorize any partner,
officer, director, advisor or representative of the Stockholder in his or its
capacity as such to, (i) solicit, initiate or knowingly encourage the submission
of, any inquiries, proposals or offers from any person relating to an
Acquisition Proposal, (ii) enter into any agreement with respect to any
Acquisition Proposal, or (iii) knowingly enter into or participate in any
discussions or negotiations regarding, or knowingly furnish to any person any
information with respect to, or take any other action to knowingly facilitate
any inquiries or the making of any proposal that constitutes, or would
reasonably be expected to lead to, an Acquisition Proposal.
SECTION 2.05. Stop Transfer. The Stockholder agrees with, and covenants to,
T Cell and Acquisition Sub that the Stockholder shall not request that VRI
register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of the Stockholder's Shares, unless
such transfer is made in compliance with this Agreement.
SECTION 2.06. Rule 145 Restrictions on Transfer. The Stockholder has been
advised that the issuance of shares of T Cell Common Stock and the T Cell
Warrants in the Merger has been registered with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Securities Act"),
on a Registration Statement on Form S-4. However, the Stockholder has also been
advised that, since at the time the Merger is submitted for a vote of the VRI
stockholders the Stockholder is expected to be an "affiliate" of VRI (although
nothing contained herein should be construed as an admission of such fact), as
that term is used in Rule 145(c) promulgated under the Securities Act ("Rule
145"), the shares of T Cell Common Stock and the T Cell Warrants
10
may be offered for sale, sold, assigned, transferred, distributed or otherwise
disposed of (any of such transactions being referred to hereinafter as a "sale")
by the Stockholder only if (i) the Stockholder sells such shares or warrants in
conformity with paragraph (d) of Rule 145, (ii) any subsequent sale of such
shares or warrants by the Stockholder has been registered under the Securities
Act, or (iii) in the opinion of counsel, reasonably satisfactory to T Cell, some
other exemption from registration under the Securities Act is available with
respect to any sale of such shares or warrants.
The Stockholder will not sell the shares of T Cell Common Stock or the T
Cell Warrants received by him or it in the Merger except pursuant to the
provisions of Rule 145, an effective registration statement or an exemption from
registration under the Securities Act.
In the event that the Stockholder intends to sell shares of T Cell Common
Stock or T Cell Warrants other than (i) pursuant to Rule 145 or (ii) pursuant to
an effective registration statement under the Securities Act, at least two
business days prior to effecting any such sale the Stockholder will furnish T
Cell with an opinion of counsel, reasonably satisfactory to T Cell (the "Legal
Opinion"), to the effect that some other exemption from registration under the
Securities Act is available with respect to such sale.
The Stockholder understands that:
(a) T Cell may, within the one-year period immediately following the
Merger, instruct its transfer agent to withhold the transfer of any shares of T
Cell Common Stock by the Stockholder, but if the transfer is pursuant to an
effective registration statement under the Securities Act or Rule 145 or if T
Cell receives a Legal Opinion (in the case of a sale made pursuant to an
exemption from registration other than Rule 145) the transfer agent shall effect
such transfer; and
(b) T Cell shall be entitled to place a restrictive legend or legends
reflecting the restrictions upon sale described above on the certificates
evidencing any shares of T Cell Common Stock and any T Cell Warrants to be
received by the Stockholder in the Merger, provided, however, that such legends
shall only be inscribed on such certificates to the extent required by law and
after T Cell shall have received written advice of its counsel to that effect.
SECTION 2.07 Voluntary Restrictions on Transfer. The Stockholder hereby
agrees not to offer, sell, contract to sell, make any short sale, pledge, grant
any option to purchase or otherwise dispose, directly or indirectly, of any
shares of T Cell Common Stock or T Cell Warrants to be issued to it or him in
the Merger for a period of 90 days after the Effective Time without the prior
written consent of T Cell.
SECTION 2.08 Covenant of T Cell Regarding Availability of Rule 144 and 145.
T Cell agrees that for so long as and to the extent necessary to permit the
Stockholder to sell his or its shares of T Cell Common Stock or T Cell Warrants
pursuant to Rule 145 and, to the extent applicable, Rule 144 under the
Securities Act, T Cell shall file, on a timely basis, all reports and other
documents required to be filed with Securities and Exchange Commission (the
"SEC") by it pursuant to the Exchange Act and shall furnish to the Stockholder
upon request a written statement as to whether T Cell has complied with such
reporting requirements during the 12 months preceding any proposed sale under
Rule 145 and shall otherwise use its best efforts to permit such sales pursuant
to Rule 145 and Rule 144. T Cell has filed, on a timely basis, all reports
required to be filed with the SEC pursuant to the Exchange Act during the
preceding 12 months.
ARTICLE III
GENERAL PROVISIONS
SECTION 3.01. Severability. If any term or other provision of this
Agreement is determined by a court or other tribunal of competent jurisdiction
to be invalid, illegal or incapable of being enforced by any rule of law or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
SECTION 3.02. Entire Agreement. This Agreement constitutes the entire
agreement of the parties and supersedes all prior agreements and undertakings,
both written and oral, between the parties, or any of them, with respect to the
subject matter hereof.
11
SECTION 3.03. Amendments. This Agreement may not be modified, amended,
waived, altered or supplemented, except upon the execution and delivery of a
written agreement executed by the parties hereto; provided, however, that T Cell
or Acquisition Sub may in writing waive or consent to a modification of any
provision of this Agreement with respect to the Stockholder without the
agreement of any other party hereto.
SECTION 3.04. Assignment. This Agreement shall not be assigned by operation
of law or otherwise, except in accordance with Section 2.01.
SECTION 3.05. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
SECTION 3.06. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement is
not performed in accordance with the terms hereof or is otherwise breached. It
is accordingly agreed that the parties shall be entitled to specific relief
hereunder, including, without limitation, an injunction or injunctions to
prevent and enjoin breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions hereof, in any state or federal court in
the Commonwealth of Massachusetts, in addition to any other remedy to which they
may be entitled at law or in equity. Any requirements for the securing or
posting of any bond with respect to any such remedy are hereby waived.
SECTION 3.07. Governing Law; Jurisdiction and Venue. This Agreement shall
be governed by, and construed in accordance with, the internal laws of the State
of Delaware without regard to its rules of conflict of laws. The parties hereto
hereby irrevocably and unconditionally consent to and submit to the exclusive
jurisdiction of the courts of the Commonwealth of Massachusetts and of the
United States of America located in such commonwealth (the "Massachusetts
Courts") for any litigation arising out of or relating to this Agreement and the
transactions contemplated hereby (and agree not to commence any litigation
relating thereto except in such courts), waive any objection to the laying of
venue of any such litigation in the Massachusetts Courts and agree not to plead
or claim in any Massachusetts Court that such litigation brought therein has
been brought in any inconvenient forum.
SECTION 3.08. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 3.09. Definitions. Terms used in this Agreement and not otherwise
defined herein shall have the meanings set forth in the Merger Agreement.
SECTION 3.10. Directors and Officers. Notwithstanding anything herein to
the contrary, the covenants and agreements set forth herein shall not prevent
the Stockholder or its or his representatives or designees who are serving on
the Board of Directors of VRI or who are officers of VRI from taking any action,
subject to the applicable provisions of the Merger Agreement, while acting in
such capacity as a director or officer of VRI.
SECTION 3.11. No Agreement Until Executed. Irrespective of negotiations
among the parties or the exchanging of drafts of this Agreement, this Agreement
shall not constitute or be deemed to evidence a contract, agreement, arrangement
or understanding between the parties hereto unless and until (i) the Board of
Directors of VRI has approved, for purposes of Section 203 of the Delaware
General Corporation Law and any applicable provision of VRI's Certificate of
Incorporation, the Merger, (ii) the Merger Agreement is executed by all parties
thereto, and (iii) this Agreement is executed by all parties hereto.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
12
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first set forth above.
T CELL SCIENCES, INC.
By: /s/ Una S. Ryan
--------------------------------
Name: Una S. Ryan
Title: President and CEO
TC MERGER CORP.
By: /s/ Una S. Ryan
--------------------------------
Name: Una S. Ryan
Title: President and CEO
HEALTHCARE VENTURES II, L.P.
By: HealthCare Partners II, L.P., as
General Partner
By: /s/ John W. Littlechild
--------------------------------
Name: John W. Littlechild
Title: General Partner
13
(Schedule to HealthCare Ventures II, L.P. Proxy Agreement)
SCHEDULE A FOR HEALTHCARE VENTURES II, L.P.
Warrants to Purchase
Shares of VRI Shares of VRI
Common Stock Common Stock
Stockholder Owned of Record Owned of Record
- ----------- --------------- ---------------
HealthCare Ventures II, L.P.* 1,324,975 0
These shares may be deemed to be beneficially owned by HealthCare Partners II,
L.P., which is the general partner of HealthCare Ventures II, L.P. and by Harold
R. Werener, James H. Cavanaugh, Ph.D., John W. Littlechild and William Crouse,
who are the general partners of HealthCare Partners II, L.P. Each such person
has shared voting and dispositive power with respect to such shares. Each such
person disclaims beneficial ownership of such shares.
SCHEDULE II (to Schedule 13D)
Shares of VRI Warrants to Purchase
Common Stock Shares of VRI Common Stock
Name of Stockholder Owned of Record Owned of Record
- ------------------- --------------- ---------------
HEALTHCARE VENTURES II, L.P.1 1,324,975 0
HEALTHCARE VENTURES III, L.P.2 1,131,595 42,980
HEALTHCARE VENTURES IV, L.P.3 332,306 12,622
AXIOM VENTURE PARTNERS, L.P.4 229,644 _
J. Barrie Ward 23,080 _
William A. Packer 65,000 _
John W. Littlechild 0 _
Alan M. Mendelson 0 _
- --------
1 These shares may be deemed to be beneficially owned by HealthCare
Partners II, L.P., which is the general partner of HealthCare Ventures II, L.P.,
and by Harold R. Werner, James H. Cavanaugh, Ph.D., John W. Littlechild and
William Crouse, who are the general partners of HealthCare Partners II, L.P.
Each such person has shared voting and dispositive power with respect to such
shares. Each such person disclaims beneficial ownership of such shares.
2 These shares and warrants may be deemed to be beneficially owned by
HealthCare Partners III, L.P., which is the general partner of HealthCare
Ventures III, L.P., and by Harold R. Werner, James H. Cavanaugh, Ph.D., John W.
Littlechild, Mark Leschly and William Crouse, who are the general partners of
HealthCare Partners III, L.P. Each such person has shared voting and dispositive
power with respect to such shares and warrants. Each such person disclaims
beneficial ownership of such shares and warrants.
3 These shares and warrants may be deemed to be beneficially owned by
HealthCare Partners IV, L.P., which is the general partner of HealthCare
Ventures IV, L.P., and by Harold R. Werner, James H. Cavanaugh, Ph.D., John W.
Littlechild, Mark Leschly and William Crouse, who are the general partners of
HealthCare Partners IV, L.P. Each such person has shared voting and dispositive
power with respect to such shares and warrants. Each such person disclaims
beneficial ownership of such shares and warrants.
4 These shares may be voted by Alan M. Mendelson, who is the general
partner of Axiom Venture Partners, L.P.
1
Exhibit 2 (to Schedule 13D)
================================================================================
AGREEMENT AND PLAN OF MERGER
by and among
T CELL SCIENCES, INC.,
TC MERGER CORP.
and
VIRUS RESEARCH INSTITUTE, INC.
Dated as of May 12, 1998
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
----
ARTICLE 1. THE MERGER .................................................... 2
1.1 The Merger .................................................... 2
1.2 The Closing ................................................... 2
1.3 Effective Time ................................................ 2
1.4 Proxy Agreements .............................................. 2
ARTICLE 2. CERTIFICATE OF INCORPORATION AND BYLAWS OF THE
SURVIVING CORPORATION ......................................... 2
2.1 Charter ....................................................... 2
2.2 Bylaws ........................................................ 3
ARTICLE 3. DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION ........... 3
3.1 Directors of Surviving Corporation ............................ 3
3.2 Officers of Surviving Corporation ............................. 3
ARTICLE 4. EXCHANGE OF STOCK ............................................. 3
4.1 Outstanding Common Stock of Acquisition Sub ................... 3
4.2 Conversion of VRI Securities .................................. 3
4.3 Exchange of Certificates Representing VRI Common Stock ........ 6
4.4 Return of Exchange Fund ....................................... 8
4.5 Lost or Stolen Certificates ................................... 9
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF VRI ......................... 9
5.1 Existence; Good Standing; Authority ........................... 9
5.2 Authorization, Validity and Effect of Agreements .............. 10
5.3 Capitalization ................................................ 10
5.4 Subsidiaries .................................................. 11
5.5 Other Interests ............................................... 11
5.6 No Violation .................................................. 11
5.7 SEC Documents ................................................. 12
5.8 Financial Statements .......................................... 12
5.9 Litigation .................................................... 13
5.10 Absence of Certain Changes .................................... 13
5.11 Taxes ......................................................... 14
5.12 Books and Records ............................................. 15
5.13 Real Property ................................................. 15
5.14 Intellectual Property ......................................... 15
5.15 Compliance with Law; Permits; Environmental Matters ........... 16
5.16 Clinical Procedures ........................................... 17
5.17 Employee Matters .............................................. 18
5.18 Labor Matters ................................................. 18
5.19 No Brokers .................................................... 19
5.20 Opinion of Financial Advisor .................................. 19
(ii)
Page
5.21 Related Party Transactions ..................................... 19
5.22 Contracts and Commitments ...................................... 19
5.23 Insurance ...................................................... 19
5.24 Proxy Statement ................................................ 20
5.25 Acquisition Proposals .......................................... 20
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF T CELL AND
ACQUISITION SUB ................................................ 20
6.1 Existence; Good Standing; Authority ............................ 20
6.2 Authorization, Validity and Effect of Agreements ............... 21
6.3 Capitalization ................................................. 21
6.4 Subsidiaries ................................................... 22
6.5 Other Interests ................................................ 22
6.6 No Violation ................................................... 22
6.7 SEC Documents .................................................. 22
6.8 Financial Statements ........................................... 23
6.9 Litigation ..................................................... 23
6.10 Absence of Certain Changes ..................................... 24
6.11 Taxes .......................................................... 25
6.12 Real Property .................................................. 25
6.13 Intellectual Property .......................................... 26
6.14 Compliance with Law; Permits; Environmental Matters ............ 27
6.15 Clinical Procedures ............................................ 28
6.16 Employee Matters ............................................... 28
6.17 Labor Matters .................................................. 29
6.18 No Brokers ..................................................... 29
6.19 Opinion of Financial Advisor ................................... 29
6.20 Related Party Transactions ..................................... 29
6.21 Contracts and Commitments ...................................... 29
6.22 Insurance ...................................................... 29
6.23 Proxy Statement ................................................ 30
ARTICLE 7. COVENANTS ...................................................... 30
7.1 Acquisition Proposals .......................................... 30
7.2 Conduct of Businesses by T Cell and VRI ........................ 31
7.3 Meetings of Stockholders ....................................... 34
7.4 Reorganization ................................................. 34
7.5 Board of Directors ............................................. 34
7.6 Listing Application ............................................ 34
7.7 Filings; Other ................................................. 35
7.8 Access to Information .......................................... 35
7.9 Publicity ...................................................... 36
7.10 Proxy Statement; Registration Statements ....................... 36
7.11 Further Action ................................................. 37
(iii)
Page
7.12 Affiliates of VRI .............................................. 37
7.13 Expenses ....................................................... 38
7.14 Indemnification ................................................ 39
7.15 ........................................................... 40
ARTICLE 8. CONDITIONS ..................................................... 40
8.1 Conditions to Each Party's Obligation to Effect the Merger ..... 40
8.2 Conditions to Obligations of VRI to Effect the Merger .......... 42
8.3 Conditions to Obligation of T Cell and Acquisition Sub
to Effect the Merger .......................................... 43
ARTICLE 9. TERMINATION; AMENDMENT; WAIVER ................................. 43
9.1 Termination .................................................... 43
9.2 Effect of Termination .......................................... 45
9.3 Termination Fees and Expenses .................................. 45
9.4 Extension; Waiver .............................................. 46
ARTICLE 10. GENERAL PROVISIONS ............................................. 46
10.1 Nonsurvival of Representations, Warranties and Agreements ...... 46
10.2 Notices ........................................................ 46
10.3 Assignment; Binding Effect; Benefit ............................ 47
10.4 Entire Agreement ............................................... 48
10.5 Amendment ...................................................... 48
10.6 Governing Law .................................................. 48
10.7 Counterparts ................................................... 48
10.8 Headings ....................................................... 48
10.9 Interpretation ................................................. 48
10.10 Waivers ........................................................ 49
10.11 Incorporation .................................................. 49
10.12 Severability ................................................... 49
10.13 Enforcement of Agreement ....................................... 49
10.14 Certain Definitions ............................................ 49
Exhibit A -- Principal Stockholders ........................................ A-1
Exhibit B -- Common Stock Purchase Warrant Provisions ...................... B-1
(iv)
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), is made and entered
into as of May 12, 1998 by and among T Cell Sciences, Inc., a Delaware
corporation ("T Cell"), TC Merger Corp., a Delaware corporation and a
wholly-owned subsidiary of T Cell ("Acquisition Sub"), and Virus Research
Institute, Inc., a Delaware corporation ("VRI").
RECITALS
WHEREAS, the boards of directors of T Cell, Acquisition Sub and VRI have
each determined that it is advisable and in the best interests of their
respective stockholders to consummate, and have approved, the business
combination transaction provided for herein in which Acquisition Sub would merge
with and into VRI and VRI would become a wholly-owned subsidiary of T Cell (the
"Merger");
WHEREAS, the boards of directors of T Cell, Acquisition Sub and VRI have
determined that the Merger is in the best interests of their respective
companies and presents an opportunity for their respective companies to achieve
long-term strategic and financial benefits, and accordingly have agreed to
effect the transactions provided for herein upon the terms and subject to the
conditions set forth herein;
WHEREAS, contemporaneously with the execution of this Agreement, each of
the stockholders of VRI named on Exhibit A attached hereto (the "Principal
Stockholders") is entering into a separate agreement with T Cell and Acquisition
Sub pursuant to which such Principal Stockholder agrees to (i) grant T Cell an
irrevocable proxy to vote his, her or its shares of common stock, par value
$.001 per share, of VRI (the "VRI Common Stock"), and (ii) not offer, sell,
contract to sell, make any short sale, pledge, grant any option to purchase or
otherwise dispose of the T Cell Common Stock (as hereinafter defined) or T Cell
Warrants (as hereinafter defined) to be issued in the Merger by T Cell and
received by such Principal Stockholder for a period of 90 days after the
Effective Time (as hereinafter defined) (each a "Proxy Agreement");
WHEREAS, T Cell, Acquisition Sub and VRI desire to make certain
representations, warranties and agreements in connection with the Merger.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1. THE MERGER
1.1 The Merger. Subject to the terms and conditions of this Agreement, at
the Effective Time (as hereinafter defined), Acquisition Sub shall be merged
with and into VRI in accordance with this Agreement, and the separate corporate
existence of Acquisition Sub shall thereupon cease. VRI shall be the surviving
corporation in the Merger (sometimes hereinafter referred to as the "Surviving
Corporation"), subject to the provisions of Section 10.3(b) with respect to the
possible restructuring of the Merger into a Direct Acquisition (as defined in
Section 10.3(b)). The Merger shall have the effects specified in Section 259 of
the Delaware General Corporation Law (the "DGCL").
1.2 The Closing. Subject to the terms and conditions of this Agreement, the
closing of the Merger (the "Closing") shall take place at the offices of
Goodwin, Procter & Hoar LLP, Exchange Place, Boston, Massachusetts, at 9:00
a.m., local time, on the first business day following the day on which the last
of the conditions set forth in Article 8 shall be fulfilled or waived in
accordance herewith, or at such other time, date or place as the parties hereto
may agree. Unless the parties shall otherwise agree, and subject to the
satisfaction of the conditions set forth in the preceding sentence, the parties
shall use their reasonable best efforts to cause the Closing to occur as soon as
possible after the meetings of stockholders held pursuant to Section 7.3. The
date on which the Closing occurs is hereinafter referred to as the "Closing
Date."
1.3 Effective Time. If all of the conditions to the Merger set forth in
Article 8 shall have been fulfilled or waived in accordance herewith and this
Agreement shall not have been terminated as provided in Article 9, the parties
hereto shall promptly cause a certificate of merger satisfying the requirements
of the DGCL (the "Certificate of Merger") to be properly executed, verified and
delivered for filing in accordance with the DGCL on the Closing Date. The Merger
shall become effective upon the acceptance for record of the Certificate of
Merger by the Secretary of State of Delaware in accordance with the DGCL or at
such later time which the parties hereto shall have agreed upon and designated
in such filing in accordance with applicable law as the effective time of the
Merger (the "Effective Time").
1.4 Proxy Agreements. As an inducement to T Cell and Acquisition Sub to
enter into this Agreement, the Principal Stockholders are simultaneously with
the execution and delivery of this Agreement executing and delivering the Proxy
Agreements.
ARTICLE 2. CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING CORPORATION
2.1 Charter. Subject to Section 10.3(b), the certificate of incorporation
of VRI in effect immediately prior to the Effective Time (the "VRI Certificate")
shall be the certificate of incorporation of the Surviving Corporation, until
duly amended in accordance with applicable law (the "Surviving Corporation
Certificate").
2
2.2 Bylaws. Subject to Section 10.3(b), the bylaws of VRI in effect
immediately prior to the Effective Time (the "VRI Bylaws") shall be the bylaws
of the Surviving Corporation, until duly amended in accordance with applicable
law (the "Surviving Corporation Bylaws").
ARTICLE 3. DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION
3.1 Directors of Surviving Corporation. Subject to Section 10.3(b), the
director or directors of Acquisition Sub immediately prior to the Effective Time
shall be the director or directors of the Surviving Corporation immediately
after the Effective Time until his, her or their successors shall have been duly
elected or appointed and qualified or until his, her or their earlier death,
resignation or removal in accordance with the Surviving Corporation Certificate
and the Surviving Corporation Bylaws.
3.2 Officers of Surviving Corporation. The officers of the Surviving
Corporation immediately after the Effective Time shall be as set forth in the
Certificate of Merger.
ARTICLE 4. EXCHANGE OF STOCK
4.1 Outstanding Common Stock of Acquisition Sub. At and after the Effective
Time, each share of common stock of Acquisition Sub outstanding immediately
prior to the Effective Time shall be converted into and become one share of the
common stock of the Surviving Corporation.
4.2 Conversion of VRI Securities.
(a) At the Effective Time, each share of VRI Common Stock issued and
outstanding immediately prior to the Effective Time (other than those shares of
VRI Common Stock to be canceled pursuant to Section 4.2(c)) shall, by virtue of
the Merger and without any action on the part of VRI, T Cell or Acquisition Sub
or the holders of any of the securities of any of such corporations, be
converted into the right to receive the following (the "Merger Consideration"):
(i) 1.55 shares (the "Common Stock Exchange Ratio") of common stock,
par value $.001, of T Cell ("T Cell Common Stock") and the associated
rights to purchase shares of T Cell Class C-1 Junior Participating
Cumulative Preferred Stock, par value $0.01 per share, pursuant to the
Rights Agreement (the "Rights Agreement") dated November 10, 1994
between T Cell and State Street Bank & Trust Company, as Rights Agent,
as amended (the "Preferred Stock Rights").
(ii) 0.20 of a warrant (the "Warrant Exchange Ratio") to purchase one
share of T Cell Common Stock (a "T Cell Warrant" and collectively, the
"T Cell Warrants"), each such T Cell Warrant to be issued in accordance
with the Common Stock Purchase Warrant Provisions attached hereto as
Exhibit B. Subject to the applicable limitations under the Securities
Act of 1933, as amended, and the rules and regulations thereunder
3
(the "Securities Act"), T Cell shall file a Registration Statement on
the appropriate form prescribed by the Securities and Exchange
Commission (the "SEC") covering the continuous offering and sale to the
holders of T Cell Warrants of the shares of T Cell Common Stock
purchasable upon exercise thereof (the "New Warrants Shelf"). T Cell
shall use its reasonable best efforts to file the New Warrants Shelf as
soon as practicable and in any event not later than the filing of the
Form S-4 (as defined in Section 7.10 hereof), to cause the SEC to
declare such registration statement effective on or prior to the
Effective Time or as soon thereafter as practicable, and to maintain
the effectiveness of the New Warrants Shelf (and maintain the current
status of the prospectus included therein) until all T Cell Warrants
have been exercised or have terminated in accordance with their terms.
(b) As a result of the Merger and without any action on the part of the
holders thereof, all shares of VRI Common Stock shall cease to be outstanding,
shall be canceled and retired and shall cease to exist and each holder of a
certificate (a "Certificate" and, collectively, the "Certificates") representing
any shares of VRI Common Stock (other than those shares of VRI Common Stock to
be canceled pursuant to Section 4.2(c) hereof) shall thereafter cease to have
any rights with respect to such shares of VRI Common Stock, except, where
applicable, the right to receive, without interest, the Merger Consideration in
accordance with Sections 4.2(a) and 4.3(e) and dividend(s) payable in accordance
with Section 4.3(c), upon the surrender of such Certificate.
(c) Each share of VRI Common Stock issued and held in VRI's treasury or
owned by T Cell or Acquisition Sub immediately prior to the Effective Time, if
any, by virtue of the Merger shall cease to be outstanding, shall be canceled
and retired and shall cease to exist and no payment of any consideration shall
be made with respect thereto.
(d) At the Effective Time, T Cell will assume the obligations of the
Company under VRI's 1992 Equity Incentive Plan (the "VRI Stock Option Plan") and
each outstanding option to purchase VRI Common Stock (a "VRI Stock Option")
granted under the VRI Stock Option Plan, whether vested or unvested, shall be
deemed assumed by T Cell and deemed to constitute an option to acquire, on the
same terms and conditions as were applicable under such VRI Stock Option prior
to the Effective Time the following: (i) with respect to each VRI Stock Option
that qualifies as an incentive stock option within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code") (a "VRI ISO") that
number of whole shares of T Cell Common Stock (plus the associated Preferred
Stock Rights, if applicable to shares of T Cell Common Stock in general at the
time) equal to the product of the number of shares of VRI Common Stock covered
by such VRI ISO immediately prior to the Effective Time multiplied by the Common
Stock Exchange Ratio (rounded down to the nearest whole number of shares of T
Cell Common Stock), and (ii) with respect to each VRI Stock Option that does not
qualify as a VRI ISO (a "VRI NQSO") (X) that number of whole shares of T Cell
Common Stock (plus the associated Preferred Stock Rights, if applicable to
shares of T Cell Common Stock in general at the time) equal to the product of
the number of shares of VRI Common Stock covered by such VRI NQSO immediately
prior to the Effective Time multiplied by the Common Stock Exchange Ratio
(rounded down to the nearest whole number of shares of T Cell Common Stock) and
(Y) that number of whole T Cell Warrants equal to the
4
product of the number of shares covered by such VRI NQSO immediately prior to
the Effective Time multiplied by the Warrant Exchange Ratio (rounded down to the
nearest whole number of T Cell Warrants); provided that following such
assumption and adjustment, (A) all references in the VRI Stock Options and the
VRI Stock Option Plan to VRI shall (unless the context otherwise requires) be
deemed to be references to T Cell and (B) the exercise price per share of shares
of T Cell Common Stock under each VRI Stock Option shall be equal to the
exercise price per share of VRI Common Stock under such VRI Stock Option
immediately prior to the Effective Time divided by the Common Stock Exchange
Ratio (rounded up to the nearest cent).
As soon as practicable after the Effective Time, T Cell shall deliver
to each holder of an outstanding VRI Stock Option an appropriate notice setting
forth such holder's rights pursuant thereto, and such VRI Stock Option shall
continue in effect on the same terms and conditions (including antidilution
provisions). T Cell shall comply with the VRI Stock Option Plan and take such
actions within its control that are reasonably necessary to ensure that each VRI
ISO prior to the Effective Time will continue to qualify under Section 422 of
the Code.
T Cell shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of T Cell Common Stock and T Cell
Warrants for delivery pursuant to the terms set forth in this Section 4.2(d).
Subject to any applicable limitations under the Securities Act, T Cell
shall file a Registration Statement on Form S-8 (or any successor form),
effective as of the Effective Time, with respect to the shares of T Cell Common
Stock and T Cell Warrants issuable upon exercise of the VRI Stock Options, and
shall use its reasonable best efforts to maintain the effectiveness of such
registration statement (and maintain the current status of the prospectus
relating thereto) for so long as any VRI Stock Options shall remain outstanding.
VRI will take all necessary actions pursuant to VRI Stock Option Plan
and the instruments evidencing the VRI Stock Options to provide for the
conversion and assumption of the VRI Stock Options in accordance with this
Section 4.2(d).
(e) At the Effective Time, T Cell will assume the obligations of VRI
with respect to each outstanding warrant to subscribe for and purchase VRI
Common Stock (collectively, the "VRI Warrants"), subject to the provisions of
Section 4.3(e). The VRI Warrants shall continue to have, and be subject to, the
same terms and conditions as set forth in the applicable warrant agreements and
warrant certificates, as in effect on the date of this Agreement, pursuant to
which the VRI Warrants were issued (true and correct copies of which have been
delivered to T Cell), provided that (i) all references in the VRI Warrants to
VRI shall (unless the context otherwise requires) be deemed to be references to
T Cell, (ii) each VRI Warrant shall be exercisable for (X) that number of whole
shares of T Cell Common Stock (plus the associated Preferred Stock Rights, if
applicable, to shares of T Cell Common Stock in general at the time) equal to
the product of the number of shares of VRI Common Stock covered by the VRI
Warrant immediately prior to the Effective Time multiplied by the Common Stock
Exchange Ratio (rounded down to the nearest whole number of shares of T
5
Cell Common Stock) and (Y) that number of whole T Cell Warrants equal to the
product of the number of shares covered by the VRI Warrant immediately prior to
the Effective Time multiplied by the Warrant Exchange Ratio (rounded down to the
nearest whole number of T Cell Warrants) and (iii) the exercise price per share
of shares of T Cell Common Stock under each VRI Warrant shall be equal to the
exercise price per share of VRI Common Stock under the VRI Warrant immediately
prior to the Effective Time divided by the Common Stock Exchange Ratio (rounded
down to the nearest cent). T Cell shall (A) reserve for issuance the number of
shares of T Cell Common Stock and T Cell Warrants that will become issuable upon
the exercise of the VRI Warrants pursuant to this Section 4.2(e), and (B)
promptly after the Effective Time issue to each holder of an outstanding VRI
Warrant a document evidencing the assumption by T Cell of VRI's obligations with
respect thereto under this Section 4.2(e). Subject to the applicable limitations
under the Securities Act, T Cell shall file a Registration Statement on the
appropriate form prescribed by the SEC covering the continuous offering and sale
to the holders of the VRI Warrants of (x) the shares of T Cell Common Stock
purchasable upon exercise thereof, (y) the T Cell Warrants purchasable upon
exercise thereof and (z) the shares of T Cell Common Stock purchasable upon
exercise of the T Cell Warrants purchasable upon exercise of the VRI Warrants
(the "Old Warrants Shelf"). T Cell shall use its reasonable best efforts to file
the Old Warrants Shelf as soon as practicable and in any event not later than
the filing of the Form S-4 (as defined in Section 7.10 hereof), to cause the SEC
to declare such registration statement effective on or prior to the Effective
Time, or as soon thereafter as practicable, and to maintain the effectiveness of
the Old Warrants Shelf (and maintain the current status of the prospectus
included therein) until all VRI Warrants have been exercised or have terminated
in accordance with their terms. The Old Warrants Shelf may be combined with the
New Warrants Shelf in a single registration statement at the option of T Cell.
(f) In the event that subsequent to the date of this Agreement, but
prior to the Effective Time, the outstanding shares of T Cell Common Stock or
VRI Common Stock shall have been increased, decreased, changed into or exchanged
for a different number or kind of shares or securities through reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split, or other changes in T Cell's or VRI's capitalization (a
"Recapitalization"), as the case may be, then an appropriate and proportionate
adjustment shall be made to the Common Stock Exchange Ratio and Warrant Exchange
Ratio so that each holder of VRI Common Stock (other than any such shares held
directly or indirectly by T Cell and any such shares held as treasury stock by
VRI) outstanding immediately prior to the Effective Time (the "VRI
Stockholders") and each holder of options or warrants to acquire VRI Common
Stock outstanding immediately prior to the Effective Time shall receive pursuant
to this Section 4.2 the equivalent equity interest in T Cell that such VRI
Stockholder or holder of options or warrants of VRI would have received had no
such Recapitalization occurred.
4.3 Exchange of Certificates Representing VRI Common Stock.
(a) As of the Effective Time, T Cell shall deposit, or shall cause to
be deposited, with an exchange agent selected by T Cell on or prior to the
Effective Time (the "Exchange Agent"), for the benefit of the holders of shares
of VRI Common Stock, for exchange in accordance with this Article 4, (i) a
certificate representing the shares of T Cell Common Stock to be issued pursuant
to Section 4.2(a), (ii) a certificate representing the T Cell
6
Warrants to be issued pursuant to Section 4.2(a), and (iii) cash in lieu of
fractional shares of T Cell Common Stock (the "Fractional Shares") and
fractional T Cell Warrants ("Fractional Warrants") to be paid pursuant to this
Section 4.3, in exchange for outstanding shares of VRI Common Stock (such
certificates for shares of T Cell Common Stock, T Cell Warrants and cash in lieu
of Fractional Shares and Fractional Warrants shall hereinafter be referred to as
the "Exchange Fund").
(b) Promptly after the Effective Time (and in any event within two (2)
business days after the Effective Time), the parties hereto shall cause the
Exchange Agent to mail to each holder of record of a Certificate or Certificates
a letter of transmittal which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions not inconsistent with the terms of this Agreement as T Cell may
reasonably specify. Upon surrender of a Certificate for cancellation to the
Exchange Agent and delivery to the Exchange Agent of such letter of transmittal,
duly executed and completed in accordance with the instructions thereto, the
holder of such Certificate shall be entitled to receive in exchange therefor (i)
a certificate representing the number of whole shares of T Cell Common Stock to
which such holder shall be entitled, (ii) a certificate representing the number
of whole T Cell Warrants to which such holder shall be entitled and (iii) a
check for the cash to be paid in lieu of Fractional Shares and/or Fractional
Warrants, if any, due such holder pursuant to Section 4.3(e) plus the amount of
any dividends or distributions, pursuant to Section 4.3(c), if any, after giving
effect to any required withholding tax, and the Certificate so surrendered shall
forthwith be canceled. No interest will be paid or accrued on the amount payable
in lieu of Fractional Shares and/or Fractional Warrants, if any, or on the
dividends or distributions, if any, due and payable to holders of Certificates
pursuant to this Section 4.3. In the event of a transfer of ownership of VRI
Common Stock which is not registered in the stock transfer records of VRI,
certificates representing the proper number of shares of T Cell Common Stock and
T Cell Warrants, together with a check for the cash to be paid in lieu of
Fractional Shares and/or Fractional Warrants, if any, pursuant to Section
4.3(e), plus, to the extent applicable, the amount of any dividends or
distributions, if any, due and payable pursuant to Section 4.3(c), may be issued
to such a transferee if the Certificate representing shares of such VRI Common
Stock is presented to the Exchange Agent, accompanied by all documents required
to evidence and effect such transfer and to evidence that any applicable stock
transfer taxes have been paid.
(c) Notwithstanding any other provisions of this Agreement, dividends
or other distributions on shares of T Cell Common Stock after the Effective Time
with respect to any shares of VRI Common Stock represented by a Certificate that
has not been surrendered for exchange shall be paid only as provided herein.
Following surrender of any such Certificate, the holder thereof shall be
entitled, subject to the provisions and effect of applicable abandoned property,
escheat or similar laws, to receive for the whole shares of T Cell Common Stock
issued in exchange therefor, without interest, (i) at the time of such
surrender, the amount of dividends or other distributions with a record date
after the Effective Time theretofore payable with respect to such whole shares
of T Cell Common Stock and not paid, less the amount of any withholding taxes
which may be required thereon; and (ii) at the appropriate payment date, the
amount of dividends or other distributions with a record date
7
after the Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such shares of T Cell Common Stock, less the
amount of any withholding taxes which may be required thereon.
(d) At and after the Effective Time, there shall be no transfers on the
stock transfer books of VRI of the shares of VRI Common Stock which were
outstanding immediately prior to the Effective Time and if, after the Effective
Time, Certificates are presented for transfer, they shall be canceled against
delivery of the Merger Consideration as hereinabove provided. Certificates
surrendered for exchange by any person constituting an "affiliate" of VRI for
purposes of Rule 145 under the Securities Act, as such rule may be amended from
time to time ("Rule 145"), shall not be exchanged until T Cell has received an
affiliate letter (the "Affiliate Letter") from such person as provided in
Section 7.13, it being understood that with respect to the Principal
Stockholders the execution and delivery of a Proxy Agreement shall be deemed to
constitute delivery to T Cell of an Affiliate Letter.
(e) No Fractional Shares or Fractional Warrants shall be issued
pursuant hereto. In lieu of the issuance of any Fractional Shares pursuant to
this Agreement, each holder of VRI Common Stock upon surrender of Certificates
for exchange shall be paid an amount in cash (without interest), rounded to the
nearest cent, determined by multiplying (i) the average closing price of T Cell
Common Stock on the Nasdaq National Market (the "Nasdaq") on the five (5)
trading days immediately preceding the Closing Date (the "Fair Market Value") by
(ii) the fractional amount of the shares of T Cell Common Stock, which such
holder would otherwise be entitled to receive under this Article 4. The
fractional share interests of each former holder of VRI Securities will be
aggregated and no such holder will receive cash in an amount greater than or
equal to the value of one full share of T Cell Common Stock.
(f) All Merger Consideration issued or paid, as the case may be, upon
the surrender for exchange of Certificates representing shares of VRI Common
Stock in accordance with the terms of this Article 4 shall be deemed to have
been issued (and paid) in full satisfaction of all rights pertaining to the
shares of VRI Common Stock exchanged for Merger Consideration theretofore
represented by such Certificates.
4.4 Return of Exchange Fund. Any portion of the Exchange Fund (including
any cash payable for Fractional Shares and/or Fractional Warrants, and any
shares of T Cell Common Stock) that remains unclaimed by the former stockholders
of VRI one year after the Effective Time shall be returned to T Cell (provided
that T Cell shall issue such shares of T Cell Common Stock and/or T Cell
Warrants and/or pay such cash in accordance with this Article 4 to former
stockholders of VRI who thereafter surrender their Certificates), subject to the
provisions and effect of applicable abandoned property, escheat or similar laws.
Any former stockholders of VRI who have not theretofore complied with this
Article 4 shall thereafter look only to T Cell for issuance or payment of that
portion of their VRI Common Stock representing T Cell Common Stock, T Cell
Warrants and cash in lieu of Fractional Shares (in accordance with Section
4.3(e) hereof, if any, as determined pursuant to this Agreement, without any
interest thereon. None of T Cell, VRI, the Exchange Agent or any other person
shall be liable to any former holder of shares of VRI Common Stock for any
8
shares of stock or cash properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
4.5 Lost or Stolen Certificates. In the event any Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming such Certificate to be lost, stolen or destroyed and, if
required by T Cell, the posting by such person of a bond in such reasonable
amount as T Cell may direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent or T Cell will
issue in exchange for such lost, stolen or destroyed Certificate the shares of T
Cell Common Stock, T Cell Warrants and cash in lieu of Fractional Shares and/or
Fractional Warrants (in accordance with Section 4.3(c) hereof), if any, to which
such person is entitled under Section 4.3(b) (and to the extent applicable,
dividends and distributions payable pursuant to Section 4.3(c)).
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF VRI
VRI represents and warrants to T Cell and Acquisition Sub that the
statements contained in this Article 5 are true and correct, except as set forth
in the disclosure letter delivered at or prior to the execution hereof to T Cell
and Acquisition Sub (the "VRI Disclosure Letter"). The VRI Disclosure Letter
shall be arranged in paragraphs corresponding to the numbered and lettered
paragraphs contained in this Article 5, and the disclosures in any paragraph of
the VRI Disclosure Letter shall also be deemed to qualify all other paragraphs
in this Article 5.
5.1 Existence; Good Standing; Authority.
(a) VRI is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware. VRI is duly licensed or
qualified to do business as a foreign corporation and is in good standing under
the laws of each jurisdiction in which the transaction of its business makes
such qualification necessary, except where the failure to be so licensed or
qualified would not reasonably be expected to have a material adverse effect on
the business, assets, prospects, results of operations or financial condition of
VRI (other than changes that are the effect of economic factors affecting the
economy as a whole or changes that are the effect of factors generally affecting
the industry in which VRI conducts its business) (a "VRI Material Adverse
Effect"); provided, however, that a "VRI Material Adverse Effect" shall not
include any adverse effect primarily arising out of or resulting primarily from
actions contemplated by the parties in connection with, or that is primarily
attributable to, the announcement or performance of this Agreement and the
transactions contemplated hereby. VRI has all requisite corporate power and
authority to carry on its business as now conducted.
(b) Copies of the VRI Certificate and VRI Bylaws (and in each such
case, all amendments thereto) have previously been delivered to T Cell and its
counsel and such copies are true, correct and complete.
9
5.2 Authorization, Validity and Effect of Agreements.
(a) VRI has the requisite power and authority to enter into and perform
the transactions contemplated hereby and to execute and deliver this Agreement.
The Board of Directors of VRI has unanimously approved this Agreement, the
Merger, and the other transactions contemplated by this Agreement and has
resolved to recommend that the holders of VRI Common Stock adopt and approve
this Agreement at the VRI stockholders' meeting to be held in accordance with
the provisions of Section 7.3 hereof. In connection with the foregoing, the
Board of Directors of VRI have taken such actions and votes as are necessary to
render the provisions of Section 203 of the DGCL inapplicable to the Merger,
this Agreement and the transactions contemplated hereby and thereby without the
payment of consideration to holders of VRI Common Stock other than the Merger
Consideration. As of the date hereof, all of the directors and executive
officers of VRI and the Principal Stockholders have indicated that they
presently intend to vote all VRI Common Stock which they own or the voting of
which they control to approve the adoption of this Agreement and the approval of
the Merger. The execution by VRI of this Agreement and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
requisite corporate action on the part of VRI, subject, in the case of this
Agreement only, to the approval of the Merger by a majority of the votes
entitled to be cast by the holders of the outstanding VRI Common Stock. This
Agreement constitutes the valid and legally binding obligations of VRI,
enforceable against VRI in accordance with its terms.
5.3 Capitalization.
(a) The authorized capital stock of VRI consists of 30,000,000 shares
of VRI Common Stock, 9,034,355 of which are issued and outstanding and 5,000,000
shares of Preferred Stock, none of which are issued or outstanding. There are no
shares of VRI Common Stock held in the treasury of VRI. VRI has no shares of VRI
Common Stock reserved for issuance other than 1,517,166 shares of VRI Common
Stock reserved for issuance pursuant to the VRI Stock Option Plan and 83,584
shares of VRI Common Stock reserved for issuance upon the exercise of the VRI
Warrants. All issued and outstanding shares of capital stock of VRI are duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights. None of the VRI Common Stock has been issued in violation of any federal
or state securities law.
(b) Except as set forth in Section 5.3 of the VRI Disclosure Letter:
(i) VRI has no outstanding bonds, debentures, notes or other
obligations the holders of which have the right to vote (or which are
convertible into or exercisable for securities having the right to vote)
with the stockholders of VRI on any matter;
(ii) VRI does not have any existing options, warrants, calls,
subscriptions, convertible securities, or other rights, agreements or
commitments which obligate VRI to issue, transfer or sell any shares of
capital stock of VRI;
10
(iii) there are no agreements or understandings to which VRI is a
party with respect to the voting of any shares of capital stock of VRI or
which restrict the transfer of any such shares;
(iv) there are no outstanding contractual obligations of VRI to
repurchase, redeem or otherwise acquire any shares of capital stock or any
other securities of VRI; and
(v) VRI is not under any obligation, contingent or otherwise, by
reason of any agreement to register any of its securities under the
Securities Act.
5.4 Subsidiaries. VRI has no subsidiaries and does not control, directly or
indirectly, or have any loans to any, corporation, partnership, joint venture,
association business or other entity.
5.5 Other Interests. Except as set forth in Section 5.5 of the VRI
Disclosure Letter, VRI does not own directly or indirectly any interest or
investment (whether equity or indebtedness for borrowed money of $100,000 or
more) in any corporation, partnership, joint venture, business, trust or other
entity (other than investments in short-term investment securities).
5.6 No Violation. Except as set forth in Section 5.6 of the VRI Disclosure
Letter, neither the execution, delivery and performance by VRI of this
Agreement, nor the consummation by VRI of the transactions contemplated by this
Agreement, will: (i) violate, conflict with or result in a breach of any
provision of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under the VRI Certificate or the
VRI Bylaws; (ii) result in a breach or violation of, a default under, or the
triggering of any payment or other material obligation pursuant to, or
accelerate vesting under, any stock option plan or option issued by VRI or any
grant or award under any of the foregoing; (iii) violate, conflict with or
result in a breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination or in a right of termination or cancellation of, or
accelerate the performance required by, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
VRI under, or result in being declared void, voidable or without further binding
effect pursuant to, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust or any license, franchise, permit,
lease, contract, agreement or other instrument, commitment or obligation to
which VRI is a party, or by which VRI is bound or affected, except for any of
the foregoing matters which, individually or in the aggregate, would not
reasonably be expected to have a VRI Material Adverse Effect and would not
prevent or materially delay the consummation of the transactions contemplated
hereby; (iv) violate, conflict with or result in a breach of any laws of the
United States or any state or other jurisdiction applicable to VRI, except for
any of the foregoing matters which would not reasonably be expected to have a
VRI Material Adverse Effect; or (v) other than the filings provided for in
Article 1 and Section 7.7 of this Agreement, if required, under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
11
Securities Act or applicable state securities and "blue sky" laws, require any
consent, approval or authorization of, or declaration, filing or registration
with, any governmental or regulatory authority, except where the failure to
obtain any such consent, approval or authorization of, or declaration, filing or
registration with, any governmental or regulatory authority, would not
reasonably be expected to have a VRI Material Adverse Effect and would not
prevent or materially delay the consummation of the transactions contemplated
hereby.
5.7 SEC Documents. VRI has filed all required forms, reports and documents,
including, but not limited to VRI's Form 10-K filed with respect to the year
ended December 31, 1997 (collectively, the "VRI SEC Reports"), with the SEC
since the earliest date on which VRI became subject to the reporting obligations
of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder (the "Exchange Act"), all of which were
prepared in all material respects in accordance with the applicable requirements
of the Exchange Act and the Securities Act and the rules and regulations
promulgated thereunder (collectively, the "Securities Laws"). As of their
respective dates, the VRI SEC Reports (i) complied as to form in all material
respects with the applicable requirements of the Securities Laws and (ii) did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. Each of the balance sheets included in or incorporated by reference
into the VRI SEC Reports (including the related notes and schedules) fairly
presents in all material respects the financial position of VRI as of its date
and each of the statements of income, retained earnings and cash flows included
in or incorporated by reference into the VRI SEC Reports (including any related
notes and schedules) fairly presents in all material respects the results of
operations, retained earnings or cash flows, as the case may be, of VRI for the
periods set forth therein (subject, in the case of unaudited statements, to
normal year-end audit adjustments which were not and are not expected to be
material in amount), in each case in accordance with generally accepted
accounting principles consistently applied (except as otherwise indicated in the
notes thereto) during the periods involved, except, in the case of the unaudited
statements, as permitted by Form 10-Q pursuant to Section 13 or 15(d) of the
Exchange Act.
5.8 Financial Statements.
(a) VRI's financial statements at and for the quarter ended March 31,
1998 (the "Q-1 1998 VRI Financial Statements"), including the balance sheet at
March 31, 1998 included therein (the "VRI Base Balance Sheet"), a copy of which
has been provided by VRI to T Cell, fairly present in all material respects the
results of operations and financial position of VRI as of their dates, and the
VRI Q-1 1998 Financial Statements (including any related notes and schedules)
fairly present in all material respects results of operations, retained earnings
or cash flows, as the case may be of VRI for the periods set forth therein
subject to normal and recurring year-end adjustments and in each case in
accordance with generally accepted accounting principles consistently applied
(except as otherwise indicated in the notes thereto and as permitted by Form
10-Q under the Exchange Act) during the periods involved.
(b) Except as disclosed in the VRI SEC Reports filed prior to the date
hereof, VRI does not have any known liabilities of any nature, whether accrued,
absolute,
12
contingent or otherwise, asserted or unasserted except liabilities (i) stated or
adequately reserved against on the VRI Base Balance Sheet or the notes thereto,
(ii) reflected in Section 5.8(b) of the VRI Disclosure Letter, (iii) incurred in
the ordinary course of business and not required under generally accepted
accounting principles to be reflected on the VRI Base Balance Sheet, (iv)
incurred after the date of the VRI Base Balance Sheet in the ordinary course of
business of VRI consistent with the terms of this Agreement or (v) which would
not reasonably be expected to have a VRI Material Adverse Effect.
5.9 Litigation. Except as set forth in Section 5.9 to the VRI Disclosure
Letter, there are (i) no continuing orders, injunctions or decrees of any court,
arbitrator or governmental authority to which VRI is a party or by which it is
bound or, to the knowledge of VRI, to which any of VRI's directors, officers,
employees or agents, in such capacity, is a party or, to the knowledge of VRI,
by which any of them is bound, and (ii) no actions, suits, investigations or
proceedings pending against VRI or, to the knowledge of VRI, against any of
VRI's directors, officers, employees or agents, in such capacities, or, to the
knowledge of VRI, threatened against VRI or against any of its directors,
officers, employees or agents, in such capacities, at law or in equity, or
before or by any federal, state or local commission, board, bureau, agency or
instrumentality, that would, individually or in the aggregate, reasonably be
expected to have a VRI Material Adverse Effect.
5.10 Absence of Certain Changes. Except as disclosed in the VRI SEC Reports
filed with the SEC prior to the date hereof or as set forth in Section 5.10 of
the VRI Disclosure Letter or the Q-1 1998 VRI Financial Statements, since
December 31, 1997, VRI has conducted its business only in the ordinary course of
such business and there has not been:
(a) any VRI Material Adverse Effect;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to the capital stock of VRI or any direct or indirect
redemption, purchase or other acquisition by VRI of its own capital stock;
(c) any material commitment or contractual obligation (each, a
"Commitment") entered into by VRI outside the ordinary course of business except
for Commitments incurred in connection with the Merger and the transactions
contemplated hereby and thereby;
(d) any material change in VRI's accounting principles, practices or
methods;
(e) any material contingent liability incurred by VRI as guarantor or
otherwise with respect to the obligations of others or any cancellation of any
material debt or claim owing to, or waiver of any material right of, VRI;
(f) any mortgage, encumbrance or lien placed on any of the material
properties of VRI which remains in existence on the date hereof;
13
(g) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, assets or
businesses of VRI;
(h) any change in the compensation payable or to become payable by VRI
to any of its officers or key employees, other than normal merit increases in
accordance with its usual practices; or any bonus payment or arrangement made to
or with any of such officers or key employees; or
(i) any change with respect to the officers or management of VRI which
would reasonably be expected to have a VRI Material Adverse Effect.
5.11 Taxes. Except as set forth in Section 5.11 of the VRI Disclosure
Letter and except for any of the following that would not reasonably be expected
to have a VRI Material Adverse Effect:
(a) VRI has paid or caused to be paid all federal, state, local,
municipal, foreign, and other taxes, including without limitation, income taxes,
estimated taxes, alternative minimum taxes, excise taxes, sales taxes, use
taxes, value-added taxes, gross receipts taxes, franchise taxes, municipal
taxes, capital stock taxes, employment and payroll-related taxes, withholding
taxes, stamp taxes, transfer taxes, windfall profit taxes, environmental taxes
and real and personal property taxes, whether or not measured in whole or in
part by net income, and all deficiencies, or other additions to tax, interest,
fines and penalties (collectively, "Taxes"), owed by it through the date hereof
except for Taxes, which are being contested in good faith by such party and for
which VRI has adequate reserves on the VRI Base Balance Sheet.
(b) VRI has timely filed all federal, state, local, municipal and
foreign tax returns and related information required to be filed by it and all
such returns and related information set forth in all material respects the
amount of any Taxes relating to the applicable period.
(c) Neither the Internal Revenue Service ("IRS") nor any other
governmental authority is now asserting against VRI or, to the knowledge of VRI,
threatening to assert against VRI any deficiency or claim for additional Taxes.
No claim has ever been made by a taxing authority in a jurisdiction where VRI
does not file reports and returns that VRI is or may be subject to taxation by
that jurisdiction. There are no security interests or statutory tax liens on any
of the assets of VRI that arose in connection with any failure (or alleged
failure) to pay any Taxes when due. VRI has never entered into a closing
agreement pursuant to Section 7121 of the Internal Revenue Code of 1986, as
amended (the "Code").
(d) VRI has not received written notice of any audit of any tax return
filed by VRI, and VRI has not been notified by any tax authority that any such
audit is contemplated or pending. VRI has not executed or filed with the IRS or
any other taxing authority any agreement now in effect extending the period for
assessment or collection of any income or other taxes, and no extension of time
with respect to any date on which a tax return was or is to be filed by or with
respect to VRI is in force.
14
(e) VRI has withheld and paid all taxes required to have been withheld
and paid in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder or other party.
5.12 Books and Records. Except as set forth in Section 5.12 of the VRI
Disclosure Letter:
(a) The books of account and other financial records of VRI are true,
complete and correct in all material respects, have been maintained in all
material respects in accordance with good business practices, and are accurately
reflected to the extent required in all material respects in the financial
statements included in the VRI SEC Reports.
(b) The minute books and other records of VRI have been made available
to T Cell or its representatives, contain in all material respects accurate
records of all meetings and accurately reflect in all material respects all
other corporate action of the stockholders and directors and any committees of
the Board of Directors of VRI.
5.13 Real Property. All of the real property leased by VRI (the "VRI Leased
Real Property") is set forth in Section 5.13 of the VRI Disclosure Letter. VRI
does not own any real property. The lease of the VRI Leased Real Property (the
"VRI Lease") is in full force and effect. VRI is not in default under the VRI
Lease, other than any defaults which would not reasonably be expected to have a
VRI Material Adverse Effect. VRI has not received any notice from any
governmental authority of any violation of any law, ordinance, regulation,
license, permit or authorization issued with respect to its operations at or
improvements of the VRI Leased Real Property that has not been heretofore
corrected or that would be reasonably be expected to have a VRI Material Adverse
Effect.
5.14 Intellectual Property.
(a) To the knowledge of VRI, VRI owns, or is licensed or otherwise
possesses legally enforceable rights under, all patents, trademarks, trade
names, service marks, copyrights (and any applications for such patents,
trademarks, trade names, service marks and copyrights), schematics, technology,
know-how, and tangible or intangible proprietary information or material
(collectively, "Intellectual Property") that are material to the conduct of its
business as currently conducted or planned to be conducted (as described in
VRI's Annual Report on Form 10-K for the year ended December 31, 1997 (the "VRI
10-K"). Section 5.14 of the VRI Disclosure Letter lists (i) all material written
licenses, sublicenses and other agreements to which VRI is a party and pursuant
to which any third party is authorized to use any Intellectual Property rights
of VRI or pursuant to which VRI assigns Intellectual Property rights to any
third party (the "VRI Outlicenses"), and (ii) all material written licenses,
sublicenses and other agreements to which VRI is a party and pursuant to which
VRI is authorized to use any third party patents, trademarks, copyrights or
other Intellectual Property (the "VRI Inlicenses"). Except as set forth in
Section 5.6 or Section 5.14 of the VRI Disclosure Letter, no consent of any
party to the VRI Inlicenses or the VRI Outlicenses is required in connection
with the Merger or any other transactions contemplated hereby.
15
(b) VRI has not been named in any suit, action or proceeding which
involves a claim of infringement by VRI of any Intellectual Property right of
any third party, which, if determined adversely to VRI, would reasonably be
expected to have a VRI Material Adverse Effect, and VRI has not received any
written notice of such claim or infringement or written threat as to the
institution by a third party of any such suit, action or proceeding. VRI is a
party to agreements that provide that VRI will own all Intellectual Property
rights in any developments made by any of its employees or contractors. VRI has
taken steps in accordance with its standard business practice to establish and
preserve its ownership of its Intellectual Property, including requiring all of
its professional and technical employees, all other employees having access to
valuable non-public information of VRI and all consultants and independent
contractors involved in the development of any of its Intellectual Property to
execute confidentiality agreements substantially in the form provided to T Cell,
except where the failure to do any of the foregoing would not be reasonably
expected to have a VRI Material Adverse Effect. To the knowledge of VRI, the
conduct of its business as currently conducted and planned to be conducted (as
described in the VRI 10-K) does not infringe any Intellectual Property rights of
a third party, other than infringements that would not reasonably be expected to
have a VRI Material Adverse Effect. To the knowledge of VRI, the Intellectual
Property rights of VRI are not being infringed by activities, products or
services of any third party in a manner that would reasonably be expected to
have a VRI Material Adverse Effect. VRI has not been named in any suit, action
or proceeding which involves a claim by a third party challenging the validity
of, or VRI's rights, in its Intellectual Property, and which would reasonably be
expected to have a VRI Material Adverse Effect.
(c) All U.S. patents and U.S. patent applications which are owned by
VRI and which are material to the conduct of its business as currently conducted
and planned to be conducted (as described in the VRI 10-K) have been duly issued
by or filed in, as applicable, the United States Patent and Trademark Office and
have been properly maintained and renewed in accordance with all applicable
provisions of law and administrative regulations of the United States. True and
complete copies thereof have been delivered to T Cell.
5.15 Compliance with Law; Permits; Environmental Matters. Except as set
forth in Section 5.15 of the VRI Disclosure Letter:
(a) VRI is not in violation of any order of any court, governmental
authority or arbitration board or tribunal, or any law, ordinance, governmental
rule or regulation to which VRI or any of its properties or assets is subject,
except for such violations which, individually or in the aggregate, would not
reasonably be expected to have a VRI Material Adverse Effect. VRI has obtained
all licenses, permits and other authorizations and has taken all actions
required by applicable law or governmental regulations in connection with its
businesses as now or previously conducted, except for failures to obtain such
authorization or take such actions which, individually or in the aggregate,
would not reasonably be expected to have a VRI Material Adverse Effect.
(b) VRI holds such registrations, applications, licenses, requests for
exemptions, permits and other regulatory authorizations (collectively, the
"Permits") from the U.S. Food and Drug Administration (the "FDA") as are
material to the conduct of VRI's
16
businesses as presently conducted, except for such Permits the lack of which
would not reasonably be expected to have a VRI Material Adverse Effect. VRI is
in compliance with such Permits, except for such instances of noncompliance
which, individually and in the aggregate, would not reasonably be expected to
have a VRI Material Adverse Effect and has no reason to believe that there
exists a reasonable basis for the revocation or suspension of any such Permits
which would reasonably be expected to have a VRI Material Adverse Effect. To the
knowledge of VRI, no party which granted any such Permit is considering
revocation or suspension thereof.
(c) VRI has complied with all applicable Environmental Laws (as defined
below), except for violations of Environmental Laws that would not, individually
or in the aggregate, reasonably be expected to have a VRI Material Adverse
Effect. There is no pending or, to the knowledge of VRI, threatened civil or
criminal litigation, written notice of violation, formal administrative
proceeding, or investigation, inquiry or information request by any governmental
entity, relating to any Environmental Law involving VRI, except for litigation,
notices of violations, formal administrative proceedings or investigations,
inquiries or information requests that would not, individually or in the
aggregate, reasonably be expected to have a VRI Material Adverse Effect. For
purposes of the Agreement, "Environmental Law" means any federal, state or local
law, statute, rule or regulation or the common law relating to the environment
or occupational health and safety.
(d) To the knowledge of VRI, there have been no releases of any
Materials of Environmental Concern (as defined below) into the environment at
any parcel of real property or any facility formerly or currently owned,
operated or controlled by VRI, other than releases that would not, individually
or in the aggregate, reasonably be expected to have a VRI Material Adverse
Effect. Except as set forth in Section 5.15 of the VRI Disclosure Letter and
except for any matter which would not reasonably be expected to have a VRI
Material Adverse Effect, neither VRI nor, to the knowledge of VRI, any legal
predecessor, affiliate or former affiliate of VRI, has received any notice that
it is potentially responsible under any Environmental Law for response costs or
natural resource damages, as those terms are defined under the Environmental
Laws, at any location and, to the knowledge of VRI, VRI has not transported or
disposed of, or allowed or arranged for any third party to transport or dispose
of, any waste containing Materials of Environmental Concern at any location
including, but not limited to, those in the National Priorities List, as defined
under the United States Comprehensive Environmental Response, Compensation, and
Liability Act ("CERCLA), or any location proposed for inclusion on that list or
at any location on any analogous state or other list. For purposes of this
Agreement, "Materials of Environmental Concern" means any chemicals, pollutants
or contaminants, hazardous substances (as such term is defined under CERCLA),
solid wastes and hazardous wastes (as such terms are defined under the federal
Resources Conservation and Recovery Act ("RCRA"), toxic materials, oil or
petroleum and petroleum products, or any other material subject to regulation
under any Environmental Law.
5.16 Clinical Procedures. The human clinical trials, animal studies and
other preclinical tests conducted by VRI or in which VRI has participated, and
such studies and tests conducted on behalf of VRI, were and, if still pending,
are being conducted in all material respects in accordance with experimental
protocols, procedures and controls generally used by
17
qualified experts in the preclinical or clinical study of products comparable to
those being developed by VRI; neither VRI nor any agent or representative of VRI
has received any notices or correspondence from the FDA or any other
governmental agency requiring the termination, suspension or modification (other
than such modifications as are normal in the regulatory process) of any animal
studies, preclinical tests or clinical trials conducted by or on behalf of VRI
or in which VRI has participated, except for such terminations, suspensions or
modifications which, individually or in the aggregate, would not reasonably be
expected to have a VRI Material Adverse Effect.
5.17 Employee Matters. With respect to all the employee benefit plans,
programs and arrangements maintained for the benefit of any current or former
employee, officer or director of VRI (the "VRI Benefit Plans"), except as set
forth in Section 5.17 of the VRI Disclosure Letter or in the VRI SEC Reports,
(a) each VRI Benefit Plan and any related trust intended to be qualified under
Sections 401(a) and 501(a) of the Code has received a favorable determination
letter from the IRS that it is so qualified and nothing has occurred since the
date of such letter that would reasonably be expected to materially adversely
affect the qualified status of such VRI Benefit Plan or related trust, (b) each
VRI Benefit Plan has been operated in all material respects in accordance with
the terms and requirements of applicable law and all required returns and
filings for each VRI Benefit Plan have been timely made, except for failures to
file which, individually or in the aggregate, would not reasonably be expected
to have a VRI Material Adverse Effect, (c) VRI has not incurred any direct or
indirect material liability under, arising out of or by operation of Title I or
Title IV of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), in connection with any VRI Benefit Plan or other retirement plan or
arrangement, and VRI has no knowledge of any fact or event that would reasonably
be expected to give rise to any such material liability, (d) all material
contributions due and payable on or before the date hereof in respect of each
VRI Benefit Plan have been made in full and in proper form, (e) VRI has never
sponsored or been obligated to contribute to any "multiemployer plan" (as
defined in Section 3(37) of ERISA), "multiple employer plan" (as defined in
Section 413 of the Code) or "defined benefit plan" (as defined in Section 3(35)
of ERISA), (f) except as otherwise required under ERISA, the Code and applicable
state laws, no VRI Benefit Plan currently or previously maintained by VRI
provides any post-retirement health or life insurance benefits, and VRI does not
maintain any obligations to provide post-retirement health or life insurance
benefits in the future, (g) all material reporting and disclosure obligations
imposed under ERISA and the Code have been satisfied with respect to each VRI
Benefit Plan, except where failure to so comply, individually or in the
aggregate, would not reasonably be expected to have a VRI Material Adverse
Effect and (h) no benefit or amount payable or which may become payable by VRI
pursuant to any VRI Benefit Plan, agreement or contract with any employee, shall
constitute an "excess parachute payment," within the meaning of Section 280G of
the Code, which is or may be subject to the imposition of any excise tax under
Section 4999 of the Code or which would not be deductible by reason of Section
280G of the Code.
5.18 Labor Matters. Except as set forth in Section 5.18 of the VRI
Disclosure Letter, VRI is not a party to, or bound by, any collective bargaining
agreement, contract or other agreement or understanding with a labor union or
labor union organization. There is no unfair labor practice or labor arbitration
proceeding pending or, to the knowledge of VRI,
18
threatened against VRI relating to its business, except for any such proceeding
which would not have a VRI Material Adverse Effect. To the knowledge of VRI,
there are no organizational efforts with respect to the formation of a
collective bargaining unit presently being made or threatened involving
employees of VRI, except where such efforts, individually or in the aggregate,
would not reasonably be expected to have a VRI Material Adverse Effect.
5.19 No Brokers. VRI has not entered into any contract, arrangement or
understanding with any person or firm which may result in the obligation of such
entity, T Cell or Acquisition Sub to pay any finder's fees, brokerage or agent's
commissions or other like payments in connection with the negotiations leading
to this Agreement or the consummation of the transactions contemplated hereby,
except that VRI has retained Hambrecht & Quist LLC ("H&Q") as its financial
advisor. True, correct and complete copies of the executed financial advisory
agreements between VRI and H&Q have been provided to T Cell.
5.20 Opinion of Financial Advisor. VRI has been advised by H&Q that in
their opinion, as of the date hereof, the Merger Consideration to be received by
the holders of VRI Common Stock in the Merger is fair, from a financial point of
view, to the holders of VRI Common Stock.
5.21 Related Party Transactions. Except for transactions described in the
VRI SEC Reports filed prior to the date hereof, since December 31, 1997, no
event has occurred that would be required to be reported as a Certain
Relationship or Related Transaction, pursuant to Item 404 of Regulation S-K
promulgated by the SEC other than as reflected in the Q-1 1998 VRI Financial
Statements.
5.22 Contracts and Commitments. Except as set forth in Section 5.22 of the
VRI Disclosure Letter, Item 14 of the VRI 10-K lists each contract to which VRI
is a party which is material to VRI ("VRI Material Contract"). VRI has delivered
to T Cell a correct and complete copy of each VRI Material Contract. Each VRI
Material Contract is in full force and effect and neither VRI nor, to the
knowledge of VRI, the other party thereto is in breach or default thereunder,
other than breaches or defaults which would not, either individually or in the
aggregate, reasonably be expected to have a VRI Material Adverse Effect.
5.23 Insurance. VRI maintains insurance coverage that is in character and
amount customary for persons engaged in similar businesses and subject to the
same or similar perils or hazards, except for any such failures to maintain
insurance policies that, individually or in the aggregate, would not reasonably
be expected to have a VRI Material Adverse Effect. VRI has not received any
notice that any policies have been or will be canceled prior to its scheduled
termination date, or would not be renewed substantially on the same terms now in
effect if the insured party requested renewal, or has received notice from any
of its insurance carriers that any insurance premiums will be subject to
increase in an amount materially disproportionate to the amount of any increases
with respect thereto (or with respect to similar insurance) in prior years,
except for any of the foregoing such instances that would not, individually or
in the aggregate, reasonably be expected to have a VRI Material Adverse Effect.
19
5.24 Proxy Statement. On the date the Proxy Statement (as defined in
Section 7.10) is mailed to T Cell's stockholders, none of the information
supplied by or on behalf of VRI for inclusion in the Proxy Statement will be
false or misleading with respect to any material fact or will omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading or necessary to correct any statement in any earlier communication
with respect to the stockholders' meeting or the solicitation of proxies
therefor which has become false or misleading. Notwithstanding the foregoing,
VRI makes no representation or warranty with respect to information supplied by
T Cell or any of its affiliates or representatives in writing for inclusion in
the Proxy Statement.
5.25 Acquisition Proposals. VRI has terminated any discussions or
negotiations relating to, or that would reasonably be expected to lead to, any
Acquisition Proposal (as defined in Section 7.1 hereof).
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF T CELL AND ACQUISITION SUB
T Cell and Acquisition Sub represent and warrant to VRI that the statements
contained in this Article 6 are true and correct, except as set forth in the
disclosure letter delivered at or prior to the execution hereof to VRI (the "T
Cell Disclosure Letter"). The T Cell Disclosure Letter shall be arranged in
paragraphs corresponding to the numbered and lettered paragraphs contained in
this Article 6, and the disclosures in any paragraph of the T Cell Disclosure
Letter shall qualify all other paragraphs in this Article 6.
6.1 Existence; Good Standing; Authority.
(a) Each of T Cell and Acquisition Sub is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware. Each of T Cell and Acquisition Sub is duly licensed or qualified to
do business as foreign corporations and is in good standing under the laws of
each jurisdiction in which the transaction of its business makes such
qualification necessary, except where the failure to be so licensed or qualified
would not reasonably be expected to have a material adverse effect on the
business, assets, prospects, results of operations or financial condition of T
Cell and Acquisition Sub (other than changes that are the effect of economic
factors affecting the economy as a whole or changes that are the effect of
factors generally affecting the industry in which T Cell and Acquisition Sub
conduct their respective businesses) (a "T Cell Material Adverse Effect");
provided, however, that a T Cell Material Adverse Effect shall not include any
adverse effect primarily arising out of or resulting primarily from actions
contemplated by the parties in connection with, or that is primarily
attributable to, the announcement or performance of this Agreement and the
transactions contemplated hereby. Each of T Cell and Acquisition Sub has all
requisite corporate power and authority to carry on its business as now
conducted.
(b) Copies of the T Cell Certificate and T Cell Bylaws (and in each
such case, all amendments thereto) have previously been delivered to VRI and its
counsel, and such copies are true, correct and complete.
20
6.2 Authorization, Validity and Effect of Agreements. Each of T Cell and
Acquisition Sub has the requisite power and authority to enter into the
transactions contemplated hereby and to execute and deliver this Agreement. The
Boards of Directors of T Cell and Acquisition Sub have approved by a unanimous
vote of all directors present this Agreement and all transactions contemplated
hereby. The execution by T Cell and Acquisition Sub of this Agreement and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all requisite corporate action on the part of T Cell and
Acquisition Sub, respectively. This Agreement constitutes the valid and legally
binding obligations of T Cell and Acquisition Sub enforceable against each such
entity in accordance with their respective terms.
6.3 Capitalization.
(a) The authorized capital stock of T Cell consists of 50,000,000
shares of T Cell Common Stock, 28,531,285 of which are issued and outstanding,
and 4,163,102 shares of Preferred Stock, none of which are issued or
outstanding. There are 8,552 shares of T Cell Common Stock held in the treasury
of T Cell. T Cell has no shares of T Cell Common Stock reserved for issuance
other than 3,700,000 shares of T Cell Common Stock reserved for issuance
pursuant to the T Cell 1991 Stock Compensation Plan, as amended, and 225,000
shares of T Cell Common Stock reserved for issuance upon the exercise of other
options granted to current and former directors of T Cell. All issued and
outstanding shares of capital stock of T Cell are duly authorized, validly
issued, fully paid, nonassessable and free of preemptive rights. None of the T
Cell Common Stock has been issued in violation of any federal or state
securities law.
(b) Except as set forth on Section 6.3 of the T Cell Disclosure Letter:
(i) T Cell has no outstanding bonds, debentures, notes or other
obligations the holders of which have the right to vote (or which are
convertible into or exercisable for securities having the right to vote)
with the stockholders of T Cell on any matter;
(ii) T Cell does not have any existing options, warrants, calls,
subscriptions, convertible securities, or other rights, agreements or
commitments which obligate T Cell to issue, transfer or sell any shares of
capital stock of T Cell;
(iii) there are no agreements or understandings to which T Cell is a
party with respect to the voting of any shares of capital stock of T Cell
or which restrict the transfer of any such shares;
(iv) there are no outstanding contractual obligations of T Cell to
repurchase, redeem or otherwise acquire any shares of capital stock or any
other securities of T Cell; and
(v) T Cell is not under any obligation, contingent or otherwise, by
reason of any agreement to register any of its securities under the
Securities Act.
21
6.4 Subsidiaries. Except for Acquisition Sub and as set forth in Section
6.4 of the T Cell Disclosure Letter, T Cell has no subsidiaries and does not
control, directly or indirectly, or have any loans to any, corporation,
partnership, joint venture, association business or other entity.
6.5 Other Interests. Except as set forth in Section 6.4 and 6.5 of the T
Cell Disclosure Letter, T Cell does not own directly or indirectly any interest
or investment (whether equity or indebtedness for borrowed money of $100,000 or
more) in any corporation, partnership, joint venture, business, trust or other
entity (other than investments in short-term investment securities).
6.6 No Violation. Except as set forth in Section 6.6 of the T Cell
Disclosure Letter, neither the execution, delivery and performance by T Cell of
this Agreement, nor the consummation by T Cell of the transactions contemplated
by this Agreement, will: (i) violate, conflict with or result in a breach of any
provision of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under the T Cell Certificate or the
T Cell Bylaws; (ii) result in a breach or violation of, a default under, or the
triggering of any payment or other material obligation pursuant to, or
accelerate vesting under, any stock option plan or option issued by T Cell or
any grant or award under any of the foregoing; (iii) violate, conflict with or
result in a breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination or in a right of termination or cancellation of, or
accelerate the performance required by, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
T Cell under, or result in being declared void, voidable or without further
binding effect pursuant to, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust or any license, franchise,
permit, lease, contract, agreement or other instrument, commitment or obligation
to which T Cell is a party, or by which T Cell is bound or affected, except for
any of the foregoing matters which, individually or in the aggregate, would not
reasonably be expected to have a T Cell Material Adverse Effect and would not
prevent or materially delay the consummation of the transactions contemplated
hereby; (iv) violate, conflict with or result in a breach of any laws of the
United States or any state or other jurisdiction applicable to T Cell, except
for any of the foregoing matters which would not reasonably be expected to have
a T Cell Material Adverse Effect; or (v) other than the filings provided for in
Article 1 and Section 7.7 of this Agreement, if required, under the HSR Act, the
Exchange Act, the Securities Act or applicable state securities and "blue sky"
laws require any consent, approval or authorization of, or declaration, filing
or registration with, any governmental or regulatory authority, except where the
failure to obtain any such consent, approval or authorization of, or
declaration, filing or registration with, any governmental or regulatory
authority, would not reasonably be expected to have a T Cell Material Adverse
Effect and would not prevent or materially delay the consummation of the
transactions contemplated hereby.
6.7 SEC Documents. T Cell has filed all required forms, reports and
documents, including, but not limited to T Cell's Form 10-K filed with respect
to the year ended December 31, 1997 (collectively, the "T Cell SEC Reports"),
with the SEC since the earliest date on which T Cell became subject to the
reporting obligations of Section 13 or 15(d) of the
22
Exchange Act, all of which were prepared in all material respects in accordance
with the applicable requirements of the Securities Laws. As of their respective
dates, the T Cell SEC Reports (i) complied as to form in all material respects
with the applicable requirements of the Securities Laws and (ii) did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
Each of the balance sheets included in or incorporated by reference into the T
Cell SEC Reports (including the related notes and schedules) fairly presents in
all material respects the financial position of T Cell as of its date and each
of the statements of income, retained earnings and cash flows included in or
incorporated by reference into the T Cell SEC Reports (including any related
notes and schedules) fairly presents in all material respects the results of
operations, retained earnings or cash flows, as the case may be, of T Cell for
the periods set forth therein (subject, in the case of unaudited statements, to
normal year-end audit adjustments which were not and are not expected to be
material in amount), in each case in accordance with generally accepted
accounting principles consistently applied (except as otherwise indicated in the
notes thereto) during the periods involved, except, in the case of the unaudited
statements, as permitted by Form 10-Q pursuant to Section 13 or 15(d) of the
Exchange Act.
6.8 Financial Statements.
(a) T Cell's financial statements at and for the quarter ended March
31, 1998 (the "T Cell Q-1 1998 Financial Statements"), including the balance
sheet at March 31, 1998 included therein (the "T Cell Base Balance Sheet"), a
copy of which has been provided by T Cell to VRI, fairly present in all material
respects the results of operations and financial position of T Cell as of their
dates, and the T Cell Q-1 1998 Financial Statements (including any related notes
and schedules) fairly present in all material respects the results of
operations, retained earnings or cash flows, as the case may be, of T Cell for
the periods set forth therein subject to normal and recurring year-end
adjustments and, in each case, in accordance with generally accepted accounting
principles consistently applied (except as otherwise indicated in the notes
thereto and as permitted by Form 10-Q under the Exchange Act) during the periods
involved.
(b) Except as disclosed in the T Cell SEC Reports filed prior to the
date hereof, T Cell does not have any known liabilities of any nature, whether
accrued, absolute, contingent or otherwise, asserted or unasserted except
liabilities (i) stated or adequately reserved against on the T Cell Base Balance
Sheet or the notes thereto, (ii) reflected in Section 6.8(b) of the T Cell
Disclosure Letter, (iii) incurred in the ordinary course of business and not
required under generally accepted accounting principles to be reflected in the T
Cell Base Balance Sheet, (iv) incurred after the date of the T Cell Base Balance
Sheet in the ordinary course of business of T Cell consistent with the terms of
this Agreement or (v) which would not reasonably be expected to have a T Cell
Material Adverse Effect.
6.9 Litigation. Except as set forth in Section 6.9 to the T Cell Disclosure
Letter, there are (i) no continuing orders, injunctions or decrees of any court,
arbitrator or governmental authority to which T Cell is a party or by which it
is bound or, to the knowledge of T Cell, to which any of T Cell's directors,
officers, employees or agents, in such capacity,
23
is a party or, to the knowledge of T Cell, by which any of them is bound, and
(ii) no actions, suits, investigations or proceedings pending against T Cell or,
to the knowledge of T Cell, against any of T Cell's directors, officers,
employees or agents, in such capacities, or, to the knowledge of T Cell,
threatened against T Cell or against any of its directors, officers, employees
or agents, in such capacities, at law or in equity, or before or by any federal,
state or local commission, board, bureau, agency or instrumentality, that would,
individually or in the aggregate, reasonably be expected to have a T Cell
Material Adverse Effect.
6.10 Absence of Certain Changes. Except as disclosed in the T Cell SEC
Reports filed with the SEC prior to the date hereof or as set forth in Section
6.10 of the T Cell Disclosure Letter or the T Cell Q-1 1998 Financial
Statements, since December 31, 1997, T Cell has conducted its business only in
the ordinary course of such business and there has not been:
(a) any T Cell Material Adverse Effect;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to the capital stock of T Cell or any direct or
indirect redemption, purchase or other acquisition by T Cell of its own capital
stock;
(c) any material commitment or contractual obligation (each, a
"Commitment") entered into by T Cell outside the ordinary course of business
except for Commitments incurred in connection with the Merger and the
transactions contemplated hereby and thereby;
(d) any material change in T Cell's accounting principles, practices or
methods;
(e) any contingent liability incurred by T Cell as guarantor or
otherwise with respect to the obligations of others or any cancellation of any
material debt or claim owing to, or waiver of any material right of, T Cell;
(f) any mortgage, encumbrance or lien placed on any of the material
properties of T Cell which remains in existence on the date hereof;
(g) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, assets or
businesses of T Cell;
(h) any change in the compensation payable or to become payable by T
Cell to any of its officers, employees, agents or independent contractors other
than normal merit increases in accordance with its usual practices; or any bonus
payment or arrangement made to or with any of such officers, employees, agents
or independent contractors; or
(i) any change with respect to the officers or management of T Cell
which would reasonably be expected to have a T Cell Material Adverse Effect.
24
6.11 Taxes. Except as set forth in Section 6.11 of the T Cell Disclosure
Letter and except for any of the following that would not reasonably be expected
to have a T Cell Material Adverse Effect:
(a) T Cell has paid or caused to be paid all Taxes as defined in
Section 5.11 hereof owed or accrued by it through the date hereof except for
Taxes which are being contested in good faith by such party and for which T Cell
has adequate reserves on its T Cell Base Balance Sheet.
(b) T Cell has timely filed all federal, state, local, municipal and
foreign tax returns and related information required to be filed by it and all
such returns and related information set forth in all material respects the
amount of any Taxes relating to the applicable period.
(c) Neither the IRS nor any other governmental authority is now
asserting against T Cell or, to the knowledge of T Cell, threatening to assert
against T Cell any deficiency or claim for additional Taxes. No claim has ever
been made by a taxing authority in a jurisdiction where T Cell does not file
reports and returns that T Cell is or may be subject to taxation by that
jurisdiction. There are no security interests or statutory tax liens on any of
the assets of T Cell that arose in connection with any failure (or alleged
failure) to pay any Taxes when due. T Cell has never entered into a closing
agreement pursuant to Section 7121 of the Code.
(d) T Cell has not received written notice of any audit of any tax
return filed by T Cell, and T Cell has not been notified by any tax authority
that any such audit is contemplated or pending. T Cell has not executed or filed
with the IRS or any other taxing authority any agreement now in effect extending
the period for assessment or collection of any income or other taxes, and no
extension of time with respect to any date on which a tax return was or is to be
filed by or with respect to T Cell is in force.
(e) T Cell has withheld and paid all taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other party.
6.12 Real Property. All of the real property leased by T Cell (the "T Cell
Leased Real Property") is set forth in Section 6.12 of the T Cell Disclosure
Letter. T Cell does not own any real property. The lease of the T Cell Leased
Real Property (the "T Cell Lease") is in full force and effect. T Cell is not in
default under the T Cell Lease, other than defaults which would not reasonably
be expected to have a T Cell Material Adverse Effect. T Cell has not received
any notice from any governmental authority of any violation of any law,
ordinance, regulation, license, permit or authorization issued with respect to
the T Cell Leased Real Property that has not been heretofore corrected or that
would not reasonably be expected to have a T Cell Material Adverse Effect.
25
6.13 Intellectual Property.
(a) To the knowledge of T Cell, T Cell owns, or is licensed or
otherwise possesses legally enforceable rights under, all Intellectual Property
(as defined in Section 5.14 hereof) that is material to the conduct of its
business as currently conducted or planned to be conducted (as described in T
Cell's Annual Report on Form 10-K for the year ended December 31, 1997 (the "T
Cell 10-K")). Section 6.13 of the T Cell Disclosure Letter lists (i) all
material written licenses, sublicenses and other agreements to which T Cell is a
party and pursuant to which any third party is authorized to use any
Intellectual Property rights of T Cell or pursuant to which T Cell assigns
Intellectual Property rights to any third party (the "T Cell Outlicenses"), and
(ii) all material written licenses, sublicenses and other agreements to which T
Cell is a party and pursuant to which T Cell is authorized to use any third
party patents, trademarks, copyrights (including software) or other Intellectual
Property (the "T Cell Inlicenses"). Except as set forth in Section 6.13 of the T
Cell Disclosure Letter, no consent of any party to the T Cell Inlicenses or the
T Cell Outlicenses is required in connection with the Merger or any other
transactions contemplated hereby.
(b) T Cell has not been named in any suit, action or proceeding which
involves a claim of infringement by T Cell of any Intellectual Property right of
any third party, which, if determined adversely to T Cell, would reasonably be
expected to have a T Cell Material Adverse Effect, and T Cell has not received
any written notice of such claim or infringement or threat as to the institution
by a third party of any such suit, action or proceeding. T Cell is a party to
agreements that provide that T Cell will own all Intellectual Property rights in
any developments made by any of its employees or contractors. T Cell has taken
steps in accordance with its standard business practice to establish and
preserve its ownership of its Intellectual Property, including requiring all of
its professional and technical employees, all other employees having access to
valuable non-public information of T Cell and all consultants and independent
contractors involved in the development of any of its Intellectual Property to
execute confidentiality agreements substantially in the form provided to VRI,
except where the failure to do any of the foregoing would not reasonably be
expected to have a T Cell Material Adverse Effect. To the knowledge of T Cell,
the conduct of its business as currently conducted and planned to be conducted
(as described in the T Cell 10-K) does not infringe any Intellectual Property
rights of a third party, other than infringements that would not reasonably be
expected to have a T Cell Material Adverse Effect. To the knowledge of T Cell,
the Intellectual Property rights of T Cell are not being infringed by
activities, products or services of any third party in a manner that would
reasonably be expected to have a T Cell Material Adverse Effect. T Cell has not
been named in any suit, action or proceeding which involves a claim by a third
party challenging the validity of, or T Cell's rights, in its Intellectual
Property and which would reasonably be expected to have a T Cell Material
Adverse Effect.
(c) All U.S. patents and U.S. patent applications which are owned by T
Cell and which are material to the conduct of its business as currently
conducted and planned to be conducted (as described in the T Cell 10-K) have
been duly issued by or filed in, as applicable, the United States Patent and
Trademark Office, and have been properly maintained and
26
renewed in accordance with all applicable provisions of law and administrative
regulations of the United States. True and complete copies thereof have been
delivered to VRI.
6.14 Compliance with Law; Permits; Environmental Matters. Except as set
forth in Section 6.14 of the T Cell Disclosure Letter:
(a) T Cell is not in violation of any order of any court, governmental
authority or arbitration board or tribunal, or any law, ordinance, governmental
rule or regulation to which T Cell or any of its properties or assets is
subject, except for such violations which, individually or in the aggregate,
would not reasonably be expected to have a T Cell Material Adverse Effect. T
Cell has obtained all licenses, permits and other authorizations and has taken
all actions required by applicable law or governmental regulations in connection
with its businesses as now or previously conducted, except for failures to
obtain such authorization or take such actions which, individually or in the
aggregate, would not reasonably be expected to have a T Cell Material Adverse
Effect.
(b) T Cell holds such Permits (as defined in Section 5.5 hereof) from
the FDA as are material to the conduct of T Cell's businesses as presently
conducted, except for Permits the lack of which would not reasonably be expected
to have a T Cell Material Adverse Effect. T Cell is in compliance with such
Permits, except for such instances of noncompliance which, individually and in
the aggregate, would not reasonably be expected to have a T Cell Material
Adverse Effect. T Cell has no reason to believe that there exists a basis for
the revocation or suspension of any of such Permits or that any party which
granted any such Permit is considering revocation or suspension thereof, which
would reasonably be expected to have a T Cell Material Adverse Effect.
(c) T Cell has complied with all applicable Environmental Laws, except
for violations of Environmental Laws that would not, individually or in the
aggregate, reasonably be expected to have a T Cell Material Adverse Effect.
There is no pending or, to the knowledge of T Cell, threatened civil or criminal
litigation, written notice of violation, formal administrative proceeding, or
investigation, inquiry or information request by any governmental entity,
relating to any Environmental Law involving T Cell, except for litigation,
notices of violations, formal administrative proceedings or investigations,
inquiries or information requests that would not, individually or in the
aggregate, reasonably be expected to have a T Cell Material Adverse Effect.
(d) To the knowledge of T Cell, there have been no releases of any
Materials of Environmental Concern into the environment at any parcel of real
property or any facility formerly or currently owned, operated or controlled by
T Cell, other than releases that would not, individually or in the aggregate,
reasonably be expected to have a T Cell Material Adverse Effect. Except as set
forth in Section 6.14 of the T Cell Disclosure Letter and except for any matter
which would not have a T Cell Material Adverse Effect, neither T Cell nor, to
the knowledge of T Cell, any legal predecessor, affiliate or former affiliate of
T Cell, has received any notice that it is potentially responsible under any
Environmental Law for response costs or natural resource damages, as those terms
are defined under the Environmental Laws,
27
at any location and, to the knowledge of T Cell, T Cell has not transported or
disposed of, or allowed or arranged for any third party to transport or dispose
of, any waste containing Materials of Environmental Concern at any location
including, but not limited to, those in the National Priorities List, as defined
under CERCLA, or any location proposed for inclusion on that list or at any
location on any analogous state or other list.
6.15 Clinical Procedures. The human clinical trials, animal studies and
other preclinical tests conducted by T Cell or in which T Cell has participated,
and such studies and tests conducted on behalf of T Cell, were and, if still
pending, are being conducted in all material respects in accordance with
experimental protocols, procedures and controls generally used by qualified
experts in the preclinical or clinical study of products comparable to those
being developed by T Cell; neither T Cell nor any agent or representative of T
Cell has received any notices or correspondence from the FDA or any other
governmental agency requiring the termination, suspension or modification (other
than such modifications as are normal in the regulatory process) of any animal
studies, preclinical tests or clinical trials conducted by or on behalf of T
Cell or in which T Cell has participated, except for such terminations,
suspensions or modifications which, individually or in the aggregate, would not
reasonably be expected to have a T Cell Material Adverse Effect.
6.16 Employee Matters. With respect to all the employee benefit plans,
programs and arrangements maintained for the benefit of any current or former
employee, officer or director of T Cell (the "T Cell Benefit Plans"), except as
set forth in Section 6.16 of the T Cell Disclosure Letter or in the T Cell SEC
Reports, (a) each T Cell Benefit Plan and any related trust intended to be
qualified under Sections 401(a) and 501(a) of the Code has received a favorable
determination letter from the IRS that it is so qualified and nothing has
occurred since the date of such letter that would reasonably be expected to
materially adversely affect the qualified status of such T Cell Benefit Plan or
related trust, (b) each T Cell Benefit Plan has been operated in all material
respects in accordance with the terms and requirements of applicable law and all
required returns and filings for each T Cell Benefit Plan have been timely made,
except for failures to file which, individually or in the aggregate, would not
reasonably be expected to have a T Cell Material Adverse Effect, (c) T Cell has
not incurred any direct or indirect material liability under, arising out of or
by operation of Title I or Title IV of ERISA, in connection with any T Cell
Benefit Plan or other retirement plan or arrangement, and T Cell has no
knowledge of any fact or event that would reasonably be expected to give rise to
any such material liability, (d) all material contributions due and payable on
or before the date hereof in respect of each T Cell Benefit Plan have been made
in full and in proper form, (e) T Cell has never sponsored or been obligated to
contribute to any "multiemployer plan" (as defined in Section 3(37) of ERISA),
"multiple employer plan" (as defined in Section 413 of the Code) or "defined
benefit plan" (as defined in Section 3(35) of ERISA), (f) except as otherwise
required under ERISA, the Code and applicable state laws, no T Cell Benefit Plan
currently or previously maintained by T Cell provides any post-retirement health
or life insurance benefits, and T Cell does not maintain any obligations to
provide post-retirement health or life insurance benefits in the future, (g) all
material reporting and disclosure obligations imposed under ERISA and the Code
have been satisfied with respect to each T Cell Benefit Plan, except where
failure to so comply, individually or in the aggregate, would not reasonably be
expected to have a T Cell Material Adverse Effect and (h) no benefit
28
or amount payable or which may become payable by T Cell pursuant to any T Cell
Benefit Plan, agreement or contract with any employee, shall constitute an
"excess parachute payment," within the meaning of Section 280G of the Code,
which is or may be subject to the imposition of any excise tax under Section
4999 of the Code or which would not be deductible by reason of Section 280G of
the Code.
6.17 Labor Matters. Except as set forth in Section 6.17 of the T Cell
Disclosure Letter, T Cell is not a party to, or bound by, any collective
bargaining agreement, contract or other agreement or understanding with a labor
union or labor union organization. There is no unfair labor practice or labor
arbitration proceeding pending or, to the knowledge of T Cell, threatened
against T Cell relating to its business, except for any such proceeding which
would not have a T Cell Material Adverse Effect. To the knowledge of T Cell,
there are no organizational efforts with respect to the formation of a
collective bargaining unit presently being made or threatened involving
employees of T Cell, except where such efforts, individually or in the
aggregate, would not reasonably be expected to have a T Cell Material Adverse
Effect.
6.18 No Brokers. T Cell has not entered into any contract, arrangement or
understanding with any person or firm which may result in the obligation of such
entity or VRI to pay any finder's fees, brokerage or agent's commissions or
other like payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated hereby, except
that T Cell has retained Lehman Brothers ("Lehman") as its financial advisor.
True, correct and complete copies of the executed financial advisory agreements
between T Cell and Lehman have been provided to VRI.
6.19 Opinion of Financial Advisor. T Cell has been advised by Lehman that
in their opinion, as of the date hereof, the Merger Consideration to be paid by
T Cell to the holders of the VRI Common Stock is fair, from a financial point of
view, to the holders of T Cell Common Stock.
6.20 Related Party Transactions. Except for transactions described in the T
Cell SEC Reports filed prior to the date hereof, since December 31, 1997, no
event has occurred that would be required to be reported as a Certain
Relationship or Related Transaction, pursuant to Item 404 of Regulation S-K
promulgated by the SEC.
6.21 Contracts and Commitments. Except as set forth in Section 6.21 of the
T Cell Disclosure Letter, Item 14 of the T Cell 10-K lists each contract to
which T Cell is a party which is material to T Cell (a "T Cell Material
Contract"). T Cell has delivered to VRI a correct and complete copy of each T
Cell Material Contract. Each T Cell Material Contract is in full force and
effect and neither T Cell nor, to the knowledge of T Cell, the other party
thereto is in breach or default thereunder, other than breaches or defaults
which would not, either individually or in the aggregate, reasonably be expected
to have a T Cell Material Adverse Effect.
6.22 Insurance. T Cell maintains insurance coverage that is in character
and amount customary for persons engaged in similar businesses and subject to
the same or similar perils
29
or hazards, except for any such failures to maintain insurance policies that,
individually or in the aggregate, would not reasonably be expected to have a T
Cell Material Adverse Effect. T Cell has not received any notice that any
policies have been or will be canceled prior to its scheduled termination date,
or would not be renewed substantially on the same terms now in effect if the
insured party requested renewal, or has received notice from any of its
insurance carriers that any insurance premiums will be subject to increase in an
amount materially disproportionate to the amount of any increases with respect
thereto (or with respect to similar insurance) in prior years except for any of
the foregoing that would not, individually or in the aggregate, reasonably be
expected to have a T Cell Material Adverse Effect.
6.23 Proxy Statement. On the date the Proxy Statement is mailed to T Cell's
stockholders, none of the information supplied by or on behalf of T Cell for
inclusion in the Proxy Statement will be false or misleading with respect to any
material fact or will omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading or necessary to correct
any statement in any earlier communication with respect to the stockholders'
meeting or the solicitation of proxies therefor which has become false or
misleading. Notwithstanding the foregoing, T Cell makes no representation or
warranty with respect to information supplied by T Cell or any of its affiliates
or representatives in writing for inclusion in the Proxy Statement.
6.24 Nasdaq National Market Listing. The T Cell Common Stock and the
associated Preferred Stock Rights are duly listed for quotation on the Nasdaq
National Market.
ARTICLE 7. COVENANTS
7.1 Acquisition Proposals.
(a) From and after the date hereof until the earlier of the termination
of this Agreement or the Effective Time, VRI shall not, nor shall it authorize
or permit any officer, director, employee, agent, advisor or representative of
VRI to, directly or indirectly (i) solicit, initiate or knowingly encourage the
submission of, any inquiries, proposals or offers from any person relating to an
Acquisition Proposal (as defined below), (ii) enter into any agreement with
respect to any Acquisition Proposal, or (iii) enter into, engage in, or
participate or continue in, any discussions or negotiations regarding, or
furnish to any person any information with respect to, or knowingly take any
other action to facilitate any inquiries or the making of any proposal that
constitutes, or would reasonably be expected to lead to, any Acquisition
Proposal. Notwithstanding anything to the contrary in this Agreement, VRI may
(A) furnish information to, or participate in discussions or negotiations with,
any person or entity that makes or expresses a bona fide intention to make an
unsolicited proposal to acquire VRI pursuant to a merger, consolidation, share
exchange, business combination, tender or exchange offer or other similar
transaction if the Board of Directors of VRI determines, in good faith following
consultation with outside legal counsel (the "VRI Legal Counsel"), that such
action is necessary in order to comply with the directors' fiduciary duties to
the stockholders of VRI under applicable law; provided, however, that prior to
VRI's furnishing such information or participating in such discussions or
negotiations, such person or entity
30
shall have executed a confidentiality agreement with VRI having terms
substantially similar to those contained in the Confidential Disclosure
Agreement, dated April 16, 1998 between T Cell and VRI (the "Confidentiality
Agreement"), relating to the provision of Proprietary Information (as defined in
the Confidentiality Agreement) by VRI and T Cell to one another, and (B) comply
with Rules 14d-9 and 14e-2 promulgated under the Exchange Act with respect to an
Acquisition Proposal.
(b) As used herein, the term "Acquisition Proposal" shall mean any
proposed or actual (i) merger, consolidation or similar transaction involving
VRI, (ii) sale, lease or other disposition, directly or indirectly, by merger,
consolidation, share exchange or otherwise, of any assets of VRI representing
15% or more of the assets of VRI, (iii) issue, sale or other disposition of
(including by way of merger, consolidation, share exchange or any similar
transaction) securities (or options, rights or warrants to purchase, or
securities convertible into, such securities) representing 15% or more of the
votes attached to the outstanding securities of VRI, (iv) transaction in which
any person shall acquire beneficial ownership (as such term is defined in Rule
13d-3 under the Exchange Act), or the right to acquire beneficial ownership, or
any "group" (as such term is defined under the Exchange Act) shall have been
formed which beneficially owns or has the right to acquire beneficial ownership
of, 15% or more of the outstanding shares of VRI Common Stock, (v)
recapitalization, restructuring, liquidation, dissolution, or other similar type
of transaction with respect to VRI, or (vi) transaction which is similar to any
of the foregoing transactions; provided, however, that the term "Acquisition
Proposal" shall not include the Merger and the transactions contemplated
thereby.
(c) VRI shall advise T Cell orally and in writing within twenty-four
(24) hours of receipt of any Acquisition Proposal, made after the date hereof,
including the terms thereof and any changes thereto and any termination thereof,
or any inquiry regarding any Acquisition Proposal and the identity of the person
making such Acquisition Proposal or inquiry.
7.2 Conduct of Businesses by T Cell and VRI. Prior to the Effective Time,
unless T Cell or VRI has otherwise consented to the other in writing thereto or
unless otherwise specifically permitted by this Agreement, and except as
contemplated by this Agreement, each of T Cell and VRI:
(a) shall use its reasonable best efforts to preserve intact its
business organization and goodwill and keep available the services of its
respective officers and material employees;
(b) shall comply in all material respects with all material laws,
regulations and orders applicable with respect to its business;
(c) shall promptly notify the other of any event that is reasonably
expected to have, in the case of T Cell, a T Cell Material Adverse Effect and,
in the case of VRI, a VRI Material Adverse Effect, as applicable, or the breach
in any material respect of any of its material representations or warranties
contained herein;
31
(d) shall promptly deliver to the other true and correct copies of any
report, statement or schedule filed by or with respect to it with the SEC
subsequent to the date of this Agreement;
(e) shall employ its reasonable best efforts to secure, before the
Closing Date, the consent to the consummation of the transactions contemplated
by this Agreement by each other party to any contract, commitment or obligations
to which it is a party, absent which consent such transactions would constitute
a default, would accelerate, modify or vest its obligations or would permit
cancellation of any such contract;
(f) in the case of VRI, shall use its reasonable best efforts to cause
the satisfaction of the conditions precedent contained in Sections 8.1 and 8.3
and in the case of T Cell shall use its reasonable best efforts to cause the
satisfaction of the conditions precedent contained in Sections 8.1 and 8.2;
(g) shall conduct its operations according to its usual, regular and
ordinary course in substantially the same manner as heretofore conducted;
(h) shall not incur any indebtedness for borrowed money or issue any
debt securities or, except in each case in the ordinary course of business
consistent with past practice, assume, guarantee or endorse or otherwise as an
accommodation become responsible for, the obligations of any person or make any
loans or advances;
(i) shall not amend its certificate of incorporation or the bylaws,
respectively;
(j) shall not (A) issue any shares of its capital stock, effect any
stock split, reverse stock split, stock dividend, recapitalization or other
similar transaction, except pursuant to its existing options or outstanding
warrants, (B) grant, confer or award any option, warrant, conversion right or
other right not existing on the date hereof to acquire any shares of its capital
stock, (C) increase any compensation, other than in the ordinary course of
business consistent with past practice, or enter into or amend any employment
agreement with any of its officers or directors, or (D) adopt any new employee
benefit plan (including any stock option, stock benefit or stock purchase plan)
or amend, in the case of T Cell, any T Cell Employee Benefit Plans and, in the
case of VRI, any VRI Benefit Plans in any material respect, except for changes
which are not more favorable to participants in such plans or are otherwise
required to comply with applicable law;
(k) shall not (A) declare, set aside or pay any dividend or make any
other distribution or payment with respect to any shares of its capital stock,
or (B) directly or indirectly redeem, purchase or otherwise acquire any shares
of its capital stock, or make any commitment for any such action;
32
(l) shall not sell, pledge, dispose of or encumber any of its assets
(except for (i) sales of assets in the ordinary course of business and in a
manner consistent with past practice, (ii) dispositions of obsolete or worthless
assets, and (iii) sales of other assets not in excess of $250,000 in the
aggregate);
(m) shall not make any capital contributions to, or investments in, any
other person;
(n) shall not pay, discharge or satisfy any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than (i) the payment, discharge or satisfaction,
in the ordinary course of business consistent with past practice or in
accordance with their terms, of claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise) reflected or reserved
against in, or contemplated by, in the case of T Cell, the Q-1 1998 T Cell
Financial Statements or the T Cell SEC Reports and, in the case of VRI, the Q-1
1998 VRI Financial Statements or the VRI SEC Reports or incurred in the ordinary
course of business consistent with past practice or pursuant to Commitments set
forth, in the case of T Cell, in Section 6.21 of the T Cell Disclosure Letter
and, in the case of VRI, in Section 5.22 of the VRI Disclosure Letter or entered
into in accordance with this Agreement or (ii) the settlement of claims and
litigation in the ordinary course of business in an amount not in excess of
$250,000;
(o) shall not authorize any capital expenditures or purchase of fixed
assets which (i) are not listed in Section 7.2(o) of the T Cell Disclosure
Letter or the VRI Disclosure Letter, as applicable, or (ii) in the aggregate,
exceed $250,000;
(p) shall not enter into any material Commitment with any of its
officers, directors, consultants or affiliates;
(q) shall use its reasonable best efforts to not do any act or omit to
do any act, or permit any act or omission to act, which will cause a material
breach of any of its material contracts, commitments or obligations;
(r) shall not acquire (by merger, consolidation, or acquisition of
stock or assets) any business or any corporation, partnership or other entity or
a division of any such business organization; and
(s) shall not take any action to accelerate the exercise date of any
outstanding option granted pursuant to its option plans, other than as a result
of the Merger.
Any request for consent under this Section 7.2 shall be, if made by VRI,
directed to Norman W. Gorin at the address set forth for T Cell in Section 10.2
hereof, with copies to Stuart M. Cable, Esq. at the address set forth for
Goodwin, Procter & Hoar LLP set forth in Section 10.2 hereof, and if made by T
Cell, directed to William A. Packer at the address set forth for VRI in Section
10.2 hereof, with copies to David E. Redlick, Esq. at the address set forth for
Hale
33
and Dorr LLP set forth in Section 10.2 hereof and any consent so requested by
either party shall not be unreasonably withheld or delayed by the other.
7.3 Meetings of Stockholders. Promptly following the execution of this
Agreement, (i) T Cell, if required by applicable law or the rules of the Nasdaq
National Market, will take all action necessary in accordance with applicable
law and its certificate of incorporation and bylaws to convene a meeting of its
stockholders as promptly as practicable to consider and vote upon the issuance
of the T Cell Common Stock and the T Cell Warrants, and (ii) VRI shall take all
action necessary in accordance with applicable law and the VRI Certificate and
the VRI Bylaws to convene a meeting of its stockholders as promptly as
practicable to consider and vote upon the adoption of this Agreement and the
approval of the Merger. The proxy statement of T Cell related to its
stockholders' meeting shall contain the recommendation of the Board of Directors
of T Cell that its stockholders approve the issuance of the T Cell Common Stock
and the T Cell Warrants, and the proxy statement of VRI related to its
stockholders' meeting shall contain the recommendation of the Board of Directors
of VRI that its stockholders approve the adoption of this Agreement and the
Merger. Notwithstanding the foregoing, VRI and T Cell shall not be required to
take such actions as are set forth in this Section 7.3 (subject to the
limitations set forth herein) if otherwise required under the applicable
fiduciary duties of the respective directors of VRI or T Cell, as determined by
such directors in good faith after consultation with and based upon the advice
of their respective outside legal counsel. Each of VRI and T Cell, subject to
and in accordance with applicable law, shall use their respective reasonable
best efforts to obtain such approval described in this Section 7.3, including
without limitation, by timely mailing the Proxy Statement (as defined in Section
7.10 hereof) contained in the Form S-4 (as defined in Section 7.10 hereof) to
their respective stockholders. VRI and T Cell shall coordinate and cooperate
with each other with respect to the timing of their respective stockholders'
meetings and shall use their reasonable best efforts to hold such meetings on
the same day.
7.4 Reorganization. From and after the date hereof, none of T Cell,
Acquisition Sub or VRI or their respective affiliates shall knowingly take any
action, or knowingly fail to take any action, whether before or after the
Effective Time, that would cause the Merger not to qualify as a "reorganization"
within the meaning of Section 368 of the Code.
7.5 Board of Directors. At or prior to the Effective Time, T Cell shall
take all action necessary in accordance with applicable law and the T Cell
Certificate and the T Cell Bylaws to fix the number of members of its Board of
Directors at seven. At the Effective Time, three of the directors of T Cell
shall be Frederick W. Kyle, John Littlechild and J. Barrie Ward and the
remaining four shall be selected by the Board of Directors of T Cell among its
current members.
7.6 Listing Application. T Cell and VRI shall cooperate and promptly
prepare and submit to the Nasdaq National Market all reports, applications and
other documents that may be necessary or desirable to enable all of the shares
of T Cell Common Stock that will be outstanding or will be reserved for issuance
at the Effective Time and the associated Preferred Stock Rights to be listed for
trading on the Nasdaq National Market. Each of T Cell and VRI shall furnish all
information about itself and its businesses and operations and all necessary
34
financial information to the other as the other may reasonably request in
connection with the Nasdaq National Market listing process. T Cell and VRI agree
to correct any information provided by it for use in the Nasdaq National Market
listing process if and to the extent that such information shall have become
false or misleading in any material respect. T Cell and VRI will advise and
deliver copies (if any) to the other parties, promptly after it receives notice
thereof, of any request by the Nasdaq National Market for amendment of any
submitted materials or comments thereon and responses thereto or requests by the
Nasdaq National Market for additional information.
7.7 Filings; Other Action. Subject to the terms and conditions herein
provided, VRI, T Cell and Acquisition Sub shall (a) determine whether any
filings under the HSR Act are required in connection with the Merger, (b) to the
extent that any filings under the HSR Act are required, promptly make their
respective filings (and cooperate with any Principal Stockholders who are
required to make any such filings) and thereafter make any other required
submissions under the HSR Act with respect to the Merger, and (c) use their
reasonable best efforts to cooperate with one another in (i) determining which
filings are required to be made prior to the Effective Time with, and which
consents, approvals, permits or authorizations are required to be obtained prior
to the Effective Time from, governmental or regulatory authorities of the United
States, the several states, and foreign jurisdictions and any third parties in
connection with the execution and delivery of this Agreement and consummation of
the Merger; (ii) timely making all such filings and timely seeking all such
consents, approvals, permits or authorizations; (iii) obtaining in writing any
consents required from third parties to effectuate the Merger in form and
substance reasonably satisfactory to each of VRI, T Cell and Acquisition Sub;
and (iv) taking, or causing to be taken, all other action and doing, or causing
to be done, all other things necessary, proper or appropriate to consummate and
make effective the transactions contemplated by this Agreement, including the
assumption, in writing, by T Cell of the agreements identified in Section 7.7 of
the VRI Disclosure Letter. If, at any time after the Effective Time, any further
action is necessary or desirable to carry out the purpose of this Agreement, the
proper officers and directors of T Cell, Acquisition Sub and VRI shall take all
such necessary action.
7.8 Access to Information.
(a) Upon reasonable notice to the other, T Cell, Acquisition Sub, and
VRI shall (and shall cause their respective subsidiaries to) afford to the
officers, employees, accountants, counsel and other representatives of the
others, reasonable access, during normal business hours during the period from
the date hereof to the Effective Time, to all its properties, books, contracts,
Commitments and records and permit such persons to make such inspections as they
may reasonably require, and during such period, each of T Cell, Acquisition Sub,
and VRI shall (and cause their respective subsidiaries to) furnish promptly to
the others all information concerning its businesses, properties, personnel and
accountants as the others may reasonably request.
(b) All such information shall be deemed "Proprietary Information" as
such term is defined in the Confidential Disclosure Agreement, except as
otherwise provided in such Confidential Disclosure Agreement.
35
7.9 Publicity. T Cell and VRI shall consult with each other before issuing
any press release or otherwise making any public statements with respect to this
Agreement or any transaction contemplated hereby or thereby and shall not issue
any such press release or make any such public statement without the prior
consent of the other parties, which consent shall not be unreasonably withheld
or delayed; provided, however, that a party may, without the prior consent of
the other parties, issue such press release or make such public statement as may
be required by law or the applicable rules of any stock exchange or the Nasdaq
National Market if it has used its reasonable best efforts to consult with the
other parties and to obtain such parties' consent but has been unable to do so
in a timely manner.
7.10 Proxy Statement; Registration Statements.
(a) T Cell, Acquisition Sub, and VRI shall prepare and file with the
SEC (with appropriate requests for confidential treatment, unless the parties
hereto otherwise agree) under the Exchange Act, a joint proxy
statement/prospectus and forms of proxies (such joint proxy statement/prospectus
and forms of proxy, together with any amendments to supplements thereto, the
"Proxy Statement") relating to the stockholder meetings of each of VRI and T
Cell and the vote of the stockholders of VRI and T Cell with respect to the
transactions contemplated by this Agreement. Promptly after clearance by the SEC
of the Proxy Statement, T Cell shall prepare and thereafter file with the SEC
under the Securities Act a registration statement on Form S-4 (such registration
statement, together with any amendments or supplements thereto, the "Form S-4"),
in which the Proxy Statement will be included as a prospectus, in connection
with the registration under the Securities Act of (a) the shares of T Cell
Common Stock (i) to be issued to the stockholders of VRI in the Merger and (ii)
issuable upon exercise of the T Cell Warrants and (b) the T Cell Warrants (such
shares of T Cell Common Stock and T Cell Warrants being referred to herein
collectively as the "Registered Securities") and the associated Preferred Stock
Rights. Either as part of or separately from, but as soon as practicable and in
any event no later than the filing of the Form S-4, T Cell shall prepare and
file with the SEC under the Securities Act the New Warrants Shelf and the Old
Warrants Shelf. T Cell and VRI will cause the Proxy Statement and the Form S-4,
and T Cell will cause the New Warrants Shelf and the Old Warrants Shelf to
comply as to form in all material respects with the applicable provisions of the
Securities Act and the Exchange Act. Each of T Cell, on the one hand, and VRI,
on the other hand, shall furnish all information about itself and its business
and operations and all necessary financial information to the other as the other
may reasonably request in connection with the preparation of the Proxy
Statement, the Form S-4, the New Warrants Shelf and the Old Warrants Shelf. T
Cell shall use its reasonable best efforts, and VRI will cooperate with it, to
have the Form S-4, the New Warrants Shelf and the Old Warrants Shelf declared
effective by the SEC as promptly as practicable (including clearing the Proxy
Statement with the SEC). Each of T Cell and VRI agrees promptly to correct any
information provided by it for use in the Proxy Statement, the Form S-4, the New
Warrants Shelf and the Old Warrants Shelf if and to the extent that such
information shall have become false or misleading in any material respect, and
each of the parties hereto further agrees to take all steps necessary to amend
or supplement the Proxy Statement and, in the case of T Cell, the Form S-4, the
New Warrants Shelf and the Old Warrants Shelf, and to cause, the Proxy Statement
and, in the case of T Cell, the Form S-4, the New Warrants Shelf and the Old
Warrants Shelf, as so amended or supplemented to be
36
filed with the SEC and to be disseminated, in each case as and to the extent
required by applicable federal, and state securities laws and the DGCL. Each of
T Cell and VRI agrees that the information provided by it for inclusion in the
Proxy Statement, the Form S-4, the New Warrants Shelf and the Old Warrants Shelf
and each amendment or supplement thereto, at the time of mailing of the Proxy
Statement or effectiveness of the Form S-4, New Warrants Shelf or Old Warrants
Shelf, will not include any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Each of T Cell and VRI will advise the other parties, and
deliver copies (if any) to them, promptly after receipt thereof, of (i) any
request by or correspondence or communication from the SEC with respect to the
Proxy Statement, the Form S-4, the New Warrants Shelf and the Old Warrants
Shelf, (ii) any responses thereto and (iii) notice of the time when the Form
S-4, the New Warrants Shelf and the Old Warrants Shelf have become effective or
any supplement or amendment has been filed, the issuance of any stop order, and
the suspension of the qualification of the Registered Securities for offering or
sale in any jurisdiction.
(b) Upon reasonable notice from the other, T Cell and VRI shall use
their respective reasonable best efforts to cause Price Waterhouse LLP and
Richard A. Eisner & Company LLP, respectively, to deliver to VRI or T Cell, as
the case may be, a letter, dated within two business days of the Effective Date
of the S-4 Registration Statement, covering such matters as are requested by VRI
or T Cell, as the case may be, and as are customarily addressed in accountant's
"comfort" letters.
7.11 Further Action. Each party hereto shall, subject to the fulfillment at
or before the Effective Time of each of the conditions of performance set forth
herein or the waiver thereof, perform such further acts and execute such
documents as may reasonably be required to effect the Merger and the
transactions contemplated by this Agreement.
7.12 Affiliates of VRI.
(a) At least 10 days prior to the Closing Date, VRI shall deliver to T
Cell a list of names and addresses of any persons in addition to the Principal
Stockholders who, in VRI's reasonable judgment, at the time the Merger is
submitted for a vote to the VRI stockholders, will be "affiliates" (each such
person, an "Affiliate") of VRI within the meaning of Rule 145. VRI shall provide
T Cell such documents and information as T Cell shall reasonably request for
purposes of reviewing such list. VRI shall use its reasonable best efforts to
deliver or cause to be delivered to T Cell and Acquisition Sub, prior to the
Closing Date, from each of the Affiliates of VRI identified in the foregoing
list, an affiliate letter reasonably satisfactory to T Cell and its counsel
confirming that the affiliate will not offer, sell, pledge, or otherwise
transfer any shares of T Cell Common Stock (including shares of T Cell Common
Stock issuable upon exercise of the T Cell Warrants) or any T Cell Warrant
except in compliance with the requirements of the Securities Act.
(b) T Cell and Acquisition Sub shall each file the reports required to
be filed by it under the Exchange Act and the rules and regulations adopted by
the SEC thereunder, and shall use their best efforts to take such further action
as any Affiliate of VRI may
37
reasonably request, all to the extent required from time to time to enable such
Affiliate to sell shares of T Cell Common Stock received by such Affiliate in
the Merger without registration under the Securities Act pursuant to (i) Rule
145(d)(1) or (ii) any successor rule or regulation hereafter adopted by the SEC.
(c) As soon a practicable, and in any event not later than the filing
of the Form S-4 (as defined in Section 7.10 herein), T Cell shall use its
reasonable best efforts to prepare and cause to be filed a registration
statement on Form S-3 (the "Resale Shelf") covering the resale on a continuous
basis under Rule 415 under the Securities Act by Affiliates of VRI, including
distributees of any such Affiliates which are partnerships, of (i) shares of T
Cell Common Stock issued to such Affiliates in the Merger, (ii) T Cell Warrants
issued to such Affiliates in the Merger and (iii) shares of T Cell Common Stock
issuable to such Affiliates upon exercise of the T Cell Warrants. T Cell shall
use its reasonable best efforts to have the Resale Shelf declared effective by
the SEC on or before the Effective Time or as soon as practicable thereafter and
to keep such Resale Shelf effective until the later of (x) the second
anniversary of the Effective Date, or (y) such time as all of the shares of T
Cell Common Stock and T Cell Warrants covered thereby may be sold pursuant to
Rule 144(k) under The Securities Act. T Cell shall be entitled to elect that the
Resale Shelf not be usable and require each person seeking to sell any shares of
T Cell Common Stock or T Cell Warrants pursuant to the Resale Shelf to suspend
sales or purchases pursuant to any prospectus contained therein, for a
reasonable period of time, but not in excess of 30 days (a "Blackout Period"),
if T Cell determines in good faith that the sale of such securities (or the use
of the Resale Shelf or any related prospectus) would interfere with any pending
materials acquisition, material corporate reorganization, material financing or
any other material corporate development involving T Cell or any of its
subsidiaries or would require premature disclosure thereof. T Cell agrees to use
its reasonable best efforts to lift such suspension as soon as practicable after
the commencement of a Blackout Period. T Cell shall promptly give each person
seeking to sell or purchase securities pursuant to the Resale Shelf written
notice of such determination and an approximation of the anticipated delay;
provided however, that the aggregate number of days included in all Blackout
Periods during any consecutive 12 months shall not exceed 90 days. The Resale
Shelf may be combined with the Form S-4, the New Warrants Shelf or the Old
Warrants Shelf at the option of T Cell with the advice of counsel.
7.13 Expenses. Subject to the provisions of Section 9.3, all costs and
expenses incurred in connection with this Agreement, the Merger and the Proxy
Agreements and the transactions contemplated hereby and thereby shall be paid by
the party incurring such expenses, except that (a) the filing fees in connection
with the filing of the Proxy Statement and the Form S-4 with the SEC, (b) the
filing fee in connection with the listing of the shares of T Cell Common Stock
on the Nasdaq National Market, if any, (c) the expenses incurred for printing
the Form S-4 and the Proxy Statement, (d) the filing fee(s) in connection with
the filing(s), if any, under the HSR Act, and (e) the expenses incurred, if any,
in connection with Section 7.16, shall be shared equally by VRI, on the one
hand, and T Cell, on the other hand. Subject to the provisions of Section 9.3,
all costs and expenses for professional services rendered in connection with the
transactions contemplated by this Agreement including, but not limited to,
investment banking and legal services, will be paid by each party incurring such
costs and expenses.
38
7.14 Indemnification.
(a) The Surviving Corporation Certificate and the Surviving Corporation
By-Laws contain provisions with respect to indemnification, which provisions
shall not be amended, repealed or otherwise modified for a period of ten years
from the Effective Time in any manner that would adversely affect the rights
thereunder of individuals who at or before the Effective Time were directors,
officers, employees or agents of VRI, unless such modification is required by
law.
(b) VRI shall, to the fullest extent permitted under the VRI
Certificate or VRI By-Laws and regardless of whether the Merger becomes
effective, indemnify and hold harmless, and after the Effective Time, T Cell and
the Surviving Corporation shall, to the fullest extent permitted under the
Surviving Corporation Certificate or the Surviving Corporation By-Laws,
indemnify and hold harmless, each present and former director, officer or
employee of VRI (collectively, the "Indemnified Parties") against any costs or
expenses (including attorneys fees), judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any claim, action,
suit, proceeding or investigation, whether civil, criminal, administrative or
investigative, (i) arising out of or pertaining to the transactions contemplated
by this Agreement or (ii) otherwise with respect to any acts or omissions
occurring at or prior to the Effective Time, to the same extent as provided in
the VRI Certificate or the VRI By-Laws or any applicable contract or agreement
as in effect on the date hereof, in each case for a period of ten years after
the date hereof. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (x) VRI, T
Cell and the Surviving Corporation after the Effective Time, shall promptly pay
expenses in advance of the final disposition of any claim, suit, proceeding or
investigation to each Indemnified Party to the fullest extent permitted by law,
(y) at its election, VRI, T Cell and the Surviving Corporation after the
Effective Time, shall be entitled to control the defense of any claim, suit,
proceeding or investigation, provided that VRI, T Cell or the Surviving
Corporation shall acknowledge liability to the Indemnified Party for such claim,
suit, proceeding or investigation under this Section 7.14, and, to the extent
VRI, T Cell or the Surviving Corporation so elects, it may select the counsel
for such purpose (provided that such counsel shall be reasonably satisfactory to
the Indemnified Party and that the Indemnified Party shall have the right to
employ separate counsel, but the fees and expenses of such counsel shall be at
the Indemnified Party's expense unless in such claim or action there is, under
applicable standards of professional conduct, a conflict between the positions
of VRI, T Cell, or the Surviving Corporation, as the case may be, and the
Indemnified Party, or between the Indemnified Party and other Indemnified
Parties that would preclude or render inadvisable joint or multiple
representation of such parties, in which case if the Indemnified Party notifies
VRI, T Cell or the Surviving Corporation, as the case may be, VRI, T Cell or the
Surviving Corporation, as the case may be, shall not have the right to assume
such defense of such action on behalf of the Indemnified Party; provided,
however, that VRI, T Cell or the Surviving Corporation, as the case may be,
shall not be required to pay the fees and expenses of more than one separate
counsel for all Indemnified Parties unless there is under applicable standards
of professional conduct, a conflict between the positions of any two or more
Indemnified Parties that would preclude or render inadvisable joint or multiple
representation of such parties). Any Indemnified Party wishing to claim
indemnification under this Section 7.14,
39
upon learning of any such claim, action, suit, proceeding or investigation,
shall notify VRI, and after the Effective Time, T Cell and the Surviving
Corporation, thereof, provided that the failure to so notify shall not affect
the obligations of VRI, T Cell or the Surviving Corporation except to the extent
such failure to notify materially prejudices such party; and (z) the Indemnified
Parties, T Cell and the Surviving Corporation will cooperate in the defense of
any such matter; provided, however, that neither T Cell nor the Surviving
Corporation shall be liable for any settlement effected without its written
consent (which consent shall not be unreasonably withheld) and neither T Cell or
the Surviving Corporation shall enter into a settlement without the consent of
the Indemnified Party unless such settlement contains complete exoneration of
the Indemnified Party; and provided; further, that in the event that any claim
or claims for indemnification are asserted or made within such ten-year period,
all rights to indemnification in respect of any such claim or claims shall
continue until the disposition of any and all such claims.
(c) At or prior to the Effective Time, T Cell shall purchase or keep in
effect directors' and officers' liability insurance coverage for VRI's directors
and officers in a form reasonably acceptable to VRI which shall provide such
directors and officers with so-called tail or other coverage for six years
following the Effective Time of not less than the existing coverage under, and
have other terms not substantially less favorable to the insured persons than,
the directors' and officers' liability insurance coverage presently maintained
by VRI.
(d) This Section 7.14 is intended for the irrevocable benefit of, and
to grant third party rights to, the Indemnified Parties (as contemplated by
Section 10.3) and shall be binding on all successors and assigns of T Cell and
the Surviving Corporation. Each of the Indemnified Parties shall be entitled to
enforce the covenants contained in this Section 7.14. The provisions for
indemnification contained in this Section 7.14 are not intended to be exclusive
and are without prejudice to any other rights to indemnification or advancement
of funds which any Indemnified Party may otherwise have.
(e) In the event T Cell, the Surviving Corporation or any of their
successors or assigns (i) consolidates with or merges into any other person or
entity and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers or conveys all or substantially
all of its properties and assets to any person or entity, then, and in each such
case, proper provision shall be made so that the successors and assigns of T
Cell or the Surviving Corporation, as the case may be, assume the obligations
set forth in this Section 7.14.
7.15 Acknowledgment of Receipt of Information. T Cell and VRI each
acknowledge receipt of the documents and other information which the other has
represented herein as having been delivered in connection with this agreement.
ARTICLE 8. CONDITIONS
8.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger and the other
transactions contemplated herein shall be subject to the fulfillment at or prior
to the Closing Date of the following conditions,
40
any or all of which may be waived, in whole or in part by the parties hereto, to
the extent permitted by applicable law:
(a) Stockholder Approvals. This Agreement and the Merger shall have
been approved and adopted by the requisite vote of the stockholders of VRI and
the issuance of the T Cell Common Stock and the T Cell Warrants in the Merger
pursuant to this Agreement shall have been approved by the requisite vote of the
stockholders of T Cell.
(b) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect, nor shall any proceeding brought
by any administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, seeking any of the foregoing be pending;
and there shall not be any action taken, or any law enacted, entered, enforced
or deemed applicable to the Merger, which makes the consummation of the Merger
illegal.
(c) Form S-4. The Form S-4 shall have been declared effective by the
SEC under the Securities Act, and no stop order suspending the effectiveness of
the Form S-4 shall have been issued by the SEC, and no proceedings for that
purpose shall have been initiated or, to the knowledge of T Cell or VRI,
threatened by the SEC.
(d) Listing. T Cell shall have obtained the approval for the listing of
the shares of the T Cell Common Stock and the Warrant Shares issuable in the
Merger or upon exercise of the T Cell Warrants on the Nasdaq National Market,
subject to official notice of issuance.
(e) Composition of Board of Directors. The Board of Directors of T Cell
shall have been fixed in the manner provided in Section 7.5 and shall consist of
the directors named therein.
(f) Relative Value of T Cell Warrants. T Cell shall have received from
Lehman and VRI shall have received from H&Q an analysis to the effect that based
on standard valuation methodologies and reasonable assumptions the value of the
T Cell Warrants to be issued to holders of VRI Common Stock in the Merger does
not exceed 20% of the total value of the Merger Consideration, provided that in
the event Lehman and H&Q are not prepared to deliver such analyses, this
condition shall be deemed to have been satisfied if the Merger is restructured
into a Direct Acquisition pursuant to Section 10.3(b), it being agreed that such
restructuring can be triggered by Acquisition Sub or VRI after the expiration of
the Election Period (as defined in Section 10.3(b)) if necessary to allow Hale
and Dorr LLP and Goodwin, Procter & Hoar LLP to issue the opinions described in
Sections 8.2(g) and 8.3(f).
(g) HSR Act. The waiting period applicable to consummation of the
Merger under the HSR Act, if applicable, shall have expired or been terminated.
41
8.2 Conditions to Obligations of VRI to Effect the Merger. The obligation
of VRI to effect the Merger and the other transactions contemplated hereby shall
be subject to the fulfillment at or prior to the Closing Date of the following
conditions, unless waived by VRI:
(a) Representations and Warranties. Each of the representations and
warranties of T Cell contained in this Agreement shall have been true and
correct when made and shall be true and correct as though made on and as of the
Closing Date except (i) for any representations and warranties made as of a
specific date, in which case such representations and warranties shall be true
and correct in all material respects as of such date or (ii) where the failure
of such representations and warranties to be true and correct would not
reasonably be expected to have a T Cell Material Adverse Effect.
(b) Performance of Obligations. T Cell and Acquisition Sub shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by T Cell or
Acquisition Sub, at or prior to the Closing.
(c) Certificate from Officers. Each of T Cell and Acquisition Sub shall
have delivered to VRI a certificate of its respective President or Chief
Financial Officer dated the Closing Date to the effect that the statements set
forth in paragraphs (a), (b) and (e) of this Section 8.2 with respect to T Cell
and Acquisition Sub, as the case may be, are true and correct.
(d) Consents, Approvals, etc. All consents, authorizations, orders and
approvals of or filings or registrations with any governmental commissions,
boards, other regulatory bodies or third parties required to be made or obtained
by T Cell including, but not limited to, third party consents under assignment
or change of control provisions, in connection with the execution, delivery and
performance of this Agreement and the Merger shall have been obtained or made
except where the failure to have obtained such consents, authorizations, orders
or approvals or to have made such filings or registrations would not,
individually or in the aggregate, reasonably be expected to have a T Cell
Material Adverse Effect.
(e) Absence of Changes. From the date of this Agreement through the
Closing Date, there shall not have occurred any changes concerning T Cell that,
when combined with all other changes, have had or would reasonably be expected
likely to have a T Cell Material Adverse Effect.
(f) Employment Agreement. The Employee Agreement between J. Barrie Ward
and T Cell shall be effective in accordance with its terms.
(g) Tax Opinion. VRI shall have received a written opinion from Hale
and Dorr LLP, in form and substance reasonably satisfactory to VRI, to the
effect that the Merger will constitute a tax-free reorganization within the
meaning of Section 368 of the Code.
42
8.3 Conditions to Obligation of T Cell and Acquisition Sub to Effect the
Merger. The obligations of T Cell and Acquisition Sub to effect the Merger and
the other transactions contemplated hereby shall be subject to the fulfillment
at or prior to the Closing Date of the following conditions, unless waived by T
Cell and Acquisition Sub:
(a) Representations and Warranties. Each of the representations and
warranties of VRI contained in this Agreement shall have been true and correct
when made and shall be true and correct as though made on and as of the Closing
Date except (i) for any representations and warranties made as of a specific
date, in which case such representations and warranties shall be true and
correct in all material respects as of such date or (ii) where the failure of
such representations and warranties to be true and correct would not reasonably
be expected to have a VRI Material Adverse Effect.
(b) Performance of Obligations. VRI shall have performed or complied in
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by VRI, at or prior to the Closing.
(c) Absence of Changes. From the date of this Agreement through the
Closing Date, there shall not have occurred any changes concerning VRI that,
when combined with all other changes, have had or would reasonably be expected
to have a VRI Material Adverse Effect.
(d) Certificate from Officers. VRI shall have delivered to T Cell and
Acquisition Sub a certificate of the President and the Chief Financial Officer
of VRI dated the Closing Date to the effect that the statements set forth in
paragraphs (a), (b) and (c) above of this Section 8.3 are true and correct.
(e) Consents, Approvals, Etc. All consents, authorizations, orders and
approvals of or filings or registrations with any governmental commissions,
boards, other regulatory bodies or third parties required to be made or obtained
by VRI including, but not limited to, third party consents under assignment or
change of control provisions, in connection with the execution, delivery and
performance of this Agreement and the Merger shall have been obtained or made
except where the failure to have obtained such consents, authorizations, orders
or approvals or to have made such filings or registrations would not,
individually or in the aggregate, reasonably be expected to have a VRI Material
Adverse Effect. (f) Tax Opinion. T Cell shall have received a written opinion
from Goodwin, Procter & Hoar LLP, in form and substance reasonably satisfactory
to T Cell, to the effect that the Merger will constitute a tax-free
reorganization within the meaning of Section 368 of the Code.
ARTICLE 9. TERMINATION; AMENDMENT; WAIVER
9.1 Termination. This Agreement may be terminated and abandoned at any time
prior to the Effective Time, whether before or after approval of matters
presented in connection with the Merger by the stockholders of VRI or T Cell:
43
(a) by mutual written consent of T Cell and VRI;
(b) by either T Cell or VRI, if any United States federal or state
court of competent jurisdiction or other governmental entity shall have issued a
final order, decree or ruling or taken any other action permanently enjoining,
restraining or otherwise prohibiting the Merger and such order, decree, ruling
or other action shall have become final and nonappealable, provided that the
party seeking to terminate shall have used its reasonable best efforts to appeal
such order, decree, ruling or other action;
(c) by either T Cell or VRI, if the Merger shall not have been
consummated on or before October 31, 1998 (the "Drop Dead Date") (other than due
to the failure of the party seeking to terminate this Agreement to perform any
of its material obligations under this Agreement required to be performed at or
prior to the Effective Time); provided, however, that if the Proxy Statement is
not mailed to stockholders of VRI and T Cell on or before September 15, 1998,
then the Drop Dead Date shall automatically be extended to November 30, 1998);
(d) by T Cell, if VRI shall have (i) withdrawn, modified or amended in
any respect adverse to T Cell or Acquisition Sub its approval or recommendation
to the stockholders of VRI for adoption of this Agreement and approval of the
Merger, (ii) failed to include such recommendation in the Proxy Statement, (iii)
recommended any Acquisition Proposal from a person other than T Cell or
Acquisition Sub, (iv) publicly expressed no opinion and remained neutral toward
any Acquisition Proposal, or (v) resolved or agreed to do any of the foregoing,
provided that in any such case, VRI shall pay T Cell the Termination Fee (as
hereinafter defined) in accordance with Section 9.3(a);
(e) by VRI, if, notwithstanding the provisions of Section 7.1, the
Board of Directors of VRI determines in good faith, after consultation with and
based on the advice of VRI Legal Counsel, that such action is necessary in order
for the Board of Directors of VRI to comply with the directors' fiduciary duties
to stockholders under applicable law and the Board of Directors of VRI
authorizes or desires to authorize VRI to execute an agreement (a "Superior
Proposal Agreement") providing for a Superior Proposal (as hereinafter defined),
provided that VRI has, immediately prior to the termination of this Agreement
and/or the execution of such Superior Proposal Agreement, paid the Termination
Fee in accordance with 9.3(a). For purposes of this Agreement, a "Superior
Proposal" means any bona fide Acquisition Proposal, the terms of which the Board
of Directors of VRI determines in its good faith judgment, after being advised
by H&Q or another financial advisor of national standing, that such Acquisition
Proposal is more favorable from a financial point of view to VRI's stockholders
than the Merger;
(f) by VRI, if T Cell or Acquisition Sub has failed to perform in any
material respect any of its obligations required to be performed by them under
this Agreement and such failure continues for more than 30 days after notice
thereof unless failure to so perform has been caused by or results from a breach
of this Agreement by VRI;
44
(g) by T Cell, if VRI shall have failed to perform in any material
respect any of its obligations required to be performed by it under this
Agreement and such failure continues for more than 30 days after notice unless
failure to so perform has been caused by or results from a breach of this
Agreement by T Cell or Acquisition Sub;
(h) by VRI, if T Cell shall have (i) withdrawn, modified or amended in
any respect adverse to VRI its approval or recommendation to the stockholders of
T Cell for approval of the issuance of T Cell Common Stock and T Cell Warrants
in the Merger pursuant to this Agreement, or (ii) failed to include such
recommendation in the Proxy Statement, provided that in such case T Cell shall
pay VRI its out-of-pocket expenses in accordance with Section 9.3(b).
9.2 Effect of Termination. In the event of termination of this Agreement by
either VRI or T Cell as provided in Section 9.1, this Agreement shall forthwith
become void and have no effect, without any liability or obligation on the part
of T Cell, Acquisition Sub or VRI, other than the provisions of Section 7.8(b),
this Section 9.2, Sections 7.14, 9.3 and 10.4. Nothing contained in this Section
9.2 shall relieve any party of liability for any willful breach of the
representations, warranties, covenants or agreements set forth in this Agreement
or any of the Proxy Agreements that occurs prior to such termination.
9.3 Termination Fees and Expenses.
(a) As a condition to the willingness of T Cell and Acquisition Sub to
enter into this Agreement and to compensate T Cell and Acquisition Sub for
entering into this Agreement, taking action to consummate the transactions
hereunder and thereunder and incurring the costs and expense related thereto, T
Cell, Acquisition Sub and VRI agree that in the event VRI terminates this
Agreement pursuant to Section 9.1(e), or T Cell or Acquisition Sub terminates
this Agreement pursuant to Section 9.1(d), VRI shall immediately pay T Cell an
amount (the "Termination Fee") in cash (payable by wire transfer of immediately
available funds to an account designated by T Cell) equal to the sum of (i)
$2,750,000, plus (ii) all documented reasonable out-of-pocket expenses actually
incurred by T Cell and Acquisition Sub prior to such termination in connection
with the negotiation and preparation of this Agreement and the transactions,
consents and filings contemplated hereby and thereby, including, but not limited
to, all attorneys' and accountants' fees and expenses, filing fees, printing
expenses, and expenses incurred by T Cell and Acquisition Sub in connection with
the Proxy Statement, the Form S-4, the New Warrants Shelf, the Old Warrants
Shelf and the Resale Shelf; provided, however, that the aggregate amount of
expenses required to be reimbursed by VRI pursuant to this Section 9.3(a) shall
not exceed $600,000.
(b) In the event that VRI terminates this Agreement pursuant to Section
9.3(h), T Cell shall immediately pay VRI an amount in cash equal to VRI's
documented reasonable out-of-pocket fees and expenses actually incurred by it
prior to such termination in connection with the negotiation and preparation of
this Agreement and the transactions, consents and filings contemplated hereby
and thereby, including, but not limited to, all attorneys' and accountants' fees
and expenses, filing fees, printing expenses and expenses incurred by VRI in
connection with the Proxy Statement; provided, however, that the
45
aggregate amount of expenses required to be reimbursed by T Cell pursuant to
this Section 9.3(b) shall not exceed $600,000.
9.4 Extension; Waiver. At any time prior to the Effective Time, the parties
may (a) extend the time for the performance of any of the obligations or other
acts of the other parties, (b) waive any inaccuracies in the representations and
warranties contained in this Agreement or in any document delivered pursuant to
this Agreement or (c) subject to the first sentence of Section 10.5, waive
compliance with any of the agreements or conditions contained in this Agreement.
Any agreement on the part of a party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party. The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise shall not constitute a waiver of such rights.
ARTICLE 10. GENERAL PROVISIONS
10.1 Nonsurvival of Representations, Warranties and Agreements. All
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall not survive the Merger,
provided, however, that the agreements contained in Article 4, Sections 7.4,
7.11, 7.12, 7.13, 7.14 and this Article 10 shall survive the Merger.
10.2 Notices. Any notice required to be given hereunder shall be in writing
and shall be sent by facsimile transmission and confirmed by courier service
(with proof of service), hand delivery or certified or registered mail (return
receipt requested and first-class postage prepaid) and addressed as follows:
If to T Cell or Acquisition Sub:
--------------------------------
T Cell Sciences, Inc.
119 Fourth Avenue
Needham, MA 02194
Attention: Una S. Ryan, Ph.D.
President and CEO
Fax: (781) 433-3191
With copies to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Attention: Stuart M. Cable, Esq.
Fax: (617) 523-1231
46
If to VRI:
----------
Virus Research Institute, Inc.
61 Moulton Street
Cambridge, MA 02138
Attention: J. Barrie Ward
Chairman and CEO
Fax: (617) 576-2605
With copies to:
Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attention: David E. Redlick, Esq.
Fax: (617) 526-5000
or to such other address as any party shall specify by written notice so
given, and such notice shall be deemed to have been delivered as of the date so
delivered.
10.3 Assignment; Binding Effect; Benefit.
(a) Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned prior to the Closing by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. Notwithstanding anything
contained in this Agreement to the contrary, except for the provisions of
Article 4 and Sections 7.4, 7.11, 7.12, 7.13 and 7.14 (including for the benefit
of the Indemnified Parties), nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective heirs, successors, executors, administrators and assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
(b) Notwithstanding any contrary provision of this Agreement at the
election of Acquisition Sub made not later than the 30th day after the date
hereof (the "Election Period"), which election can be made by Acquisition Sub in
its sole discretion, Acquisition Sub may assign all of its rights and
obligations under this Agreement to T Cell, whereby T Cell will assume all such
obligations and the Merger shall mean the merger of VRI with and into T Cell, as
the Surviving Corporation, (a "Direct Acquisition") in which event, upon the
effective time of the Direct Acquisition, the separate corporate existence of
VRI shall cease and the charter, bylaws, directors and officers of T Cell shall
be the charter, bylaws, directors and officers of the Surviving Corporation as
provided by the terms of this Agreement. If Acquisition Sub and T Cell elect to
restructure the Merger into a Direct Acquisition, T Cell and VRI shall cooperate
in good faith to make all amendments to this Agreement reasonably necessary to
preserve to the greatest extent reasonably possible the substantive rights of
all parties hereunder in spite of the change in structure and to allow the
consummation of the
47
Direct Acquisition with the minimum disruption to the businesses and operations
of each of T Cell and VRI.
10.4 Entire Agreement. This Agreement, the Exhibits, the VRI Disclosure
Letter and the T Cell Disclosure Letter constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings among the parties with respect thereto, except
that the Confidential Disclosure Agreement shall remain in effect and shall be
binding upon the parties hereto and thereto in accordance with its respective
terms; provided, however, to the extent, any of the terms of the Confidential
Disclosure Agreement are inconsistent with this Agreement, this Agreement shall
be controlling. No addition to or modification of any provision of this
Agreement shall be binding upon any party hereto unless made in writing and
signed by all parties hereto.
10.5 Amendment. This Agreement may be amended by the parties hereto, by
action taken by their respective boards of directors, at any time before or
after approval of matters presented in connection with the Merger by the
stockholders of VRI and T Cell, but after any such stockholder approval, no
amendment shall be made which by law requires the further approval of
stockholders without obtaining such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
10.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to its rules of
conflict of laws. VRI, T Cell and Acquisition Sub hereby irrevocably and
unconditionally consent to submit to the exclusive jurisdiction of the courts of
the Commonwealth of Massachusetts and of the United States of America located in
the Commonwealth of Massachusetts (the "Massachusetts Courts") for any
litigation arising out of or relating to this Agreement and the transactions
contemplated hereby (and agrees not to commence any litigation relating thereto
except in such courts), waive any objection to the laying of venue of any such
litigation in the Massachusetts Courts and agree not to plead or claim in any
Massachusetts Court that such litigation brought therein has been brought in any
inconvenient forum.
10.7 Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts, each of which so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.
10.8 Headings. Headings of the Articles and Sections of this Agreement are
for the convenience of the parties only, and shall be given no substantive or
interpretive effect whatsoever.
10.9 Interpretation. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and vice
versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa.
48
10.10 Waivers. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
10.11 Incorporation. The VRI Disclosure Letter and the T Cell Disclosure
Letter and all Exhibits and Schedules attached hereto and thereto and referred
to herein and therein are hereby incorporated herein and made a part hereof for
all purposes as if fully set forth herein.
10.12 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
10.13 Enforcement of Agreement. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with its specific terms or was otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions and other equitable remedies to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any Massachusetts Court, this being in addition to any other remedy to which
they are entitled at law or in equity. Any requirements for the securing or
posting of any bond with respect to such remedy are hereby waived by each of the
parties hereto.
10.14 Certain Definitions.
(a) As used in this Agreement, the word "person" means an individual, a
corporation, a partnership, an association, a joint-stock company, a trust, a
limited liability company, any unincorporated organization or any other entity.
(b) As used in this Agreement, the word "affiliate" shall have the
meaning set forth in Rule 12b-2 of the Exchange Act.
(c) As used in this Agreement, the phrase "transactions contemplated by
this Agreement" shall include without limitation, each act and transaction to be
performed or completed under this Agreement or any of the Proxy Agreements by
any party hereto or thereto.
(d) References to a party's "knowledge" in this Agreement means the
actual knowledge of the directors and officers of that party who are required to
file reports under Section 16(a) of the Exchange Act.
49
{Signature Page to Agreement and Plan of Merger}
IN WITNESS WHEREOF, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf on the day and year first written
above.
ATTEST: T CELL SCIENCES, INC.
By: /s/ Norman W. Gorin By: /s/ Una S. Ryan
------------------------------- -------------------------------
Name: Norman W. Gorin Name: Una S. Ryan
Title: Vice President and Chief Title: President and CEO
Financial Officer
ATTEST: TC MERGER CORP.
By: /s/ Norman W. Gorin By: /s/ Una S. Ryan
------------------------------ -------------------------------
Name: Norman W. Gorin Name: Una S. Ryan
Title: Vice President and Title: President and CEO
Chief Financial Officer
ATTEST: VIRUS RESEARCH INSTITUTE, INC.
By: /s/ William A. Packer By: /s/ J. Barrie Ward
------------------------------- -------------------------------
Name: William A. Packer Name: J. Barrie Ward
Title: President and Chief Title: Chairman and Chief
Financial Officer Executive Officer
EXHIBIT A (to Merger Agreement)
Principal Stockholders
Number of Shares of
VRI
Name and Address Common Stock Held
---------------- -----------------
HEALTHCARE VENTURES II, L.P. 1,324,975
1 Kendall Square
Cambridge, MA 02138
HEALTHCARE VENTURES III, L.P. 1,131,595
1 Kendall Square
Cambridge, MA 02138
HEALTHCARE VENTURES IV, L.P. 332,306
1 Kendall Square
Cambridge, MA 02138
AXIOM VENTURE PARTNERS, L.P. 229,644
City Place II
185 Asylum Street, 17th Floor
Hartford, CT 06103
J. Barrie Ward
c/o Virus Research Institute, Inc. 23,080
61 Moulton Street
Cambridge, MA 02138
William A. Packer 65,000
c/o Virus Research Institute, Inc.
61 Moulton Street
Cambridge, MA 02138
John W. Littlechild
HealthCare Ventures 0
1 Kendall Square
Cambridge, MA 02138
Alan M. Mendelson 0
c/o Axiom Venture Partners, L.P.
City Place II
185 Asylum Street, 17th Floor
Hartford, CT 06103
51
EXHIBIT B (to Merger Agreement)
================================================================================
COMMON STOCK PURCHASE WARRANT PROVISIONS
================================================================================
TABLE OF CONTENTS
Page
ARTICLE I
WARRANT CERTIFICATES .................................................... 1
Section 1.1 Form of Warrant Certificates ............................... 1
Section 1.2 Execution of Warrant Certificates .......................... 1
Section 1.3 Registration of Warrant Certificates ....................... 2
Section 1.4 Exchange and Transfer of Warrant Certificates .............. 2
Section 1.5 Lost, Stolen, Mutilated or Destroyed Warrant Certificates .. 2
Section 1.6 Cancellation of Warrant Certificates ....................... 2
ARTICLE II
WARRANT EXERCISE PRICE AND EXERCISE OF WARRANTS .......................... 3
Section 2.1 Exercise Price .............................................. 3
Section 2.2 Reservation of Common Stock ................................. 3
Section 2.3 Exercise of Warrants ........................................ 3
Section 2.4 Issuance of Common Stock .................................... 3
Section 2.5 Certificates for Unexercised Warrants ....................... 4
Section 2.6 Registration of Warrant Shares .............................. 4
Section 2.7 No Impairment ............................................... 4
ARTICLE III
ADJUSTMENTS AND NOTICE PROVISIONS ........................................ 4
Section 3.1 Adjustment of Exercise Price ................................ 4
Section 3.2 No Adjustments to Exercise Price ............................ 7
Section 3.3 Adjustment of Number of Shares .............................. 7
Section 3.4 Reorganizations ............................................. 7
Section 3.5 Notice of Certain Actions ................................... 8
Section 3.6 Certificate of Adjustments .................................. 9
Section 3.7 Warrant Certificate Amendments .............................. 9
Section 3.8 Fractional Shares ........................................... 9
Section 3.9 Liquidating Dividends ....................................... 9
ARTICLE IV
MISCELLANEOUS ........................................................... 10
Section 4.1 Changes to Agreement ....................................... 10
Section 4.2 Assignment ................................................. 10
Section 4.3 Successor to Company ....................................... 10
Section 4.4 Notices .................................................... 10
Section 4.5 Defects in Notice .......................................... 11
Section 4.6 Governing Law .............................................. 11
Section 4.7 Standing ................................................... 11
Section 4.8 Headings ................................................... 11
(i)
Page
Section 4.9 Counterparts ............................................... 11
Section 4.10 Availability of the Agreement .............................. 12
Section 4.11 Entire Agreement ........................................... 12
Signature pages ............................................................. 12
Exhibit A - Form of Common Stock Purchase Warrant Certificate .............. A-1
(ii)
T CELL SCIENCES, INC.
THESE COMMON STOCK PURCHASE WARRANT PROVISIONS (this "Agreement"), relate
to certain Warrants (as defined below) to be issued by T Cell Sciences, Inc., a
corporation organized under the laws of Delaware (the "Company"), pursuant to
the Merger Agreement (as defined below).
W I T N E S S E T H:
WHEREAS, the Company and Virus Research Institute, Inc., a corporation
organized under the laws of Delaware ("VRI"), have entered into an Agreement and
Plan of Merger dated as of May 12, 1998 (the "Merger Agreement") pursuant to
which a wholly-owned subsidiary of the Company will merge with and into VRI,
with VRI as the surviving entity; and
WHEREAS, the Merger Agreement provides that the Company will issue to the
stockholders of VRI shares of the Company's common stock, par value $.001 per
share ("Common Stock"), and warrants (each, a "Warrant", and collectively, the
"Warrants") to purchase shares of Common Stock (the Common Stock issuable upon
exercise of the Warrants being referred to herein as the "Warrant Shares") as
consideration, subject to the terms and conditions of the Merger Agreement and
this Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the parties hereto agree as follows:
ARTICLE I
WARRANT CERTIFICATES
Section 1.1 Form of Warrant Certificates. The warrant certificates
representing the Warrants issued under this Agreement (the "Warrant
Certificates") shall be issued in registered form only and, together with the
form of the election to purchase (the "Election to Purchase") and assignment to
be attached thereto, shall be substantially in the form of Exhibit A attached
hereto and, in addition, may have such letters, numbers or other marks of
identification or designation and such legends, summaries, or endorsements
stamped, printed, lithographed or engraved thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as, in any particular case, may be required in the opinion of counsel for the
Company, to comply with any law or with any rule or regulation of any regulatory
authority or agency, or to conform to customary usage.
Section 1.2 Execution of Warrant Certificates. The Warrant Certificates
shall be executed on behalf of the Company by its President and Chief Executive
Officer and attested to by its Treasurer, either manually or by facsimile
signature printed thereon. In the event that any authorized officer of the
Company who shall have signed any of the Warrant Certificates shall cease to be
an officer of the Company either before or after delivery of such Warrant
Certificates by the Company, the signature of such person on such Warrant
Certificates shall be valid nevertheless and such Warrant Certificates may be
issued and delivered to those persons entitled
to receive the Warrants represented thereby with the same force and effect as
though the person who signed such Warrant Certificates had not ceased to be an
officer of the Company.
Section 1.3 Registration of Warrant Certificates. The Company shall number
and register the Warrant Certificates in a warrant register maintained by the
Company. The Company may deem and treat the registered holder(s) of the Warrant
Certificates (the "Holders") as the absolute owner(s) thereof for all purposes.
Section 1.4 Exchange and Transfer of Warrant Certificates. The Warrants
(and any Warrant Shares issued upon exercise of the Warrants) shall bear such
restrictive legend or legends as may be required by law or by this Agreement and
shall be transferable only in accordance with the terms of this Agreement.
The Company shall from time to time register the transfer of any
outstanding Warrant Certificates in the warrant register upon surrender thereof
accompanied by a written instrument or instruments of transfer in form
reasonably satisfactory to the Company duly executed by the Holder or Holders
thereof or by the duly appointed legal representative thereof or by a duly
authorized attorney. Upon any such registration of transfer, the Company shall
issue as promptly as practicable and in any event within three (3) business days
after receipt of such notice of transfer a new Warrant Certificate to the
transferee(s).
Warrant Certificates and all rights thereunder may be exchanged, in whole
or in part, at the option of the Holder(s) thereof when surrendered to the
Company at the address set forth in Section 4.5 hereof for another Warrant
Certificate or Warrant Certificates of like tenor and representing the right to
purchase in the aggregate a like number of Warrant Shares; provided that the
Company shall not be required to issue any Warrant Certificate representing any
fractional Warrant Shares.
The Company shall pay all expenses, taxes and other charges payable in
connection with the preparation, issuance and delivery of new Warrant
Certificates, including, without limitation, any transfer or stamp taxes.
Section 1.5 Lost, Stolen, Mutilated or Destroyed Warrant Certificates. If
any Warrant Certificate shall be mutilated, lost, stolen or destroyed, the
Company shall issue, execute and deliver, in exchange and substitution for and
upon cancellation of such mutilated Warrant Certificate, or in lieu of or in
substitution for such lost, stolen or destroyed Warrant Certificate, a new
Warrant Certificate representing the right to purchase an equivalent number of
Warrant Shares. If required by the Company, the Holder of the lost, stolen or
destroyed Warrant Certificate must agree to indemnify and protect the Company
from any loss which it may suffer if the Warrant Certificate is replaced. Any
new Warrant Certificate shall constitute an original contractual obligation of
the Company, whether or not the allegedly lost, stolen, mutilated or destroyed
Warrant Certificate shall be at any time enforceable by anyone.
Section 1.6 Cancellation of Warrant Certificates. Any Warrant Certificate
surrendered upon the exercise of Warrants or for exchange or transfer, or
purchased or otherwise acquired by
2
the Company, shall be canceled and shall not be reissued by the Company; and,
except as provided in Section 2.5 with respect to the exercise of less than all
of the Warrants evidenced by a Warrant Certificate or in Section 1.4 with
respect to an exchange or transfer, no Warrant Certificate shall be issued
hereunder in lieu of such canceled Warrant Certificate. Any Warrant Certificate
so canceled shall be destroyed by the Company.
ARTICLE II
WARRANT EXERCISE PRICE AND EXERCISE OF WARRANTS
Section 2.1 Exercise Price. Each Warrant Certificate shall, when duly
issued by the Company, entitle the Holder thereof to purchase from the Company,
subject to the terms and conditions of this Agreement, the number of fully paid
and nonassessable Warrant Shares evidenced thereby at a purchase price of Six
Dollars and no/cents ($6.00) per share (the "Exercise Price") or such adjusted
purchase price as may be established from time to time pursuant to the
provisions of Article III hereof, payable in full in accordance with Section
2.3, at the time of exercise of the Warrant. Except as the context otherwise
requires, the term "Exercise Price" as used in this Agreement shall mean the
purchase price of one share of Common Stock, reflecting all appropriate
adjustments made in accordance with the provisions of Article III hereof.
Section 2.2 Reservation of Common Stock. The Company shall at all times
reserve and keep available, free from preemptive rights, for issuance upon the
exercise of Warrants, the maximum number of its authorized but unissued shares
of Common Stock which may then be issuable upon the exercise in full of all
outstanding Warrants. If the Common Stock is listed on any national securities
exchange or quoted on Nasdaq at the time of any issuance of Warrant Shares, then
such maximum number of shares of Common Stock shall be approved for listing or
quotation, the case may be, subject to notice of issuance if applicable.
Section 2.3 Exercise of Warrants.
(a) Procedure. The Warrants may be exercised prior to the Expiration
Date (as hereinafter defined) at the Exercise Price at any time following the
date hereof. The Warrants shall expire at 5:00 p.m., New York City time, on
[__________ __, 2003] [FIFTH ANNIVERSARY OF CLOSING DATE] (the "Expiration
Date"). The Warrants may be exercised by surrendering the Warrant Certificates
representing such Warrants to the Company at its address set forth in Section
4.5, together with the Election to Purchase duly completed and executed,
accompanied by payment in full, as set forth below, to the Company of the
Exercise Price for each Warrant Share in respect of which such Warrants are
being exercised. Such Exercise Price shall be paid in full by cash or a
certified check or a wire transfer in same day funds in an amount equal to the
Exercise Price multiplied by the number of Warrant Shares then being purchased.
Section 2.4 Issuance of Common Stock. As promptly as practicable after the
Date of Exercise of any Warrants and in any event within three (3) business days
after receipt of the Election to Purchase, the Company shall issue, or cause its
transfer agent to issue, a certificate or certificates for the number of
non-fractional Warrant Shares (the "Common Stock Certificate"),
3
registered in accordance with the instructions set forth in the Election to
Purchase, together with cash for fractional Warrant Shares exercised as provided
in Section 3.9. All Warrant Shares issued upon the exercise of any Warrants
shall be validly authorized and issued, fully paid, non-assessable, free of
preemptive rights and free from all taxes, liens, charges and security interests
in respect of the issuance thereof. Each person in whose name any such Common
Stock Certificate is issued shall be deemed for all purposes to have become the
holder of record of the Common Stock represented thereby on the Date of Exercise
of the Warrants resulting in the issuance of such shares, irrespective of the
date of issuance or delivery of such Common Stock Certificate. The Company shall
pay all expenses, taxes and other charges payable in connection with the
preparation, issuance and delivery of new Common Stock Certificates, including,
without limitation, any transfer or stamp taxes. Upon exercise of the Warrant,
the Holder shall also receive, in addition to the Warrant Shares, the associated
rights to purchase shares of the Company's Class C-1 Junior Participating
Cumulative Preferred Stock, par value $.01 per share (the "Preferred Stock
Rights"), pursuant to the Rights Agreement dated November 10, 1994 between the
Company and State Street Bank and Trust Company, as Rights Agent, if then in
effect.
Section 2.5 Certificates for Unexercised Warrants. In the event that, prior
to the Expiration Date, a Warrant Certificate is exercised in respect of fewer
than all of the Warrant Shares issuable on such exercise a new Warrant
Certificate representing the remaining Warrant Shares shall be issued and
delivered pursuant to the provisions hereof; provided that the Company shall not
be required to issue any Warrant Certificate representing any fractional Warrant
Shares.
Section 2.6 Registration of Warrant Shares. The Company shall use its
reasonable best efforts to make such filings and obtain such authorizations,
exemptions or consents from any public regulatory body having jurisdiction
thereof as may be necessary to enable the Company to perform its obligations
under the Warrants, including without limitation registering under the
Securities Act of 1933, as amended (the "Securities Act") the issuance of the
Warrant Shares upon exercise of the Warrants and the Preferred Stock Rights and
maintaining the effectiveness of the registration statement filed for such
purpose.
Section 2.7 No Impairment. The Company will not, by amendment of its
charter or through reorganization consolidation, merger, dissolution, sale of
assets or any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of the Warrants, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of the
Holders of the Warrants against impairment.
ARTICLE III
ADJUSTMENTS AND NOTICE PROVISIONS
Section 3.1 Adjustment of Exercise Price. Subject to the provisions of this
Article III, the Exercise Price in effect from time to time shall be subject to
adjustment, as follows:
4
(a) In the event that the Company shall (i) declare a dividend payable
in or make a distribution on the outstanding Common Stock of additional shares
of Common Stock, (ii) subdivide or reclassify the outstanding Common Stock into
a greater number of shares of Common Stock, or (iii) combine or reclassify the
outstanding shares of Common Stock into a fewer number of shares of Common
Stock, the Exercise Price in effect immediately after the record date for such
dividend or distribution or the effective date of such subdivision, combination
or reclassification, as the case may be, shall be adjusted so that it shall
equal the price determined by multiplying the Exercise Price in effect
immediately prior thereto by a fraction, of which the numerator shall be the
number of shares of Common Stock outstanding immediately before such dividend,
distribution, subdivision, combination or reclassification, and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately after such dividend, distribution, subdivision, combination or
reclassification. Any shares of Common Stock issuable in payment of a dividend
shall be deemed to have been issued immediately prior to the record date for
such dividend for the purpose of calculating the number of outstanding shares of
Common Stock under Sections 3.l(b), 3.l(c) and 3.2(a) hereof. Such adjustment
shall be made successively whenever any event specified above shall occur.
(b) In the event that the Company shall fix a record date for the
issuance of rights, options, warrants or convertible or exchangeable securities
to all holders of its Common Stock entitling them (for a period which, by its
express terms, expires within forty-five (45) days after such record date) to
subscribe for or purchase shares of Common Stock at a price per share less than
the Fair Market Value (as defined below) of a share of Common Stock on such
record date, the Exercise Price shall be adjusted immediately thereafter so that
it shall equal the price determined by multiplying the Exercise Price in effect
immediately prior thereto by a fraction, of which the numerator shall be the
number of shares of Common Stock outstanding on such record date plus the
maximum number of shares of Common Stock which the aggregate subscription or
purchase price for the total number of shares of Common Stock so offered for
subscription or purchase pursuant to such rights, options, warrants or
convertible or exchangeable securities would purchase at the Fair Market Value
(as defined below) per share, and of which the denominator shall be the number
of shares of Common Stock outstanding on such record date plus the number of
additional shares of Common Stock issuable pursuant to such rights, options,
warrants or convertible or exchangeable securities offered for subscription or
purchase. Such adjustment shall be made successively whenever such a record date
is fixed. To the extent that any such rights, options, warrants or convertible
or exchangeable securities are not so issued or expire unexercised, the Exercise
Price then in effect shall be readjusted to the Exercise Price which would then
be in effect if such unissued or unexercised rights, options, warrants or
convertible or exchangeable securities had not been issuable in the first place.
(c) In the event that the Company shall fix a record date for the
making of a distribution to all holders of shares of Common Stock (i) of shares
of any class of its capital stock other than Common Stock, or (ii) of evidences
of its indebtedness, or (iii) of assets (excluding cash dividends or
distributions and dividends or distributions referred to in Section 3.1(a)), or
(iv) of rights, options, warrants or convertible or exchangeable securities
(excluding those rights, options, warrants convertible or exchangeable
securities referred to Section 3.1(b)), then in each such case the Exercise
Price in effect immediately thereafter shall be determined by multiplying the
Exercise
5
Price in effect immediately prior thereto by a fraction, of which the numerator
shall be the total number of shares of Common Stock outstanding on such record
date multiplied by the Fair Market Value per share of Common Stock on such
record date, less the aggregate Fair Market Value of said other shares of
capital stock or evidences of indebtedness or assets or rights, options,
warrants or convertible or exchangeable securities so distributed, and of which
the denominator shall be the total number of shares of Common Stock outstanding
on such record date multiplied by such Fair Market Value per share of Common
Stock. Such adjustment shall be made successively whenever such a record date is
fixed; provided, however, that in no event shall the Exercise Price be less than
zero. In the event that such distribution is not so made, or that such
distribution, by its express terms, is intended to be made, and is in fact made,
with respect to any Warrant Shares issued after the record date for such
distribution upon exercise of Warrants, the Exercise Price then in effect shall
be readjusted to (or remain as) the Exercise Price which would then be in effect
if such record date had not been fixed.
(d) As used herein:
(i) the term "Fair Market Value" means:
(x) with respect to the Common Stock, on a per share
basis, the average of the daily Closing Prices (as
hereinafter defined) of the Common Stock for the five
(5) consecutive Trading Days (as hereinafter defined)
ending on the Trading Day immediately preceding a
Computation Date (the "Fair Market Value Measurement
Period"), or, if the Closing Price of the Common Stock
cannot be determined pursuant to Section 2.3(b)(iv),
the fair value thereof determined in good faith by the
Company's Board of Directors as of a date which is
within 15 days of the date as of which the
determination is to be made; and
(y) with respect to any other securities or property,
the fair value thereof determined in good faith by the
Company's Board of Directors as of a date which is
within 15 days of the date as of which the
determination is to be made;
(ii) the term "Computation Date" means any date on which a
calculation of the Fair Market Value of the Common
Stock is contemplated by this Agreement;
(iv) the term "Closing Price" for any date shall mean the
last sale price reported in The Wall Street Journal
regular way or, in case no such reported sale takes
place on such date, the average of the last reported
bid and asked prices regular way on the principal U.S.
national securities exchange on which the Common Stock
is admitted to trading or listed if that is the
principal market for the Common Stock or, if not listed
or admitted to trading on any national securities
exchange or if such national securities
6
exchange is not the principal market for the Common
Stock, the last sale price as reported on The Nasdaq
Stock Market, Inc.'s National Market ("Nasdaq") or its
successor, if any, or if the Common Stock is not so
reported, the average of the reported bid and asked
prices in the over-the-counter market, as furnished by
the National Quotation Bureau, Inc., or if such firm is
not then engaged in the business of reporting such
prices, as furnished by any similar firm then engaged
in such business and reasonably selected by the Company
or, if there is no such firm, as furnished by any
member of the National Association of Securities
Dealers, Inc. reasonably selected by the Company; and
(v) the term "Trading Days" with respect to the Common
Stock means (i) if the Common Stock is quoted on
Nasdaq, or any similar system of automated
dissemination of quotations of securities prices, days
on which trades may be made on such system or (ii) if
the Common Stock is listed or admitted for trading on
any national securities exchange, days on which such
national securities exchange is open for business.
(e) In the event that there shall have occurred prior to the
Computation Date any event described in Section 3.l(a), 3.l(b) or 3.1(c) which
shall have become effective with respect to market transactions at any time (the
"Market-Effect Date") within the Fair Market Value Measurement Period, the
Closing Price for each Trading Day preceding the Market-Effect Date shall be
adjusted, for purposes of calculating such average, by multiplying such Closing
Price by a fraction, of which the numerator shall be the Exercise Price as in
effect immediately prior to the Computation Date and the denominator of which
shall be the Exercise Price as in effect immediately prior to the Market-Effect
Date, it being understood that the purpose of this proviso is to ensure that the
effect of such event on the market price of the Common Stock shall, as nearly as
possible, be eliminated in order that the distortion in the calculation of the
Fair Market Value per share may be minimized.
Section 3.2 No Adjustments to Exercise Price. No adjustment in the Exercise
Price in accordance with the provisions of Section 3.1(a), 3.1(b) or 3.1(c)
hereof need be made unless such adjustment would amount to a change of at least
1.0% in such Exercise Price, provided, however, that the amount by which any
adjustment is not made by reason of the provisions of this Section 3.2 shall be
carried forward and taken into account at the time of any subsequent adjustment
in the Exercise Price.
Section 3.3 Adjustment of Number of Shares. Upon each adjustment of the
Exercise Price pursuant to Section 3.l(a), 3.1(b) or 3.1(c), each Warrant shall
thereupon evidence the right to purchase that number of Warrant Shares
(calculated to the nearest hundredth of a share) obtained by multiplying the
number of Warrant Shares purchasable immediately prior to such adjustment upon
exercise of the Warrant by the Exercise Price in effect immediately prior to
such adjustment and dividing the product so obtained by the Exercise Price in
effect immediately after such adjustment.
7
Section 3.4 Reorganizations. In the event of any capital reorganization,
other than in the cases referred to in Section 3.1, or the consolidation or
merger of the Company with or into another corporation (other than a merger or
consolidation in which the Company is the continuing corporation and which does
not result in any reclassification of the outstanding Common Stock or the
conversion of such outstanding Common Stock into shares of other capital stock
or other securities or property), or the sale or conveyance of the property of
the Company as an entirety or substantially as an entirety (collectively such
actions being hereinafter referred to as "Reorganizations"), there shall
thereafter be deliverable upon exercise of any Warrant (in lieu of the number of
Warrant Shares theretofore deliverable) the number of shares of stock or other
securities or property to which a holder of the number of Warrant Shares which
would otherwise have been deliverable upon the exercise of such Warrant would
have been entitled upon such Reorganization if such Warrant had been exercised
in full immediately prior to such Reorganization. In the event of any
Reorganization, appropriate adjustment, as determined in good faith by the
Company's Board of Directors, shall be made in the application of the provisions
herein set forth with respect to the rights and interests of Holders so that the
provisions set forth herein shall thereafter be applicable, as nearly as
possible, in relation to any shares or other property thereafter deliverable
upon exercise of Warrants. Any such adjustment shall be made by and set forth in
a supplemental agreement prepared by the Company or any successor thereto,
between the Company and any successor thereto, and shall for all purposes hereof
conclusively be deemed to be an appropriate adjustment. The Company shall not
effect any such Reorganization, unless upon or prior to the consummation thereof
the successor corporation, or if the Company shall be the surviving corporation
in any such Reorganization and is not the issuer of the shares of stock or other
securities or property to be delivered to holders of shares of Common Stock
outstanding at the effective time thereof, then such issuer, shall assume the
obligation to deliver to the Holder of any Warrant Certificate such shares of
stock, securities, cash or other property as such holder shall be entitled to
purchase in accordance with the foregoing provisions.
Section 3.5 Notice of Certain Actions. In the event the Company shall (a)
declare any dividend payable in stock to the holders of its Common Stock or make
any other distribution in property other than cash to the holders of its Common
Stock, (b) offer to the holders of its Common Stock rights to subscribe for or
purchase any shares of any class of stock or any other rights, options, warrants
or other convertible or exchangeable securities, (c) effect any reclassification
of its Common Stock (other than a reclassification involving merely the
subdivision or combination of outstanding shares of Common Stock) or any capital
reorganization or any consolidation or merger (other than a merger in which the
Company is the continuing corporation and which does not result in any
reclassification of the outstanding Common Stock or the conversion of such
outstanding Common Stock into shares of other capital stock or other securities
or property), or any sale, transfer or other disposition of its property, assets
and business substantially as an entirety, or the liquidation, dissolution or
winding up of the Company, or (d) take any other action specified in Sections
3.1(a), 3.1(b) or 3.1(c); then, in each such case, the Company shall cause
notice of such proposed action to be mailed to each Holder at least twenty (20)
days prior to the record date for such action, or if no record is taken for such
action, twenty (20) days before such action. Such notice shall specify the date
on which the books of the Company shall close, or a record be taken, for
determining holders of Common Stock entitled to
8
receive such stock dividend or other distribution or such rights or options, or
the date on which such reclassification, reorganization, consolidation, merger,
sale, transfer, other disposition, liquidation, dissolution, winding up or
exchange shall take place or commence, as the case may be, and the date as of
which it is expected that holders of record of Common Stock shall be entitled to
receive securities or other property deliverable upon such action, if any such
date has been fixed.
Section 3.6 Certificate of Adjustments. The Company shall perform any
computations and determine any adjustments required to be made under this
Article III (the "Adjustments") and as promptly as practicable after determining
any Adjustment, the Company shall prepare a certificate executed by the Chief
Financial Officer of the Company setting forth such Adjustment and mail such
certificate to each Holder (an "Adjustment Notice") within five (5) business
days after the event resulting in adjustment. The Adjustment Notice shall
include in reasonable detail (a) the events precipitating the Adjustment, (b)
the computations relating to such Adjustment, and (c) the Exercise Price and the
securities or other property purchasable upon exercise of each Warrant after
giving effect to such Adjustment. In the event that the Holders of Warrants
entitling such Holders to purchase 20% of the Warrant Shares subject to purchase
upon exercise of Warrants at the time outstanding (the "Required Interest")
shall disagree with any Adjustment, the Holders of the Required Interest shall
give notice thereof (the "Dispute Notice") to the Company within fifteen (15)
days after the Adjustment Notice. Upon receipt of the Dispute Notice, the
Company shall promptly engage a third party independent public accounting firm
acceptable to the Required Interest to make an independent determination of such
disputed Adjustment (the "Independent Adjustment"). The Independent Adjustment
shall be final and binding on the Company and all Holders.
Section 3.7 Warrant Certificate Amendments. Irrespective of any adjustments
pursuant to this Article III, Warrant Certificates theretofore or thereafter
issued need not be amended or replaced, but certificates thereafter issued shall
bear an appropriate legend or other notice of any adjustments; provided the
Company may, at its option, issue new Warrant Certificates evidencing Warrants
in such form as may be approved by its Board of Directors to reflect any
adjustment in the Exercise Price and number of Warrant Shares purchasable under
the Warrants.
Section 3.8 Fractional Shares. The Company shall not be required upon the
exercise of any Warrant to issue fractional Warrant Shares. If more than one
Warrant is exercised at one time by the same Holder, the number of full Warrant
Shares which shall be issuable upon the exercise thereof shall be computed based
on the aggregate number of Warrant Shares purchasable upon exercise of such
Warrants. With respect to any final fraction of a share called for upon the
exercise of any Warrant or Warrants, the Company shall pay an amount in cash to
the Holder of the Warrants in respect of such final fraction in an amount equal
to the Fair Market Value of a share of Common Stock as of the date of exercise
of such Warrants, multiplied by such fraction. All calculations under this
Section 3.8 shall be made to the nearest hundredth of a share.
Section 3.9 Liquidating Dividends. If the Company pays a dividend or makes
a distribution on the Common Stock payable otherwise than in cash out of
earnings or earned surplus (determined in accordance with generally accepted
accounting principles) except for stock dividend
9
payable in shares of Common Stock (a "Liquidating Dividend"), then the Company
will pay or distribute to the Holders of the Warrants, upon the exercise
thereof, in addition to the Warrant Shares purchased upon such exercise, the
Liquidating Dividend which would have been paid to such Holders if they had been
the owner of record of such Warrant Shares immediately prior to the date on
which a record is taken for such Liquidating Dividend or, if no record is taken,
the date as of which the record holders of Common Stock entitled to such
dividends or distribution are to be determined.
ARTICLE IV
MISCELLANEOUS
Section 4.1 Changes to Agreement. The Company, when authorized by its Board
of Directors, with the written consent of Holders of at least a majority of the
outstanding Warrants may amend or supplement this Agreement, except that no
amendment which increases the Exercise Price or reduces the number of Warrant
Shares shall be enforceable against a Holder who has not consented in writing to
such amendment.
Section 4.2 Assignment. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Holders shall bind and inure to the
benefit of their respective successors and assigns.
Section 4.3 Successor to Company. In the event that the Company merges or
consolidates with or into any other corporation or sells or otherwise transfers
its property, assets and business substantially as an entirety to a successor
corporation or other entity, the Company shall use its best efforts to have such
successor corporation or other entity to assume in writing each and every
covenant and condition of this Agreement to be performed and observed by the
Company, and such successor corporation or other entity shall be deemed, upon
the closing of such merger, consolidation, transfer or sale, to have so assumed
such liabilities whether or not such assumption is made in writing.
Section 4.4 Notices. Any notice or demand required by this Agreement to be
given or made by any Holder to or on the Company shall be sufficiently given or
made if sent by first-class or registered mail, postage prepaid, addressed as
follows:
T Cell Sciences, Inc.
Attention:
Telephone:
Facsimile:
10
With a copy to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Attention: Stuart M. Cable, Esq.
Telephone: (617) 570-1322
Facsimile: (617) 523-1231
Any notice or demand required by this Agreement to be given or made by the
Company to or on any Holder shall be sufficiently given or made if sent by
first-class or registered mail, postage prepaid, addressed to such Holder and
sent to the address of such Holder on the Company's warrant register.
Any notice or demand required by this Agreement to be given or made by the
Company to or on any Holder shall be sufficiently given or made, whether or not
such Holder receives the notice, five (5) days after mailing, if sent by
first-class or registered mail, postage prepaid, addressed to such Holder at its
last address as shown on the books of the Company. Otherwise, such notice or
demand shall be deemed given when received by the party entitled thereto.
Section 4.5 Defects in Notice. Failure to file any certificate or notice or
to mail any notice, or any defect in any certificate or notice pursuant to this
Agreement shall not affect in any way the rights of any Holder or the legality
or validity of any adjustment made pursuant to Section 3.1 or 3.2 hereof.
Section 4.6 Governing Law. This Agreement and each Warrant Certificate
issued hereunder shall be governed by the laws of the State of Delaware without
regard to principles of conflicts of laws thereof.
Section 4.7 Standing. Nothing in this Agreement expressed and nothing that
may be implied from any of the provisions hereof is intended, or shall be
construed, to confer upon, or give to, any person or corporation other than the
Company and the Holders any right, remedy or claim under or by reason of this
Agreement or of any covenant, condition, stipulation, promise or agreement
contained herein; and all covenants, conditions, stipulations, promises and
agreements contained in this Agreement shall be for the sole and exclusive
benefit of the Company and its successors and the Holders.
Section 4.8 Headings. The descriptive headings of the articles and sections
of this Agreement are inserted for convenience only and shall not control or
affect the meaning or construction of any of the provisions hereof.
Section 4.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, and
all of which together shall constitute one and the same instrument.
11
Section 4.10 Availability of the Agreement. The Company shall keep copies
of this Agreement available for inspection by Holders during normal business
hours. Copies of this Agreement may be obtained upon written request addressed
to the Company at the address set forth in Section 4.5.
Section 4.11 Entire Agreement. This Agreement, including the Exhibits
referred to herein and the other agreements and writings specifically identified
herein or contemplated hereby, is complete, reflects the entire agreement of the
parties with respect to its subject matter, and supersedes all previous written
or oral negotiations, commitments and writings.
[Remainder of page intentionally left blank]
12
EXHIBIT A (to Common Stock Purchase Warrant Provisions)
FORM OF COMMON STOCK PURCHASE WARRANT CERTIFICATE
THE RIGHTS OF THE HOLDER OF THIS WARRANT ARE SUBJECT TO THE TERMS AND CONDITIONS
CONTAINED IN, THE COMMON STOCK PURCHASE WARRANT PROVISIONS (THE "WARRANT
PROVISIONS"), A COMPLETE AND CORRECT COPY OF THE FORM OF WHICH WILL BE FURNISHED
BY THE ISSUER TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE.
No. ___________
Certificate for ________ Warrants
NOT EXERCISABLE AFTER 5:00 P.M.,
NEW YORK CITY TIME, ON ______ ___, 2003 [FIFTH ANNIVERSARY OF CLOSING DATE]
T CELL SCIENCES, INC.
COMMON STOCK PURCHASE WARRANT CERTIFICATE
THIS CERTIFIES that _______________________________, a
__________________________, or its registered assigns is the registered holder
(the "Registered Holder") of the number of Warrants set forth above, each of
which represents the right to purchase one fully paid and non-assessable share
of the common stock, par value $.001 per share (the "Common Stock"), of T Cell
Sciences, Inc., a corporation organized under the laws of Delaware (the
"Company"), at the Exercise Price (as defined in and determined from time to
time in accordance with the Warrant Provisions), by surrendering this Warrant
Certificate, with the attached hereto duly executed and by paying in full the
Exercise Price (the shares of Common Stock issuable upon exercise of the
Warrants being referred to herein as the "Warrant Shares"). Payment of the
Exercise Price shall be made as set forth in the Warrant Provisions. No Warrant
may be exercised after 5:00 P.M., New York City time, on _________ __, 2003
[Fifth Anniversary of Closing Date] (the "Expiration Date"). All Warrants
evidenced hereby shall thereafter become void, subject to the terms of the
Warrant Provisions hereinafter referred to.
Prior to the Expiration Date, subject to any applicable laws, rules or
regulations restricting transferability and to any restriction on
transferability that may appear on this Warrant Certificate and in accordance
with the terms of the Warrant Provisions hereinafter referred to, the Registered
Holder shall be entitled to transfer this Warrant Certificate, in whole or in
part, upon surrender of this Warrant Certificate at the principal office of the
Company with the form of assignment set forth hereon duly executed. Upon any
such transfer, a new Warrant Certificate or Warrant Certificates representing
the same aggregate number of Warrant Shares will be issued in accordance with
instructions in the form of assignment.
Upon the exercise of less than all of the Warrants to purchase the shares
of Common Stock evidenced by this Warrant Certificate, there shall be issued to
the Registered Holder a new Warrant Certificate in respect of the Warrants not
exercised.
Prior to the Expiration Date, the Registered Holder shall be entitled to
exchange this Warrant Certificate, with or without other Warrant Certificates,
for another Warrant Certificate or Warrant Certificates for the same aggregate
number of Warrant Shares, upon surrender of this Warrant Certificate at the
principal office of the Company.
Upon certain events provided for in Section 3.1 and 3.3 of the Warrant
Provisions, the Exercise Price and/or the number of Warrant Shares is required
to be adjusted.
A-1
No fractional shares will be issued upon the exercise of Warrants. As to
any final fraction of a share of Common Stock which the Registered Holder of one
or more Warrant Certificates, the rights under which are exercised in the same
transaction, would otherwise be entitled to purchase upon such exercise, the
Company shall pay the cash value thereof determined as provided in the Warrant
Provisions. No Warrant Certificate representing any fractional Warrant Shares
will be issued.
This Warrant Certificate is issued under and in accordance with the Warrant
Provisions and is subject to the terms and conditions contained in the Warrant
Provisions. All capitalized terms not defined herein shall have the meanings
given such terms as set forth in the Warrant Provisions.
Except as provided in Section 3.9 of the Warrant Provisions, this Warrant
Certificate shall not entitle the Registered Holder to any of the rights of a
stockholder of the Company, including, without limitation, the right to vote, to
receive dividends and other distributions, or to attend or receive any notice of
meetings of stockholders or any other proceedings of the Company.
[Remainder of page intentionally left blank]
A-2
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed under its facsimile corporate seal.
T CELL SCIENCES, INC.
By:_____________________________________
Name:
Title:
[Seal] Attest:
By:_____________________________________
Name:
Title: Secretary
A-3
[Form of Assignment]
FOR VALUE RECEIVED, the undersigned hereby irrevocably sells, assigns and
transfers unto the Assignee named below all of the rights of the undersigned
represented by the within Warrant Certificate, with respect to the number of
Warrants to purchase the Common Stock set forth below:
Name of Assignee Address No. of Warrants
---------------- ------- ---------------
and does hereby irrevocably constitute and appoint _____________________ true
and lawful Attorney, to make such transfer on the books of T Cell Sciences,
Inc., maintained for that purpose, with full power of substitution in the
premises.
Dated: __________ ___, _____
Signature
----------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant Certificate.)
A-4
[Form of Election To Purchase]
The undersigned hereby irrevocably elects to exercise ____________ of the
Warrants represented by this Warrant Certificate and to purchase the Common
Stock issuable upon the exercise of said Warrants, and requests that
certificates for such shares be issued and delivered as follows:
ISSUE TO:_______________________________________________________________________
(NAME)
________________________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
________________________________________________________________________________
(SOCIAL SECURITY OR OTHER IDENTIFICATION NUMBER)
DELIVER TO: ____________________________________________________________________
(NAME)
at______________________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
If the number of Warrants to purchase the Common Stock hereby exercised
is less than all the Warrants represented by this Warrant Certificate, the
undersigned requests that a new Warrant Certificate representing the number of
such full Warrants not exercised be issued and delivered as follows:
ISSUE TO:_______________________________________________________________________
(NAME)
at______________________________________________________________________________
________________________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
________________________________________________________________________________
(SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER)
DELIVER TO:_____________________________________________________________________
(NAME)
at______________________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
Date: __________ ___, ______ Signature
----------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant Certificate.)
PLEASE INSERT SOCIAL SECURITY OR TAX I.D. NUMBER OF HOLDER:
A-5
